A recent Delaware Court of Chancery decision addressed penalties for spoliation of electronically stored information (ESI)—specifically, text messages that were not preserved for litigation despite a duty to do so. It is a cautionary tale for all litigators and provides insightful guidance for those anticipating or engaged in litigation.
In Infab Co. Inc. v. Cusick, 2025 WL 1618331 (Del. Ch. June 9, 2025), the court addressed a motion for spoliation sanctions by the defendant—more than a year after it granted a similar motion made by the plaintiff. Our last ethics column discussed another Court of Chancery decision on preservation duties and spoliation of ESI based on different facts, in the matter of In re Facebook Derivative Litigation (Del. Ch., Jan 21, 2025).
Some factual and procedural context will be helpful in understanding the court’s imposition of penalties for spoliation. Discovery was fraught from inception; ongoing discovery disputes led to the plaintiff filing an early motion to compel, requesting a preliminary injunction requiring the defendant to relinquish two computers, and a motion for sanctions for various violations of the court’s discovery orders. A prior decision in this case, Infab Co. v. Cusick, 2024 WL 277864 (Del. Ch. Jan. 25, 2024), addressed plaintiff’s motion for sanctions for spoliation relating to deletion of text messages and concluded that appropriate sanctions for that spoliation would be to draw inferences in favor of plaintiff where evidence was incomplete and it would be reasonable to infer that potential evidence had been deleted. The court also granted reasonable attorneys’ fees in that prior ruling.
The court’s prior decision to impose penalties was based on testimony at a spoliation hearing. At that hearing, the defendant testified that he had a habit of deleting text messages daily to clear his phone and that his phone was set to auto-delete texts every 30 days. He testified that he was unaware of his phone’s auto-delete setting or his duty to preserve text messages until a year and a half after inception of the case, despite evidence being presented that he had received a litigation hold notice and that he had communicated with his attorney concerning preservation requests near the inception of the case.
This most recent decision granted in part the defendant’s motion for spoliation sanctions based on the plaintiff’s failure to preserve text messages. Yes, both parties failed the ESI test. The court found that the plaintiff did not take reasonable steps to preserve relevant ESI. The company had relied upon self-collection and self-certifications by employees as well as a company texting policy—which was deemed insufficient. Infab had issued a litigation hold before the case was filed and entered into a stipulated and proposed order governing discovery of documents and electronically stored information (ESI Order) shortly after the case was filed. The order required the plaintiffs to preserve and collect data from all Infab employees during the relevant period. However, the plaintiffs failed to include certain key custodians in their ESI collection efforts and failed to ensure that employees’ texting practices complied with the ESI order. Depositions revealed that ESI had been lost.
As required by the ESI order entered in the case, the plaintiff provided a list of key custodians from whom they collected ESI. However, that list of key custodians excluded an officer who initiated and oversaw the investigation that eventually uncovered the misconduct that led to the initiation of the suit. It also excluded two partners to whom that investigator reported his findings over the course of the investigation.
After noting the omission of those custodians, the defendant requested confirmation that their ESI had been searched and preserved. In response, the plaintiff indicated that company policy discouraged use of text messaging and that the three custodians had conducted self-reviews and had not located any relevant messages.
Later, however, the defendant discovered through deposition testimony that one custodian had used text messages extensively during an internal investigation, but he had not disabled his phone’s auto-delete function, resulting in the loss of relevant messages. Another custodian admitted to deleting messages. Others were found to have selectively deleted messages and resisted forensic imaging efforts.
The court found that the plaintiff failed to take reasonable steps to preserve relevant ESI, leading to spoliation as defined by Court of Chancery Rule 37(e). The court also explained why reliance on self-certifications and a company texting policy was insufficient.
The court noted that self-collection and failure to disable auto-delete had been found sanctionable in Goldstein v. Denner, 310 A.3d 548 (Del. Ch. 2024). The chancellor emphasized that “parties must follow through by suspending deletion policies and ensuring compliance by key custodians.” Infab, 2025 WL 1618331 at *3.
The defendant successfully argued that the plaintiff’s failure to preserve ESI resulted in spoliation concerning two custodians, as most texts between them during the investigation were irretrievably deleted. However, the defendant did not prove spoliation regarding a third custodian’s ESI, as he complied with a targeted request to produce messages and did not refuse to image his phone. The court found the plaintiff’s other arguments against spoliation unpersuasive, noting that the missing information could have been relevant or could have led to admissible evidence.
The court awarded reimbursement of reasonable attorneys’ fees and costs associated with the plaintiff’s discovery failures. However, the court denied the request for adverse inferences without prejudice, allowing the defendant to raise the issue in post-trial briefing.