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Third Party Not Required to Produce Hard Drives to Plaintiff Competitor; Court Limits Subpoena and Allows Third Party to Conduct its Own Search

Posted in CASE SUMMARIES

Daimler Truck N. Am. LLC v. Younessi, 2008 WL 2519845 (W.D. Wash. June 20, 2008)

In this case, Daimler sued its former employee in Oregon district court for breach of his duty of loyalty, his confidentiality contract, and his common law duty not to convert confidential and proprietary information, based upon the employee’s departure and subsequent employment by a competitor, Cascadia.  As part of that suit, Daimler served Cascadia with the third-party discovery requests at issue.  The parties resolved most of their disagreements, but were unable to resolve Daimler’s request to search Cascadia’s computers for communications between Younessi and Jim Hebe (a former CEO of Daimler who was subsequently employed by Cascadia) and between Hebe and other Daimler employees.  Cascadia moved to quash the subpoena and for a protective order because Daimler’s subpoena was both unduly burdensome and would require disclosing confidential trade secrets to a competitor.

Trade Secrets

Cascadia claimed that production of its hard drives would necessarily reveal its trade secrets.  The court recognized Cascadia’s interest in keeping its trade secrets out of the public eye, and particularly away from its competitors.  However, the court determined that the requested communications were highly relevant to the case.  Since Daimler had shown sufficient good cause for the discovery, the court denied the motion to quash.  However, the court also found that some form of protective order was appropriate.  It discussed the manner in which the production should occur, and concluded that Cascadia should be allowed to conduct the search for responsive documents itself:

The Federal Rules provide for discovery of electronically stored information either in its original state, i.e. actual production and copying of hard drives, or in a reasonably usable form, i.e. print outs.  Fed. R. Civ. P. 34(a)(1)(A).  While this is consistent with the general scope of the Rules allowing broad discovery, it is inconsistent with the adversarial aspect of trial practice and discovery because it contemplates granting opposing counsel, and opposing parties, direct access to information beyond the scope of discovery.  That is, the Rule allows for a subpoena of an entire hard drive for the limited purpose of finding a few documents which may be stored therein.  See Fed. R. Civ. P. 34(a)(1)(A) (requesting party may obtain information stored in any medium); Fed. R. Civ. P. 34(b)(1)(C) (requesting party "may specify the form or forms in which electronically stored information is to be produced").  This would be analogous to allowing the search of a party’s entire collection of file drawers for the purpose of finding a single class of documents.

In situations involving information which is appropriately kept private, the Court may fashion restrictions on the form and method of disclosure.  See Playboy Enterprises, Inc. v. Welles, 60 F. Supp. 2d 1050 (S.D. Cal.1999).  In the interest of protecting private information such as trade secrets or privileged documents, the Court can order the responding party’s attorneys to search for all documents consistent with the subpoena and to produce only those which are relevant, responsive, and do not disclose trade secrets.  See, e.g., id.  The Court finds in Playboy an appropriate model for this case.  There, the plaintiff sought to copy the defendant’s hard drives after it learned she may have deleted emails which could potentially prove the knowledge element of plaintiff’s infringement claims.  Id. at 1051.  Defendant responded with concerns that privileged communications would also be recoverable under such a procedure.  Id. at 1054.  The court ordered the copying, but directed defense counsel to search the copy for responsive materials instead of turning over the copied drives themselves.  Id. at 1055.

Here, Daimler also requests to copy Cascadia’s hard drives, a process which might reveal not just privileged, but also trade secret information.  Having Cascadia search its own computers is an appropriate compromise here because of the unique status of Daimler as a direct competitor and of Cascadia as a nonparty to the underlying suit.  The elaborate copying which took place in Playboy is not necessary because there are no allegations of documents being destroyed and Cascadia has shown that it is responsive and willing to cooperate with Daimler’s reasonable requests.

The Rules and case law support this solution.  See In re Ford Motor Co., 345 F.3d 1315 (11th Cir. 2003); Comment to 1970 Amendment of Fed R. Civ. P. 34(a) ("[W]hen the data can as a practical matter be made usable by the discovering party only through respondent’s devices, respondent may be required to use his devices to translate the data into usable form. In many instances, this means that respondent will have to supply a print-out of computer data."); Comment to 1993 Amendment to Fed. R. Civ. P. 34(a) (the rule "is not meant to create a routine right of direct access to a party’s electronic information system").  Fortunately, Cascadia has demonstrated it is willing to cooperate with Daimler in seeking discovery and the Court has confidence that Cascadia’s counsel will adequately and appropriately screen all discovered materials and remove only those documents which are beyond the scope of this order.

Undue Burden

The court next considered Cascadia’s arguments that the discovery requests were overly broad because of Cascadia’s wide-ranging collection of locations and computers.  It stated that Hebe was involved in a wide range of activities while heading Cascadia and had access to a variety of computers.  Cascadia further argued that the broad scope of Daimler’s request further complicated production.

The court found some merit in Cascadia’s position:

When the Federal Rules were amended, the drafters were well aware that the scope of electronic discovery could be both broad and burdensome. GAP Report to the 2006 Amendment to Fed. R. Civ. P. 26(b)(2).  "Information systems are designed to provide ready access to information used in regular and ongoing activities," however, and this makes large scale production of documents stored in this way much less burdensome than it otherwise would be.  Id.  The very nature of electronically stored information makes it easier to search, and "[i]n many circumstances the requesting party should obtain and evaluate the information from such sources before insisting that the responding party search and produce information contained on sources that are not reasonably accessible."  Id.

The Court is aware that the parties have conferred to some extent to discuss this request and that Cascadia has voluntarily complied with the subpoena to some extent.  That being said, neither party has briefed with the specificity required how burdensome further production might be or what likelihood there is that the resulting documents might be relevant.

The requesting party, Daimler, has the burden of showing a need for further discovery outweighs the burden placed on Cascadia in producing it, and not all of Daimler’s requested documents meet that burden.  See GAP Report to the 2006 Amendment to Fed. R. Civ. P. 26(b)(2) ("The requesting party has the burden of showing that its need for the discovery outweighs the burdens and costs of locating, retrieving, and producing the information.").  Under the showing Daimler has made thus far, it would unduly burden Cascadia to produce information regarding contacts between Hebe and Daimler employees when no effective way has been presented to distinguish such contacts from the wide range of contacts any businessman undertakes.  There is no evidence before this Court that Daimler has performed a search of its own records and documents for such contacts.  If it has not, it would be unduly burdensome and potentially cumulative to require Cascadia to perform such a search in its records when Daimler, by failure to do such a search on its own, has implied that the costs of such a search outweigh the potential benefits.  If Daimler has performed such a search and revealed no evidence to support the need for such a broad ranging search then the likelihood of Cascadia’s similar search being sufficiently beneficial to outweigh the costs is low.  Without such a showing, Daimler has not met its burden of showing "good cause."

Accordingly, the court ordered Cascadia to perform its own search to determine what documents could be produced without violating its trade secret and privilege concerns.  It directed Cascadia to identify all potentially responsive sources that it did not search and all potentially responsive documents that it did not produce, providing enough detail to enable the requesting party to evaluate the burdens and costs of providing the discovery and the likelihood of finding responsive information on the identified sources.  The court limited production to documents regarding communications on hard drives, Blackberries, lap tops and calendars used by Hebe, between Hebe and Younessi or between Hebe and another third party regarding Younessi during the 14 months laid out in the subpoena.  Finally, the court quashed the subpoena to the extent it required Cascadia to produce documents regarding contacts between Hebe and Daimler or Daimler employees.