A recent decision from the Southern District of Ohio highlights the serious consequences facing attorneys and clients who fail to satisfy their discovery obligations. It also provides a helpful reminder of best practices for both law firm lawyers and in-house counsel who respond to discovery requests, particularly those that involve electronically stored information (ESI). In Brown v. Tellermate, No. 2:11-cv-1122 (S.D. Ohio July 1, 2014), the Court imposed Rule 37 sanctions on Defendants for failing to conduct a reasonable inquiry into the availability of ESI and discoverable information, failing to preserve responsive material, and making misleading and unsupported statements to the Court and Plaintiffs' counsel. As a result, the Court severely limited Defendants defenses at trial.
Brown v. Tellermate
In Brown v. Tellermate, the Court reprimanded Defendants and their counsel for repeated, serious transgressions regarding the discovery, disclosure, and preservation of materials relevant to the case. The Brown Plaintiffs were involuntarily terminated by Defendant Tellermate, and sued alleging age discrimination. Defendants' primary defense was that Plaintiffs had been terminated for poor performance. In order to prove their case, Plaintiffs sought information related to the performance of other employees. In particular, Plaintiffs requested data from salesforce.com, a web-based application that records sales employees' interactions with customers and potential customers. In addition, Plaintiffs demanded the production of employee performance reviews in order to demonstrate that their performance was similar to other non-terminated employees.
During discovery Tellermate represented that it was "prohibited" from providing information from salesforce.com. Tellermate claimed that it did not "maintain salesforce.com information in hard copy format" and could not "print out accurate historical records." In written letters to the Court, Tellermate's counsel represented that Tellermate was "contractually prohibited from providing salesforce.com information -- including information Tellermate inputs into it -- to third parties" and could only access "real time" information from the database, not historical data.
As it turned out, all of these statements proved to be false. The Court found that Tellermate's employees used salesforce.com to input, add, delete, or edit information regarding their contact with customers. All employees with access to the application were able to access all information -- including historical information -- regarding their own customers. In addition, Tellermate managers and administrators had broader access, allowing them to see the information input by any other Tellermate employees and to edit information added by other employees. Further, the contract between salesforce.com and Tellermate made clear that Tellermate owned and controlled the information input into the application by Tellermate employees.
Not only did Tellermate misrepresent facts regarding the availability of data in salesforce.com, Tellermate also failed to properly preserve data that was maintained in the application. Testimony demonstrated that Tellermate employees had the ability to go into salesforce.com and update, or in some instances overwrite, information regarding customer contacts. At the time the litigation commenced, Tellermate did not take any steps to preserve or export a snapshot of the data as it existed at that time. As a result, Tellermate was never able to produce a version of the salesforce.com data as it existed during the Brown's tenure. The Court severely reprimanded Defendants for failing to take steps to ensure the information was as accurate as possible. Specifically, the Court found that Tellermate could have asked salesforce.com to back up the information, frozen the accounts of the Plaintiffs when they were terminated, and/or exported data from salesforce.com as soon as Tellermate received a preservation letter from Plaintiffs.
The salesforce.com database was not the only area of discovery in which the Defendants failed to uphold their duties. Plaintiffs requested documents related to a prior age discrimination lawsuit involving another employee, and Tellermate claimed it would produce only the non-privileged documents. Tellermate did produce a few documents, but withheld the vast majority on the basis of privilege, although it never prepared a privilege log. The Court found that Tellermate waived any claim of privilege by not creating a privilege log.
Finally, the Court took issue with the Defendants' approach to confidentiality designations. Plaintiffs requested documents relating to the performance evaluation of various other Tellermate employees. Tellermate first claimed the number of such documents was "unlimited," but then produced only 20 responsive documents. After the Court ordered Tellermate to produce any additional documents, Tellermate produced 50,000 documents but marked every one of them as Confidential - Attorneys' Eyes Only, ostensibly because it viewed one of the terminated Plaintiffs as a competitor. When asked to remove the designation, Tellermate refused to do so. Although many of the documents were clearly not competitively sensitive, Tellermate claimed that it had to designate everything Attorneys' Eyes Only because of the "far-reaching request" and short period of time for production. The Court found that Tellermate did not meet its burden of proving confidentiality in large part because its statements regarding the harm of disclosure were not supported by any evidence such as affidavits or declarations.
In response to these transgressions, the Court ordered serious sanctions. Because the evidence that was eventually collected from the salesforce.com database could not be verified due to the Tellermate's actions, the Court precluded Tellermate from "using any evidence which would tend to show that the [Plaintiffs] were terminated for performance-related reasons." Additionally, the Court ordered Tellermate to pay Plaintiffs' attorneys' fees and costs in connection with moving to compel discovery.
As set forth below, Brown provides a helpful reminder of a number of best practices that apply to both law firm and in-house lawyers.
- Verify information regarding ESI sources received from your client.
As the Brown Court stated, "counsel cannot simply take a client's representations about such matters at face value." Tellermate's counsel failed to ask the right questions to the right people regarding Tellermate's ESI, and failed to conduct any diligence to verify their clients' claims, such as by reviewing the contract between Tellermate and salesforce.com. This lack of diligence resulted in the attorneys' making misleading statements to both the Court and opposing counsel. Attorneys must engage IT and subject matter experts, and not simply rely on representations from employees, particularly information regarding the availability of ESI. If necessary, review contracts with vendors to know who controls client information. Information stored with vendors/outside servers (e.g., Gmail) often still belongs to your client and is your client's responsibility to produce.
- The duty to preserve extends beyond merely issuing a document hold memo.
Simply issuing a document hold is not enough. Counsel must follow up with custodians about potential sources of documents to ensure that documents are being appropriately preserved. When dealing with "live" databases, engage IT personnel to ensure that a snapshot or extract of the database is preserved at the time of the hold to protect against the possibility that data is overwritten. If your client does not routinely back up information in a database, check as soon as practicable with vendors and any other party who might back up such information.
- Remember that by signing discovery responses, counsel is certifying that they have made a "reasonable inquiry" into discovery sources.
The Federal Rules of Civil Procedure impose an affirmative obligation on counsel to approach discovery "cooperatively and in good faith." Every time an attorney signs a disclosure, discovery response, or objection, the attorney is certifying that he or she has conducted a "reasonable inquiry" into discovery sources. See Fed. R. Civ. Proc. 26 (a), (f), and (g). Remember that statements to opposing counsel and the Court, whether in document responses or letters, require you to undertake this "reasonable inquiry" -- an obligation that cannot be met merely by regurgitating information received from your client's employees.
- Prepare privilege logs at the time you produce documents.
By failing to timely raise privilege claims and prepare a privilege log, Tellermate waived its claim of privilege over particular documents. Attorneys have a duty to raise privilege claims on a timely basis, which should be done in the response to a party's initial document request. Preparing a privilege log at the time of production, rather than waiting for the end of fact discovery, requires counsel to address privilege issues earlier in discovery, and protects against claims that privilege has been waived.
- Support statements to the Court regarding the availability of ESI and documents and confidentiality with affidavits signed by your client.
The Brown Court rejected Tellermate's arguments regarding the availability of ESI because all of counsel's statements were "unverified and were not evidence." Plaintiffs' counsel, on the other hand, included signed affidavits from the Plaintiffs regarding what they knew of the ESI at Tellermate. Similarly, Tellermate designated 50,000 documents as Attorneys' Eyes Only without any supporting affidavit regarding the harm it would suffer from disclosure.
In the context of a motion to compel, attorneys should insist on an affidavit with factual assertions about the availability of ESI and documents. The creation of the affidavit -- and the necessity of identifying and preparing an affiant -- will be useful tools in critically examining representations about the availability of documents. If asserting confidentiality or AEO restrictions, attorneys should make sure an analysis is done for each document and, if challenged, submit an affidavit from your client regarding the competitive harm of disclosure.