Meet and Confer with Kelly Twigger

WeChat Woes: How Failing to Preserve Ephemeral Data Led to Sanctions in Two Canoes LLC v. Addian Inc

• Kelly Twigger • Season 1 • Episode 148

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Unlock the secrets to a winning litigation strategy by mastering the art of preserving ephemeral data. What happens when critical evidence vanishes into thin air? This episode promises to arm you with essential insights from the pivotal case of Two Canoes LLC versus Addian Inc., where the loss of WeChat messages led to significant legal sanctions. Join me, Kelly Twigger, as I dissect the crucial role of early planning and the often-overlooked data sources like mobile devices that can make or break a case. Learn from the pitfalls of neglecting evidence preservation, drawing parallels from the 2020 3M lawsuit over counterfeit N95 masks, and understand the profound implications on litigation tactics and risk management.

Throughout our discussion, I unravel the challenges faced by Addian's CEO, Adam Woolworth, who failed to preserve essential messages, highlighting the ever-important themes of possession, custody, and control of data. We'll also delve into the broader landscape of eDiscovery case law, offering practical tips and insights to enhance your discovery practices. Whether you're a seasoned legal professional or navigating the complexities of eDiscovery for the first time, this episode is packed with valuable guidance to keep you ahead in managing electronically stored information. Subscribe and leave a review to stay informed on this rapidly-evolving field, and join me next week for more cutting-edge insights into the world of electronic discovery. 

Two Canoes LLC v. Addian Inc. (April 30, 2024)
Read the blog about this case- Minerva26 Blog
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Interested in seeing Mode One's technology mentioned in this episode? Visit them at modeone.io.  

#eDiscovery #CaseLaw #DataPreservation #mobiledevice #Sanctions #LegalTech #legalhold #failuretopreserve #wechat #LitigationStrategy #ElectronicDiscovery #DataRetention #CourtDecisions #LegalInsights #spoliation #discovery #litigationstrategy

Thank you for tuning in to Meet and Confer with Kelly Twigger. If you found today’s discussion helpful, don’t forget to subscribe, rate, and leave a review wherever you get your podcasts. For more insights and resources on creating cost-effective discovery strategies leveraging ESI, visit Minerva26 and explore our practical tools, case law library, and on-demand education from the Academy.

Kelly Twigger:

Welcome to the Case of the Week segment of the Meet and Confer Podcast, where each week I break down a recent decision in electronic discovery case law, talk about the practical impact for you and your clients, and keep you up to date on your obligations as litigators with electronically stored information as evidence. If you're a litigator, legal professional, or you love the power of ESI as much as I do, this is the place to be.

Kelly Twigger:

I'm your host, Kelly Twigger, the CEO and founder at Minerva26 and the Principal at ESI Attorneys, with more than 25 years of experience navigating the evolving landscape of litigation and discovery of ESI. This week's decision involves an aspect of discovery that remains a technological challenge to preserve, collect, and provide: ephemeral messaging. Today's decision from the Two Canoes case highlights how quickly a simple communication overseas can have dramatic implications when sanctions are sought following the loss of WeChat messages on a mobile device. It highlights two of our regular themes here on Case of the Week: the need to do early planning and consideration of all data sources that are implicated, especially for mobile devices, and to pay careful attention to the timeline when data is lost relative to the duty to preserve. Those two themes are going to be rampant throughout this episode.

Kelly Twigger:

Before we dive in, let's take a brief pause to talk about mobile discovery. If your case hinges on a custodian's phone, ModeOne lets you pull only the relevant texts, chats, or photos in a fully remote manner. No kits and no travel. The user clicks a secure link and the data you choose lands in relativity the same day for a flat fee. I've watched it shrink collections from weeks to hours, and it just works. To learn more about how Mode One can help you get mobile data faster and more cost-effectively, visit mode one.io.

Kelly Twigger:

Let's get to the case today. The decision today comes to us from Two Canoes versus Addian. This is a decision from April 30th, 2024, written by United States Magistrate Judge Jose Almonte. As always, we identify each of the issues for our decisions within our Minerva 26 database. Issues covered by this case include ephemeral data, possession custody, or control, spoliation, bad faith, mobile device, text messages, legal hold, scope of preservation, sanctions, cloud computing, and failure to preserve. It's a lot of issues for not that long a case.

Kelly Twigger:

We are before the court here on Two Canoes' motion for sanctions for spoliation of WeChat messages by the defendant's CEO. This is the Magistrate Judge's report and recommendation to the District Judge. The underlying facts of the case allege that Addian sold allegedly fraudulent N95 masks manufactured by 3M to Two Canoes during the pandemic. So recall that the N95 masks were in very short supply during the early part of the pandemic when everyone was scrambling to get their hands on personal protective equipment, otherwise known as PPE.

Kelly Twigger:

Addian is a small family-owned company that provides logistics services to its customers and is headed by Adam Woolworth. Aobvious was one of Addian's customers. A obvious also provided logistics services and included Two Canoes on its client roster. So we've really got a chain of three companies, Addian buying the mask, selling them to Aobvious, who then sold them to Two Canoes.

Kelly Twigger:

In 2020, Woolworth reached out to Robert Fisher, a contact in China, who Woolworth understood could supply N95 masks from a 3M manufacturer in China. Fisher supplied those masks to Addian, who then supplied the masks to Aobvious, then supplied the masks to Two Canoes. Two Canoes then supplied the masks to resellers who sold the masks to end users. Makes you wonder whether the N95 masks you bought were actually free.

Kelly Twigger:

Here's where the timeline comes into play in the case. In November 2020, 3M sued Addian and other entities alleging the masks were counterfeit. Woolworth was aware of his duty to preserve as of the filing of that case and took steps to preserve data related to his Google accounts and other sources of ESI. Addian settled the lawsuit in June of 2021, and the 3M lawsuit was officially terminated in February 2022. On July 14, 2021, so a few weeks after Addian settled out of the 3M case, Two Canoes threatened litigation against Aobvious via email.

Kelly Twigger:

On July 16, 2021, Aobvious' counsel forwarded the email to Addian's counsel, putting Addian on notice of that litigation. Two Canoes then filed this action that's currently pending before us against Aobvious on November 4th, 2021, and Aobvious added Addian as a third party on January 7, 2022. During discovery of this litigation, Woolworth, Addian's Principal, collected and produced ESI, including emails, documents, and text messages with Fisher, a contact in China. He did not produce any messages from WeChat.

Kelly Twigger:

Now, if you're not familiar with it, WeChat is a very popular ephemeral messaging application from China that allows messages to disappear from WeChat servers. And at the time of the decision here, WeChat worked like this: Once 72 hours had lapsed since a chat message was sent, or 120 hours for images, audio, videos, and files, WeChat permanently deleted the content of the message on their servers. After deletion, neither WeChat nor any third party would be able to view the content of that message. Now, although the messages disappeared from the WeChat servers, it remained within the user's application only on the user's device, such as a cell phone, unless it has been otherwise backed up. So those messages would have lived on Woolworth's device and Fisher's device after they were deleted from the WeChat servers.

Kelly Twigger:

Woolworth testified at his deposition that while he communicated with Fisher primarily by phone call, he did correspond with Fisher a few times on WeChat, but he no longer had those messages due to a loss of his phone. And here's our twist where we talk about early preservation — Woolworth testified that he discarded at least three cell phones in the span of approximately a year and a half: The first one in September 2020, so before the November 2020 duty to preserve in the 3M case, the second in October 2021, after both cases had arisen, which was broken and recycled, and the third one in February 2022. Woolworth did not back up the WeChat messages from the phones.

Kelly Twigger:

Now the parties dispute whether Woolworth made reasonable efforts to recover any lost WeChat messages to the extent they existed. Fisher is in the wind at this point and unresponsive to any subpoena, so there is no other way to recover the messages. All right, those are the facts before us on our motion for sanctions.

Kelly Twigger:

Let's talk about what the court's analysis is. Now, plaintiff here sought sanctions under Rule 37E2 of the Federal Rules of Civil Procedure for Failure to Preserve and asked for an adverse inference instruction to be applied at a summary judgment stage. Now, this case is an excellent example of analysis done under Rule 37, and I recommend that you spend a few minutes reading it and bookmarking it for reference when you're addressing these issues. And the court goes into the initial elements of the spoliation of the data more than usual because of the facts of this case. And it's not an analysis that we see very often. Now, the court goes through, as I mentioned, each step in the analysis under Rule 37 in the context of the timeline of the case and held, not surprisingly, that Addian had a duty to preserve as of November 5th, 2020, and that continued with the filing of the case against Aobvious, in which Addian was later made a third party. Since the communications with Fisher were clearly relevant, the court considered whether the chat messages were lost after the duty to preserve attached.

Kelly Twigger:

Now, critical to the court's analysis here was that Woolworth initially lost the phone with the WeChat messages on it in September 2020 before the 3M litigation was filed, which meant it was not subject to spoliation analysis. The court then looked at two relevant time periods after the duty attached, November 5th, 2020 through October 2021, and October 21, 2021 through February 2022. And the court found that WeChat messages from between November 5th, 2020 and October 2021 were lost. Plaintiff did not meet its burden to show that messages were lost during the subsequent time period. So we've established the messages were lost for purposes of this spoliation analysis.

Kelly Twigger:

The court next determined that Woolworth did not take reasonable steps to preserve the WeChat messages and then moved to discuss available sanctions, including whether prejudice and intent to deprive existed. Now, based on the evidence that Woolworth communicated primarily with Fisher via phone, the court found it, " difficult to ascertain the extent to which plaintiffs suffered prejudice, if any, from defendant's spoliation."

Kelly Twigger:

Now the court's discussion here relative to the timing of the facts is very important. And I urge you to read it. It's too detailed for us to cover completely today. This is the kind of factual analysis that's so critical to motion practice, and it's what you're going to want to include in your motion papers to be able to make the most effective arguments for your client. As a result of that analysis, the Magistrate Judge recommended that the court defer a decision on prejudice until trial, when, quote, the court will be in a better position to evaluate Two Canoes' evidence and determine what the missing WeChat messages could plausibly establish. Close quote.

Kelly Twigger:

Now the magistrate judge took a similar approach on the intent issue, finding that while Woolworth should have kept the broken phone instead of recycling it, it could not find bad faith based on Addian's preservation of other ESI. But the court left the final determination up to the jury following the process outlined in the advisory notes from 2015. Quote, because the issue of intent is one that might hinge on credibility, I recommend that Two Canoes be given the opportunity at trial to inquire about Woolworth's intent so that the court or the jury may determine what sanction, if any, is appropriate after evaluating Woolworth's credibility. Close quote. The court also recommended that Two Canoes be given the opportunity to examine witnesses at trial to determine whether Addian acted in bad faith.

Kelly Twigger:

Now, this is the second decision we've seen recently where the court is sending that intent determination on a sanctions motion to a jury. And that has pros and cons to it. So let's talk about that in terms of the takeaways. This sending of a determination of intent to a jury can be very fraught. One, it removes the focus of the original evidence and forces a trial team to have almost a separate intent inquiry and to deal with that at trial. That's not something you want to be dealing with, especially when you're calling your main witness credibility into question. So Woolworth is the one who had all the communications for Addian. He's the one whose credibility is going to be most at key in determining whether or not Addian knew that these maps were fraudulent when they resold them to Aobvious and then to Two Canoes. So that credibility issue is going to be hugely complicated, very important. And to add the intent element to sanctions associated with it really complicates things from a trial perspective. It's not something you want to have happen. For that reason, our very first takeaway is critical. And that is early, early planning, conducting custodian interviews, and identifying sources of ESI is critical. These types of factual scenarios, like Woolworth losing his phone three times, come up in almost every case in which a custodian may not have every relevant piece of ESI. It may be custodian-based, it may be enterprise-based, right? Oftentimes databases are an issue that gets shut down that were never implicated in the litigation and sometimes just come up at some point, and there's a spoliation argument made. Figuring out and identifying issues related to lost data early, that will allow you to strategize and figure out how to deal with them. You always have options that need to be considered strategically. Should you advise counsel about the lost data and the timeline when it was lost? Prep your witness to address the issue at their deposition? Come up with strategic alternatives on how to address the court, how to approach this particular issue? But you can only have that ability to think strategically if you know about those potentially lost data sources. And you can only know that by asking custodians and your companies very early so that you're aware of those data sources. When you are dealing with them retroactively, i.e. finding out that there's spoliation of a potential data source later in the litigation, you are on your back heels just trying to survive.

Kelly Twigger:

The next takeaway: mobile devices are such an incredibly important part of ediscovery today. And counsel have to be aware of the types of data that's stored on phones that can be lost without taking active steps to preserve them. Here, it's likely that the data was lost before counsel even knew about the case in November 2020. But the cost of preserving Woolworth's phone would have been a drop in the bucket compared to defending this motion for sanctions and the risk that will come at trial on the issues of prejudice and intent. Here, it seems that if we had addressed this issue very early on, and maybe counsel hack, right? We're Monday morning quarterbacking here on case of the week. Maybe they knew about this issue from the outset of the 3M litigation. But you've got to be able to address it actually. And it didn't seem like from the portions of Woolworth's testimony that are cited in the decision that he was clear and concrete about when he communicated with Woolworth or Fisher via WeChat and when his phones were lost. If he could have done that better at his deposition, this issue might have been precluded. The court might have been able to better determine his credibility on this motion, or the motion could have been not brought in the first place if the information was sufficient that the motion wouldn't have carried.

Kelly Twigger:

Finally, keep in mind that as you're reading the facts of this case, this is how WeChat worked at the time at issue. Applications are constantly changing their retention practices, and it's imperative to know what was in place as of the time frame under consideration for the data that is at issue in your case based on your timeline. Don't rely on the facts about how WeChat operates in this decision at some later point. You'll want to confirm how data can be retained at the time your duty to preserve arises. Best course, take what WeChat does off the table and preserve the data sources that you have for your custodians so you can eliminate motion practice like this one.

Kelly Twigger:

That's our case of the week segment for today. And if you take nothing else with you, take this. Early identification of data sources that have a high likelihood of being lost, like WeChat messages, is now a critical component of your discovery strategy. This case is not the exception, it's the rule. Custodians replace their phones regularly, even when under a preservation notice, because they don't know or understand the law the way that you do or that you're required to. If your discovery strategy doesn't include an early assessment of applications from mobile devices containing responsive data, you're building a lot of risk into your case.

Kelly Twigger:

That's also why we built Minerva 26, the discovery strategy platform that connects case law rules and real-world workflows so that teams can turn decisions like this into a defensible plan instead of reinventing the wheel in every Meet and Confer.

Kelly Twigger:

If this episode was helpful, please do me a favor, share it with a colleague who's wrestling with these issues, post it on your LinkedIn with your biggest takeaway, because the fastest way to level up discovery strategy is to normalize these conversations in public. And if you haven't already, please subscribe to the Meet and Confer podcast so you don't miss the next ruling that changes what reasonable looks like. Thanks for listening. I'm your host, Kelly Twigger, and we'll be back next time with another case of the week.

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