Nurmagomedov v. Legionfarm, Inc.

Background

Khabib Nurmagomedov sued Legionfarm, Inc., alleging that Legionfarm failed to pay him under a promotional agreement involving the minting and sale of digital tokens. Legionfarm asserted a breach-of-contract counterclaim. Nurmagomedov’s manager, Yarmet Yarmetov, had sourced the deal and acted as the primary liaison between the parties.

In April 2022, Nurmagomedov’s lawyer sent a demand letter warning of possible litigation and directing relevant people to preserve communications, documents, and electronically stored information, specifically including WhatsApp messages. During depositions, Nurmagomedov and Yarmetov acknowledged that numerous WhatsApp messages had been deleted. They had changed phone numbers or devices without taking steps to preserve the messages, and the messages could not be recovered.

Legal standard

Federal Rule of Civil Procedure 37(e) permits sanctions when electronically stored information that should have been preserved for litigation is lost because a party failed to take reasonable preservation steps, and the information cannot be restored or replaced through additional discovery. Under Rule 37(e)(1), the moving party must show prejudice from the loss. If the court finds that a party acted with an intent to deprive another party of the information’s use in the litigation, Rule 37(e)(2) allows harsher measures, including an instruction allowing the factfinder to draw an unfavorable conclusion.

Court’s analysis

The court found that Nurmagomedov and Yarmetov had preservation duties beginning at least on April 11, 2022. Nurmagomedov was a named party and was copied on the demand letter. Although Yarmetov was not a party, the court found that he controlled relevant evidence because he was Nurmagomedov’s manager, had access to him, and handled the Legionfarm relationship.

The court also found that both men failed to take reasonable steps to preserve the WhatsApp messages. WhatsApp was a frequently used platform and a key repository of information about the agreement. Existing messages addressed payment, conduct, performance, and other matters relevant to the contract claims and counterclaim. The court concluded that Legionfarm had shown prejudice because the deleted messages likely affected its ability to support its counterclaim and defenses.

Disposition

The court granted in part and denied in part Legionfarm’s motion for spoliation sanctions. Under Rule 37(e)(1), it granted Legionfarm’s requests to preclude Nurmagomedov from testifying about the contents of the deleted messages and to allow Legionfarm to present evidence of the spoliation. The court did not award attorney’s fees at this time because Legionfarm had not shown that it undertook corrective discovery efforts beyond filing the motion, leaving no evidentiary basis to calculate fees.

The court denied Rule 37(e)(2) sanctions at this time. Because the parties planned a non-jury trial, the court stated that it would evaluate Nurmagomedov’s intent and whether an adverse inference was appropriate after hearing the parties’ testimony at trial. The court terminated the pending motion and related letter motions.