Monetary Sanctions for Misconduct Ordered Post-Settlement

• Pages: 9-9
• Date: 01 October 2024
• Author: Olivia S. Hiltbrand
• Subject Matter: Civil Law

acebook and its law rm

incurred nearly a million dol-

lars in sanctions post settle-

ment for prolonged discovery

misconduct in a consumer class-

action lawsuit. ABA Litigation Section

leaders caution that discovery miscon-

duct can subject clients and their law

rms to serious sanctions, and even a

negotiated settlement might not immu-

nize law rms and their clients from

imposition of post-settlement sanctions.

During the 2016 election, Cambridge

Analytica, a British consulting f‌irm,

took personal user data mined from

millions of Facebook accounts and

used it to target voters with political

ads. The data scientist who obtained

the user information collected it

through a software application on

Facebook’s platform. Despite having

only about 300,000 users, the app col-

lected the data of approximately 87

million Facebook users.

When the privacy scandal came

to light in 2018, the Federal Trade

Commission (FTC) began investigating

whether Facebook violated an earlier

FTC consent decree that, among other

things, required the company to main-

tain a reasonable user privacy program.

Facebook subsequently paid a $5 bil-

lion penalty to settle the FTC charges

that it “deceiv[ed] users about their

ability to control the privacy of their

personal information.”

Following the FTC settlement, three

dozen Facebook users f‌iled federal

lawsuits, which eventually were consoli-

dated into a single class-action com-

plaint. The named plaintis represented

all Facebook users whose personal

information was improperly shared or

inadequately protected since 2007.

The plaintis 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

Monetary Sanctions for Misconduct

Ordered Post-Settlement

in 2014, the plaintis alleged certain

so-called “whitelisted” apps contin-

ued to have access to user data and

that Facebook decided which apps to

whitelist based on f‌inancial gain. The

plaintis also alleged Facebook traded

personal information with other compa-

nies without disclosing that data-shar-

ing practice to users.

After more than two years of dis-

covery 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 litiga-

tion “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 plaintis 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” argu-

ments, improperly instructing witnesses

not to answer questions during deposi-

tions, and even claiming the plaintis

were the ones causing delays. “One

wonders if the lawyers on the other

side began to question their own san-

ity,” the court opined.

Litigation Section leaders believe

there are many lessons to be learned

from the decision. “It really can’t be

By Olivia S. Hiltbran d, Litigation News C ontributing Editor

overstated. If you lose your credibil-

ity with the court, you put yourself

and you put your client at a disad-

vantage—and that happened here,”

asserts Joseph V. Schaeer, Pittsburgh,

PA, Co-Chair of the Section’s Pretrial

Practice & Discovery Committee.

Because these sanctions followed

a settlement, Schaeer explains, rem-

edies that “might typically have been

in the court’s arsenal” were unavail-

able. Instead, the monetary sanctions

awarded were intended to account

for the time the plaintis’ counsel

spent obtaining documents the defen-

dants should have provided, explains

Schaeer, 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, Co-Chair 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.

Sanctions can aect more than just

the public reputations of f‌irms, attor-

neys, and clients. “Next time Facebook

goes into court and says, ‘We’ve pro-

duced 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,’”

Schaeer 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.”

FALL 2024 • VOL. 5 0 NO. 1

9 | A BA LITIGATION SECTION

ETHICS STRU GGLES IN THE LEGAL WORL D

Published in Lit igation News Volume 5 0, Number 1, Fall 2024. © 2 024 by the America n Bar Associati on. Reproduced wi th permission. A ll rights reserv ed. This informati on or any portion t hereof may not be copi ed or

disseminated in an y form or by any means or s tored in an electro nic database or re trieval system wi thout the express w ritten consen t of the American B ar Associatio n.