In our last episode of the year and of Season 1 of #CaseoftheWeek, CEO Kelly Twigger discusses when failure to provide back up for your discovery responses and an appropriate privilege log can lead to an adverse inference.
Good morning, happy holidays and welcome to our 50th episode of #CaseoftheWeek this week for December 21st, 2021. Thanks for that confetti, Deja. My name is Kelly Twigger, I am the CEO and founder of eDiscovery Assistant and the principal at ESI Attorneys, and I’m so happy to be here with you today. Thank you so much for taking a few minutes to join me in this week’s case discussion.
This is our last broadcast for 2021. It is hard to believe how quickly this year is gone and how few of you I have gotten to see in person, which wounds my heart. We will be, of course, back again in 2022, starting on I believe, January 5th with our #CaseoftheWeek. We’ll also be recapping decisions from 2021 in our 2021 Case Law report, done in cooperation with Doug Austin at eDiscovery Today. That will be out in early 2022, probably late January, early February.
As always, we want to hear from you about issues that you’re struggling with, in eDiscovery or about cases that you’ve had success with or not in court on discovery decisions that we can feature here on #CaseoftheWeek. We’d love your input and the ability to talk with you about what goes into your motions on the decision-making process.
You can find the link to today’s decision in the comments section of whatever platform you’re viewing us on. Whether that is Twitter, Facebook, LinkedIn or YouTube. There we go. I got them all.
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You can also download the 2020 Annual Case Law Report, which again will be updating for 2021 soon. All right, let’s get into this week’s decision.
This week’s decision comes to us from a case called Full Tilt Boogie, LLC v. Kep Fortune. Of course, that’s a great name, so why not have it as #CaseoftheWeek?
The reason I picked this case this week is because it really illustrates some practical issues that we need to be thinking about when we’re responding to discovery, and we’re going to find out how failure to pay attention to those can lead to some serious sanctions.
This decision is from October 21st of 2021, just a couple of months ago decision. This one is written by Magistrate Judge Karen Scott out of the Central District of California. Judge Scott is very prolific on her discovery decisions, and she writes excellently and her lead ins in terms of the way that she lays out the law and the analysis to be done is excellent. I would encourage you to take a look at some of her opinions, this one in particular, and I’m going to point out to you some of that language that I found to be really valuable.
Judge Scott has 36 discovery decisions in our eDiscovery Assistant database dating back just to June of 2016. As I mentioned, she’s very prolific on discovery issues and does not hesitate to wade into these issues in her cases. As always, we include the issue tags from the decision, and this one has a number of issue tags, costs and fees, native format, dismissal, exclusion of evidence, privilege log, failure to produce, attorney client privilege, adverse inference, metadata and sanctions.
What are we talking about here? Well, essentially, we’re talking about a final report and recommendations for sanctions from the Magistrate judge submitted to the District Court via 28 U.S. Code § 636, which is the process by which reports and recommendations for sanctions are delivered to the District Court for consideration. The underlying facts here, which are not discussed very much at all in this particular decision, is a breach of a franchise agreement in which the plaintiff assigned on to be a franchise of the defendant’s operation, which was a store for custom made suits and essentially ended up suing them for a number of violations of the franchise agreement, including increased fees associated with operating the franchise.
The defendants ultimately countersued for other breaches of the franchise agreement, and what ensued was a series of about nine or 10 different discovery disputes, each of which are included in eDiscovery Assistant under the Additional Decisions tab for the public link at this case.
Now, let’s talk about the timeline in this case because as we talk about all the time on #CaseoftheWeek, the timeline is what’s key. Plaintiff served sets of interrogatories and requests for production on November 3, 2020, and in those interrogatories and requests for production, they sought kind of what you would consider to be the standard information for any litigation facts, witnesses and experts supporting damages, claims, lists of payments received identification of documents showing costs for certain items or services. The list goes on and on and on, and the Court articulates exactly what those requests for production and/or interrogatories asked for, none of which were essentially overwrought, vague or disproportionate to the needs of the case.
The defendants responded to those initial requests on December 14, 2020 and then ultimately supplemented their responses on July 10, 2021, and May 10, 2021, but key to that is that fact discovery actually closed on May 3, 2021. Any supplemental responses that the defendant would have provided after the close of fact discovery precluded the plaintiff from being able to follow up on them. Whether they were documents that were produced or responses to interrogatories or additional witnesses that were identified, all of those were produced after the close of fact discovery.
Following the close of fact discovery and following the supplemental responses in May, the plaintiff filed a motion to compel on May 14th of 2021, exactly 11 days after the close of fact discovery, and essentially argued that the defendant’s responses and production of documents were deficient, including the failure to provide a privilege log. On June 9th, which is a pretty quick turnaround for a decision on a motion to compel, Magistrate Judge Scott, issued a report and recommendation in which the District Court ultimately accepted, in which it overruled all of the defendants’ objections that the plaintiffs’ requests were burdensome, subject to work product were driven by confidentiality or trade secrets and relevancy objections, and they also rejected defendants relevancy and vagueness objections to their request for production.
The Court also found in its June 9th order that the defendants’ responses to multiple interrogatories and multiple requests for production were deficient and ordered them to provide supplemental responses within 10 days. That was June 9th. In addition to requiring those supplemental responses, the Court also ordered that the defendant provide an index identifying each category of documents produced and an adequate privilege log. Let’s stay for a minute on that index identifying each category of documents produced.
A week or two ago, we talked about on #CaseoftheWeek manner of production and the fact that Rule 34’s ordinary course of business really has no application when it comes to ESI. It’s interesting to me to note here that this court is requiring an index identifying the categories of documents that are being produced so that that information can be available to the plaintiff.
The Court also gave the plaintiff in its June 9th order until July 30th to file motions related to the supplemental discovery that was ordered. Even though we’ll be on fact discovery at this point, the Court gives the defendant a few more days and then says, okay, plaintiff if you get until the 30th of July to tell us why they didn’t properly supplement following the June 9th order. On that exact date, July 30th plaintiff filed a further motion to compel arguing that the defendant had failed to comply with the court order.
Now this decision is a little bit long in terms of some of the ones that we cover on the #CaseoftheWeek, but it’s because the Court goes into a very detailed breakdown of each of the interrogatories and requests for production and whether there are deficiencies related to them. It also talks about the lack of a privilege log that was served, and it details how each request is either deficient or compliant. Although for our purposes we’re not going to review each one of those individually, I would encourage you to look at them because they are very instructive with regard to how you respond to written discovery. Essentially, the Court looks at specifically what documents were produced, what categories were produced, where they are produced, and whether or not the defendant supplemented responses to each individual interrogatory, taking into account the Court’s denial of their objections, and many of the responses were found to be deficient. There were some that were found to be compliant, but many of them were found to be deficient. Now you’ve got the defendant in violation of the Court’s June 9th order requiring supplemental responses and the Court also found a lack of a privilege log. There was a privilege log that was produced with one entry on it that was very vague. The court found that did not meet the privilege log requirements under Rule 26.
There’s also, as I mentioned to you, kind of as we started out, Judge Scott does an excellent job articulating the law in her decisions and there’s a really great paragraph under the legal standard section of the opinion, in which it discusses that a party must have substantial legal justification for its responsive written answers or objections. That is in keeping with what we’ve discussed previously on #CaseoftheWeek, which is the changes in Rule 2015 precluding the use of general objections. You’ve got to have a very specific objection to each individual request and substantial legal justification for those responsive written answers.
We’ve got a violation of the Court’s June 9th order. We’re now on July 30 further motion to compel. We’re looking at Rule 37 and what sanctions are available to the plaintiff as a result of the defendant’s failure to properly supplement their interrogatories and request for production, and to produce that information as required by the Court under the June 9th order.
The plaintiffs, of course, ask for terminating sanctions. We’ve talked before about what’s required for terminating sanctions. Then the Court reviews what those factors are in order to be able to get terminating sanctions. First, you got to have the public’s interest in expeditious resolution of litigation. The court’s need to manage its dockets. The risk of prejudice to the party seeking the sanctions, the public policy favoring disposition of cases on their merits and the availability of less drastic sanctions. The court essentially looks at those factors and says the first two of these factors favor the imposition of sanctions in most cases, while the fourth, the public policy favoring disposition of cases on their merits, cuts against a dismissal sanction. Really, the Court says that the key factors in this analysis are whether there’s prejudice and the availability of lesser sanctions.
What the Court looked at is whether or not the plaintiff had sufficiently articulated prejudice here in order to impose terminating sanctions. The Court found that they did not. Essentially, the Court said that the plaintiff did not fully describe the prejudice, particularly in light of all of the RFA is deemed admitted, and while there was some inability for the plaintiff to prepare its case for trial, any prejudice can be remedied by lesser sanctions. The Court, in its discretion, decided not to issue case terminating sanctions here. What lesser sanctions are available?
Well, as we’re going to find out, while they are not terminating sanctions, they are effectively terminating sanctions for the defendant. The first one that the Court considers is whether or not an adverse inference is appropriate. Now, the Court found that the defendant failed to produce all of the documents related to its management and operation of its marketing fund, and therefore it was recommended that plaintiff would be entitled to the following adverse inference instruction, “Defendants failed to produce all communications related to Kep’s management and operation of the system wide marketing fund. You may infer that defendants did not produce this information to plaintiff because defendants believe that this information would help plaintiff and harm defendants.” That’s a pretty severe adverse inference instruction to be given to 12 people. Basically, the Court saying, you get to decide that this information would be good for the plaintiff and bad for the defendant. That’s the first sanction that the Court levies here for failure to supplement discovery and produce proper discovery responses.
The second one is the exclusion of evidence, and the Court again lays out the law regarding exclusion of evidence and says, if a party, “fails to obey an order to provide or permit discovery.” as occurred here, the Court may issue a limiting order, “prohibiting the disobedient party from supporting or opposing designated claims or defenses or from introducing designated matters in evidence.” That language comes straight from Rule 37 (b)(2)(A), and that sanction is also available for parties who fail to fully answer, interrogatories or respond to requests for production pursuant to Federal Rule Civil Procedure 37(d)(3).
Applying those sections of Rule 37, the Court essentially made the following list of evidentiary exclusions against the defendant, and they are significant.
- That defendant cannot seek any form of compensatory damage as a trial other than unpaid future royalties.
- That the defendant cannot call any witnesses other than those named in the initial disclosures.
- That the defendant cannot enter any evidence or argue that cross defendants purchased goods from unapproved suppliers and also purchased goods of quality lesser than that required pursuant to the franchise agreement, as described in paragraph 15 of the Cross complaint, which shall be stricken.
- The Court refuses to allow the defendant to enter any evidence or argue that a particular individual spoke negatively to clients, his staff and other franchises, or that any statements caused any other franchise to do or not do anything as described in their cross complaint, which was also stricken.
That was a significant issue because there was a concern by the plaintiffs that this particular individual had been bad mouthing them to other franchisees and that it had caused the defendant to take action to undermine their franchise, and so they asked for all evidence related to that individual and basically received insubstantial discovery response. The Court essentially struck any ability for the defendant to put on evidence that that individual had made any statements that would have bolstered their claims.
The Court also precluded the defendant from relying on any documents not produced by July 30, 2021 to dispute the profits that the defendant derived from Full Tilt required inventory purchases. Again, you’ve got damages related issues that are being precluded.
The Court also precluded the defendant from relying on any documents not produced by July 30th to dispute price increases that were imposed on the plaintiff. That was one of the key claims of plaintiff’s complaint that the defendant, subject to the franchise agreement-imposed price increases where the franchise agreement stated that there would be no price increases. The Court also precluded the defendants from relying on any documents to dispute that the defendant experience delays in processing or delivering orders.
Essentially, by excluding all of these various categories of evidence, the Court completely undercuts the defendant’s case. Their ability really to cross complain against the plaintiff here on the breach of the agreement becomes very, very difficult in light of all of the evidence that is excluded for these discovery violations.
Following those sanctions, essentially, we’ve got an adverse inference on a specific category of documents, and we’ve got eight separate exclusions of evidence that the defendant cannot put forward in their case. The Court also allowed for what it turns as cost shifting, but really was just allowing for costs and fees on the motion to compel, and the Court tells the plaintiff that they can submit a separate motion for costs and fees. I expect that we’ll see that come across, and that will certainly be included in our eDiscovery Assistant database.
What are our takeaways here? Well, we all know that when you get discovery requests in, it’s early in the case or it’s before you really know the answers to most of the questions to be able to respond to the discovery, and while we have 30 days, 30 days goes very quickly. What I’m telling you is what we talk about every time on #CaseoftheWeek, which is PLAN, start early. You really need to do this with regard to these discovery requests. If you put something in writing and you sign off on it, and it turns out not to be the case, you need to take steps to withdraw those objections or to modify them very quickly. I would encourage you to start tracking each of your individual discovery responses. You can do it simply with just an Excel spreadsheet or Google Sheet that allows you to list the requests, list what you objected to, list any supplemental responses that you provided, as well as what efforts you’ve done to identify and collect information for that particular response, so that you can respond as necessary under the federal rules of civil procedure, or the state equivalent to what your discovery obligations are for those individual requests.
That’s hard to do and it’s an administrative task, but it really allows you to comb quickly through your discovery responses and make sure that you’ve got everything done. You can even color code them, color code them with green when they’re done, color code them with yellow when there’s still something left to do, or red when you haven’t started on them or there’s still a substantial amount to be done in order to determine whether you’ve gathered or identified all of the appropriate responsive information for that particular discovery request.
In short, you really can’t half ass your discovery responses. What we’re seeing here from Judge Scott is consistent with what we’re seeing across the country, and that is that these judges are holding you to the standards that you should be held to in responding to discovery. Stop just throwing out responses to your request. Don’t use meaningless objections. Don’t use general objections. Make sure that what you’re responding to is in fact based on an adequate and reasonable investigation of the evidence before you’re responding to those requests. If you don’t have enough information to respond to the request, then you should seek an extension. Seek an extension or file your responses knowing that you’re going to supplement them very quickly but know that you’re signing those responses, especially when it comes to the request for production and that your professional reputation is on the line with regard to the objections and the responses that you submit.
We talked about it before, but plan, plan, plan. Get started early with your discovery and understand what your client has and what you need to be providing. You do not want to end up in a situation like this defendant where you’re dealing with what we call lesser sanctions but are essentially redefining the case that you can put on to a jury. Lesser sanctions here were an adverse inference and exclusion of evidence. Those are severe, harsh sanctions. They are going to damage your client relationships, and it’s going to be a problem going forward.
That’s our #CaseoftheWeek for this week. Thanks so much for joining me. As I mentioned, we’ll be back again starting on January 4th to kick off our #CaseoftheWeek for 2022. I’m so appreciative of all of you for joining us this year as we get through our first 50 editions of #CaseoftheWeek in cooperation with the Association of Certified eDiscovery Specialists. It is my pleasure and our team’s pleasure to work with the team at ACEDS, including Mike Quartararo, Maribel Rivera, Deja Miller and everyone else. They are a wonderful group of people to work with, and we’re so privileged to be in partnership with them at eDiscovery Assistant.
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Thank you so much for being here with us. Happy Holidays, whatever holiday you’re celebrating, may you have a lot of peace, love and joy in your hearts this holiday season. All the best, see you in 2022.
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