In this qui tam action, relator Ben Ferris, while employed by defendant Alutiiq, LLC, which is a wholly-owned subsidiary of defendant Afognak Native Corporation, came to believe that Alutiiq subsidiaries were misrepresenting their small business status when applying for government contracts through the Small Business Administration's 8(a) Business Development Program. Relator believes “that [defendants were] misrepresenting and falsely certifying that 8(a) business entities were bidding on and performing the awarded government contracts because these entities did not actually exist as separate business entities.”[3] Defendants “deny that ... Alutiiq's 8(a) Participants have misrepresented an 8(a) Participant's small business status.”[4]

On May 30, 2013, relator commenced this action by filing a complaint under seal.[5] On June 21, 2013, relator filed his first amended complaint,[6] and on October 28, 2016, relator filed his second amended complaint.[7]

On March 10, 2015, relator served on defendants his first twenty requests for production, and on February 2, 2017, relator served on defendants an additional twenty-eight requests for production. Defendants produced documents in response[8] but relator contends that defendants’ production as to Request for Production Nos. 1, 2, 8 and 44-46 was inadequate. Relator now moves to compel defendants to produce additional documents in response to these discovery requests.

“Pursuant to Rule 37(a)(3)(B)(iv), ‘[a] party seeking discovery may move for an order compelling an answer, designation, production, or inspection’ if ‘a party fails to respond that inspection will be permitted—or fails to permit inspection—as requested under Rule 34.’ ” Renfrow v. Redwood Fire and Cas. Ins. Co., 288 F.R.D. 514, 521 (D. Nev. 2013) (quoting Fed. R. Civ. P. 37(a)(3)(B)(iv)). “Federal Rule of Civil Procedure 34(a) permits each party to serve the opposing party with document requests within the scope of Rule 26(b) that are ‘relevant to any party's claim or defense ...’ or, for good cause shown, ‘relevant to the subject matter involved in the action.’ ” Id. (quoting Fed. R. Civ. P. 26(b)). “For discovery purposes, relevance means only that the materials sought are reasonably calculated to lead to the discovery of admissible evidence.” Id. However, “[r]elevancy alone is no longer sufficient—discovery must also be proportional to the needs of the case.” In re: Bard IVC Filters Products Liability Litig., 317 F.R.D. 562, 564 (D. Ariz. 2016). Rule 26(b)(1) provides that “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case[.]” In addition to meeting the tests for relevancy and proportionality, requests for production must “describe the items to be produced with ‘reasonable particularity’....” Mailhoit v. Home Depot U.S.A., Inc., 285 F.R.D. 566, 570 (C.D. Cal. 2012) (quoting Fed. R. Civ. P. 34(b)(1–2)). “ ‘The test for reasonable particularity is whether the request places a party upon ‘reasonable notice of what is called for and what is not.’ ” Id. (quoting Bruggeman ex rel. Bruggeman v. Blagojevich, 219 F.R.D. 430, 436 (N.D. Ill. 2004)).

*2 Request for Production No. 44. In RFP 44, relator requests that defendants produce “[i]ntercompany service agreements with attachments, including related purchase orders.”[9] Initially, defendants refused to produce intercompany service agreements that were not submitted to the Small Business Administration but they have now agreed to produce these agreements.[10] To the extent they have not already done so, defendants are compelled to produce the intercompany service agreements “and related purchase orders executed by 8(a) Participants” that were “not submitted to the SBA[.]”[11]

Request for Production No. 45. In RFP 45, relator requests that defendants produce “[d]ocuments and communications related to the development and utilization of intercompany service agreements.”[12] Defendants refused to produce any documents in response to RFP 45 on the grounds that these documents were irrelevant.[13]

Relator argues that these documents are relevant to his contention that defendants’ 8(a) subsidiaries existed on paper only and were not independent small business entities. Relator contends that under the 8(a) regulations, business concerns owned and controlled by an Alaska Native Corporation (ANC) will not be considered affiliates of the ANC “based upon the performance of common administrative services so long as adequate payment is provided for those services.” 13 C.F.R. § 121.103(b)(2)(ii). Thus, relator contends that the documents related to the creation of the intercompany service agreements are relevant to the issue of whether defendants falsely certified that their 8(a) subsidiaries were separate small business concerns and whether the 8(a) subsidiaries complied fully with the 8(a) regulations.

The regulations that apply specifically to ANCs provide that for a firm owned by an ANC, the “firm's size shall be determined independently without regard to its affiliation with the tribe, any entity of the tribal government, or any other business enterprise owned by the tribe[.]” 13 C.F.R. § 124.109(c)(2)(iii). So, whether defendants were complying with the administrative services regulation has little to do with whether defendants’ 8(a) entities were in fact small businesses. Thus, documents related to the development and utilization of the intercompany service agreements have little, if any, relevancy to relator's contention that the 8(a) entities existed on paper only. Defendants are not compelled to respond to RFP 45.

Request for Production Nos. 1, 8 and 46. In RFP 1, relator requests that defendants produce “all certifications, filings, applications, correspondence (electronic, written, or any other form), memoranda, any other documents you or your affiliates have sent to the Small Business Administration during the relevant time period.”[14] In RFP 8, relator requests that defendants produce “all employee rolls, logs or directories, for [d]efendants and all affiliated entities from January 2007 until the present.”[15] In RFP 46, relator requests that defendants produce “[c]orrespondence between Ms. Huettl and/or Ms. Caldwell[16] on the one hand and senior management (VP and above) and/or general managers of individual 8(a) entities on the other regarding 8(a) entities, including, without limitation, 8(a) applications, Annual Reviews, business plans, marketing strategies, as well as representations and certifications made to the SBA.”[17]

*3 Defendants produced documents responsive to RFPs 1, 8 and 46 but refused to produce any documents that post-dated the filing of relator's original complaint on May 30, 2013. Relator seeks to compel defendants to produce the following documents through October 28, 2016, which was the date on which relator filed his second amended complaint: 1) emails between defendants and the SBA relating to defendants’ 8(a) entities and the 8(a) program, 2) the Employee List including labor details for leased employees, and 3) correspondence between Huetl and/or Caldwell and senior management and general managers of the 8(a) entities.

Contrary to defendants’ contention, “the filing date of [relator's] lawsuit does not control the relevance of the information sought.” Paolo v. Amco Ins. Co., Case No. 02-02367 JW (HRL), 2003 WL 24027878, at *2 (N.D. Cal. Dec. 16, 2003). Where, as here, “a relator pleads a complex and far-reaching fraudulent scheme, [the] relator may proceed to discovery on the entire fraudulent scheme.” United States ex rel. Bledsoe v. Community Health Systems, Inc., 501 F.3d 493, 510 (6th Cir. 2007). “[C]ourts have recognized that a party who alleges a continuing scheme may seek discovery past the filing of the original complaint, based upon the particular allegations and the factual circumstances of the case.” United States ex rel. Bibby v. Wells Fargo Bank, N.A., 165 F. Supp. 3d 1340, 1354 n.15 (N.D. Ga. 2015). Limiting discovery to the filing of relator's original complaint would make sense in this case if the government had full knowledge of the alleged fraud by then. But as the court recently observed, “while there is no dispute that relator filed his qui tam complaint with the Department of Justice over four years ago, there is nothing in what is currently before the court that shows that the Department of Justice shared the information in relator's complaint with the SBA.”[18] Because relator has alleged an on-going fraudulent scheme and it is not yet known when the SBA learned of his allegations, relator is entitled to discovery after May 30, 2013. Defendants are compelled to produce documents in response to RFPs 1, 8 and 46 through October 28, 2016.

As to RFP 8, defendants contend that what relator is now requesting is not what was originally requested. The court is not convinced that there is a meaningful difference between what relator originally requested and what defendants are contending he is requesting now. But, to be clear, in response to RFP 8, defendants are only being compelled to produce “all employee rolls, logs or directories, for [d]efendants and all affiliated entities” through October 28, 2016.

Request for Production No. 2. In RFP 2, relator requests that defendants produce

Although defendants were willing to search for documents responsive to RFP 2, the parties disagreed on search terms, custodians, and the temporal scope. In April 2017, relator proposed a set of search terms and custodians for 24 “subtopics”. Defendants ran a search using those terms and custodians for the period January 1, 2007 through October 28, 2016, which resulted in 2.38 million documents. Defendants contended that it would cost “over $200,000 just to process the 2.38 million documents for review”, which did not include “the cost of actually reviewing the 2.38 million documents.”[20] Defendants contended that applying technology assisted review (TAR) would help lower the cost, but that even using TAR with relator's search terms would result in costs of more than $2.1 million.[21] Defendants offered two solutions: either 1) defendants “would apply a reasonable number of search terms provided by Relator and ... expand the temporal scope of RFP 2 to October 28, 2016..., but the total volume of documents to review must be 50,000”[22] or 2) if the parties could not “agree on search terms that return a reasonable amount of documents for review..., [d]efendants w[ould] move forward with TAR review of the documents identified by [d]efendants’ proposed search terms and custodians through May 30, 2013[.]”[23]

*4 In response, relator then further refined his list of search terms,[24] and defendants ran a search using this refined list which resulted in 1.9 million potentially responsive documents.[25] But defendants felt that “[a] reduction from 2.3 million to 1.9 million documents does not come close to producing a reasonable scope of review or ... address the patently undue burden such a review would impose on [d]efendants.”[26] In response, relator's counsel indicated that they were “amenable to working further with [d]efendants to refine search terms to narrow the differences between the parties [and] to minimize any cost and burden” to defendants.[27] Relator counsel also proposed meeting “to discuss the TAR process. ... As we understand it, the bulk of [the] estimated $7 million cost of ESI review isn't because of TAR costs per se, but rather because of [the] estimate of how much time Perkins Coie intends to spend reviewing documents after TAR has taken place.”[28] Relator's counsel felt that such review was “wholly unnecessary under the circumstances.”[29] On June 22, 2017, defendants advised that they were “stand[ing] on our position that [r]elator's review proposal for RFP 2, which would cost [d]efendants more than $3.4 million to implement ... is unreasonable, poses an undue burden on [d]efendants, and is not proportional to the needs of this case....”[30]

As of the filing of their response to the instant motion in July 2017, defendants had produced 2,300 emails in response to RFP 2 and were in the process of reviewing another 130,000 documents[31] that might be responsive to RFP 2.[32] Defendants have now completed that review, and on September 29 and 30, 2017 produced 219,724 additional pages of documents in response to RFP 2.[33] But relator still insists that defendants should be compelled to produce any of the 1.9 million documents that have not yet been produced.

Defendants argue that they should not be compelled to provide any further discovery in response to RFP 2 because relator failed to identify the documents that he was seeking with “reasonable particularity.” Rule 34 does not require that every document be described but only that the requesting party identify “each ... category of items to be inspected.” Fed. R. Civ. P. 34(b)(1)(A). Relator adequately identified the category of items to be produced.

Defendants also argue that relator has not shown that the 1.9 million documents he is requesting are relevant, but it is possible these documents are relevant to relator's claims. If there is evidence to support relator's contention that the 8(a) entities existed on paper only, that evidence is likely to be in defendants’ internal emails, which is what relator is requesting in RFP 2.

Defendants next argue that relator's request for 1.9 million documents is not proportional to the needs of this case. The factors the court considers in determining whether a discovery request is proportional are 1) “the importance of the issues at stake in the action,” 2) “the amount in controversy,” 3) “the parties’ relative access to relevant information,” 4) “the parties’ resources,” 5) “the importance of the discovery in resolving the issues,” and 6) “whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1).

*5 This case involves fraud on the government, which is an important issue. It involves potentially billions of dollars in damages and civil penalties. Defendants have access to the discovery being requested, while relator does not for the most part. Defendants have the resources to pay for this discovery, given that in 2016, their net income was a little more than $10 million.[34] As noted above, this discovery is important to relator because if there is any evidence that the 8(a) entities existed on paper only, that evidence is most likely in defendants’ internal emails. But, the importance of this discovery is tempered by the fact that defendants already have produced a large number of documents in response to RFP 2.

That leaves the question of whether the expense and burden of producing the rest of the 1.9 million documents will outweigh the likely benefit. Defendants argue that having to produce all of the 1.9 million documents would place undue burden and expense on them. Mr. Beeman avers that it would cost between $3.2 and $3.9 million to respond to RFP 2 using relator's proposed search terms and custodians.[35] Defendants argue that this an extraordinary amount of money to pay for discovery that may have very little benefit.

But the court agrees with relator that defendants are inflating the cost of responding to RFP 2. The majority of defendants’ estimated cost is for lawyer review of the documents. Defendants insist that the documents must be reviewed by their lawyers for privilege and responsiveness. Other courts have rejected such a position. For example, in Adair v. EQT Production Co., Case Nos. 1:10CV00037, 1:10CV0004, 2012 WL 2526982, at *5 (W.D. Va. June 29, 2012), the court found such a position “untenable” based on “trending case law and the recent amendments to the [discovery] rules....” The court pointed out “that a clawback order can ‘protect a party or parties from the undue burden and expense of reviewing vast numbers of documents for privilege before they are produced[.]’ ” Id. (quoting Rajala v. McGuire Woods, LLP, Civil Action No. 08–2638–CM–DJW, 2010 WL 2949582, at *5 (D. Kan. July 22, 2010)). As another court has observed, “while some lawyers still consider manual review to be the ‘gold standard,’ that is a myth, as statistics clearly show that computerized searches are at least as accurate, if not more so, than manual review.” Moore v. Publicis Groupe, 287 F.R.D. 182, 190 (S.D.N.Y. 2012).

The extent of review that defendants want to pay for is their choice. If defendants wish to pay their defense counsel to review each document manually, they may do so. But, such review does not strike the court as necessary given the availability of TAR and other eDiscovery search tools as well as the claw-back provision which could be used to protect any privileged documents that were inadvertently produced.

Nonetheless, there is a significant amount of cost involved in producing the remainder of the 1.9 million documents. The parties appear to have already spent a significant amount of money on discovery (as they have on all aspects of this case), and spending a great deal more money on RFP 2 for what could turn out to be little benefit would not make sense. The court concludes that requiring defendants to produce all of the remaining 1.9 million documents would be out of proportion to the needs of this case. Instead, defendants are compelled to run a search using their search terms for all 37 custodians relator requested, rather than the 32 defendants used, and using October 28, 2016 as the cut-off date, rather than May 30, 2013, and then produce any documents from that search that are responsive to RFP 2 that have not already been produced.

*6 Relator's request to review the set of documents that defendants intend to use (or are using) as their control set for TAR is denied.

Relator's motion to compel[36] is granted in part and denied in part. It is denied as to RFP 45. It is granted as to RFPs 1, 8, 44, and 46. It also granted as to RFP 2 but only to the extent set forth above.

DATED at Anchorage, Alaska, this 19th day of October, 2017.

Docket Nos. 258 and 297.

Docket No. 274.

Relator Ben Ferris's First Amended Complaint [etc.] at 15-16, ¶ 39, Docket No. 6.

Defendants’ Answer to Relator's Ben Ferris’ First Amended Complaint at 9, ¶ 38, Docket No. 53.

Docket No. 1.

Docket No. 6.

Docket No. 202.

Defendants have produced “approximately 15,972 documents, including emails, totaling over 140,900 pages” as of the filing of their response in July 2017. Declaration of Angela R. Jones [etc.] at 3, ¶ 4, Docket No. 275.

Defendants’ Responses and Objections to Relator's Second Requests for Production at 24, Exhibit I, Declaration of Laura W. Ray [etc.], Docket No. 260.

Defendants’ Opposition to Plaintiff's Motion to Compel at 5, Docket No. 274.

Id.

Defendants’ Responses and Objections to Relator's Second Requests for Production at 24, Exhibit I, Ray Declaration, Docket No. 260.

In their opposition to the instant motion, defendants raise a particularity objection, but it is too late for such an objection.

Defendants’ Responses and Objections to Relator's First Requests for Production at 6, Exhibit H, Ray Declaration, Docket No. 260.

Id. at 12.

These were the two employees of defendants who worked most closely with the SBA.

Defendants’ Responses and Objections to Relator's Second Requests for Production at 25, Exhibit I, Ray Declaration, Docket No. 260.

Order re Motion to Dismiss Relator's Second Amended Complaint at 15, Docket No. 295.

Defendants’ Responses and Objections to Relator's First Requests for Production at 7, Exhibit H, Ray Declaration, Docket No. 260.

Letter from Angela R. Jones to Laura Ray and Mathew Jasinski at 6, Exhibit J, Declaration of Laura W. Ray [etc.], Docket No. 298.

Id.

Id. at 8.

Id.

This list of search terms included 3,635 search terms and 37 custodians. Declaration of Victor Petersen [etc.] at 2, ¶ 4, Docket No. 277. Relator contends, however, that the 3,635 number is inflated because defendants have broken his terms into their component parts, something they have not done when counting their terms. See Declaration of Jonathan Robins at 2, ¶ 9, Docket No. 285.

Email from Angela R. Jones to Laura Ray and others, Exhibit L at 1, Ray Declaration, Docket No. 260.

Id.

Email from Laura Ray to Angela Jones and others, Exhibit M at 1, Ray Declaration, Docket No. 260.

Id. Brett Beeman, a TAR consultant working for defendants, has estimated that attorney review of the 1.9 million documents would cost between $2.5 and $3 million. Declaration of Brett Beeman [etc.] at 3, ¶ 8, Docket No. 276. Beeman avers that he “relied on the hourly rates for attorney review and the rate of review provided by Perkins Coie to develop this estimate.” Id. at 5, ¶ 13.

Email from Laura Ray to Angela Jones and others, Exhibit M at 1, Ray Declaration, Docket No. 260.

Email for Angela R. Jones to Laura W. Ray, Exhibit N at 2, Ray Declaration, Docket No. 298.

The 130,000 documents is the set of documents that were compiled when a search was run using defendants’ 75 individual search terms for 32 custodians through May 30, 2013. Petersen Declaration at 3, ¶ 9, Docket No. 277.

Jones Declaration at 10, ¶¶ 31-32, Docket No. 275.

Exhibit A, Supplemental Factual Material [etc.], Docket No. 325.

Exhibit T at 17, Jones Declaration, Docket No. 275.

Beeman Declaration at 3, ¶ 8, Docket No. 276.

Docket Nos. 258 and 297.