In an opinion yesterday, Magistrate Judge Ellis sanctioned The Money Store and other related defendants for failing to preserve evidence held by a third party vendor, Fidelity National Foreclosure Solutions. The underlying class action accuses the defendants of improper debt collection practices relating to mortgage loans, and the plaintiff argued that evidence from a database created by Fidelity (referred to as the “New Invoice System”) was improperly lost. Calling to mind a similar opinion from Magistrate Judge Mass two years ago (see this post), Judge Ellis found that, since the defendants has the legal right and practical ability to direct Fidelity to preserve evidence, they were required to do so:
Defendants had both the legal right and practical ability to obtain the information relating to fees in the New Invoice System after the initiation of this action. Defendants had a contract with Fidelity, the Master Services Agreement, which stated that billing invoices submitted to Defendants by Fidelity through the New Invoice System must “specifically identify the fees and costs for which payment or reimbursement is sought.” Because the Master Services Agreement gave Defendants a contractual right to demand the information specifically identifying the fees being charged, Defendants were in control of that information. . . . . The duty to preserve belongs to Defendants. They had the ability to preserve the information through Fidelity. They failed in that duty.