Court Warns “Continuing Problems” with Document Production Will Result in Order to Retain an e-Discovery Vendor

Logtale, Ltd. v. IKOR, Inc., No. C-11-05452 CW (DMR), 2013 WL 3967750 (N.D. Cal. July 31, 2013)

Plaintiff sought to compel Defendants’ production of all responsive documents and also sought sanctions, including attorneys’ fees and an order requiring Defendants “to retain an e-discovery vendor to conduct a thorough and adequate search for responsive electronic documents.”  Acknowledging that it shared Plaintiff’s concerns “about the inadequacy of Defendants’ search for responsive documents,” the court granted Plaintiff’s motion to compel and also granted the request for attorneys’ fees (although at a reduced rate).  The court declined to order the retention of an e-discovery vendor “at this time,” but warned that such an order would be entered if problems with Defendants’ document production continued.

Plaintiff, a shareholder in IKOR, Inc., “a pharmaceutical company that is developing bovine-derived oxygen therapeutics,” brought suit against IKOR and two of its officers alleging misrepresentations to induce investment and related claims.  In the at-issue motion, Plaintiff sought to compel IKOR’s compliance with a prior court order requiring the production of all responsive documents and to compel production from an individual defendant who objected to several of Plaintiff’s discovery requests.  Plaintiff also sought more complete answers to its interrogatories.

In support of the assertions that Defendants’ document productions were incomplete and that they had failed to adequately search for responsive documents, Plaintiff’s counsel explained that all three defendants had produced a total of 121 emails—109 of which were communications with Plaintiff—and that IKOR had produced only three pages in response to a request seeking “all documents relating to IKOR’s communications with BeefTech, LLC, a company run by three of IKOR’s principals.”

Although they conceded that their productions had not been timely (and IKOR had previously admitted that its prior production was incomplete), Defendants asserted that they were “adequately searching for electronic documents.”  Specifically, defense counsel explained that he instructed IKOR’s principals, accountant and corporate attorney to search their computers and produce all responsive emails and that he requested that the principals conduct a second search upon discovering “a few gaps in the production” during his review.  A third search “of the same sources” was proposed when Plaintiff’s counsel “raised concerns about the existence of additional responsive documents.”  At the time of oral argument, Defendants’ counsel was in the process of reviewing the approximately 10,000 documents returned following the latest search.

Citing the “paucity” of documents produced and defense counsel’s admission that productions had been incomplete, the court acknowledged its own concern regarding the “inadequacy of Defendants’ search” and stated:

Defense counsel has not been sufficiently proactive in ensuring that his clients are conducting thorough and appropriate document searches, especially in light of obvious gaps and underproduction.  Under such circumstances, it is not enough for counsel to simply give instructions to his clients and count on them to fulfill their discovery obligations.  The Federal Rules of Civil Procedure place an affirmative obligation on an attorney to ensure that a client’s search for responsive documents and information is complete.  See Fed.R.Civ.P. 26(g) (requiring a signing attorney to certify that a reasonable inquiry has been made with respect to the factual and legal bases for any discovery response); see also Nat’l Ass’n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 554–56 (N.D.Cal.1987) (discussing counsel’s obligations pursuant to Rule 26(g); sanctioning party and its counsel for failure to “establish a coherent and effective system to faithfully and effectively respond to discovery”).  As the Advisory Committee’s Note to Rule 26(g) states, “[t]he duty to make a ‘reasonable inquiry’ is satisfied if the investigation undertaken by the attorney and the conclusions drawn therefrom are reasonable under the circumstances.”  Therefore, where, as here, counsel notices obvious “gaps in the production” of documents by his clients, he is obligated to make a reasonable inquiry as to the thoroughness of that search.

As to the individual defendant specifically, the court found that his objections were untimely and thus waived, but nonetheless ordered the parties to meet and confer to “refine the scope of production.”

Ultimately, the court ordered Defendants to produce all remaining responsive documents and to supplement their responses to interrogatories.  Although the court declined to order Defendants to retain the services of an e-discovery vendor “at this time,” the court indicated that “Defendants [were] on notice that if there [were] continuing problems with their document productions,” they would be ordered to retain an e-discovery vendor and to submit “sworn, detailed declarations regarding their document preservation and collection efforts.”

The court also granted in part Plaintiff’s request for sanctions and awarded Plaintiff $5,200 in attorneys’ fees “incurred as a result of Defendants’ conduct,” “at least half” of which was to be paid by the parties, who the court observed were “at least partly responsible for the numerous delays in producing the requested documents.”