Court Finds “Rather Broad” Request to be Proportional Upon Factor-by-Factor Analysis

First Niagara Risk Mgmt., Inc. v. Folino, —F.R.D.—, 2016 WL 4247654 (E.D. Pa. Aug. 11, 2016)

In this case, the court addressed the parties’ disagreement regarding a proper scope of discovery and Plaintiff’s related motion to compel the search of Defendant’s electronic devices, to be conducted by an independent e-Discovery vendor utilizing search terms proposed by the plaintiff.  Upon finding the requested information relevant and following consideration of each of the proportionality factors identified in recently amended Rule 26(b)(1), the court granted Plaintiff’s motion to compel.

Plaintiff accused Defendant, a former employee, of creating a competing company while still working for Plaintiff.  Shortly after Plaintiff’s claim was filed, the parties entered into a Stipulated Preliminary Injunction pursuant to which Defendant agreed to make his personal and business electronic devices available for independent imaging and assessment using key terms.  However, the parties quickly disagreed regarding the proper scope of discovery, including the appropriate date range and search terms.

Taking up Plaintiff’s motion to compel, the court acknowledged that the requested search was “rather broad” but “after analyzing the factors set out in Rule 26(b)(1)” concluded that the request was “proportional to the needs of this case.”  Specifically, after concluding that the requested material was relevant, the court turned to a factor-by-factor assessment:

The issues at stake are of grave importance to First Niagara, who has allegedly uncovered a plan by one of its top executives to start a competing business and employing former First Niagara employees. The first factor therefore weighs in favor of granting First Niagara’s motion. The amount in controversy is unknown at this time, so the second factor weighs in favor of Folino, who avers that unknown damages cannot justify exorbitant discovery requests. Folino has access to the information on his emails and text messages while First Niagara does not, so the third factor weights in favor of First Niagara. The parties’ resources weigh in favor of neither party because, while First Niagara is a corporation and Folino is an individual, his complaints about costs ring hollow from someone who just sold two companies for over $5 million. The importance of discovery in resolving the issues in this case weighs heavily in favor of First Niagara, who needs to conduct broad discovery to uncover the scope of Folino’s alleged misdeeds. Finally, as to the sixth factor, the burden or expense of discovery for Folino, which is substantial, does not outweigh the benefit of discovery for First Niagara, who, again, has uncovered evidence that one of its top executives may have started a competing company while under its employ. Weighing these factors makes clear that the potential harm First Niagara’s discovery requests may impose on Folino does not outweigh the presumption for disclosure of those requests.

In response to Defendant’s argument that “the Sedona principles state that the responding party is presumed to be in the best position to choose an appropriate method of searching and culling data,” the court reasoned that the principles were not binding, in contrast to the Federal Rules —“the proper analytical tool for this endeavor”—and that Defendant’s proposed protocol was “inadequate.”

Ultimately, the court concluded that “[Plaintiff] ha[d] shown that the material it request[ed] was relevant under Rule 26, and [Defendant’s] defenses under both the Rule 26 proportionality factors and the non-binding Sedona principles fail.”  The court therefore granted Plaintiff’s motion to compel.

In this opinion, the court also denied Defendant’s motion to disqualify the e-Discovery vendor for alleged “ex parte” contact with Plaintiff and Defendant’s motion for a protective order to shield him from requests regarding other business ventures.

A full copy of the courts opinion is available here.