INTRODUCTION

*1 In this action alleging natural gas price fixing, plaintiff E & J Gallo Winery (“Gallo”) seeks copies of computer hard drives of eight gas traders of Encana Energy Services, Inc. (“EES”) which is presently defendant WD Energy Services, Inc. (“WD Energy”). Alternatively, Gallo seeks to run word searches on the hard drives and production of responsive documents. Gallo further seeks from defendants Encana Corporation (“Encana Corp.”) and WD Energy (collectively “defendants”) reimbursement of $28,000 paid to defendants' computer consultant for hard drive copies and searches. Gallo also seeks to impose an unspecified sanction to pursue this motion to compel and to extend the nonexpert discovery cutoff 30-60 days.

Based on the record and without the December 17, 2004 hearing or oral argument, this Court issues the following orders on Gallo's motion to compel computer discovery and related requests. See Local Rule 78-230(h).

BACKGROUND

Gallo's Claims

Gallo and Gallo Glass Company (“Gallo Glass”) produce wine and wine bottles using natural gas. Gallo is one of California's largest consumers of natural gas used to operate its furnaces. Encana Corp., a Canadian company, is North America's largest independent natural gas producer and seller and does business in California through its subsidiaries. EES was Encana Corp.'s indirect subsidiary and sales and marketing arm in the United States. Encana Corp. used EES to trade, hedge and speculate in natural gas, natural gas transportation contracts and natural gas market-based derivatives. EES changed its name to WD Energy Services Inc.[1] in early 2003.

During April 2001 to June 2003, EES was Gallo's sole marketer.[2] Gallo claims that when EES “ostensibly” worked with Gallo, EES conspired with natural gas marketers to artificially inflate natural gas prices and related commodities contracts.

On April 9, 2003, Gallo filed this action to pursue against defendants price fixing claims under the Sherman Act, 15 U.S.C. § 1, and the Cartwright Act, Cal. Bus. & Prof. Code, §§ 16700, et seq., and claims for unfair business practices (Cal. Bus. & Prof. Code, §§ 17200 et seq.), and unjust enrichment, constructive trust and fraudulent transfer under California Civil Code, §§ 3439, et seq. Gallo alleges defendants manipulated and grossly inflated California natural gas prices and derivative markets.

Trader Hard Drives

Gallo has negotiated with defendants to produce “ghost images” of computer hard drives or to run word searches on computer hard drives of eight EES traders, Sarah Allen, Dave Cooley, Craig Elias, David Shu, Don McClure, Brian Redd, Eric Strum and Tom Gary (collectively “traders”). According to Gallo, in June 2004, Gallo and defendants agreed the entire hard drives of traders would be copied in full if Gallo agreed to pay costs. Gallo contends in October 2004, defendants reneged on the agreement and insisted Gallo use a search term process which defendants' computer consultant would run to locate responsive e-mails and documents. Nonetheless, Gallo agreed to employ a word search term process for the hard drives which is expected to generate 200,000 to 600,000 pages of responsive documents.

*2 On November 19, 2004, Gallo provided defendants Gallo's proposed search criteria comprising all e-mail communications of the eight traders with 90 identified EES employees and 66 specific search terms. (A copy of the proposed search criteria is attached.) According to Gallo, defendants object only to the eight traders' e-mail communications with 90 other EES employees, most of whom are not traders.

Gallo has paid defendants' computer consultant $3,600 to extract data and produce “ghost images” of hard drives of the trader's six computers and an additional $24,4000 to conduct the word searches.

Gallo's Motion To Compel

On November 24, 2004, Gallo filed its notice of motion and motion to compel defendants to provide the hard drive copies or to run the word searches. On December 7, 2004, Gallo e-mailed to defendants its portion of a joint discovery dispute statement. Gallo attributes defendants as taking the position that they would not agree to a briefing schedule on Gallo's motion until a briefing schedule had been reached on all pending discovery disputes. On December 13, 2004, defendants filed notices of their seven discovery motions and set a January 7, 2005 hearing. On the late afternoon of December 14, 2004, Gallo filed its portion of the discovery dispute statement without defendants' portion.

Gallo specifically requests that defendants:

Gallo further requests that defendants reimburse Gallo $28,000 in connection with the hard drive discovery and that this Court impose an unspecified sanction in connection with this motion. Gallo further seeks to extend the February 21, 2005 nonexpert discovery deadline 30-60 days to compensate for delay to obtain the hard drive discovery.

Defendants' Opposition

On the morning of December 15, 2004, defendants belatedly faxed to the Court their opposition brief and confirmed that the only unresolved issue is all e-mail communications of the eight traders with 90 other EES employees, including legal counsel. Defendants accuse Gallo of failing to meet and confer regarding an appropriate briefing schedule for Gallo's motion and assert they indicated to Gallo that they needed Gallo's portion of the joint discovery dispute statement no later than December 3, 2004 to timely provide defendants' portion. Defendants claim that after receiving Gallo's portion of the joint discovery dispute statement on December 7, 2004, Gallo ignored defendants' communications regarding a briefing schedule and that defendants provided its opposition as soon as possible on December 15, 2004.

Defendants assert they will produce all non-privileged documents “as soon as practicable” after searches and screening for privileged communications. Defendants claim they have capability to screen 50,000 pages of documents per day for privileged matters.

DISCUSSION

Scope Of Production

Essentially, the parties have agreed to conduct a search of 66 terms of the traders' six computer hard drives. The remaining dispute boils down to the eight traders' e-mail communications with 90 other EES employees and timing to produce computer discovery. Gallo contends 90 EES employees “predictably have had communications relevant to price manipulation of natural gas” and “are believed to have job functions closely relating to pricing, and review of pricing decisions and patterns.” Gallo fears a mere search by terms will miss e-mails based on jargon unknown to Gallo. Gallo proposes defendants produce ghost images of the e-mails with the 90 other EES employees along with documents in response to search terms.

*3 The eight traders' e-mail communications with the 90 other EES employees surely contain relevant and discoverable material and perhaps privileged material. Defendants seek to screen privileged material rather than produce the e-mail communications subject to a privilege non-waiver. Unfortunately, time for screening, even at 50,000 pages a day, is not a luxury. Discovery in this action has been fraught with delay and disputes. This Court fears that a privilege screen will generate only more delay and disputes. As such, all of the traders' e-mail communications with non-attorneys must be produced in short order subject to non-waiver of privileges. Defendants are entitled promptly to isolate e-mail communications with attorneys and screen them for privilege. Thereafter, defendants must produce non-privileged matters and a privilege log in short order.

Order

This Court ORDERS defendants:

Cost-Shifting

Gallo seeks to shift to defendants the $28,000 Gallo has paid defendants' computer consultants for the computer discovery. The “presumption is that the responding party must bear the expense of complying with discovery requests, but may invoke the district court's discretion under Rule 26(c) to grant protective orders protecting him from ‘undue burden or expense’ in doing so, including orders conditioning discovery on the requesting party's payment of the costs of discovery.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 358, 98 S.Ct. 2380 (1978).

“In the context of discovery of electronic documents, ‘whether production of [such] documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format (a distinction that corresponds closely to the expense of production).” ’ OPENTV v. Liberate Technologies, 219 F.R.D. 474, 476 (N.D. Cal. 2003) (quoting Zubulake v. UBS Warbug LLC, 217 F.R.D. 309, 318 (S.D.N.Y. 2003)). “Shifting the cost of production from the producing party to the requesting party should be considered only when inaccessible data is sought.” OPENTV, 219 F.R.D. at 476. “The burden or expense of discovery is, in turn, ‘undue’ when it ‘outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.” Zubulake, 217 F.R.D. at 318. “[I]n the world of electronic data, thanks to search engines, any data that is retained in a machine readable format is typically accessible.” Zubulake, 217 F.R.D. at 318.

Since Gallo has paid $28,000 to defendants' computer consultant, presumably, Gallo has been willing to absorb such costs and tacks on the cost-shifting to its motion to compel. Taking into account defendants' privilege claims, the requested material is not readily accessible. Gallo has failed to justify shifting the computer discovery costs to defendants in light of among other matters, the extravagance of this litigation, its discovery and related disputes.

Order

This Court DENIES Gallo's request to shift to defendants the costs associated with the computer discovery and related production of documents.

Sanctions

Gallo seeks to impose an unspecified sanction on defendants. If a motion to compel is granted, the court “shall, after affording an opportunity to be heard, require ... the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in making the motion, including attorney's fees, unless the court finds that the motion was filed without the movant's first making a good faith effort to obtain the disclosure or discovery without court action, or that the opposing party's nondisclosure, response, or objection was substantially justified, or that other circumstances make an award of expenses unjust.” F.R.Civ.P. 37(a)(4)(A).

*4 The standard for an award of expenses is whether there was substantial justification for the losing party's conduct. Reygo Pac. Corp. v. Johnston Pump. Co., 680 F.2d 647, 649 (9th Cir. 1982). The rationale for fee-shifting statutes, such as F.R.Civ.P. 37(a)(4) “is that the victor should be made whole – should be as well off as if the opponent had respected his legal rights in the first place.” Rickels v. City of South Bend, Indiana, 33 F.3d 785, 787 (7th Cir. 1994). A court “is afforded great latitude in imposing sanctions under Rule 37” and sanctions are reviewed “only for abuse of discretion.” Reygo, 680 F.2d at 649; David v. Hooker, Ltd., 560 F.2d 412, 428-429 (9th Cir. 1977).

As the parties have noted, the intricacies of this computer discovery have evolved and unfortunately consumed great effort and expense. The parties reached agreement on all but one issue of the computer discovery. Although the Court is puzzled for delay as to the uncontested discovery, defendants have raised concerns regarding the broad mass of e-mails sought by Gallo. Without Gallo's proper support or documentation, an award of sanctions is improper.

Order

This Court DENIES Gallo's request to impose an unspecified sanction against defendants.

Nonexpert Discovery Extension

Gallo notes that defendants' computer consultant will require two weeks to conduct the computer searches and that Gallo will start to depose the traders on January 12, 2005. Gallo fears it will not have the search results in time to meaningfully use them in the depositions and requests to extend the February 21, 2005 nonexpert discovery cutoff 30-60 days.

At the parties' requests, discovery, motion and trial dates have been continued twice. This Court recognizes the dilemma of conducting depositions without underlying supporting materials. However, Gallo makes no attempt to demonstrate disadvantages to proceed with trader depositions as currently set. Moreover, Gallo makes no attempt to address F.R.Civ.P. 16(b) good faith standards to modify dates, including the nonexpert discovery cutoff. Without more, this Court is not in a position at this time to extend the discovery cutoff but will entertain the parties' stipulation to extend the nonexpert discovery cutoff.

Order

This Court DENIES without prejudice Gallo's request to extend the February 21, 2005 nonexpert discovery cutoff.

Failure To File Joint Discovery Dispute Statement

Under this Court's Local Rule 37-251(b), this Court will not determine a discovery dispute unless the parties “have conferred and attempted to resolve their differences” and “have set forth their differences and the bases therefor” in a joint discovery dispute statement. Local Rule 37-251 (a) requires a joint discovery statement to be filed no later than three court days prior to the scheduled hearing, or in this case, December 14, 2004. This Court's Local Rule 37-251(d) addresses failure to obtain a joint statement:

*5 The parties' counsel submitted declarations to address meeting and conferring and failure to file a joint discovery dispute statement. The gist of Gallo's position is that it filed its notice of motion on November 24, 2004, submitted to defendants its portion of the joint statement on December 7, 2004, would not agree to a briefing schedule relating to its current motion to future motions, and timely filed its portion of the statement after not receiving defendants' portion. Defendants contend a week was insufficient to address Gallo's 55-page brief and 15-page declaration (without exhibits) to timely provide its portion of the joint statement no later than December 14, 2004. Defendants claim Gallo was unwilling to compromise on a briefing schedule and used two weeks to prepare its portion of the joint statement to leave defendants one week to prepare their portion.

Regrettably, the parties regress from their expected professionalism to a trite squabble. The parties fail to justify their failure to cooperate on a matter as simple as filing a joint statement. This Court questions Gallo's motives to delay a week prior to the filing deadline to provide defendants its joint statement portion and then proceed with filing its portion without defendants' input. This Court further questions defendants' motives to attempt to tie this motion with others, the hearing date of which is weeks away. As such, the Court is required to further explore the matter to assess sanctions.

Order

This Court ORDERS the parties, no later than December 23, 2004, to show cause in writing why this Court should not impose sanctions, including monetary sanctions payable to the Court, for the parties' failure to cooperate on and file a joint discovery dispute statement in compliance with Local Rule 37-251(a), (c).

IT IS SO ORDERED.

Tim Buchanan

From: Tim Buchanan

Sent: Friday, November 19, 2004 12:43 PM

To: ‘Battaglia, David A.’

Cc: Greg Durbin; ‘swilliams@cpsmlaw.com’

Subject: Search terms for WD hard drives

Here is the list of search terms we submit for the Kroll second phase. We will need production of responsive documents in electronic format as previsously discussed (searchable TIFF files with metadata intact) by December 15. Please arrange production delivery of CDs that are each Bates stamped. Also please have Kroll identify which drives the responsive materials came from.

1. All emails from, to or copied to any email address of the following persons:

Adams, Tracy

Allen, Sarah

Anderson, Jim

Anderssen, Rick

Beasley, Scott

Bidwell. Maria

Biemans, Roger

Bohall, Aaron

Brink, Steve

Carter, Mark

Cartwright, John

Cattermole, Jay

Clark, Tom

Cline, Theresa

Conner, Ben

Cooley, Dave

Craker, Susan

Crumley, John

Dahncke, Beth

D'Ambrosio, Fred

D'Amico, Pete

Desroches, Rachel

Dowles, Doug

Edwards, Darren

Elias, Craig

Evans, Bruce

Gagne, Paul

Garcia, Carlos

Gary, Tom

Guerriero, Mike

Gullett, Rob

Hamrick, Kyle

Harvey, Diane

Hays, Mark

Holman, Diane

Heagy, Brent

Holub, Karen

Hsu, David

Hutchens, Robert

Jangula, Amy

Jarvis, Jeff

Jernigan, Jerry

Johnson, Jim

Johnson, Perry

King, Ben

Kwan, Mackenzie

Laird, Nancy

Larson, Laurie

Lathrop, Tim

Lincoln, Robert

Lowe, Judd

McClure, Don

McCord, Jim

McNamara, Don

McWilliams, Lance

Morrison, Toni

Murray, Alisa

Nini, David

Olshove, Bryan

Parker, Cecil

Pedersen, Lisa

Pendleton, Clyde

Poorman, Mary

Redd, Brian

Rodgers, Norman

Rosson, John

Ruiz, Rene

Saunders, Christopher

Sappenfield, Keith

Schnorf, Jamie

Schuller, Laurie

Shiring, Robert

Sony, Steve

Stanley, Bill

Stephenson, Matt

Stevens, Dana

Sturm, Eric

Tang, Cathy

Thompson, Miriam

Thorn, Dave

Trippe, Steve

Tuer, David

Twiss, Wesley

Vandenham, Lisa

Vaughn, Stewart

Wallace, Billy

White, Karen

Williams, R. Oliver

Zdenek, Mark

Zemljak, Renee

2. All emails that refer to “PanCanadian Energy Services, a division of PanCanadian Petroleum Ltd.”

3. All emails that mention or refer to the “Houston-based merchant energy operations”

5. All emails that mention or refer to “wash” sales, “round trip” transactions, “sale-buyback” transactions, “credit wash” transactions.

*6 6. All emails that mention or refer to Natural Gas Intelligence, NGI, Bloomberg, Platts, Energy Intelligent Group, Gas Daily, Inside FERC, Natural Gas Week, Daily Gas Price Index, or Weekly Gas Price Index

7. All emails that mention or refer to defendants' Corporate Risk Management Program.

8. All emails that mention or refer to the PanCanadian Energy Services Risk Management Policy, the EnCana Energy Services Risk Management Policy or the WD Energy Services Risk Management Policy.

9. All emails that mention or refer to the PanCanadian Energy Services Risk Management Committee, the EnCana Energy Services Risk Management Committee or the WD Energy Services Risk Management Committee, including any variant of the name used by defendants

10. All emails that mention or refer to the PanCanadian Energy Services Credit Policy, the EnCana Energy Services Credit Policy or the WD Energy Services Credit Policy, including any variant of the name used by defendants

11. All emails that mention or refer to the PanCanadian Energy Services Legal Policy, the EnCana Energy Services Legal Policy or the WD Energy Services Legal Policy, including any variant of the name used by defendants

12. All emails that mention or refer to the PanCanadian Energy Services Systems Policy, the EnCana Energy Services Systems Policy or the WD Energy Services Systems Policy, including any variant of the name used by defendants

13. All emails that mention or refer to any entity containing the word “Enron”

14. All emails that mention or refer to any entity containing the word “Duke”

15. All emails that mention or refer to any entity containing the word “Reliant”

16. All emails that mention or refer to any entity containing the word “Enserco”

17. All emails that mention or refer to any entity containing the word “Dynegy”

18. All emails that mention or refer to any entity containing the word “TXU”

19. All emails that mention or refer to any entity containing the word “Mirant”

20. All emails that mention or refer to any entity containing the words “PG&E Energy Trading”

21. All emails that mention or refer to any entity containing the word “Scana”

22. All emails that mention or refer to any entity containing the word “Sempra”

23. All emails that mention or refer to any entity containing the words “El Paso Merchant Energy”

24. All emails that mention or refer to any entity containing the word “Calpine”

25. All emails that mention or refer to any entity containing the word “Williams”

26. All emails that mention or refer to any entity containing the word “BP”

27. All emails that mention or refer to any entity containing the word “CMS”

28. All emails that mention or refer to any entity containing the word “Cinergy”

29. All emails that mention or refer to “California”

30. All emails that mention or refer to “Stanislaus Food Products” or “Stanislaus” or “SFP”

31. All emails that mention or refer to FERC, SEC or CFTC, including the full names of these agencies and any other abbreviations or acronyms

32. All emails that mention or refer to any entity containing the word “Gallo”

33. All emails that mention, refer to or contain the word “citygate” or “city gate”

34. All emails that mention, refer to or contain the word “Malin”

35. All emails that mention or refer to the Transfer Pricing Review

*7 36. All emails that refer to “transfer pricing”

37. All emails sent to or received from intelligencepress.com

38. All emails sent to or received from gas daily@ftenergy.com

Thank you. Tim Buchanan.

* * * *

Timothy J. Buchanan

Commercial and Business Litigation Practice Group

McCormick, Barstow, Sheppard, Wayte & Carruth LLP

5 River Park Place East

* * CERTIFICATE OF SERVICE * *

December 17, 2004

I, the undersigned, hereby certify that I am an employee in the Office of the Clerk, U.S. District Court, Eastern District of California.

That on December 17, 2004, I SERVED a true and correct copy(ies) of the attached, by placing said copy(ies) in a postage paid envelope addressed to the person(s) hereinafter listed, by depositing said envelope in the U.S. Mail, by placing said copy(ies) into an inter-office delivery receptacle located in the Clerk's office, or, pursuant to prior authorization by counsel, via facsimile.

AWI LJO

Joseph W Cotchett

Cotchett Pitre Simon and McCarthy

San Francisco Airport Office Center

840 Malcolm Road

Suite 200

Burlingame, CA 94010

G Kip Edwards

Law Offices of G Kip Edwards

P O Box 1979

Kings Beach, CA 96143

Daniel Gregory Durbin

McCormick Barstow Sheppard Wayte and Carruth

PO Box 28912

Five River Park Place East

Fresno, CA 93729-8912

Louis Elwood Shoch III

Gibson Dunn and Crutcher

333 South Grand Avenue

Suite 5000

Los Angeles, CA 90071-3197

Richard P Levy

Gibson Dunn and Crutcher

333 South Grand Avenue

Suite 5000

Los Angeles, CA 90071-3197

Charles Joseph Stevens

Stevens and O'Connell

400 Capitol Mall

Suite 1400

Sacramento, CA 95814

William C Hahesy Jr

Sagaser Franson and Jones

PO Box 1632

2445 Capitol Street

Second Floor

Fresno, CA 93717-1632

Jack L. Wagner, Clerk

BY:

Deputy clerk

WD Energy was sued in this action as EnCana Energy Services, Inc.

Gallo entered into an April 26, 2001 natural gas sale and purchase agreement with Encana Corp.'s predecessor.