Magistrate Imposes Discovery Sanctions of $102,079 Against Law Firm for Interference with Third Party Deposition; Recounts Electronic Discovery Disputes

E & J Gallo Winery v. Encana Energy Servs., Inc., 2005 WL 3709885 (E.D. Cal. July 5, 2005)

In this action alleging natural gas price fixing, plaintiff sought severe sanctions against certain defendants and their counsel for taking actions which plaintiff claimed resulted in the cancellation of a third-party witness deposition set by plaintiff. The magistrate ultimately rejected the heavy sanctions requested by Gallo, finding that a further monetary sanction against the defendants’ law firm was in order. It imposed a $102,078.97 sanction against Gibson, Dunn & Crutcher, with $92,078.97 to be paid to Gallo to defray its fees and expenses to pursue the sanctions motion, and $10,000 to be paid to the court.

In reaching his decision, the magistrate recounted numerous discovery disputes leading up to the current motion, and described a number of the court’s prior orders. Several related to electronic discovery. The court’s December 16, 2004 order required defendants to “search six computer hard drives of eight traders for 66 terms identified by Gallo and to produce responsive documents along with e-mail communications with 90 identified employees and a privilege log.” The order denied Gallo’s request to shift costs associated with the computer discovery and related production to the defendants. A January 28, 2005 order granted in part and denied in part a discovery motion brought by defendants. The order denied defendants’ request that the court require Gallo to:

1. Itemize all hard drives, servers and e-mail boxes of 84 Gallo employees and which have been deleted or erased since June 2000;
2. Explain when and how such materials were deleted or erased, why the materials were not preserved, and why automatic destruction did not cease when Gallo recognized a potential natural gas dispute;
3. Recover hard drives, servers or e-mails of the employees and which have been destroyed and to search for responsive documents once recovered; and
4. Search computer hard drives, servers and other electronic data of 11 Gallo employees whom defendants characterized as “involved in Gallo’s energy decisions, policies and purchases.”

The court noted that it had earlier “commented on the lack of merit of defendants’ computer motions,” quoting text from its earlier decision:

This Court is left with the impression that defendants manufactured this discovery dispute in response to Gallo’s attempts to seek discovery regarding tapes, e-mails and computers of defendants’ traders. This Court views defendants’ motion as a harassing tactic to distract Gallo. Defendants’ motions pending before the Court reveal their practice to counter a Gallo motion with a similar motion of their own, meritorious or not. This Court has repeatedly warned defendants to cease abusive retaliatory discovery and motion practices. . . .

Defendants’ papers reveal this motion retaliates for Gallo’s successful motion to search the traders’ computers. This motion mimics Gallo’s motion, except that it lacks support or merit. The gist of defendants’ position is that since the traders’ computers will be searched, Gallo should endure searches. However, defendants fail to attempt to justify a search of Gallo’s computers let alone its unfathomable scope, especially given that Gallo produced the relevant Supplier Development Department documents and data. Attempting to equate defendants’ proposed searches with the searches of the trader computers insults this Court’s intelligence.