Cahoo et al v. SAS Analytics Inc. et al
Filing
217
ORDER Granting Defendant Fast's Motion to Compel Compliance with Subpoena (Dkt. 212 ). Signed by District Judge David M. Lawson. (Sandusky, K)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
PATTI JO CAHOO, KRISTEN MENDYK,
KHADIJA COLE, HYON PAK, and
MICHELLE DAVISON,
Plaintiffs,
Case Number 17-10657
Honorable David M. Lawson
v.
SAS INSTITUTE INC., FAST
ENTERPRISES LLC, CSG GOVERNMENT
SOLUTIONS, STEPHEN GESKEY,
SHEMIN BLUNDELL, DORIS MITCHELL,
DEBRA SINGLETON, JULIE A.
McMURTRY, and SHARON
MOFFET-MASSEY,
Defendants.
/
ORDER GRANTING DEFENDANT FAST’S MOTION TO COMPEL
COMPLIANCE WITH SUBPOENA
Defendant FAST Enterprises, LLC served a subpoena on November 19, 2018 on the State
of Michigan for eight categories of documents that are relevant to the plaintiffs’ claims in this case.
Having received very little in response, FAST filed the present motion to compel production of
the documents. The Court heard oral argument on August 29, 2019 and ruled from the bench that
prompt production of documents is required.
The subpoena was directed to “the State of Michigan,” although the focus of many of the
requests is on the Michigan Unemployment Insurance Agency (UIA), a department of the State
whose employees are defendants in this case. The subpoena sought production of documents
responsive to the following eight categories:
1. All Communications and Documents from the Microsoft Outlook/Exchange
accounts of any FAST, CSG, or SAS employee who was given a Michigan.gov
email address;
2. All files (including Communications and Documents) from the local hard drives
(or images thereof) of any State of Michigan computers given to any FAST, CSG,
or SAS employee to use for purposes of the Project;
3. All files (including Communications and Documents) located on the Project
Sharepoint sites;
4. All files (including Communications and Documents) located in the SQR, SQT,
SQD and FCR databases for the Project;
5. All Communications and Documents related to the Project which are located on
any Agency shared drives (this request specifically excludes all data within the
MiDAS system);
6. All Communications and Documents from Microsoft Outlook/Exchange, the
local hard drives, and the personal records and files of any State of Michigan
employee which are related to the Project, including:
a. All Communications and Documents related to the Agency’s Request for
Proposals for the Project, including all responses received;
b. All Communications and Documents related to the Agency’s decision to
implement auto-adjudication;
c. All Communications and Documents related to the Agency’s
development of requirements and parameters for the Project, including the nonmonetary determinations aspects of the Project;
d. All Communications and Documents related to the Agency’s hiring of
Defendants SAS Institute Inc., FAST Enterprises, LLC, and CSG Government
Solutions (the “Corporate Defendants”);
e. All Communications and Documents related to the respective roles of
each of the Corporate Defendants and the Agency for the Project;
f. All Communications and Documents related to the Agency’s
communications with the Department of Labor and/or Employment and Training
Administration regarding the Project and auto-adjudications;
g. All Communications and Documents related to the customizations or
changes made to the MiDAS software throughout the Project, including all
customizations and changes made to the non-monetary determinations decision
trees, and where, why, and with whom those changes originated;
h. All Communications and Documents related to procedures for
adjudication of claims;
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7. All Communications and Documents produced by the Policies and Procedures
Group at the Agency related to, relevant to, or used during the Project; and
8. Documents evidencing the fraud detection and adjudication system and decision
tree used by the Agency prior to the Project.
FAST Subpoena, ECF No. 212-2, PageID.4830-31. The subpoena, commanding the State of
Michigan to produce the requested documents on December 13, 2018 at 9:00 a.m., was directed to
the care of assistant attorney general Debbie Taylor, who represents defendant Sharon MoffetMassey in this case, and non-party UIA in the Bauserman litigation, a related lawsuit brought
against the State and its agency. Taylor accepted service of the subpoena but purported to limit
her acceptance to the UIA, even though it was directed to the State of Michigan. More on that
later.
To date, FAST has not received emails responsive to the subpoena, except for 11 emails
produced on June 25, 2019 that were responsive to only two categories of documents sought.
Neither the UIA nor any other state agency objected to the subpoena or filed a motion to quash or
for a protective order.
Counsel for FAST, the other parties, and the UIA apparently have been negotiating for
eight months regarding form of production, search terms, and privilege for emails responsive to
the subpoena. The UIA has represented that only one mailbox for a FAST employee still existed,
and that all other FAST mailboxes have been deleted.
On May 31, 2019, the parties and counsel for the UIA discussed over telephone issues
related to the location of emails as well as privilege concerns and cost-sharing. FAST agreed to
issue courtesy subpoenas to three State agencies — the Department of Technology, Management,
and Budget (DTMB), Department of Licensing and Regulatory Affairs (LARA), and Department
of Talent and Economic Development (TED) — in order to satisfy the UIA’s procedural concerns.
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During the conference, counsel for the UIA represented that she had no indication that the other
agencies would object to the subpoenas. FAST served copies of the subpoena on those three
agencies on June 4, 2019.
On June 12, 2019, LARA responded to FAST’s subpoena certifying that after conducting
a “thorough search of its electronic databases and other records . . . it has no records responsive to
the request.”
TED apparently responded to the subpoena via email indicating that it had gathered
responsive emails and intended to produce them following review. Berry Aff., ECF No. 212,
PageID.4818.
On June 17, 2019, DTMB responded to FAST’s subpoena objecting to the requests on
various grounds including that they are vague, unduly burdensome, and duplicative of what was
asked of the UIA. ECF No. 212-6. The response indicated that if FAST stipulated to an order that
allows DTMB to be “reasonably compensated” for its costs for complying with the subpoena,
DTMB would work with FAST to produce any responsive and non-privileged documents. DTMB
estimated costs of compliance to be in the hundreds of thousands of dollars, perhaps even
exceeding one million dollars.
Despite FAST’s efforts to negotiate in good faith regarding cost-sharing of loading and
producing the requested data, the UIA has not taken any steps to begin producing non-privileged
responsive emails, either from FAST’s employees’ mailbox or from any State of Michigan
employee. However, at the hearing an assistant attorney general represented that the UIA will
furnish certain non-privileged emails within two weeks. A significant portion of the UIA’s
estimated costs is for privilege review of responsive emails. The UIA estimates that based on the
search terms provided, 5.5% of the emails responsive to the subpoena contain privileged search
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terms. Document review of the State of Michigan mailboxes alone will cost $1.5 million. The
estimate is approximately $177,000 for the single mailbox of the FAST employee the UIA was
able to uncover. It is undisputed, however, that FAST employees were considered independent
contractors when they worked at the UIA.
Despite its failure to object to the original subpoena, the UIA now argues that it believes
that the emails of FAST’s own employees, as independent contractors, are covered
communications subject to the attorney-client privilege. That is not a justification to delay
production any further, however, as eight months have elapsed since the subpoena was served, the
UIA never objected to it, it did not submit a privilege log, and it did not move for a protective
order asserting any sort of privilege. Moreover, the production would be covered by a protective
order that the Court entered months ago, which contains a claw-back provision after the fashion of
Federal Rule of Evidence 502.
A valid privilege might be a legitimate basis for withholding production. See Ross v. City
of Memphis, 423 F.3d 596, 600 (6th Cir. 2005) (“The attorney-client privilege protects from
disclosure confidential communications between a lawyer and his client in matters that relate to
the legal interests of society and the client.”) (citations omitted). And “[a] subpoena to a third
party under Rule 45 is subject to the same discovery limitations as those set out in Rule 26.” Knight
Capital Partners Corp. v. Henkel Ag & Co., KGaA, 290 F. Supp. 3d 681, 685 (E.D. Mich. 2017)
(citations omitted). The UIA says that there are thousands of emails that may contain privileged
communications between FAST employees and attorneys for the State. Citing Raymond James &
Associates, Inc. v. 50 North Front Street, TN, LLC, No. 18-2104, 2018 WL 6529879 (W.D. Tenn.
Sept. 13, 2018), the UIA argues that contractor emails, as well as emails belonging to State
employees, are covered under the attorney-client privilege. In that case, the plaintiff alleged that
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the defendant breached its obligations under the parties’ lease agreement by failing to maintain the
elevators in the building owned by the defendant and occupied by the plaintiff. Id. at *1. The
plaintiff served a subpoena on a third party that was the asset manager for the building and was
owned, at least in part, by the same owner of the defendant entity. Ibid. The defendant asserted
that because the third party was its “functional employee,” “it retain[ed] a personal right and
privilege to protect the subpoenaed information.” Ibid. The court explained that the “[a]ttorneyclient privilege can extend to a corporation’s independent contractor that is the ‘functional
equivalent of an employee.’” Id. at *3 (citing In re Flonase Antitrust Litig., 879 F. Supp. 2d 454,
459 (E.D. Pa. 2012)); see also In re Bieter Co., 16 F.3d 929, 937 (8th Cir. 1994) (““[W]hen
applying the attorney-client privilege to a corporation or partnership, it is inappropriate to
distinguish between those on the client’s payroll and those who are instead, and for whatever
reason, employed as independent contractors.”).
But that case does not help the UIA where FAST is seeking emails of its own employees.
Even assuming the communications satisfy the elements of the attorney-client privilege — which
is impossible to know in the absence of a privilege log — FAST would fall within the scope of the
privilege and assert or waive it as it chooses. See Upjohn Co v. United States, 449 U.S. 383, 396
(1981). The UIA has not offered any explanation for why FAST would not be entitled to review
those emails of FAST’s own employees contracted to the State, which the UIA intends to withhold
on the basis of privilege.
Moreover, “[a] person withholding subpoenaed information under a claim that it is
privileged . . . must: (i) expressly make the claim; and (ii) describe the nature of the withheld
documents, communications, or tangible things in a manner that, without revealing information
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itself privileged or protected, will enable the parties to assess the claim.” Fed. R. Civ. P.
45(e)(2)(A); see also Fed. R. Civ. P. 26(b)(5)(A). As noted, no privilege log has been produced.
The UIA has raised cost sharing as an issue, but as the Court explained at the hearing on
February 6, 2019, cost-sharing disputes are not a valid basis to withhold producing documents
responsive to a subpoena. See Tr. at 7, ECF No. 212-7. It does not appear that this is the primary
reason behind the UIA’s delay in production, but if it is, it is unclear why the UIA has not sought
a protective order.
Both the UIA and its sister agency, the DTMB, have projected cost estimates of hundreds
of thousands of dollars to produce the documents, most of which would consist of privilege review
expenses.
Seeking reimbursement for wildly expensive production costs certainly could
discourage a party from seeking potentially damaging information. But it has been well recognized
that a subpoenaed party cannot seek reimbursement for costs of privilege review. See e.g., Steward
Health Care System LLC v. Blue Cross & Blue Shield of Rhode Island, No. 15-272, 2016 WL
8716426, at *4 (E.D. Pa. Nov. 4, 2016) (explaining that fees that were “incurred as a result of [a]
desire to check for privileged and confidential documents . . . are not subject to reimbursement
under Rule 45”); US Bank Nat’l Ass’n v. PHL Variable Ins. Co., No. 12-6811, 2012 WL 5395249,
at *3 (S.D. N.Y. Nov. 5, 2012) (awarding search, collection, and production costs associated with
compliance, but holding that the “non-parties shall bear their own costs of reviewing the
documents for privilege,” and noting that “[g]enerally, it is not appropriate to shift such costs
because the producing party has the exclusive ability to control the cost of reviewing the
documents”) (internal citation and quotation omitted). Neither agency has pointed to any authority
to the contrary, and as noted above, the Court already admonished the UIA that cost-shifting
disputes are not a valid basis for withholding production.
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The UIA also asserts that it cannot produce deleted mailboxes, explaining that when the
Bauserman litigation began, a litigation hold was issued and all UIA employee accounts, manual
sections, training manuals, and other documents related to MiDAS were preserved. A reminder
was issued several times after that to continue to preserve documents, including after this case was
filed, and the UIA says that it prepared litigation hold memoranda related to the contractor
defendants as the case unfolded. The UIA apparently is unaware of whether the other State
agencies issued a litigation hold regarding their employees and this litigation. Despite this, the
mailboxes for many of the FAST employees that were identified in the disclosures are
“unavailable.” The UIA says that it advised counsel for FAST and CSG that the mailboxes for
Tuvell, Platt, and Gragg had been disabled. And the mailboxes for Hayden, Atkinson, Silva, Araki,
and Eads were deleted five years ago and prior to the Bauserman case.
Certainly, the UIA cannot produce what it no longer has. See Roden v. Floyd, No. 1611208, 2019 WL 1098918, at *4 (E.D. Mich. Mar. 8, 2019) (Patti, M.J.) (“[A] a party cannot be
compelled to produce what he does not have.”). But as FAST points out, the UIA has failed to
explain adequately why certain mailboxes were deleted in 2018, after Bauserman, and why other
mailboxes were deleted in 2014. There is insufficient information in the record to allow a
determination, and the Court will permit FAST to take discovery on this point.
Finally, the UIA responds that it cannot produce emails of persons it does not employ or
that no longer exist. The UIA says that employees whose mailboxes belong to other State agencies
— such as DTMB, LARA, and TED — are not within its control as those agencies are non-parties
to this case. DTMB apparently informed the UIA that it would not provide the UIA with the
mailboxes of any non-UIA employees. The UIA asserts that a motion to compel production should
be directed to the agencies where the mailboxes are located.
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But the subpoena was not directed to the UIA; it was directed to the State of Michigan.
FAST explains, however, that it sent the subpoena to the UIA because assistant attorney general
division chief Debbie Taylor told counsel for FAST that the UIA director authorized her assistant
to accept the subpoena. The UIA’s attempt to compartmentalize the State and its agencies is
disingenuous here. It generally is recognized that process directed to a state agency (and its
employees in their official capacity) is tantamount to proceeding against the state itself. See Will
v. Michigan Dep't of State Police, 491 U.S. 58, 71 (1989) (citing Kentucky v. Graham, 473 U.S.
159, 165-166 (1985)). The State should not be able to enjoy the benefits of consolidation, only to
disavow it when it becomes inconvenient. Moreover, according to FAST, the DTMB has been
intimately involved with searches and production of the documents concerning this subpoena
already. Its attempt to erect artificial barriers to compliance with the Court’s subpoena is not well
taken. Convincing FAST to serve a “courtesy subpoena” specifically directed to DTMB, so as to
reset the clock for filing objections, does not change that. FAST’s November 29, 2018 subpoena,
directed to the State of Michigan, was served upon an assistant attorney general involved in this
litigation and was sufficient to notify the appropriate state agencies of their obligation to respond.
It appears that there are thousands of documents in the UIA’s possession that it has not
turned over despite the significant lapse in time since the subpoena was served, and it has not
accounted for any of them in a privilege log. FAST is entitled to its discovery, and the State will
not be permitted to foot-drag any longer and delay this litigation.
Accordingly, for the reasons stated here and on the record, it is ORDERED that the motion
to compel production of the documents in compliance with the November 29, 2018 subpoena (ECF
No. 212) is GRANTED.
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It is further ORDERED that non-privileged emails must be produced on or before
September 19, 2019 in the mode of production identified by defendant FAST.
It is further ORDERED that all documents responsive to the subpoena subject to privilege
review must also be produced on or before September 19, 2019. Privilege review may be
conducted, but if it is not completed, the production will be subject to the protective order and its
claw-back provisions.
It is further ORDERED that the defendants may conduct a deposition under Federal Rule
of Civil Procedure 36(b) of a technology representative of the State focusing on the issue of deleted
mailboxes, how, why, and when they were deleted, and whether there is any basis to conclude that
there is technology available to recover the deleted material.
s/David M. Lawson
DAVID M. LAWSON
United States District Judge
Date: August 30, 2019
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was
served upon each attorney or party of record herein by
electronic means or first-class U.S. mail on August 30, 2019.
s/ Karri Sandusky
KARRI SANDUSKY
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