Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 UNITED STATES OF AMERICA, Case No. 23-cv-00313-BAS-KSC 12 Plaintiff, 13 ORDER:

v. 14 (1) GRANTING IN PART STRATICS NETWORKS INC., et. al., PLAINTIFF’S MOTION FOR 15 SANCTIONS (ECF No. 191); Defendants. 16 AND 17 (2) APPROVING AND ADOPTING REPORT AND 18 RECOMMENDATION (ECF 19 No. 256)

20 Pending before the Court are Plaintiff United States of America’s motion for 21 sanctions (“Sanctions Motion”) (ECF No. 191) and a Report and Recommendation issued 22 by United States Magistrate Judge Karen S. Crawford (“R & R”). (ECF No. 256.) For the 23 reasons below, the Court GRANTS IN PART Plaintiff’s motion for sanctions. (ECF No. 24 191.) The Court also ADOPTS the R & R. (ECF No. 256). 25 I. BACKGROUND 26 On August 29, 2025, Plaintiff filed its Sanctions Motion asserting that Defendants 27 Atlas Marketing Partners, Inc. (“Atlas Marketing”), Atlas Investment Ventures, LLC 28 1 (“Atlas Investment”), Tek Ventures d/b/a Provident Solutions (“Provident Solutions”), 2 Eric Petersen (“Petersen”), and Todd DiRoberto (“DiRoberto”) (collectively, “Atlas 3 Defendants”) violated Federal Rule of Civil Procedure (“Rule”) 37(b) by failing to produce 4 certain call recordings with customers. (ECF No. 191.) Atlas Defendants opposed 5 Plaintiff’s Sanctions Motion. (ECF No. 194.) Plaintiff filed a reply. (ECF No. 196.) 6 On November 3, 2025, the Honorable Chief Judge Bashant referred Plaintiff’s 7 Sanctions Motion to the Honorable Judge Crawford for Report and Recommendation. 8 (ECF No. 216.) 9 Plaintiff’s memorandum in support of its Sanctions Motion included a footnote 10 stating that Rule 37(e) allows for sanctions for similar conduct pursuant to the court’s 11 inherent authority. (ECF No. 191-1 at 16 n. 6.) On December 3, 2025, Plaintiff filed a 12 motion in support of Rule 37(e) sanctions (ECF No. 222) in response to Judge Crawford’s 13 order for Parties to file supplemental briefing on whether Atlas Defendants’ conduct also 14 violated Rule 37(e). (ECF No. 216.) Atlas Defendants responded. (ECF No. 223.) 15 II. DISCUSSION 16 District judges review de novo those portions of the R & R to which objections are 17 made. 28 U.S.C. § 636(b)(1). They may “accept, reject, or modify, in whole or in part, 18 the findings or recommendations made by the magistrate judge.” Id. But “[t]he statute 19 makes it clear that the district judge must review the magistrate judge’s findings and 20 recommendations de novo if objection is made, but not otherwise.” United States v. 21 Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc); see also Schmidt v. 22 Johnstone, 263 F. Supp. 2d 1219, 1226 (D. Ariz. 2003) (concluding that where no 23 objections were filed, the district court had no obligation to review the magistrate judge’s 24 report). “Neither the Constitution nor the statute requires a district judge to review, de 25 novo, findings and recommendations that the parties themselves accept as correct.” 26 Reyna-Tapia, 328 F.3d at 1121. This rule of law is well-established within the Ninth 27 Circuit and this district. See Wang v. Masaitis, 416 F.3d 992, 1000 n.13 (9th Cir. 2005) 28 (“Of course, de novo review of a R & Ris only required when an objection is made to the 1 R & R.”); Nelson v. Giurbino, 395 F. Supp. 2d 946, 949 (S.D. Cal. 2005) (Lorenz, J.) 2 (adopting R & R in its entirety without review because neither party filed objections to 3 the R & R despite the opportunity to do so); see also Nichols v. Logan, 355 F. Supp. 2d 4 1155, 1157 (S.D. Cal. 2004). 5 In this case, Judge Crawford issued the R & R (ECF No. 256) on February 13, 6 2026, recommending that this Court grant Plaintiff’s Sanctions Motion (ECF No. 191). 7 The time for filing objections expired on February 27, 2026. 1 (ECF No. 256 at 20:6-8.) 8 Both parties are represented by counsel. Neither party has filed any objections nor 9 requested additional time to do so. Hence, the Court may adopt the R & R on that basis 10 alone. See Reyna-Tapia, 328 F.3d at 1121. 11 Nonetheless, having conducted a review of the R & R, the Court concludes that 12 Judge Crawford’s reasoning is sound and correct in recommending that this Court grant 13 in part, Plaintiff’s Sanctions Motion. (ECF No. 256.) 14 A. Rule 37(b) 15 In Plaintiff’s Sanctions Motion, Plaintiff moves for sanctions under Federal Rule 16 of Civil Procedure 37(b) against Atlas Defendants. (ECF No. 191.) Plaintiff bases its 17 claims on Atlas Defendants’ failure to preserve certain call recordings, despite having 18 notice that those call recordings are pertinent to the instant lawsuit and an underlying FTC 19 investigation, and Atlas Defendants’ failure to timely notify Plaintiff of the deleted call 20 recordings. (See ECF No. 191-1 at 17:23–20:13; 256 at 9:1-9.) 21 Rule 37(b) prohibits Atlas Defendants’ failure to obey discovery orders. See Fed. 22 R. Civ. P. 37(b)(2)(A). Here, Atlas Defendants have violated two discovery orders in this 23 action—one issued on March 20, 2025 (ECF No. 139) and on June 16, 2025 (ECF No. 24 167)—by failing to produce the relevant call recordings. (See ECF No. 256 at 7:13–8:15, 25 26 1 The Court notes it has preliminarily reviewed Atlas Defendants’ motion to withdraw and 27 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 28 1 17:13-28.) Thus, the Court adopts the R & R’s recommendation that adverse inference 2 sanctions against Atlas Defendants are appropriate under Rule 37(b). (ECF No. 256 at 3 18:16-28.) 4 B. Rule 37(e) 5 Rule 37(e) prohibits Atlas Defendants’ spoliation of electronically stored 6 information (“ESI”) resulting in prejudice to Plaintiff, and subsequently permits the Court 7 to impose sanctions “no greater than necessary to cure the prejudice” upon finding Atlas 8 Defendants “acted with intent to deprive another party of the information’s use in the 9 litigation.” Fed. R. Civ. P. 37(e)(1)-(2). Here, Plaintiff will be unable to obtain evidence 10 necessary for its case (i.e., the only phone recordings of live calls Atlas Defendants made 11 to consumers) and Atlas Defendants have not met their burden of showing Plaintiff was 12 not prejudiced by their failure to preserve the recordings. (See ECF No. 256 at 11:4– 13 17:2.) Further, Atlas Defendants have not sufficiently demonstrated intent to take 14 affirmative steps in accordance with their duty to preserve the recordings (id. at 12:15– 15 16:5). See also These Ponies Are Miserable v. City of Los Angeles, No. 2:23-CV-08330- 16 HDV-SK, 2025 WL 3248690, at *6 (C.D. Cal. Nov. 7, 2025) (citing Fed. R. Civ. P. 37(e) 17 advisory committee's note to 2015 amendment) (“[D]uty to preserve can include taking 18 affirmative steps to preserve electronically-stored information, such as suspending auto- 19 delete systems”). Accordingly, the Court adopts the R & R’s recommendation that 20 adverse inference sanctions against Atlas Defendants are appropriate under Rule 37(e)(2). 21 (See ECF No. 256 at 16:1–17:2.) 22 II. CONCLUSION 23 In light of the foregoing, the Court APPROVES and ADOPTS IN ITS 24 ENTIRETY the R & R (ECF No. 256), and GRANTS IN PART Plaintiff’s Sanctions 25 Motion (ECF No. 191). See 28 U.S.C. § 636(b)(1). 26 The Court shall give a rebuttable adverse inference instruction at trial that the jury 27 must presume that the AWS data, specifically the recordings of live debt relief calls, was 28 unfavorable to the Atlas Defendants, with the specific language of the instruction to be 1 || decided by the Court at the pretrial conference. 2 In the course of adjudicating any pre-trial, trial, and post-trial motions, the Court 3 ||should presume that the data Atlas Defendants electronically stored and lost, specifically 4 ||the recordings of debt relief calls, contained information unfavorable to the Atlas 5 || Defendants. 6 Lastly, Plaintiff may make an application for reasonable attorney’s fees and costs 7 related to the spoliation. 8 IT IS SO ORDERED. 9 ~ 10 || DATED: March 3, 2026 (yi. (Dihan H n. Cynthia Bashant, Chief Judge United States District Court 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 _& _