PROFIT POINT TAX TECHNOLOGIES, INC., Plaintiff, v. DPAD GROUP, LLP; JOHN MANNING; and DANIEL STEELE, Defendants Civil Action No. 2:19-cv-698 United States District Court, W.D. Pennsylvania Filed September 24, 2020 Counsel David B. Willis, Pro Hac Vice, Manning Gross &amp; Massenburg LLP, Boston, MA, Robert J. Hannen, Clark Hill PLC, Pittsburgh, PA, Jeffrey Joseph Lorek, Clark Hill PLC, Washington, DC, for Plaintiff. Brad A. Funari, Alex Mahfood, Reed Smith LLP, Pittsburgh, PA, for Defendants. Kelly, Maureen P., United States Magistrate Judge REPORT AND RECOMMENDATION I. RECOMMENDATION *1 This Report and Recommendation addresses Plaintiff's Motion to Compel, filed on August 19, 2020 (ECF No. 102, referred to herein as “PPTT's Motion”). Based on a thorough review of PPTT's Motion, Defendants/Counter-Plaintiffs DPAD Group, LLP, John Manning and Daniel Steele's Brief in Opposition to Motion to Compel, filed on August 20, 2020 (ECF No. 104, referred to herein as “Defendants’ Brief in Opposition”) and Plaintiff's Reply Brief in Support of Motion to Compel, filed on August 21, 2020 (ECF No. 108, referred to herein as “PPTT's Reply Brief”), including all exhibits attached to the above-referenced documents and the authorities cited therein, it is respectfully recommended that PPTT's Motion be denied without prejudice. 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). As alleged, PPTT's claims arise from Defendants’ 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). PPTT's Motion challenges the sufficiency of Defendants’ Responses to Plaintiff's First Set of Requests for Production of Documents and Things (PPTT's Motion, Ex. A – ECF No. 102-2), which was served by Defendants on July 20, 2020 along with an accompanying link to an FTP site containing Defendants’ document production in electronic form. Through its Motion, PPTT requests an order “compelling Defendants to amend their discovery responses to comply with Fed.R.Civ.P. 34(b)(2)(E) by organizing and labeling their document production to correspond to the categories of documents requested in ... PPTT's individual Requests for Production of Documents.” PPTT's Motion (ECF No. 102), at 1. Defendant opposes PPTT's Motion based on Rule 34(b)(2)(E)(i)’s disjunctive requirements that parties do one of the following when making a document production: either produce document as they are kept in the usual course of business; or organize and label the documents. Defendants contend that the documents they produced on July 20, 2020 were produced as they are kept in the usual course of business and that Defendants therefore have no duty under Rule 34(b)(2)(E)(i) to organize and label the documents. Accordingly, the narrow issue presented by PPTT's Motion is whether Defendants have complied with the first prong of the Rule (producing documents as they are kept in the usual course of business) so as to excuse compliance with the second prong of the rule (organizing and labeling their production). B. LEGAL STANDARDS APPLICABLE TO PPTT'S MOTION *2 Rule 34(b)(2)(E) of the Federal Rules of Civil Procedure provides: Producing the Documents or Electronically Stored Information. Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information: (i) 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; (ii) If a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms; and (iii) A party need not produce the same electronically stored information in more than one form. Fed.R.Civ.P. 34(b)(2)(E). Rule 34(b)(2)(E)(i) reflects an amendment to Rule 34 that was made to put an end to the “apparently not rare” practice of “deliberately ... mix[ing] critical documents with others in the hope of obscuring significance.” Fed.R.Civ.P. 34 Notes of Advisory Committee on Rules – 1980 Amendment, quoting Report of the Special Committee for the Study of Discovery Abuse, Section of Litigation of the American Bar Association (1977). See United States v. O'Keefe, 537 F. Supp. 2d 14, 19 (D.D.C. 2008) (Facciola, M.J.) (Rule 34(b) “was amended in 1980 to prevent the juvenile practice whereby the producing party purposely rearranged the documents prior to production in order to prevent the requesting party's efficient use of them.”). Rule 34 does not explain what is meant by producing documents “as they are kept in the usual course of business” and the cases cited by the parties do not provide clear guidance concerning the steps a producing party must take in order to comply with this prong of Rule 34(b)(2)(E)(i). PPTT cites non-controlling cases for the proposition that the producing party has the burden of establishing through evidentiary support that the documents were produced as they are maintained in the usual course of business. See PPTT's Motion (ECF No. 102), ¶ 13. Defendants, on the other hand, cite other non-controlling cases suggesting that a representation by counsel for the producing party that the responsive documents were produced as the documents are kept in the usual course of business can be sufficient to invoke the first prong of Rule 34(b)(2)(E)(i). See Defendants’ Brief in Opposition, at 5-8. Moreover, the courts have used varying approaches in evaluating whether documents were produced “as they are kept in the usual course of business” when the documents are in the form of electronically stored information (“ESI”). Some courts have even ruled that Rule 34(b)(2)(E)(i) does not even apply to ESI. E.g., Anderson Living Trust v. WPX Energy Production, LLC, 298 F.R.D. 514, 526 (D.N.M. 2014) (“Rule 34(b)(2)(E)(i) governs hard copy documents, and (E)(ii) governs ESI, with no overlap between.”); see also, e.g., TetraVue, Inc. v. St. Paul Fire &amp; Marine Ins. Co., No. 14cv2021-W (BLM), 2017 U.S. Dist. LEXIS 37373, at *19-21 (S.D. Cal. Mar. 15, 2017) (Major, M.J.) (following Anderson Living Trust regarding the application of Rule 34(b)(2)(E)(i) and (ii) to ESI); McKinney/Pearl Restaurant Partners, L.P. v. Metropolitan Life Ins. Co., 322 F.R.D. 235, 248 (N.D. Tex. 2016) (Horan, M.J.) (noting that “[c]ourts are split on whether both Rule 34(b)(2)(E)(i) and Rule 34(b)(2)(E)(ii) apply to ESI productions or whether an ESI production must comply with only Rule 34(b)(2)(E)(ii)” and collecting cases). *3 Most of the more recent decisions have regarded the provisions of subparagraphs (i) and (ii) of Rule 34(b)(2)(E) as supplementary rather than alternative with respect to productions of ESI, with Rule 34(b)(2)(E)(i) applying to the manner in which a production is organized and Rule 34(b)(2)(E)(ii) applying to the format in which ESI is produced. E.g., Ronaldson v. National Ass'n of Home Builders, No. 19-01034, 2020 U.S. Dist. LEXIS 107436, at *24-25 (D.D.C. June 3, 2020) (Robinson, M.J.); Lamar Advertising Co. v. Zurich American Ins. Co., No. 18-1060-JWD-RLB, 2020 U.S. Dist. LEXIS 13891, at *11-12 (M.D. La. Jan. 28, 2020) (Burgeois, Jr., M.J.); Wilson v. Washington, No. C16-5366 BHS, 2017 U.S. Dist. LEXIS 18038, at *5-6 (W.D. Wash. Feb. 8, 2017); Quality Manufacturing Systems, Inc. v. R/X Automation Solutions, Inc., No. 3:13-cv-00260, 2016 U.S. Dist. LEXIS 42303, at *16-17 (M.D. Tenn. Mar. 30, 2016) (Bryant, M.J.); McKinney/Pearl Restaurant Partners, 322 F.R.D. at 249. The courts that have applied Rule 34(b)(2)(E)(i) to productions of ESI have formulated the standards for determining whether ESI was produced as it was kept in the usual course of business in different ways, depending on the nature of the ESI produced (e.g., email or non-email), the volume of ESI produced and other factors. Compare, e.g., Lamar Advertising, 2020 U.S. Dist. LEXIS 13891, at *12 (requiring re-production of ESI as kept in the usual course of business, meaning in native format); Adria MM Productions, Ltd. v. Worldwide Entertainment Group, Inc., No. 17-21603-CIV-MORENO, 2018 U.S. Dist. LEXIS 56791, at *4-5 (S.D. Fla. April 3, 2018) (requiring that emails be arranged by custodian, in chronological order and with attachments); McKinney/Pearl, 322 F.R.D. at 250 (referring to “Rule 34(b)(2)(E)(i)’s requirement to produce documents as they are kept in the usual course of business by producing ESI in the format in which it is kept or stored on the user's system or storage device”); Spilker v. Medtronic, Inc., No. 4:13-CV-76-H, 2015 U.S. Dist. LEXIS 48244, at *11 (E.D.N.C. April 13, 2015) (Jones, Jr., M.J.) (production that consisted of “fully searchable documents, sortable by metadata fields, in a folder structure organized by custodian” complied with Rule 34); Teledyne Instruments, Inc. v. Cairns, No. 6:12-cv-854-Orl-28TBS, 2013 U.S. Dist. LEXIS 153497, at *32-34 (M.D. Fla. Oct. 25, 2013) (Smith, M.J.) (to be produced as kept in the usual course of business, ESI should be produced in the format in which it is maintained on a hard drive or other storage device and the producing party should provide system metadata organized in a manner that permits systemized retrieval of files); Valeo Electrical Systems, Inc. v. Cleveland Die &amp; Mfg. Co., No. 08-cv-12486, 2009 U.S. Dist. LEXIS 51421, at *6 (E.D. Mich. June 17, 2009) (Pepe, M.J.) (emails are produced as they are kept in the usual course of business when they are arranged by custodian, in chronological order and with attachments; for non-email ESI, a party must produce the files by custodian and by the file's location on the hard drive directory, subdirectory and file name). The overarching standard, consistent with the amendment to Rule 34(b)(2)(E)(i) discussed above, is that “parties are entitled under the Federal Rules to rationally organized productions so that they may readily identify documents, including ESI, that are responsive to their document requests.” City of Colton v. American Promotional Events, Inc., 277 F.R.D. 578, 582 (C.D. Cal. 2011) (Segal, M.J.); accord, Hanwha Azdel, Inc. v. C&amp;D Zodiac, Inc., No. 6:12-cv-00023, 2012 U.S. Dist. LEXIS 182046, at *6 (W.D. Va. Dec. 27, 2012) (Ballou, M.J.). C. DISCUSSION *4 According to PPTT's Motion, Defendants’ July 20, 2020 production consisted of “approximately 1,467 pages of documents ... haphazardly dumped into four ‘IMAGES’ folders and three ‘NATIVE’ folders for downloading by PPTT's counsel.” PPTT's Motion (ECF No. 102), ¶ 3. The Motion further states that most of the production was in the form of “unorganized, random assortments of TIF files,” id., ¶ 4, and refers to Defendants’ production as a “data dump,” id., ¶¶ 19, 21, 23. Defendants dispute that their production was a “data dump” and clarify that their production consisted of only 552 documents and a total of 1,466 pages. Defendants’ Brief in Opposition (ECF No. 104), at 2. Defendants contend that they produced documents “in a commonly accepted manner that, along with accompanying ‘load’ and ‘metadata’ files, permits import into the document database platform Relativity,” which according to Defendants is the platform used by PPTT's counsel. Id. The record does not contain any further specific information about the composition of Defendants’ July 20, 2020 production, such as the extent to which the production consisted of emails or non-email ESI or the extent to which the approximately 1,450 TIF files in the “IMAGES” folders produced by Defendants (see PPTT's Motion, ECF No. 102, ¶¶ 3, 4) consisted of original electronic files or, on the other hand, documents existing in paper or “hard copy” format that were converted to electronic files for purposes of Defendants’ document production. In addition, the record is undeveloped concerning the specific metadata and file source information available to PPTT through a review of Defendants’ production. In sum, the record before the Court does not support a determination that Defendants failed to comply with Rule 34(b)(2)(E)(i) in making their July 20, 2020 document production. In particular, there are insufficient facts in the record to support a finding that the ESI produced by Defendants was not produced as it is kept in the usual course of business under the legal standards discussed above. Defendants have asserted in response to PPTT's Motion that their production included load and metadata files that may be imported into PPTT's counsel's document database platform, which suggests that the ESI produced by Defendants may well have included information that allows the ESI to be organized by PPTT's counsel in a manner that permits systemized retrieval of files. See cases cited above at pages 5-7. This is especially the case, given that the electronic files produced by Defendants are manageable in number, particularly with the utilization of document management software. In terms of overall volume, Defendants’ production would likely fall at the low end of the range of document productions in commercial litigation generally. In its Motion and its Reply Brief (ECF No. 108), PPTT expresses concerns about its inability to perform searches that would allow PPPT's counsel to determine which specific documents within Defendants’ production are responsive to specific requests within PPTT's Request for Production of Documents. See PPTT's Motion (ECF No. 102), ¶ 24; PPTT's Reply Brief, at 5. Although that is information that a requesting party would be entitled to receive if the second prong of Rule 34(b)(2)(E)(i) were triggered, the Rule does not guarantee that a requesting party who receives ESI as it is kept in the usual course of business pursuant to the first prong of the Rule will be able to perform searches yielding such information. *5 The Special Master recommends that the denial of PPTT's Motion be without prejudice, such that PPTT would have the opportunity, if it chooses to do so, to renew its motion and supplement the record in an effort to show that the ESI produced by Defendants was not as it is kept in the usual course of business, under the standards discussed in the cases cited above. The parties through their counsel are encouraged to resolve any remaining differences about Defendants’ July 20, 2020 document production on their own, with the benefit of the guidance provided in this Report and Recommendation. For example, to the extent that PPTT has encountered any technical difficulties with the metadata and load files produced by Defendants, or believes that it is entitled to additional metadata or information about the ESI produced based on the legal standards discussed above, counsel are encouraged to confer and work cooperatively to address those issues. D. CONCLUSION For the reasons set forth above, it is respectfully recommended that PPTT's Motion to Compel (ECF No. 102) be denied without prejudice. In addition, it is respectfully recommended that Defendants’ request for an award of attorneys’ fees and costs incurred in opposing PPTT's Motion (see Defendants’ Brief in Opposition, ECF No. 104, at 8-9) be denied, as the Special Master regards PPTT's Motion as involving a genuine dispute about which reasonable people could differ. 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 of Court filed on July 28, 2020 (ECF No. 100), Judge Stickman adopted Magistrate Judge Kelly's Report and Recommendation filed on June 2, 2020 (ECF No. 70) as his opinion and dismissed PPTT's claims for tortious interference with prospective contractual relations (Count IV) and conversion (Count V). In the July 28, 2020 Order, the Court also dismissed the claim for unjust enrichment (Count III) with respect to defendants John Manning and Daniel Steele.  PPTT complied with its obligation under Fed.R.Civ.P. 37(a)(1) to confer in good faith with Defendants’ counsel prior to filing the present motion. See PPTT's Motion (ECF No. 102), ¶¶ 5-11, Exs. B through F and Certificate of Conferral.  The court's opinion in Anderson Living Trust includes a detailed analysis of Rule 34(b)(2)(E) and its evolution. Anderson Living Trust, 298 F.R.D. at 518-26. The court observed: [I]t is unclear whether hard copy document production even could be produced as ESI and still be “in the usual course of business.” If the quintessential example of producing hard copy documents in the usual course of business involves handing over the keys to the filing room, then it is hard to see how an ESI production could ever provide a comparably true-to-life picture of the business’ hard copy document organization. Id. at 526 (emphasis in original).  The Special Master recognizes PPTT's position that it is Defendants’ burden to establish that the documents produced by Defendants were as they are kept in the usual course of business. Without expressing a view concerning whether that position is correct, the Special Master regards it as appropriate to deny PPTT's Motion without prejudice, with PPTT having the opportunity to decide whether to renew its motion based on its knowledge of additional facts that might be used to supplement the record and based on the legal standards discussed above.