Profit Point Tax Techs., Inc. v. DPAD Grp., LLP
Profit Point Tax Techs., Inc. v. DPAD Grp., LLP
2021 WL 1968271 (W.D. Pa. 2021)
March 3, 2021
Betts, Michael J., Special Master
Summary
Plaintiff PPTT requested an independent forensic examination of Defendants' computers and ESI due to their alleged failure to produce certain documents in discovery. The court recommended that an independent forensic review be conducted and that PPTT's request for an award of fees and costs incurred in pursuing its Motions be granted. The court also noted that ESI must be preserved and produced in accordance with the applicable rules and regulations.
Additional Decisions
PROFIT POINT TAX TECHNOLOGIES, INC., Plaintiff,
v.
DPAD GROUP, LLP; JOHN MANNING; and DANIEL STEELE, Defendants
DPAD GROUP, LLP; JOHN MANNING; and DANIEL STEELE, Counterclaim Plaintiffs,
v.
PROFIT POINT TAX TECHNOLOGIES, INC.; and PATRICK J. SWEET, Counterclaim Defendants
v.
DPAD GROUP, LLP; JOHN MANNING; and DANIEL STEELE, Defendants
DPAD GROUP, LLP; JOHN MANNING; and DANIEL STEELE, Counterclaim Plaintiffs,
v.
PROFIT POINT TAX TECHNOLOGIES, INC.; and PATRICK J. SWEET, Counterclaim Defendants
Civil Action No. 2:19-cv-698
United States District Court, W.D. Pennsylvania
Filed March 03, 2021
Counsel
Audrey K. Kwak, Eckert, Seamans, Cherin & Mellott, Robert J. Hannen, Clark Hill PLC, Pittsburgh, PA, David B. Willis, Pro Hac Vice, Manning Gross & Massenburg LLP, Boston, MA, Jeffrey Joseph Lorek, Clark Hill PLC, Washington, DC, for Plaintiff/Counterclaim Defendant Profit Point Tax Technologies, Inc.Jeffrey Joseph Lorek, Clark Hill PLC, Washington, DC, Robert J. Hannen, Clark Hill PLC, Pittsburgh, PA, for Counterclaim Defendant Patrick J. Sweet.
Brad A. Funari, Alex Mahfood, Reed Smith LLP, Pittsburgh, PA, for Defendants/Counterclaim Plaintiffs.
Betts, Michael J., Special Master
REPORT AND RECOMMENDATION
I. RECOMMENDATION
*1 This Report and Recommendation addresses the following two motions: (i) Plaintiff/Counterclaim Defendant, Profit Point Tax Technologies, Inc.’s Motion to Compel Forensic Examination and to Authenticate “Boston Documents,” filed on February 1, 2021 (ECF No. 153); and (ii) Plaintiff/Counterclaim Defendant, Profit Point Tax Technologies, Inc.’s Third Motion to Compel Forensic Examination, filed on February 9, 2021 (ECF No. 158) (collectively, “PPTT's Motions”).[1] Based on a thorough review of PPTT's Motions and Defendants/Counter-Plaintiffs’ Briefs in opposition thereto[2], including all exhibits attached to the above documents and the authorities cited therein, it is respectfully recommended that PPTT's Motions be granted insofar as the Motions request the issuance of an order providing for an independent forensic examination of Defendants’ computers and ESI. It is further recommended that PPTT's request (in its Motion filed at ECF No. 153) that the Court issue an order authenticating the “Boston Documents” be denied. Finally, it is recommended that PPTT's request for an award of fees and costs incurred in connection with its Motions be granted and that Defendants’ request for an award of fees and costs incurred in opposing PPTT's Motions be denied.
II. REPORT
A. BACKGROUND
Plaintiff, Profit Point Tax Technologies, Inc. (“PPTT”), is pursuing claims against Defendants for alleged breach of contract (Count I), breach of fiduciary duty (Count II), unjust enrichment (Count III) (against defendant DPAD Group, LLP only), intentional misrepresentation (Count VI), and negligent misrepresentation (Count VII). Amended Complaint (ECF No. 27).[3] PPTT's claims arise from Defendants’ alleged usurpation of PPTT's business through the use of PPTT's confidential information and other resources in soliciting PPTT's clients. Defendants, in turn, are asserting counterclaims against PPTT for alleged breach of contract (Counterclaims, Count I), breach of a release (Counterclaims, Count II), breach of contract in the alternative (Counterclaims, Count III), and unjust enrichment (Counterclaims, Count IV). Defendants/Counter-Plaintiffs DPAD Group, LLP, John Manning and Daniel Steele's Answer Affirmative Defenses, and Counterclaims to the First Amended Complaint, filed on August 11, 2020 (ECF No. 101).
*2 The Court previously addressed the scope of discovery in this case in the course of ruling on Defendants/Counter-Plaintiffs DPAD Group, LLP, John Manning and Daniel Steele's Motion for Protective Order (ECF No. 52). On May 29, 2020, Judge Kelly granted in part and denied in part that motion, and ruled that Defendants were required to provide full and complete responses to PPTT's Requests for Production of Documents, except for certain enumerated categories of documents requested by PPTT. Memorandum Order (ECF No. 69), at 5, 6.[4] Judge Kelly further ruled that “[t]he relevant time period is properly limited to 2014 to the present given that PPTT alleges that Manning and Steele formed DPAD in May 2015.” Id. at 4. On June 19, 2020, Judge Stickman denied objections filed by Defendants to Judge Kelly's May 29, 2020 Memorandum Order, affirmed and adopted the Memorandum Order, and ordered Defendants to “produce full and complete responses to the discovery requests outlined therein on or before July 20, 2020.” ECF No. 83.
Earlier in the case, prior to its filing of the two motions addressed in this Report and Recommendation, PPTT filed a Motion to Compel requesting the same relief requested in its pending motions: an order authorizing an independent forensic review of Defendants’ computers. Plaintiff/Counterclaim Defendant, Profit Point Tax Technologies, Inc.’s Motion to Compel, filed on December 3, 2020 (ECF No. 129, referred to below as “PPTT's First Motion”). PPTT contended in that Motion that a forensic review was warranted because it had received from various non-parties, in response to subpoenas, 289 documents that according to PPTT would be expected to be found within Defendants’ files and that were responsive to PPTT's discovery requests, but that had not been produced by Defendants. See PPTT's First Motion, ¶¶ 3-4, 14-18. Plaintiff's First Motion also relied on deposition testimony of defendant Steele that, PPTT argued, showed that Defendants had failed to preserve relevant evidence. Id., ¶ 6, 15, 22. PPTT's First Motion was denied without prejudice. Order of Court filed on January 27, 2021 (ECF No. 152). The Special Master's Report and Recommendation dated December 22, 2020 (ECF No. 137), which was adopted by the Court in its January 27, 2021 Order (ECF No. 152), found that PPTT's First Motion had failed to establish a sufficient basis for the imposition of sanctions. The Special Master indicated in that Report and Recommendation, however, that it appeared from PPTT's summary of the 289 documents produced by non-parties (but not produced by Defendants) that many of those documents were responsive to PPTT's document requests – requests with respect to which Defendants had been ordered by the Court to “produce full and complete responses.” Report and Recommendation filed on December 22, 2020 (ECF No. 137), at 16-19; see Order of Court filed on June 19, 2020 (ECF No. 83) (affirming and adopting Judge Kelly's May 29, 2020 Memorandum Order and ordering that “Defendants are directed to produce full and complete responses to the discovery requests outlined [in the Memorandum Order] on or before July 20, 2020”).
Because Defendants had not produced the 289 documents that PPTT had received from non-parties and that were the subject of PPTT's First Motion, and because a substantial number of those documents appeared to be responsive to PPTT's document requests, the December 22, 2020 Report and Recommendation encouraged counsel for the parties to agree to a process for addressing PPTT's concerns:
The recommended denial of PPTT's Motion, however, is not intended to foreclose or prejudice PPTT's right to pursue further inquiry about the concerns it has raised concerning Defendants’ non-production of responsive documents received from non-parties. Nor is this recommendation intended to foreclose or prejudice PPTT's right to seek relief from the Court if its concerns are not satisfied after appropriate steps have been taken by PPTT (with the reasonable cooperation of Defendants and their counsel) to ensure that Defendants have made a diligent search of their files for documents responsive to PPTT's Requests. Although a detailed discussion of appropriate steps that may be taken under the circumstances is beyond the purview of this Report and Recommendation, the Special Master offers as guidance for the parties and their counsel his view that it would be reasonable for PPTT to request that Defendants perform another search of their ESI to identify additional responsive documents and to supplement their response to PPTT's Requests as appropriate. Ideally, the methodology for any re-review by Defendants of their files for responsive documents would be the subject of discussions between counsel and agreement among the parties, so as to avoid future disputes and motion practice. It is noted that although a search by Defendants that was primarily manual or “eyeballs only” may have been appropriate in the first instance, the observations made above concerning the list of 289 documents produced by non-parties – i.e., that many of the documents are responsive to PPTT's Requests and would be expected to be in Defendants’ possession – could justify a request by PPTT that Defendants conduct a forensic search using agreed-upon search terms and take reasonably necessary steps to recover deleted emails and files that could be responsive to PPTT's Requests.
*3 Report and Recommendation filed on December 22, 2020 (ECF No. 137), at 23-24.
The two motions filed by PPTT that are the subject of this Report and Recommendation renew PPTT's request for issuance of an order authorizing an independent forensic examination of Defendants’ ESI; in the alternative, the motions ask that Defendants be ordered to conduct a search for documents subject to a court ordered ESI protocol. PPTT's Second Motion[5] further requests that the Court issue an order authenticating the contents of Defendants’ email communications contained in the so-called “Boston Documents.” Finally, PPTT requests an award of fees and costs incurred in connection with PPTT's Motions.
B. LEGAL STANDARDS APPLICABLE TO PPTT's MOTIONS
As Judge Kelly observed earlier in the case, “[f]ederal courts have broad discretion in managing discovery.” Memorandum Order filed on May 29, 2020 (ECF No. 69), at 3. Therefore, rulings on motions under Fed.R.Civ.P. 37 are “committed to the sound discretion of the district court.” Kokinda v. Pennsylvania Dept. of Corrections, No. 16-303, 2018 WL 1155999 at *2, 2018 U.S. Dist. LEXIS 34892 at *5 (W.D. Pa. March 5, 2018), quoting DiGregorio v. First Rediscount Corp., 506 F.2d 781, 788 (3d Cir. 1974). A district court's discretion in ruling on motions to compel is “far-reaching.” Kokinda, 2018 WL 1155999, at *2, 2018 U.S. Dist. LEXIS 34892, at *5; see also, e.g., Williams v. CVS Caremark Corp., No. 15-5773, 2016 WL 4409190, at *4, 2016 U.S. Dist. LEXIS 109708, at *13 (E.D. Pa. Aug. 18, 2016) (“[r]ulings regarding the proper scope of discovery, and the extent to which discovery may be compelled, are matters consigned to the court's discretion and judgment”).
The legal standards that apply to a party's request for an order authorizing a forensic examination of an adversary's computers were set forth in addressing PPTT's First Motion. See Report and Recommendation filed on December 22, 20220 (ECF No. 137), at 5-6. In general, a forensic examination may be ordered “as a sanction after a litigant has failed to preserve evidence, equivocally responded to discovery or otherwise resisted discovery.” Marsulex Environmental Technologies v. Selip S.P.A., No. 1:15-CV-00269, 2019 WL 2184873, at *12, 2019 U.S. Dist. LEXIS 85153, at *34 (M.D. Pa. May 21, 2019), quoting Brooks Group & Associates, Inc. v. Levigne, No. 2:12-CV-02922, 2013 U.S. Dist. LEXIS 70685 at *4 (E.D. Pa. May 17, 2013).
C. DISCUSSION
1. The Parties’ Positions
In support of its renewed request for an order authorizing a forensic review of Defendants’ ESI, PPTT relies on two additional sets of documents received from non-parties beyond the 289 documents that were the subject of PPTT's First Motion. The additional documents are:
*4 • The Boston Documents. The “Boston Documents,” which are the subject of PPTT's Second Motion, are described by PPTT as approximately ninety documents (100 pages) that were received by PPTT's counsel in Boston on or about October 26, 2020 “from an unknown source.” PPTT's Second Motion, ¶ 4. According to PPTT, “[t]hese Boston Documents consist of responsive and relevant e-mail communications by and between the Defendants, as well as other responsive documents between Defendants and some third parties.” Id. PPTT contends that the vast majority of the Boston Documents were not produced by Defendants in response to PPTT's document requests. Id.; see also PPTT's Second Motion, Exhibit 3 (ECF No. 153-4).[6]
• The GTM Documents. The “GTM Documents,” which are the subject of PPTT's Third Motion, consist of 389 documents produced to PPTT by non-party Global Tax Management, Inc. on January 14, 2021. PPTT's Third Motion, ¶ 2. PPTT contends that the GTM Documents represent additional documents produced by a non-party that, although responsive to PPTT's document requests and reasonably expected to be in Defendants’ possession, have not been produced by Defendants. Id. According to PPTT, “[a]lmost all of the withheld GTM documents consist of e-mail communications involving Defendants Steele and Manning which are directly responsive to PPTT's document requests.” Id.
PPTT contends that the cumulative effect of Defendants’ alleged failures to produce the Boston Documents and the GTM Documents, combined with Defendants’ non-production of the 289 documents that were the subject of PPTT's First Motion – a total of 768 responsive documents, according to PPTT – warrants a court-ordered forensic examination of Defendants’ computers.
Defendants oppose PPTT's Motions, contending that the Motions fail to establish a basis for the Court to subject Defendants to a forensic examination of their computers. In their opposition, Defendants do not dispute that they did not produce the Boston Documents or the GTM Documents in discovery (except as noted in PPTT's Motions). Rather, Defendants assert various challenges to PPTT's reliance on those documents, essentially arguing that Defendants’ non-production of the documents is entitled to no weight for various reasons specific to each set of documents.
Defendants’ primary objection to PPTT's reliance on the Boston Documents is to contend that the documents are not authentic. Defendants’ Second Brief, at 2-8, 10-11, 15-17. Defendants provide a number of reasons for questioning the authenticity of the Boston Documents, including: (i) PPTT did not rely on the documents, and did not even refer to them, in support of the First Motion, id. at 2-3, 9 (see page 8, footnote 6 above); (ii) PPTT did not use the documents during the depositions of defendants Manning and Steele taken on November 18-20, 2020, id. at 3, 8, 16; (iii) PPTT's counsel objected to deposition questions posed by Defendants’ counsel related to the documents, including questions asking about the origin of the documents, id. at 2, 10-11; (iv) the postage tape of the envelope used to deliver the documents to PPTT's counsel had been removed and has not been provided to Defendants, id. at 5; (v) the handwriting on the envelope in which the documents were delivered to PPTT's counsel appears to Manning and Steele to be that of Patrick Sweet, PPTT's President, id. at 5-6, 16 & Exhibits 6 and 7 (Declarations of John Manning and Daniel Steele); (vi) alleged “doctoring” of certain of the documents, including the alleged removal or redaction of dates, recipients and forwarding information on certain emails, id. at 6-7, 16-17; and (vii) although PPTT subpoenaed various non-parties, PPTT did not subpoena Deloitte, who was identified on the envelope containing the documents as the sender of the documents, id. at 2, 9.
*5 Defendants contend that PPTT's reliance on the GTM Documents is misplaced for three reasons. First, Defendants suggest that their non-production of the documents is entitled to no weight because of PPTT's alleged violations of Fed.R.Civ.P. 45 in connection with the subpoenas served by it on GTM. Defendants’ Third Brief, at 1-2, 5-6, 8-10, 15-18. Second, Defendants argue that the GTM Documents are not relevant to the issues in the case. Id. at 2, 12, 13, 19. Third, Defendants contend that the GTM Documents are not responsive to PPTT's document requests because GTM, due to the nature of its business, was not, for purposes of those requests, a client to whom Defendants provided services or a potential client solicited by Defendants. Id. at 4, 19-20.
2. Responsiveness of the Boston Documents
The Special Master has reviewed the Boston Documents submitted in support of PPTT's Second Motion[7] and the parties’ respective positions concerning whether the documents are responsive to PPTT's documents requests. Although PPTT asserts in its Second Motion, and particularly in Exhibit 3 to the Motion, that all of the Boston Documents are responsive to its document requests, the Special Master does not agree. While most of the documents are internal emails between Manning and Steele, it appears that many of the emails do not fall within the scope of PPTT's document requests. For example, although a number of the emails discuss potential or proposed payments, payment arrangements or “splits,” certain of the document requests on which PPTT relies can be fairly read to call for the production only of those emails or other documents discussing actual payments, payment arrangements or “splits.” E.g., PPTT's Request for Production of Documents (see ECF No. 153-2), ¶¶ 1(18), 4, 6, 10. As another example, although PPTT relies heavily on Paragraph 1(17) of its Request for Production of Documents, it is unclear whether a document, in order to be responsive to this request, must refer to a specific amount of fees charged (as opposed to the fact that fees of some amount were charged), but the request can reasonably be interpreted in that manner.
Even though many of the Boston Documents can be fairly regarded as not responsive to PPTT's document requests, certain of the documents, including the following, appear to be responsive:
3. Responsiveness of the GTM Documents
The Special Master has reviewed the GTM Documents submitted in support of PPTT's Third Motion[8] and the parties’ respective positions concerning whether the documents are responsive to PPTT's documents requests. Again, PPTT contends that all of the documents are responsive to its document requests. See PPTT's Third Motion, Ex. 3 (ECF No. 164, filed under seal). As with the Boston Documents, however, many of the GTM Documents appear to not be responsive to the requests. In this regard, requests that would call for documents related to solicitation of any of the entities listed in Paragraph 1 of PPTT's Requests for Production of Documents (GTM is one of the listed entities), or documents reflecting work done for any of those entities, do not appear to apply to communications between Defendants and GTM because GTM was not an end-user client of Defendants’ services. See Defendants’ Brief, at 4, 19-20.
PPTT claims that the vast majority of the GTM Documents are responsive to one or more of the following paragraphs of PPTT's Request for Production of Documents: 1(10), 1(15), 1(20), 4 and 21. Based on a review of the GTM Documents and a fair reading of PPTT's document requests, Paragraphs 1(10) and 1(15) do not appear to apply to most of the GTM Documents for the reasons indicated above; Paragraphs 1(20) and 21 are not applicable to most of the documents because the phrase “advertising and/or marketing materials” can fairly be construed narrowly; and Paragraph 4 applies to few of the documents if the phrase “payment arrangements” is regarded as referring to actual, as opposed to potential or proposed, payment arrangements, which the Special Master regards as a reasonable interpretation of that request as it is written.
*6 Despite the fact that many of the GTM Documents are not responsive to PPTT's documents requests, a large number of them – at least forty, based on the Special Master's review – appear to be responsive. Without describing the subject matter of any of those sealed documents, following are the control numbers of GTM Documents that the Special Master regards as responsive to PPTT's document requests: GTM00012-13; GTM00039-50; GTM00129-30; GTM00138-45; GTM00266-76; GTM00332-33; GTM00350-52; GTM00356; GTM00495-506; GTM00617-19; GTM00638-40; GTM00679-80; GTM00701; GTM00712-13; GTM742-50; GTM00758; GTM00762; GTM00777; GTM00827; GTM00860; GTM00863-64; GTM00901; GTM00993-96; GTM00997-98; GTM01002; GTM01036-37; GTM01176-77; GTM01214; GMT01265-67; GTM01281-85; GTM01349; GTM01374; GTM01375-77; GTM01393; GTM01394-95; GTM01436-37; GTM01650; GTM01674-81; GTM01718-21; GTM01851; and GTM01862-63.
4. The Cumulative Significance of Defendants’ Non-Production of the Documents Relied upon in PPTT's Three Motions
Having identified fifty-three of the Boston Documents and GTM Documents that are responsive to PPTT's Request for Production of Documents, it is necessary to next consider how much significance should be given to Defendants’ non-production of those documents, along with the at least sixty documents that appeared to be responsive in connection with PPTT's First Motion (see December 22, 2020 Report and Recommendation, at 16-18), in the context of the relief sought by PPTT's Motions.
With regard to the Boston Documents, the Special Master does not agree with Defendants’ position that their non-production of the documents, particularly those identified above as responsive to PPTT's document requests, should be ignored due to questions raised by Defendants about their authenticity.[9] Although Defendants have raised substantial questions about authenticity that may need to be addressed prior to any of the Boston Documents being admitted into evidence at trial, the focus of this Report and Recommendation is to determine whether PPTT's concerns about whether Defendants have taken reasonable steps to search for and produce responsive documents are warranted and, if so, whether a forensic examination is appropriate. In this regard, PPTT's Second Motion is significant for what it does not say about the Boston Documents. Nearly all of the Boston Documents purport to be emails sent to or received by Manning or Steele, with many of the emails purporting to be sent by one of them to the other. After having had more than three months to review the Boston Documents prior to filing their opposition to PPTT's Second Motion[10], Defendants, notwithstanding their claims that certain of the emails have been “doctored,” do not identify any emails from within the Boston Documents that they believe were not sent or received in an un-doctored form. In particular, although Defendants submitted Declarations of Manning and Steele in opposition to PPTT's Second Motion, neither Manning nor Steele asserts that any of the emails were not sent or received, either in their un-doctored states or otherwise. See Defendants’ Second Brief, Exhibits 6 and 7 (ECF Nos. 157-6 and 157-7). The logical inference to be drawn is that the emails within the Boston Documents – including those emails identified above that are responsive to PPTT's document requests but were not produced – are, or at some point were, found on Defendants’ computers in some form. But Defendants do not provide any explanation for why the responsive emails have not been produced.
The GTM Documents further support PPTT's concerns about whether Defendants have made a reasonably diligent search for all responsive documents in their possession or control. The Special Master does not accept Defendants’ suggestion that the GTM Documents should be ignored for purposes of PPTT's Third Motion because of PPTT's alleged failures to comply with Fed.R.Civ.P. 45. As the case law cited by Defendants indicates, Defendants may have recourse with respect to any violations of Fed.R.Civ.P. 45 that may have occurred. Defendants’ Third Brief, at 16-17. Whether or not PPTT may be subject to sanctions for alleged violations of Fed.R.Civ.P. 45, however, is not within the scope of this Report and Recommendation, and Defendants have not filed a motion seeking such sanctions. Again, the issue presently before the Court is whether Defendants have taken reasonably diligent steps to search for and produce all responsive documents and the Special Master regards the GTM Documents as properly considered in reviewing that issue.
*7 In addition, with respect to the GTM Documents, Defendants’ attempts to argue that the documents are not relevant to the issues in the case and to minimize the significance of their non-production by Defendants is of no moment. E.g., Defendants’ Third Brief, at 19 (“PPTT does not attempt to describe how any of the documents that PPTT received from GTM are relevant to this case, let alone support their theory of the case”) (emphasis in original). In addressing a similar relevancy objection asserted by Defendants in connection with the 289 documents that were the subject of PPTT's First Motion, it was observed:
The Special Master disagrees and in particular rejects any notion that at this stage PPTT has the burden to establish the relevance of the documents at issue. The Court has ruled on the propriety of PPTT's Requests insofar as they were challenged by Defendants’ Motion for Protective Order and has effectively ruled on the discoverability of the requested documents, including whether, consistent with Fed.R.Civ.P. 26(b)(1), they are relevant and proportional to the needs of the case. ECF Nos. 69, 83. At this juncture, Defendants are obligated to produce all responsive documents in their possession, custody or control, except as provided by the Court's orders.
Report and Recommendation filed on December 22, 2020 (ECF No. 137), at 18.
Although PPTT's First Motion was denied because PPTT had not made a sufficient showing at that time to justify the imposition of sanctions, the Special Master determined that a substantial number of the 289 documents that were the subject of PPTT's First Motion (at least sixty) appeared to be responsive to PPTT's document requests and would be expected to be (or to have been) in Defendants’ possession but, inexplicably, had not been produced by Defendants in discovery. Id. at 16-19. Even without the benefit of the Boston Documents or the GTM Documents, the Special Master expressed the view that Defendants’ non-production of responsive documents that would be expected to be in their possession “could justify a request by PPTT that Defendants conduct a forensic search using agreed-upon search terms and take reasonably necessary steps to recover deleted emails and files that could be responsive to PPTT's Requests.” Id. at 24. For the reasons discussed above, PPTT's Motions serve only to heighten concerns about whether Defendants have made a reasonably diligent search for responsive documents. These concerns relate not only to whether Defendants have complied with their obligations under Fed.R.Civ.P. 34(b), but also whether Defendants have complied with this Court's Order of June 19, 2020. That Order required Defendants, subject to certain objections to PPTT's discovery requests that had been sustained by Judge Kelly, “to produce full and complete responses” to PPTT's discovery requests on or before July 20, 2020. ECF No. 83 (affirming and adopting Judge Kelly's May 29, 2020 Memorandum Order, ECF No. 69).
In the prior Report and Recommendation relating to PPTT's request for a forensic examination, the Special Master recommended an approach to be taken by the parties and their counsel to address and potentially resolve the concerns that had been raised in PPTT's First Motion. See page 5, above; Report and Recommendation filed on December 22, 2020 (ECF No. 137) (adopted by the Court at ECF No. 152), at 23-24. The suggested approach has not been pursued, however. PPTT's Third Motion states that by email dated February 4, 2021, PPTT's counsel forwarded to Defendants’ counsel a list of search terms to use in making a further search of Defendants’ computers for responsive documents. PPTT's Third Motion, ¶ 6 & Exhibit 6[11]. According to PPTT, during a discovery conference on the following day Defendants’ counsel stated that Defendants “outright refused to conduct any further searches or entertain any of the suggested searches provided in Exhibit 6.” Id., ¶ 6. Defendants’ Third Brief does not attempt to refute these assertions.
5. Recommendation Regarding PPTT's Request for a Forensic Examination
*8 The Special Master recommends that PPTT's Motions be granted insofar as they request the issuance of an order authorizing an independent forensic review of Defendants’ computers and ESI. The reasons supporting this recommendation include: (i) Defendants’ non-production of numerous emails and other documents that are responsive to PPTT's document requests and that would be expected to be in Defendants’ possession; (ii) Defendants’ failure to offer any explanation concerning why such documents have not been produced by them (e.g., if they had been properly destroyed in connection with a document retention policy or ESI had been irretrievably lost due to a systems failure or natural event such as flood or fire); (iii) Defendants’ ongoing failure, indeed refusal, to perform any further searches of their ESI for responsive documents, including any deleted ESI that might be recoverable, despite substantial concerns having existed since at least December about whether Defendants’ production of documents was complete; and (iv) Defendants’ apparent refusal to perform any searches for responsive documents using the search terms provided by PPTT's counsel on February 4, 2021, in accordance with the approach previously suggested by the Court. In sum, Defendants have left the Court with little choice but to order a forensic examination, in the interest of ensuring that all responsive documents in Defendants’ possession and control are identified and produced.
Although it was observed in the December 22, 2020 Report and Recommendation that an independent forensic examination is regarded as an extreme measure and normally ordered as a sanction for violations of discovery orders, a forensic examination can also be an appropriate measure to enforce compliance with Fed.R.Civ.P. 34. District courts in this Circuit have observed that forensic examinations may be ordered not only as a sanction for failure to preserve evidence, but also when a party has “equivocally responded to discovery or otherwise resisted discovery.” Marsulex, 2019 WL 2184873, at *12, 2019 U.S. Dist. LEXIS 85153, at *34, quoting Brooks Group, 2013 U.S. Dist. LEXIS 70685, at *4; see also Adhi Parasakthi Charitable, Educational and Cultural Society of N. America, No. 09-1626, 2010 WL 1047894, at **, 2010 U.S. Dist. LEXIS 25542, at *25-27 (E.D. Pa. Mar. 16, 2010) (the court permitted the defendant's expert to inspect the plaintiff's computers to determine if responsive e-mails were still contained on the plaintiff's hard drives or servers because the plaintiff had failed to deny that responsive emails may have existed at one time; the court acknowledged that there was an insufficient basis to impose sanctions for spoliation, but ruled that a forensic examination was an measure for enforcing compliance with Rule 34); Bank of Mongolia v. M&P Global Financial Services, Inc., 258 F.R.D. 514, 519-22 (S.D. Fla. 2009) (the court ordered that an independent computer expert be appointed to examine the defendants’ computers in an effort to retrieve any deleted files that were responsive to the plaintiff's discovery requests, where the defendant failed to provide a reasonable explanation for failing to produce certain documents and had not undertaken a search for deleted computer records); Covad Communications Co. v. Revonet, Inc., 258 F.R.D. 5, 13 (D.D.C. 2009) (stating that if a party's production of emails suggests that it is “failing to take appropriate steps to respond to discovery, a forensic examination may be appropriate”); cf. Williams v. Massachusetts Mut. Life Ins. Co., 226 F.R.D. 144, 146 (D. Mass. 2005) (court denied motion for forensic examination, noting that the responding party had “undertaken its own search and forensic analysis and has sworn to its accuracy”).
The December 22, 2020 Report and Recommendation noted at pages 19-20 that “manual” or “eyeballs only” searches may be adequate in certain cases and that Defendants’ initial manual search for documents may have been reasonable in the first instance. As was also observed in that Report and Recommendation, however, the concerns that have been raised about Defendants’ non-production of numerous responsive documents produced by other parties justifies the taking of additional steps to ensure, among other things, that any deleted responsive computer files are located and produced. There is no question that deleted computer files are discoverable. See, e.g., cases cited in Report and Recommendation filed on December 22, 2020 (ECF No. 137), at 24-25.
*9 For the above reasons, the Special Master recommends that the Court enter an order providing for an independent forensic review of Defendants’ computers and ESI in accordance with the following review and collection protocol (with appropriate deadlines to be inserted by the Court):
1. Counsel for the parties would meet and confer concerning the designation of an independent computer forensics expert and the search terms to be used in searching for responsive documents. If the parties cannot agree, the Court would select the expert and/or decide the search terms.
2. The independent expert would be required to agree to and sign a confidentiality order.
3. The expert would obtain forensic images of Defendants’ computers, hard drives, storage devices and any other devices that have a reasonable likelihood of containing discoverable data.
4. Counsel would provide the list of search terms to the independent expert and the expert would apply the search terms to the forensic images. The results of the search and electronic copies of the documents responsive to the search terms would be provided to Defendants’ counsel.
5. Defendants would review the search results provided by the independent expert and identify all documents responsive to PPTT's Requests for Production of Documents (subject to the limitations recognized in ECF Nos. 69 and 83). Defendants would produce all responsive documents to PPTT, except for any documents withheld on grounds of privilege. Any withheld documents would be identified on a privilege log provided to PPTT's counsel.
6. Defendants would be responsible for payment of the fees and costs charged by the independent expert.
6. Recommendation Regarding PPTT's Request for an Order Authenticating the Boston Documents
PPTT requests in its Second Motion that the Court enter an order authenticating the Boston Documents. PPTT's Second Motion, ¶ 17. In light of the unusual circumstances related to PPTT's counsel's receipt of the documents and the questions Defendants have raised about the authenticity of the documents, it would seem appropriate to enter such an order only as a sanction against Defendants if it were shown that Defendants impeded or interfered with any efforts on the part of PPTT to authenticate the documents. As no such showing has been made, it is recommended that PPTT's request for an order authenticating the Boston Documents be denied.
D. FEES AND COSTS
PPTT requests an award of fees and costs incurred in pursuing its Motions, pursuant to Fed.R.Civ.P. 37(a)(5)(A). The Special Master recommends that PPTT's request be granted. For the reasons discussed above, it is likely that PPTT's Motions and the parties’ ongoing dispute about whether the Court should order a forensic examination would have been avoided had Defendants agreed to perform an additional search of their ESI for responsive documents after PPTT raised legitimate concerns about whether Defendants’ production was complete, with such a search extending beyond the original manual searches performed by Manning and Steele and designed, among other things, to identify any “deleted” files remaining in Defendants’ possession that were responsive to PPTT's requests. In addition, PPTT's Motions might not have been necessary had Defendants provided PPTT and the Court, in response to PPTT's First Motion, with an explanation about why they did not produce a significant number of responsive documents, sent to or received by Defendants, that PPTT had received from non-parties. For these and other reasons discussed above, it is recommended that Defendants’ request for an award of fees and costs be denied.
*10 As stated above, it is recommended that Defendants pay the fees and costs charged by the independent forensic expert. The basis for this recommendation is that had Defendants performed their own forensic search of their ESI in order to ensure that they had identified all responsive documents in their possession, rather than necessitating a court-ordered forensic examination, the expenses incurred in performing such a search in the normal course would have been borne by Defendants.
E. CONCLUSION
For the reasons set forth above, it is respectfully recommended that PPTT's Second Motion (ECF No. 153) and PPTT's Third Motion (ECF No. 158) be granted insofar as they request the entry of an order providing for an independent forensic examination of Defendants’ computers and ESI. It is further recommended that PPTT's request in its Second Motion for the entry of an order authenticating the Boston Documents be denied. Finally, it is recommended that PPTT's request for an award of fees and costs incurred in connection with its Motions be granted and that Defendants’ request for an award of fees and costs incurred in opposing PPTT's Motions be denied.
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Footnotes
By Order Appointing Special Master filed on September 16, 2020 (ECF No. 112), Judge Stickman appointed the undersigned as Special Master and directed the Special Master to review all motions relating to discovery and to submit reports and recommendations concerning the disposition of such motions to the Court. By Order filed on February 16, 2021 (ECF No. 166), Judge Stickman referred PPTT's Motions to the Special Master. The February 16, 2021 Order also referred a third motion to compel (ECF No. 155) to the Special Master. That motion is addressed in a separate Report and Recommendation. The two motions that are the subject of this Report and Recommendation are addressed together because the primary relief sought by PPTT in those motions is the same: an order authorizing the forensic review of Defendants’ computers and ESI.
Defendants/Counter-Plaintiffs DPAD Group, LLP, John Manning and Daniel Steele's Brief in Opposition to Motion to Compel Forensic Examination and to Authenticate “Boston Documents,” filed on February 8, 2021 (ECF No. 157); Defendants/Counter-Plaintiffs DPAD Group, LLP, John Manning and Daniel Steele's Brief in Opposition to Third Motion to Compel Forensic Examination Relating to Documents Improperly Subpoenaed from Third-Party Global Tax Management, Inc., filed on February 15, 2021 (ECF No. 165).
By Order of Court filed on July 28, 2020, Judge Stickman adopted Magistrate Judge Kelly's Report and Recommendation filed on June 2, 2020 (ECF No. 70) as the opinion of the Court and dismissed PPTT's claims for tortious interference with prospective contractual relations (Count IV) and conversion (Count V). ECF No. 100, at 4. The Court also dismissed the claim for unjust enrichment (Count III) with respect to defendants John Manning and Daniel Steele. Id.
The Court upheld Defendants’ objections to the following document requests: (i) Requests No. 1(1) and 1(11) as overly broad; (ii) Request No. 1(16) as duplicative of Request No. 1(10); (iii) Request No. 12 because the relevance of the request had not been established; and (iv) Requests No. 22 and 23 as premature. ECF No. 69, at 5.
When either of the two Motions that are the subject of this Report and Recommendation are referred to separately, they will be referred to as “PPTT's Second Motion” and “PPTT's Third Motion.” PPTT's Second Motion is the second motion filed by PPTT in the case seeking a forensic examination (ECF No. 153) and PPTT's Third Motion is the third motion seeking such relief (ECF No. 158). Defendants’ Brief filed in opposition to PPTT's Second Motion will be referred to as “Defendants’ Second Brief” (ECF No. 157) and Defendants’ Brief filed in opposition to PPTT's Third Motion is referred to as “Defendants’ Third Brief” (ECF No. 165).
PPTT's First Motion was filed on December 3, 2020. It is unclear why Defendants’ alleged failure to produce the Boston Documents, documents that PPTT indicates were received by its counsel on or about October 26, 2020, was not included as a basis for the relief sought by PPTT in its First Motion.
Exhibit 3 to PPTT's Second Motion is a table listing the documents. ECF No. 153-4. The documents themselves are Exhibit 4 to the Motion. ECF No. 153-5.
Exhibit 3 to PPTT's Third Motion is a table listing the GTM Documents. ECF No. 164 (filed under seal). The documents are set forth in Exhibit 4 to the Motion. Id.
The Special Master notes that even if Defendants’ non-production of the Boston Documents were ignored for purposes of reviewing PPTT's Motions, doing so would not affect the recommendations made herein.
Defendants’ counsel received the Boston Documents on October 30, 2020. Defendants’ Second Brief, at 4-5 and Exhibit 1.
Exhibit 6 to PPTT's Third Motion (ECF No. 158-6) is an email dated February 4, 2021 from PPTT's counsel to Defendants’ counsel. The email states that a document listing PPTT's requested search terms was attached to the email; that list of search terms, however, is not included in Exhibit 6.