United States Of America v. Stratics Networks Inc. et al

1
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
STRATICS NETWORKS INC., et al.,
Defendants.
Case No.: 3:23-cv-00313-BAS-KSC
REPORT AND
RECOMMENDATION FOR ORDER
GRANTING IN-PART PLAINTIFF’S
MOTION FOR SANCTIONS [Dkt.
Nos. 191, 222]
Before the Court is plaintiff’s Motion for Rule 37(b) and 37(e) Sanctions (“Motion
for Sanctions”) [Dkt. Nos. 191, 222] filed against defendants Atlas Marketing Partners,
Inc. (“Atlas Marketing”); Atlas Investment Ventures, LLC (“Atlas Investment”); Tek
Ventures, 	LLC, 	d/b/a 	Provident 	Solutions 	(“Provident 	Solutions”); 	Eric 	Petersen
(“Petersen”); and Todd DiRoberto (“DiRoberto”) (collectively “defendants” or the “Atlas
defendants”). For the reasons discussed below, the Court RECOMMENDS that plaintiff’s
Motion for Rule 37(b) and 37(e) Sanctions be GRANTED in-part with respect to all Atlas
defendants. The Court’s Order is as follows:
I. 	BACKGROUND
a. Procedural Background
On August 29, 2025, plaintiff filed the instant Motion for Sanctions asserting that
defendants violated Fed. R. Civ. P. 37(b) (“Rule 37(b)”). Dkt. No. 191. On September 12,
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 1 of 20

2
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
2025, the Atlas defendants filed their Opposition to plaintiff’s Motion for Sanctions. Dkt.
No. 194. On September 19, 2025, plaintiff filed its Reply to defendants’ Opposition. Dkt.
No. 196.
On November 3, 2025, the Honorable Judge Bashant referred plaintiff’s Motion for
Sanctions to the Honorable Judge Crawford for Report & Recommendation. Dkt. No. 216.
After reviewing the parties’ briefs, the Honorable Magistrate Judge Crawford ordered the
parties on November 20, 2025 to file supplemental briefing on whether defendants conduct
also violated Fed. R. Civ. P. 37(e) (“Rule 37(e)”). Dkt. No. 217.
Plaintiff filed its Supplemental Memorandum in Support of Rule 37(e) Sanctions
(“Supplemental Memorandum”) on December 3, 2025. Dkt. No. 222. Defendants filed
their responsive supplemental briefing on December 10, 2025. Dkt. No. 223.
b. The Atlas Defendants
Defendant Atlas Marketing, a Nevada lead generation company, was a customer of
Stratics Network, Inc. (“Stratics”), a now dismissed co-defendant. Dkt. No. 71. Defendants
Eric Petersen and Todd DiRoberto are co-owners of Atlas Marketing, Atlas Investment,
and Provident Solutions. Id. at 2. Between September 2019 and November 2020, Atlas
Marketing allegedly purchased access to Stratics’s ringless voicemail service to offer credit
card debt relief services to consumers. Dkt. No. 1 at 16. Atlas Marketing allegedly
represented to consumers that it could “resolve [the consumer’s] credit card debt in 24
months 	with 	affordable 	repayment 	options.” 	Id. 	Through 	Stratics’s 	service, 	Atlas
Marketing was allegedly responsible for delivering more than 23 million pitches. Id. When
consumers who received these messages called Atlas Marketing back, they were connected
to live telemarketers who sold debt services. 	Id. at 17. The phone calls with live
telemarketers were recorded and stored on Atlas’s Amazon Web Services (“AWS”) storage
account, along with all other Customer Relationship Management (“CRM”) data. The
recordings of these phone calls are the disputed spoliated evidence at issue in the present
motion.
/ / /
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 2 of 20

3
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
c. 	Factual Background and Chronology
i. 	The Underlying Claims and Discovery Requests
The United States filed this lawsuit on behalf of the Federal Trade Commission
(“FTC”) on February 12, 2023, alleging “Atlas’s business practices violated Section 5(a)
of the FTC Act, 15 U.S.C. § 45(a) and the [FTC’s Telemarketing Sales Rule (“TSR”), as
amended, 16 C.F.R. Part 310]. Specifically: Counts I and V allege that Atlas made
misrepresentations to consumers regarding material aspects of its debt relief service,
including on telephone calls with consumers.” Dkt. No. 191-1 at 11.
First, 	the 	United 	States 	alleges 	Atlas 	Marketing, 	DiRoberto, 	and 	Petersen
misrepresented a debt relief service, in violation of the TSR and Section 5 of the FTC Act,
by stating to consumers they would be out of credit card debt within 24 months and that
they did not apply consumers’ monthly payments toward consumer debts (“Count I”;
“Count V”). Dkt. No. 71 at 3. Second, plaintiff alleges Atlas Marketing, Petersen, and
DiRoberto 	were 	responsible 	for 	initiating 	outbound 	telephone 	calls 	that 	delivered
prerecorded sales messages to consumers in violation of the TSR (“Count III”). Id. Third,
plaintiff alleges these defendants did not truthfully or promptly disclose the seller’s identity
in their outbound telephone calls in violation of the TSR (“Count IV”). Id. Finally, plaintiff
alleges Atlas Marketing, Petersen, and DiRoberto requested or received a fee from
consumers for a debt relief service prior to the renegotiation, settlement, or reduction of
the terms of their debt in violation of the TSR (“Count VI”). Id.
Central to plaintiff’s claims against the Atlas defendants are allegations that they
made “deceptive representations” to consumers over the phone. Dkt. No. 191-1 at 5. The
parties do not dispute that recordings of the live phone calls existed, that they were stored
on defendants’ AWS cloud storage platform, and that they were subsequently deleted from
defendants’ AWS cloud storage platform. The gravamen of the disputed factual allegations
underlying plaintiff’s Motion for Sanctions lies in how and why the audio recordings were
deleted from the Atlas defendants’ AWS cloud storage platform.
/ / /
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 3 of 20

4
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Below is a chronology of the key events before and after the recordings were deleted,
and the Atlas defendants’ conduct after they learned when and how the recordings were
deleted.
ii. 	The FTC Investigation, the Commencement of This Litigation, and
Atlas’s First AWS Notification (December 2020 – November 2023)
The alleged illegal conduct underlying this litigation was first brought to light in
December 2020, when the Atlas defendants were the subject of an FTC investigation
regarding their business practices and alleged violations of “Section 5 of the FTC Act, 15
U.S.C. § 45, and the Telemarketing Sales Rule, 16 C.F.R. Part 310.” Dkt. No. 191-1 at 9.
The claims in the FTC investigation are similar to those here and were brought under the
same federal statutes. Dkt. No. 1 at 28-29. During the investigation, on February 19, 2021,
the FTC issued a Civil Investigative Demand (“CID”) ordering the Atlas defendants to
produce, among other things, “[a]udio files containing all prerecorded messages included
in, delivered with or through, or played as part of any Outbound Telephone Calls You
dialed or caused to be dialed.” Dkt. No. 191-1 at 9. The FTC investigation is highly relevant
as to when the Atlas defendants’ duty to preserve documents arose and when they became
aware the call recordings were relevant to such claims.
The investigation resulted in the present litigation, which was filed in February 2023.
Dkt. No. 1. Later that year, on November 2, 2023, the Atlas defendants received their first
notice that their AWS account payments were overdue. Dkt. No. 194 at 5. After
determining that the AWS account was storing the Atlas defendants’ “email data, call
recordings for debt, and all the Swift backups and leads etc.,” Petersen asked if it was
possible to preserve the data on a drive or another platform that did not require payment.
Dkt. No. 194-1 at 9 (emphasis added). On November 15, 2023, Atlas’s Director of
Information Technology (“IT”), Ronald Johnson (“Johnson”), responded he would look
into it. Id. at 6.
/ / /
/ / /
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 4 of 20

5
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
iii. 	Discovery Begins and the Atlas Defendants Continue to Receive
Notifications from AWS (April 2024 – August 2024)
Fast forward five months, the parties held two Federal Rule of Civil Procedure 26(f)
conferences (“Rule 26(f) Conference”) on April 15, 2024 and May 15, 2024 as required by
this Court’s Notice and Order Setting Early Neutral Evaluation Conference. Dkt. No. 222
at 5. In the month between the two conferences, the Atlas defendants1 received three more
alerts from AWS stating their account was overdue and may be suspended for failure to
make payments.2 Dkt. No. 194-1 at 14, 18, 21. Petersen again followed up with Johnson,
who responded informing him that “the download was still running.” Dkt. No. 194-1 at 20.
On May 11, 2024, Johnson informed Petersen that the download was not working because
the account was locked, and payment was needed to reopen the account to continue the
download. Dkt. No. 194-1 at 20. Notably, the Atlas defendants did not disclose the
existence of the AWS server, the contents of the AWS server, or the issues they were
experiencing with regards to the server at either Rule 26(f) conference. Dkt. No. 222 at 6.
On May 27, 2024, AWS sent another email to the Atlas defendants informing them
that the account balance was overdue. Dkt. No. 194 at 7. Petersen again reached out to
Johnson requesting an update on the progress of the download, to which Johnson replied
that it was in progress but going slowly. Id.
On July 10, 2024, AWS again emailed the Atlas defendants regarding the overdue
account balance. Dkt. No. 194 at 7. Petersen informed Johnson that Atlas paid $1,400 due
to the delay in the download and asked when it would be complete. Id. The Atlas defendants
made additional failed attempts to download the files from the AWS cloud storage. Id.
/ / /
1 	The AWS emails were sent to “admin@atlasinvestmentventures.com” and carbon
copied to Pamela Adams, an Atlas employee.
2 	The email notifications were sent on April 20, 2024; April 25, 2024; and May 8,
2024. Dkt. No. 194-1 at 14, 18, 21.
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 5 of 20

6
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
On July 11, 2024, the parties filed their Rule 26(f) Joint Discovery Plan (“Joint
Discovery Plan”). Dkt. No. 99. In the Joint Discovery Plan, “[c]ounsel for the Parties
affirm[ed] that they [ ] reviewed the Checklist for Rule 26(f) Meet and Confer Regarding
Electronically Stored Information [ ] and [ ] met and conferred fully regarding the
preservation and discovery of ESI.” Dkt. No. 99 at 7. The Rule 26(f) checklist requires
counsel to, inter alia, “discuss any issues about preserving discoverable information ….”
Fed. R. Civ. P. 26(f)(2). Counsel for the Atlas defendants failed to inform the Court of their
preservation issues associated with the AWS account as required in the Joint Discovery
Plan. Fed. R. Civ. P. 26(f)(3)(C) (“A discovery plan must state the parties’ views and
proposals on … any issues about disclosure, discovery, or preservation of electronically
stored information ….”).
Between July 12, 2024 and July 23, 2024, the Atlas defendants made several
additional attempts to download the AWS files–all attempts failed. Dkt. No. 194 at 7.
Neither the records available to the Court nor the representations made by the Atlas
defendants in their briefing suggest that defendants made any attempts to preserve the files
on the AWS server from July 2024 to March 2025. See, e.g., id.
On August 2, 2024, the Atlas defendants received their seventh email from AWS
advising them of the overdue account balance and that the account may be suspended or
terminated. Dkt. No. 194-1 at 33.
iv. 	Plaintiff Serves Formal Written Discovery; Discovery Disputes Arise;
and the Atlas Defendants Learn, Delay, then Divulge That Their AWS
Account and Its Content Were Deleted (September 2024 – August
2025)
On September 20, 2024, plaintiff served its First Requests for Production (“RFP”)
on 	the 	Atlas 	defendants 	seeking 	“[a]ll 	documents 	relating 	to 	any 	agreements 	or
communications between You and any other person that relate to telemarketing, telephone
calls, voicemail, or creating, sending, or receiving any audio recording or transmission,”
as well as “[a]ll documents, including communications with any person, relating to the
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 6 of 20

7
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
advertising, marketing, promotion, offering for sale, sale, or provision of Debt Relief
Services.” Dkt. No. 191-1 at 11 (quotations omitted). The RFP’s definition of “document”
covered recordings of calls between the Atlas defendants and consumers. Id.
The Atlas defendants made their first production on January 6, 2025, (the “January
Production”) but failed to produce any call recordings. Id. at 12. Unbeknownst to the Atlas
defendants, on January 22, 2025, their AWS account was terminated, and all documents
were permanently erased for failure to make payments on the account. Dkt. No. 194-2 at
19. In the following weeks, the parties discussed, inter alia, the sufficiency of the Atlas
defendants’ January Production and ultimately decided to bring their dispute to the Court’s
attention. 	Id. at 12. As it relates specifically to electronically stored information (“ESI”),
the Atlas defendants informed plaintiff that “it appear[ed] that the ESIs [sic] storage was
cloud based and was discontinued years ago.” Dkt. No. 167-2 at 9.
On March 5, 2025, the parties filed a Joint Motion relating to, inter alia, the Atlas
defendants’ failure to produce the live call recordings. Dkt. No. 139 at 1. That same day,
Peterson sent an email stating that he believed the Atlas defendants’ prior counsel was in
possession of downloads from the AWS server. Dkt. No. 194-1 at 37. Two days later, on
March 7, 2025, the Court ordered the Atlas defendants to produce all relevant documents
in their possession no later than March 20, 2025 (the “March 2025 Order”). Dkt. No. 139
at 2.
In a March 28, 2025, meet and confer, plaintiff alleges (and the Atlas defendants do
not rebut) that the Atlas defendants’ attorney stated: (1) “no audio recordings existed”; (2)
the 	AWS 	data 	was 	deleted 	after 	the 	FTC 	investigation 	but 	before 	this 	litigation
commenced; and, (3) the AWS data was circulated among key custodians via email. Dkt.
No. 167-2 at 12. As a result, the parties brought this discovery dispute back before the
Court. Dkt. No. 167 at 1. In their May 21, 2025, statement to the Court, the Atlas defendants
represented that Petersen testified in his deposition that access to the cloud storage was lost
in 2022. Dkt. No. 167-2 at 3.
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 7 of 20

8
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
On June 16, 2025, following a Discovery Conference, the Court ordered the Atlas
defendants to produce all relevant non-privileged documents in their possession on or
before July 7, 2025 (the “June 2025 Order”). Dkt. No. 173. Following the Court’s
instruction, on June 20, 2025, the Atlas defendants issued a subpoena to AWS regarding
their account. Dkt. No. 194-2 at 24. After exchanging multiple emails, AWS’s counsel
informed the Atlas defendants that “[a]s anticipated, all account content has been deleted.”
Dkt. No. 194-2 at 20. Counsel for the Atlas defendants responded asking if AWS was able
to determine when the data was deleted. Dkt. No. 194-2 at 20. At 2:27 p.m. on August 1,
2025, counsel for AWS responded that the account was terminated on January 22, 2025.
Dkt. No. 194-2 at 19. At 2:33 p.m. the Atlas defendants’ counsel responded “2025???” Id.
Less than two hours later, at 4:08 p.m., the Atlas defendants’ counsel responded to a
separate email from plaintiff relating to the call recordings and inaccurately stated: “I also
don’t have a final answer from AWS. There was supposed to be a call this week, but that
did not happen. I have followed up with AWS’ counsel and am awaiting a response.” Dkt.
No. 194-2 at 8.
On August 8, 2025, the Atlas defendants finally informed plaintiff that “AWS’
counsel confirmed the account was deleted. Thus, there will be no production by our
office.” Dkt. No. 194-2 at 4. As of August 25, 2025 (the date plaintiff filed the instant
Motion), plaintiff was still unaware of the date on which the documents were deleted. See
generally, Dkt. No. 191.
Based on the Atlas defendants’ statements in their Opposition and exhibits attached
thereto [see Dkt. No. 194], the Atlas defendants received at least seven emails over the
course of nine months—between November 2023 and August 2024—informing them that
their AWS account balance was overdue. In the latter emails, the Atlas defendants were
explicitly informed that their account may be suspended or terminated and that if that
occurred, they would not be able manage existing resources. Id. Furthermore, from July
2024 to March 2025, the Atlas defendants halted their efforts to download the information
from their AWS storage account. See, e.g., Dkt. No. 194 at 4.
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 8 of 20

9
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
In sum, the Atlas defendants were aware that the call recordings stored on their AWS
storage account were in jeopardy as early as November 2023. Despite at least seven
notifications thereafter over the course of nearly one year informing them that their account
would be suspended or terminated for non-payment, defendants failed to preserve the call
recordings. As a result of their failures, the call recordings were deleted nearly two years
after the instant lawsuit was filed, and approximately four years after the information was
requested in the underlying FTC investigation. Even after learning of the deletion of this
information, the Atlas defendants waited a full week to inform plaintiff that the documents
were deleted and would not be produced.
II. 	LEGAL STANDARD
Plaintiff seeks adverse inference sanctions against all Atlas defendants under: (1)
Federal Rule of Civil Procedure 37(b); and, (2) Federal Rule of Civil Procedure 37(e).
“Federal Rule of Civil Procedure 37 authorizes the district court, in its discretion, to impose
a wide range of sanctions when a party fails to comply with the rules of discovery or with
court orders enforcing those rules.” Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 589
(9th Cir. 1983). Rule 37(b) allows for the imposition of sanctions for a party’s failure to
comply with discovery orders, and Rule 37(e) provides for sanctions for the spoliation of
ESI that the party was under a duty to preserve.
The duty to preserve evidence attaches when litigation is “pending or reasonably
foreseeable.” Sunrider Corp. v. Bountiful Biotech Corp., 2010 WL 4590766, at *29 (C.D.
Cal. Oct. 8, 2010) (citing Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.
2003)); see also United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir.
2002). In the Ninth Circuit, courts generally agree that this duty arises “[a]s soon as a
potential claim is identified.” Apple, Inc. v. Samsung Elecs Co., 888 F. Supp. 2d 976, 991
(N.D. Cal. 2012) (citations omitted). This duty extends to evidence that parties knew or
should have known was relevant or may be relevant to future litigation. Kitsap, 314 F.3d
at 1001; Sunrider Corp., 2010 WL 4590766, at *29; see also Wm. T. Thompson v. Gen.
Nutrition Corp., 593 F. Supp. 1443, 1455 (C.D. Cal. 1984) (“Sanctions may be imposed
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 9 of 20

10
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
against a litigant who is on notice that documents and information in its possession are
relevant to litigation, or potential litigation, or are reasonably calculated to lead to the
discovery of admissible evidence, and destroys such documents and information.”).
Under Rule 37, “[s]anctions that a federal court may impose for spoliation include
assessing attorney’s fees and costs, giving the jury an adverse inference instruction,
precluding evidence, or imposing the harsh, case-dispositive sanctions of dismissal or
judgment.” Compass Bank v. Morris Cerullo World Evangelism, 104 F. Supp. 3d 1040,
1052 (S.D. Cal. 2015) (citing U.S. v. Town of Colorado City, Ariz., 2014 WL 3724232, *7
(D.Ariz. Jul. 28, 2014)) (quotations omitted). “While the court has discretion to impose
spoliation sanctions, it must determine which sanction best (1) deters parties from future
spoliation; (2) places the risk of an erroneous judgment on the spoliating party; and (3)
restores the innocent party to their rightful litigation position.” Id. (citing id.) (quotations
omitted). “Ultimately, the choice of appropriate spoliation sanctions must be determined
on a case-by-case basis, and should be commensurate to the spoliating party’s motive or
degree of fault in destroying the evidence.” Id. (citing id.) (quotations omitted).
District courts in this Circuit apply the preponderance of evidence standard when
considering sanctions. See Weride Corp. v. Kun Huang, Case No. 18-cv-07233-EJD, 2020
WL 1967209 at *9 (N.D. Cal. Apr. 16, 2020); Crossfit, 2019 WL 6527951, at *10; Colonies
Partners, L.P. v. Cnty of San Bernardino, Case No. 18-cv-00420-JGB (SHK), 2020 WL
1496444, at *2 (C.D. Cal. Feb. 27, 2020); Ramos v. Swatzell, Case No. ED CV 12-1089-
BRO (SPx), 2017 WL 2841695, at *5 (C.D. Cal. June 30, 2017).
III. 	DISCUSSION
a. Threshold Issue – Meet and Confer Requirement Pursuant to Local Rule
26.1.a
In their Opposition, the Atlas defendants argue that the Court cannot consider
plaintiff’s 	Motion 	because 	the 	parties 	did 	not 	comply 	with 	the 	meet 	and 	confer
requirements pursuant to Civil Local Rule 26.1.a. While the Court already held that the
parties did adequately meet and confer, the Court nonetheless ordered the parties to hold
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 10 of 20

11
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
an additional meet and confer prior to the filing of the parties’ supplemental brief. Dkt. No.
217. On December 3, 2025, plaintiff filed a Certificate of Compliance. Dkt. No. 221. Thus,
the Court rejects defendants’ argument and will consider plaintiff’s Motion.
b. Sanctions Under Fed. R. Civ. Proc. 37(e)
Rule 37(e) applies when ESI “that should have been preserved in the anticipation or
conduct of litigation is lost because a party failed to take reasonable steps to preserve it,
and it cannot be restored or replaced through additional discovery.” Fed. R. Civ. P. 37(e).
There is no dispute that the Atlas defendants had a duty to preserve the AWS data.
See Dkt. No. 194 at 11 (“Defendants concede they were under a duty to preserve the ESI.”).
Further, there is also no genuine dispute that the AWS data cannot be restored or replaced
through additional discovery. See id. (“The data from the AWS server is no longer
available.”). 	Id. 	While 	there 	is 	written 	evidence 	in 	the 	record 	detailing 	what
misrepresentations the Atlas defendants trained their employees to say on phone calls and
evidence of these misrepresentations being made to consumers via pre-recorded messages
and written advertisements, plaintiff is deprived of arguably the most critical piece of
evidence: the verbal statements the Atlas defendants made to consumers on live phone
calls. This evidence cannot be replaced and as discussed in detail below, the Atlas
defendants failed to take reasonable steps to preserve the AWS data.
i. 	Prejudice to Plaintiff
If the district court finds the spoliation prejudicial, it “may order measures no greater
than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1). “Prejudice under Rule
37(e) includes the thwarting of a party’s ability to obtain the evidence it needs for its
case.” 3D Sys., Inc. v. Wynne, No. 21-CV-1141-AGS-DDL, 2024 WL 3896454 at *6 (S.D.
Cal. Aug. 21, 2024) (quotations and citations omitted). Prejudice can also be found where
the spoliating party’s conduct threatens to “interfere with the rightful decision of the case.”
Id. (citing Leon v. IDX Sys. Corp., 464 F.3d 951, 959 (9th Cir. 2006)) (quotations omitted).
As discussed above, the spoliation of the AWS data—the “call recordings for
debt”—prejudices plaintiff’s ability to obtain evidence it needs for its case, thus threatening
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 11 of 20

12
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
to interfere with the rightful decision of this case. Plaintiff’s claims against the Atlas
defendants are predicated on alleged misrepresentations the Atlas defendants made to
consumers. The Atlas defendants’ spoliation of the only recordings of the live calls they
had with consumers prevents plaintiff from accessing critical evidence to support its
claims. Circumstantial evidence of what may have been said on these phone calls does not
rectify plaintiff’s inability to access recordings of the actual calls.
The Atlas defendants bear the burden of showing that plaintiff was not prejudiced
by their conduct. Youngevity Int’l v. Smith, No. 16-cv-704, 2020 WL 7048687, at *3 (S.D.
Cal. July 28, 2020) (“Although [Rule] 37(e) does not place the burden of proving or
disproving prejudice on either party, if spoliation is proven, the burden shifts to the
spoliating party to prove the lost information is not prejudicial.”). Notably, the Atlas
defendants failed to make any meaningful argument that the spoliation of the AWS data
was not prejudicial. Therefore, corrective measures are appropriate, but they must be “no
greater than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1).
ii. The Atlas Defendants’ Intent to Deprive
Rule 37(e)(2) states that before the court may impose one of the listed sanctions, it
must first find that the spoliating party “acted with the intent to deprive another party of
the information’s use in the litigation.” Fed. R. Civ. P. 37(e)(2). “On its face, that is a
demanding specific-intent standard, and purposely so. The advisory committee notes
confirm that the amended rule was specifically intended to abrogate ‘cases such as
Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002), that
authorize the giving of adverse-inference instructions on a finding of negligence or gross
negligence.’” Gregory v. State of Montana, 118 F.4th 1069, 1080 (9th Cir. 2024) (citing
Fed. R. Civ. P. 37(e)(2) Advisory Committee’s note to 2015 amendment).
Rule 37(e)(2)’s intent requirement “is most naturally understood as involving the
willful destruction of evidence with the purpose of avoiding its discovery by an adverse
party.” 	Jones 	v. Riot 	Hosp. Grp. 	LLC, 	95 F.4th 730, 	735 	(9th Cir. 2024) (citations
omitted). “Because intent can rarely be shown directly, a district court may consider
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 12 of 20

13
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
circumstantial evidence in determining whether a party acted with the intent required for
Rule 37(e)(2) sanctions.” Id. “Relevant considerations include the timing of destruction,
affirmative steps taken to delete evidence, and selective preservation.” Id.
Here, the AWS data was destroyed in January 2025, almost two years after the
underlying litigation commenced. While the Atlas defendants were not aware of the actual
date of deletion until August 2025, they had ample notice that AWS would delete the data
if the account service fees were not paid. Further, the evidence was destroyed months after
the Rule 26(f) conferences (where Atlas counsel stated that there were no ESI issues), and
the issuance of plaintiff’s RFPs.
The Atlas defendants consciously abandoned their duty to preserve the data when
they halted their efforts to preserve the data and failed to pay for their account for roughly
two years. Ungar v. City of New York, 329 F.R.D. 8, 13 (E.D.N.Y. 2018), aff’d, No. 21-
1384-CV, 2022 WL 10219749 (2d Cir. Oct. 18, 2022) (“[A] party’s conscious dereliction
of a known duty to preserve electronic data is both necessary and sufficient to find that the
party acted with the intent to deprive another party of the information’s use under Rule
37(e)(2).”) (emphasis in original) (quotations and citations omitted). Here, the emails
exchanged between Petersen and Johnson demonstrate that Petersen knew the AWS files
should have been retained. Despite this knowledge, Petersen and the other Atlas defendants
abandoned their efforts to preserve the AWS files.
The Atlas defendants argue that their efforts to preserve the AWS data show a lack
of intent to delete the data and try to boil the entire situation down to “technical difficulties
and miscommunication ….” Dkt. No. 223 at 3. However, “[c]ourts long have recognized
that when the deletion of ESI is set to occur, parties have an affirmative duty to step in and
prevent its loss.” Fast v. GoDaddy.com LLC, 340 F.R.D. 326, 346 (D. Ariz. 2022). The
Atlas defendants stepped in, made efforts to preserve the data, and then without justifiable
explanation, 	abandoned 	their 	efforts 	despite 	being 	put 	on 	notice 	that 	this 	precise
information was requested by plaintiff in discovery. See Ungar, 329 F.R.D. at 13.
/ / /
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 13 of 20

14
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The Atlas defendants also argue that their failed attempts to download the files are
emblematic of the “technical and financial realities faced by the company during this
period.” Dkt. No. 223 at 6. These statements and the Atlas defendants’ conduct, however,
are contradictory. They now claim they faced financial and technical difficulties with
preserving the AWS data, but at the same time represented to plaintiff’s counsel and the
Court that they faced no issues with the preservation of ESI. See, e.g., Dkt. No. 99. Both
statements cannot be true. The Atlas defendants received three notifications from AWS
regarding their overdue payments in the weeks between the parties’ first and second Rule
26(f) conferences. The purpose of making such disclosures is to provide the parties and the
Court with the opportunity to try to solve preservation issues. Had the Atlas defendants
done so, the Court could have addressed this and considered cost shifting under Rule 26(c).
The failure to disclose this ESI issue precluded the Court from doing so. 	Defendants’
misrepresentations and failure to disclose the ESI issues they faced constitute additional
facts which support an inference of intent to deprive the plaintiff from the use of this
information in support of their claims. See Est. of Schuck v. Cnty. of San Diego, No. 3:23-
CV-00785-DMS-AHG, 2025 WL 2180987 at *9 (S.D. Cal. Aug. 1, 2025), report and
recommendation adopted (Oct. 9, 2025), report and recommendation adopted, No. 23-
CV-0785-DMS-AHG, 2025 WL 3033407 (S.D. Cal. Oct. 9, 2025) (“Thus, the County’s
failure to acknowledge the video deletion [at the Rule 26(f) Conference] can plausibly lead
to an inference of an intent to deprive.”).
The Atlas defendants also allege that they halted their efforts to preserve the AWS
data and did not disclose the issues they faced because they “mistaken[ly] belie[ved] that
the data was already preserved elsewhere.” Dkt. No. 223 at 6. Yet again, the Atlas
defendants’ statements and their conduct contradict each other. The Atlas defendants allege
that they made numerous “good faith” efforts to download the AWS data and that it cost
them at least $1,400 to do so. Dkt. No. 194-1 at 30. Almost a year after halting their
preservation efforts, however, the Atlas defendants represented that they believed the AWS
data was preserved by their prior counsel. Dkt. No. 194-1 at 37. They offer no explanation
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 14 of 20

15
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
for why they would allegedly expend the time and the resources to preserve this data if
they also believed the data was already preserved by prior counsel. Further, this position is
not supported by the contemporaneous evidence they provide which makes no mention of
this purported belief. See, e.g., Dkt. No. 194-1 at 13-14, 17-18, 20-21 (emails, inter alia,
between Petersen and Johnson in which neither mention that they believed prior counsel
downloaded the AWS files).
The Atlas defendants’ only evidence of this alleged “belief” is an email sent by
Petersen in 2025, years after they received the original notification from AWS. Dkt. No.
194-1 at 37. The Atlas defendants failed to establish any other support evidencing attempts
to confirm that the data was preserved by former counsel. See Ahamed v. 563 Manhattan
Inc., No. 19 CV 6388 (EK) (CLP), 2024 WL 3061962 at *4 (E.D.N.Y. June 17, 2024)
(finding defendant’s failure to confirm his belief that spoliated ESI was preserved through
other means “would be tantamount to a failure to ‘take any reasonable steps to preserve’
relevant ESI.”) (citing Ottoson v. SMBC Leasing and Finance, Inc., 268 F. Supp. 3d 570,
582 (S.D.N.Y. 2017); Moody v. CSX Transp., Inc., 271 F. Supp. 3d 410, 431 (W.D.N.Y.
2017) (finding defendant intentionally spoliated evidence for the purpose of depriving
plaintiff by knowingly allowing ESI data to be overwritten, and failing to make any effort
over the course of years to confirm the data was properly preserved elsewhere).
Finally, the Atlas defendants’ selective preservation of evidence also weighs in favor
of a finding of intent to destroy the AWS data for the purpose of preventing plaintiff’s
access to the information. The Atlas defendants produced evidence of the pre-recorded
calls they allegedly sent to consumers and the call scripts that were allegedly relied on by
Atlas employees during live calls with consumers. They failed, however, to preserve
possibly the most damning evidence: the recordings of the live phone calls wherein Atlas
allegedly made these representations. This selective preservation of information that would
be less damaging to the Atlas defendants also weighs in favor of a finding of intent to
deprive plaintiff from obtaining information that would be potentially favorable to them at
trial to prove their case.
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 15 of 20

16
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
In sum, the Atlas defendants offer numerous unpersuasive and contradictory
explanations for why they halted their efforts to preserve the AWS data, despite knowing
that the information was subject to preservation and being on notice that the data would be
deleted. Accordingly, the Court finds by a preponderance of the evidence that the Atlas
defendants had the intent to deprive plaintiff from obtaining the AWS data.3
iii. Appropriate Remedies
Because the Court finds by a preponderance of the evidence that the Atlas defendants
acted with intent to deprive plaintiff from accessing the AWS data, the Court finds adverse
inference sanctions are appropriate. Under Rule 37(e)(2), the court may “instruct the jury
that it may or must presume the information was unfavorable to the party ….” The Court
recommends that the Honorable Cynthia Bashant find: (1) the Atlas defendants had a duty
to preserve the AWS data consisting of the recordings of live phone calls with consumers;
(2) the Atlas defendants intentionally spoliated the AWS data to deprive the plaintiff from
obtaining and using this information; (3) that the District Court should give an adverse
inference instruction at trial that the jury must presume that the AWS data, specifically the
recordings of live debt relief calls, was unfavorable to the Atlas defendants, with the
specific language of the instruction to be decided by the District Court at the pretrial
conference; and, (4) in the course of adjudicating any pre-trial, trial, and post-trial motions,
the District Court should presume that the AWS data, specifically the recordings of live
3 	The Atlas defendants’ data retention policy, or lack thereof, is also problematic. In
testimony on June 11, 2021 during the FTC investigation, Kenan Azzeh, former defendant
in this litigation, was questioned on Atlas’s data retention policy, to which he responded,
“[w]e just kept everything. We had a huge database. Our systems – our CRM systems and
everything are built on a huge database, and we just continued to maintain.” Dkt. No. 191-
3 at 231. The Atlas defendants do not dispute that this was their practice. Thus, by failing
to maintain their database, defendants violated their own data retention policy, further
demonstrating an intent to spoliate the AWS data. See Est. of Schuck, 2025 WL 2180987
at *9; Musse v. King County, No. C18-1736-JCC, 2021 WL 4709875, at *4 (W.D. Wash.
Oct. 8, 2021) (finding intent when the county “overwrote footage of the assault not
‘according to’ its record-retention policy, but in spite of it ….”).
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 16 of 20

17
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
debt relief calls, contained information unfavorable to the Atlas defendants and favorable
to plaintiff.
c. 	Sanctions Available Under Fed. R. Civ. Proc. 37(b)
Rule 37(b) provides that “[i]f a party or a party’s officer, director, or managing agent
… fails to obey an order to provide or permit discovery … the court where the action is
pending may issue further just orders.” Fed. R. Civ. P. 37(b)(2)(A); see also, Wanderer v.
Johnston, 910 F.2d 652, 657 (9th Cir. 1990) (stating sanctions are appropriate where a
party is guilty of failing to make court-ordered productions). “A judicial finding that a
discovery order has been violated is entitled to considerable weight because the judge
presiding over the case is best equipped to assess the circumstances of non-compliance.”
RG Abrams Ins. v. L. Offs. of C.R. Abrams, 342 F.R.D. 461, 493 (C.D. Cal. 2022) (citing
Payne v. Exxon Corp., 121 F.3d 503, 507 (9th Cir. 1997) (quotations omitted).
Here, defendants violated the March Order and the August Order by intentionally
failing to preserve the call recordings. The Atlas defendants argue that they could not have
violated the March and August Orders because, as a result of their own conduct, the data
was deleted prior to the entry of the Court’s orders. This proposition and its implications
are inherently flawed, deeply concerning, and completely ignores the fact that the Atlas
defendants had a duty to preserve which arose well before the March or August Orders
were issued. In essence, the Atlas defendants ask this Court to set a precedent that a party
who intentionally spoliates evidence cannot be subject to sanctions under Rule 37(b) if the
party spoliates the evidence prior to the issuance of any discovery orders. The Court will
make no such precedent. In fact, courts in this circuit routinely impose sanctions under
Rule 37(b) when evidence was spoliated prior to an official order mandating production.
See, e.g., Ramos v. Swatzell, No. EDCV121089BROSPX, 2017 WL 2857523 (C.D. Cal.
June 5, 2017), report and recommendation adopted, No. EDCV121089BROSPX, 2017
WL 2841695 (C.D. Cal. June 30, 2017) (imposing adverse inference sanctions even though
the spoliated evidence was technically deleted prior to the issuance of the court order
compelling production).
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 17 of 20

18
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Under Rule 37(b)(2)(A), a court can impose a variety of discovery sanctions on a
disobedient party, including:
(i) 	directing that the matters embraced in the order or other designated
facts be taken as established for purposes of the action, as the prevailing
party claims;
(ii) 	prohibiting 	the 	disobedient 	party 	from 	supporting 	or 	opposing
designated claims or defenses, or from introducing designated matters
in evidence;
(iii) 	striking pleadings in whole or in part;
(iv) 	staying further proceedings until the order is obeyed;
(v) 	dismissing the action or proceeding in whole or in part;
(vi) 	rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except an order
to submit to a physical or mental examination.
Here, plaintiff seeks sanctions under Rule 37(b)(2)(A)(i). “An adverse inference
instruction can take many forms, [ ] ranging in degrees of harshness.” Ramos, 2017 WL
2857523 at *14 (citing Apple Inc. v. Samsung Elecs. Co., 881 F.Supp.2d 1132, 1050 (N.D.
Cal. 2012)) (quotations omitted). The severity of the sanction should be commensurate
with the egregiousness of the conduct. Id. There are three tiers of instructions considered:
“(1) when a spoliating party has acted willfully or in bad faith, the jury can be instructed
that certain facts are deemed admitted and must be accepted as true; (2) when a spoliating
party has acted willfully or recklessly, a court may impose a mandatory presumption; and
(3) the least harsh instruction permits (but does not require) a jury to presume that the lost
evidence is both relevant and favorable to the innocent party.” Id. (quotations omitted).
As discussed above, the Court recommends a finding that the Atlas defendants acted
willfully 	in 	spoliating 	the 	AWS 	data. 	The 	Court 	recommends 	a 	finding 	that 	the
aforementioned sanctions are equally appropriate under 37(b)(2)(A)(i).
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 18 of 20

19
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
d. Payment of Attorney’s Fees Under Rule 37
Rule 37(b)(2)(C) states “the court must order the disobedient party, the attorney
advising that party, or both to pay the reasonable expenses, including attorney’s fees,
caused by the failure, unless the failure was substantially justified or other circumstances
make an award of expenses unjust.” (emphasis added). Accordingly, the undersigned also
recommends that plaintiff make an application for its reasonable attorney’s fees and costs
related to the spoliation if the aforementioned recommendations are adopted.
IV. 	CONCLUSION
The Court submits this Report and Recommendation to United States District Judge
Cynthia Bashant under 28 U.S.C. § 636(b)(1) and Local Civil Rule 72.1 of the United
States District Court for the Southern District of California. In addition, IT IS HEREBY
RECOMMENDED that the Court issue an Order:
1. approving and adopting this Report and Recommendation;
2. finding the Atlas defendants had a duty to preserve the AWS data consisting of the
recordings of live phone calls with consumers and intentionally spoliated this
evidence to deprive the plaintiff from obtaining and using this information;
3. directing that plaintiff’s Motion for Sanctions [Dkt. Nos. 191, 222] be GRANTED
in-part. The District Court should give an adverse inference instruction at trial that
the jury must presume that the AWS data, specifically the recordings of live debt
relief calls, was unfavorable to the Atlas defendants, with the specific language of
the instruction to be decided by the District Court at the pretrial conference;4
/ / /
/ / /
4 	This holding grants in-part plaintiff’s request because the Court does recommend
that adverse inference sanctions are warranted in the form of a mandatory presumption;
however, the Court does not recommend a finding that defendants should be barred from
rebutting this mandatory presumption.
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 19 of 20

20
3:23-cv-00313-BAS-KSC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
4. In the course of adjudicating any pre-trial, trial, and post-trial motions, the District
Court should presume that the AWS data, specifically the recordings of debt relief
calls, contained information unfavorable to the Atlas defendants; and,
5. Plaintiff may make an application for reasonable attorney’s fees and costs related to
the spoliation.
IT IS HEREBY ORDERED that any party to this action may file written objections
with the Court and serve a copy on all parties no later than February 27, 2026. The
document should be captioned “Objections to Report and Recommendation.”
IT IS FURTHER ORDERED that any Reply to the Objections shall be filed with
the Court and served on all parties no later than March 6, 2026.
The parties are advised that failure to file objections within the specified time may
waive the right to raise those objections on appeal of the Court’s Order. See Turner v.
Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1157 (9th Cir.
1991).
IT IS SO ORDERED
Dated: February 13, 2026
Case 3:23-cv-00313-BAS-GC Document 256 Filed 02/13/26 PageID.<pageID>
Page 20 of 20