I. INTRODUCTION

*1 Slack is a cloud-based messaging platform. Employees of Defendant American Future Systems, Inc. (“AFS”) used Slack to communicate, including about topics that are the subject of this case. During discovery, Plaintiffs Federal Trade Commission (“FTC”) and Commonwealth of Pennsylvania requested the production of electronically stored information on numerous pertinent topics, including telemarketing, debt collection, reputation management, and employee training. AFS did not obtain any of its data held by Slack, and it did not produce Slack messages in response to requests for production.

The Plaintiffs jointly move to compel AFS to produce Slack data and for sanctions for AFS' failure to produce the data to date. AFS contends that Slack data is not within its possession, custody, or control and that the production of Slack information is not proportional to the needs of the case. Because Slack data is within AFS' possession, custody, and control and is likely to contain relevant information, the Special Master recommends that the Motion to Compel be granted in part and that AFS be compelled to produce relevant, responsive, and nonprivileged Slack data. Although the Plaintiffs request immediate, unreviewed access to AFS's Slack data, the Special Master recommends that AFS have the opportunity to review the data before production. Finally, the Special Master recommends that the Motion be denied in part because the Special Master does not recommend an award of sanctions in these circumstances.

II. BACKGROUND

The Plaintiffs brought this action against American Future Systems, Inc. and others under Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b); the Unordered Merchandise Statute, 39 U.S.C. § 3009; and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1, et seq. (Doc. # 43, First Am. Compl. ¶¶ 1-2.) AFS has denied the claims and denied committing any statutory violations. (Doc. # 91, AFS Defs.' Answer.)

Under the Court's Order Governing Electronic Discovery, AFS was required to list “each relevant electronic system that has been in place at all relevant times.” On October 16, 2020, it listed eight systems on its Disclosure of Electronically Stored Information (“ESI”). (Doc. # 280-2, Pl. Appendix [App.] at App.006-08.) Slack was not on the list. See id. Under the Order Governing Electronic Discovery, AFS also had the opportunity to provide information regarding electronic documents of limited accessibility. Again, AFS did not mention Slack. Id. at App.007-08. Finally, the Order Governing Electronic Discovery required AFS to designate an “e-discovery liaison,” who is the “single individual, through whom all the discovery requests and responses are made.” AFS designated William Townsend, its Director of Technology Publishing Operations, as its e-discovery liaison. Id. at App.008.

During discovery, the Plaintiffs served requests under Rule 34 for a wide range of documents, which includes ESI. Many requests call for the production of electronic messages on topics that include telemarketing, debt collection, reputation management, and employee training. (Doc. # 280-1, List of Document Requests to Which Slack Data is Likely Responsive, at 25-28.) AFS produced copious amounts of responsive documents, but it did not produce any documents, messages, or data from Slack. AFS did, however, produce emails, which included notifications to some Slack users about Slack messages. See, e.g., Doc. # 280-2, Pl. App.055-60, 064-071. The Plaintiffs also noticed a Rule 30(b)(6) deposition of AFS and included the company's “use of messaging apps, including Slack, since January 1, 2015” in the topics for examination. (Doc. # 280-1, Pl. Mem. at 3.)

*2 The Plaintiffs deposed William Townsend on December 15, 2022. During that deposition Mr. Townsend described the company's use of Slack, which appeared extensive. Although Mr. Townsend suggested that Slack usage was “voluntary” (Doc. # 280-2, Pl. App.011), he also testified that the SuccessFuel workspace on Slack is what “employees are expected to use for messaging.” Id. at App.018. According to other evidence, Slack was necessary for telemarketers, who were not provided with company email addresses. Id. at App.031-32. Telemarketers were told that Slack was “the program we use to communicate with each other during and after orientation.” Id. at App.036; App.041. When Mr. Townsend was asked whether AFS employees used Slack “regarding telemarketing of the publications that are at issue in this lawsuit,” he responded, “Yes, I'm sure they did some. Yep.” Id. at App.019.

After learning more details about AFS' Slack usage during the Townsend deposition, the Plaintiffs requested by letter that AFS “produce all Slack messages involving AFS employees from July 1, 2015 through to the present for all of AFS's Slack accounts.” Id. at App.097-98. AFS refused and characterized the Plaintiffs' letter as an “exceedingly disproportionate and irrelevant demand.” Id. at App.099-102.

Faced with AFS' outright refusal to obtain and produce Slack data, the Plaintiffs filed this Joint Motion to Compel Production of Documents Responsive to Requests for Production of Documents to American Future Systems, Inc. and Motion for Sanctions Due to AFS's Failure to Produce Slack Messages. (Doc. # 280.) AFS opposed. (Doc. # 281.) The Court referred the Motion to the Special Master for Report and Recommendation. (Doc. # 290.)

III. STANDARD OF REVIEW

Under Fed. R. Civ. P. 26(b)(1), “[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[.]” Subject to that scope, a party may request “any designated documents or electronically stored information” that is in the responding party's “possession custody or control.” Fed. R. Civ. P. 34(a)(1)(A). A party may seek to compel the production of documents under Fed. R. Civ. P. 37(a)(3)(B)(iv). Rule 37(a)(5) governs the payment of expenses associated with a motion to compel.

IV. THE SPECIAL MASTER'S ANALYSIS

A. AFS' Possession, Custody, or Control of Slack Data

Under Fed. R. Civ. P. 34, subject to other limitations, a party is required to produce documents and electronically stored information in its possession, custody, or control. AFS argues that it need not produce Slack data because the Slack data is not in its possession, custody or control; rather, the Slack data is held only by Slack. (Doc. # 282, AFS Opp. at 5-11.) The Plaintiffs contend that the Slack data is within AFS' control because AFS created and owns the data and that Slack is merely a custodian. (Doc. # 283, Pl. Reply Mem. at 1-7.)

“Control” under Rule 34 is construed broadly. Calhoun v. Invention Submission Corp., No. 2:19-CV-1396, 2021 WL 640759, at *2 (W.D. Pa. Jan. 13, 2021) (Dodge, M.J.). Legal ownership and physical possession do not determine control; “rather, documents are considered to be under a party's control when that party has the right, authority, or practical ability to obtain the documents from a non-party to the action.” Id.; see also Barton v. RCI, LLC, No. CIV.A. 10-3657 PGS, 2013 WL 1338235, at *6 (D.N.J. Apr. 1, 2013) (“If the producing party has the legal right or the practical ability to obtain the documents, then it is deemed to have ‘control’ ... even if the documents are actually in the possession of a non-party.”). The location of the documents is irrelevant. Gerling International Insurance Co. v. Commissioner of Internal Revenue, 839 F.2d 131, 140 (3d Cir. 1988).

AFS has control over its Slack data. Under Slack's Customer Terms of Service, “Customer will own all Customer Data.” (Doc. # 283-1, Pl. Reply App. 010.) Slack explicitly defines its role as “custodian[ ] of Customer Data.” Id. at App. 012. Customer Data includes messages and files exchanged using the Slack service. Id. at App. 004. The Customer is the organization that agrees to the terms of the Slack service. Id. Here, that is AFS. The Customer is distinguished from Authorized Users, who are the individuals authorized to access Slack, i.e., AFS employees. Id.

*3 The Slack Customer Terms of Service also provide that a Customer's “ability to export or share Customer Data may be limited or unavailable depending on the type of Services plan in effect and the data retention, sharing or invite settings enabled.” Id. at App. 012-13. Importantly, the limitations imposed by Slack do not apply in every circumstance (i.e, “may be limited”), and they apply to a Customer's ability to “export and share.” Id. Slack does not limit the existence of Customer Data or explicitly provide for automatic deletion of Customer Data on a set schedule. See id. Rather, the Customer controls “retention and export settings.” Id. at App. 004. Thus, Slack's Terms and Conditions do not eliminate AFS' control over its Slack data.[1]

AFS contends that the Plaintiffs “fail to differentiate between Slack's different levels of service, which allow Slack customers different administrative rights to access their files, control the preservation of data, or request data.” (Doc. # 282, AFS Opp. at 1.) AFS is correct that its day-to-day access to messages in its free accounts is limited to the previous 90 days. But immediate accessibility in the ordinary course of business is not the test for control under Rule 34. Rather, the “the right, authority, or practical ability to obtain the documents from a non-party” determines control. Calhoun, 2021 WL 640759, at *2.

AFS is incorrect about the effect of its account levels on data retention and its ability to request its data. “By default, Slack will retain all messages for the lifetime of your workspace.” (Doc. # 280-2, Pl. App.107.) Even for free accounts, Slack merely starts “hiding messages and files older than 90 days,” and it would require action by Workspace Owners to delete the messages older than 90 days. Id. at 107-108. And while real-time access varies by account type, Slack provides all customers with the ability to request data in certain circumstances, including for legal reasons (as discussed further below). Thus, the level of Slack account—whether free (access to most recent 90 days of messages) or paid (full message history available “at your fingertips”)—is irrelevant to the determination of whether AFS has control over Slack data.

AFS argues that it lacks control over its Slack data because a signed court order would be required for Slack to export the data. (Doc. # 282, AFS Opp. at 8.) But a court order is not required. A court order is sufficient to obtain Slack data, but it is not necessary. Even in the Slack webpage that AFS cites, a court order is just one of “a few examples where a customer may need to export content.” Compare Doc. # 282, AFS. Opp. at 9 with Slack, “Guide to Slack Import and Export Tools,” available at https://slack.com/help/articles/204897248-Guide-to-Slack-import-and-export-tools (last accessed March 28, 2023).

Slack permits its Workspace Owners to apply to export “content from all channels and conversations, including private channels and direct messages.” (Doc. # 280-2, Pl. App.113.) The prerequisites are “(a) valid legal process, or (b) consent of members, or (c) a requirement or right under applicable laws in order to export data.” Id. This export application process is the same under Slack's Free plan and its paid Pro plan.[2] Id. at App.113-14. The FTC investigated Slack's “valid legal process” requirement. Id. at App.117-122. Slack's Senior Director of Privacy told the FTC:

Thus, “a valid legal process” is broader than a signed court order. Perhaps if AFS simply provided the FTC's document requests to Slack, that would have been sufficient. But it appears that AFS never tried or even contacted Slack about the issue, even after the Plaintiffs specifically demanded production. Although this Report and Recommendation ultimately recommends that the Court issue an order, that is because it is the relief requested by the Plaintiffs and because it should ensure that no further issues may arise. It is not because Slack appears to require an order.

AFS suggests that a third-party subpoena to Slack would be the appropriate discovery tool to obtain the Slack data and relies on the Central District of California's decision in Laub v. Horbaczewski, No. CV 17-6210-JAK (KSX), 2020 WL 7978227 (C.D. Cal. Nov. 17, 2020) (Stevenson, M.J.) as the “leading case” on this subject. (Doc. # 282, AFS Opp. at 6-7.) First, the Stored Communications Act (“SCA”) would prevent Slack from producing messages in response to the suggested subpoena.[3] See 18 U.S.C. § 2701 et. seq.; Mintz v. Mark Bartelstein & Assocs., Inc., 885 F. Supp. 2d 987, 991 (C.D. Cal. 2012) (“The SCA does not contain an exception for civil discovery subpoenas.”).

Second, Laub is unpersuasive and distinguishable. Laub did not mention Slack's policies discussed above which address Slack customers' ownership of data and ability to export data in certain legal circumstances. Additionally, Laub denied the motion to compel at issue based on a lack of proportionality, rather than the possession, custody, or control. Laub, 2020 WL 7978227, at *6. Finally, to the extent that Laub concluded that a party lacked possession, custody, or control over Slack messages, its reasoning was based on that fact that the messages were “housed at Slack.com.” Id. at *4. This conclusion is contrary to Third Circuit law that the location of responsive documents is irrelevant. See Gerling, 839 F.2d at 140.

Finally, AFS contends that its production of “relevant Slack messages that were transmitted via email” somehow supports its lack of possession, custody, or control of other Slack messages. (Doc. # 282, AFS Opp. at 10-11.) Yet, even within this argument, AFS admits that “there are surely Slack messages that were not captured by email[.]” Id. at 11. Additionally, its e-discovery liaison William Townsend acknowledged that Slack message notifications are sent to emails by choice and are not a required Slack feature. (Doc. # 280-2, Pl. App.021.) Thus, AFS' production of emails containing Slack messages only is not a substitute for obtaining and producing all relevant, responsive, and nonprivileged Slack data.

*5 Therefore, AFS has control over all its Slack data under Fed. R. Civ. P. 34. The Special Master recommends that the Court issue an order requiring AFS to obtain its data from Slack and compelling AFS to produce relevant, responsive, nonprivileged Slack data.

B. Relevance of the Slack Data and Proportionality to the Needs of the Case

Rule 26 permits discovery on “any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” Lux Global Label Co., LLC v. Shacklett, No. 18-CV-5061, 2020 WL 1700572, at *2 (E.D. Pa. Apr. 8, 2020) (Sitarski, M.J.). Relevance is “construed broadly to encompass any matter that could bear on, or that could reasonably lead to other matter that could bear on, any issue that is or may be in the case.” Id. The proportionality analysis considers “the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1). If the moving party demonstrates that the requested discovery is within the scope of permitted discovery, “the burden then shifts to the opposing party to demonstrate that the requested discovery (i) does not fall within the scope of discovery contemplated by Rule 26(b)(1), or (ii) is not sufficiently relevant to justify the burden of producing the information.” Lux, 2020 WL 1700572, at *3.

Broadly, the Slack data at issue is relevant to this case. AFS employees used Slack for messaging and file sharing. (Doc. # 280-2, Pl. App.013-16.) AFS' own testimony through its Director of Technology Publishing Operations, William Townsend, effectively admitted the relevance to the case: when was asked whether AFS employees used Slack to communicate “regarding telemarketing of the publications that are at issue in this lawsuit,” Townsend responded, “Yes, I'm sure they did some. Yep.” Id. at App.019.

In its Opposition, AFS argues that it maintains multiple slack accounts, most of which have no relevance to the case because they support unrelated business lines. (Doc. # 282, AFS Opp. at 17-18; Doc. # 280-2, Pl. App.100-101.) AFS held four different accounts (also known as “Workspaces”) with Slack: Pbppubs.slack.com (telemarketing); TMLeadgen.slack.com (lead generation); Successfuel.slack.com (SuccessFuel); Inboundpbp.slack.com (Inbound pbp/Customer Interaction Team). See Doc. # 280-2, Pl. App.064, 067, 078, 103, 104. AFS admits that the PBPPubs account is relevant. (Doc. # 280, Pl. App.100 (pbppubs.slack.com was “specifically created for AFS' publication telemarketing business”). But it contends that its other accounts are irrelevant.

AFS' production of should not be limited based on the account because all accounts may contain relevant information. First, AFS will have the opportunity to review the Slack data for relevance and reduce its review through search terms, as discussed below. Thus, any distinction between accounts has minimal relevance to the proportionality analysis.[4] Second, there is information that signals that the other Slack accounts could contain information relevant the case. The TMLeadgen account includes communications with telemarketers. App.073, 076. SuccessFuel is alleged to be a fictitious name of AFS and telemarketed publications. (Doc. # 280-1, Pl. Mem. at 8-9; Doc. # 280-2, Pl. App.080-082.) The company has worked to “let PBP absorb [BBB] complaints” to ensure that SuccessFuel would not have associated complaints with BBB. (Doc. # 280-2, Pl. App.093.) And AFS' lead generation activities overlap with telemarketing, including the transition of a former telemarketing manager to a lead generation position. Id. at App.171-172. Thus, all AFS Slack accounts are relevant and data associated with all accounts must be obtained from Slack. AFS can review individual messages or files, but there is no basis to conclude that entire categories of data are irrelevant. See Lux, 2020 WL 1700572, at *2 (broadly defining relevance).

*6 Additionally, Slack messages are not duplicative or cumulative of discovery already conducted, as AFS contends. (Doc. # 282, AFS Opp. at 3-4, 11-12.) Although the Plaintiffs are aware of Slack messages through certain emails, Slack did not send an email for every Slack message – only in select circumstances and under optional settings. (Doc. # 280-2, Pl. App.021.) Additionally, telemarketers were not given company email addresses and were told to use Slack. Id. at App.025, App.031-32, App.036, App.041. Thus, AFS' email production could not have produced substantially all Slack messages through emails.

AFS also contends that Slack messages have minimal relevance to the case. (Doc. # 282, AFS Opp. at 12.) The focus of this argument is that the crux of the case is external interactions, and not internal communications. But internal communications are relevant even though the case looks outward. The Plaintiffs allege unfair and deceptive trade practices under federal and state law. See Doc. # 43, First Am. Compl. ¶¶ 60, 63, 66, 75, 78, 83, 86, 95; 15 U.S.C. § 45(a); 73 P.S. §§ 201-2, 201-3. Internal communications may shed further light on the practices at AFS that go beyond singular acts. Further, for the Plaintiffs to obtain injunctive relief under certain counts, they must show “some cognizable danger of recurrent violation.” See Doc. # 122, Report and Recommendation (10/8/2021), at 6 (citing FTC v. Accusearch 113 Inc., 570 F.3d 1187, 1201 (10th Cir. 2019)); Doc. # 128, Order (11/3/2021), at 4 n.1. Thus, internal messages could be quite probative to the claims alleged and relief sought.

Indeed, Slack messages may be very significant to the case. Telemarketers were not provided with company email addresses. (Doc. # 280-2, Pl. App.031-32.) Instead, they were instructed to communicate by Slack. Id. at App.036; App.041, App.048. And AFS failed to properly preserve a potentially important subset of emails. See, e.g., id. at App.053-54. Thus, a key group of employees' written communications may reside primarily, if not exclusively, on Slack.

Also relevant to the proportionality analysis, AFS controls access to Slack data. As explained above, if the Plaintiffs issued a subpoena to Slack, a responsive production by Slack is likely prohibited by the SCA. A request by AFS associated with a legal process seems to be the only viable way to obtain the materials, or it is at least the most efficient manner in the present posture.

Regarding costs, Slack does not appear to charge a fee for the export of Slack data. Thus, the primary cost associated with production is any pre-production review by AFS' counsel. AFS' Opposition notes that it has produced 11.6 million pages of information and 500,000 pages of custodial files. (Doc. # 282, AFS Opp. at 3-4.) AFS has managed to review and produce this great magnitude of documents thus far, and it currently has three law firms representing it. AFS' resources are not an obstacle that would prevent the production of Slack data. Thus, obtaining, reviewing, and producing Slack data does not present an undue burden on AFS or its counsel. And the benefit of producing this potentially significant information outweighs the burden.

Therefore, AFS' Slack data is relevant and obtaining and producing it is proportional to the needs of the case.

C. Review of Slack Data Before Production

The Plaintiffs requested that all Slack data be produced without review by AFS. Specifically, it claims that the limitations on Slack's data exporting and the “delay that would be imposed by any subsequent application of a keywords search or relevance review,” permit their request “for all data within AFS's Slack accounts.” (Doc. # 280-1, Pl. Mem. at 13 n.23.) AFS contends that it must be given an opportunity to review any data provided by Slack for privilege and relevance before production to the Plaintiffs. (Doc. # 282, AFS Opp. at 15-17.)

*7 The Plaintiffs are moving to compel a Rule 34 production. In the normal course, a document production under Rule 34 would first be reviewed by the producing counsel. Privileged documents, if any, may be withheld and logged. Irrelevant or non-responsive documents need not be produced. The Plaintiffs have provided no basis to require a production of all Slack data without providing AFS with the opportunity to review.

The Special Master, however, understands the potential delay. Thus, the Special Master recommends that the Court order AFS to produce responsive Slack data no later than 14 days after receipt of the data from Slack.

Finally, to address AFS' concerns about the scope of the review, the Special Master recommends the application of search terms to the initial data set to be provided by Slack to AFS. The parties have previously applied search terms to reduce the review of possibly responsive documents. See, e.g., Doc. # 280-2, Pl. App.053 (AFS noting production of emails “utilizing the search terms provided [FTC's] April 25, 208 letter”); Doc. # 122, Report and Recommendation (10/8/2021), at 7 n.5 (decision not altering parties' agreement regarding search and production of discovery); Doc. # 145, Report and Recommendation (12/31/2021), at 15-17 (discussing keyword searches). The Special Master recommends that the parties apply the search terms previously applied to emails or other communications by agreement or order.

D. Request for Sanctions

Under Fed. R. Civ. P. 37(a)(5)(A), (B), when a motion to compel is granted or denied, the Court must require the party losing the motion or its attorney to pay the prevailing party's expenses associated with the motion, including attorneys' fees, unless “the motion was substantially justified or other circumstances make an award of expenses unjust.” Under Fed. R. Civ. P. 37(a)(5)(C), “[i]f the motion is granted in part and denied in part, the court ... may, after giving an opportunity to be heard, apportion the reasonable expenses for the motion.”

AFS' failure to produce Slack data is troubling. Even more troubling is its apparent failure to seriously consider Slack as a potential custodian of AFS data that could be relevant to the case. Even more troubling still is its failure to even reach out to Slack to determine what communications may exist, particularly after the Plaintiffs specifically requested Slack data after the Townsend deposition.

The failure to meet this discovery obligation is all the more egregious when the information known by key AFS representatives is juxtaposed against its unwillingness to take investigative steps. AFS' e-discovery liaison knew that at least some Slack messages were kept for the duration of the Slack account (Doc. # 280-2, Pl. App.023), that AFS telemarketers used Slack (App.025), and that “Slack has a protocol for” requesting messages. Id. at App.28. Yet, the e-discovery liaison—single individual, through whom all the discovery requests and responses are made—testified that he did not have direct knowledge of Slack's data retention policies in relation to this lawsuit. Id. at App.025.

Nevertheless, the Special Master does not recommend the imposition of sanctions in connection with this motion. AFS relied on Laub v. Horbaczewski, No. CV 17-6210-JAK (KSX), 2020 WL 7978227 (C.D. Cal. Nov. 17, 2020) for the proposition that Slack data is outside its possession, custody, or control. Although the Special Master did not find Laub persuasive and Laub lacked the background information available here, the case provided some external basis for the AFS' legal position. Given the evolving nature of new technologies and the existence of Laub, an award of expenses would be unjust in the circumstances. Accordingly, the Special Master recommends that the Court deny the Plaintiffs' request for sanctions.

V. RECOMMENDATION

*8 For the reasons explained above, the Special Master recommends that the Plaintiffs' Joint Motion to Compel the Production of Slack Data and for Sanctions be granted in part and denied in part. The Special Master recommends that the Motion to Compel be granted to the extent that AFS must obtain Slack data and produce relevant, responsive, and nonprivileged Slack data. And the Special Master recommends that the Motion be denied to the extent that the Plaintiffs requested that the Slack data should be produced without the opportunity for review by AFS and to the extent that it requested sanctions.

Respectfully submitted,

James J. Rohn, Esq., Special Master

AND NOW, this ____ day of ___________, 2023, based upon the March 28, 2023 Report and Recommendation of the Special Master, it is hereby ORDERED that:

BY THE COURT: