eDiscovery Assistant

Am. Consol. Indus., Inc. v. Blasingim

2024 WL 2093659 (N.D. Ohio 2024)

April 16, 2024

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Summary

The court found that the defendants failed to comply with their discovery obligations regarding the production of ESI. This included failures to properly search and produce relevant data, as well as failures to review and notice missing information. The court rejected the defendants' excuses and found that sanctions may be appropriate for their conduct.

Additional Decisions

AMERICAN CONSOLIDATED INDUSTRIES, INC., et al., Plaintiffs,
v.
CHAD BLASINGIM, et al., Defendants.
MONARCH STEEL COMPANY, INC., et al., Plaintiffs,
v.
JAMES EDWARD MCCRACKEN, et al., Defendants

CASE NO. 1:19-cv-00137, CASE NO. 5:17-cv-02253

United States District Court, N.D. Ohio, EASTERN DISTRICT

Filed April 16, 2024

Counsel

Ami J. Patel, David P. Frantz, Lauren M. Drabic, Stephen S. Zashin, Zashin & Rich, Cleveland, OH, for Plaintiffs.
R. Christopher Yingling, Richard G. Witkowski, Nicola, Gudbranson & Cooper, Cleveland, OH, for Defendants Chad Blasingim.
David A. Campbell, III, Donald G. Slezak, Gordon Rees Scully Mansukhani, Cleveland, OH, Stephen L. Miller, Lewis Brisbois Bisgaard & Smith, Cleveland, OH, for Defendants Jon Campbell.

Bollin, Kip, Special Master

SPECIAL MASTER REPORT AND RECOMMENDATION REGARDING PLAINTIFFS’ CONSOLIDATED MOTION FOR SANCTIONS AGAINST DEFENDANTS BLASINGIM AND CAMPBELL

*1 Plaintiffs American Consolidated Industries, Inc. and Monarch Steel of Alabama, Inc. move the Court for sanctions against Defendants Jon Campbell and Chad Blasingim (the “Individual Defendants”) based on the “indisputable discovery misconduct” found to have been committed by Defendant Liberty Steel (see generally Blasingim ECF #211; McCracken ECF #94)[1] in which they are alleged to have participated, and based on the Individual Defendants’ alleged willfulness. Plaintiffs argue that the Court should impose sanctions of default and attorneys’ fees against the Individual Defendants. (Plaintiffs’ Consolidated Motion (Appendix A) at page 2.)[2]

Although at times all three the Defendants shared counsel (sometimes making it less clear at whose behest a given action/inaction was taken) and the Defendants largely shared the same interests, some of that misconduct was clearly unique to Liberty Steel. But after much sifting of issues, the primary questions here involve what role the Individual Defendants played in the various discovery shortcomings and how much they contributed (or fail to contribute) to the discovery mess that gave rise to the sanctions motions. This Report and Recommendation attempts to answer those questions based on the extensive record before the Court.

In its December 15, 2022 Order, the Court found at least four discovery failures by Defendant Liberty Steel that warranted the imposition of sanctions, but made clear that its Order did not involve Individual Defendants Jon Campbell or Chad Blasingim who had not had a fair opportunity to litigate whether they should be subject to discovery sanctions. ECF #211, PageID #10524. Subsequently, the Court set a schedule pursuant to which Plaintiffs could submit motions to the Special Master seeking the imposition of sanctions on those two Individual Defendants. ECF #253. In compliance with that schedule, Plaintiffs submitted a Joint Motion, Mr. Campbell and Mr. Blasingim separately opposed, and Plaintiffs submitted replies in support of their motions, which are now ripe.

For the reasons set forth below, the Special Master recommends that the motions be GRANTED IN PART, and DENIED IN PART, and that the Court issue limited sanctions against Mr. Campbell and Mr. Blasingim.

I. The Consolidated Motion for Sanctions

1. Plaintiffs’ Consolidated Motion for Sanctions is brought pursuant to Rule 26(g)(3) for failure, without substantial justification, to conduct a reasonable inquiry before responding to discovery requests, Rule 26(e) for failure to supplement an incomplete or incorrect discovery response, Rule 37(c), and the inherent power of the Court, and seeks sanctions against Defendants Chad Blasingim and Jon Campbell (hereinafter when referred to together, “the Individual Defendants”), including default and attorneys’ fees, arising out of their discovery conduct (coordinated with defendant Liberty Steel), including:

*2 a. Failure to make reasonable inquiries as to the location of relevant data (from their cell phones);

b. Failure to initially apply two ESI protocols (to the data from their cell phones); and
c. Their behavior “consistent with” Liberty about unnecessary objections.

(Plaintiffs’ Consolidated Motion (Appendix A) at page 2.) In this way, the Plaintiffs’ motion largely tracks the Court's Order granting sanctions against Liberty Steel. Plaintiffs assert that the Individual Defendants’ behavior was more egregious than Liberty Steel's because theirs was willful, as evidenced by “false testimony and written responses which contradicted the very records they withheld.” (Id. at 11, & at 2.)

2. As the Court explained in its December 15, 2022 Order:

Rule 26(g)(1) requires, among other things, that every discovery response or objection “must be signed by at least one attorney of record.” By signing, counsel makes important certifications, including that (1) a disclosure “is complete and correct as of the time it is made”; and (2) a discovery response or objection is consistent with the rules and not made for any improper purpose. Fed. R. Civ. P. 26(g)(1)(A) & (B). These certifications must come “after a reasonable inquiry.” Fed. R. Civ. P. 26(g)(1). “If a certification violates this rule without substantial justification, the court, on motion or on its own, must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both.” Fed. R. Civ. P. 26(g)(3).

“[I]f the party learns that in some material respect the disclosure or response is incomplete or incorrect,” Rule 26(e) requires supplementation of discovery responses in a timely manner. Fed. R. Civ. P. 26(e)(1)(A). It also requires supplementation where additional responsive or corrective information “has not otherwise been made known to the other parties during the discovery process or in writing.” Id.

“If a party fails” to supplement a disclosure under Rule 26(e), Rule 37(c)(1) provides for a mandatory self-executing exclusionary rule as a sanction and authorizes a court to award other appropriate sanctions in addition to or instead of exclusion. Fed. R. Civ. P. 37(c)(1). In addition to the self-executing sanction of exclusion, or instead of it, the Rule authorizes a court to award reasonable expenses, including attorneys’ fees, caused by the failure to disclose or supplement; to inform the jury of the party's failure; and to impose other appropriate sanctions, including ordering that certain facts or matters be taken as true, prohibiting a party from supporting certain claims or defenses or from introducing certain evidence; striking pleadings, and entering a default judgment. Fed. R. Civ. P. 37(c)(1) (cross-referencing Fed. R. Civ. P. 37(b)(2)(A)(i)–(vi)).

The purpose of imposing sanctions is to “assure both future compliance with the discovery rules and to punish past discovery failures, as well as to compensate a party for expenses incurred due to another party's failure to properly allow discovery.” Bell v. Automobile Club of Mich., 80 F.R.D. 228, 229 (E.D. Mich. 1978).

ECF #211, PageID #10517-10518.

*3 3. Here, Defendant Campbell acknowledges that his subject mobile phone data was not originally produced to Plaintiffs as required, and that the ESI protocols were not applied correctly, but Mr. Campbell avers that prior counsel is responsible for those errors, not he, and that he provided his phone to his counsel very early in the litigation for copying and assumed that it had been produced to Plaintiffs, as appropriate. Moreover, Mr. Campbell argues that any shortcoming has since been remedied, that the prior sanctions issued have already made Plaintiffs whole, and that sanctions – especially the requested sanction of default – are inappropriate because they are not available without a failure to obey a Court Order pursuant to Rule 37(b)(2)(A) (the requirements of which he imputes to Rule 37(c)(1)(C)). Further, Mr. Campbell argues, default is not an available remedy because his failure to produce the requested discovery was not willful, that he should not be held responsible for his former counsel's shortcomings, and that default would be unjust given the weakness of the Plaintiffs’ underlying case. (See generally Campbell Opposition (Appendix C).)

4. Defendant Blasingim also seemingly concedes (or at least does not dispute) that he did not originally produce the subject mobile phone data to Plaintiffs as required, and that the ESI protocols were not applied correctly to the data gathered, and instead argues that sanctions are inappropriate because (1) he timely supplemented his discovery responses once he learned they were incomplete – how he learned the prior ESI productions were incomplete is immaterial, (2) he did not improperly certify his discovery responses because he believed them to be true at the time he certified them [albeit wrongly], and he did preserve the ESI even if he did not produce it initially, (3) Rule 37(b) (not at issue here) does not allow sanctions unless a party has failed to obey an order, and Rule 37(c) sanctions are not permitted because he supplemented his production per Rule 26(e), (4) default is inappropriate because he participated in discovery in good faith, he did not cause the delay (the contempt proceedings involving Liberty Steel did), and his alleged fabrications of testimony are simply a matter of opinion, or are due to lack of sleep, or lack of recall – and the eventually-produced documents “will provide fertile ground for cross-examination if the case goes to trial.” See generally Campbell Opposition (Appendix C), & at page 12.

II. Background

A. Prior Findings

5. The background for these motions is mostly set forth in detail in the Court's December 15, 2022 Order and in the Special Master's Report, and will only be repeated here as needed to provide context. For the purposes of this Report, I have relied on the facts as previously found by the Court and or adopted by the Court from the Report of the Special Master. ECF #211, ECF #166, and the evidence cited therein, and the evidence specifically cited infra, from the parties’ submissions (Appendices A-E).

6. In its Order, the Court found, in relevant part, that by clear and convincing evidence Defendant Liberty Steel:

1. Failed to take reasonable steps to identify and locate responsive and relevant data in the Blasingim matter, especially with regard to the collection of ESI data, and including, inter alia, that Liberty was unable to articulate what it collected and when. Further, Liberty frustrated the ability to comply with discovery obligations when it changed counsel.

2. Failed to apply the first two agreed ESI protocols to the forensic images of the Campbell and Blasingim cell phones.[3] And,

3. Engaged in improper and unnecessary objections.

ECF 211, PageID #10524-10530. None of the discovery failures were substantially justified or harmless, and all prejudiced Plaintiffs.

7. In its December 2022 Order, the Court found that Liberty Steel failed to reasonably inquire, in contradiction to its certification that it had done so when responding to Plaintiffs’ discovery requests. This finding was based in part on Liberty Steel's failure to take reasonable steps to produce responsive data that should have been purged pursuant to the McCracken settlement, but were not, its inability to articulate what it collected and when, and its failure to work with prior counsel, again relating to information identified by its vendors but not produced in the Blasingim matter.[4] ECF 211, PageID #10525-10527. These particular shortcomings are unique to Liberty Steel and do not involve the Individual Defendants.

1. Failure to Produce Campbell and Blasingim Cell Phones

*4 8. As the Special Master explained in her June 2022 Report & Recommendation, “Just before Liberty was added to the litigation, both Mr. Blasingim and Mr. Campbell responded through [their lawyers at] Dentons to substantially similar discovery requests from Plaintiffs. Those requests sought, among other things, written communications between each defendant and any representative or employee of Liberty after January 1, 2018; documents (including, specifically, text messages) reflecting the circumstances of their hire by Liberty; and all documents and data that either defendant “accessed, copied, emailed to yourself, or removed from” Monarch prior to specified dates. Subject to certain objections and limitations, both Blasingim and Campbell committed to producing responsive documents.” ECF 166, PageID #4948.

9. Further, “On August 22, 2019, responding to deficiencies alleged by Plaintiffs, Gallagher Sharp confirmed on behalf of Mr. Blasingim and Mr. Campbell that all of their “personal and Liberty Steel-issued email addresses and devices have been preserved.” Gallagher Sharp also averred that neither defendant had any documents or data in his possession relating to Plaintiffs or its “products, customers, suppliers, wholesalers, business contacts, plans, strategies, employees, pricing, or support services.” ECF 166, PageID #4949.

10. Despite these representations, the Court found in its December 15, 2022 Order, that while they had been preserved, “the forensic images of the Campbell and Blasingim cell phones and personal devices were not initially searched under the November 2019 ESI Protocol.” ECF 211 PageID #10527 (citing Blasingim ECF No. 166, PageID #4962; Blasingim ECF No. 177, PageID #6873; Blasingim ECF No. 156-22, ¶ 10, PageID #3578).

11. 14 months later, after negotiating an ESI protocol including relevant search terms and engaging an e-discovery vendor to assist, “[i]n November 2020, Plaintiffs took Mr. Blasingim and Mr. Campbell's depositions, and learned that their individual cell phones had been imaged but not produced. This necessitated a new ESI Protocol and search. Parties’ Nov. 30 and Dec. 1, 2020 Letters to the Court (Pl. Subm. Exs. 18, 19). Former counsel for Liberty has indicated that “the failure to include Mr. Campbell's and Mr. Blasingim's cell phones or other personal devices as data sources searched was an oversight.” ECF 166, PageID #4949-50.

2. Failures to Apply ESI Protocols

12. The producing party bears responsibility for assuring the vendor's proper application of an agreed protocol for the discovery of information electronically stored on such cell phones:

“Responding parties are best situated to evaluate the procedures, methodologies, and technologies appropriate for preserving and producing their own electronically stored information.”

ECF 211, PageID #10528 (citing The Sedona Principles, Third Edition: Best Practices, Recommendations & Principles for Addressing Electronic Document Production, 19 Sedona Conf. J. 1, 52 (2018)).

13. After locating the preserved but unproduced cell phones of Mr. Blasingim and Mr. Campbell, “[i]n December 2020, the parties entered into a ‘Supplemental Protocol Regarding the Search of Electronic Stored Information of Campbell and Blasingim.’ The protocol included a negotiated ‘Modified Search Term List.’ Second ESI Protocol (Pl. Subm. Ex. 20). Liberty's counsel forwarded the protocol to [the ESI vendor] Epiq but ‘overlooked’ the modified search term list, causing Epiq to re-apply the search terms from the 2019 protocol – a fact that only came to light during the Special Master process.” ECF 166, PageID #4950, see also ECF 211, PageID #10527.

14. In early 2021, both Mr. Blasingim and Mr. Campbell produced documents purportedly identified through application of the December 2020 ESI Protocol to the preserved cell phone records (ECF 166, PageID #4951 (citing Plaintiffs’ Submission ECF 154, PageID #2488)) but applying the old Search Term List.

*5 15. Mr. Blasingim's counsel represents that he learned that the wrong Search Term List was used by Epiq in January of 2021, and disclosed it to the Court on March 25, 2022 (Blasingim Opposition at 6 (citing Yingling Decl. at ¶ 15 & Exhibits thereto; ECF 137, PageID #2208)). The correct, Modified Search Term List was applied by Epiq, and Mr. Blasingim made supplemental productions on May 9 & 11, 2022. (Id. at Ex. 10.) This was supplemented on June 6, 2022, with the production of documents sent via text. (Id. at Ex. 10.) Additional photographs or screenshots were produced in January, February, and March of 2023. (Id. at Exs. 11-13.) Mr. Campbell made his productions at roughly the same times.

16. Based on this understanding of the evidence regarding Liberty Steel's (1) failure to take reasonable steps to produce responsive data that should have been purged pursuant to the McCracken settlement, but were not, (2) failure to produce the cell phones, failure to effectively coordinate with its ESI vendor to apply the correct protocol, and failure to provide accurate discovery responses regarding same, and (3) its improper and unnecessary objections (especially regarding the spreadsheets and pricing workups), the Court found that Liberty Steel failed to fulfill its discovery obligations. ECF 211, PageID #10526-32.

III. Analysis and Findings

A. Some Shortcomings Previously Found Are Uniquely Liberty Steel's

17. Plaintiffs argue that the Court's findings as to Liberty Steel should now be made as to the Individual Defendants who they say engaged in the same behavior and were represented by the same counsel. (Plaintiffs’ Consolidated Motion at 12–13.) But as alluded to above, some of the shortcomings that led to Liberty Steel's sanctions are uniquely its own, including: the failure to produce documents that should have been purged as a result of the McCracken settlement (but were not), and the failure to produce the Grasso cell phone. These were substantial shortcomings that contributed to the award of sanctions but that neither Individual Defendant played a role in and so cannot be the basis for sanctions against them.

B. Cell Phones and ESI

18. Other failures, like the Individual Defendants’ failures to timely produce their cell phones, and apply correct ESI protocols, are quite fair to consider.

19. Reviewing the parties’ submissions and evidence in support thereof, as well as Mr. Campbell's and Mr. Blasingim's depositions transcripts, Mr. Campbell's failure to timely produce his cell phone does not appear intentional, but rather careless, and a result of a delegation of supervision of the litigation to others. Astoundingly, it was not until his original deposition on November 19, 2020, that he learned that his cell phone – and the many text messages between him and Liberty Steel employees – had never been produced. See, e.g., ECF 166, PageID #4949-50.

20. Further, Mr. Blasingim's failure to produce his cell phone does not appear to have been intentional. He similarly readily acknowledged in his deposition, taken the next day, that “forensics took the evidence off of” his cell phone. ECF 168 at 18. His counsel knew that the personal devices had been imaged at the outset of the case and believed that information from them had been provided. (Blasingim Opposition, Appendix B, at Ex. F ¶ 7.) During the deposition, counsel learned that the personal devices had not been searched. (Id.)[5]

21. It is notable that neither Defendant reviewed the documents he produced to Plaintiffs or if they did, that they failed to notice the lack of cell phone data identified or produced.[6] It is further remarkable that this missing evidence was not discovered in preparation for the deposition of either gentleman – especially since the timing and content of their communications with Liberty were sure to be a topic for their depositions, and their cell phones provided some of the most objective evidence on that topic.

*6 22. The Individual Defendants were in the best position to note the failures to produce that data, and yet neither Mr. Blasingim nor Mr. Campbell (who were involved in the original collection and preservation of the cell phones) seem to have taken responsibility to ensure that they produced the data, or that their new counsel were aware of, and then produced, the cell phone images.

23. Indeed, the Individual Defendants and Plaintiffs take different lessons from the circumstances surrounding the 18 month-delayed realization that the cell phone data had been collected but not produced in discovery. Where the Individual Defendants see evidence of lack of intent or willfulness to withhold evidence; Plaintiffs on the other hand see evidence of the Individual Defendants’ failure to make a reasonable inquiry, and of certification of their discovery responses without substantial justification.[7] Both Plaintiffs’ and Defendants’ positions have merit. While I do not find evidence of willful violations of their discovery duties, neither Rule 26(g) nor Rule 37(c) require that a party act maliciously or willfully before a court may impose sanctions. Here, the Individual Defendants did not live up to their obligations under Rule 26(g).

24. Neither Individual Defendant satisfied their duty to make a reasonable inquiry when they failed to convey their cell phone data to Plaintiffs and certified their responses to discovery, or when the ESI protocol was not applied properly to that cell phone data. These failures were made possible, or at least exacerbated by their failure to manage and coordinate between and among their changes of counsel. They did supplement their discovery responses eventually, but even then they did so in fits and starts in a process plagued by error that resulted in several productions spread out over more than a year. Their supplementations while in good faith, were not timely. None of the discovery failures were substantially justified or harmless, and all prejudiced Plaintiffs. Their conduct was not consistent with their obligations under Rule 26(g)(3) or 26(e).

C. Defendants’ Objections

1. The Shared Counsel Defense

25. While the Individual Defendants do not now dispute what transpired prior to retaining their present counsel,[8] Mr. Campbell argues that he should not be found culpable because any potentially sanctionable behavior was that of prior counsel, not Mr. Campbell, and that the blame is further attenuated because he was sharing counsel with Liberty Steel and was relying on that shared counsel to appropriately engage in the discovery process. Mr. Blasingim highlights that Gallagher Sharp had been handling the e-discovery for all defendants even after Nicola Gudbranson appeared for Mr. Blasingim, and that Mr. Blasingim and Nicola Gudbranson were unaware that his cell phone information had not been previously produced. (Appendix B, at 3-4.)

*7 26. Defendant Campbell asserts that while he participated in discovery in good faith, Liberty Steel controlled the ESI discovery relevant to Plaintiffs’ motion, and their joint counsel handled the application of ESI protocols. (Campbell Opposition (Appendix C) at 8.) In other words, Mr. Campbell's defense is that he was being practical – for efficiency and cost reasons, no doubt, he believes that he reasonably delegated to and relied on his codefendant's preferred counsel and it is they who erred, not him. He should not be held culpable for their acts or omissions.

27. But then where does his responsibility begin? Mr. Campbell provides no legal authority to support his shared counsel defense and I am aware of none. Instead, as Special Master Niehaus previously advised, sanctions may be appropriate “under Rule 37(c) based on the Defendants’ (acting through common counsel) failure to supplement their discovery responses, and Rule 26(g)(3) based on the Defendants’ failure to perform reasonable inquiry into the existence and location of responsive records before asserting in discovery that such record did not exist or were not available.” ECF 166, PageID #4964 (citing Fed. R. Civ. P. 26 & 37; Brown v. Tellermte Holdings Ltd., No. 2:11-CV-1122, 2015 WL 4742686, at *13 (S.D. Ohio Aug. 11, 2015).

28. The Individual Defendants are responsible for their behavior and for the actions of their counsel – however many they choose to engage. Accepting as true that Mr. Blasingim and Mr. Campbell chose to rely on counsel that was chosen and retained by codefendant Liberty Steel, at times to handle their defense, and at times to manage the discovery process, it is a dubious proposition that they may now use that choice to defend their failure to comply with their discovery obligations. It would create terrible incentives to allow parties to avoid sanctions for their behavior simply by blaming their counsel – or co-counsel. Here, the Individual Defendants appeared glad to take the benefit of their shared counsel's work but seek to disclaim the duty to involve themselves in, manage, or monitor those defense efforts. But this duty cannot be delegated. Inasmuch as Liberty Steel is responsible for its approach to the litigation, so too are the Individual Defendants responsible for theirs.

2. Mr. Blasingim's Objections

29. Defendant Blasingim argues further that with regard to the improper application of the ESI protocols, both he and Monarch's counsel had the opportunity to but did not notice the missing search terms in the ESI contractor's Search Term Reports. (Blasingim Opposition, (Appendix B) at 5.) Mr. Blasingim's error was in the open for all to see. (Id. at 5.) He is of course correct and this is evidence of his lack of intent to mislead, but it also does nothing to address Mr. Blasingim's own failure to comply with discovery obligations.

30. Mr. Blasingim further claims that he was precluded from reviewing the search terms and the Search Term Reports due to Plaintiffs’ assertion of AEO as to the ESI Protocol. (Id. at 5 & Ex. F, ¶ 14.) Again, this is a fair point, and the lack of such an AEO designation may have provided a greater opportunity for Mr. Blasingim to note the error – this can be a problem with AEO designations. But this does not put the issue to bed, because the AEO designation also did not preclude Mr. Blasingim from viewing the document production itself, from which an absence of cell phone data would be easily noted.

31. Mr. Blasingim argues that he may not be sanctioned pursuant to Rule 26(e) because he supplemented his response once he learned that his cell phone data had not been produced, and that his prior responses were incomplete. (Blasingim Opposition (Appendix B, at 8, et seq.).)[9] He did not learn that his discovery responses were correct until the time of his deposition, and that was the “triggering event” for his duty to supplement. (Id. (citing 8A Wright & Miller Fed. Prac. & Proc. Civ. § 2049.1 (3d ed.).)

*8 32. Mr. Blasingim served responses to discovery requests on May 6, 2019, the parties later negotiated the 2019 ESI protocol (which did not mention Mr. Blasingim's personal phone at issue here), and the parties applied the ESI protocol to items other than Mr. Blasingim's personal phone. Then Mr. Blasingim's deposition was taken on November 20, 2020 (ECF 168), at which time Mr. Blasingim discovered that his phone was not identified in his discovery responses issued 18 months earlier, nor had it been searched pursuant to the 2019 protocol negotiated the year before. ECF 168 at 18. At this time (December of 2020) the parties negotiated a new discovery protocol pursuant to which Mr. Blasingim purported to produce data from his personal cell phone beginning in February of 2021, and then again in May of 2022, after it was discovered that the 2020 ESI protocol Search Terms had not been used. (Blasingim Opposition at Appendix B, Yingling Declaration (Exhibit F) at ¶¶ 13, 15.) Thus, Mr. Blasingim's “timely” supplementation occurred between 4-16 months after he realized that his cell phone data had not been produced, and three years after his initial written response to discovery.

33. On this record, I cannot agree that Mr. Blasingim's supplementation of his production was timely. I do recognize that, subject to the seemingly continuous errors made in discovery, his attempt to remedy the prior shortcoming was made in good faith. But those multiple errors occurred and the supplementation did not occur for a long, long time.

D. Change of Counsel

34. The parties also take different lessons from the defendants’ change of counsel. The Individual Defendants originally shared counsel, Dentons Cohen & Grigsby P.C., between the two of them, and then they shared counsel with Liberty Steel – first Dentons and then Gallagher Sharp. But in May of 2020 Mr. Blasingim secured separate counsel, Nicola Gudbranson & Cooper, LLC (ECF 166, PageID #4952), and in February of 2022 attorney David A. Campbell, III (first of Lewis Brisbois and now of Gordon Rees Scully Mansukhani) appeared on behalf of Defendant Jon Campbell. Plaintiffs cite to the Court's prior Order finding that the transfer of the defense from one counsel to another had a “direct role” in the discovery issues that prompted the Court's sanctions of Liberty Steel.

35. Mr. Campbell cites to the same language from the Court's prior Order, and he acknowledges that after his initial discovery responses he retained new counsel. (Campbell Opposition at 7-8.) But where Plaintiffs (and the Court) see this choice as creating opportunity for error, the Individual Defendants see any change-of-counsel-inspired errors as further evidence of their lack of bad faith – these are mistakes that happened due to the unfortunate lack of coordination before and after change of counsel, not due to an intent to withhold information.

36. Again, both parties are right – the change of counsel did create unforced errors on the part of counsel which were not intended by the parties, but the parties are still responsible for the scenario they created.

37. Defendant Blasingim is also correct that the Federal Rules of Civil Procedure do not demand perfection. See Reinsdorf v. Skechers U.S.A., Inc., 296 F.R.D. 604, 615 (C.D. Cal 2013). But the Rules do require a bit more than what occurred here. While “counsel made certain oversights and the like that contributed to the circumstances that resulted in” the Court's sanctions rulings (ECF 211, PageID #20563), the parties are ultimately responsible for the choices they make, and here those choices promoted the likelihood of error and non-compliance.

E. Relevance, Objections, and the Multiplication of Discovery Disputes

38. Finally, in its December 15, 2022 Order, the Court found that Liberty Steel responded to discovery with “an overly restrictive view of relevance that finds no support in the Rules or in practice.” Id. ECF 211, PageID #10530.

39. This was based in large part on the Defendants’ prolonged efforts at avoiding production of “work up” sheets and related transactional data requested by Plaintiffs. Relying on an Order in the McCracken case, the parties’ common counsel attempted to shield these matters from discovery to the benefit of all three Defendants. ECF 166, PageID #4950.

*9 40. In a February 24, 2021 Order Magistrate Judge Parker found that the requested documents were relevant and, indeed “strike[ ] to the very heart of [Plaintiffs’] claims.” ECF 85, PageID #1669. At the same time, he specifically found that Mr. Blasingim had satisfied his duty to respond to that request. Id. PageID #1671.

41. The Court found the Defendants’ Objections “overly restrictive, hindering and delaying the production of documents that – although Liberty may contest their interpretation – are indisputably relevant.” ECF 211 at PageID #10524, see also PageID #10531 (finding clear and convincing evidence of Liberty Steel's “inconsistently and selectively applied” standard of relevance, “resulting in the multiplication of discovery disputes and hindering the production of documents and the information.”). Again, the Magistrate Judge found that Mr. Blasingim had satisfied his duty to respond.

42. Although Liberty Steel may have taken the lead on these efforts, Plaintiffs argue that Mr. Campbell was complicit in Liberty's attempts to avoid production of Plaintiffs’ pricing workups. (Plaintiffs’ Reply (Appendix E), at 4 (citing Defendants’ [Liberty Steel and Campbell's] Joint Brief in Opposition to Motion to Compel ECF 69, PageID #623-24).) Mr. Campbell's testimony does indeed describe how and when he developed and used spreadsheets and pricing workups while working for previous employers (ECF 183, Campbell Deposition at 81 et seq.), but this testimony is consistent with Defendants’ theory of the case – Plaintiffs are certainly free to challenge it – but it is not particularly persuasive evidence of Mr. Campbell's complicity in discovery shenanigans. Though he supported his codefendant's objections and so does bear some responsibility, Mr. Campbell's role appears to have been a distant second to that of Liberty Steel, which the Court has already found to have multiplied discovery disputes and hindered the production of documents and other information. ECF 211, PageID #10531. Sanctions are not warranted for either Individual Defendant on this basis.

F. Consideration of Sanctions

43. If a party fails to comply with its discovery obligations under Rule 26, Rule 37(c)(1) provides for the imposition of sanctions. Hitachi Med. Sys. Am., Inc. v. Choe, N.D. Ohio No. 5:10 CV 384, 2021 U.S. Dist. LEXIS 138522, at *4 (Sept. 26, 2012). As previously explained by the Court, Rule 37(c) identifies available sanctions including:

(A) payment of reasonable expenses including attorneys’ fees caused by the failure;
(B) inform the jury of the party's failure; and
(C) impose other sanctions, including those set forth in Rule 37(b)(2)(A)(i)-(vi).

Further, Fed. R. Civ. P. 37(b)(2)(A)(i)–(vi) allows for a Court to order that certain facts or matters be taken as true, prohibit a party from supporting certain claims or defenses or from introducing certain evidence; striking pleadings, and entering a default judgment.

44. On their face, neither Rule 26(g) nor Rule 37(c) require that a party act maliciously or willfully before a court may impose sanctions. (See also ECF No. 211, PageID #10543.) But while sanctions may be warranted without such a showing, default is more typically found where a party “acted in willful bad faith.” KCI USA, Inc. v. Healthcare Essentials, Inc., 801 F. App'x 928, 934 (6th Cir. 2020); First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 519 (6th Cir. 2002).

*10 45. Ultimately, discovery sanctions should compensate Plaintiffs for the costs they have incurred as a result, and assure future compliance with the discovery rules, while at the same time avoiding sanctions that give Plaintiffs a windfall or are unfairly punitive. ECF 211, PageID #10554 (citing Bell v. Automobile Club of Mich., 80 F.R.D. 228, 229 (E.D. Mich. 1978)).

1. Default Is Inappropriate

46. “It is improper to infer nefarious intent or bad faith from what appear to be ordinary discovery errors.” Id.; PaineWebber Group, Inc. v. Zinsmeyer Trusts Partnership, 187 F.3d 988, 993 (8th Cir. 1999). While the nature and persistence of discovery errors in this matter take them out of the “ordinary” category, I agree that there is not persuasive evidence of bath faith.

47. Plaintiffs claim that the Individual Defendants’ misconduct was equal to or more egregious than Liberty Steel's sanctionable misconduct because they each took advantage of the failure to produce mobile phone data by testifying falsely (and providing written discovery answers) and omitting key facts, including about the circumstances and timing of discussion pertaining to their hiring at Liberty and communications with Plaintiff's employees, customers, and prospects, often in a manner expressly contradicted by the (originally unproduced) text messages. (Plaintiffs’ Consolidated Motion at 11, & at 2.)

48. But Plaintiffs’ requested sanction of default is inappropriate for largely the same reasons that default was not entered against Liberty Steel. See ECF 211 generally, and at PageID #10555 (whether documents in question amount to trade secrets). Moreover, unlike Liberty Steel neither of the Individual Defendants played a role with regard to any of the documents improperly retained by Liberty Steel, and not produced, that were at the center of the McCracken dispute.

49. Further, although the Individual Defendants cannot escape responsibility for their own roles, Liberty Steel played a much more direct role in the discovery failings – it coordinated the ESI discovery fiasco and led the charge on the strategy of improper and unnecessary objections.[10] In the end, just as the Court previously found a lack of ill intent on the part of Liberty Steel when it failed to identify, search, and produce the cell phone data, here, the Individual Defendants’ failures were not intended.

50. Plaintiffs nonetheless argue that Mr. Blasingim and Mr. Campbell's shortcomings were worse than Liberty Steel because the electronic data shows communications involving their employment by Liberty Steel at a time earlier than they acknowledge in their deposition testimony and in written discovery responses; essentially, Plaintiffs argue that by withholding the data, the Individual Defendants were freed to lie. (See Plaintiffs’ Consolidated Motion (Appendix A) at 7-10.)

51. Indeed, it is very hard to reconcile the statements made by Mr. Blasingim and Mr. Campbell in their first depositions with the data later produced, and as Defendant Blasingim suggests, this will “will provide fertile ground for cross-examination if the case goes to trial.” (See Campbell Opposition (Appendix C), at page 12.)

*11 52. But Plaintiffs conflate the substance of the evidence discovered with the evidence of the Individual Defendants’ conduct in the discovery process. The fact remains that when asked about the missing cell phone data, both of the Individual Defendants readily acknowledged that images had been made. They may or may not have lied about the underlying facts of the case – a jury will decide that – but they appeared not to realize the data had not been produced and were honest about the existence of the data. This ultimately led to its discovery and production – and while it did contribute to the time and effort spent by the parties on this case, the production ultimately eliminated any prejudice to the Plaintiffs at trial. In fact, due to the possibility of an explosive cross-examination at trial based on that recovered data, one could say that Individual Defendants’ “self-imposed sanction” is worse than any other the Court could choose to impose (save default itself).

53. Here, both Individual Defendants effectively demonstrate that their shortcomings in the discovery process were not intentional, malicious, or willful. Moreover, their shortcomings were not nearly as extensive and pervasive as those of codefendant Liberty Steel, whose conduct also fell short of the sanction of default. Instead, the Individual Defendants took a deferential approach to their own defense, delegating to others and failing to monitor or take an active role in satisfying their duties to provide full and accurate discovery responses, and to timely supplement those responses. Their failures were not as plentiful or extensive as Liberty Steel's and they are deserving of a lesser sanction.

54. Finally, Defendants object that Plaintiffs have already been made whole by the sanctions awarded in the Court's December 2022 Order, and this is largely true – at least in a financial sense – and so the sanctions recommended are narrowly tailored.

IV. Conclusion

For the foregoing reasons and based on the Individual Defendants’ independent failures to comply with Rules 26(e) & (g)(3), I respectfully recommend that Plaintiffs’ Joint Motion for Contempt be granted in part and denied in part. In sum, I recommend:

A. Discovery sanctions against Defendant Blasingim and Defendant Campbell are appropriate and should be granted.

B. Instruction: Consistent with Rule 37(c)(1)(B), I recommend that as part of its instructions at the end of the case, the Court inform the jury of Mr. Blasingim's and Mr. Campbell's failures to comply with their discovery obligations, using the production of their cell phone data as examples, and instruct the jury that it may give these facts whatever weight they choose in their deliberations.

C. Costs and fees: Under Rule 26(g)(3), an appropriate “sanction may include an order to pay the reasonable expenses, including attorney's fees, caused by the violation.” Similarly, Rule 37(c)(1)(A) provides that a court “may order payment of the reasonable expenses including attorney's fees, caused by the [discovery] failure.” Accordingly, I recommend that the Court award Plaintiffs attorneys’ fees and expenses under those Rules, but in light of Liberty Steel's primary and more severe discovery violations which entirely overlap with the sanctionable behavior of the Individual Defendants, and for which the Plaintiffs have already been awarded fees and expenses, I recommend that the Court limit that award to:

1. Plaintiffs’ reasonable fees and costs associated with Plaintiffs’ Consolidated Motion for Sanctions Against Defendants Blasingim and Campbell, and
2. Fees and costs of the Special Master associated with Plaintiffs’ Consolidated Motion for Sanctions Against Defendants Blasingim and Campbell.

As both Individual Defendants’ culpability was comparable in scope and effect, I recommend that these costs and fees be split evenly between the two.

In accordance with Rule 53(f) of the Federal Rules of Civil Procedure and section II.D. of the Appointment Order, any party may file objections to, or a motion to adopt or modify, this Report and Recommendation within twenty-one calendar days. Failure to timely file objections may result in permanent waiver.

Footnotes

[1]

Because the present motions involve alleged discovery violations in the Blasingim matter, going forward, all citations to the record shall be to the docket in that case.

[2]

The Parties’ submissions to the Special Master are attached hereto as Appendices A, B, C, D, & E.

[3]

Although not relevant to the present motions, the Court also found that Liberty Steel failed to locate or produce images of Liberty Steel CEO Grasso's cell phone.

[4]

The Court also found that by changing counsel Liberty Steel frustrated the efforts of counsel to discharge their discovery obligations. ECF 211, PageID# 10527.

[5]

Counsel subsequently worked with Plaintiffs’ counsel to apply the ESI protocol to the phone data, which was eventually produced. (Id. Ex. F at ¶¶ 8, 15-18.)

[6]

Defendant Blasingim suggests that, because he is a client and not an attorney, and due to AEO designations in the ESI protocol, he was precluded from reviewing the Search List for the ESI protocol and otherwise hampered from participating in the discovery process. There's a point to be made there – one avenue for his review was obscured – but having reviewed the Protective Order and the parties’ communications, I see nothing that prevents a party such as Mr. Blasingim from reviewing materials in their possession, including those produced to the other side prior to producing them or prior to certifying discovery responses.

[7]

Plaintiffs attempt to bolster this with the suggestion that the apparent disappearance of the cell phone data allowed the Individual Defendants to testify in a manner contradicted by that data (as was learned once the data was ultimately produced). Put another way, while the Defendants may not have purposefully lost the data, they were quick to take advantage of its absence.

But Defendants’ alleged misrepresentations about the timing of certain communications is not the same as dishonestly withholding documents or data. If the Defendants did indeed take advantage of the fact that the data was missing when they testified, that plan will surely backfire at trial when Plaintiffs impeach them with the now-available data – and that is something that can occur without sanction by the Court.

[8]

The two shared counsel with Liberty Steel – first Dentons and then Gallagher Sharp – but in May of 2020 Nicola Gudbranson & Cooper, LLC appeared as counsel for Mr. Blasingim. (ECF 166, PageID #4952), and attorney David A. Campbell, III (first of Lewis Brisbois and now of Gordon Rees Scully Mansukhani) appeared on behalf of defendant Jon Campbell.

[9]

He further argues that he discovered the misapplication of the outdated ESI protocol while the case was stayed as to him (from October 2021 through December 2022), that he worked to remedy the situation during that time, and that his conduct did not contribute to delay or prejudice Plaintiffs.

[10]

Still, the Individual Defendants’ inaction or acquiescence contributed to Liberty Steel's multiplication of the proceedings.