February’s Notable Cases and Events in E-Discovery

[Editor’s Note: This article was first published February 15, 2023 and EDRM is grateful to Robert Keeling, Chair of the EDRM Global Advisory Council and our Trusted Partner, Sidley, for permission to republish.]

This Sidley Update addresses the following recent developments and court decisions involving e-discovery issues:

1. a ruling from the U.S. District Court for the District of Utah overruling an objection to discovery based on Thai privacy law, finding that the Plaintiff had not established that the foreign law applied or precluded the discovery
2. an order from the U.S. District Court for the Eastern District of Pennsylvania denying a motion for sanctions based on alleged spoliation of Discord threads that had been accessed by hackers and deleted by either the hackers or moderators
3. a decision from a discovery master in the U.S. District Court for the District of Colorado granting some sanctions against Plaintiffs’ counsel but denying others where Plaintiffs’ counsel used protected discovery material for the improper purpose of influencing a Federal Trade Commission (FTC) investigation, and then obfuscated their use of the protected material through improper objections and misleading discovery responses
4. an opinion from the U.S. District Court for the Middle District of Pennsylvania overruling the Defendants’ objections to a discovery request requiring a search through over 100,000 emails, finding that the search was proportionate in light of the significant relevance of the documents and that application of the Sedona principles would mitigate the burden on Defendants

1. A ruling from the U.S. District Court for the District of Utah overruling an objection to discovery based on Thai privacy law, finding that the Plaintiff had not established that the foreign law applied or precluded the discovery.

In OL Private Counsel, LLC v. Olson, No. 2:21-cv-00455, 2022 WL 17475381 (D. Utah Dec. 6, 2022), U.S. Magistrate Judge Daphne A. Oberg addressed an objection to discovery based on Thai privacy law, which Plaintiff claimed precluded it from producing personal identifying information. 

Plaintiff, a law firm, brought this action against its former employee alleging that Defendant improperly accessed Plaintiff’s confidential documents after leaving the firm by convincing an employee of one of Plaintiff’s clients to access and send him the documents. Id. at *1. 

In discovery, Defendant served an interrogatory seeking the identity of any person or entity that had access to Plaintiffs’ server or the servers of two of its clients as well as the timeframe of such access. Id. at *3. While Plaintiff provided information about its security protocols and the number of people who had access to its server, Plaintiff argued that (1) the identity of the individuals and entities with access was irrelevant to the issue of whether Defendant’s conduct was improper, (2) producing the information would be unduly burdensome, and (3) it could not be compelled to disclose the names of Thai employees who had access to the servers because a Thai privacy law prohibited disclosure of these employees’ identifying information. Defendant moved to compel responses to the interrogatory.

Magistrate Judge Oberg began her analysis by finding that the requested information was relevant and proportional to the needs of the case. Id. at *4. Because Plaintiff’s claims relied on allegations that Defendant misappropriated confidential documents, Magistrate Judge Oberg concluded that information regarding which entities and individuals had access to the servers where the documents were stored, and the timeframes during which they had access, was relevant to whether the documents were maintained as confidential. She noted that Plaintiff did not make any argument regarding undue burden in its briefing and that the number of individuals who had access to the servers during the relevant time period ranged from 45 to 93. Under these circumstances she found that any burden in responding did not outweigh the likely benefit.

Magistrate Judge Oberg next addressed whether the requested information was protected by Thai privacy laws. Id. at *4-6. She explained that a party relying on a foreign law to avoid discovery has the burden of showing that such law bars the discovery sought and requires application of a multifactor balancing test to evaluate the interests of the United States and the party seeking the discovery against the foreign state’s interests, including (1) the importance to the litigation of the documents or other information requested, (2) the degree of specificity of the request, (3) whether the information originated in the United States, (4) the availability of alternative means of securing the information, and (5) the extent to which noncompliance with the request would undermine important interests of the United States or to which compliance with the request would undermine important interests of the state where the information is located. Id. at *5. Magistrate Judge Oberg noted that these factors are not exhaustive and that courts have also considered “the extent and the nature of the hardship that inconsistent enforcement would impose upon the person” ordered to produce discovery.

Magistrate Judge Oberg found that Plaintiff had not met its burden to show Thai law prohibited the discovery sought in the interrogatory at issue. She first noted that Plaintiff supported this argument with an unsworn letter from a Thai attorney providing a “legal opinion” regarding the Thai Personal Data Protection Act (PDPA). The letter explained that the PDPA covers the disclosure of “personal data of Thai individuals,” including “any information relating to a person, which enables the identification of such person, whether directly or indirectly,” but includes a limited exception for information sought in legal proceedings. The letter stated that “if a disclosure is made without an order from a Thai court when the individual has not provided their consent, a party may be subject to civil, and potentially criminal, penalties under the PDPA.” The lawyer concluded: “I am of the view that a data controller may well be committing a violation of the PDPA if it disclosed protected information pursuant to an order of a foreign court without the consents of the employees.”

Magistrate Judge Oberg found that the attorney letter was insufficient to demonstrate that the discovery sought was barred by Thai law. She noted that the attorney did not opine that the information sought was protected information, nor had Plaintiff provided any evidence that information responsive to the interrogatory related to individuals who were protected under the Thai statute. She further concluded that Plaintiff had not demonstrated that the statutory exception for legal proceedings was inapplicable.

But Magistrate Judge Oberg found that regardless of whether Thai law barred disclosure, the balancing test weighed in favor of compelling disclosure. Id. at *6. She first found that the information requested was important because it directly related to the relevant issue of confidentiality, and she found that the request was sufficiently specific because the interrogatory was tailored to seek only relevant information. She also concluded that Plaintiff had not demonstrated that alternative means of obtaining the information were available. Next, she found that the “balance of national interests favors disclosure.” Although Thailand has interests in maintaining the privacy of its citizens, she noted that Plaintiff is a Utah entity that chose to bring this suit in Utah and therefore could not hide behind foreign privacy laws to avoid its discovery obligations.

Finally, Magistrate Judge Oberg concluded that Plaintiff had not demonstrated it would face hardship if compelled to respond to the interrogatory. She noted that the letter submitted by the Thai attorney offered only a generic observation that a party that violates the Thai law “may be subject to civil, and potentially criminal, penalties,” but he did not opine that Plaintiff would face such penalties if it responded to the interrogatory.

For all of these reasons, Magistrate Judge Oberg granted Defendant’s request that Plaintiff be ordered to “detail and describe” all persons and entities who had access to Plaintiff’s servers or documents during the relevant timeframe, although she noted that Plaintiff need not identify the individuals by name but may use other descriptors.

2. An order from the U.S. District Court for the Eastern District of Pennsylvania denying a motion for sanctions based on alleged spoliation of Discord threads that had been accessed by hackers and deleted by either the hackers or moderators.

In Carty v. Steem Monsters Corp., No. CV 20-5585, 2022 WL 17083645 (E.D. Pa. Nov. 18, 2022), U.S. Magistrate Judge Elizabeth T. Hey addressed Plaintiff’s spoliation motion for sanctions for allegedly failing to preserve Discord threads in violation of a preservation notice.

In this action for breach of contract, fraud, and related claims arising from the operation of a digital card game called Splinterlands, Plaintiff served Defendants with a preservation notice shortly before filing their action in 2020 that included electronically stored information (ESI) such as online messages. Id. at *1. However, Plaintiff “came to believe that Defendants had removed certain messages and data from the Steem Monsters Discord channel around January 15, 2022, in violation of the Notice.” Id. at *2. 

Magistrate Judge Hey permitted Plaintiff to depose Jesse Reich, a Defendant, on the limited issue of spoliation. Reich testified that “on three separate occasions, an unknown bad actor or actors hacked into the … Discord channel, resulting in three threads from the channel — entitled ‘General,’ ‘Maverick’s House’ (also referred to as ‘Monster Maverick’), and ‘Official Announcements,’ respectively — being deleted either by a moderator to prevent an attempted scam, or by the bad actor attempting to avoid detection.” Reich testified that some deletions were done by a content moderation team to remove messages designed to financially scam readers and that others were done by the hacker itself to avoid detection once information identifying the scam was posted on the threads. Id. at *2-3. Reich further testified that the deleted information was “roughly five percent or less of the entire Discord server and the messages contained within” and was data from “a year after you filed your lawsuit and after we had preserved any meaningful amount of discord messages.” Plaintiff filed a motion for sanctions based on the alleged spoliation, seeking an adverse inference. Id. at *4.

Magistrate Judge Hey agreed with Defendants that Plaintiff had not demonstrated that spoliation had occurred. She first noted that “Defendants produced more than 17,000 pages of Discord messages from the relevant time period, which Defendants defined without objection as February 1, 2019.” She also noted that Reich had testified that information was preserved from the “General” and “Maverick’s House” threads from the relevant time period. It was unclear whether all the relevant information from the “Official Announcements” thread was preserved for the relevant time period, but Plaintiff had failed “to identify what relevant ESI would have been posted on that thread” or why Plaintiff believed the litigation hold applied to that information. 

Magistrate Judge Hey then found that Plaintiff had not demonstrated that the ESI was lost because Plaintiff did not present any evidence that it attempted to retrieve the information from the company that operates Discord, as Reich testified that the company might retain that information. Id. at *5. Magistrate Judge Hey also noted that Plaintiff’s attempts to aver that production of the ESI in a PDF format subjects it to alteration do not make it “lost” for spoliation purposes, noting that “[d]ata in any format can be manipulated or falsified, and there is no evidence that any such thing has occurred in this case.”

Magistrate Judge Hey also noted that Federal Rule of Civil Procedure 37(e) permits sanctions based on a failure to preserve only if the movant can demonstrate prejudice or intent to deprive the opponent of access to the relevant information. Id. at *4 (citing Goldrich v. City of Jersey City, No. CV 15-885, 2018 WL 4492931, at *7 (D.N.J. July 25, 2018), report and recommendation adopted as modified by, 2018 WL 4489674 (D.N.J. Sept. 19, 2018)). In so stating, Magistrate Judge Hey cited a case noting that “Rule 37(e) ‘makes explicit that an adverse inference is appropriate only on a finding that the party responsible for the destruction of the lost information acted with the intent to deprive another party of access to the relevant information.’” Id. (quoting Accurso v. Infra-Red Servs., Inc., 169 F. Supp. 3d 612, 618 (E.D. Pa. 2016)). She found that Plaintiff had failed to demonstrate either prejudice or an attempt to deprive. 

Magistrate Judge Hey explained that it was Plaintiff’s burden to demonstrate prejudice and that Plaintiff had not demonstrated that statements in the “Official Announcements” thread, or statements in the “General” and “Maverick’s House” threads from after the relevant time period, had “any relevance” to Plaintiff’s claim. Id. at *5. She found that “the record does not support a finding that any loss or deletion was intentionally caused by Defendants.” Magistrate Judge Hey based this finding on Reich’s spoliation deposition, which Plaintiff “has not raised grounds to reject.”

Finding that Plaintiff had demonstrated neither that spoliation had occurred from the deletion of Discord thread content nor that sanctions could be imposed even if it had occurred, Magistrate Judge Hey denied Plaintiff’s motion for sanctions.

3. A decision from a discovery master in the U.S. District Court for the District of Colorado granting some sanctions against Plaintiffs’ counsel but denying others where Plaintiffs’ counsel used protected discovery material for the improper purpose of influencing an FTC investigation and then obfuscated their use of the protected material through improper objections and misleading discovery responses.

In In re Homeadvisor, Inc. Litigation, Case No. 16-cv-01849-PAB-KLM, 2023 WL 196414 (D. Colo. Jan. 16, 2023), Discovery Master Maura R. Grossman addressed a motion for sanctions by Defendants for Plaintiffs’ and Plaintiffs’ counsels’ use of discovery materials for an improper purpose under the applicable protective order and for failing to produce the resulting communications with the FTC (and obfuscating their failure with both Defendants and the Master).

Plaintiffs in this putative class action were home service professionals who used the services of Defendant HomeAdvisor, Inc., an online marketplace that matches professionals with homeowners who are actively in search of home services. Id. at *1-2. Plaintiffs claimed that they were deceived by Defendants’ membership conditions and service requests by homeowners, which Plaintiffs claimed were not properly verified, were not from “qualified,” “serious,” “project-ready” homeowners, and were largely “bogus.” Id. at *2.

The discovery dispute that led to Defendants’ sanctions motion began with a motion to compel Plaintiffs to produce communications between Plaintiffs and the FTC related to an investigation being conducted by the FTC into Defendants’ practices. Id. at *2-3. Defendants claimed that Plaintiffs learned of the FTC’s nonpublic investigation through documents produced by Defendants that had been designated as “confidential” or “highly confidential” under the applicable protective order in the case, which limited the use of such material to the litigation. Defendants claimed that Plaintiffs improperly used the confidential discovery material to steer the FTC’s investigation of Defendants, “impugning Defendants’ credibility with the FTC while keeping Defendants in the dark about these covert communications, thereby preventing them from addressing that interference or responding to Plaintiffs’ allegations.” Id. at *4.

When Defendants learned about Plaintiffs’ contacts with the FTC, Defendants raised with Plaintiffs the fact that Plaintiffs had not produced their communications with the FTC, which were responsive to certain of the Defendants’ requests, including requests for communications with third parties. Id. at *17. Plaintiffs responded to Defendants, and later to Master Grossman, that Plaintiffs had produced all communications with third parties subject to their objections, including on grounds of work product and other privileges, and were not otherwise withholding any responsive communications with third parties. Id. at *18.

Master Grossman made several findings of fact regarding Plaintiffs’ discovery responses and use of confidential materials under the applicable protective order. First, she found that Plaintiffs’ responses to certain of Defendants’ requests were “disingenuous, improper, and invalid at the time they were made” and that “the FTC-related communications and documents should have been timely produced without the need for a court order.” Id. at *21. Despite Plaintiffs’ objections to Defendants’ broad requests, she found that Plaintiffs “unquestionably did not have a reasonable basis to withhold the narrow, non-burdensome, known set of FTC-related documents.” She further found that there was no basis to claim that any communications with the FTC were privileged.

Next, Master Grossman found that Plaintiffs’ representations to Defendants about what they were or were not producing were “at best confusing and at worst intentionally misleading.” Id. at *22. She noted that Plaintiffs “made and repeated statements both orally and in writing that have since been shown to be neither complete nor correct, when they told [Defendants] and the Master either that there were no other responsive documents or no non-work-product-protected documents that were being withheld.” She found that Plaintiffs “doubled down on their misstatement of fact” by later insisting to the Master that their statements were accurate, even though Plaintiffs knew at the time that Plaintiffs were withholding multiple emails from the FTC responsive to the requests for communications with any third party related to Plaintiffs’ claims.

In short, Master Grossman found that (i) Plaintiffs lodged invalid, boilerplate objections of vagueness and undue burden that were inapplicable to their communications with the FTC; (ii) there was a lack of clarity and specificity by Plaintiffs regarding what exactly they were withholding on the basis of their objections; and (iii) there was a severe information asymmetry that interfered with Defendants’ ability to know what they were not receiving in discovery.

Master Grossman next found that Plaintiffs’ contacts with the FTC using Defendants’ confidential or highly confidential discovery material was improper under the protective order, which permitted the use of such material “solely for the purpose of prosecution, defense, and settlement of this action.” She found that Plaintiffs’ communications with the FTC using Defendants’ discovery material had a “secondary — if not primary — goal of assisting the FTC in developing and prosecuting its case against Defendants.” Master Grossman also found that Plaintiffs’ counsel continued to communicate with the FTC even after she told Plaintiffs’ counsel that their use of Defendants’ discovery material with the FTC would be a violation of the protective order. Id. at *23.

Defendants moved for sanctions against Plaintiffs and Plaintiffs’ counsel for their conduct.

In addressing this motion, Master Grossman first summarized Rule 16, which requires a court to order a party, its attorney, or both to pay the reasonable expenses incurred because of any noncompliance with a scheduling or pretrial order issued under Rule 16. Id. at *24. She noted that a finding of bad faith is not required for sanctions under Rule 16, just a finding that the pretrial order was violated, but the sanctions awarded must be proportional to the specific violation and should depend on the seriousness of the violation and where the fault lies (i.e., with counsel or client). However, in the absence of a finding of bad faith, there must be a sufficient nexus between noncompliance with the rules and the amount of fees and expenses awarded as a sanction.

Master Grossman next summarized Rule 37(b)(2)(A) regarding a party’s failure to obey a discovery order, which permits courts to prohibit a party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence or to make a finding of contempt. Id. at *25. Several factors can be evaluated in this regard, including (1) the willfulness of the noncompliant party or the reason for the noncompliance, (2) the efficacy of lesser sanctions, (3) the duration of the period of noncompliance, and (4) whether the noncompliant party had been warned of the consequences of noncompliance. She noted that no particular state of mind or degree of culpability is a prerequisite to an award of sanctions, but any sanctions award must be in the interests of justice and proportional to the specific violation of the rules. Finally, Master Grossman noted that Rule 37(b) requires courts to order the disobedient party and/or attorney to pay the reasonable expenses caused by the discovery failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.

Master Grossman also briefly summarized Fed. R. Civ. P. 37(c)(1) (providing that a party is not allowed to use information that it fails to produce in response to an order); 28 U.S.C. § 1927 (providing for an award of costs against an attorney who “multiplies the proceedings in any case unreasonably and vexatiously”); and the court’s inherent authority (which gives it authority to impose a sanction for the abuse of the judicial process). Id. at *25-26.

Master Grossman next described the elements of bad faith, willfulness, prejudice, and substantial justification in the context of a discovery failure. Id. at *27. She noted that courts within the Tenth Circuit have held that “a party acts in bad faith when actions taken during the litigation are entirely without color and have been asserted wantonly, for purposes of harassment or delay or for other improper reasons.” A willful failure is “any intentional failure as distinguished from involuntary noncompliance” or where a party has engaged in a “pattern of conduct” in “flagrant disregard” of the rules of discovery and a specific court order.

Master Grossman explained that withholding of evidence “substantially prejudices an opposing party by casting doubt on the veracity of all of the culpable party’s submissions throughout the litigation.” Finally, she noted that the factors for determining whether conduct was substantially justified or harmless in the context of a Rule 26(a) violation included “(1) the prejudice to the party against whom the information is offered, (2) the ability of the party to cure the prejudice, (3) the extent to which introducing such [information] would disrupt the trial, and (4) the moving party’s bad faith or willfulness.” Id. (quoting Woodworker’s Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d 985, 993 (10th Cir. 1999)).

Turning to the sanctions requested by Defendants, Master Grossman noted that she had broad discretion to fashion an appropriate sanction that would serve the dual purposes of penalizing misconduct and deterring those who might be tempted to engage in such misconduct absent a deterrent, but the sanction should be “measured, proportionate, and in the interests of justice.” Id. at *28. Defendants’ requested sanctions included (1) a full accounting of Plaintiffs’ communications with the FTC, (2) an order holding Plaintiffs’ counsel in contempt and directing them to pay US$100,000 in sanctions to the court, as well as Defendants’ fees and costs, (3) preclusion of Plaintiffs from citing or otherwise relying on any FTC-related discovery, and (4) all of the Master’s fees. Id. at *29.

Master Grossman first addressed the Defendants’ request to conduct further discovery into Plaintiffs’ communications with the FTC and to access Plaintiffs’ in camera declarations about those communications. She denied this relief because discovery had closed 18 months prior, and the discovery was neither “relevant to any party’s claim or defense nor proportional to the needs of the case.” Id. (quoting Rule 26(b)(1)). She rejected Defendants’ argument that the discovery was necessary to assess the scope of Plaintiffs’ “bad-faith conduct,” finding that issue both irrelevant and unnecessary. She also refused to grant access to Plaintiffs’ in camera declarations, finding “nothing to be accomplished at this point by doing so” and noting that providing access might deter future parties from sharing information in camera to resolve disputes. Id. at *30.

Master Grossman next addressed Defendants’ request to impose civil contempt sanctions and costs on Plaintiffs. She explained that a finding of civil contempt would require Defendants to prove by clear and convincing evidence that a valid court order existed, that Plaintiffs had knowledge of the order, and that the Plaintiffs disobeyed the order. The violation need not be willful to result in a finding of contempt, but sanctions could be imposed only to “compel or coerce obedience to a court order” or to “compensate the contemnor’s adversary for injuries resulting from the contemnor’s noncompliance.”

Master Grossman agreed with Defendants that there likely was sufficient proof for a finding of civil contempt, but she noted that the order appointing her Master did not permit her to impose civil contempt sanctions, and, in fact, only the presiding district court judge could do so after a recommendation by a magistrate judge. Given the lengthy proceedings that would be required to reach a finding of civil contempt, Master Grossman concluded that the likely benefit to Defendants “simply does not outweigh this burden when there are other, plainly available tools in the Master’s arsenal that can and will compensate [Defendants] for Plaintiffs’ Counsel’s discovery violations and deter both them and others from engaging in the same conduct in the future.”

Master Grossman next addressed the Defendants’ request to order that Plaintiffs pay a US$100,000 sanction to the Clerk of Court under Fed. R. Civ. P. 16(f), 37(b)(2)(A), and/or its inherent authority. Id. at *31. Master Grossman noted that this was a request for a punitive sanction, as opposed to a compensatory sanction, but she found that significant damage had not been inflicted on the court because the court had not addressed significant motion practice related to the discovery disputes at issue. Master Grossman explained that “sanctions imposed pursuant to civil procedures must be compensatory rather than punitive unless contemptuous conduct is shown” and “must be in the interests of justice and proportional to the specific violation of the rules.” Id. (emphasis in original). She found that there were other more proportionate and suitable sanctions available, and that there was “no need to pile on.”

Master Grossman next addressed the Defendants’ request for reimbursement of their costs, including attorney’s fees, for Plaintiffs’ “many Protective Order violations.” Id. at *32. Master Grossman found that there was “ample basis” to award at least a significant portion of the Defendants’ attorney’s fees and costs, including that (1) Plaintiffs’ counsel indisputably violated the protective order through “a willful and intentional course of conduct based on a plainly unreasonable reading of the [protective order] over an extended period of time” and (2) Plaintiffs failed to fully and accurately respond to Defendants’ requests by knowingly withholding a narrow subset of responsive documents based on arguments that were “disingenuous, invalid, and unreasonable at the time they were made, in clear violation of their discovery obligations.”

Master Grossman found that Plaintiffs’ misstatements to Defendants “were not minor, accidental slips made by inexperienced counsel, but rather, the product of a conscious strategic decision made by savvy attorneys that backfired” when Defendants dug in their heels. She further noted that rather than concede and rectify the misstatements, Plaintiffs’ counsel “doubled and tripled down on nearly frivolous, alternating arguments.”

Master Grossman found that Plaintiffs’ counsels’ violations of the protective order warranted the sanction of reimbursement of fees and costs. Id. at *32-33. She first noted that Rule 16(f) requires imposition of costs sanctions for a violation of an order under the rule “unless the non-compliance was substantially justified or other circumstances make an award of expenses unjust.” But she found no reasonable justification for Plaintiffs’ counsels’ defiance of the express terms of the protective order or any other circumstances that would make this sanction unjust. Rather, she noted that the circumstances presented “an egregious offense engaged in by Plaintiffs’ counsel over a sustained period of time,” even after they were confronted by Defendants and cautioned by the Master. Accordingly, she imposed the sanction of fees and costs on Plaintiffs’ counsel only, “since there is no evidence to suggest any involvement in this decision or course of conduct on the part of Plaintiffs themselves.”

Master Grossman declined to impose sanctions on Plaintiffs for failing to supplement certain of their discovery responses, but she found that sanctions against Plaintiffs’ counsel were warranted under Rule 26(g)(3), which requires imposition of a sanction for any discovery certification that violates the rule “without substantial justification.” Id. at *34-35. She found that Plaintiffs’ assertions of work product protection and common-interest privilege as to the FTC-related communications and documents were not warranted by existing law and that Plaintiffs’ discovery responses as to the FTC-related documents “were unreasonable, invalid, and undertaken for an improper purpose, i.e., to avoid being caught at their violation of the [protective order] and so they could continue to assist the FTC in its prosecution of” Defendants. 

Master Grossman next addressed the Defendants’ request to bar Plaintiffs “from citing or otherwise relying on any FTC-related discovery … including all productions and submissions Defendants made to the FTC and any documents Defendants received from the FTC.” Id. at * 37. However, Master Grossman agreed with Plaintiffs that the “exclusion of evidence is a drastic sanction not warranted or proper under these circumstances.” She noted that “a court should impose the least onerous sanction that will remedy the prejudice and, when applicable, punish the past wrongdoing and deter future wrongdoing.”

Master Grossman noted the “strong predisposition to resolve cases on their merits” and explained that the preclusion sanctions Defendants sought would “operate in the same fashion as a default judgment” in that they would “intrude into the truth-finding process.” Because the prejudice caused by the discovery violations was limited to distraction, lost time, and the significant cost to litigate this dispute, an evidence preclusion sanction “would bear no nexus to the harm that [Defendants] suffered in this action.” Master Grossman decided not to “punish[] Plaintiffs for the sins of their counsel, which such evidence preclusion would inevitably cause.” Instead, she found that the interests of justice “will be amply served by imposing what will be a not-insubstantial amount of fees and costs on Plaintiffs’ counsel,” and “the imposition of evidence preclusion would be overkill under the circumstances.”

Finally, Master Grossman addressed the Defendants’ request that Plaintiffs be ordered to pay all of the Master’s fees “incurred in connection with her analysis and evaluation of Plaintiffs’ significant misconduct.” She noted that she had warned Plaintiffs’ counsel multiple times over the course of the dispute that she was likely to apportion her fees and costs to Plaintiffs’ counsel if they continued to litigate this matter on the basis of the arguments they were making, but Plaintiffs’ counsel chose to continue to do so long after it was clear that the Master strongly disagreed with their arguments. Id. at *38. Accordingly, she found that Defendants, who prevailed on virtually all of the motions related to this dispute, should not have to bear the cost of the Master’s fees, and she ordered Plaintiffs’ counsel only — not Plaintiffs — to reimburse Defendants for the portion of her fees related to this dispute.

4. An opinion from the U.S. District Court for the Middle District of Pennsylvania overruling the Defendants’ objections to a discovery request requiring a search through over 100,000 emails, finding that the search was proportionate in light of the significant relevance of the documents and that application of the Sedona principles would mitigate the burden on Defendants.

In Stephan Zouras LLP v. Marrone, No. 3:20-CV-2357, 2022 WL 4007296 (M.D. Pa. Sept. 1, 2022), U.S. Magistrate Judge Martin C. Carlson addressed Plaintiff’s motion to compel discovery of all documents from a prior proceeding supporting Defendants’ fee application in that proceeding, finding that the burden was justified by the importance of the requested discovery to the claims in the litigation, and ordering the parties to cooperate and agree on search terms and representative sampling to cull the documents down to a more manageable number.

This lawsuit arose from a dispute between two law firms that achieved a joint victory in a prior employment action under the Fair Labor Standards Act (FLSA) that spanned nine years and resulted in a joint fee award of almost $1.8 million. Id. at *1. After Defendants received the fee award, it put only $325,502.70 in escrow for payment to Plaintiff, whereas Plaintiff claimed it was entitled to “at least $573,000” and sued for the difference. The parties disputed Defendants’ contribution to the case, with Plaintiff arguing that Defendants’ assertion that the work Defendants performed from 2012 to 2018 was sufficient to support it receiving most of the fees. Id. at *2. 

In discovery, Plaintiffs requested from Defendants “all documents” supporting Defendants’ fee petition in the prior employment litigations. Defendants produced only 13 documents in response to this request, arguing that any further discovery was irrelevant and that the scope of the requests was unduly burdensome. Plaintiff moved to compel.

Magistrate Judge Carlson first found that the documents sought were relevant, noting that fact finders “will necessarily have to consider the hours worked on this lawsuit by these competing claimants, along with the nature and quality of that work.” Id. at *4. In so finding, Magistrate Judge Carlson rejected Defendants’ argument that the aggregate fee award in FLSA disputes is calculated on a distinct “percent of recovery” approach, finding that the argument conflated “the reasonableness of an aggregate fee award” with “the distribution of this award between [the parties],” and that “the lodestar cross check is a ‘sensible’ part of any percent of recovery analysis.” Id. at *5 (quoting and citing Lawson v. Love’s Travel Stops & Country Stores, Inc., No. 1:17-CV-1266, 2021 WL 720359, at *5 (M.D. Pa. Feb. 24, 2021)).

Magistrate Judge Carlson then rejected Defendants’ argument that the request was unduly burdensome. Defendants argued that the request would require them to “sift[] through over 122,000 emails” which would be “disproportional to any need.” But Magistrate Judge Carlson found that even if the request was burdensome, the claim the request related to was a “sweat equity” claim for fees and required “a thorough examination of the documentary support for these fees” such that the examination was “not only proportional” but “necessary.” Magistrate Judge Carlson then noted that the request for supporting documents was proportional because “hundreds of thousands of dollars hang in the balance.” Magistrate Judge Carlson also noted that Plaintiff had already produced “more than 73,000 pages of material in discovery to support its claims” as a part of reciprocal discovery, which was a “substantial production” that meant that Plaintiff was “justified in requesting … more than 13 documents to justify the hours [Defendants] claim to have devoted.”

Magistrate Judge Carlson then rejected Defendants’ assertion that meeting the production request would actually require them to “sift[] through over 122,000 emails.” He stated that for ESI, “we no longer live in a primitive legal environment where a laborious manual review of documents is necessary.” Id. at *6. He quoted at length one of his prior opinions citing approvingly to the recommendations of the Sedona Conference, which proposed “best practices” to handle the demands of “the staggering volume of ESI which many large organizations routinely collect and retain” due to technological advances which “enable us to collect, retain, analyze and review [ESI] on a scale which was unimaginable a generation ago.” Id. (quoting Lawson v. Love’s Travel Stops & Country Stores, Inc., No. 1:17-CV-1266, 2019 WL 7102450, at *1-2 (M.D. Pa. Dec. 23, 2019) (citing The Sedona Principles, Third Edition: Best Practices, Recommendations & Principles for Addressing Electronic Document Production, 19 SEDONA CONF. J. 1 (2018))). 

Magistrate Judge Carlson noted that the Sedona principles recognize that large ESI volumes do not “alter the legal obligations of parties in discovery” but do impose “special duties and obligations on litigants,” the “[f]oremost” of which is “a duty to work in a cooperative and collaborative fashion to devise discovery strategies.” Id. (noting that “cooperation is the keystone to any successful ESI discovery strategy”) (quoting Lawson, 2019 WL 7102450, at *1). He further noted that the Sedona principles “identify two specific, collaborative strategies”: “[t]he use of relevant search terms or technology assisted review to cull ESI” and “on-going sampling of data to assess the accuracy of search term searches.” Id. (quoting Lawson, 2019 WL 7102450, at *2.)

Magistrate Judge Carlson found that in the current dispute “the parties can mitigate the burden of this discovery to a significant degree” by applying the Sedona principles, including “collaborative efforts to identify relevant search terms.” Id. at *7. Accordingly, he ordered the parties to “engage in the collaborative process outlined by the Court, consistent with the Sedona principles.”LESS

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