Sanctions In Facebook Litigation
The Delaware Court of Chancery considered sanctions for the failure to preserve ESI in litigation involving data harvesting from Facebook
The plaintiffs moved for sanctions against two individual defendants who failed to preserve electronically stored information (“ESI”). The plaintiffs succeeded against the defendant who was a C-suite officer and director. The plaintiffs failed against the defendant who was an outside director. As a sanction, the officer defendant will only be able to prevail on any issue where she bears the burden of proof if she can carry her burden by clear and convincing evidence. The officer defendant also must pay the expenses plaintiffs incurred pursuing sanctions.
The case
In March 2018, The New York Times reported that Cambridge Analytica, a British data analytics firm, had harvested the private information of more than 50 million Facebook users without their permission. The article reported that Cambridge Analytica paid the Company for information that included users’ identities, personal identifying information, friends, and “likes.”10 The Consent Order prohibited those practices.
Shortly after the Cambridge Analytica scandal broke, the Company issued a legal hold…
The legal hold instructed custodians to make certain that they “do not delete or destroy” documents and explained that if custodians were “unsure whether a document is relevant to matters, save it.” The legal hold told recipients, “If you create a document in the future that is relevant to the matters, save it.”
Sheryl Sandberg, a member of the Company’s senior leadership team, received the legal hold. At the time, she served as the Company’s Chief Operating Officer, a role she held until August 2022. She also served as a member of the Company’s board of directors (the “Board”), a position she held until May 2024.
Ensuing litigation
This litigation began on April 25, 2018. As it progressed, the Company reminded the custodians about the legal hold. After Jeffrey Zients joined the Board in 2018, the Company sent him the legal hold. Zients served on a special committee tasked with evaluating and recommending a potential settlement with the FTC.
On July 31, 2018, outside counsel contacted Sandberg and Zients “to discuss document preservation and collection in connection with the Cambridge Analytica-related derivative cases.” In November 2018, outside counsel contacted Zients to discuss his preservation obligations.
Request for sanctions
Here, the motion rests on undisputed facts regarding the failure to preserve ESI. The motion does not turn on disputed facts that would warrant an evidentiary hearing or post-trial adjudication. Moreover, the plaintiffs seek remedies that would affect how the balance of discovery and pre-trial proceedings unfold. The plaintiffs seek sanctions including (i) preventing Sandberg and Zients from moving for summary judgment, (ii) raising the burden of proof for their affirmative defenses, and (iii) precluding certain testimony at trial. Whether the court grants those sanctions will affect how the parties prepare for trial and present their evidence. The proper time to consider the plaintiff’s motion is now.
The court discussed the duty to preserve and found
Sandberg failed to take reasonable steps to preserve ESI. Starting on March 22, 2018, Sandberg had a legal duty to preserve evidence, including ESI, relating to the topics identified in the legal hold. Sandberg is a highly sophisticated individual who served as the Company’s Chief Operating Officer and as a director during the events in question. She knew what was required, and she could have consulted with Company counsel if she had any doubts.
Sandberg did not take reasonable steps to identify likely sources of ESI. The legal hold told Sandberg to preserve “any pertinent evidence in our possession that could be relevant to the matter.” The legal hold specifically referenced “all correspondence (such as email, instant messages, Skype messages, WhatsApp messages, FB Messages, text messages, FB Group posts, and letters).”
Nor did Sandberg’s counsel provide transparency when plaintiffs’ counsel raised the issue.
Preservation
Sandberg failed to make a convincing case against a finding of prejudice. She argued that no relevant ESI was lost—and hence there could be no prejudice—because she did not use her Gmail account to conduct Company business in a significant way. To justify that claim, Sandberg cites discovery statistics about emails that were preserved and collected from thirty-two custodians and dozens of unique custodial sources. In that collection, there were only fifty-seven emails sent to or from Sandberg’s Gmail account. There were 11,576 emails from her Company account. The defendants also reviewed approximately 3,800 emails from Sandberg’s Gmail account that were preserved and that hit on the negotiated search terms. The defendants represent that none were responsive.
It does not follow from those statistics that Sandberg did not use her Gmail account for Company business. The defendants admit she did, and the contents of the fifty-seven emails that were preserved shows that she did.
Conclusion
The motion for sanctions is granted in part. Sandberg must prove her affirmative defenses by clear and convincing evidence and plaintiffs are awarded their expenses as set forth in the rulings in this decision. The motion is denied with respect to the sanctions requested against Zients.
(Mike Frisch)