MicroVention, Inc. v. Balt USA, LLC
MicroVention, Inc. v. Balt USA, LLC
2023 WL 4317195 (C.D. Cal. 2023)
June 13, 2023
Scott, Karen E., United States Magistrate Judge
Summary
The court granted MVI's motion to compel Balt to search its backup servers and ordered a limited search. The court also ordered Balt to pay MVI's reasonable expenses for bringing the motion. The parties must use the method described in Federal Rule of Civil Procedure 6(a)(1) to compute the time in days for processing the ESI.
Additional Decisions
MICROVENTION, INC.
v.
BALT USA, LLC, et al
v.
BALT USA, LLC, et al
Case No. 8:20-cv-02400-JLS-KESx
United States District Court, C.D. California
Filed June 13, 2023
Counsel
Callie A. Bjurstrom, Michelle A. Herrera, Pillsbury Winthrop Shaw Pittman LLP, San Diego, CA, Alekzandir Morton, Christopher Edward Stretch, Colin T. Kemp, Pillsbury Winthrop Shaw Pittman LLP, San Francisco, CA, Bryan P. Collins, Pro Hac Vice, Pillsbury Winthrop Shaw Pittman LLP, McLean, VA, Chaz Matthew Hales, Chloe Stepney, Evan Finkel, Michael S. Horikawa, Pillsbury Winthrop Shaw Pittman LLP, Los Angeles, CA, Yuri Mikulka, Alston and Bird LLP, Los Angeles, CA, Kenneth W. Taber, Pro Hac Vice, Pillsbury Winthrop Shaw Pittman LLP, New York, NY, Ranjini Acharya, Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, CA, for Microvention, Inc.Alexander Ding Zeng, Knobbe Martens Olson and Bear LLP, Los Angeles, CA, Tiffany M. Ikeda, Latham and Watkins LLP, Los Angeles, CA, Douglas E. Lumish, Latham and Watkins LLP, San Francisco, CA, Nicholas Andrew Belair, Knobbe Martens Olson and Bear LLP, San Francisco, CA, Joseph Hyuk Lee, Ryan Robert Owen, Latham and Watkins LLP, Costa Mesa, CA, Michael A. Morin, Pro Hac Vice, Latham and Watkins LLP, Washington, DC, Patricia Young, Latham and Watkins LLP, Menlo Park, CA, Paul A. Stewart, Sean M. Murray, William Oscar Adams, Sheila N. Swaroop, Knobbe Martens Olson and Bear LLP, Irvine, CA, for Balt USA, LLC.
Lindley Paige Fraley, Kroesche Schindler LLP, Irvine, CA, Mark A. Finkelstein, Molly J. Magnuson, Ellen Sooyoun Kim, Umberg Zipser LLP, Irvine, CA, for David Ferrera.
Benjamin L. Singer, Evan N. Budaj, Singer Cashman LLP, San Francisco, CA, Ellen Sooyoun Kim, Mark A. Finkelstein, Molly J. Magnuson, Umberg Zipser LLP, Irvine, CA, Eric J. Schindler, KroescheSchindler LLP, Irvine, CA, Lindley Paige Fraley, Kroesche Schindler LLP, Irvine, CA, Sheila N. Swaroop, Knobbe Martens Olson and Bear LLP, Irvine, CA, for Nguyen Jake Le.
Bernard Conrad Jasper, Jasper Law, Fullerton, CA, Mark A. Finkelstein, Molly J. Magnuson, Ellen Sooyoun Kim, Umberg Zipser LLP, Irvine, CA, Lindley Paige Fraley, Kroesche Schindler LLP, Irvine, CA, for Michelle Tran.
Scott, Karen E., United States Magistrate Judge
PROCEEDINGS (IN CHAMBERS): ORDER Granting, in part, MVI's Motion to Compel Balt to Search Backup Servers (Dkt. 437)
*1 Plaintiff Microvention, Inc. (“MVI”) is suing Defendant Balt USA, LLC (“Balt”), and former employees of MVI who went to work for Balt, for misappropriation of trade secrets. Before the Court is MVI's motion to compel Balt to search its backup servers. (Dkt. 437.) For the reasons stated below, the Court grants, in part, MVI's motion.
I. BACKGROUND.
The Court provides the following timeline summarizing the development of this discovery dispute.
• October 20, 2022: MVI took the deposition of Balt's 30(b)(6) witness about information technology, Kheng Ang. Mr. Ang testified that Balt maintained backups of its file servers and that Balt had not searched for MVI files on any of the backups. (Dkt. 399-2, Hales Decl., ¶ 22.)
• November 22, 2022: During a meet and confer call, Balt agreed that additional searches for MVI files were needed but disagreed about how those searches should be conducted. (Id. ¶ 23.) During or around the time of this call, MVI requested that Balt search the backups. (Dkt. 401 at 4; Dkt. 437-1 at 7.)
• December 7, 2022: When they could not agree, MVI filed a motion, via the Magistrate Judge's informal discovery conference (“IDC”) procedure,[1] to compel Balt to search for MVI documents on “Balt's network resources ... that would include their file server which is a locally administered network, as well as their cloud storage ... as well any backups of those....” (Dkt. 248 at 24, (12/7/22 IDC transcript).) Balt objected that the request was too burdensome. (Id. at 18-20, 25.) The Magistrate Judge ordered the parties to meet and confer with their experts to find “a way to search for the file names on the network resources that would not be unduly burdensome.” (Id. at 25.)
• December 14, 2022: The parties met, but they disagree about what happened. Per MVI, Balt agreed to immediately begin searching its file servers, told MVI that it would investigate how to search its server backups, and agreed to provide MVI with requested information about those backups that was needed to plan the searches. (Dkt. 399-2, Hales Decl., ¶ 25.) Per Balt, its attorney, Mr. Belair, “informed MVI that a search of Balt's backups was neither reasonable nor necessary, and repeated that Balt would not agree to search its backup servers.” (Dkt. 402 ¶ 2.) Balt agreed to provide information about the backups, but only in an effort to persuade MVI that searching them was so burdensome as to be disproportionate to the needs of the case. (Id.)
• December 28, 2022: Per MVI, Balt “reported ... that it was ‘working on’ producing the requested information and that productions related to Balt searches would be ‘coming soon.’ ” (Dkt. 399-2, Hales Decl. ¶ 25.)
*2 • January 17, 2023: Balt wrote an update letter on its search of “current and legacy network file servers,” saying it expected to produce “a subset of the documents that hit on the search terms by January 25, 2023.” (Dkt. 402-1 at 2.) This letter does not mention backups.
• January 25, 2023: Balt produced some results of searches for MVI files. These did not include results of searches conducted of its cloud storage or of its server backups. (Dkt. 399-2, Hales Decl., ¶¶ 26-28.) Because the deadline to file discovery motions expired on February 27, 2023 (Dkt. 224; Dkt. 54 ¶ I.D), MVI did not have time to file a formal discovery motion under Local Rule 37. However, MVI thought it still had time to bring an IDC motion regarding the backup server issue. Since March 2022, MVI and Balt had been operating under an agreement to use the Magistrate Judge's IDC process for all discovery disputes, and they had appeared for many IDC hearings before the Magistrate Judge. (Dkt. 399-2, Hales Decl. ¶ 30.)
• February 13, 2023: Balt informed MVI that it would no longer agree to use the IDC process and instead insisted that MVI use the formal discovery motion procedure in Local Rule 37. (Id.)
• February 16, 2023: Balt produced the MVI files found in its cloud storage , but Balt never produced any search results from its server backups. (Dkt. 399-2, Hales Decl., ¶¶ 26-28.) On that same day, at a second deposition, Mr. Ang again testified that Balt had never searched its server backups. (Id. ¶ 29; Dkt. 437-2 at 5 ¶ 12.)
• February 17, 2023: Balt sent MVI a copy of notes Mr. Ang had referred to during his deposition, including an inventory of network server infrastructure and backups. (Dkt. 426-1 at 2, 9-10.) That inventory listed 98 backup “images” from monthly, weekly, and daily backups with corresponding date ranges. (Id. at 10.) MVI says that, during a call the same day, Balt “argued for the first time that the backups did not need to be searched.” (Dkt. 399-2, Hales Decl., ¶ 29.) Balt disagrees, saying that it told MVI back in December 2022 that it would not search backups. (Dkt. 402 ¶ 2.)
• February 23, 2023: The Magistrate Judge scheduled a status conference with the parties in response to conflicting emails sent to the Court clerk. MVI's emails requested dates for an IDC, while Balt's emails stated that they did not agree to use the IDC procedure. The Magistrate Judge directed the parties to meet and confer to see if they could agree to present their remaining discovery disputes via IDC. (Dkt. 335 (transcript).)
• February 24, 2023: The parties agreed to use the IDC process for all remaining discovery disputes but one – the search of Balt's backups for MVI files. (Dkt. 399-2, Hales Decl., ¶ 31.) Balt says, “this highly technical issue was too complex for a two-page letter brief, and thus inappropriate for [the Magistrate Judge's] informal procedure.” (Dkt. 401 at 8.)• February 27, 2023: The deadline for filing discovery motions expired. (Dkt. 224; Dkt. 54 at ¶ I.D.)
• April 3, 2023: MVI filed an ex parte application for leave to file a late motion to compel Balt to search its backup servers. (Dkt. 399.) The District Judge granted the application on April 14, 2023. (Dkt. 413.)
• April 28, 2023: MVI filed the instant motion in the form of a joint stipulation under Local Rule 37 to compel Balt to search its backup servers. (Dkt. 437-1.) On May 16, 2023, MVI filed a supplemental memo. (Dkt. 455.) The Court conducted a hearing on May 30, 2023. (Dkt. 457 (minutes); Dkt. 478 (transcript).)
II. SUMMARY OF THE PARTIES' ARGUMENTS.
*3 MVI interprets the Magistrate Judge's 12/7/22 IDC order as an order that Balt search its backup servers. (Dkt. 437-1 at 8, 14.) MVI argues that Balt should be sanctioned under Federal Rule of Civil Procedure 37(b) for disobeying this court order. (Id. at 13.) MVI argues that Balt failed at any earlier time to show that the burden of conducting the requested searches would outweigh the utility. (Id. at 4.)
The requested searches involve a search for approximately 76,000 file names with the addition of the search terms “Microvention” and “MVI.” (Dkt. 478 at 16 (transcript of 5/30/23 hearing).) According to MVI, the utility would be both discovering relevant evident about how MVI documents containing trade secrets were disseminated within and used by Balt and to find all such documents so that they can be deleted. (Id. at 15.)
Balt counters that it did not violate the Magistrate Judge's 12/7/22 IDC order, because the parties were only ordered to meet and confer. Balt argues that searching its backup servers would have little to no utility. Balt argues that it already searched its Zeus server, which was in use until late 2019 or early 2020 and is effectively a backup for Balt's current server. (Dkt. 437-1 at 6.) Balt further argues that searching all its backup servers would require a tremendous amount of time and money.
Balt states that it has “134 backups of its servers, including 67 backups of its file server and 67 backups of its QCBD server,” which collectively contain “approximately 157.45 terabytes of data.” (Id. at 5.) Balt's e-discovery vendor Epiq estimates that retrieving, processing, and searching all of these backups would take 4-9 months and cost between $755,600 and $1,745,1000, excluding the attorney time needed to review the search results. (Id. at 5-6.)
III. LEGAL STANDARDS.
“Parties 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, considering 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 a party unsuccessfully opposes a motion to compel discovery, the Court “must, after giving an opportunity to be heard, require the party or deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees.” Fed. R. Civ. P. 37(a)(5)(A) (emphasis added). These fee-shifting sanctions are not required if the moving party failed to meet and confer in good faith prior to filing the motion, the opposing party's position was substantially justified, or other circumstances would make an award unjust. Id.
If a party fails to provide discovery in compliance with a court order to do so, the Court can impose a variety of sanctions including monetary sanctions, adverse jury instructions, or striking pleadings. Fed. R. Civ. P. 37(b)(2)(A). “Instead of or in addition” to these sanctions, “the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” Fed. R. Civ. P. 37(b)(2)(C) (emphasis added).
IV. DISCUSSION.
A. Balt Failed to Comply with the Court's December 7, 2022 Order.
*4 Balt's failure to search all its backup servers was not a violation of the Court's 12/7/22 IDC order. The Court did not order Balt to search its backup servers, as the Court had no idea in December 2022 what the relative burden and utility of such searches would be. But the Court instructed the parties to “work in good faith to try to figure out a reasonably unburdensome (sic) solution that allows the collection of file names from Balt's network resources, including the cloud and so forth, as [MVI's counsel] Mr. Hales has described,” which clearly included backups. (Dkt. 248 at 26.)
From December 2022 until February 17, 2023, Balt did not provide MVI with any information necessary to assess the burden or utility of searching Balt's backup servers (let alone substantial or complete information). Although there is some disagreement between the parties about what was said during their December 2022 conferences, Balt admits that, at that time, it agreed to provide “information concerning the scope of” the backups. (Dkt. 402 ¶ 2 (Belair Decl.).) Balt does not point to any communications with MVI, prior to the briefing on the current motion, wherein it told MVI that searching the backups would take 4-9 months and cost between $755,600 and $1,745,100. (Dkt. 437-1 at 5-6.)
Instead, Balt delayed providing any information until after it was too late for MVI to file a Local Rule 37 discovery motion for this issue, and then informed MVI that it would withhold consent to the IDC process, thus barring MVI from pursuing motions to compel the discovery. (Dkt. 399-2, Hales Decl., ¶ 30.) Although Balt asserts this is because this dispute is too complex for that procedure, the Court has handled similar issues using the IDC procedure throughout this action.
This does not constitute a good faith meet-and-confer over the searching of Balt's backup servers. By failing to meet and confer in good faith, Balt violated the 12/7/22 IDC order.
B. MVI is Entitled to a Limited Search of Balt's Backup Servers.
Despite the information about burden that Balt has now provided, the Court finds that a limited search of Balt's backup servers strikes the appropriate balance under Federal Rule of Civil Procedure 26(b)(1). Balt confirmed at the hearing that the main burden involved in searching the backup servers is processing the images so that they are amenable to searching. (Dkt. 478 at 6.) Balt says that there are 134 backup images. (Dkt. 437-1 at 16.)
IT IS HEREBY ORDERED that:
1. Within three (3) days[2] of this order, MVI shall pick five (5) images for searching based on date.
2. Within five (5) days after MVI communicates its selection, Balt will consult with its IT personnel and retained experts and advise MVI of the anticipated time to process those five images. The Court expects that the processing will not take longer than ten (10) days.[3]
3. Within ten (10) days after MVI communicates its selection, Balt will provide a progress report to MVI.
4. Within seven (7) days of the progress report to MVI, Balt will run the searches requested by MVI and provide a “hit report” to MVI.
5. Within three (3) days of exchanging the hit report, the parties will hold a meet and confer conference either in person, by telephone, or by videoconference, to discuss the hit report and what it reveals about the utility (or lack of utility) of any further searches of Balt's backups.
*5 6. Within seven (7) days after this conference, the parties shall file a joint report with the Court advising what they contend are the reasonable next steps and why.
C. Balt Should Pay MVI's Reasonable Expenses in Making the Present Motion.
Because MVI has prevailed on its motion to compel, fee-shifting under Federal Rule of Civil Procedure 37(a)(5)(A) is required unless:
(i) the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action;
(ii) the opposing party's nondisclosure, response, or objection was substantially justified; or
(iii) other circumstances make an award of expenses unjust.
Fed. R. Civ. P. 37(a)(5)(A)(i)-(iii).
None of these circumstances are present here. As described in detail above, movant MVI has been trying in good faith to obtain the disclosure or discovery without court action for more than six months, since at least November 2022. Balt has not given any justification, much less a substantial one, for its failure to disclose earlier the information about the burden of searching its backup servers. Finally, Balt does not point to any other circumstances that would make an award of expenses unjust. The Court therefore orders Balt and/or its lawyers to pay MVI's reasonable expenses, including attorney's fees) in bringing the instant motion (Dkt. 437).
Because Balt failed to obey the Court's December 7, 2022 order, Balt and/or its lawyers must also pay MVI's reasonable expenses, including attorney's fees, in bringing MVI's successful ex parte application (Dkt. 399). Those expenses were caused by Balt's failure to obey the Court's order to meet and confer in good faith. See Fed. R. Civ. P. 37(b)(2)(C).
IT IS HEREBY ORDERED that:
1. Within fourteen (14) days of the day of this order, MVI shall inform Balt of its reasonable costs and provide supporting evidence.
2. Balt shall respond within seven (7) days of receipt of MVI's costs.
3. If Balt disputes the amount, then MVI shall file its request with the Court within seven (7) days of receipt of Balt's response. If MVI is forced to ask the Court to resolve this dispute, MVI may also seek reimbursement for the time spent compiling supporting evidence and litigating the reasonableness of its request.
4. Upon receipt of MVI's filing, the Court will set a briefing schedule to resolve the dispute over the reasonableness of the amount.
Footnotes
With the agreement of the parties, the Magistrate Judge conducts IDCs to resolve discovery disputes outside the formal Local Rule 37 procedures. Before any such telephonic conference, the parties must engage in the pre-filing conference of counsel required by Local Rule 37-1. They then file two-page letter briefs providing a synopsis of the discovery dispute and what meet and confer efforts have been undertaken. See Hon. Karen E. Scott, Judge's Procedures, https://www.cacd.uscourts.gov/honorable-karen-e-scott.
In computing the time in days, the parties should use the method described in Federal Rule of Civil Procedure 6(a)(1).
At the hearing, counsel estimated that processing one image would take about one day. (Dkt. 478 at 8.)