Court Concludes Defendant Did Not Take Reasonable Steps to Preserve Evidence in Anticipation of Litigation

2 Jun 2023

In IN RE GOOGLE PLAY STORE ANTITRUST LITIGATION, Case No. 21-md-02981-JD (N.D. Cal., March 28, 2023), before the Court was Plaintiffs’ request for sanctions under Federal Rule of Civil Procedure 37(e). Plaintiffs alleged Google did not adequately preserve communications that were exchanged internally on its Chat message system, and therefore intentionally deprived Plaintiffs of material evidence.

The MDL action involved multiple antitrust cases that challenged Google’s Play Store practices as anticompetitive. Plaintiffs alleged that Defendant illegally monopolized the Android app distribution market and engaged in exclusionary conduct, which harmed the different Plaintiff groups in various ways.

Even before the MDL was instituted, the Court directed the parties to coordinate discovery with an eye toward containing costs and burdens. This was largely successful; however, in April 2021, Plaintiffs asked Defendant about a lack of Chat messages in its document productions. In Oct. 2021, Defendant said that Google Chats were typically deleted after 24 hours, and that Defendant had not suspended this auto-deletion even after this litigation began. Defendant chose instead to let employees make their own personal choices about preserving chats.

This decision raised obvious questions that were presented to the Court in a joint statement on May 2022. With the Court’s consent, Plaintiffs filed a motion for sanctions under Rule 37 in Oct. 2022, which resulted in substantial briefing by each side, which included the filing of declarations and other written evidence.

At the Court’s direction, Google produced to Plaintiffs in Feb. 2023 approximately 52,271 additional chats, after which both sides filed supplemental briefs addressing the new evidence. 

Rule 37(e) provides:

(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

Fed. R. Civ. P. 37(e).

The Committee Notes for Subdivision (e) state that the rule embodies the “common-law duty” of “potential litigants . . . to preserve relevant information when litigation is reasonably foreseeable.” The parties do not dispute that Google bore that duty as of August 2020, when the first constituent lawsuit in the MDL was filed by Epic Games.

The Court presented a question that was at the heart of the dispute: “did Google do the right thing with respect to preserving Chat communications in this case?”

The Court noted there was no doubt that Defendant was perfectly free to set up an internal IM service with any retention period of its choosing for employees to use for whatever purposes they liked. The overall propriety of Chat was not at issue here. The Court noted what mattered was how Defendant responded after the lawsuits were filed, and whether it honored the evidence preservation duties it was familiar with from countless prior cases.

The Court stated Defendant fell short on that score; several aspects of Defendant’s conduct was troubling.  As Rule 37 indicates, the duty to preserve relevant evidence is an unqualified obligation in all cases. The Court’s Standing Order for Civil Cases expressly spells out the expectation that “as soon as any party reasonably anticipates or knows of litigation, it will take the necessary, affirmative steps to preserve evidence related to the issues presented in the action, including, without limitation, interdiction of any document destruction programs and any ongoing erasures of e-mails, voice mails, and other electronically-recorded material.” Standing Order for Civil Cases Before Judge James Donato ¶ 8.

Defendant had different intentions with respect to Chat, but it did not reveal those intentions with candor or directness to the Court or counsel for Plaintiffs. Instead, Defendant falsely assured the Court in a case management statement in Oct. 2020 that it had “taken appropriate steps to preserve all evidence relevant to the issues reasonably evident in this action,” without saying a word about Chats or its decision not to pause the 24-hour default deletion.

Defendant did not reveal the Chat practices to Plaintiffs until Oct. 2021, many months after Plaintiffs asked about them. The Court had since spent a substantial number of resources to get to the truth of the matter, including several hearings, a two-day evidentiary proceeding, and countless hours of reviewing voluminous briefs. All the while, Defendant tried to downplay the problem and displayed a dismissive attitude ill tuned to the gravity of its conduct, said the Court. Defendant’s initial defense was that it had no “ability to change default settings for individual custodians with respect to the chat history setting,” but evidence at the hearing established that this representation was not truthful.

The Court noted Defendant had every opportunity to flag the handling of Chat and air concerns about potential burden, costs, and related factors. At the very least, Defendant should have advised Plaintiffs about its preservation approach early in the litigation and engaged in a discussion with them, noted the Court.

Instead, Defendant chose to stay silent until compelled to speak by the filing of a Rule 37 motion and the Court’s intervention. The Court repeatedly asked Defendant why it never mentioned the Chat until the issue became a substantial problem; Defendant did not provide an explanation.

The Court noted this practice was abnormal for Defendant, as it automatically preserved all emails from relevant custodians without individual action. Yet Defendant took the opposite course with Chat and gave each employee carte blanche to make his or her own call about what might be relevant in this complex antitrust case, and whether a Chat communication should be preserved.

The Court concluded that Defendant did not take reasonable steps to preserve electronically stored information that should have been preserved in the anticipation of litigation. Fed. R. Civ. P. 37(e). The record demonstrated that the deleted Chat evidence “cannot be restored or replaced through additional discovery.” Id. The record also established intentionality for purposes of Rule 37(e)(2).

It was clear in the record that relevant, substantive business communications were made on Chat that Plaintiffs will never see to the potential detriment of their case. Defendant said that the prejudice was limited because there are only “21 custodians for which the parties agreed to conduct limited post-Complaint discovery,” and “[f]or only 21 of the total 44 custodians, the parties agreed that Google would search for documents dated after August 13, 2020. With respect to the remaining 23 custodians, the cut-off date was on or before August 13, 2020.”

The Court found that that point was not well taken as the agreements between the parties were made while Plaintiffs were completely in the dark about Defendant’s Chat practices and the Court declined to give Defendant any benefit from deals made on incomplete information. It was also not plaintiffs’ burden to prove prejudice but the plaintiffs’ supplemental briefs and evidence did so.

Next, the Court determined the appropriate remedy with focus on proportionality. To that end, the Committee Notes advise courts to “exercise caution,” and state that “[f]inding an intent to deprive another party of the lost information’s use in the litigation does not require a court to adopt any of the measures listed in subdivision(e)(2). The remedy should fit the wrong, and the severe measures authorized by this subdivision should not be used when the information lost was relatively unimportant or lesser measures such as those specified in subdivision (e)(1) would be sufficient to redress the loss.” Comm. Notes, Subdivision (e)(2).

The Court already declined to issue terminating sanctions against Defendant and determined that the case would not be decided based on lost Chat communications and that the determination of an appropriate non-monetary sanction required further proceedings. As for monetary sanctions, however, the Court ordered Defendant to cover Plaintiffs’ reasonable attorneys’ fees and costs in bringing the Rule 37 motion, which included the joint statement that preceded the motion and the evidentiary hearing and related events.