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

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
STRATICS NETWORKS INC., et. al.,
Defendants.
Case No. 23-cv-00313-BAS-KSC
ORDER:
(1) GRANTING IN PART
PLAINTIFF’S MOTION FOR
SANCTIONS (ECF No. 191);
AND
(2) APPROVING AND ADOPTING
REPORT AND
RECOMMENDATION (ECF
No. 256)
Pending before the Court are Plaintiff United States of America’s motion for
sanctions (“Sanctions Motion”) (ECF No. 191) and a Report and Recommendation issued
by United States Magistrate Judge Karen S. Crawford (“R & R”). (ECF No. 256.) For the
reasons below, the Court GRANTS IN PART Plaintiff’s motion for sanctions. (ECF No.
191.) The Court also ADOPTS the R & R. (ECF No. 256).
I. 	BACKGROUND
On August 29, 2025, Plaintiff filed its Sanctions Motion asserting that Defendants
Atlas Marketing Partners, Inc. (“Atlas Marketing”), Atlas Investment Ventures, LLC
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(“Atlas Investment”), Tek Ventures d/b/a Provident Solutions (“Provident Solutions”),
Eric Petersen (“Petersen”), and Todd DiRoberto (“DiRoberto”) (collectively, “Atlas
Defendants”) violated Federal Rule of Civil Procedure (“Rule”) 37(b) by failing to produce
certain call recordings with customers. 	(ECF No. 191.) 	Atlas Defendants opposed
Plaintiff’s Sanctions Motion. (ECF No. 194.) Plaintiff filed a reply. (ECF No. 196.)
On November 3, 2025, the Honorable Chief Judge Bashant referred Plaintiff’s
Sanctions Motion to the Honorable Judge Crawford for Report and Recommendation.
(ECF No. 216.)
Plaintiff’s memorandum in support of its Sanctions Motion included a footnote
stating that Rule 37(e) allows for sanctions for similar conduct pursuant to the court’s
inherent authority. 	(ECF No. 191-1 at 16 n. 6.) 	On December 3, 2025, Plaintiff filed a
motion in support of Rule 37(e) sanctions (ECF No. 222) in response to Judge Crawford’s
order for Parties to file supplemental briefing on whether Atlas Defendants’ conduct also
violated Rule 37(e). (ECF No. 216.) Atlas Defendants responded. (ECF No. 223.)
II. 	DISCUSSION
District judges review de novo those portions of the R & R to which objections are
made. 28 U.S.C. § 636(b)(1). They may “accept, reject, or modify, in whole or in part,
the findings or recommendations made by the magistrate judge.” 	Id. 	But “[t]he statute
makes it clear that the district judge must review the magistrate judge’s findings and
recommendations de novo if objection is made, but not otherwise.” United States v.
Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc); see also Schmidt v.
Johnstone, 263 F. Supp. 2d 1219, 1226 (D. Ariz. 2003) (concluding that where no
objections were filed, the district court had no obligation to review the magistrate judge’s
report). 	“Neither the Constitution nor the statute requires a district judge to review, de
novo, findings and recommendations that the parties themselves accept as correct.”
Reyna-Tapia, 328 F.3d at 1121. 	This rule of law is well-established within the Ninth
Circuit and this district. 	See Wang v. Masaitis, 416 F.3d 992, 1000 n.13 (9th Cir. 2005)
(“Of course, de novo review of a R & Ris only required when an objection is made to the
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R & R.”); Nelson v. Giurbino, 395 F. Supp. 2d 946, 949 (S.D. Cal. 2005) (Lorenz, J.)
(adopting R & R in its entirety without review because neither party filed objections to
the R & R despite the opportunity to do so); see also Nichols v. Logan, 355 F. Supp. 2d
1155, 1157 (S.D. Cal. 2004).
In this case, Judge Crawford issued the R & R (ECF No. 256) on February 13,
2026, recommending that this Court grant Plaintiff’s Sanctions Motion (ECF No. 191).
The time for filing objections expired on February 27, 2026. 1 (ECF No. 256 at 20:6-8.)
Both parties are represented by counsel. 	Neither party has filed any objections nor
requested additional time to do so. Hence, the Court may adopt the R & R on that basis
alone. See Reyna-Tapia, 328 F.3d at 1121.
Nonetheless, having conducted a review of the R & R, the Court concludes that
Judge Crawford’s reasoning is sound and correct in recommending that this Court grant
in part, Plaintiff’s Sanctions Motion. (ECF No. 256.)
A. 	Rule 37(b)
In Plaintiff’s Sanctions Motion, Plaintiff moves for sanctions under Federal Rule
of Civil Procedure 37(b) against Atlas Defendants. 	(ECF No. 191.) 	Plaintiff bases its
claims on Atlas Defendants’ failure to preserve certain call recordings, despite having
notice that those call recordings are pertinent to the instant lawsuit and an underlying FTC
investigation, and Atlas Defendants’ failure to timely notify Plaintiff of the deleted call
recordings. (See ECF No. 191-1 at 17:23–20:13; 256 at 9:1-9.)
Rule 37(b) prohibits Atlas Defendants’ failure to obey discovery orders. See Fed.
R. Civ. P. 37(b)(2)(A). Here, Atlas Defendants have violated two discovery orders in this
action—one issued on March 20, 2025 (ECF No. 139) and on June 16, 2025 (ECF No.
167)—by failing to produce the relevant call recordings. (See ECF No. 256 at 7:13–8:15,
1 The Court notes it has preliminarily reviewed Atlas Defendants’ motion to withdraw and
amended motion to withdraw. (ECF Nos. 258, 259.) Though the Court refrains from ruling on that motion
at this time, it finds that Atlas Defendants’ motions to withdraw do not constitute objections to the R & R
given that both motions were filed after the deadline to object.
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17:13-28.) Thus, the Court adopts the R & R’s recommendation that adverse inference
sanctions against Atlas Defendants are appropriate under Rule 37(b). 	(ECF No. 256 at
18:16-28.)
B. 	Rule 37(e)
Rule 	37(e) 	prohibits 	Atlas 	Defendants’ 	spoliation 	of 	electronically 	stored
information (“ESI”) resulting in prejudice to Plaintiff, and subsequently permits the Court
to impose sanctions “no greater than necessary to cure the prejudice” upon finding Atlas
Defendants “acted with intent to deprive another party of the information’s use in the
litigation.” Fed. R. Civ. P. 37(e)(1)-(2). Here, Plaintiff will be unable to obtain evidence
necessary for its case (i.e., the only phone recordings of live calls Atlas Defendants made
to consumers) and Atlas Defendants have not met their burden of showing Plaintiff was
not prejudiced by their failure to preserve the recordings. 	(See ECF No. 256 at 11:4–
17:2.) 	Further, Atlas Defendants have not sufficiently demonstrated intent to take
affirmative steps in accordance with their duty to preserve the recordings (id. at 12:15–
16:5). See also These Ponies Are Miserable v. City of Los Angeles, No. 2:23-CV-08330-
HDV-SK, 2025 WL 3248690, at *6 (C.D. Cal. Nov. 7, 2025) (citing Fed. R. Civ. P. 37(e)
advisory committee's note to 2015 amendment) (“[D]uty to preserve can include taking
affirmative steps to preserve electronically-stored information, such as suspending auto-
delete systems”). 	Accordingly, the Court adopts the R & R’s recommendation that
adverse inference sanctions against Atlas Defendants are appropriate under Rule 37(e)(2).
(See ECF No. 256 at 16:1–17:2.)
II. 	CONCLUSION
In 	light 	of 	the 	foregoing, 	the 	Court 	APPROVES 	and 	ADOPTS 	IN 	ITS
ENTIRETY the R & R (ECF No. 256), and GRANTS IN PART Plaintiff’s Sanctions
Motion (ECF No. 191). See 28 U.S.C. § 636(b)(1).
The Court shall give a rebuttable 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
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decided by the Court at the pretrial conference.
In the course of adjudicating any pre-trial, trial, and post-trial motions, the Court
should presume that the data Atlas Defendants electronically stored and lost, specifically
the recordings of debt relief calls, contained information unfavorable to the Atlas
Defendants.
Lastly, Plaintiff may make an application for reasonable attorney’s fees and costs
related to the spoliation.
IT IS SO ORDERED.
DATED: March 3, 2026
Hon. Cynthia Bashant, Chief Judge
United States District Court
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