Court Issues Fourth Order Regarding Forensic Inspection of Defendant’s Computer Systems; Finds Defendant’s Behavior Fell “Just Shy” of Conduct Befitting Default Judgment

Square D Co. v. Scott Elec. Co., 2008 WL 2779067 (W.D. Pa. July 15, 2008)

In June 2007, the court had ordered, among other things, that defendant Globe Electric Supply Co. “submit to a forensic inspection of its computer systems which record its purchases and sales of Square D products and its inventory of such products, with such inspection to be incurred at Globe’s sole expense and cost."  In November 2007, after finding Globe in contempt of court and considering that "the information at issue is important to the public health and safety in that the counterfeit circuit breakers represent a potential danger to unknowing consumers," the court again addressed the issue of the forensic inspection.  At that time, the court ordered Globe to:

submit to an inspection by Square D (including its attorneys), at Globe’s expense, of its inventory of Square D circuit breakers as well as Globe’s offices, warehouses, storage containers or facilities where Square D circuit breakers are or may be located, and also submit to a forensic inspection of its computer systems which records its purchases and sales of Square D products and its inventory of such products, with such inspection to be incurred at Globe’s sole expense and cost.

The court further ordered that said inspection occur within thirty days, or on or before December 14, 2007.

The third instance in which the court addressed the issue of the forensic inspection arose on a motion from Globe filed in March 2008.  Relevant to the forensic inspection, Globe requested that the court limit the forensic inspection "to a set time and cost to avoid a fishing expedition."  Globe argued that the lack of any limits on the inspection would result in "staggering" costs.  The court considered and rejected Globe’s request, and in April 2008 again ordered Globe to submit to the forensic inspection within thirty days.

The parties thereafter scheduled the inspection for Sunday and Monday, June 15 and 16, 2008.  Upon arrival, according to plaintiff, Globe objected to a portion of the inspection and plaintiff returned on June 20-22, 2008 (Friday through Sunday), in order to complete the inspection.  However, again according to plaintiff, Globe asserted numerous objections.

As a result, on June 27, 2008, plaintiff moved once again for an order compelling the inspection and also sought sanctions in the form of default judgment.  For the fourth time, the court addressed the parameters of the forensic inspection and Globe’s continuing resistance.

First, counsel for Globe asserted that "there is one server and two work stations that have any connection whatsoever with Square D product."  Globe argued that plaintiff’s expert should not be allowed to examine the remaining 11 workstations.  The court did not accept Globe’s argument:

“[C]onsidering Globe’s long history of obstinate behavior in the discovery process and seeming lack of candor to the Court on occasions, the Court refuses to accept its representation in this instance.  Moreover, given that the Court ordered the forensic inspection on June 12, 2007, the timing of Globe’s revelation on the day of the inspection that only two (2) workstations contain any relevant information within the parameters of the ordered inspection casts some doubt on its veracity.  If Globe wished to so limit the forensic inspection, it should have sought leave of Court to do so long ago as opposed to imposing limitations on the day of the inspection.  Accordingly, Globe shall give Plaintiff Square D access to all thirteen (13) workstations for its forensic inspection. Said inspection shall take place in the next thirty (30) days.

Second, the parties disputed whether plaintiff would be allowed to remove the imaged ESI from Globe’s facilities.  Plaintiff requested an order "mandating that Globe Electric allow any imaged and copied data to be removed from Globe Electric’s premises by Square D forensic consultant for further querying based on agreed-upon search terms."  The court noted that its previous orders concerning the inspection never imposed any parameter requiring plaintiff to review all imaged and copied ESI at Globe’s facility.  Further, it found that Globe was “more than late” in making the request.

Finally, the court considered plaintiff’s request for sanctions.  The court declined to enter default judgment against Globe at this point in the litigation because it found Globe’s failure to comply with the court’s orders concerning the forensic inspection and overall lack of respect and deference to the court’s authority fell “just shy of conduct befitting default judgment,” i.e., “‘flagrant bad faith” and “callous disregard” akin to the conduct described in Nat’l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639 (1976).  The court issued a stern warning to Globe and its counsel:

In conclusion, while the Court has previously spoken of its frustration regarding the discovery process in this case, it is becoming clearer to this Court that Defendant Globe and its counsel bear much of the responsibility for the continual and unreasonable delays in effectuating the Court-ordered forensic inspection and for the other delays in the discovery process in this case.  With that in mind, the Court wishes to impress upon Globe and its counsel that any further restrictions unilaterally imposed by it or its counsel on the forensic inspection (in any regard) as well as any other baseless barriers impeding the completion of discovery will be met with sanctions.  The Court shall conduct a post-inspection status conference on August 19, 2008 at 10:00 a.m. and counsel shall appear in-person.  The Court advises the parties that if additional discovery disputes arise, the Court may require them to utilize a special master, with costs to be borne by the parties.

Accordingly, the court granted plaintiff’s motion to the extent it sought an order compelling Globe to submit to a forensic inspection of its remaining computer systems (including the 11 remaining workstations) and mandating that Globe allow any imaged and copied data to be removed from the premises by plaintiff’s forensic consultant for further querying based on agreed-upon search terms.  The court further ordered, consistent with its past orders, that Globe shall bear all costs and expenses related to all of the forensic inspections.

The court denied plaintiff’s motion without prejudice and with leave to re-file (if necessary) to the extent plaintiff sought default judgment against Globe.