Ezfauxdecor, LLC et al v. Smith et al
Filing
135
MEMORANDUM AND ORDER granting in part and denying in part 119 Motion Regarding ESI Protocol; granting in part and denying in part 122 Second Motion to Adopt ESI Protocol. Signed by Magistrate Judge Kenneth G. Gale on 6/16/17. (df)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
EZFAUXDECOR, LLC, et al.,
)
)
Plaintiffs, )
)
)
)
v.
)
)
ALISON SMITH, et al.,
)
)
Defendants. )
______________________________ )
Case No. 15-9140-CM-KGG
MEMORANDUM & ORDER
The parties’ competing motions regarding the adoption of an ESI protocol
are currently pending before the Court in the above-captioned matter. (Docs. 119,
122.) For the reasons set forth herein, Plaintiffs’ Motion Regarding the ESI
Protocol (Doc. 119) is GRANTED in part and DENIED in part while
Defendants’ Second Motion to Adopt ESI Protocol (Doc. 122) is GRANTED in
part and DENIED in part.
BACKGROUND
The parties in this lawsuit are competing on-line retailers selling adhesive
coverings for household appliances and countertops. (See Doc. 86, at 1-2.)
Plaintiffs bring claims against Defendants for false advertising, tortious
interference with business relations, commercial disparagement, and false or
fraudulent trademark registration. (See generally Doc. 96.) Additionally, Plaintiffs
seek a cancellation of Defendants’ trademark registrations and request a
declaratory judgment “of its continued right to use the phrases ‘instant stainless,’
‘instant stainless steel,’ and ‘instant granite,’ as such or in combination with other
words to describe Plaintiffs’ products, all free and clear of interference or
harassment by Defendants and without any obligation or liability to Defendants.”
(Id., at 13-18.)
The parties previously filed dueling motions requesting an ESI protocol
(Docs. 87, 88). While they agreed about most of the elements, six issues relating
to Defendants’ proposed protocol were identified. (See Doc. 104, at 7-8.)
Plaintiffs argued that their proposal was more consistent with the Sedona
Conference than Defendants’ proposal. (Doc. 88, at 1-2.) Plaintiffs’ main
problems with Defendants’ proposal was that it mixed “matters more appropriate
to a protective order with the limited scope of a [sic] ESI plan. An ESI plan
concerns the format of production – a protective order concerns the limits to
production or dissemination of material.” (Id., at 2.)
This Court’s prior Order on the issue stated that “the elements to which the
parties have agreed create the structure for an appropriate ESI protocol.” (Doc.
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104, at 9.) The Court also stated that “[t]he protective order-type elements of
Defendants’ proposal do not belong in an ESI protocol.” (Id.) The parties were
directed to “to jointly compose a revised ESI protocol adhering to the elements on
which they have expressed agreement in their respective motions” within 30 days.
(Id.) The Court concluded by holding that additional elements proposed by either
party were excluded by the Order, without prejudice to revisiting these as they may
relate to specific discovery. (Id.)
The parties’ efforts to draft an agreed protocol were unsuccessful and they
subsequently (and timely) submitted an additional round of competing ESI
protocols. (Docs. 119, 122.) Plaintiffs’ motion indicates that the attached protocol
was agreed upon “with the exception of Paragraphs 8 and 9 which concern the
format for the production of financial information and websites/webpages.” (Doc.
119, at 1.)
ANALYSIS
A.
Paragraph 8.
According to Plaintiffs,
[t]he only difference between the parties’ versions of
paragraph 8 is that the Plaintiffs’ version identifies the
accounting programs of Defendant as a database system
that requires native format production. Defendants
acknowledge they use QuickBooks as their accounting
system. This is the only financial database from which
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the Plaintiffs have requested native format production.
(Doc. 119, at 2.) Plaintiffs argue that the QuickBooks file is the only native format
financial information requested and doing so imposes “virtually no burden” to
either party. (Id., at 3-4.)
Plaintiffs also contend that Defendants’ objection to this is improper because
goes to the content of what is produced, rather than the format of the production.
(Id., at 4-5.) According to Plaintiffs, “[w]ithout the underlying financial data,
Plaintiffs would have no way of disputing the cost offsets claimed by the
Defendants and demonstrating that the claimed offsets do not apply to the sales
generated by the false advertising.” (Id., at 5.)
Finally, Plaintiffs contend that the production of the QuickBooks file would
potentially allow the parties to withdraw certain other discovery requests (i.e.
requesting bank statements) which were necessitated by Defendants’ refusal to
produce the QuickBooks file. (Id.)
Defendants argue that “the QuickBooks file contains information regarding
sales and costs of products not at issue in this lawsuit and would subject
Defendants to costly, error-prone efforts to redact irrelevant information.” (Doc.
122, at 2.) As such, Defendants propose that the parties produce their financial
information “in native-format Excel spreadsheets or a comparable form of
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electronic report – not ‘paper reports,’ and not ‘unilaterally,’ as Plaintiffs argue.”
(Id.)
Defendants contend that releasing their entire financial status to Plaintiffs –
including as to non-relevant products – would put them at a competitive
disadvantage. (Id., at 3.) Further, “[c]reating a native-format QuickBooks file
containing only the sales and cost information relating to the two product lines at
issue in this lawsuit file would impose an undue burden on Defendants, and the
process of separating out” only the relevant native-format Quickbooks data would
be “costly and potentially error-prone.” (Id.) Defendants argue that Paragraph 12
of the protocol, to which the parties have agreed, contains the necessary provisions
regarding the production of structured financial data (in Excel spreadsheet format).
The Court agrees with Defendants that production of the documents in
QuickBooks format is improper because it would include the production of a
significant amount of information that is thoroughly irrelevant to this case.
Therefore, the financial information shall be produced in native-format Excel
spreadsheets or a comparable form of electronic report, as proposed by Defendants.
Defendants are, however, instructed to preserve all of this information in its native
QuickBooks format. The Court is willing revisit the issue of producing the
information in QuickBooks format upon a showing of good cause by Plaintiffs that
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the Excel spreadsheets or comparable electronic report(s) are insufficient.
B.
Paragraph 9.
The disagreement regarding this paragraph concerns the format of
production of websites and webpages. “Plaintiffs maintain that Defendants must
produce working, functional copies of their websites/webpages. Defendants
maintain that they will only produce static images converted to single page pdf
format.” (Doc. 119, at 5.)
Plaintiffs contend that Defendants were aware of the duty to preserve the
web-information by sending a litigation hold letter to Plaintiffs on July 28, 2015.
(Id., at 6.) The letter specifically stated that “Paper Preservation of ESI is
inadequate. As hard copies do not preserve electronic searchability or metadata,
they are not an adequate substitute for, or cumulative of, electronically stored
versions. If information exists in both electronic and paper forms, you should
preserve both forms.” (Id.) Plaintiffs argue they are simply trying to hold
Defendants to this same standard. (Id., at 7.) Plaintiffs also argue that production
of functional copies of the websites is appropriate, common in litigation, and
imposes little burden. (Id.)
Defendants state that Plaintiffs have failed to articulate a basis for requiring
native, fully functional versions of the websites. (Doc. 122, at 5.) They disagree
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with Plaintiffs’ “assertions that not preserving ‘functional electronic copies’ of
webpages is a per se breach of the duty of preservation. The duty to preserve
information attaches to the information itself, and not the particular form or format
of that information.” (Id.)
Defendants continue that “[t]he only issues in a Lanham Act falseadvertising/unfair-competition case are whether Defendants (and Plaintiffs) made
false or misleading statements that were likely to deceive the public about their
products.” (Id., at 6.) In Defendants’ opinion, only the “visible content” of the
parties webpages and third-party web listings “is relevant to the claims asserted in
this case, and that is the only content to which any preservation duty attaches.”
(Id.) Thus, according to Defendants, “the duty to preserve HTML code or other
underlying webpage metadata never arose.” (Id.) Defendants rely on the latest
version of The Sedona Principles, which states that “it is unreasonable to expect
parties to take every conceivable step or disproportionate steps to preserve each
instance of relevant electronically stored information.” The Sedona Principles § 5
(3d ed. 2017, public comment version) (emphasis added).
The Court finds that working, functional copies of the websites/webpages at
issue go to the very heart of this case. It is appropriate for Plaintiff to be able to
review the websites as a consumer would have done so. Defendants are instructed
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to provide Plaintiffs with fully functional copies of the websites. The issue of
preservation is, however, premature absent a showing that Defendants no longer
have the ability to provide the websites/webpages.
IT IS THEREFORE ORDERED that Plaintiffs’ Motion Regarding the ESI
Protocol (Doc. 119) is GRANTED in part and DENIED in part while
Defendants’ Second Motion to Adopt ESI Protocol (Doc. 122) is GRANTED in
part and DENIED in part, as set forth more fully above.
IT IS SO ORDERED.
Dated at Wichita, Kansas, on this 16th day of June, 2017.
S/ KENNETH G. GALE
KENNETH G. GALE
United States Magistrate Judge
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