Monetary Sanctions for Misconduct Ordered Post-Settlement

The plaintiffs alleged that Facebook allowed third-party app developers to request users’ permission to access their friends’ personal information and collect “vast” amounts of information without the friends’ consent. While Facebook limited this functionality in 2014, the plaintiffs alleged certain so-called “whitelisted” apps continued to have access to user data and that Facebook decided which apps to whitelist based on financial gain. The plaintiffs also alleged Facebook traded personal information with other companies without disclosing that data-sharing practice to users.

Discovery Disputes Last Nearly Three Years

After more than two years of discovery in the litigation, the U.S. District Court for the Northern District of California imposed discovery sanctions against Facebook. The district court had invited the sanctions motion by stating that it appeared Facebook and its law firm were to blame for litigation “going nowhere.” The court stayed the litigation when the parties settled in August 2022, but kept the sanctions motion pending.

Ultimately, post-settlement, the court imposed sanctions on Facebook and its counsel.

“It’s almost as if Facebook and [its law firm] spent the better part of three years trying to gaslight their opponents, not to mention the Court,” the court wrote. The court reasoned that the sanctions of approximately $925,000—which it described as “loose change”—encompassed only the worst of the defendants’ misconduct and likely accounted for “just a portion” of the costs the plaintiffs incurred.

Among examples of misconduct, the Facebook court cited: Incorrectly designating thousands of documents as privileged, “twisting” statements of opposing counsel and the court, repeatedly making “frivolous” arguments, improperly instructing witnesses not to answer questions during depositions, and even claiming the plaintiffs were the ones causing delays. “One wonders if the lawyers on the other side began to question their own sanity,” the court opined.

The Remedial Purpose of Sanctions

Litigation Section leaders believe there are many lessons to be learned from the decision. “It really can’t be overstated. If you lose your credibility with the court, you put yourself and you put your client at a disadvantage—and that happened here,” asserts Joseph V. Schaeffer, Pittsburgh, PA, cochair of the Section’s Pretrial Practice & Discovery Committee.

Because these sanctions followed a settlement, Schaeffer explains, remedies that “might typically have been in the court’s arsenal” were unavailable. For example, adverse inference instructions (where a judge instructs a jury to assume as true an otherwise-disputed fact), case-terminating sanctions (where the court enters judgment against one party for discovery misconduct), or simply attorney fees.

Instead, the monetary sanctions awarded were intended to account for the time the plaintiffs’ counsel spent obtaining documents the defendants should have provided, explains Schaeffer, adding, “That would be fees that would have come out of the settlement amount that Facebook had already funded.”

The standard for sanctions is one of “bad faith,” explains Jason K. Kellogg, Miami, FL, cochair of the Section’s Class Actions & Derivative Suits Committee. “What the court does here is kind of puts the facts together side-by-side and says, ‘Take a look at this. Doesn’t this seem like evidence of what they’re doing?’ without actually saying, ‘There’s proof that this is exactly what they were doing,’” Kellogg illustrates.

Sanctioning Firms or Individual Attorneys

The Facebook court imposed sanctions on Facebook and its law firm, rather than single out individual lawyers. “I think it starts in the first instance with how the movant frames the request. Does the movant ask for opposing counsel to be sanctioned individually? That’s a very uncomfortable thing to ask for,” Schaeffer posits.

Sanctions can affect more than just the public reputations of firms, attorneys, and clients. “Next time Facebook goes into court and says, ‘We’ve produced all the documents,’ someone says, ‘You know what? I don’t know that I’m going to take your word for that because of your past conduct,’” Schaeffer counsels. “As a lawyer, each of us wants to be a zealous advocate, but there is a line,” Kellogg cautions. “And every once in a while, a case like this comes out to remind us what that line looks like.”

Hashtags: #discovery; #sanctions; #privacy

Resource

• FTC Imposes $5 Billion Penalty and Sweeping New Privacy Restrictions on Facebook, Federal Trade Commission (July 24, 2019).
• Debra Cassens Weiss, “Tech companies under fire: Facebook to pay $5B, antitrust probe opened, AG Barr criticizes encryption,” ABA J. (July 24, 2019).
• Debra Cassens Weiss, “Judge sanctions Facebook and BigLaw firm $925K for ‘delay, misdirection and frivolous arguments,’” ABA J. (February 13, 2023).

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