Buckle Up: Facebook and Instagram Seek Extreme Sanctions in Trademark Litigation Following Extensive Spoliation

In a recently filed motion in the United States District Court for the Northern District of California, plaintiffs Facebook, Inc. and Instagram, LLC (collectively, “the plaintiffs”) requested terminating sanctions pursuant to Federal Rule of Civil Procedure 37 in a trademark infringement and cybersquatting litigation against a domain registrar, based on the registrar’s destruction of over 11 million records. The motion relies heavily on a Special Master’s detailed report, which outlines egregious discovery abuses, including “ample evidence that Defendants failed to preserve responsive ESI, deleted ESI and withheld ESI.” In the motion, the plaintiffs requested a default judgment in the amount of $3.5 million ($100,000 for each of the 35 infringing domain names registered by defendant ID Shield), attorneys’ fees in the amount of $2,057,782.17, costs of the action, costs of the Special Master in the amount of $88,937, and a permanent injunction.

As background, the plaintiffs sued the defendants for cybersquatting pursuant to the Anti-Cybersquatting Consumer Protection Act, trademark infringement, false designation of origin, and dilution. Numerous discovery disputes arose in the litigation, including motion practice after the defendants: (1) failed to produce documents with proper metadata; (2) designated public documents as “confidential”; and (3) did not deduplicate hundreds of thousands of pages of documents. The plaintiffs subsequently requested the appointment of a Special Master to determine if the defendants deleted or withheld data and to supervise portions of the defendants’ ESI productions. The court appointed a Special Master on March 3, 2021 to “supervise and complete, with all reasonable diligence, Defendants’ collection, search and production to Plaintiff’s counsel of Defendants’ support ticket database.” The plaintiffs argued that the support ticket database contains notices received by the defendants regarding cybersquatting that are critical to the plaintiffs’ claims that the defendants acted in bad faith by failing to take action after receiving such notices.

As noted above, the Special Master prepared a report detailing his painstaking analysis of the discovery databases and other sources and concluding that the defendants intentionally withheld evidence, obfuscated the discovery process, and destroyed relevant evidence (now irrecoverable), and that the plaintiffs suffered irreparable harm as a result of the defendants’ spoliation of evidence. The Special Master explained that, “based on Defendants’ widespread activities involving ESI deletion, information withholding, and data dumping there is no other conclusion that Defendants acted intentionally to avoid producing responsive ESI to Plaintiffs.” In light of the Special Master’s extensive findings, it appears very likely that the court will award the plaintiffs the vast majority (if not all) of the relief they requested. We will continue to monitor this case and update the blog after the court adjudicates the plaintiffs’ pending motion. Stay tuned.