5 Discovery
5.1 Introduction
Discovery is both the most distinctive and one of the most expensive aspects of American civil litigation. This phase of litigation most commonly begins after the defendant has answered the complaint (whether or not a motion to dismiss was filed). It consists of a formalized exchange of documents, information, and testimony between the parties and, occasionally, from third parties. Information gained in discovery is often the pivotal moment in a case. Incriminating emails, telling admissions, and smoking-gun evidence are the needles lawyers seek in the haystack of discovery. Even when evidence revealed in discovery doesn’t force parties into a settlement, it often plays a starring role at trial.
5.2 Timing and Types of Discovery
Rule 26 sets out the general rules of, and timeline for, discovery. That timeline looks roughly as follows, with specific dates to be set by the judge in consultation with the parties:
First, “as soon as practicable,” the parties must confer with each other to “consider the nature and basis of their claims and defenses and the possibilities for promptly settling or resolving the case.” Rule 26(f)(2). They must also “develop a proposed discovery plan,” including how they will “preserv[e] discoverable information.”
Next, the parties must exchange their initial disclosures, which are basic information about the parties’ claims, as well as potential witnesses and evidence. See Rule 26(a)(1)(A). Failing to disclose information required at this stage can result in witnesses or evidence being barred from being used in the case. See Rule 37(c)(1).
After the Rule 26(f) conference, the judge must issue a scheduling order. See Rule 16(b). The scheduling order “must limit the time to join other parties, amend the pleadings, complete discovery, and file motions.” Rule 16(b)(3)(A). It may also set the limits of discovery, govern how electronically stored information should be shared, and set dates for future conferences and trial. Rule 16(b)(3)(B).
With the scheduling order in place, the parties may begin exchanging discovery requests. There are three major types of discovery requests:
Requests for Production (Rules 34 and 35): at this point, the parties may ask each other for documents or any other tangible or electronic item that is relevant, proportional and nonprivileged. A typical case will involve thousands and sometimes millions of pages of documents and communications.
Interrogatories and Requests for Admissions (Rules 33 and 36): As the parties are exchanging documents, they can also pose written questions directly to each other. However, each pair of parties may pose only 25 interrogatories (including sub-parts of questions) to each other, limiting their overall value. Relatedly, under Rule 36, parties may request that other parties admit certain facts not in dispute. Unlike interrogatories, requests for admissions are unlimited in number.
Depositions (Rule 30) and Examinations (Rule 35): Finally, the parties may depose witnesses who may have knowledge of the case. Depositions (governed by Rule 30), are typically seven-hour long interviews that are recorded under oath. The deposing party must bear the cost of the deposition (conference room, stenographer, etc.). By default, each side (plaintiffs, defendants) may take only 10 depositions. Rule 35 allows physical and mental examinations of parties, including medical and mental examinations, but these are relatively rare.
Next, in cases that employ expert witnesses, the parties must exchange expert reports and schedule expert depositions. Rule 26(a)(2), (b)(4).
At the close of the party-driven phase of discovery, the case is often ripe for one last phase of dispositive motions (summary judgment). Then the parties exchange pretrial disclosures, including witness lists and exhibit lists. Rule 26(a)(3).
Finally, the court must hold a final pretrial conference to set the plan for trial. Rule 16(e). This conference must happen “as close to the start of trial as is reasonable.” Id.
5.3 Limits on Discovery
As you can begin to appreciate, the discovery process unlocks a series of powerful tools. If not safeguarded, the parties may use these tools in ways that are excessive or abusive. For that reason, the Rules impose a series of limits on what kinds of information is discoverable. The three main limits are relevance, proportionality, and privilege. See Rule 26(b)(1). The next section will consider each of those limits in turn.
Favale v. Roman Catholic Diocese of Bridgeport
SQUATRITO, J.
Now pending in the above-captioned matter is plaintiffs’ motion to compel and defendant’s motion for a protective order. […] For the reasons that follow, plaintiffs’ motion to compel is DENIED and defendant’s motion for a protective order is GRANTED.
Background
Plaintiff Maryann Favale worked as an administrative assistant at Saint Joseph’s School in Brookfield, Connecticut, for approximately twenty-one years. During this time period, in November of 2002, Sister Bernice Stobierski became the new interim principal. Then, in May 2003, Sister Stobierski assumed the position of full-time principal. Maryann Favale alleges that Sister Stobierski subjected her to “severe and repeated sexual harassment” in the workplace from December 2002 to June 2003. Specifically, plaintiff alleges that Sister Stobierski touched her inappropriately, made sexually suggestive comments, exhibited lewd behavior, and requested physical affection. Plaintiff first informed her employer, the Roman Catholic Diocese of Bridgeport, (“the Diocese”) of the alleged sexual harassment on June 11, 2003. Maryann Favale, who no longer works at Saint Joseph’s School, seeks damages against the Diocese for sexual harassment, retaliation, defamation, intentional and negligent infliction of emotional distress, negligent hiring, negligent supervision, and other causes of action. In addition, co-plaintiff Mark Favale asserts a claim for loss of consortium against the defendant. Sister Stobierski is not a party to this case.
Plaintiffs now seek to compel Sister Stobierski to testify to any prior treatment she may have received for her alleged anger management history and psychological or psychiatric conditions. Plaintiffs also move to compel the Diocese to produce any records it has of any such treatment. The Diocese objects to these requests on the grounds that this information is irrelevant […] .
Sister Stobierski’s Testimony
Plaintiffs assert that Sister Stobierski’s testimony regarding the treatment she received for her alleged anger management, psychological, and psychiatric conditions is relevant to their claims of negligent hiring and negligent supervision. To assert a negligent hiring claim under Connecticut law, a plaintiff must “[p]lead and prove that she was injured by the defendant’s own negligence in failing to select as its employee a person who was fit and competent to perform the job in question and that her injuries resulted from the employee’s unfit or incompetent performance of his work.” Similarly, Connecticut law requires that a plaintiff bringing a negligent supervision claim
[p]lead and prove that he suffered an injury due to the defendant’s failure to supervise an employee whom the defendant had a duty to supervise. A defendant does not owe a duty of care to protect a plaintiff from another employee’s tortious acts unless the defendant knew or reasonably should have known of the employee’s propensity to engage in that type of tortious conduct.
Both negligent hiring and negligent supervision claims turn upon the type of wrongful conduct that actually precipitated the harm suffered by plaintiff. “It is well settled that defendants cannot be held liable for their alleged negligent hiring, training, supervision or retention of an employee accused of wrongful conduct unless they had notice of said employee’s propensity for the type of behavior causing the plaintiff’s harm.”
Plaintiffs allege that the defendant negligently hired and supervised an individual who was not fit to be the principal of an elementary school. They contend that the “defendant knew or reasonably should have known that Sister Stobierski was unfit to be the principal of St. Joseph’s School as a result of her prior emotional and anger management issues, and limited school administration experience.” […] Yet, plaintiffs do not allege that Sister Stobierski’s prior emotional and anger management issues harmed plaintiff.
Rather, the only type of harm alleged to have been suffered by Maryann Favale was harm resulting from repeated acts of sexual harassment, and plaintiffs do not maintain that Sister Stobierski’s alleged anger management and psychological or psychiatric conditions contributed to the sexual harassment. Accordingly, Sister Stobierski’s testimony pertaining to the treatment she allegedly received for her anger management, psychological, or psychiatric conditions is not relevant because it does not pertain to the defense or claim of any party.
Indeed, even if the Diocese was aware of Sister Stobierski’s alleged anger management history or psychological or psychiatric conditions, this knowledge would have no bearing on plaintiffs’ claims for negligent supervision and negligent hiring because the wrongful conduct of which the Diocese would have had notice was not the same type of wrongful conduct that caused Maryann Favale harm. Notice of Sister Stobierski’s alleged anger management history or psychological or psychiatric conditions does not equate to notice of Sister Stobierski’s propensity to commit acts of sexual harassment. The Diocese’s objection to plaintiffs’ motion to compel the testimony of Sister Stobierski is sustained, and plaintiffs’ motion is denied.
The Production of Defendant’s Records Relating to Sister Stobierski
Plaintiffs assert that any documentation that the Roman Catholic Diocese of Bridgeport may have regarding Sister Stobierski’s treatment for anger management or psychological and psychiatric conditions is relevant to their claims of negligent hiring and negligent supervision. The elements of these claims are discussed above. […] [E]ven if the defendant possessed documents relating to treatment Sister Stobierski received for her alleged anger management or psychological and psychiatric 482conditions, these records would not establish Sister Stobierski’s propensity for the type of behavior that caused Maryann Favale harm because they would not demonstrate a propensity for sexual harassment. Again, it is significant that plaintiffs do not allege that Maryann Favale was harmed by Sister Stobierski’s alleged inability to control her anger or her alleged psychological or psychiatric conditions. Sexual harassment is the only type of harm alleged by plaintiffs. […]
Defendant’s motion for a protective order is granted. A protective order shall enter barring future discovery into Sister Stobierski’s anger management or psychological and psychiatric treatment as the court finds that this information is profoundly personal and, as stated herein, not relevant to the claims in this case.
Notes & Questions
The lesson of Favale is that relevance is judged in light of the parties’ actual claims and defenses. Only if evidence would tend to prove or disprove a claim or defenses is it considered relevant within the meaning of Rule 26(b).
What might the plaintiff have done differently at the pleading stage in order to make her discovery request relevant under Rule 26?
Cerrato v. Nutribullet, LLC
SNEED, M.J.
ORDER ON PLAINTIFF’S MOTION TO COMPEL
This matter is before the Court on Plaintiff’s Motion to Compel Prior Accident/ Injury Reports and Consumer Complaints Regarding Product at Issue and Defendant’s Response in Opposition. Upon consideration, the Motion to Compel is granted in part and denied in part.
Background
Plaintiffs Phyllis and German Cerrato bring this products liability action against Defendants for injuries allegedly sustained by Plaintiff Phillis Cerrato while using a blender designed and manufactured by Defendants. Plaintiffs allege that the blender exploded and resulted in hot liquids burning Plaintiff Phyllis Cerrato and causing property damage to Plaintiffs’ kitchen. Plaintiffs bring negligence, strict liability, and breach of warranty claims against Defendants. […]
Analysis
[…] Request Number 4 seeks “[a]ll accident reports and records relating to any injury allegedly caused by the product.” Request Number 5 seeks “[a]ll consumer complaints of any type relating to the product.” Plaintiff defined the term “product” as the “MagicBullet/Nutribullet Pro 900 series that is the subject of this litigation.” In response, Defendant objected to both requests as vague, ambiguous, overbroad, not reasonably calculated to lead to the discovery of admissible evidence, [and] not proportional to the needs of the case. […]
[T]he Court agrees that Plaintiff’s requests are overbroad and not proportional to the needs of the case. The requests contain no time limitation and no limitation as to the type of injury at issue, the subject matter of the complaints requested, the alleged defect at issue, or the circumstances of the incident in the materials requested. Defendant asserts that if Plaintiff’s Motion to Compel is granted, Plaintiff should only be entitled to discovery of incidents “similar enough” to the incident Plaintiff describes in her deposition. Specifically, Defendant states the requests should be limited to similar incidents where “the Nutribullet Pro 900 cup could not be untwisted from the base to turn it off.” Defendant further asserts that Plaintiff should not be entitled to discovery of information concerning other incidents that occurred subsequent to the subject incident as subsequent incidents are irrelevant. Nevertheless, evidence of subsequent incidents is admissible to prove a particular theory of causation, particularly where the exact circumstances of an accident are unknown.
Given the overbroad nature of Plaintiff’s requests, the Court finds that the requests are unduly burdensome and seek information that is disproportionate to the needs of this case. However, with an appropriate time limitation, a request for accident reports and consumer complaints concerning incidents where the MagicBullet/ Nutribullet Pro 900 Series could not be turned off is relevant and proportional to the needs of the case. The Motion to Compel is therefore granted in part, and Defendant shall supplement its response by producing all accident reports and consumer complaints occurring within five years prior to Plaintiff’s incident through the date of Plaintiff’s Complaint concerning incidents where the MagicBullet/Nutribullet Pro 900 Series could not be turned off. See Moore v. Armour Pharmaceutical Co., 927 F.2d 1194, 1197 (11th Cir. 1991) (stating that the trial court “has wide discretion in setting the limits of discovery”); Farnsworth, 758 F.2d at 1547 (same); Commercial Union Ins. Co., 730 F.2d at 731 (“Case law states that a motion to compel discovery is committed to the discretion of the trial court”).
Last, Defendant objected to Plaintiff’s Requests Number 4 and 5 as seeking confidential and private information, including private information concerning other consumers. The confidential and private information of other consumers is irrelevant to Plaintiffs’ claims. Therefore, Defendant shall redact all accident reports and consumer complaints produced to Plaintiffs for the consumers’ private and confidential information, including any names, addresses, telephone numbers, and social security numbers. […]
Wagoner v. Lewis Gale Medical Center, LLC
BALLOU, M.J.
Order
Plaintiff, Jim David Wagoner (“Wagoner”) seeks to compel defendant Lewis Gale Medical Center, LLC (“Lewis Gale”) to conduct a search of its computer systems for certain electronically stored information (“ESI”). Lewis Gale objects because of the “difficulty and unreasonable expense in performing plaintiff’s requested searches.” Alternatively, Lewis Gale asks that Wagoner pay for the related costs of conducting this search. The motion to compel is GRANTED.
I. Background
Wagoner worked as a security guard for Lewis Gale from April 4, 2014 until he was terminated on June 12, 2014. He worked approximately 16 hours per week and earned $12.49 per hour. He filed suit against Lewis Gale on October 23, 2015, alleging that he suffered from dyslexia and that Lewis Gale wrongfully terminated his employment in violation of the Americans with Disabilities Act (“ADA”). Wagoner asserts claims related to discrimination, retaliation, and failure to accommodate in violation of the ADA.
Wagoner propounded requests for production of documents to Lewis Gale seeking production of ESI maintained by two custodians, Frank Caballos and Bobby Baker, who were Wagoner’s supervisors. Wagoner limited the dates for any ESI search to only four months and requested the following search terms:
Jim OR Wagoner AND dyslexia OR dyslexic OR read OR reading OR slow OR ADA OR disabled OR disability OR security OR schedule OR copy OR copying.
Lewis Gale conceded that it does not have the capability to perform this global search and obtained an estimate of $21,570 from a third-party vendor to collect the requested ESI, with an additional $24,000 estimated to review the documents retrieved. The ESI search would involve seven computers that the two custodians had access to and an exchange server located in Tennessee. Lewis Gale argues that the discovery plaintiff seeks is not proportional because Wagoner only worked for two months as a security guard, and his potential damages are less than the cost to perform the ESI search. Lewis Gale further asserts that it has produced considerable ESI in the form of “e-mails gathered manually from the computers of key custodians.”
II. Analysis
A. Relevance
Rule 26 of the Federal Rules of Civil Procedure provides that a party “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 … .” Fed. R. Civ. P. 26(b). Thus, as a threshold matter, I must determine whether Wagoner’s discovery requests are relevant under Rule 26.
Wagoner contends that his dyslexia caused him to have difficulty reading and copying his posted work schedule, that Lewis Gale denied his request for a written copy of the schedule, and that his termination violated the ADA. E-mails or other memoranda written by Wagoner’s supervisors, Frank Caballos and Bobby Baker, between April and July 2014 and containing the search terms listed above are relevant to Wagoner’s claim. Indeed, Lewis Gale largely conceded at the hearing that Wagoner’s request was relevant, arguing only that the keyword searches were too broad. Accordingly, I find that Wagoner’s requested ESI search is relevant to the claims and defenses asserted in this case. […]
B. Reasonable Accessibility
Lewis Gale argues that the discovery in this case should not be permitted because [it] is not proportional, considering the high cost of performing the ESI search compared to Wagoner’s limited potential recovery. Lewis Gale further states that, if the court does order it to obtain the requested discovery, the court should shift the cost of the ESI search to Wagoner. Relevant ESI may still not be discoverable under Rule 26 if the party can show that the information is “not reasonably accessible because of undue burden or cost.” Fed. R. Civ. P. 26(b)(2)(B). The court may also specify conditions for the discovery which may include cost sharing. Here I find that Lewis Gale has not shown that the burdens and costs of obtaining the ESI discovery makes the requested information not reasonably accessible, nor has Lewis Gale shown that the requested ESI discovery is not proportional.
Lewis Gale claims that the fact that it cannot perform the requested ESI search in-house, and must contract with a third party vendor at significant cost, requires the court to find that the information is not reasonably accessible. Lewis relies upon the declarations of Karyn Hayes, Systems Manager for HCA Management Services, which provides computer systems services to Lewis Gale, and of Austin Maddox, Senior Litigation Technology Consultant for Document Solutions, Inc., the third-party vendor that provided an estimate to Lewis Gale for performing the ESI search. Ms. Hayes indicated that there were approximately 30,598 [responsive] e-mails […] . She further stated that a third-party vendor would be required to perform the ESI search on seven computers located at Lewis Gale, and the “computers would require forensic extraction of data, data processing, data hosting, project management, production, and review” with an estimated cost of $45,570.00. Mr. Maddox indicated that Wagoner’s ESI request would involve:
the remote collection of at least seven laptops and email archive data. The data would be processed and loaded into a Catalyst Repository Systems web-hosted review platform. Once the data has been loaded to Catalyst, the [Document Solutions, Inc.] Client Services team would work with the hospital to cull data through objective filters (date range, email domain, file type, etc.) to identify and promote documents for review by counsel.
Mr. Maddox further estimated that, “Reasonable parameters and metrics suggest that after search terms and date filters have been applied, approximately five gigabytes of data consisting of an estimated 3500 documents per gigabyte would need to be reviewed at an estimated 292 hours of expended time, which would cost approximately $24,000.”
Whether production of documents is unduly burdensome or expensive turns primarily on whether the data is kept in an accessible or inaccessible format. Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 318 (S.D.N.Y. 2003). […] Lewis Gale has not carried its burden to show that the data on the seven computers or exchange server is inaccessible, i.e. must be restored, de-fragmented, or reconstructed. Instead, Lewis Gale has stated that it is not capable of performing the ESI searches requested by plaintiff in-house, and would be required to contract with an expensive outside vendor.
Moreover, it is difficult to conclude that the ESI sought is not proportional or “not reasonably accessible” due to undue burden and expense because Lewis Gale apparently chose to use a system that did not automatically preserve e-mails for more than three days, and did not preserve e-mails in a readily searchable format, making it costly to produce relevant e-mails when faced with a lawsuit. See AAB Joint Venture v. United States, 75 Fed. Cl. 432, 443 (2007) (noting “the Court cannot relieve Defendant of its duty to produce those documents merely because Defendant has chosen a means to preserve the evidence which makes ultimate production of relevant documents expensive.”).
Proportionality consists of more than whether the particular discovery method is expensive. Here, Lewis Gale advances no other reasonable alternative to obtain the requested information. Lewis Gale simply proposes to have the very person who may have authored relevant documents search their computer for responsive information. No insurance exists that this search method would yield any ESI deleted prior to the search. Employment discovery presents particular challenges to the employees where most, and sometimes all, relevant discovery is in the control of the employer. Here, in light of the limited request, restricted by custodian, search terms, and time period, I find the request proportional to the needs of the case.
Finally, because I find that the ESI sought is reasonably accessible without undue burden or expense, cost-shifting is not appropriate. Accordingly, I will not shift the cost of discovery, and the general rule that the party responding to a discovery request bears the cost will apply.
III. Conclusion
Accordingly, Wagoner’s motion to compel is GRANTED. […]
It is so ORDERED.
Rengifo v. Erevos Enterprises, Inc.
ELLIS, M.J.
Plaintiff, Willy Rengifo (“Rengifo”)[, who is suing his former employers to recover unpaid overtime wages under the federal Fair Labor Standards Act (FLSA) and New York Labor Law, along with other claims] requests this Court to issue a protective order pursuant to Federal Rule of Civil Procedure 26(c) barring discovery related to his immigration status, social security number, and authorization to work in the United States. […]
Rule 26(c) authorizes courts, for good cause, to “make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including … that certain matters not be inquired into, or that the scope of the disclosure or discovery be limited to certain matters … .” Fed. R. Civ. P. 26(c). “[T]he burden is upon the party seeking non-disclosure or a protective order to show good cause.”
Rengifo argues that discovery related to his immigration status, authorization to work in this country, and social security number are not relevant to his right to recover unpaid wages. Further, Rengifo argues that the intimidating effect of requiring disclosure of immigration status is sufficient to establish “good cause” when the question of immigration status only goes to a collateral issue. Defendants argue that documents containing Rengifo’s social security number or tax identification number, such as tax returns, are relevant to the issue of whether he is entitled to overtime wages, which is a central issue in this case. Additionally, defendants argue that the validity of Rengifo’s social security number, his immigration status and authorization to work in this country are relevant to his credibility. […]
Courts have recognized the in terrorem effect of inquiring into a party’s immigration status and authorization to work in this country when irrelevant to any material claim because it presents a “danger of intimidation [that] would inhibit plaintiffs in pursuing their rights.” Here, Rengifo’s immigration status and authority to work is a collateral issue. The protective order becomes necessary as “[i]t is entirely likely that any undocumented [litigant] forced to produce documents related to his or her immigration status will withdraw from the suit rather than produce such documents and face … potential deportation.” […]
Rengifo also seeks to prevent disclosure of his social security number or tax identification number. Defendants note that, in support of his claim for unpaid overtime wages, Rengifo has produced an incomplete set of pay stubs that do not reflect all of the compensation he has received from corporate defendants, and that he has not produced any records regarding the number of hours he has worked on a weekly basis. Defendants contend, therefore, that discovery of documents containing his tax identification number or social security number, such as tax returns, is necessary and relevant to obtain this information. [The court rejects defendants’ argument, reasoning that t]he information sought is not relevant to the claims in this case. Even if it were, however, the corporate defendants possess relevant data on hours and compensation, and there is no reason to assume that defendants’ records are less reliable than any records maintained by Rengifo. […]
Defendants also assert that the documents requested would allow them to test the truthfulness of Rengifo’s representations to his employer. They argue that by applying for a job and providing his social security number, Rengifo represented to defendants that he was a legal resident and they are entitled to test the truthfulness of that information. Defendants further argue that if Rengifo filed tax returns, this information would be relevant to his overtime claim, but if he failed to file tax returns, this fact would affect the veracity of statements he would potentially make at trial.
While it is true that credibility is always at issue, that “does not by itself warrant unlimited inquiry into the subject of immigration status when such examination would impose an undue burden on private enforcement of employment discrimination laws.” A party’s attempt to discover tax identification numbers on the basis of testing credibility appears to be a back door attempt to learn of immigration status. Further, the opportunity to test the credibility of a party based on representations made when seeking employment does not outweigh the chilling effect that disclosure of immigration status has on employees seeking to enforce their rights. “While documented workers face the possibility of retaliatory discharge for an assertion of their labor and civil rights, undocumented workers confront the harsher reality that, in addition to possible discharge, their employer will likely report them to the INS and they will be subjected to deportation proceedings or criminal prosecution.” Granting employers the right to inquire into immigration status in employment cases would allow them to implicitly raise threats of such negative consequences when a worker reports illegal practices.
While defendants suggest a compromise whereby discovery would be limited to the present litigation and not disclosed to any third party for any purpose beyond this litigation, the limitation does not abate the chilling effect of such disclosure. “Even if the parties were to enter into a confidentiality agreement restricting the disclosure of such discovery … , there would still remain ‘the danger of intimidation, the danger of destroying the cause of action’ and would inhibit plaintiffs in pursuing their rights.” This Court finds that defendants’ opportunity to test the credibility of Rengifo does not outweigh the public interest in allowing employees to enforce their rights.
For the foregoing reasons, Rengifo’s application for a protective order barring defendants from inquiring into his immigration status, social security number or tax identification number, and authorization to work in the United States is GRANTED.
Notes & Questions
Whereas Favale concerned relevance, Cerrato, Wagoner, and Rengifo concern proportionality. What principles did the courts in those cases rely on to decide whether to narrow the discovery requests at issue?
What might have led the plaintiff in Cerrato to seek broader discovery than the court ultimately allowed? What might have led the defendant in Rengifo to seek broader discovery than the court ultimately allowed?
Why might the defendant try to limit the scope of discovery in a case like this Cerrato? What about the plaintiff in Rengifo?
Note that Wagoner rejects the idea that simply because discovery is expensive to produce, it is not proportional to the case. In particular, expense that is caused by a defendant’s own choices about how to store information is unlikely to count as a good reason. Why?
Coca-Cola Bottling Co. v. Coca-Cola Co.
MURRAY M. SCHWARTZ, Chief Judge.
The complete formula for Coca-Cola is one of the best-kept trade secrets in the world. Although most of the ingredients are public knowledge, the ingredient that gives Coca-Cola its distinctive taste is a secret combination of flavoring oils and ingredients known as “Merchandise 7X.” The formula for Merchandise 7X has been tightly guarded since Coca-Cola was first invented and is known by only two persons within The Coca-Cola Company (“the Company”). The only written record of the secret formula is kept in a security vault at the Trust Company Bank in Atlanta, Georgia, which can only be opened upon a resolution from the Company’s Board of Directors.
The impregnable barriers which the Company has erected to protect its valuable trade secret are now threatened by pretrial discovery requests in two connected cases before this Court. Plaintiffs in these lawsuits are bottlers of Coca-Cola products who seek declaratory, injunctive and monetary relief against the Company based upon allegations of breach of contract, violation of two 1921 Consent Decrees, trademark infringement, dilution of trademark value, and violation of federal antitrust laws, all of which allegedly occurred when the Company introduced diet Coke in 1982. Stripped to bare essentials, the plaintiffs’ contention is that the Company is obligated to sell them the syrup used in the bottling of diet Coke under the terms of their existing contracts covering the syrup used in the bottling of Coca-Cola. The primary issue arising from this contention is whether the contractual term “Coca-Cola Bottler’s Syrup” includes the syrup used to make diet Coke. Plaintiffs contend that in order to prevail on this issue, they need to discover the complete formula, including the secret ingredients, for Coca-Cola, as well as the complete formulae, also secret, for diet Coke and other Coca-Cola soft drinks. Accordingly, plaintiffs have filed a motion to compel production of the complete formulae under Fed. R. Civ. P. 37(a). Defendant, which has resisted disclosure of its secret formulae at every turn, contests the relevance of the complete formulae to the instant litigation and avers that disclosure of the secret formulae would cause great damage to the Company.
The issue squarely presented by plaintiffs’ motion to compel is whether plaintiffs’ need for the secret formulae outweighs defendant’s need for protection of its trade secrets. In considering this dispute, I am well aware of the fact that disclosure of trade secrets in litigation, even with the use of an appropriate protective order, could “become by indirection the means of ruining an honest and profitable enterprise.” 8 J. Wigmore, Evidence § 2212, at 155 (McNaughton rev. 1961). Moreover, I am also aware that an order compelling disclosure of the Company’s secret formulae could be a bludgeon in the hands of plaintiffs to force a favorable settlement. On the other hand, unless defendant is required to respond to plaintiffs’ discovery, plaintiffs will be unable to learn whether defendant has done them a wrong. Except for a few privileged matters, nothing is sacred in civil litigation; even the legendary barriers erected by The Coca-Cola Company to keep its formulae from the world must fall if the formulae are needed to allow plaintiffs and the Court to determine the truth in these disputes.
I. Factual Background
Since the turn of the century, Coca-Cola has been produced in a two-stage process: the Company manufactures “Coca-Cola Bottler’s Syrup” (“Bottler’s Syrup”) and sells it to bottlers, who add carbonated water to the syrup and place the resulting product in bottles and cans. In 1921, following litigation between bottler groups and the Company concerning their contracts for Bottler’s Syrup, the Company entered into Consent Decrees which established certain contractual terms between the Company and its bottlers. The Consent Decrees provided, inter alia: first, that Coca-Cola Bottler’s Syrup contain no less than 5.32 pounds of sugar per gallon; second, that bottlers would pay a maximum of $1.30 per gallon for the syrup; third, that the price of Bottler’s Syrup could increase based upon the increase in the market price of sugar as quoted quarterly by the ten largest refiners in the United States. Until 1978, the price of Bottler’s Syrup for virtually all bottlers was governed by the price formula established by the 1921 Consent Decrees.
Beginning in 1978, due to inflationary pressures and declining sales, the Company sought price relief from the existing price formula in its contracts with bottlers. After negotiations, most of the bottlers agreed to an amendment (“the 1978 Amendment”) to their contracts in exchange for a clause requiring the Company to pass on any cost savings if the Company decided to substitute a lower cost sweetener for granulated sugar. The 1978 Amendment established a new price formula for Bottler’s Syrup which utilizes a “sugar element,” a “base element,” and the Consumer Price Index. The sugar element provides for adjustments based on the quoted market price of any sweetening ingredient used in Bottler’s Syrup. The great majority of the bottlers, representing approximately 90 percent of domestic sales, have signed the 1978 Amendment. These bottlers are generally known as the “amended bottlers.” The remaining bottlers, known as the “unamended bottlers,” refused to sign the amendment and continue to operate under Bottler’s Contracts which basically conform to the contracts entered into after the 1921 Consent Decrees. In 1980, the amended bottlers began obtaining some benefit from the 1978 Amendment when the Company decided to substitute high fructose corn syrup (“HFCS–55”), a less expensive sweetener than granulated sugar, for approximately 50 percent of the granulated sugar in Bottler’s Syrup.
On July 8, 1982, the Company introduced diet Coke to the market with great fanfare. The name was chosen carefully and focused on the descriptive nature of the word “diet” and the tremendous market recognition of “Coke.” The advertising emphasized the taste of the new cola and its relationship to Coke. The public response to diet Coke has been phenomenal—in just three years, it has become the third largest selling soft drink in the United States and the best-selling diet soft drink in the world.
The introduction of diet Coke immediately gave rise to a dispute between Coke bottlers and the Company over what price bottlers must pay for diet Coke syrup. The Company took the position that diet Coke was not within the scope of the existing contracts, and a new contract term with flexible pricing would have to be developed. Many of the bottlers—both amended and unamended—believed that the Company was obligated to provide diet Coke under the terms of their existing Bottler’s Contracts for Coca-Cola. This dispute led to the filing of these lawsuits in early 1983.
[…]
II. Plaintiffs’ Motion to Compel
After extensive discovery, plaintiffs filed the instant motion that, in essence, seeks to compel the Company to produce the complete formulae, including secret ingredients, for Coca-Cola [and] diet Coke […] . Defendant’s responses to the discovery requests at issue, which plaintiffs filed as an appendix to their motion, demonstrate that defendant has objected to plaintiffs’ discovery wherever it approached matters related to the secret formulae. Thus, plaintiffs have been foreclosed both from learning the formulae themselves and from learning about other matters that relate to the formulae.
In support of their motion to compel, plaintiffs have contended that the secret formulae are relevant and necessary to prove their contentions and respond to defendant’s argument that Coca-Cola and diet Coke are two different products. In response, the Company denies that the formulae are relevant and essential to resolve the central issues in these cases, and also contends that disclosure of these trade secrets is inappropriate at this stage of the litigation.
[…]
C. Relevance and Necessity of the Formulae
Plaintiffs contend that discovery of these secret formulae is required because they are relevant and necessary to the presentation of plaintiffs’ case. In order to determine whether these trade secrets are in fact relevant and necessary, a review of the issues in the two cases is warranted.
1. Unamended Bottlers
The unamended bottlers claim that defendant must furnish diet Coke syrup to them pursuant to the terms of their Bottler’s Contracts and the 1921 Consent Decrees. The standard form contract for unamended bottlers states, in pertinent part: “COMPANY agrees to furnish to BOTTLER … sufficient syrup for bottling purposes to meet the requirements of BOTTLER in the territory herein described … . COMPANY does hereby select BOTTLER as its sole and exclusive customer and licensee for the purpose of bottling the Bottlers’ bottle syrup, COCA–COLA, in the territory herein described.” The contract further provides that “BOTTLER agrees … [t]o bottle COCA–COLA in the following manner: to have it thoroughly carbonated, put in bottles, using one ounce of Bottlers’ Coca-Cola syrup in a standard bottle for Coca-Cola … decorated with the name Coca-Cola in the characteristic script … .” The terms “bottle syrup” and “Bottlers’ Coca-Cola syrup” are not defined in the contract.
Plaintiffs contend that the terms “Bottlers’ Coca-Cola syrup” and “bottle syrup” include any syrups manufactured by the Company for the purpose of providing any packaged soft drink sold under the names “Coca-Cola” or “Coke,” including diet Coke. In addition, plaintiffs allege that Coca-Cola and diet Coke are just two versions of the same product, except that one is sweetened with caloric sweeteners and the other with non-caloric sweeteners. Defendant’s response to these contentions has been that only syrup for sugar-sweetened Coca-Cola is covered by the unamended bottlers’ contracts, and that diet Coke and Coca-Cola are two separate products.
2. Amended Bottlers
The amended bottlers rely on different contractual language to argue that the Company must furnish them diet Coke syrup on the same terms as Coca-Cola syrup. The 1978 Amendment, which all of the amended bottlers signed, replaced the pricing formula used for the unamended bottlers with one that was tied to the “Sugar Element,” a term defined in the contract. The Amendment then provides: “In the event that the formula for Bottle Syrup is modified to replace sugar, in whole or in part, with another sweetening ingredient, the Company will modify the method for computing the Sugar Element in such a way as to give the Bottler the savings realized as a result of such modification through an appropriate objective quarterly measure of the market price of any such sweetening ingredient.” The amended bottlers have contended that “another sweetening ingredient” includes saccharin or aspartame, the sweeteners that the Company has used in diet Coke.
The Company argues that this contractual language is inapplicable because diet Coke is a new and different product and is not modified Coca-Cola. Plaintiffs’ response is that diet Coke is “simply a version of a product which has undergone evolutionary change but which retains its identity as Coke,” and “that any differences between Coke and diet Coke Bottler’s Syrup are either insignificant or reflect attempts to achieve taste identity.” […]
3. Relevancy of the Secret Ingredients
A major issue common to both actions is whether diet Coke and Coca-Cola are the same product. The Company’s primary defense has been that Coca-Cola and diet Coke are two separate and distinct products. Plaintiffs contend that the complete formulae for diet Coke and Coca-Cola would be relevant to rebut this defense by showing that the two colas share common attributes and that any differences between the two are insignificant and merely reflect attempts to achieve taste identity. With the introduction of new Coke, plaintiffs argue that because new Coke was derived in part from the secret formula for diet Coke, it may be true that new Coke is more like diet Coke than new Coke is like old Coke. In response, defendant argues that except for the difference in sweeteners, ingredient similarities and differences are not relevant to the determination of whether diet Coke and Coca-Cola are the same product. Instead, defendant relies upon the difference in taste, different essential characteristics of the beverages, different consumer markets for the beverages, and different consumer perceptions of the beverages.
Defendant’s response is unavailing. […] Although defendant has attempted to define the issues so that the only relevant ingredient is the sweetener, all the ingredients are relevant to determine whether the two colas are the same product. In fact, the secret ingredients may be the most relevant ones because the secret ingredients are what gives these drinks their distinctive tastes.
Plaintiffs could use the secret formulae to prove one of several product identity theories. An analysis of the secret ingredients in diet Coke and old Coke might show that diet Coke was designed to taste as much like old Coke as a low calorie cola could, and that any differences in secret ingredients reflect defendant’s attempts to achieve taste identity. […] [Thus, t]he complete formulae, once known, will tend to make a disputed fact more (or less) likely: that, for purposes of this litigation, diet Coke syrup is Bottler’s Syrup.
[…]
4. Necessity of Discovery of This Information
As in most disputes over the discoverability of trade secrets, the necessity of the discovery of the complete formulae follows logically from the determination that the formulae are relevant. Plaintiffs need the complete formulae in order to address the product identity issue by comparing the ingredients of the various soft drinks involved. Plaintiffs cannot respond to the assertions of defendant’s experts that diet Coke and Coca-Cola are two products unless plaintiffs’ experts can analyze the complete formulae and explain why the products are the same. Merely using the publicly-disclosed ingredients is obviously insufficient, because they would present an incomplete picture, and because the secret ingredients are the key to the taste of Coca-Cola. The differences in the public ingredients, including sweeteners, cannot be understood unless they are put in context through disclosure of the similarities and differences in the secret ingredients. Without the complete formulae, plaintiffs will be foreclosed from presenting all the relevant evidence in support of their position.
In addition, plaintiffs need the complete formulae in order to explore on cross-examination the bases for the opinions of Company witnesses that Coca-Cola and diet Coke are two separate products. As plaintiffs’ counsel stated at oral argument, plaintiffs’ cross-examination of defendant’s witnesses has been foreclosed by defendant’s objections that plaintiffs’ questions relate to trade secrets. Plaintiffs cannot be expected to discover the truth without full cross-examination. Moreover, the formula information is not available from any other source, and no adequate substitute exists for this information. It follows that discovery of the complete formulae is necessary.
After the hearing, defendant attempted to remove the necessity for the information by offering to stipulate that the secret ingredients in old Coke, new Coke and diet Coke are identical. Defendant contends that this result is the most favorable set of facts that plaintiffs could hope to find through discovery. It is evident, however, that the actual formulae could be more favorable to plaintiffs than this stipulation. For example, […] discovery may show that the secret ingredients in old Coke were modified to make diet Coke, and that those modifications were intended to counterbalance the taste change caused by substituting artificial sweeteners for sugar. The effect of the secret ingredient change may have been to cancel out the changes in other ingredients and make diet Coke taste like Coke. Further, defendant’s proposed stipulation does not reveal the number of ingredients that are secret ingredients. If the secret ingredients in Coke and diet Coke are composed of the same 100 ingredients, so that the vast majority of all the ingredients in the two colas are identical, that fact would be more favorable to plaintiffs than if the secret ingredients were only a few in number. Finally, defendant’s proposed stipulation does not solve the problem of plaintiffs being foreclosed from full cross-examination by defendant’s assertion of trade secret privilege. In sum, defendant’s proposed stipulation is not as favorable to plaintiffs as discovery might be and does not remove the necessity for disclosure.
5. Need Balanced Against Harm
The final part of the test for discoverability of trade secrets is to balance the need for disclosure against the harm that would ensue from disclosure. The potential harm that would come from public disclosure of the formulae […] is great, but virtually all of that harm can be eliminated with stringent protective orders and other safeguards. Because plaintiffs are Coca-Cola bottlers, they will have an incentive to keep the formulae secret. The likelihood of harm is less than if defendant’s trade secrets were disclosed in litigation to competitors. The potential for harm from protected disclosure of the formulae […] is outweighed by the plaintiffs’ need for the information. While plaintiffs’ need for the experimental cola formulae is less strong, this lesser need is counterbalanced by the fact that the harm resulting from disclosure of these formulae would be less severe, because those colas have never been marketed and are less valuable trade secrets.
In sum, the product identity issue is important in these two cases, and analyses of the complete formulae will be a significant part of the proof on that issue. Plaintiffs’ need for this information outweighs the harm that disclosure under protective order would cause. Disclosure will be ordered.
Notes & Questions
Why did the plaintiffs say they needed the formulae for various Coca-Cola products to prove their claims?
The court notes that disclosure of the formulae “could be a bludgeon in the hands of plaintiffs to force a favorable settlement.” How could the plaintiffs use the formulae in this way? What does the court do to prevent that possibility? Do you think those protections are enough?
Coca-Cola Bottling Co. v. Coca-Cola Co. (II)
MURRAY M. SCHWARTZ, Chief Judge.
On August 20, 1985, this Court granted plaintiffs’ motion to compel production of certain formulae and taste-test results, subject to an agreed-upon protective order. Defendant has refused to comply with the discovery order as it pertains to the formulae. Presently before the Court is plaintiffs’ motion for sanctions.
[…]
By letter dated September 9, 1985, counsel for the Company informed the Court that the Company would not disclose its formulae, “[i]n light of the overriding commercial importance of the secrecy of formulae to the entire Coca-Cola system, … even under the terms of a stringent protective order … .” The Company acknowledged the Court “may order … a sanction” for that refusal, and requested an opportunity to be heard on the sanctions issue.
Plaintiffs moved for the entry of an order under Fed. R. Civ. P. 37(b)(2)(C) striking the Company’s answer and entering judgment in favor of plaintiffs on [several of plaintiffs’ claims]. In addition, they moved for expenses and attorney’s fees. Defendant contended a limited preclusion order is the proper sanction and argued the award of expenses and attorney’s fees is unwarranted.
The Court’s substantive sanctions will include a preclusion order under Rule 37(b)(2)(A). The Court has already held that the formulae sought by plaintiffs are relevant and disclosure necessary for a fair trial on the merits. Because defendant refuses to supply that information, in the face of this Court’s disclosure order, plaintiffs are entitled to the advantage of every possible inference that fairly could be drawn from the formulae evidence sought.
For the purposes of making formulae comparisons, plaintiffs are entitled to compare the entire formulae, and to obtain a favorable comparison of the entire formulae. Defendant may not qualify those comparisons by noting the difference in sweetener. Defendant forfeited that opportunity by refusing to divulge the formulae that could put the sweetener difference into context. The Court’s Order will provide plaintiffs the best possible formula context for the sweetener difference, a context that “overcomes” the difference for formulae comparison purposes.
[…]
Conclusion
The Court’s previous Opinion in this litigation noted an order to compel disclosure of the Company’s secret formulae could be “a bludgeon in the hands of plaintiffs to force a favorable settlement.” The Court now declines to wield on plaintiffs’ behalf the ultimate bludgeon in this litigation, default judgment, when careful use of a scalpel is far more appropriate. In the accompanying Order, the Court will […] strictly limit defendant’s use of formulae evidence for the purposes of this litigation. In addition, the Court will order defendant to pay the reasonable expenses and attorney’s fees incurred by plaintiffs in prosecuting the motion for sanctions. Hopefully, the litigants will be able to amicably resolve payment of attorneys’ fees and costs.
Notes & Questions
Note that Coca-Cola refused to comply with the court’s order requiring disclosure of the formulae to the plaintiffs. You might expect this behavior to get Coca-Cola in big trouble.
What sanction did the plaintiffs ask the court to impose on Coca-Cola for their non-compliance? What alternative (and less harsh) sanction did Coca-Cola argue should be imposed instead? What sanctions did the court end up imposing?
Do you think the sanctions were fair under the circumstances?
The cases above discuss the difficulties that can arise when a party seeks its adversary’s trade secrets in discovery. A more typical attempt to resist discovery is a claim of “work product,” a doctrine recognized by the case that follows.
Hickman v. Taylor
Murphy, J., delivered the opinion of the Court.
This case presents an important problem under the Federal Rules of Civil Procedure as to the extent to which a party may inquire into oral and written statements of witnesses, or other information, secured by an adverse party’s counsel in the course of preparation for possible litigation after a claim has arisen. […]
On February 7, 1943, the tug “J.M. Taylor” sank while engaged in helping to tow a car float of the Baltimore & Ohio Railroad across the Delaware River at Philadelphia. The accident was apparently unusual in nature, the cause of it still being unknown. Five of the nine crew members were drowned. Three days later the tug owners and the underwriters employed a law firm, of which respondent Fortenbaugh is a member, to defend them against potential suits by representatives of the deceased crew members and to sue the railroad for damages to the tug.
A public hearing was held on March 4, 1943, before the United States Steamboat Inspectors, at which the four survivors were examined. This testimony was recorded and made available to all interested parties. Shortly thereafter, Fortenbaugh privately interviewed the survivors and took statements from them with an eye toward the anticipated litigation; the survivors signed these statements on March 29. Fortenbaugh also interviewed other persons believed to have some information relating to the accident and in some cases he made memoranda of what they told him. […]
One year later, petitioner[, who was one of the surivors,] filed 39 interrogatories directed to the tug owners. The 38th interrogatory read: “State whether any statements of the members of the crews of the Tugs ‘J.M. Taylor’ and ‘Philadelphia’ or of any other vessel were taken in connection with the towing of the car float and the sinking of the Tug `John M. Taylor.’ Attach hereto exact copies of all such statements if in writing, and if oral, set forth in detail the exact provisions of any such oral statements or reports.”
Supplemental interrogatories asked whether any oral or written statements, records, reports or other memoranda had been made concerning any matter relative to the towing operation, the sinking of the tug, the salvaging and repair of the tug, and the death of the deceased. If the answer was in the affirmative, the tug owners were then requested to set forth the nature of all such records, reports, statements or other memoranda.
The tug owners, through Fortenbaugh, answered all of the interrogatories except No. 38 and the supplemental ones just described. While admitting that statements of the survivors had been taken, they declined to summarize or set forth the contents. They did so on the ground that such requests called “for privileged matter obtained in preparation for litigation” and constituted “an attempt to obtain indirectly counsel’s private files.” It was claimed that answering these requests “would involve practically turning over not only the complete files, but also the telephone records and, almost, the thoughts of counsel.”
[The district court ruled that the requested information was not privileged and ordered it produced. After Fortenbaugh refused, the district court ordered him imprisoned for contempt but stayed the order while Fortenbaugh appealed. The Court of Appeals reversed.] […]
The pre-trial deposition-discovery mechanism established by Rules 26 to 37 is one of the most significant innovations of the Federal Rules of Civil Procedure. Under the prior federal practice, the pre-trial functions of notice-giving, issue-formulation and fact-revelation were performed primarily and inadequately by the pleadings. Inquiry into the issues and the facts before trial was narrowly confined and was often cumbersome in method. The new rules, however, restrict the pleadings to the task of general notice-giving and invest the deposition-discovery process with a vital role in the preparation for trial. The various instruments of discovery now serve (1) as a device, along with the pre-trial hearing under Rule 16, to narrow and clarify the basic issues between the parties, and (2) as a device for ascertaining the facts, or information as to the existence or whereabouts of facts, relative to those issues. Thus civil trials in the federal courts no longer need be carried on in the dark. The way is now clear, consistent with recognized privileges, for the parties to obtain the fullest possible knowledge of the issues and facts before trial.
[…]
We agree, of course, that the deposition-discovery rules are to be accorded a broad and liberal treatment. No longer can the time-honored cry of “fishing expedition” serve to preclude a party from inquiring into the facts underlying his opponent’s case. Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession. The deposition-discovery procedure simply advances the stage at which the disclosure can be compelled from the time of trial to the period preceding it, thus reducing the possibility of surprise. But discovery, like all matters of procedure, has ultimate and necessary boundaries. […]
We also agree that the memoranda, statements and mental impressions in issue in this case fall outside the scope of the attorney-client privilege and hence are not protected from discovery on that basis. It is unnecessary here to delineate the content and scope of that privilege as recognized in the federal courts. For present purposes, it suffices to note that the protective cloak of this privilege does not extend to information which an attorney secures from a witness while acting for his client in anticipation of litigation. Nor does this privilege concern the memoranda, briefs, communications and other writings prepared by counsel for his own use in prosecuting his client’s case; and it is equally unrelated to writings which reflect an attorney’s mental impressions, conclusions, opinions or legal theories.
But the impropriety of invoking that privilege does not provide an answer to the problem before us. Petitioner has made more than an ordinary request for relevant, non-privileged facts in the possession of his adversaries or their counsel. He has sought discovery as of right of oral and written statements of witnesses whose identity is well known and whose availability to petitioner appears unimpaired. He has sought production of these matters after making the most searching inquiries of his opponents as to the circumstances surrounding the fatal accident, which inquiries were sworn to have been answered to the best of their information and belief. Interrogatories were directed toward all the events prior to, during and subsequent to the sinking of the tug. Full and honest answers to such broad inquiries would necessarily have included all pertinent information gleaned by Fortenbaugh through his interviews with the witnesses. Petitioner makes no suggestion, and we cannot assume, that the tug owners or Fortenbaugh were incomplete or dishonest in the framing of their answers. In addition, petitioner was free to examine the public testimony of the witnesses taken before the United States Steamboat Inspectors. We are thus dealing with an attempt to secure the production of written statements and mental impressions contained in the files and the mind of the attorney Fortenbaugh without any showing of necessity or any indication or claim that denial of such production would unduly prejudice the preparation of petitioner’s case or cause him any hardship or injustice. For aught that appears, the essence of what petitioner seeks either has been revealed to him already through the interrogatories or is readily available to him direct from the witnesses for the asking.
[…]
In our opinion, neither Rule 26 nor any other rule dealing with discovery contemplates production under such circumstances. […] Not even the most liberal of discovery theories can justify unwarranted inquiries into the files and the mental impressions of an attorney.
Historically, a lawyer is an officer of the court and is bound to work for the advancement of justice while faithfully protecting the rightful interests of his clients. In performing his various duties, however, it is essential that a lawyer work with a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel. Proper preparation of a client’s case demands that he assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan his strategy without undue and needless interference. That is the historical and the necessary way in which lawyers act within the framework of our system of jurisprudence to promote justice and to protect their clients’ interests. This work is reflected, of course, in interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways—aptly though roughly termed by the Circuit Court of Appeals in this case as the “work product of the lawyer.” Were such materials open to opposing counsel on mere demand, much of what is now put down in writing would remain unwritten. An attorney’s thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served.
We do not mean to say that all written materials obtained or prepared by an adversary’s counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and non-privileged facts remain hidden in an attorney’s file and where production of those facts is essential to the preparation of one’s case, discovery may properly be had. Such written statements and documents might, under certain circumstances, be admissible in evidence or give clues as to the existence or location of relevant facts. Or they might be useful for purposes of impeachment or corroboration. And production might be justified where the witnesses are no longer available or can be reached only with difficulty. […]
[…]
But as to oral statements made by witnesses to Fortenbaugh, whether presently in the form of his mental impressions or memoranda, we do not believe that any showing of necessity can be made under the circumstances of this case so as to justify production. […]
Denial of production of this nature does not mean that any material, non-privileged facts can be hidden from the petitioner in this case. He need not be unduly hindered in the preparation of his case, in the discovery of facts or in his anticipation of his opponents’ position. Searching interrogatories directed to Fortenbaugh and the tug owners, production of written documents and statements upon a proper showing and direct interviews with the witnesses themselves all serve to reveal the facts in Fortenbaugh’s possession to the fullest possible extent consistent with public policy. Petitioner’s counsel frankly admits that he wants the oral statements only to help prepare himself to examine witnesses and to make sure that he has overlooked nothing. That is insufficient under the circumstances to permit him an exception to the policy underlying the privacy of Fortenbaugh’s professional activities. If there should be a rare situation justifying production of these matters, petitioner’s case is not of that type.
We fully appreciate the wide-spread controversy among the members of the legal profession over the problem raised by this case. It is a problem that rests on what has been one of the most hazy frontiers of the discovery process. But until some rule or statute definitely prescribes otherwise, we are not justified in permitting discovery in a situation of this nature as a matter of unqualified right. When Rule 26 and the other discovery rules were adopted, this Court and the members of the bar in general certainly did not believe or contemplate that all the files and mental processes of lawyers were thereby opened to the free scrutiny of their adversaries. And we refuse to interpret the rules at this time so as to reach so harsh and unwarranted a result.
We therefore affirm the judgment of the Circuit Court of Appeals.
Affirmed.
MR. JUSTICE JACKSON, concurring.
[…] Counsel for the petitioner candidly said on argument that he wanted this information to help prepare himself to examine witnesses, to make sure he overlooked nothing. He bases his claim to it in his brief on the view that the Rules were to do away with the old situation where a law suit developed into “a battle of wits between counsel.” But a common law trial is and always should be an adversary proceeding. Discovery was hardly intended to enable a learned profession to perform its functions either without wits or on wits borrowed from the adversary.
The real purpose and the probable effect of the practice ordered by the district court would be to put trials on a level even lower than a “battle of wits.” I can conceive of no practice more demoralizing to the Bar than to require a lawyer to write out and deliver to his adversary an account of what witnesses have told him. […]
MR. JUSTICE FRANKFURTER joins in this opinion.
Notes & Questions
What source of law authorizes the Court to deny the requested discovery on work-product grounds?
What does the Court say counts as work product?
Is all work product created equally?
Can a claim of work product ever be overcome by a party seeking discovery? If so, when?
The work-product doctrine is now codified in Rule 26(b)(3). Read that Rule and the following case to see how it is applied alongside the related but distinct doctrine of attorney-client privilege.
Upjohn Co. v. United States
JUSTICE REHNQUIST delivered the opinion of the Court.
We granted certiorari in this case to address important questions concerning the scope of the attorney-client privilege in the corporate context and the applicability of the work-product doctrine in proceedings to enforce tax summonses. With respect to the privilege question the parties and various amici have described our task as one of choosing between two “tests” which have gained adherents in the courts of appeals. We are acutely aware, however, that we sit to decide concrete cases and not abstract propositions of law. We decline to lay down a broad rule or series of rules to govern all conceivable future questions in this area, even were we able to do so. We can and do, however, conclude that the attorney-client privilege protects the communications involved in this case from compelled disclosure and that the work-product doctrine does apply in tax summons enforcement proceedings.
I
Petitioner Upjohn Co. manufactures and sells pharmaceuticals here and abroad. In January 1976 independent accountants conducting an audit of one of Upjohn’s foreign subsidiaries discovered that the subsidiary made payments to or for the benefit of foreign government officials in order to secure government business. The accountants so informed petitioner Mr. Gerard Thomas, Upjohn’s Vice President, Secretary, and General Counsel. […] He consulted with outside counsel and R. T. Parfet, Jr., Upjohn’s Chairman of the Board. It was decided that the company would conduct an internal investigation of what were termed “questionable payments.” As part of this investigation the attorneys prepared a letter containing a questionnaire which was sent to “All Foreign General and Area Managers” over the Chairman’s signature. The letter began by noting recent disclosures that several American companies made “possibly illegal” payments to foreign government officials and emphasized that the management needed full information concerning any such payments made by Upjohn. The letter indicated that the Chairman had asked Thomas, identified as “the company’s General Counsel,” “to conduct an investigation for the purpose of determining the nature and magnitude of any payments made by the Upjohn Company or any of its subsidiaries to any employee or official of a foreign government.” The questionnaire sought detailed information concerning such payments. Managers were instructed to treat the investigation as “highly confidential” and not to discuss it with anyone other than Upjohn employees who might be helpful in providing the requested information. Responses were to be sent directly to Thomas. Thomas and outside counsel also interviewed the recipients of the questionnaire and some 33 other Upjohn officers or employees as part of the investigation.
On March 26, 1976, the company voluntarily submitted a preliminary report to the Securities and Exchange Commission on Form 8-K disclosing certain questionable payments. A copy of the report was simultaneously submitted to the Internal Revenue Service, which immediately began an investigation to determine the tax consequences of the payments. Special agents conducting the investigation were given lists by Upjohn of all those interviewed and all who had responded to the questionnaire. On November 23, 1976, the Service issued a summons pursuant to 26 U.S.C. § 7602 demanding production of:
“All files relative to the investigation conducted under the supervision of Gerard Thomas to identify payments to employees of foreign governments and any political contributions made by the Upjohn Company or any of its affiliates since January 1, 1971 and to determine whether any funds of the Upjohn Company had been improperly accounted for on the corporate books during the same period.
“The records should include but not be limited to written questionnaires sent to managers of the Upjohn Company’s foreign affiliates, and memorandums or notes of the interviews conducted in the United States and abroad with officers and employees of the Upjohn Company and its subsidiaries.”
The company declined to produce the documents specified in the second paragraph on the grounds that they were protected from disclosure by the attorney-client privilege and constituted the work product of attorneys prepared in anticipation of litigation. On August 31, 1977, the United States filed a petition seeking enforcement of the summons under 26 U.S.C. §§ 7402(b) and 7604(a) in the United States District Court for the Western District of Michigan. That court adopted the recommendation of a Magistrate who concluded that the summons should be enforced. Petitioners appealed to the Court of Appeals for the Sixth Circuit which rejected the Magistrate’s finding of a waiver of the attorney-client privilege, but agreed that the privilege did not apply “[t]o the extent that the communications were made by officers and agents not responsible for directing Upjohn’s actions in response to legal advice … for the simple reason that the communications were not the ‘client’s.’” The court reasoned that accepting petitioners’ claim for a broader application of the privilege would encourage upper-echelon management to ignore unpleasant facts and create too broad a “zone of silence.” Noting that Upjohn’s counsel had interviewed officials such as the Chairman and President, the Court of Appeals remanded to the District Court so that a determination of who was within the “control group” could be made. In a concluding footnote the court stated that the work-product doctrine “is not applicable to administrative summonses issued under 26 U.S. C. § 7602.”
II
Federal Rule of Evidence 501 provides that “the privilege of a witness … shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in light of reason and experience.” The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law. 8 J. Wigmore, Evidence § 2290 (McNaughton rev. 1961). Its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer’s being fully informed by the client. […] Admittedly complications in the application of the privilege arise when the client is a corporation, which in theory is an artificial creature of the law, and not an individual; but this Court has assumed that the privilege applies when the client is a corporation […] .
The Court of Appeals, however, considered the application of the privilege in the corporate context to present a “different problem,” since the client was an inanimate entity and “only the senior management, guiding and integrating the several operations, … can be said to possess an identity analogous to the corporation as a whole.” […]
Such a view, we think, overlooks the fact that the privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice. The first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the legally relevant. […] See also Hickman v. Taylor.
In the case of the individual client the provider of information and the person who acts on the lawyer’s advice are one and the same. In the corporate context, however, it will frequently be employees beyond the control group as defined by the court below—“officers and agents … responsible for directing [the company’s] actions in response to legal advice”—who will possess the information needed by the corporation’s lawyers. Middle-level—and indeed lower-level—employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. […]
The control group test adopted by the court below thus frustrates the very purpose of the privilege by discouraging the communication of relevant information by employees of the client to attorneys seeking to render legal advice to the client corporation. The attorney’s advice will also frequently be more significant to noncontrol group members than to those who officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation’s policy.
The narrow scope given the attorney-client privilege by the court below not only makes it difficult for corporate attorneys to formulate sound advice when their client is faced with a specific legal problem but also threatens to limit the valuable efforts of corporate counsel to ensure their client’s compliance with the law. In light of the vast and complicated array of regulatory legislation confronting the modern corporation, corporations, unlike most individuals, “constantly go to lawyers to find out how to obey the law[.]” […] [I]f the purpose of the attorney-client privilege is to be served, the attorney and client must be able to predict with some degree of certainty whether particular discussions will be protected. An uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all. The very terms of the test adopted by the court below suggest the unpredictability of its application. The test restricts the availability of the privilege to those officers who play a “substantial role” in deciding and directing a corporation’s legal response. […]
The communications at issue were made by Upjohn employees to counsel for Upjohn acting as such, at the direction of corporate superiors in order to secure legal advice from counsel. […] Information, not available from upper-echelon management, was needed to supply a basis for legal advice concerning compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas. The communications concerned matters within the scope of the employees’ corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. The questionnaire identified Thomas as “the company’s General Counsel” and referred in its opening sentence to the possible illegality of payments such as the ones on which information was sought. A statement of policy accompanying the questionnaire clearly indicated the legal implications of the investigation. The policy statement was issued “in order that there be no uncertainty in the future as to the policy with respect to the practices which are the subject of this investigation.” It began “Upjohn will comply with all laws and regulations,” and stated that commissions or payments “will not be used as a subterfuge for bribes or illegal payments” and that all payments must be “proper and legal.” Any future agreements with foreign distributors or agents were to be approved “by a company attorney” and any questions concerning the policy were to be referred “to the company’s General Counsel.” This statement was issued to Upjohn employees worldwide, so that even those interviewees not receiving a questionnaire were aware of the legal implications of the interviews. Pursuant to explicit instructions from the Chairman of the Board, the communications were considered “highly confidential” when made, and have been kept confidential by the company. Consistent with the underlying purposes of the attorney-client privilege, these communications must be protected against compelled disclosure.
The Court of Appeals declined to extend the attorney-client privilege beyond the limits of the control group test for fear that doing so would entail severe burdens on discovery and create a broad “zone of silence” over corporate affairs. Application of the attorney-client privilege to communications such as those involved here, however, puts the adversary in no worse position than if the communications had never taken place. The privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney […]
Here the Government was free to question the employees who communicated with Thomas and outside counsel. Upjohn has provided the IRS with a list of such employees, and the IRS has already interviewed some 25 of them. While it would probably be more convenient for the Government to secure the results of petitioner’s internal investigation by simply subpoenaing the questionnaires and notes taken by petitioner’s attorneys, such considerations of convenience do not overcome the policies served by the attorney-client privilege. As Justice Jackson noted in his concurring opinion in Hickman v. Taylor: “Discovery was hardly intended to enable a learned profession to perform its functions … on wits borrowed from the adversary.”
[…]
III
Our decision that the communications by Upjohn employees to counsel are covered by the attorney-client privilege disposes of the case so far as the responses to the questionnaires and any notes reflecting responses to interview questions are concerned. […] To the extent that the material subject to the summons is not protected by the attorney-client privilege as disclosing communications between an employee and counsel, we must reach the ruling by the Court of Appeals that the work-product doctrine does not apply to summonses issued under 26 U.S.C. § 7602.
The Government concedes, wisely, that the Court of Appeals erred and that the work-product doctrine does apply to IRS summonses. This doctrine was announced by the Court over 30 years ago in Hickman v. Taylor. In that case the Court rejected “an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party’s counsel in the course of his legal duties.” The Court noted that “it is essential that a lawyer work with a certain degree of privacy[.]” […]
The “strong public policy” underlying the work-product doctrine […] has been substantially incorporated in Federal Rule of Civil Procedure 26(b)(3).
[…] Nothing in the language of the IRS summons provisions or their legislative history suggests an intent on the part of Congress to preclude application of the work-product doctrine. Rule 26(b)(3) codifies the work-product doctrine, and the Federal Rules of Civil Procedure are made applicable to summons enforcement proceedings by Rule 81(a)(3). While conceding the applicability of the work-product doctrine, the Government asserts that it has made a sufficient showing of necessity to overcome its protections. […]
The Government stresses that interviewees are scattered across the globe and that Upjohn has forbidden its employees to answer questions it considers irrelevant. The above-quoted language from Hickman, however, did not apply to “oral statements made by witnesses … whether presently in the form of [the attorney’s] mental impressions or memoranda.” As to such material the Court did “not believe that any showing of necessity can be made under the circumstances of this case so as to justify production. … If there should be a rare situation justifying production of these matters, petitioner’s case is not of that type.” Forcing an attorney to disclose notes and memoranda of witnesses’ oral statements is particularly disfavored because it tends to reveal the attorney’s mental processes.
Rule 26 accords special protection to work product revealing the attorney’s mental processes. The Rule permits disclosure of documents and tangible things constituting attorney work product upon a showing of substantial need and inability to obtain the equivalent without undue hardship. […] Rule 26 goes on, however, to state that “[i]n ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions or legal theories of an attorney or other representative of a party concerning the litigation.” Although this language does not specifically refer to memoranda based on oral statements of witnesses, the Hickman court stressed the danger that compelled disclosure of such memoranda would reveal the attorney’s mental processes. It is clear that this is the sort of material the draftsmen of the Rule had in mind as deserving special protection.
[…] It is clear that the Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the work-product doctrine. The Magistrate applied the “substantial need” and “without undue hardship” standard articulated in the first part of Rule 26(b)(3). The notes and memoranda sought by the Government here, however, are work product based on oral statements. If they reveal communications, they are, in this case, protected by the attorney-client privilege. To the extent they do not reveal communications, they reveal the attorneys’ mental processes in evaluating the communications. As Rule 26 and Hickman make clear, such work product cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship.
While we are not prepared at this juncture to say that such material is always protected by the work-product rule, we think a far stronger showing of necessity and unavailability by other means […] would be necessary to compel disclosure. […]
Accordingly, the judgment of the Court of Appeals is reversed, and the case remanded for further proceedings.
It is so ordered.
Notes & Questions
The first of the Court’s holdings concerns attorney-client privilege. The basic requirements of that doctrine are as follows:
Asserted holder of privilege is or sought to be a client;
The material sought is a communication between that client and a member of the bar (or subordinate) acting in her capacity as an attorney;
The communication relates to a fact of which attorney was informed by the client;
The communication was made without the presence of strangers;
for the purpose of securing a legal opinion, services, or assistance;
but not for the committing of a crime or tort; and
The privilege has been claimed and not waived.
The defining feature of corporations is that they are artificial persons, meaning they may act only through their employees, agents, officers, or shareholders. The key question in Upjohn was which actual persons count as the “client” when the client is a corporation: all employees, or only a subset? What test did the Court of Appeals apply below to determine which part of a corporation is “the client”? What test did the Supreme Court adopt?
Second, consider the Court’s holdings on work product. What if anything does Upjohn add to our understanding of work product beyond what the Court said in Hickman? Which part of the work-product doctrine was at issue in the case?
Although the doctrines of work product and attorney-client privilege overlap in many ways and often arise alongside one another (witness Upjohn as just one example), they are distinct. In what circumstances does attorney-client privilege apply but not work product? Vice versa? Note that if either doctrine applies, discovery is likely prohibited.
5.4 Ensuring Compliance and Controlling Abuses
Perhaps more than any other phase of civil litigation, discovery is notorious for perceived and real abuses. To control the process and ensure parties comply with the rules, courts have broad power to punish misbehavior during discovery. These next cases explore this power.
Zubulake v. UBS Warburg LLP
SCHEINDLIN, J.
[…] What is true in love is equally true at law: Lawyers and their clients need to communicate clearly and effectively with one another to ensure that litigation proceeds efficiently. When communication between counsel and client breaks down, conversation becomes “just crossfire,” and there are usually casualties.
I. Introduction
This is the fifth written opinion in this case, a relatively routine employment discrimination dispute in which discovery has now lasted over two years. Laura Zubulake is once again moving to sanction UBS for its failure to produce relevant information and for its tardy production of such material. […]
II. Facts
[…] Zubulake is an equities trader specializing in Asian securities who is suing her former employer for gender discrimination, failure to promote, and retaliation under federal, state, and city law.
A. Background
Zubulake filed an initial charge of gender discrimination with the EEOC on August 16, 2001. Well before that, however—as early as April 2001—UBS employees were on notice of Zubulake’s impending court action. After she received a right-to-sue letter from the EEOC, Zubulake filed this lawsuit on February 15, 2002.
Fully aware of their common law duty to preserve relevant evidence, UBS’s in-house attorneys gave oral instructions in August 2001—immediately after Zubulake filed her EEOC charge—instructing employees not to destroy or delete material potentially relevant to Zubulake’s claims, and in fact to segregate such material into separate files for the lawyers’ eventual review. […] [Similar warnings were given four more times. The court found that, despite the instructions, UBS had deleted relevant e-mails and backup tapes and failed to produce responsive e-mails it had not deleted.] […]
III. Legal Standard
Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation. The determination of an appropriate sanction for spoliation, if any, is confined to the sound discretion of the trial judge, and is assessed on a case-by-case basis. The authority to sanction litigants for spoliation arises jointly under the Federal Rules of Civil Procedure and the court’s inherent powers.
The spoliation of evidence germane to proof of an issue at trial can support an inference that the evidence would have been unfavorable to the party responsible for its destruction. A party seeking an adverse inference instruction (or other sanctions) based on the spoliation of evidence must establish the following three elements: (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a “culpable state of mind” and (3) that the destroyed evidence was “relevant” to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.
[…] In Zubulake IV, I summarized a litigant’s preservation obligations:
Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents. As a general rule, that litigation hold does not apply to inaccessible backup tapes (e.g., those typically maintained solely for the purpose of disaster recovery), which may continue to be recycled on the schedule set forth in the company’s policy. On the other hand, if backup tapes are accessible (i.e., actively used for information retrieval), then such tapes would likely be subject to the litigation hold.
A party’s discovery obligations do not end with the implementation of a “litigation hold”—to the contrary, that’s only the beginning. […]
Once a “litigation hold” is in place, a party and her counsel must make certain that all sources of potentially relevant information are identified and placed “on hold,” to the extent required in Zubulake IV. To do this, counsel must become fully familiar with her client’s document retention policies, as well as the client’s data retention architecture. This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual (as opposed to theoretical) implementation of the firm’s recycling policy. It will also involve communicating with the “key players” in the litigation, in order to understand how they stored information. In this case, for example, some UBS employees created separate computer files pertaining to Zubulake, while others printed out relevant e-mails and retained them in hard copy only. Unless counsel interviews each employee, it is impossible to determine whether all potential sources of information have been inspected. […]
To the extent that it may not be feasible for counsel to speak with every key player, given the size of a company or the scope of the lawsuit, counsel must be more creative. […] [I]t is not sufficient to notify all employees of a litigation hold and expect that the party will then retain and produce all relevant information. Counsel must take affirmative steps to monitor compliance so that all sources of discoverable information are identified and searched. This is not to say that counsel will necessarily succeed in locating all such sources, or that the later discovery of new sources is evidence of a lack of effort. But counsel and client must take some reasonable steps to see that sources of relevant information are located.
[…] The continuing duty to supplement disclosures strongly suggests that parties also have a duty to make sure that discoverable information is not lost. Indeed, the notion of a “duty to preserve” connotes an ongoing obligation. Obviously, if information is lost or destroyed, it has not been preserved. […]
There are thus a number of steps that counsel should take to ensure compliance with the preservation obligation. While these precautions may not be enough (or may be too much) in some cases, they are designed to promote the continued preservation of potentially relevant information in the typical case.
First, counsel must issue a “litigation hold” at the outset of litigation or whenever litigation is reasonably anticipated. The litigation hold should be periodically re-issued so that new employees are aware of it, and so that it is fresh in the minds of all employees.
Second, counsel should communicate directly with the “key players” in the litigation, i.e., the people identified in a party’s initial disclosure and any subsequent supplementation thereto. Because these “key players” are the “employees likely to have relevant information,” it is particularly important that the preservation duty be communicated clearly to them. As with the litigation hold, the key players should be periodically reminded that the preservation duty is still in place.
Finally, counsel should instruct all employees to produce electronic copies of their relevant active files. Counsel must also make sure that all backup media which the party is required to retain is identified and stored in a safe place. […]
UBS’s in-house counsel issued a litigation hold in August 2001 and repeated that instruction several times from September 2001 through September 2002. Outside counsel also spoke with some (but not all) of the key players in August 2001. Nonetheless, certain employees unquestionably deleted e-mails. Although many of the deleted e-mails were recovered from backup tapes, a number of backup tapes—and the e-mails on them—are lost forever. Other employees, notwithstanding counsel’s request that they produce their files on Zubulake, did not do so. […]
Counsel failed to communicate the litigation hold order to all key players. They also failed to ascertain each of the key players’ document management habits. By the same token, UBS employees—for unknown reasons—ignored many of the instructions that counsel gave. This case represents a failure of communication, and that failure falls on counsel and client alike.
At the end of the day, however, the duty to preserve and produce documents rests on the party. Once that duty is made clear to a party, either by court order or by instructions from counsel, that party is on notice of its obligations and acts at its own peril. Though more diligent action on the part of counsel would have mitigated some of the damage caused by UBS’s deletion of e-mails, UBS deleted the e-mails in defiance of explicit instructions not to.
[The court went on to require UBS to restore documents from backup tapes where available and to submit to additional depositions. The court further held that the jury would be given an “adverse inference instruction,” which allows the jury to conclude that UBS hid evidence because it would have been unfavorable to UBS.]
Mueller v. Swift
Martínez, J.
In this tort action pending under the Court’s diversity jurisdiction, 28 U.S.C. § 1332, Plaintiff pursues claims against all Defendants for tortious interference with his employment contract and with related business expectancies, while Defendant-Counter Claimant Taylor Swift (“Swift”) pursues counterclaims for the torts of assault and battery. Now before the Court is Plaintiff’s Motion for Sanctions for Plaintiff’s Spoliation of Evidence. (ECF No. 139 (Defendants’ “Motion”).) As explained below, Defendants’ Motion is granted in part, to impose a spoliation sanction that is less harsh than the adverse inference requested by Defendants, but which the Court finds is the most appropriate sanction in the circumstances of this case.
I. BACKGROUND AND FINDINGS OF FACT
[…] [T]he additional background set out below is both undisputed and supported by evidence in the record.
Plaintiff worked as an on-air radio personality for a Denver area radio station, KYGO. On June 2, 2013, he attended a backstage “meet and greet” preceding a concert performed by Swift at Denver’s Pepsi Center. As detailed in the summary judgment order, Swift alleges that during a staged photo opportunity at the “meet and greet,” Plaintiff purposefully and inappropriately touched her buttocks beneath her dress. Plaintiff denies having done so.
Plaintiff’s employer, the company that owned KYGO, was informed of Swift’s accusation on the evening of June 2, 2013 and on the following day. On June 3, 2013, Plaintiff met with his superiors at KYGO, including Robert Call (“Call”) and Hershel Coomer (a/k/a “Eddie Haskell”) (“Haskell”). Unbeknownst to Call and Haskell at the time, Plaintiff made an audio recording of their conversation. The following day, June 4, 2013, Plaintiff was terminated from his employment at KYGO by Call. Call explained that one reason for Plaintiff’s termination was because Call perceived Plaintiff had “changed his story that it couldn’t have occurred, then that it was incidental.”
At some point thereafter, well after having first contacted an attorney regarding potential legal action, Plaintiff edited the audio recording of the June 3, 2013 conversation, and then sent only “clips” of the entire audio file to his attorney. In his deposition testimony, Plaintiff offered the following explanation for these actions: “[t]he audio I recorded was close to two hours long. And the audio that I could provide to [Plaintiff’s counsel] was a portion of the entire audio” (id.), and “it was so long, that I edited down clips from the recording to provide to [Plaintiff’s counsel] to give an idea of what kind of questioning I went … through.”
According to his testimony, Plaintiff edited the audio file on his laptop computer, on which he also retained a full copy of the original audio file(s). (See id. at 11–12.) However, sometime thereafter, coffee was spilled on the keyboard of Plaintiff’s laptop, damaging it. Plaintiff took the laptop to the Apple Store, and was given “a new machine.” He did not keep the original hard drive or recover the files from it. Evidently this occurred sometime in 2015. In addition, although Plaintiff kept an external hard drive “to store audio files and documents,” and the complete audio recording was saved on this drive, at some point it “stopped working.” At his deposition, Plaintiff testified that he “may have kept” this hard drive, but that because it was “useless” he “[didn’t] know if I discarded it because it was junk.” It has not been produced.
The end result of all this is that the complete audio recording of the June 3, 2013 conversation among Plaintiff, Call, and Haskell has never been produced. So far as the record reveals, Plaintiff is the only person who has ever heard it. Defendants and their lawyers have never heard it, and neither has Plaintiff’s own lawyer. As a result, Defendants move for a Court-imposed sanction for spoliation of evidence, and in particular for the Court to give the jury an adverse inference instruction at trial, to direct the jury “that the entirety of the June 3, 2013 audio recording would have been unfavorable to Plaintiff.”
II. LEGAL STANDARD
“A spoliation sanction is proper where: `(1) a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.’” In deciding whether to sanction a party for the spoliation of evidence, courts have considered a variety of factors, but two “generally carry the most weight: (1) the degree of culpability of the party who lost or destroyed the evidence; and (2) the degree of actual prejudice to the other party.”
[…]
III. ANALYSIS
A. A Spoliation Sanction is Warranted
The Court concludes that Plaintiff’s loss or destruction of the complete recording of the June 3, 2013 conversation constitutes sanctionable spoliation of evidence.
1. Duty to Preserve
Initially, Plaintiff does not dispute that he knew or should have known that litigation was imminent and that he was therefore under a duty to preserve relevant evidence, including the complete audio recording, at the time when he first altered it for his own purposes and then lost or destroyed the unedited file. See Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003).
The Court finds that Plaintiff knew or should have known that litigation was imminent. He had consulted with a criminal attorney immediately following the events of June 2, 2013, before being terminated by KYGO. He then consulted with a civil attorney about the allegations in this case, on or very shortly after June 4, 2013, and in contemplation of suing KYGO. Indeed, it is quite likely that the reason Plaintiff secretively recorded his conversation with Call and Haskell was because he knew that some form of adversarial legal action was likely to follow.
Moreover, Plaintiff later edited the audio file in order to send “clips” to his own attorney, when it was abundantly clear that litigation was imminent, because Plaintiff himself was actively considering it. […]
2. Relevance
The Court also readily concludes that the recording of the June 3, 2013 conversation was relevant to numerous disputed facts and issues in this case. For instance, to prevail on his tortious interference claims, Plaintiff must prove that Defendants’ communication with KYGO was improper, and that Defendants’ conduct caused KYGO to terminate him. The statements made by Plaintiff and by Messrs. Call and Haskell the day following the incident with Swift and the day before KYGO fired him would plainly be relevant to proving or disproving those facts. Moreover, the record reflects that one of the reasons Mr. Call decided to terminate Plaintiff was because he perceived that Plaintiff had “changed his story” during the course his communications with KYGO. (ECF No. 108-8 at 20.) A recording of this conversation could be invaluable to a jury that will be asked to decide, in part, whether they agree with Mr. Call’s assessment that Plaintiff has been inconsistent in his descriptions of the events of June 2, 2013.
[…]
3. Prejudice
The Court similarly finds that Defendants were prejudiced by the loss of evidence. At the very least, if the complete recording had been available, it might have saved time and expense in litigation by documenting the June 3, 2013 conversation, allowing for better preparation for depositions and ultimately for trial. Moreover, to the extent there may now be discrepancies in the accounts that Plaintiff and Messrs. Call and Haskill give regarding their June 3, 2013 conversation, the recording would probably have resolved them. […]
4. Culpability
Finally, the Court finds that the degree of culpability warrants a sanction. Although the Court declines to make a finding that Plaintiff acted in “bad faith” in the sense that he intended to destroy the evidence, it also cannot characterize the loss or destruction of evidence in this case as innocent, or as “mere negligence.” Rather, the spoliation falls higher up on the “continuum of fault.” […]
Plaintiff knew full well that litigation was imminent, since he was pursuing it. He knew that he was the only person in possession of the complete audio recording. He made the decision— inexplicably, in the Court’s view—to alter the original evidence and to present his lawyer with only “clips” hand-picked from the underlying evidence. This reflects that he obviously intended to make use of portions of the recording to advance his own claims. […] Plaintiff could and should have made sure that some means of backing up the files relevant to litigation was in place, but this was not done.
Moreover, when Plaintiff surrendered his laptop for repair or replacement, he knew that it contained relevant evidence. Depending on whether this occurred before or after the loss of his external hard drive (the record is unclear), the laptop contained either the only remaining copy of the complete audio file or one of only two, as Plaintiff also knew or should have known. Despite this, the record does not reflect that he made any effort to retain the hard drive, to have it returned to him after he surrendered the damaged laptop, or to otherwise recover the lost file(s). The same was true when his external hard drive stopped working. Rather than saving it, seeking to have it repaired, or taking steps to preserve the files stored on it, Plaintiff evidently just set the drive aside, and eventually lost it.
[…]
B. Appropriate Sanction
Despite the discussion of Plaintiff’s culpability above, the Court rejects Defendants’ request to make a finding of bad faith and to give the jury an adverse inference instruction. Having considered various options, and after directing Defendants to brief the issue of alternative sanctions, the Court finds that the following sanction is appropriate: Notwithstanding any limitations under Federal Rule of Evidence 611(b), Defendants will be permitted to cross-examine Plaintiff in front of the jury regarding the record of his spoliation of evidence, as described above.
The Court concludes this is the most appropriate sanction for several reasons. First, while Plaintiff is culpable, the Court does not find that the nature of that culpability warrants an adverse inference instruction. Although a threshold finding of bad faith is a prerequisite for an adverse inference, the Court does not view bad faith as a binary or “yes/no” issue. “The destruction of potentially relevant evidence obviously occurs along a continuum of fault—ranging from innocence through the degrees of negligence to intentionality.” As set forth above, the Court takes a dim view of Plaintiff’s acts of spoliation, which Defendants characterize—not entirely unfairly—as defendant “cherry picking what he wanted” from the recording, then “conveniently destroy[ing] the multiple copies.” However, the record does not establish—at least not clearly—that Plaintiff was acting with an intent to deprive Defendants of relevant evidence. Absent a more clear showing that Plaintiff’s conduct reflected his own “consciousness of a weak case,” an adverse inference instruction is not appropriate. See […] Fed. R. Civ. P. 37(e)(2) (as to electronically stored information, adverse inference jury instruction is permissible “only upon [a] finding that the party acted with the intent to deprive another party of the information’s use in litigation”).
[…]
[A]llowing Defendants to cross examine Plaintiff about his spoliation of evidence has the benefit of allowing the jury to make its own assessment of Plaintiff’s degree of culpability and of the actual prejudice to Defendants. The Court has little doubt that if the jury concludes Plaintiff acted with bad faith or an intention to destroy or conceal evidence, they will draw their own adverse inferences, whether the Court instructs it or not. In this case where Plaintiff’s credibility is critical to his claims, allowing cross-examination regarding his spoliation of evidence, including the fact that he personally chose and edited the “clips” now available to the jury is therefore quite a heavy sanction. On the other hand, if the jury is persuaded that Plaintiff’s actions were indeed innocent, then the impact of the Court’s sanction will be far less harsh.
[…] [T]he remedial effects of the Court’s sanction will be proportionally scaled to the degree of Plaintiff’s culpability and the degree of resulting prejudice. However, the remedial and punitive impact of the Court’s sanction will follow from the jury’s own findings and credibility determinations, rather than from findings by the Court on the basis of only the written record.
For all these reasons, the Court concludes in the exercise of its discretion that among all the many possible sanctions it might impose, the one set forth above is properly suited to the circumstances of this case, is no more onerous than is necessary to serve its purposes, and best serves the interests of justice.
IV. CONCLUSION
For the reasons set forth above, Defendants’ Motion for Sanctions for Plaintiff’s Spoliation of Evidence is GRANTED IN PART and DENIED IN PART as described above.
Notes & Questions
Zubulake discusses the standards for spoliation: when a party has failed to comply with its duties to preserve and turn over responsive and discoverable information when requested. Mueller focuses on the consequences of spoliation: the punishment for misbehavior.
Note that in Muller, the court stopped short of imposing an adverse inference instruction because there was not clear evidence of bad faith behind Mueller’s behavior. Instead, the Court allowed Swift’s lawyer to cross-examine Mueller about the missing recording at trial. Why do you think the court concluded that was a lesser sanction? Is it possible that it was actually more damaging to Mueller’s defenses?