In the case Two Canoes LLC v. Addian Inc., the District of New Jersey addressed issues regarding the alleged spoliation of evidence, particularly concerning the failure of Defendant Addian Inc. (“Addian”) to preserve WeChat messages. Plaintiff Two Canoes LLC (“Two Canoes”) filed a motion that alleged Addian spoliated evidence when Defendant Addian failed to preserve crucial WeChat messages. In its motion, Two Canoes alleged that Addian intentionally failed to preserve the messages at issue and requested the Court grant an adverse inference sanction pursuant to Federal Rule of Civil Procedure 37(e)(2) at the summary judgement stage. To succeed on an adverse inference sanction pursuant to Rule 37(e)(2), Two Canoes had to prove that it was prejudiced by the loss of evidence and Addian acted with the intent to deprive it of such evidence.

By way of background, Two Canoes filed its lawsuit in November 2022 and alleged that Addian sold Two Canoes counterfeit N-95 Masks in 2020, during the height of the Covid Pandemic. Addian obtained the masks at issue from a contact in China, and Addian’s principal testified that he primarily communicated with his Chinese contact via live phone calls and text messages but admitted that he used WeChat a “couple times.” As part of discovery in the lawsuit, Addian produced all emails, text messages and documents it received from the contact in China but did not produce any WeChat messages. In November 2020, Addian’s principal was named a defendant in another lawsuit related to the counterfeit N-95 masks, yet he used and discarded multiple phones, which may have had relevant WeChat messages, after the related lawsuit was filed.

The court ruled that Addian’s principal had a duty to preserve discoverable WeChat messages since November 2020 because of the related lawsuit. In its spoliation analysis, the court focused on two discrete timeframes in which Addian’s principal possessed cell phones that he discarded after the duty to preserve arose: November 2020 to October 2021 and October 2021 to February 2022. For the November 2020 to October 2021 timeframe, the court found that Addian’s principal failed to take reasonable steps to preserve relevant WeChat messages and Two Canoes failed to establish the specific evidence that was “lost.” For the and October 2021 to February 2022 timeframe, the court ruled that Two Canoes failed to establish that WeChat messages existed, and, thus, the Court ended its sanctions analysis for that timeframe.

Ultimately, the court found that Two Canoes failed to satisfy its burden of proof for adverse inference sanctions at the summary judgment stage and denied Two Canoes’ motion without prejudice until trial. Regarding prejudice, the court opined that because Two Canoes did not establish what evidence was missing, trial would be the appropriate venue for Two Canoes to prove prejudice.  Regarding the intent to deprive, the court found it significant that Addian otherwise complied with a litigation hold since the filing of the related lawsuit and Addian’s principal testified that he believed any data on the discarded phones was backed up to his Google Account. The Two Canoes case highlights the difficult showings a movant must prove to succeed on a Rule 37(e)(2) motion. In essence, a movant must be able to demonstrate what evidence was specifically destroyed by the non-moving party and that the non-moving party acted in bad-faith. Otherwise, the motion will likely be denied.

If your organization is seeking support with eDiscovery, our team has solutions to address all phases of the discovery process. At CODISCOVR, we deliver client-focused, defensible, and scalable solutions using advanced technology and intelligent review practices to meet eDiscovery, document review, and information governance needs in a manner that reduces the risks and costs associated with electronically stored information (ESI). Reach out to Nicholas Berenato, Associate Attorney at CODISCOVR. Nick focuses his practice on information governance and electronic discovery in the construction, higher education, financial services, antitrust, government investigations, white-collar, insurance defense, and health care and life sciences industries.