Court Calls Cost Shift for Review of Withheld Documents Disproportional

Nachurs Alpine Sols. Corp. v. Banks, No. 15-CV-4015-LTS, 2017 WL 2918979 (N.D. Iowa July 7, 2017).

In this trade secret theft case, the court granted the plaintiff’s request to review documents that the defendants had previously withheld as nonresponsive. However, the court refused the plaintiff’s request to shift the cost of that review to the defendants, calling it disproportional.

The plaintiff, Nachurs Alpine Solutions (“NAS”), alleged that its former employee, Brian Banks, took proprietary company information from NAS and provided it to his new employer, NAS competitor Nutra-Flow Company. In this motion, NAS moved the court to compel both defendants to produce additional discovery. NAS alleged that the defendants had “wrongfully withheld documents” that they “deemed beyond the scope of discovery.”

After an earlier dispute, the court entered an order governing the search and production of electronically stored information (ESI). The defendants then searched their ESI according to the court’s list of terms and reviewed the resulting documents for relevance. The defendants provided two batches of ESI, excluding 235 documents that they marked as nonresponsive. NAS later learned that the defendants had withheld another 44,000 “nonresponsive” documents from the first production.

NAS broke these documents down into 32 distinct categories. It agreed that 28 categories were properly withheld, but it argued that four were relevant. NAS asked the court to order the defendants to re-sort their documents and produce all those that fell within the latter four categories, at the defendants’ expense.

The defendants argued that this “amount[ed] to a request that [they] ‘perform a second, costly review’” of nearly 25,000 remaining documents. This, they claimed, would be “asking this Court to tear up its old ESI Order and establish a brand new one.” The defendants further argued that the request was disproportional and cumulative.

Under Federal Rule of Civil Procedure 26(b)(1), the scope of discovery encompasses “any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.” As the movant, NAS “must make a threshold showing that the requested information falls within the scope” of Rule 26(b)(1).

Here, the court found “a colorable prima facie showing that the withheld documents fall within the broad scope of liberal discovery,” since those documents contained at least one search term. But NAS failed to make a “strong showing” of relevance. However, the court also noted that its “confidence in [the] defendants’ response is colored … by [its] conclusion that [the] defendants have previously not complied with discovery obligations.”

The court concluded that “it would be disproportional to require [the] defendants to go back through the documents” to separate those that may be relevant. Moreover, given their history, any such effort would neither satisfy NAS nor give the court confidence in the result.

The court therefore granted the motion in part. It ordered the defendants to produce all of their “nonresponsive” ESI documents, labeled attorneys’ eyes only, for NAS to review. It also denied the motion in part, ordering that NAS would bear the expense of that review. The court granted NAS leave to move for sanctions to recover its costs if it found that the defendants wrongfully withheld relevant documents.

Takeaways on complying with discovery obligations

This case illustrates the importance of maintaining a good reputation for diligence and cooperation with opposing counsel and the court. Here, the court clearly distrusted the defendants due to their earlier foot-dragging and noncompliance with discovery. The court might have denied NAS’s motion outright had it had more confidence in the defendants’ efforts.

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