RYH Props., LLC v. West
RYH Props., LLC v. West
2011 WL 13196437 (E.D. Tex. 2011)
February 11, 2011
Craven, Caroline M., United States Magistrate Judge
Summary
The court ordered Plaintiffs to reproduce certain files produced on the CDs in a complete, accessible, and/or authenticated form, where possible, or explain otherwise. The court also ordered that, to the extent Plaintiffs possess a copy of Aaron Buck's hard drive, Plaintiffs shall produce the information to Defendants' computer forensics expert. The court also ordered the parties to meet and confer on a supervised on-site visit for access to the hard drives of their personal computers. These orders ensure that the parties are able to access and authenticate the relevant data concerning the lawsuit, while also protecting Plaintiffs' relevancy and confidentiality concerns.
RYH PROPERTIES, LLC, et al.
v.
Bruce R. WEST, Sr., et al
v.
Bruce R. WEST, Sr., et al
No. 5:08CV172
United States District Court, E.D. Texas, Texarkana Division
Signed February 11, 2011
Counsel
Rondal Gary Nutter, Dunn Nutter & Morgan, Texarkana, TX, David D. Wilson, James M. Simpson, Friday Eldredge & Clark, Robert L. Henry, Barber McCaskill Jones & Hale PA, Little Rock, AR, for RYH Properties, LLC, et al.Searcy L. Simpson, Jr., Julie Kay Baker, Law Offices of Skip Simpson, Frisco, TX, for Bruce R. West, Sr., et al.
D. Aaron Buck, Frisco, TX, pro se.
Craven, Caroline M., United States Magistrate Judge
ORDER
*1 The above-referenced cause of action was referred to the undersigned United States Magistrate Judge for pre-trial purposes in accordance with 28 U.S.C. § 636. The following motion is before the Court: Defendants' Second Motion to Compel and Request for Sanctions (Docket Entry # 93). The Court, having reviewed the relevant briefing, is of the opinion the motion should be GRANTED IN PART and DENIED IN PART.
I. FACTUAL BACKGROUND
According to Plaintiffs, Greg Henry and RYH Properties, LLC (“Plaintiffs”) are investors in securities solicited, offered for sale, and sold by Bruce R. West, Sr.; Bruce R. West, Jr.; JR Realty Group; D. Aaron Buck; Laura Sinclair Manning, as Executrix of the Estate of W. Ward Manning, Jr., deceased; Manning Companies, LLC; Carolina Jubilee Ltd.; Carolina Lakeview Ltd.; Jubilee Park at Carolina Beach, LLC; and Lakeview at Carolina Beach, LLC (“Defendants”). Plaintiffs allege the securities were in the form of investment contracts and limited partnership interest, and Defendants engaged in false representations regarding the investments with the intent of inducing Plaintiffs to invest in inter-related investment schemes related to condominium developments. (Docket Entry # 28 at pg.1). In their amended complaint, Plaintiffs assert a claim for breach of fiduciary duty, generally alleging that certain Defendants have “fiduciary duties” to Plaintiffs and that these duties were breached.
II. PROCEDURAL BACKGROUND
On July 26, 2010, Defendants filed their first motion to compel, asserting Plaintiffs had not tendered their initial disclosures, responses to interrogatories, or documents responsive to Defendants' requests for production. Defendants sought an Order compelling Plaintiffs to: (1) produce their initial disclosures; (2) produce all documents responsive to their requests for production; and (3) provide complete responses to their interrogatories. In their response, Plaintiffs explained that they had been precluded from engaging in discovery with Defendants because Defendants filed motions to dismiss pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-5(c) (“PSLRA”). Relying on their belief that a new scheduling order would be issued with new dates for discovery, Plaintiffs did not make certain filings. Plaintiffs further explained that they had been collecting documents to respond to discovery and that on July 26, 2010, Plaintiffs produced to Defendants over 1,700 pages of documentation and Supplemental Responses to Defendants' Requests for Production. Plaintiffs asserted they could not provide more detailed information than that already provided absent meaningful discovery from Defendants.
On October 14, 2010, the undersigned issued an Order granting in part and denying in part Defendants' motion to compel. Specifically, the Court ordered Plaintiffs to produce within thirty days, to the extent they had not already done so, documents responsive to Request for Production Nos. 9, 14, 45, 52, and 53. The undersigned also overruled Plaintiffs' objections to Interrogatory Nos. 18, 19, and 20 and ordered Plaintiffs to answer these interrogatories within thirty days from the date of entry of the Order.
III. DEFENDANTS' MOTION
*2 On December 20, 2010, Defendants filed their second motion to compeland request for sanctions, asserting Plaintiffs failed to produce electronic evidence responsive to Request for Production Nos. 52 and 53 despite the Court's Order compelling them to do so. Defendants further assert Plaintiffs may have destroyed electronic evidence in violation of their Data Preservation Letter and the general duty to preserve relevant evidence.
Defendants request the Court enter an Order requiring Plaintiffs to produce to Defendants' forensics expert the available electronic evidence, including a copy of the hard drive of Defendant Buck; require Plaintiffs to provide a complete response to Request for Production Nos. 52 and 53; and require Plaintiffs to provide a detailed explanation and chronology regarding the unavailability of the CPU of Plaintiff Greg Henry. Defendants also seek sanctions, including an adverse inference instruction and monetary sanctions of $3,050.00, for spoliation of electronic evidence.
IV. ANALYSIS
A. Request for Production Nos. 52 and 53
In Request for Production No. 52, Defendants requests “[a]ny and all computer disks or other forms of data storage containing any of the information requested in any Interrogatory served upon Defendant by Plaintiff or any of the documents requested in any Request for Production of Documents and Things served upon Defendant by Plaintiff that is reasonably available to Plaintiff in the normal course of business.” In response to Defendants' first motion to compel, Plaintiffs stated, with regard to Request 52, as follows:
This is an unreasonable request, involves significant expense, and exceeds permissible discovery in this case. Plaintiffs have supplied the documentation sought by defendants in the Request for Production (over 1,700 pages of documents) as to the documentation currently available. Consequently, plaintiff should not be put to the expense and difficulty to engage in the time-consuming process regarding computer discs when the documentation has been supplied.
Docket Entry # 80 at pg. 7. Plaintiffs failed to convince the Court that the burden or expense of searching for the requested information outweighs the likely benefit of the discovery. Thus, the Court granted this part of Defendants' first motion to compel and ordered Plaintiffs to produce responsive documents, to the extent they had not already done so, within thirty days.
Request for Production No. 53 seeks the “actual CPUs used and/or operated by former employees of Plaintiff.” Plaintiffs objected to the request as being overly broad, irrelevant, and not likely to lead to the discovery of admissible evidence. Plaintiffs further stated the requests seek information not readily available to Plaintiffs, and searching for the information would require expertise and “great expenditures of money.” Again, the Court granted this part of Defendants' motion and ordered Plaintiffs to produce responsive documents, to the extent they had not already done so, within thirty days.
B. Relevant Timeline
On November 12, 2010, Plaintiffs filed their Supplemental Responses to Defendants' Requests for Production, in which they stated, with regard to Request for Production No. 52, that “a computer disk is being prepared to be supplied to counsel for defendants regarding the information responsive to this request.” Regarding Request for Production No. 53, Plaintiffs stated in their supplemental responses that:
*3 A CPU is available for inspection, but the protocol for any inspection of the CPU must be approved and agreed by the parties because the CPU will contain information that is confidential and totally unrelated to this action, will contain confidential communications subject to attorney-client privilege, and other information not responsive to these discovery requests and not subject to discovery. Counsel for plaintiffs will work with counsel for defendants to arrive at an agreed protocol.
(Docket Entry # 93, Exhs. C-E).
In late November of 2010, Defendants' counsel advised Plaintiffs' counsel that the computer disk that Plaintiffs had indicated was being prepared would not be sufficient to comply with Request for Production No. 52 and that the CPUs needed to be produced to Defendants' computer forensic expert or to an expert selected by Plaintiff. Counsel for Plaintiffs told Defendants' counsel that Plaintiffs were not agreeable to this intrusion into their privacy because the computers contained vast amounts of personal, private, and unrelated information. However, Plaintiffs' counsel agreed to talk to the computer forensics expert hired by Defendants. After talking to the expert, Plaintiffs' counsel learned that the expert would charge at least $2,500 for the transfer and would download all data from the hard drives of the personal computers of Richard Y. Henry and Greg Henry if allowed to do so. According to Defendants, their computer forensics expert advised Plaintiffs of the computer forensics procedure and further advised that Plaintiffs' private and confidential information would not be disclosed.
On December 1, 2010, Plaintiffs' counsel advised defense counsel that he had spoken with Defendants' computer forensics expert. At a telephone conference held on December 2, 2010, Plaintiffs' counsel advised Plaintiffs were “resistant” to turning hard drives over to a third-party.
On November 24, December 1, 7, and 10, 2010, Defendants forwarded search terms to be used in the review of the electronic evidence by the Defendants' computer forensics expert. On December 8, 2010, Plaintiff Greg Henry served his Third Supplemental Responses, in which Plaintiff continued to state that a disk was “being prepared.” According to Defendants, Plaintiffs also represented, for the first time in the fifteen months that these discovery requests have been pending, that:
a CPU from the investment timeframe [sic] is not available for inspection. Data is on a current computer, but the protocol for any inspection of that CPU must be approved and agreed by the parties because the CPU will contain information that is confidential and totally unrelated to this action, will contain confidential communications subject to attorney-client privilege, and other information not responsive to these discovery requests and not subject to discovery. Counsel for plaintiffs will work with counsel for defendants to arrive at an agreed protocol.
(Docket Entry # 93, Exh. G at pgs. 2-3).
On December 9, 2010, defense counsel again advised Plaintiffs that the contemplated production of a “computer disc” would be neither responsive to the requests nor in compliance with the Court's Order to compel, and that the computer was to be produced to Defendants' expert or to an expert selected by Plaintiff for imaging. Defendants also voiced concerns with the new assertion that a CPU for the relevant time period was “not available,” and reminded Plaintiffs of their obligation to maintain electronic evidence under a January 9, 2009 Data Preservation Letter sent by Defendants to Plaintiffs (Docket Entry # 93, Exhibit H).
*4 Defendants requested a full explanation, with relevant dates, regarding why a CPU from the relevant time period is not available and requested an explanation of Plaintiffs' statement that “data is on a current computer.” Also, regarding Plaintiffs' statement concerning the lack of an agreed protocol, defense counsel reminded counsel for Plaintiffs that Plaintiffs' counsel had represented that he had spoken with Defendants' expert and understood the process. Defendants requested that the electronic evidence be produced in three days, and advised in the absence of such compliance, a motion to compel would be filed. According to Defendants, they received no response.
Thus, on December 20, 2010, Defendants filed their current motion. On December 22, 2010, more than 30 days after this Court's deadline, Plaintiffs produced two CD-ROMs (the “CDs”) which contain copies of certain files. Regarding the CPUs, in a letter dated December 21, Plaintiffs offered to allow Defendants to have their computer forensics expert inspect Richard and Greg Henry's personal computers to confirm that all relevant data concerning the investments, the projects, and the lawsuit had been downloaded onto the CDs provided to Defendants.
C. Discussion
Relying on Richard and Greg Henry's affidavits, Plaintiffs represent they have not destroyed any evidence. Plaintiffs assert they have produced to Defendants on two CDs the relevant information having to do with this lawsuit (communications with counsel being excluded). Plaintiffs argue their personal computers contain vast amounts of personal financial, business, and personal information unrelated to this case, and Defendants have no right to further intrude into that personal, private, confidential, and irrelevant data. According to Plaintiffs, Defendants are attempting to improperly expand the scope of discovery beyond information that is “relevant.”
According to Defendants, the CDs are not responsive to their Request No. 52 for “computer disks or other forms of data storage,” and they are not CPUs as requested in Request No. 53. Defendants state they have been clear in their communications with Plaintiffs that they are seeking an image of Plaintiffs' computer hard drives and that CDs containing certain files chosen by Plaintiffs do not comply with the discovery requested or ordered to be produced. Defendants further assert the files produced on the CDs are not complete and cannot be accessed and/or authenticated. For example, as noted in the affidavit of Defendants' forensics expert, files which appear to be emails are present on the CD, but they do not contain header and footer information, making it so the sender and/or recipient cannot be determined.
Request for Production No. 52, as worded, does not provide a basis for Defendants to assert they are entitled to download all the data contained on the personal computers of Plaintiffs. The Court finds Plaintiffs have complied with the Court's October 12, 2010 Order regarding this request. However, to the extent certain files produced on the CDs are not complete or cannot be accessed and/or authenticated, Defendants may provide to Plaintiffs, within fourteen days from the date of entry of this Order, a specific list of such files. Within fourteen days thereafter, Plaintiffs shall reproduce those files in a complete, accessible, and/or authenticated form, where possible, or explain otherwise.
Turning to Request for Production No. 53, which does seek the actual CPUs used and/or operated by former employees, it is undisputed that Plaintiffs' hard drives have not been produced despite this Court's order.[1] However, Plaintiffs offered to allow Defendants to send a computer forensics expert of their choosing to inspect their computers to verify the relevant data concerning this lawsuit had been supplied on the CDs.
*5 First, the Court is not convinced, as urged by Defendants, that Plaintiffs have destroyed computer data. Plaintiffs have explained why Greg Henry does not have the specific CPU he owned at the time of the investments in 2005. The CPU being used by Greg Henry in 2005 and 2006 stopped functioning in 2006 or early 2007. Greg Henry purchased a new computer, downloaded the data onto his new computer, and disposed of the old CPU which was no longer working. This was before the 2008 lawsuit; before any contemplation of lawsuits; and almost two years before the data preservation letter sent by Defendants' counsel on January 8, 2009. Greg Henry states in his affidavit that the responsive data has been produced on the CDs supplied to Defendants' counsel on December 21, 2010.
Defendants also assert Plaintiffs have not produced a copy of Defendant Aaron Buck's hard drive, which was given to Plaintiffs prior to November of 2008 as a result of a cooperation agreement between the parties. To the extent Plaintiffs possess a copy of Aaron Buck's hard drive, within fourteen days from the date of entry of this Order, Plaintiffs shall produce the information to Defendants' computer forensics expert.
The Court now considers Defendants' proposed imaging protocol. Defendants explain their proposal as follows:
a forensic image a bit for bit duplicate of the original hard drive and can be acquired while a computer is up and running so as not to disrupt business operations. The imaging process is performed as a supervised on-site visit at a mutually agreeable time for all parties involved.... After the image is prepared, it is placed in a ... safe until the parties have agreed on the search parameters. Upon receipt of the agreed search terms, [Defendants' computer forensics expert] conducts a search of the image using only the agreed upon search terms, data ranges and file types. She then prepares a detailed report for review of the producing parties (in this case, the Plaintiffs), so that Plaintiffs can be assured that no irrelevant, personal, confidential or attorney privileged information has been retrieved in the search of the image. Defendants are not given a copy of this report. It is only after Plaintiffs confirm that no irrelevant, personal, confidential or attorney privileged information has been retrieved that a report is prepared for Defendants' review.
(Defendants' reply at pgs. 2-3). Defendants further assert they have already proposed search terms and parameters and repeatedly requested Plaintiffs' agreement on the search terms and parameters for the imaging process. Finally, in this regard, Defendants asserts their expert has already imaged Defendants' hard drives, and the information remains in the expert's vault until the parties can agree to the search terms.
The Court finds the proposed forensic imaging protocol reasonable, especially considering that Plaintiffs have offered to allow Defendants' computer forensics expert to inspect their computers to verify the relevant data concerning this lawsuit has been supplied on the CDs. The above-protocol will provide the necessary verification to Defendants while utilizing search terms that have been agreed upon by both sides. The protocol will also protect Plaintiffs' relevancy and confidentiality concerns. Defendants represent that it is only after Plaintiffs confirm that no irrelevant, personal, confidential, or attorney-client privileged information has been retrieved that a report is prepared for Defendants' review. The Court finds neither side will be prejudiced by the proposed protocol.
Plaintiffs are always free to hire their own computer forensics expert to work with Defendants' expert in the imaging process. Importantly, both parties are subject to the imaging protocol. Both parties are reminded that if either side claims that certain relevant documents are privileged, such documents shall be identified on a privilege log pursuant to FED. R. CIV. P. 26(b)(5)(A). In the event a dispute arises over the relevancy or privilege of certain images, the parties can file proper motions with the Court.
*6 Lastly, Defendants seek an Order compelling Plaintiffs to reorganize all of the documents produced in response to Defendants' Requests for Production. Federal Rule of Civil Procedure 34(b) provides that a “party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request.” FED. R. CIV. P. 34(b)(2)(E)(i). Plaintiffs represent the documentation was produced as it was “kept in the usual course of business” by Plaintiffs. Plaintiffs further assert the documents are self-explanatory and do not require further categorization. Plaintiffs are not required to organize and label each document to correspond to each request. Therefore, the Court denies this part of Defendants' motion. The Court further declines to impose sanctions. Based on the foregoing, it is
ORDERED that Defendants' Second Motion to Compel and Request for Sanctions (Docket Entry # 93) is hereby GRANTED IN PART and DENIED IN PART. It is further
ORDERED that to the extent certain files produced on the CDs are not complete or cannot be accessed and/or authenticated, Defendants may provide to Plaintiffs, within fourteen days from the date of entry of this Order, a specific list of such files. Within fourteen days thereafter, Plaintiffs shall reproduce those files in a complete, accessible, and/or authenticated form, where possible, or explain otherwise. It is further
ORDERED that to the extent Plaintiffs possess a copy of Aaron Buck's hard drive, within fourteen days from the date of entry of this Order, Plaintiffs shall produce the information to Defendants' computer forensics expert. It is further
ORDERED that within fourteen days from the date of entry of this Order, the parties shall meet and confer on a supervised on-site visit at a mutually agreeable time and date for all parties involved. The parties shall also agree upon the search parameters. Consistent with the parties' agreement, Plaintiffs shall provide Defendants' computer forensics expert access to the hard drives of their personal computers. Defendants' forensics expert shall follow the protocol as outlined above.
Footnotes
On October 14, 2010, the Court ordered information responsive to Request for Production No. 53 be produced within thirty days.