VALERIANO SAUCEDO v. TRANS UNION LLC (2025)

ORDER GRANTING MOTION FOR SPOLIATION SANCTIONS

In this case alleging violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., Plaintiff Valeriano Saucedo (“Plaintiff”) requests sanctions for spoliation of relevant evidence by Defendant Trans Union LLC (“Defendant” or “Trans Union”). Specifically, Plaintiff seeks evidentiary sanctions and attorney's fees for Trans Union's spoliation of a call recording between Plaintiff and Trans Union in which Plaintiff allegedly informed Trans Union that he was the victim of identity theft. The Court reviewed the briefs and exhibits, and heard argument on February 12, 2025. For the reasons discussed herein, the Court GRANTS the motion and awards sanctions under Federal Rule of Civil Procedure 37(e)(1).

I. BACKGROUND

The Court includes only the factual and procedural background that are relevant to ruling on the present motion for sanctions. Plaintiff alleges that in July 2022, he ordered a credit report from Trans Union following a 2021 data breach at Flagstar Bank. Fourth Am. Compl. ¶ 36 (“Compl.”), ECF No. 83. Plaintiff's credit report revealed several fraudulent transactions, including a $31,000 unsecured loan from Lending Point, LLC, in Plaintiff's name. Id. ¶ 37. Plaintiff filed a police report regarding the fraudulent accounts. Id.

On July 27, 2022, Plaintiff called Trans Union twice to report the fraud and to dispute the Lending Point account. Id. ¶ 38. According to Plaintiff, he informed Trans Union that he was the victim of identity theft during the second call. Mot. for Sanctions at 2 (“Mot.”), ECF No. 157. Plaintiff asserts that the Trans Union representative was “dismissive” in response and failed to advise him to submit a police report or any other supporting documentation. Id. On August 5, 2022, Trans Union informed Plaintiff by letter that it had conducted an investigation and verified the Lending Point account as “accurate.” Compl. ¶ 38. Trans Union advised Plaintiff that he “would need to take further steps to resolve the dispute.” Id.

On August 26, 2022, Plaintiff commenced this action against Trans Union and Flagstar Bank. ECF No. 1. The complaint initially asserted an individual claim against Trans Union for violation of the FCRA, and class claims against Flagstar Bank arising from the data breach.¹ Id. It is undisputed that Trans Union was served with the complaint in September 2022. ECF No. 12. The operative complaint asserts class claims against Trans Union for violations of the FCRA and California's Unfair Competition Law, Bus. & Prof. Code § 17200 et seq., and for unjust enrichment. ECF No. 83.

According to Trans Union, Plaintiff first inquired about the call recordings on March 15, 2024. Decl. of Michael O'Neil (“O'Neil Decl.”) ¶ 3, ECF No. 129. Trans Union advised Plaintiff that “the recordings [of both calls] were no longer available.” Id. ¶ 4. On July 25, 2024, Plaintiff informed Trans Union that he intended to seek sanctions in connection with Trans Union's failure to preserve the call recordings; subsequent emails between the parties did not resolve the discovery dispute. Decl. of Michael Ram (“Ram Decl.”) Ex. B, ECF No. 120-3; id. Ex. C, ECF No. 120-4; Reply Decl. of Michael Ram (“Ram Reply Decl.”) ¶ 4, ECF No. 149-1. On August 27, 2024, Plaintiff filed this Rule 37(e) motion for evidentiary and monetary sanctions based on Trans Union's destruction of the July 27, 2022 audio recordings. ECF No. 120.²

The day before Plaintiff's motion for sanctions was filed, Trans Union Senior Advisor Lynn Prindes (“Prindes”) “learned that Trans Union had instituted a preservation hold in connection with a separate and unrelated legal matter pursuant to which audio recordings of consumer calls made in 2022, regardless of content, had been preserved.” Decl. of Lynn Prindes (“Prindes Decl.”) ¶ 5, ECF No. 154. Trans Union conducted a manual search and located a recording of the first call Plaintiff placed to Trans Union on July 27, 2022. Id. ¶¶ 7-8. Trans Union produced that recording to Plaintiff on September 23, 2024. O'Neil Decl. ¶ 5; Ram Reply Decl. Ex. C. Trans Union searched for the recording of the second call made that day, but was unable to locate it. Prindes Decl. ¶¶ 9-10. Plaintiff moves for sanctions due to Trans Union's spoliation of this second call recording, which was never located or produced.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 37(e), a party may be sanctioned for failing to preserve electronically stored information when the information: (1) should have been preserved “in the anticipation or conduct of litigation”; (2) it was lost “because a party failed to take reasonable steps to preserve it”; and (3) it “cannot be restored or replaced through additional discovery[.]” Fed. R. Civ. P. 37(e). If the moving party satisfies these three criteria and the court finds that prejudice occurred due to the loss of the information, the court may order measures “no greater than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1); see Porter v. City and Cnty. of San Francisco, No. 16-cv-03771-CW (DMR), 2018 WL 4215602, at *3 (N.D. Cal. Sept. 5, 2018).

If the court finds that the spoliating party acted intentionally to deprive the moving party of the information, the court may award more severe sanctions, including a jury instruction that the information was unfavorable to the spoliating party, or dismissal of the action. Fed. R. Civ. P. 37(e)(2); Porter, 2018 WL 4215602, at *3. Rule 37(e)(2) does not define “intent,” but courts have found that it requires something more than negligent or grossly negligent behavior, i.e., that a party purposefully destroyed evidence to avoid its litigation obligations. Porter, 2018 WL 4215602, at *3; see also Facebook, Inc. v. OnlineNIC Inc., No. 19-cv-07071-SI (SVK), 2022 WL 2289067, at *6 (N.D. Cal. Mar. 28, 2022).

III. DISCUSSION

A. Trans Union Spoliated Evidence.

All three of the Rule 37(e) criteria are met here. First, Trans Union had a duty to preserve the call recording once it was served with the complaint containing a FCRA claim on September 29, 2022. ECF No. 12. “As soon as a potential claim is identified, a litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action.” Doe LS 340 v. Uber Techs., Inc., 710 F. Supp. 3d 794, 801 (N.D. Cal. 2024) (citing In re Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060, 1067 (N.D. Cal. 2006)). According to Trans Union, the call recordings did not “become relevant” until May 2024, when Plaintiff sought to amend the class definition. Opp. to Mot. (“Opp.”) at 5, ECF No. 153. This argument is unavailing because Trans Union had an obligation to preserve the call recordings when it first became aware of the FCRA claim in September 2022.

Second, Trans Union failed to take reasonable steps to preserve the call recording. Trans Union records incoming consumer calls “[i]n the ordinary course of business” for quality assurance and training purposes, retains them for a specific time period, and then destroys them. Prindes Decl. ¶ 4. Trans Union failed to suspend its ordinary-course destruction of call recordings once it learned of Plaintiff's FCRA claim, and the second call recording was lost as a result. Id. Third, the spoliated evidence cannot be restored or replaced. Trans Union has searched for the second call recording but did not find it. Id. ¶ 10.

Additionally, Plaintiff demonstrates prejudice resulting from the spoliation. Plaintiff's FCRA claim is based on the theory that Trans Union failed to follow reasonable investigation procedures, including its failure to review and consider all relevant information submitted by Plaintiff. Reply at 5, ECF No. 158. Without the second call recording, Plaintiff contends that he lacks key evidence needed to prove these allegations. Id. Specifically, Plaintiff is deprived of evidence that he informed Trans Union that he was a victim of identity theft; that Trans Union did not counsel him on how to challenge a fraudulent charge; and that Trans Union did not advise him to submit a police report in support of his dispute. Mot. at 6. Evidence establishing these facts may bear on the reasonableness of Trans Union's investigation, and may have been persuasive to a jury. Moreover, Trans Union has leveraged its own internal notes – which it did retain – to discredit Plaintiff's recollection of the call.³ Opp. to Mot. to Certify Class (“Class Cert. Opp.”) at 2, 11-12, ECF No. 110.

B. Trans Union's Spoliation Was Not Intentional.

Once the moving party has demonstrated prejudice, the court may only employ measures “no greater than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1). More severe sanctions may be imposed with a finding of intentional spoliation. Fed. R. Civ. P. 37(e)(2). Relevant factors for determining whether the spoliating party intended to deprive the moving party of the lost information “can include, inter alia, the timing of the destruction, the method of deletion (e.g., automatic deletion vs. affirmative steps of erasure), selective preservation, the reason some evidence was preserved, and, where relevant, the existence of institutional policies on preservation.” Laub v. Horbaczewski, No. CV 17-6210-JAK (KS), 2020 WL 9066078, at *6 (C.D. Cal. July 22, 2020).

Plaintiff argues that such a finding is warranted because Trans Union destroyed the call recording while this litigation was pending, despite being on actual notice of Plaintiff's FCRA claim within its retention period. Mot. at 7. The record does not support a finding of intentional spoliation. It appears that Trans Union allowed the recording to be deleted a few months after this action commenced in accordance with its standard retention policy for call recordings. See Prindes Decl. ¶ 4. Although Trans Union should have preserved the recording after the litigation had commenced, its failure to do so reflects gross negligence, not the intentional destruction of evidence to deprive Plaintiff of the call recording. See Laub, 2020 WL 9066078, at *6. It is true that Trans Union preserved other internal records of the same call (i.e., its operator's notes), but those records were subject to a different retention schedule. See O'Neil Decl. Ex. 5 at Bates No. SAUCEDO-TU0000004-17, ECF No. 111-5. Thus, this seeming discrepancy does not demonstrate the intent to create a one-sided evidentiary record as alleged by Plaintiff.

Although not intentional, Trans Union's spoliation is of notable concern. The cornerstone of Trans Union's business is to act as a trusted steward of consumer financial records.⁴ Uncorrected errors in a consumer's credit report can cause significant and long-lasting financial harm. When a consumer disputes a credit report, the consumer reporting agency often has exclusive control of evidence reflecting its investigation into the dispute. For these reasons, the Court is troubled by Trans Union's dismissive approach to its preservation obligations in this case. At the motion hearing, Trans Union argued that the call recordings “are really not all that significant” and retaining them is “not necessary” because Trans Union's internal call notes are sufficient. Hr'g Tr. at 10, ECF No. 171. It is not Trans Union's place to decide what evidence is “significant enough” to retain. Rather Trans Union must abide by its duty to preserve evidence under Rule 37(e). See Doe LS 340, 710 F. Supp. 3d at 801. The result of Trans Union's actions is that Plaintiff has been deprived of a call recording that may support his claims, while Trans Union retains contemporaneous notes made by its employees that it has already used against Plaintiff. See Class Cert. Opp. at 11-12. Plainly, this is an unjust result. Thus, the Court will enter a limited preclusion order to cure the prejudice caused by the spoliation.⁵

C. A Targeted Preclusion Order Is An Appropriate Sanction.

After meeting and conferring at the motion hearing regarding the scope of the evidence to be precluded, the parties stipulated to redacting four lines from the document bates-numbered SAUCEDO-TU00000017 reflecting Trans Union's internal notes concerning the second call. Accordingly, the Court ORDERS that Trans Union shall be precluded from offering into evidence or relying on the redacted portion of the document bates-numbered SAUCEDO-TU00000017 for any purpose, including for impeachment, pursuant to Rule 37(e)(1). To the extent Trans Union seeks to introduce or rely on substantially the same evidence in different forms (e.g., deposition testimony about the redacted portion of the document), Plaintiff may file motions in limine, as necessary, to exclude or limit the use of such evidence.

IV. MONETARY SANCTIONS

The Court may award monetary sanctions under Rule 37(e)(1) in the form of fees and costs associated with spoliation. RG Abrams Ins. v. L. Offs. of C.R. Abrams, 342 F.R.D. 461, 522 (C.D. Cal. 2022) (“In addition to the sanctions available under Rule 37(b)(2)(C), courts may award costs and fees associated with spoliation as a sanction under Rule 37(e)(1).”). Plaintiff requests $57,685 in fees incurred in bringing this motion. Ram Reply Decl. ¶¶ 2-5; see also id. Ex. C.

Trans Union objects to Plaintiff's supporting evidence on the ground that it was untimely filed and fails to support counsel's purported hourly rates. The Court overrules the objection in part because the Local Rules permit the inclusion of evidence with the reply. See Civ. L. R. 7-3(c). The Court agrees, however, that the declaration offered in support of the fee request is deficient because it fails to “set forth an appropriate justification” for the hourly rates charged by counsel, in the amount of $850, $1,000, and $1,300, respectively. Civ. L. R. 37-4(b)(3). Plaintiff has not submitted any evidence of counsel's experience or expertise and has not provided comparable hourly rates in this jurisdiction for similar legal services. Nor has Plaintiff explained why this sanctions motion needed three attorneys to bill a total of 59.5 hours. Thus, Plaintiffs have not offered a reasonable basis for awarding the amount requested.

Mindful of Rule 37(e)(1)'s directive that an appropriate remedy for spoliation impose “measures no greater than necessary to cure the prejudice,” the Court therefore reduces the requested fees by 50%, and awards Plaintiff a total of $28,000 in fees. See Meta Platforms, Inc. v. BrandTotal Ltd., 605 F. Supp. 3d 1218, 1241 (N.D. Cal. 2022) (finding that Meta “overreached” in seeking overly severe sanctions and reducing requested fee award by 25%).

V. CONCLUSION AND ORDER

For the foregoing reasons, the Court grants the motion for spoliation sanctions, and orders as follows:

1. Trans Union is hereby precluded from introducing into evidence the portion of SAUCEDO-TU00000017 that the parties have stipulated to redact on February 12, 2025, or relying on that portion, for any purpose; and

2. Trans Union is ordered to pay Plaintiff $28,000 in monetary sanctions for fees incurred in bringing this motion.

IT IS SO ORDERED.

FOOTNOTES

1.   In November 2022, District Judge Beth Labson Freeman severed all claims against Flagstar Bank and transferred them to the Eastern District of Michigan to be litigated with pending state and federal cases arising from the 2021 Flagstar data breach. ECF Nos. 20, 28.

2.   Plaintiff later refiled the motion for sanctions, ECF No. 157, pursuant to the order regarding the parties' joint consolidated sealing motion, ECF No. 148.

3.   Trans Union argues that although it used the call notes for the purpose of impeaching Plaintiff on a class certification issue, Plaintiff cannot demonstrate prejudice because “the contents of the [second] call ․ will be wholly irrelevant to any issues at trial.” Opp. at 6. But, without an evidentiary sanction, Plaintiff still faces the risk that Trans Union will unfairly leverage the one-sided record against him at trial.

4.   See TransUnion Home Page, https://www.transunion.com/about-us (last visited Feb. 28, 2025).

5.   During the hearing, the Court stated that its tentative ruling was to preclude Trans Union from using its internal call notes for the second call pursuant to Rule 37(e)(1). The Court identified one page of one document that it was considering. Trans Union argued that such an order was impermissible under Rule 37(e) unless the Court found intentional destruction of evidence. Hr'g Tr. 16-17. In support of his argument, Trans Union's counsel quoted one sentence from the Advisory Committee notes to Rule 37, but omitted the very next sentence (emphasized below), which directly contradicts Trans Union's argument:An example of an inappropriate (e)(1) measure might be an order striking pleadings related to, or precluding a party from offering any evidence in support of, the central or only claim or defense in the case. On the other hand, it may be appropriate to exclude a specific item of evidence to offset prejudice caused by failure to preserve other evidence that might contradict the excluded item of evidence.Fed. R. Civ. P. 37(e) advisory committee's note to 2015 amendment (emphasis added). Whether intended, counsel's argument was misleading. The Court's proposed evidentiary sanction conforms to the Advisory Committee notes. Trans Union is admonished that future misrepresentations to the Court may result in issuance of further sanctions.

Eumi K. Lee United States District Judge