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United States District Court for the District of Arizona
August 30, 2021, Decided; August 30, 2021, Filed
In May 2019, Defendant James Noland ("Noland") discovered, via the inadvertent disclosure of a bank subpoena, that the FTC was conducting an investigation of him and his business, Success By Health ("SBH"). When the FTC learned its investigation was no longer covert, it specifically advised Noland and SBH to preserve relevant [*2] documents.
They did no such thing. The day after learning about the FTC's investigation, Noland instructed the other members of SBH's leadership team, Defendants Lina Noland, Thomas Sacca ("Sacca"), and Scott Harris ("Harris") (together with Noland, the "Individual Defendants"), to start using a pair of encrypted communications platforms called Signal and ProtonMail. After doing so, the Individual Defendants stopped using their previous messaging platforms for work-related communications, apparently turned on Signal's "auto-delete" function, and then proceeded to exchange an untold number of messages related to SBH's business.
In January 2020, after completing its investigation, the FTC filed this action. At the same time, the FTC sought and obtained a temporary restraining order ("TRO") that, among other things, appointed a receiver to assume control over SBH, required the Individual Defendants to produce their electronic communications, and required the Individual Defendants to turn over the mobile devices they had used to operate the business. Notwithstanding these orders, the Individual Defendants did not initially turn over their mobile devices and did not produce any Signal communications. [*3] Additionally, during a post-TRO deposition, Noland failed to disclose the Signal and ProtonMail accounts in response to direct questioning about the existence of any encrypted communications platforms.
It gets worse. It has now come to light that, during the months following the issuance of the TRO, Noland used his ProtonMail account to provide third-party witnesses with what can be construed as a script to follow when drafting declarations the Individual Defendants wished to submit in support of their defense. These communications only came to light by fortuity, when one of the recipients anonymously disclosed them to the FTC.
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2021 U.S. Dist. LEXIS 163918 *; 2021 WL 3857413
Federal Trade Commission, Plaintiff, v. James D. Noland, Jr., et al., Defendants.
Prior History: FTC v. Noland, 2020 U.S. Dist. LEXIS 10657 (D. Ariz., Jan. 13, 2020)
Signal, communications, messages, deleted, email, sanctions, phones, affiliates, destroyed, install, spoliation, auto-delete, preservation, documents, discovery, encrypted, parties, text message, intent to deprive, deposition, adverse inference, duty to preserve, disclose, hacking, argues, Leadership, platforms, electronic, employees, advisory committee note