S.G.D. Engineering Limited v. Lockheed Martin Corporation Incorporated

Filing 72

REPORT AND RECOMMENDATIONS of Special Master. (Attachments: # 1 Errata A)(Himelrick, Richard)

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Richard G. Himelrick (004738)
TIFFANY & BOSCO, P.A.
Third Floor Camelback Esplanade II
2525 East Camelback Road
Phoenix, Arizona 85016-4237
Telephone: [phone]
Facsimile: [phone]
[e-mail]

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Special Master

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UNITED STATES DISTRICT COURT

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DISTRICT OF ARIZONA

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SGD Engineering Limited, an Israeli
corporation,

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Plaintiff,

Case No.: 2:11-cv-2493-DGC

Special Master’s Preliminary
Report and Recommendation

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vs.
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Lockheed Martin Corporation
Incorporated, a Maryland corporation,

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Defendant.

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1.

Introduction
Defendant Lockheed Martin Corporation contracted to build an aircraft pod for

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Toshiba. The pod was to house radar equipment on F-15 military aircraft. Lockheed

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subcontracted construction of the pod to Plaintiff SGD Engineering Ltd. SGD sued

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Lockheed for allegedly breaching the subcontract by refusing to pay in full for SGD’s

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work. Lockheed counterclaimed for lost profits and liquidated damages it incurred to

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Toshiba because of SGD’s allegedly untimely and defective performance.

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In connection with the parties’ document production, Lockheed served a privilege
log. Lockheed revised the privilege log several times in response to objections and

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concerns expressed by SGD. After the parties were unable to resolve their differences

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over the sufficiency of Lockheed’s Fourth Privilege Log, the Court appointed me as a

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special master to prepare a report and recommendation. See Doc. 64.

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Lockheed’s Fourth Privilege Log contains 653 entries. Objections were

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withdrawn and the documents produced for 147 entries, leaving 506 entries in dispute.

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Many, probably most of the entries, involve multiple documents.

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Shortly after my appointment, I scheduled a telephone conference with the parties.

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During the conference, the parties summarized their positions and agreed upon a schedule

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to brief their positions. So that I could better understand the controversy, I ordered the

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parties to each select five documents listed on the privilege log to be produced for me to

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confidentially review. See Doc. 65. The parties designated the documents as ordered,

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and Lockheed provided them to me.
On March 22, 2013 SGD filed its opening memorandum. See Doc. 66. Lockheed

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responded on March 27, 2013. See Doc. 69.

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Lockheed’s Response did not address SGD’s objections. Instead, Lockheed

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focused exclusively on what it called a fraudulent document that was attached as Exhibit

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O to SGD’s Opening Memorandum. Lockheed’s Response asked that SGD’s claims be

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dismissed and that Lockheed be awarded fees and costs. A few days later, Lockheed

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filed a Motion for Sanctions in which it renewed its request for dismissal with fees and

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costs. See Doc. 71.

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2.

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SGD’s Erroneous Summary
The SGD document that is in dispute is a composite exhibit that is attached as

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Exhibit O to SGD’s Opening Memorandum (Doc. 66). SGD represented that Exhibit O

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was a copy of Lockheed’s Fourth Privilege Log with an additional column added to list

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SGD’s objections to Lockheed’s privilege claims. But as Lockheed points out, at least 32

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of the entries are erroneous. These errors are in the column that contains Lockheed’s

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description of the basis for its privilege claims. In general, the errors involve omitted

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words that added detail to the basis for Lockheed’s privilege claims.
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SGD does not dispute the errors in the summary exhibit that it prepared. SGD

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filed a Notice of Errata (Doc. 70) admitting the errors. SGD candidly admitted that it

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could not reconstruct how the errors occurred. See id. at 2.

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SGD had no incentive to create a misleading exhibit. The nature of the errors is

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such that they would be immediately obvious to Lockheed and would deflect attention

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from the privilege-log issues on which SGD wants a ruling. Besides that, SGD made no

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attempt to hide the correct version of Lockheed’s privilege log. To the contrary, Exhibit

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N to SGD’s Opening Memorandum (Doc. 66) is a correct copy of Lockheed’s Fourth

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Privilege Log. For these reasons, I find that SGD’s errors were unwitting and occurred

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without any intent to mislead.

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It is also significant that Lockheed did not meet or confer with SGD about SGD’s

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errors before Lockheed filed its Response requesting sanctions. If that had been done, it

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seems almost certain that SGD would have conceded the mistake and would have filed a

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corrected exhibit as was done when SGD discovered its mistake. That would have

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expedited matters and allowed the parties to move forward on briefing the privilege-log

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issue on which I was assigned to report. Instead, the case has been stalled because of

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Lockheed’s requests for sanctions.
Finally, I note that I did not rely on SGD’s erroneous exhibit or waste time

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because of it. The only time that I spent regarding SGD’s erroneous exhibit is

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attributable to Lockheed’s requests for sanctions.
Under these circumstances—involving unintentional errors that were promptly

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acknowledged and corrected—I recommend that Lockheed’s Motion for Sanctions (Doc.

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71) be denied.

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3.

Lockheed’s failure to respond to SGD’s objections.

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Lockheed’s Response (Doc. 69) focused exclusively on SGD’s erroneous exhibit.

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Lockheed did not respond to the alleged deficiencies in its privilege log that were briefed

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by SGD.

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On March 28, 2012, I prepared a Memorandum to Counsel, Exhibit A, that

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explained that Lockheed needed to respond to SGD’s objections. A response is needed to

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enable me to prepare a report and recommendation on the sufficiency of Lockheed’s

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privilege log. In my Memorandum to Counsel I explained some of the major issues that I

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wanted Lockheed to address in a supplemental brief. Those issues, and other objections

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raised by SGD, still require a response from Lockheed.
In its Motion for Sanctions, Lockheed states that it will file a supplemental

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response by April 5, 2012.

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4.

Recommendation

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I recommend that (1) Lockheed’s Motion for Sanctions be denied, (2) Lockheed

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be allowed until April 5, 2013 to file a complete response to SGD’s objections, and (3)

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SGD be given until April 10, 2013 to file a reply. I request that the time for my final

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report and recommendation be extended to April 17, 2013.

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Dated: April 1, 2013.
s/ Richard G. Himelrick
Richard G. Himelrick
TIFFANY & BOSCO, P.A
Third Floor Camelback Esplanade II
2525 East Camelback Road
Phoenix, Arizona 85016
Special Master

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CERTIFICATE OF SERVICE

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I hereby certify that on April 1, 2013, I electronically filed the foregoing with the

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Clerk of the Court using the CM/ECF system which will send notification of such filing

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to the e-mail addresses denoted on the Electronic Mail notice list, and I hereby certify

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that I have mailed the foregoing document or paper via the United States Postal Service

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to the non-CM/ECF participants indicated on the Manual Notice list.

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I certify under penalty of perjury under the laws of the United States of America
that the foregoing is true and correct.

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s/ Shelley Boettge
Shelley Boettge

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540262

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