*1 Defendants’ Motion for Fed. R. Civ. P. 37 Sanctions for Plaintiff's failure to preserve documents (“Sanctions Motion”) is one of six discovery motions assigned to the Special Master by Magistrate Judge Prose [ECF No. 304]. The undersigned considers the Sanctions Motion pursuant to the Order Appointing Master for Discovery [ECF No. 303]. For the reasons that follow, Special Master GRANTS the Sanctions Motion.

The Sanctions Motion arises from the obligation of putative litigants to preserve documents and other information that may be relevant to pending or imminent litigation. Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 620 (D. Colo. 2007) (citing Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003) (“the obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation”). See also Fed. R. Civ. P. 37(e). However, that obligation is not boundless and, like most obligation under the Federal Rules of Civil Procedure, are governed by the concept of proportionality. See Fed. R. Civ. P. 26(b)(1). At issue in the Sanctions Motion is whether Plaintiff and Counter-Defendant, Crocs, Inc. (“Crocs”), properly preserved its Microsoft Team chats messages.

Microsoft Team chats is a messaging platform through which individuals can send “chat” messages to other individuals copied on a communication thread. A Team chats message is a form of communication that exists on an electronic device using the Microsoft Teams platform and qualifies as “documents” under Fed. R. Civ. P. 34(a)(1)(A).

Under Crocs’ document retention policy, if a custodian is not on a litigation hold, then the conversation history for Team chats goes back 90 days from the date of the search, and if a custodian is on hold, the conversation history for Team chats goes back 90 days from the date when the custodian was placed on hold. Accordingly, Team chats are only retained for 90 days from the date of an inquiry and/or the date a litigation hold is imposed.

Although the record is not crystal clear, it appears that the following dates are relevant to the Special Master's analysis:

*2 The Special Master is the “new kid on the block.” From a review of the pleadings and listening to counsel during the hearing on February 21, 2024, which lasted almost three hours, it appears that both sides are well represented by counsel, but that both sides have a tendency to take an extreme position. In the Sanctions Motion, Joybees seems to imply that Crocs should have instituted preservation measures “across the entire database in which it stores Team chats.” Given the fact that Crocs apparently has 5,000-6,000 employees, that position seeks to impose an obligation on Crocs that is disproportionate to the needs of the case pursuant to Fed. R. Civ. P. 26(b)(1). Similarly, however, Crocs’ position is that it fulfilled its obligations to preserve relevant evidence and that at most it failed to preserve evidence for only 21 days in November 2022 (from November 5 to November 25) [ECF 221 at 17]. That position unduly minimizes its obligations to preserve evidence. The proper balance lies somewhere between the two positions stated by the parties.

It is the Special Master's opinion that Crocs did too little and too late to preserve the relevant Team chats. Specifically, at least as early as July 9, 2020, Crocs knew that it had potential claims against both Kellen McCarvel and Joybees, Inc. Crocs explains its failure to impose a litigation hold at that time based on its negotiations with Mr. McCarvel to resolve the issues, and it relied on certain representations by him that he would cooperate. However, Crocs should have known that it was possible that settlement negotiations would not be successful and, indeed, they were not.

Crocs filed its lawsuit a little over a year later. In hindsight, it certainly seems prudent that Crocs would have instituted some form of litigation hold in or around July 2020, at least as to the individuals and issues that were the subject matter of the cease and desist letter. See Exhibit A, Declaration of Shelby L. Morbac in Support of Defendants’ Motion for Fed. R. Civ. P. 37 Sanctions against Plaintiff, Crocs, Inc. [ECF 201-2 at 2]. Even if Crocs can be excused from imposing a litigation hold when it sent a demand letter, it should have imposed a litigation hold when it filed its Complaint on or about October 21, 2021, alleging claims for misappropriation of trade secrets and trademark infringement.[2] However, it is questionable whether the original litigation hold, even considering the 55 individuals who were already subject to a litigation hold, was adequate in terms of the scope of the individuals covered by the original litigation hold.

After the Answer and Counterclaim were filed in November 2021, and after the Defendants had served written discovery on February 28, 2022, Crocs should have expanded the scope of the individuals covered by the litigation hold because it was on notice that the scope of the litigation had substantially increased and, therefore, the scope of the individuals having relevant information also increased. Instead, Crocs did not broaden its litigation hold until approximately November 4, 2022, and, by its own admission, 32 of those individuals were inadvertently not placed on a litigation hold until February 2023. Under these circumstances, the Special Master finds that Crocs’ efforts to preserve the Team chats was deficient.

Sanctions for failure to preserve electronically stored information is set forth in Fed. R. Civ. P. 37(e). That section states, in relevant part, as follows:

Here, the Special Master finds that there was no evidence that Crocs intended to deprive Joybees of the Team chats information at issue in the litigation. Instead, the Special Master finds that Crocs took too narrow a view of its obligation to preserve the Team chats both in terms of when a litigation hold should have been imposed and the scope of individuals on whom it should have been imposed. Additionally, contrary to Crocs’ position, the Special Master finds that there was prejudice to the Defendants in at least two respects. First, as Joybees points out in its Reply Brief, Crocs produced Team chats conversations that discussed both Kohl's and Walmart [ECF 232 at 8]. Second, Crocs seeks to place Joybees in an impossible Catch-22 position by asserting Defendants have not established prejudice when their inability to do so is in part due to the fact that Crocs did not retain the documents and, therefore, the Defendants do not know the contents of the documents that were destroyed by Crocs. To the extent there are difficulties of proof, the burden should not be imposed on the innocent party.

Based on the foregoing analysis, the Special Master rules that Crocs is prohibited from using at trial any Team chats messages from individuals who were not placed on a litigation hold on or before the date the original 13 individuals (which would include the additional 55 individuals already on a litigation hold) were placed on a litigation hold unless the Defendants elect to use a Team chats message from one of those individuals in which case that will “open the door” for Crocs to use any Team chats messages from that individual. See, by analogy, Fed. R. Evid. Rule 106.

IT IS SO ORDERED.