District Court Modifies Magistrate Judge’s Order Requiring Production of Forensically Sound Copies of Defendant’s Servers to Allow for Pre-Production Privilege Review

Bro-Tech Corp. v. Thermax, Inc., 2008 WL 724627 (E.D. Pa. Mar. 17, 2008)

In this case involving claims of misappropriation of trade secrets, defendants objected to an order of a magistrate judge requiring them to disclose "forensically sound" images of certain data storage devices (Thermax’s India and Michigan servers) to plaintiffs’ counsel without any limitation as to the scope of the disclosure or prior filtering for privileged or work-product materials that the images might hold.  The production was required to permit a determination of whether defendants had violated an earlier stipulation and order that had imposed an ongoing obligation on defendants to return to plaintiffs any of plaintiffs’ files in their possession, and then to purge such files from their possession, custody and/or control.

The magistrate judge’s order had issued in the context of a dispute around the deposition of Stephen Wolfe, an employee of Huron Consulting Group, a computer forensic services firm relied on by defendants for both testifying and consultative expert work.  Wolfe testified that, at Thermax’s direction, he had performed two distinct tasks.  The first was to produce an expert report regarding whether an array of plaintiff’s information identified by plaintiff’s expert was located on a discrete set of data storage devices, after performing all necessary searches of images of the devices.  This set of devices did not include the India or Michigan servers.  The second task was to conduct electronic searches of images of Thermax’s India and Michigan servers for evidence of plaintiff’s files therein (which, in accordance with the parties’ earlier stipulation and order, already should have been disclosed to plaintiffs and purged).  The two tasks were different in several ways, as each task involved searches of different devices, with the searches involved in the former task providing the exclusive basis of Wolfe’s expert report, and the searches of the India and Michigan servers not informing his report in any respect.  In other words, Wolfe performed the former task in his capacity as a testifying expert, and performed the latter task in his capacity as a consulting expert.

In requiring the disclosure of the India and Michigan servers to plaintiffs, the magistrate judge had reasoned that, because Wolfe had testified that “he considered the [servers], for purposes of Rule 26(a)(2)(B), Defendants must provide copies [of the servers] to Plaintiffs, regardless of any claim of attorney-client privilege or work product doctrine.”

Defendants raised two objections to the magistrate judge’s order.  They argued that, before any disclosure of the contents of the India and Michigan servers to plaintiffs’ counsel occurred, defendants had the legal right to filter the information to be disclosed in order to remove any attorney-client communications or work product material therein.  Defendants also argued that they should be required to disclose (after a review for privileged materials) only files which yielded hits during a targeted search of the India and Michigan servers for evidence of plaintiffs’ files, and not, as the order required, to disclose the entire contents of the India and Michigan servers for plaintiffs’ counsel’s review.

Plaintiffs argued that the order should not be disturbed because inspection of the entire India and Michigan servers by plaintiffs’ counsel was the only way to ensure that no violation of the stipulation and order had occurred.  Plaintiffs further asserted that defendant had waived any privilege it might have been able to claim in the information on the India and Michigan servers by disclosing the servers to Wolfe.

The District Court sustained defendants’ objections to the magistrate judge’s order.  The court overruled as contrary to law that portion of the magistrate judge’s order which compelled defendants to produce to plaintiffs the entire India and Michigan servers for paintiffs’ review, without regard for privilege, on Rule 26(a)(2)(B) grounds.  The court observed that Wolfe had repeatedly stated under oath that the India and Michigan servers were outside the scope of his expert report, and that he did not consider them in his testifying expert role.  Instead, his expert report exclusively concerned the contents of other devices.  Because the information on the India and Michigan servers was not disclosed to or considered by Wolfe for purposes of his expert report, the court ruled that Rule 26(a)(2)(B) did not apply to the materials on those servers, and did not provide a legal basis for requiring their disclosure to plaintiffs.

Notwithstanding this ruling, the court agreed that under the circumstances, a significant measure of disclosure of the contents of the India and Michigan servers was necessary to ensure that Thermax had not retained plaintiff’s information in violation of their stipulation and order.  Because there was no evidence of an intentional violation of the parties’ stipulation and order, the court found that full disclosure of the servers was not warranted.  "We know too little about the contents of the files that yielded hits during Wolfe’s search of the India and Michigan servers to reach such a conclusion at this time.  Wolfe’s search may have yielded false hits, or may otherwise have signaled files that were properly in Thermax’s possession; conversely, the hits may indicate a Thermax violation." 

Accordingly, the court ordered a more limited production:

• Defense counsel, within three days, to produce to plaintiffs’ computer forensic expert forensically sound copies of the images of all electronic data storage devices in Michigan and India of which Huron Consulting Group ("Huron") made copies in May and June 2007.  These forensically sound copies are to be marked "CONFIDENTIAL–DESIGNATED COUNSEL ONLY";
• Review of these forensically sound copies to be limited to:
  (a) MD5 hash value searches for plaintiff’s documents identified as such in the litigation;
  (b) File name searches for plaintiff’s documents; and
  (c) Searches for documents containing any term identified by Wolfe in his expert report;
• All documents identified in these searches by plaintiffs’ computer forensic expert to be provided to defense counsel in electronic format, who will review these documents for privilege;
• Within seven days of such receipt, defense counsel to provide all such documents which are not privileged, and a privilege log for any withheld or redacted documents, to plaintiffs’ counsel.  Plaintiffs’ counsel to not have access to any other documents on the images;
• Each party to bear its own costs.