Cress v. Nexo Capital, Inc., No. 3:23-cv-00882-TSH (N.D. Cal. Aug. 17, 2026), full opinion (PDF)
A crypto lender kept shortening its Google Vault and Slack retention windows from the arrival of a demand letter through discovery in the suit that followed. Nexo conceded that it had issued no litigation hold. It also conceded taking affirmative steps to destroy ESI. Magistrate Judge Thomas S. Hixson found that Nexo spoliated ESI with the intent to deprive Cress of its use. The Rule 37(e) sanctions are a mandatory adverse inference instruction, preclusion, leave to try the destruction to the jury, and $439,267.21 in fees and expenses payable within 21 days.
What happened
Cress's counsel sent Nexo a demand letter in October 2021 over its VIP program and liquidations. On December 4, 2022, Nexo created rules deleting email to or from two of its managing partners across the organization after thirty days. The same day it set Slack direct messages to purge after four days. Three days later it moved that window to thirty. Cress filed suit in February 2023. Nexo learned of it by March 1, set a sixty-day purge on its Slack channels that day, then extended the rules to the founders' personal accounts. During discovery it created one-day rules for two Google Drive labels and dozens aimed at specific emails, some identified by message ID.
Nexo's data retention policy required emails to be kept permanently and other electronic documents for at least five years. An employee who learned of litigation had to inform management. Under the policy, disposal then stopped until management, in consultation with counsel, allowed it to resume. Nexo had issued a litigation hold in a parallel proceeding in England, though not in this case. It never tried to recover anything.
The court's analysis
Nexo argued that Cress should have requested preservation and named the custodians in his demand letter. The court rejected that, stating "That is not the law." The duty reaches the subject matter of the action and its key players, the court reasoned, so Nexo was the party positioned to identify them.
On reasonable steps, the court restated the rule that a party anticipating litigation must suspend routine destruction and issue a hold. Nexo did the opposite, the court found, taking affirmative steps to purge relevant ESI. The court wrote that "Nexo's claim that it took steps to preserve relevant ESI strains credulity". Nexo's evidence of any collection came down to its corporate representative's testimony that the company had gathered all relevant communications. That testimony held no value, the court stated, since the witness could not say when it happened or who performed it.
The court weighed six factors bearing on intent to deprive, from the timing of the deletions to the method used. Cress's evidence, it stated, made every one of them weigh against Nexo. The court also had direct evidence, because two witnesses described how the deletions were ordered. The employee who implemented the deletions testified that each change came as a task assigned by management or legal. One managing partner testified that he had wanted to get rid of sensitive material that could be used against Nexo. The timing tracked the docket, with Slack channel threads deleted two days after the complaint. Method counted as well, since Nexo had changed default settings that preserved the information for at least five years.
The court found Nexo's specific justifications false. It described the four-day Slack setting as an accident, though the employee who entered it testified that it was an assigned task. Nexo also said two Google Drive purge labels targeted documents from a case it had settled in England. The court noted that the settlement came months after the labels were created. On the volume argument, the court replied with the settled rule that "production of some evidence does not excuse destruction of other relevant evidence."
Terminating sanctions were denied, since the loss still left Cress able to prosecute his case. The jury will instead be instructed to presume four facts the destroyed communications would have shown. The same presumptions will govern the summary judgment motions.
Why it matters
Retention settings are evidence of state of mind. Deletion rules entered days after a complaint is filed are circumstantial evidence of intent.
A policy mandating a litigation hold makes the failure to issue one a decision rather than an oversight. Counsel who has not read the client's policy will meet it in an opponent's brief.
A corporate witness who cannot say when the company gathered its ESI, or who did the work, leaves the company with no proof that it happened.
An uncontested fee itemization is a conceded one. Nexo contested neither the reasonableness nor the itemization, so the court awarded Cress's figure in full.
Four facts Nexo needed to contest are now presumed against it, at summary judgment as well as at trial, even though the terminating sanctions motion was denied.
The full opinion is available as a PDF.
