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 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.
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.
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:
If counsel for the moving party is unable, after a good faith effort, to secure the cooperation of counsel for the opposing party in arranging the required conference, or in preparing and executing the required joint statement, counsel for the moving party may file and serve an affidavit so stating, setting forth the nature and extent of the counsel's efforts to arrange the required conference or procure the required joint statement, the opposing counsel's responses or refusals to respond to those efforts, the issues to be determined at the hearing, and the moving party's contentions with regard to the issues, including any briefing in respect thereto. Refusal of any counsel to participate in a discovery conference, or refusal without good cause to execute the required joint statement, shall be grounds, in the discretion of the Court, for entry of an order adverse to the party represented by counsel so refusing or adverse to counsel.
*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.
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).
Sent: Friday, November 19, 2004 12:43 PM
To: ‘Battaglia, David A.’
Cc: Greg Durbin; ‘email@example.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:
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 firstname.lastname@example.org
Commercial and Business Litigation Practice Group
McCormick, Barstow, Sheppard, Wayte & Carruth LLP
* * CERTIFICATE OF SERVICE * *
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.
Cotchett Pitre Simon and McCarthy
San Francisco Airport Office Center
Law Offices of G Kip Edwards
McCormick Barstow Sheppard Wayte and Carruth
Five River Park Place East
Los Angeles, CA 90071-3197
Los Angeles, CA 90071-3197
Sagaser Franson and Jones