In a recent decision out of Oklahoma (Curtis v. Progressive N. Ins. Co., No. CIV-17-1076-C [W.D. Okla. June 13, 2018]), District Judge Robin J. Cauthron ruled that non-party ESI subpoenaed pursuant to Rule 45 was not subject to the 100 mile-limitation found in the Rule.  Specifically, the Court held there is “no violation of the 100-mile limitation,” as the non-party “subpoena at issue does not require the travel or attendance of any witnesses and Plaintiff is requesting the production of electronic documents.”

Factual Background

After plaintiff was involved in two automobile collisions, Curtis’ insurance company (“Progressive”) engaged Mitchell International, Inc. (“MII”), to create valuations of total loss for its use.  Eventually, Curtis filed the instant lawsuit against Progressive, claiming breach of contract, bad faith, unjust enrichment, and fraud in connection with the valuation of Curtis’ vehicles.  During discovery, Curtis served non-party MII with a subpoena duces tecum requesting the production of documents relating to “the correspondence, purchase, and analysis of the [computer valuation system]” MII used to create valuations of total loss for Progressive (“Subpoena”).  Curtis’ attorneys served the Subpoena upon MII using MII’s Oklahoma registered agent.  MII served written objections to the Subpoena, and meet and confer sessions failed to resolve the impasse reached between MII and Curtis.  And so, Curtis filed a Motion to Compel Compliance with Subpoena (the “Motion”).

MII argued the Court lacked jurisdiction to hear the Motion because MII’s headquarters and principal place of business are located in San Diego, and the Subpoena required compliance more than 100 miles away in Shawnee, Oklahoma.

In response, Curtis argued that her subpoena was valid and enforceable because “a subpoena that commands a person to travel beyond the 100-mile boundary must be quashed however, a Court retains discretion to command compliance with a subpoena for documents which requires production beyond the 100-mile limitation.”

In granting the Motion, Judge Cauthron noted that “Federal district courts enjoy broad discretion over discovery measures” and further stated:

“Here, Plaintiff states—and Mitchell does not dispute—that the information requested can be produced electronically. Mitchell has an Oklahoma registered agent and Progressive Northern Insurance Company continues to use the valuation system licensed and provided by Mitchell in Oklahoma to conduct business. As a result, Mitchell regularly transacts business in Oklahoma. The subpoena at issue does not require the travel or attendance of any witnesses and Plaintiff is requesting the production of electronic documents. This Court finds that there is no violation of the 100-mile limitation for electronic documents…”

This case is a good reminder that the Rule 45 geographic restrictions relates to how far a subpoena-recipient can be compelled to travel in order to comply with a subpoena (see FRCP 45[c]) and that while the geographic limitation applies equally to parties, and party officers, who cannot be commanded to appear for trial outside of the geographic restrictions set forth in the Rule (FRCP 45[c], [d][3][A][ii]), it has no applicability to the production of ESI.

In Youngevity Intl’s Corp. v. Smith (No: 16-cv-00704 [SD CA December 21, 2017]), defendants sought an Order pursuant to Federal Rules of Civil Procedure 26(g) and 37.  The Order required Plaintiffs to remediate an improper discovery production to pay for Defendants’ costs for bringing the motion to compel and for the cost to review various improper prior productions.  Specifically, in connection with the discovery of electronically stored information (“ESI”), Defendants proposed a three-step process by which: “(i) each side proposes a list of search terms for their own documents; (ii) each side offers any supplemental terms to be added to the other side’s proposed list; and (iii) each side may review the total number of results generated by each term in the supplemented lists (i.e., a ‘hit list’ from our third-party vendors) and request that the other side omit any terms appearing to generate a disproportionate number of results.”

Approximately one week later, Plaintiffs advised in writing that they were “amenable to the three step process described in your May 9 e-mail.”  The parties then exchanged lists of proposed search terms to be run through their own ESI and the ESI of their opponent.

Pursuant to the agreed-to three-step process, Defendants provided to Plaintiffs its “hit list.”  Plaintiffs, however, never produced its “hit list.”  Instead, Plaintiff produced two large caches of documents – the first consisting of approximately 1.9 million pages and the second production consisting of approximately 2.3 million pages.   Upon receipt by Defendants, it became clear that the productions had been bulk coded with a CONFIDENTIAL legend and in some instances also with an ATTORNEYS’ EYES ONLY designation.  The produced materials also contained non-responsive documents.  A few months later, defendants advised they inadvertently failed to produce an additional 700,000 documents due to a vendor error.  Although the parties attempted to resolve amicably their differences, they were unsuccessful.

As a result, Defendants’ filed the instant motion to compel proper production and for costs.

In granting Defendants’ motion, Magistrate Judge Jill L. Burkhardt concluded, “the record indicates that Youngevity did not produce documents following the protocol to which the parties agreed.”  Specifically, “Youngevity failed to produce its hit list … and instead produced every document that hit upon any proposed search term” thus conflating “a hit on the parties’ proposed search terms with responsiveness.”  Moreover, the Court observed “the parties negotiated a stipulated protective order, which provides that only the ‘most sensitive’ information should be designated as AEO.”  As a result, Judge Burkhardt gave the plaintiffs two options for correcting their discovery productions with specific deadlines:

“1) By December 26, 2017, provide its hit list to Defendant; by January 5, 2018, conclude the meet and confer process as to mutually acceptable search terms based upon the hit list results; by January 12, 2018, run the agreed upon search terms across Plaintiff’s data; by February 15, 2018, screen the resulting documents for responsiveness and privilege; and by February 16, 2018, produce responsive, non-privileged documents with only appropriate designations of “confidential” and “AEO” (said production to include that subset of the not-previously-produced 700,000 documents that are responsive and non-privileged); or

2) By December 26, 2017, provide the not-previously-produced 700,000 documents to Defendant without further review; pay the reasonable costs for Defendant to conduct a TAR of the 700,000 documents and the July 21, 2017 and August 22, 2017 productions for responsiveness; by January 24, 2018, designate only those qualifying documents as “confidential” or “AEO”; by that date, any documents not designated in compliance with this Order will be deemed de-designated.”

Judge Burkhardt also ordered Plaintiffs to pay for the reasonable expenses, including attorney’s fees, for bringing the motion and for the expenses incurred by Defendants “as a result of Youngevity’s failure to abide by the Stipulated Protective Order.”

Conclusion

This case is another reminder of what appears to be the well-embraced theme in Federal discovery – cooperation.  The 2015 amendments made plain that cooperation between the parties and their attorneys during the litigation process to achieve orderly and cost-effective discovery is a priority.  Indeed, mutual knowledge of the relevant facts is essential to proper litigation; and therefore the process of obtaining those facts (i.e., discovery) should be a cooperative one.  Had counsel simply abided by the three-step process and stipulated protective Order it willingly entered, there would be no need to defend against (and foot the bill for) the motion to compel.

This case (Heller’s Gas, Inc. v. Int’l Ins. Co. of Hannover Ltd., 2016 U.S. Dist. LEXIS 71069 [M.D. Pa. June 1, 2016]), arises from an insurance claim filed by Heller’s Gas Inc. (“Heller”).  Heller was issued a commercial output insurance program property insurance policy by defendants International Insurance Company of Hannover LTD and International Insurance Company of Hannover  SE (“Defendants”). Heller’s used this policy to insure property that housed six 30,000 gallon tanks filled with approximately 136,800 gallons of liquid propane. On October 11, 2013, Plaintiffs found evidence of a sinkhole beneath the tanks, which allegedly damaged the tanks. Heller removed the liquid propane from the tanks, transported the liquid propane to other facilities, disassembled the tanks, and moved the tanks to stable ground at considerable expense. Defendants denied coverage for the loss, aside from $5,000 under emergency removal expense coverage. Heller’s subsequently filed a lawsuit alleging breach of contract and statutory bad faith.

During discovery, Defendants received information from various third parties through subpoenas.  After receipt of that information, Defendants discovered that Heller failed to produce relevant and discoverable information. For example, Defendants received an email from a records custodian who admitted in the email that there was no physical damage to the propane tanks. This email was discovered, not through documents produced by Plaintiff, but from documents produced from a third party. Thus, Defendants brought a motion to compel Heller to produce more complete responses to discovery.

The Court, in granting Defendants’ motion noted that recently amended Federal Rule of Civil Procedure 26(b)(1) provides that “[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case . . .” And, evidence is relevant if it has “any tendency to make a fact more or less probable than it would be without the evidence” and if it “is of consequence in determining the action.” The Court then noted that the party objecting to discovery must state the grounds for the objection with specificity and the party requesting the discovery then bears the burden to prove that the requested discovery falls within the bounds of Rule 26.  Finally, the Court noted that if this burden is met, the objecting party must then “convince the court why discovery should not be had.”

Applying these discovery principles to the motion at hand, the Court determined that Heller failed to put forth specific objections to the requested discovery.  Rather, Heller objected to the motion on the grounds that it already produced four hundred and thirty-one pages of documents at Defendants’ request and that Defendants have suffered no prejudice, as they received the disputed documents, albeit from third parties. Heller’s counsel also stated that he was “amenable to revisiting the issue with Plaintiff and issuing an appropriate discovery certification.”  Latching on to Plaintiff’s counsel’s good intentions, the Court found “the Plaintiff offers no objection to ‘revisiting the issue,’ ” and granted Defendants’ motion to compel.

The lesson here is that any discovery objections interposed must be done with specificity especially where, as in Heller, the requested discovery falls within the bounds of Rule 26.

In Gardner v. Continental Cas. Co., (2016 WL 155002 [D. Conn. Jan. 13, 2016]), the District Court was called upon to decide two different issues raised by Plaintiffs in a motion to compel.  The case itself concerned the long term care insurance coverage for five Connecticut residents for stays at Connecticut Managed Residential Care (“MRC”) facilities.  As is relevant here, after some negotiation, counsel agreed to a list of search terms to use to search the emails of twenty-three custodians.   The result was the return of approximately 38,000 documents.  Defendants reviewed the documents for relevance and privilege and produced 2,214 pages of documents – many of which were copies of the complaint and other filings in the lawsuit.  Plaintiffs sought to compel the production of the balance of the 38,000 documents, all of which were found using the agreed-upon search terms, and argued the smaller production was the result of defendant “cherry-pick[ing]” documents.  Plaintiff also agreed it should not be forced to accept the “just trust us” approach defendant endorsed. Further, the plaintiffs argued that the purpose of the agreed-upon search terms was “to avoid prolonged and detailed debate over what ESI documents [were] ‘responsive’ . . .” The plaintiffs supported their position regarding the scant production by pointing out that the defendant’s third-party claims adjustor submitted a “far more comprehensive and informative” production, while the defendant argued that it had already provided “extensive discovery” and that it had spent “significant resources” reviewing the documents from the agreed-upon search terms.

This discovery issue arises with much consistency in cases with extensive electronically stored information (“ESI”).  Overwhelmingly courts conclude that the position taken by plaintiffs is “simply untenable” – the defendant is not obligated to turn over all 38,000 documents, especially where issues of privilege abound.  The court did, however, recognize plaintiffs’ “legitimate concern” regarding the limited production, and ordered opposing counsel to confer and discuss approaches for addressing the potential need to turn over results of the search hits including—“sampling and iterative refinement.”

This decision raises an interesting issue.  It would seem obvious that only relevant non-privileged documents would be produced irrespective of how many documents (i.e., false responsive or privileged) “hit” upon a search term.  However, to avoid motions to compel and protracted discovery disputes, this case reminds us all to spell out precisely what we are agreeing to do when we enter into ESI protocols.

A recent decision from the United States District Court of the District of Connecticut demonstrates the need for proper custodian interview before responding to discovery requests. Electrified Discounters, Inc. v MI Technologies, Inc. (2015 U.S. Dist. LEXIS 64950) involved a dispute over sales of replacement lamps for rear projector televisions and front projectors, via online marketplaces like Amazon.com.

The plaintiff alleged trademark infringement and related claims. The defendant counterclaimed seeking cancellation of the trademark and brought a separate action against the plaintiff’s principals. The two actions were consolidated. The problems arose with plaintiff’s discovery responses.

The plaintiff’s deposition testimony contradicted its discovery responses. For example, the plaintiff repeatedly responded that it did not maintain certain records, but during its deposition testimony its witnesses testified that the records were maintained in a QuickBooks database. This testimony also contradicted the information supplied in opposition to the defendant’s motion to compel.

The court reviewed 22 different requests for production, finding that each response was inadequate. The court did not place specific blame for these inconsistencies, but required that the plaintiff provide its counsel with access to its emails (which it was required to stop deleting), and image its ESI, including hard drives and QuickBooks files. The court further required plaintiff and its counsel to examine these records, provide all non-privileged responsive documents and information and a sworn statement that all responsive discovery has been produced. The court also required that the plaintiff show cause why the movant should not be awarded its attorney’s fees incurred in making the motion.

In the latest of a string of decisions relating to ediscovery spoliation, the First Department, on Jun 11, 2015, reconfirmed a basic principal of a spoliation motion: the party seeking sanctions must demonstrate that the spoliated materials were relevant to their case.  This requirement must be satisfied even if the spoliation was caused by gross negligence.

In AJ Holdings Group LLC v IP Holdings LLC et al., (2015 NY Slip Op 04943 [1st Dept 2015]), which arose from a licensing dispute, the First Department reversed the Trial Court’s spoliation sanctions, which included an adverse inference and an award of the movant’s expert and attorneys’ fees in bringing the motion.  The plaintiff alleged that the defendant improperly terminated its license for “MUDD” branded products so that it could enter into a licensing arrangement with Kohl’s.  The defendant claimed that the plaintiff orally agreed to modify the termination provision in their licensing agreement.

The problem was that the plaintiff failed to properly implement a litigation hold after it was on notice of the potential litigation and destroyed its internal emails.  In the words of the First Department:

Plaintiff’s failure to ensure that its principals, who were all involved in the instant transactions, preserved their emails on various accounts used by them, and its failure to implement any uniform or centralized plan to preserve data or even the various devices used by the “key players” in the transaction, demonstrated gross negligence with regard to the deletion of the email.

The Court’s analysis did not end there.  The grossly negligent spoliation only gave rise to a rebuttal presumption that the spoliated materials were relevant.  The defendant in AJ Holdings, rebutted the presumption by demonstrating that the defendant’s claimed defense – the oral modification – necessarily turned on communications to or with defendant’s, not plaintiff’s internal communications.  Again, in the words of the First Department:

because defendants can have only relied on communications they received from plaintiff to establish this defense, there is no sense in which the deleted internal emails of plaintiff would be relevant.  As such, it was error to impose spoliation sanctions.

The lesson for the practitioner is that when bringing a spoliation motion one must not forget to demonstrate the relevancy of the spoliated materials, which cannot be taken for granted.

AJ Holdings Grp. LLC v. IP Holdings, LLC, No. 600530/2009 (N.Y. Sup. Ct. Sept. 19, 2014) reversed by AJ Holdings Group LLC v IP Holdings LLC et al., (2015 NY Slip Op 04943 [1st Dept 2015]).

In this breach of licensing agreement dispute, the Defendants sought spoliation sanctions against the Plaintiff.  The sought-after sanctions included striking the complaint, dismissal of the suit, adverse inferences, and attorneys’ fees.  The Court declined to strike the Plaintiff’s complaint, but found an adverse inference appropriate both at summary judgment and at trial because Plaintiff failed to preserve critical emails, which caused the Defendants to be “at an undue disadvantage in establishing their defense.” The Court also ordered the Plaintiff to cover the cost of the forensic examination and the Defendants’ attorneys’ fees for both motions that sought sanctions.

In AJ Holdings, Defendants filed a motion to compel the Plaintiff to produce both paper and electronic discovery. In granting the motion, the Court ruled that the Plaintiff’s duty to preserve arose on September 29, 2008, the date Plaintiff’s counsel sent the Defendants an e-mail regarding the early termination of the license agreement. The Court’s ruling also allowed the Defendants’ forensic expert to examine the Plaintiff’s computers and devices to determine whether any information deleted after September 29, 2008 could be recovered. Because it was unclear whether any data had been lost, the Court found the Defendants’ request for spoliation sanctions premature but granted them the right to renew their request after the forensic examination.

The Defendants’ expert found that the Plaintiff did not institute a legal hold or take steps to collect or preserve e-mail on its e-mail servers.  Indeed, the Plaintiff’s IT manager testified that he was unaware of the lawsuit until the day before his deposition and that no one informed him that e-mail needed to be preserved. Therefore, all but a “handful” of e-mails sent between the time the duty to preserve arose and the filing of the lawsuit had been lost. Comparing that handful to the typical volume of e-mails sent by the custodians, the expert concluded that “a substantial number of mail items” had been destroyed. This problem was exacerbated by the Plaintiff’s replacement of the computers and Blackberry’s its principals used during the relevant time frame, so the expert could not examine them. Further, the Plaintiff’s employees used AOL accounts to exchange work-related e-mails, and without access to the hardware, the expert could not access any deleted messages.

After the forensic examination, the Defendants asked again for spoliation sanctions, and the Court granted their motion. Under the seminal case Zubulake v. UBS Warburg, the Court found the company should have preserved the e-mail of “key players” likely to have information relevant to the dispute. The five principals at issue had participated in the termination of the license agreement and “had control over relevant email.” Therefore, they had a duty to preserve evidence when litigation was reasonably foreseeable.

Despite this duty, the key players took no steps to preserve evidence: they did not institute a legal hold or prevent the automatic deletion of their e-mails from the servers, although their counsel had repeatedly warned them to do so. The principals “discussed” an oral legal hold but never implemented it. Thus, the Court found the principals were grossly negligent in the dereliction of their duty to preserve evidence. Because the destruction of the evidence was grossly negligent, the relevance of the evidence was presumed. The Court found that even if the spoliation had been merely negligent, the destroyed e-mail would have been relevant to the defense of the action.

In AJ Holdings Group LLC v IP Holdings LLC et al., (2015 NY Slip Op 04943 [1st Dept 2015]), the First Department reversed the Trial Court’s spoliation sanctions.  Stay tuned for our next blog post discussing that decision.