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Case Blurb: Mformation Technologies; Court discusses document dumps and the meaning of ‘maintained in the usual course of business’

Posted by rjbiii on November 29, 2009

Courts have struggled with the interpretation of Fed. R. Civ. P. 34 which allows production as documents are maintained in the usual course of the producing party’s business. In attempting to define the requirements that should be place on a producing party who chooses to produce documents in the manner they are normally maintained, the courts have attempted to balance the burden on the respective parties. Generally, courts have concluded that simply dumping a mass of documents on the requesting party may not satisfy the rule’s requirements, even though the undifferentiated mass of documents are in the same form as maintained by the producing party.

Espy v. Mformation Techs., 2009 U.S. Dist. LEXIS 81832, 23-24 (D. Kan. Sept. 9, 2009)(citations removed).

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Posted in 10th Circuit, Case Blurbs, D. Kan., Data Dump, Form of Production, FRCP 34, Magistrate Judge Donald W. Bostwick | Leave a Comment »

Case Summary: MFormation Technologies; Court looks at how data is ‘Ordinarily maintained’

Posted by rjbiii on November 27, 2009

Espy v. Mformation Techs., 2009 U.S. Dist. LEXIS 81832 (D. Kan. Sept. 9, 2009)

Factual Background: Plaintiff (Brian Espy) brought this action to recover commissions for sales made while in the employ of defendant company (Mformation). Plaintiff resigned from the company because of disagreements over the method of calculating those commissions. There was also a dispute regarding the value of the accounts for which the commissions would be paid.

In late 2007 or early 2008, defendant company was positioning itself for sale. As part of that process, the company established a secure website to which it published much confidential financial information about itself. Items published included such things as articles of incorporation, board and stockholder meeting minutes, past financial statements, and future financial forecasts of revenues. Mformation limited access to this website to companies and individuals who obtained a secure password from Mformation. The website collected information as to who entered the website and when, not only as to the company that was making the contact, but more specifically the individuals who accessed the site.

Plaintiff contends that the company would have had to have include information on the value of the Clearwire account (the largest of Plaintiff’s accounts for which he sought commissions), and he sought to obtain names of prospective purchases who may have been privy to this information. During deposition, Mformation CEO Mark Edwards refused to provide this information, claiming that the information was privileged and confidential, and that the request was not made to lead to the discovery of admissible evidence. Defendants did, however, state that “all of the representations made to all the third parties are contained in a CD of the secure website which Defendants finally located and provided to the court for in camera inspection.”

Before the court were multiple motions by plaintiff to compel production, and a motion that sanctions be imposed for failure to produce documents.


Identity of Third Parties & continuation of Edwards’ deposition

Defendants represented to the court that all information provided to prospective third-party purchasers about the value of the company was located on the secure website, and that no further materials existed from follow-up discussions or meetings. Certain emails which were attached as exhibits convinced the court that these representations were false, despite defendants’ continued assertions that of the accuracy of those statements. In light of this, the court required defendants to produce to Plaintiff the CD containing the contents of the secure website and certain hard copy documents that were previously produced to the court for in camera inspection.

Defendants argued that because these materials were confidential and proprietary, they should be allowed to produce a redacted version of the material, or have a special master appointed at Defendants’ expense to govern this particular dispute. The court disagreed, however, saying that while it was understood that these materials were confidential, they were also dated, as none of the information includes current financial information or projections.

The court also granted Plaintiff the right to depose any prospective third party purchaser had any direct communications with Mformation or its representative. The court accepted defendant’s offer to produce its 30(b)(6) witness for a deposition, scheduled earlier but cancelled due to that witness’s illness. Finally, in light of the fact that it appeared that responsive data associated with third party prospective purchasers had not been produced by defendant, the court ordered defendant to go back and review its files and records and produce anything it missed first time around.


Documents presented to board of directors concerning Clearwire contract

The court noted that it appeared that documents associated with the Clearwire contract not necessarily involving representations to third parties. The court stated that such documents presented to it for in camera review, in the form of a presentation made to the board of directors during a meeting of that group. Defendants argue that they produced any relevant documents in this category, but the judge noted that they presumably did not produce this document, due to its presence in the in camera review. The court ordered the defendants to produce any such documents that might have been missed in previous productions.

Financial records of Mformation and receipt of payments from contracts booked by Plaintiff

Plaintiffs requested that all documents related to the financial condition of Mformation between the months of December 2007 through May 2009. Defendant’s objected that this request was overly broad and burdensome, and not calculated to lead to the discovery of admissible evidence. Plaintiffs argued that it was entitled to the information because of Defendant’s position (either explicit or implied) that it cannot pay certain commissions. The court agreed with Defendants that the request was extremely broad and could encompass a substantial volume of records, and concluded that plaintiffs reason were not sufficient to mandate a production of all documents encompassed in the request. The court decided to require all financial information concerning the receipt of payments from all contracts for which Plaintiff is seeking commissions. The rub here is that Defendant claimed that it had already produced these documents. The court seemed to express its concern about being able to identify these documents within the large document collection already produced to plaintiff.

Plaintiff complained that defendant’s documents were produced in electronic format, without bates stamps and not categorized in response to the specific requests or interrogatories and that this caused Plaintiff difficulty in accessing and reviewing these records. Defendants responded to this complaint by representing that the documents were produced in the manner in which they are stored and kept in the usual course of the business.

The court then discussed the interpretation of FRCP 34, which allows production as documents are maintained in the usual course of the producing party’s business. The court noted that in attempting to define the requirements that should be place on a producing party who chooses to produce documents in the manner they are normally maintained, the courts have attempted to balance the burden on the respective parties. Generally, courts have concluded that simply dumping a mass of documents on the requesting party may not satisfy the rule’s requirements, even though the undifferentiated mass of documents are in the same form as maintained by the producing party. The court concluded that Defendants should be required to specifically identify, by index or otherwise, those specific financial records that relate to receipts of payments from all contracts for which Plaintiff is seeking commissions, and to specify, by index or otherwise, any financial records of Mformation, from December 2007 through May 2009, that specifically relate to treatment of those contracts, specifically including the Clearwire contract. The court also ordered Defendants to produce documents associated with a separated, but related, request to produce certain financial records not previously provided, some of which were unavailable at the time of the request.

Plaintiff’s Request for Sanctions
The court then turned its attention to Plaintiff’s two motions for sanctions. First, Plaintiff requested that he be reimbursed for all costs associated with discovery from Clearwire, including costs for service of a subpoena to Clearwire and the costs for any deposition of Clearwire, including travel to Seattle, court reporter fees and attorneys fees at $ 250 per hour. Plaintiff also sought all expenses associated with the continuation of the depositions of [Mformation CEO] Mark Edwards and the Rule 30(b)(6) deposition of Defendant , including travel to Defendant’s location in New Jersey, court reporter costs and attorneys fees.

In its second motion, Plaintiff repeated its earlier requests, Plaintiff also sought an order striking Defendants’ responsive pleadings and entering judgment in Plaintiff’s favor and the costs associated with the filing of pleadings concerning the discovery dispute.

The court reiterated its determination that that Defendant be required to produce Mark Edwards for the continuation of his deposition and to produce Mformation’s Rule 30(b)(6) witness for deposition, were to be taken at Defendants’ cost, and that all travel and court reporter’s expenses for both of these depositions were the responsibility of Defendants. The court also ordered Defendants to pay attorneys’ fee for the time spent in completing the deposition of Mark Edwards, capped at $1,250.

The court, however, did not grant Plaintiff’s its request for attorneys fee for conducting the Rule 30(b)(6) deposition of Mformation, as this deposition was merely delayed due to the witness’s illness. This is especially true when one considers that Defendants have voluntarily offered to bring the 30(b)(6) witness to Kansas City for deposition. The court also ordered Defendants to pay he costs and attorneys fees required to file such motions. The court denied the request for all other expenses, without prejudice for renewal in the future.

Motions for additional sanctions were denied.

Posted in 10th Circuit, Case Summary, D. Kan., Data Dump, Discovery Requests, FRCP 30(b)(6), FRCP 34, Magistrate Judge Donald W. Bostwick, Objections to Discovery Requests, Overly Broad Request, Relevance, Sanctions | Leave a Comment »