Jim Hawk Truck-Trailers of Sioux Falls, Inc. v. Crossroads Trailer Sales & Service, Inc. et al
Filing
136
ORDER granting in part and denying in part 104 Plaintiff's Motion to Compel. Signed by U.S. District Judge Karen E. Schreier on 07/29/2022. (KLE) Modified on 7/29/2022 to change to opinion (SKK).
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
JIM HAWK TRUCK-TRAILERS OF
SIOUX FALLS, INC.,
Plaintiff,
vs.
CROSSROADS TRAILER SALES &
SERVICE, INC., ALVIN SCHOLTEN,
MARK SNEVE, MICHAEL FALOR,
DAVID JENSEN, TRACY THOMPSON,
NICK BIG EAGLE, CHAZ KOHERST,
TAYLOR LARSON, and DEREK FALOR,
4:20-CV-04058-KES
ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFF’S
MOTION TO COMPEL
Defendants.
Plaintiff, Jim Hawk Truck Trailers of Sioux Falls, Inc., moves to compel
Defendant Crossroads Trailer Sales & Services, Inc., to respond to an
Interrogatory and multiple Requests for Production of Documents (RFP), and to
produce electronically stored information (ESI) responsive to seven search
terms. Docket 104. Crossroads opposes the motion. Docket 110. For the
following reasons, the court grants in part and denies in part Jim Hawk’s
motion.
BACKGROUND
A full factual background was provided by this court in its Order
Granting in Part and Denying in Part Defendants’ Motion to Dismiss. Docket
78. The following is a summary of the facts relevant to this discovery dispute.
On March 27, 2020, Jim Hawk brought suit against Crossroads and nine
of its former employees (Individual Defendants) for misappropriation of trade
secrets, breach of the duty of loyalty, tortious interference with businesses
relations and employee relationships, civil conspiracy, unjust enrichment,
unfair competition, and defamation. 1 Docket 1. Jim Hawk alleges that
Crossroads has engaged in unfair business practices by hiring all the
Individual Defendants within a short period of time and obtaining trade secrets
and customer contacts as a result. Id. ¶¶ 55, 59-60. Jim Hawk alleges that
these practices have greatly expanded the scope and profitability of Crossroads’
business while diminishing that of Jim Hawk. Id. ¶ 71.
Jim Hawk served its First Set of Interrogatories and RFPs on Crossroads
on September 15, 2020. Docket 105-1 ¶¶ 4, 7. Since then, the parties have
engaged in extensive back in forth over various discovery disputes. 2 See
generally Docket 105-1. Upon failure to resolve several disputes, Jim Hawk
filed the instant motion to compel discovery under Federal Rule of Civil
Procedure 37(a) and D.S.D. Civ. LR 37.1. Docket 104. The discovery requests at
Not all claims are brought against all defendants. The only claims not brought
against defendant Crossroads are breach of the duty of loyalty and defamation.
Docket 1.
2 Both the Federal Rules of Civil Procedure and this district’s local rules require
that parties meet and confer in an attempt to resolve discovery disputes before
filing discovery motions. See Fed.R.Civ.P. 37(a)(1); D.S.D LR 37.1. Jim Hawk’s
counsel asserts that it has done so. Docket 105-1 ¶ 3. Crossroads does not
disagree. See generally Docket 110. Thus, the court finds the meet-and-confer
prerequisite to be satisfied.
1
2
issue are Interrogatory No. 6, RFPs Nos. 21, 22, 33, and 55, and seven ESI
search terms. 3 See Docket 105 at 1-3.
LEGAL STANDARD
Federal Rule of Civil Procedure 26 governs the scope of discovery in civil
matters, providing:
Unless otherwise limited by court order, the scope of discovery is as
follows: Parties may obtain discovery regarding any nonprivileged
matter that is relevant to any party’s claim or defense and
proportional to the needs of the case, considering the importance of
the issues at stake in the action, the amount in controversy, the
parties’ relative access to relevant information, the parties’
resources, the importance of the discovery in resolving the issues,
and whether the burden or expense of the proposed discovery
outweighs its likely benefit. Information within this scope of
discovery need not be admissible in evidence to be discoverable.
Fed. R. Civ. P. 26(b)(1). “The scope of discovery under Rule 26(b) is extremely
broad.” Burke v. Ability Ins. Co., 291 F.R.D. 343, 348 (D.S.D. 2013). The reason
for the broad scope of discovery is that “[m]utual knowledge of all the relevant
facts gathered by both parties is essential to proper litigation. To that end,
either party may compel the other to disgorge whatever facts he has in his
possession.” Hickman v. Taylor, 329 U.S. 495, 507 (1947).
If a party does not produce requested documents, the party seeking
discovery may move for an order compelling production. See Fed. R. Civ. P.
37(a)(3)(B). “The requesting party must make a threshold showing that the
At the time of filing, Jim Hawk’s Motion to Compel claimed “Request for
Production No. 9 – Financial Information Supplementation” to be in dispute.
Docket 105 at 3. Crossroads later supplemented its response to Request No. 9.
Docket 110 at 2. Jim Hawk has informed the court that it now considers this
dispute resolved, and it withdrew it from its motion to compel. Docket 113 at 1.
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requested information falls within the scope of discovery under Rule 26(b)(1).”
Sprint Commc’ns Co. L.P. v. Crow Creek Sioux Tribal Ct., 316 F.R.D. 254, 26364 (D.S.D. 2016) (citing Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir.
1992)). “Mere speculation that information might be useful will not suffice;
litigants seeking to compel discovery must describe with a reasonable degree of
specificity, the information they hope to obtain and its importance to their
case.” Id. at 264 (quoting E.E.O.C. v. Woodmen of the World Life Ins. Soc., 2007
WL 1217919, at *1 (D. Neb. Mar. 15, 2007)).
Once the requesting party has made a thresholding showing of relevance,
the burden shifts to the party resisting discovery to show specific facts
demonstrating that the discovery is not relevant, or how it is overly broad,
burdensome, or oppressive. See Penford Corp. v. Nat’l Union Fire Ins. Co., 265
F.R.D. 430, 433 (N.D. Iowa 2009); St. Paul Reinsurance Co. v. Com. Fin. Corp.,
198 F.R.D. 508, 511 (N.D. Iowa 2000). The articulation of mere conclusory
objections that something is “overly broad, burdensome, or oppressive” is
insufficient to carry the resisting party’s burden — that party must make a
specific showing of reasons why the relevant discovery should not be had.
Cincinnati Ins. Co. v. Fine Home Mangers, Inc., 2010 WL 2990118, at *1 (E.D.
Mo. July 27, 2010); see also Burns v. Imagine Films Entm’t, Inc., 164 F.R.D.
589, 593 (W.D.N.Y. 1996).
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DISCUSSION
I.
Interrogatory No. 6 – Employee Identification
In this interrogatory, Jim Hawk requests that Crossroads, “Identify all
employees of Crossroads for the time period of December 1, 2018 through the
present. For each employee identify his or her full name, position with
Crossroads, and job duties.” Docket 105-1 ¶ 11. The interrogatory was later
limited to employees in the trailer sales and the parts and service sales
departments working in South Dakota and Minnesota. Id. at 83, 115.
Crossroads objects, claiming the information requested is irrelevant,
unreasonably cumulative and duplicative, and overbroad. Docket 110 at 5-6.
Crossroads’ main contention is that Jim Hawk has failed to make a
threshold showing of relevance for this breadth of employee information. Id.
Instead, Crossroads has offered to specify how its total employee-count has
changed since 2018. Id. at 6; Docket 105-1 at 94. But this would only provide
some of the information Jim Hawk is seeking. Jim Hawk seeks the context of
titles and duties to fully understand Crossroads’ business expansion. Docket
113 at 3. Because this expansion is fundamental to Jim Hawk’s various
allegations of unfair competition, this information is relevant.
Crossroads also argues that Jim Hawk can obtain the information
sought by Interrogatory No. 6 through other means, namely, through
depositions of Crossroads’ employees and financial documents, thus making
this request unreasonably cumulative and duplicative. Docket 110 at 5-6. But
Crossroads has not shown that any one person, or combination of people, who
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Jim Hawk could depose would have all the information Jim Hawk seeks.
Likewise, the financial information already provided, and that to be provided in
accord with the later provisions of this order, only provides quantitative
information about Crossroads’ growth, and not the other employment
information Jim Hawk seeks through this interrogatory.
Although Crossroads objects that Interrogatory No. 6 is overbroad, it has
not explained how it is overbroad, particularly given the agreed-to limitation.
See Docket 110 at 5-6. Thus, the court orders Crossroads to respond to
Interrogatory No. 6 by identifying employees in its trailer sales and parts and
service sales departments in its South Dakota and Minnesota locations from
December 1, 2018 to the present by full name, position, and job duties.
II.
Request for Production No. 21 – Bank Statements or Records
Jim Hawk requests production of “[a]ny and all bank statements or
records for Crossroads for the period of time from January 1, 2018 through the
present.” Docket 105-1 ¶ 13. Crossroads objects, claiming this request is
overbroad, irrelevant, vague, and ambiguous. Docket 110 at 7-9.
The court agrees that this request is overbroad regarding Crossroads’
Albert Lea, Denver, Wichita, and Garden City branches. Jim Hawk’s claims
only concern Crossroads’ hiring of the nine Individual Defendants, who all now
work at its Luverne and Sioux Falls locations, and sales to former Jim Hawk
customers at the Luverne and Sioux Falls locations. Docket 105 at 14-15;
Docket 113 at 5. Jim Hawk has not alleged wrongful conduct beyond these two
locations. Id. Thus, the court will limit this request to bank statements or
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records for Crossroads’ Sioux Falls and Luverne locations from 2018 to the
present.
With this limitation, the request for bank statements or records is
relevant. Courts have held financial records to be relevant and discoverable in
cases alleging unfair business practices. See Upchurch v. USTNET, Inc., 158
F.R.D. 157, 160 (D. Or. 1994) (finding documents “indicating [defendant’s]
financial condition” relevant to claims of tortious interference with contract and
prospective advantage and unfair competition); W. Air Charter v. Schembari,
2018 WL 6537158, *5 (C.D. Cal. Apr. 9, 2018) (finding plaintiff’s “balance
sheet, income statement, and statement of cash flows” relevant to punitive
damages on counterclaim of intentional interference with prospective economic
advantage). Here, Crossroads’ bank statements are relevant to Jim Hawk’s
claims of misappropriation of trade secrets, tortious interference with
businesses relations and employee relationships, unjust enrichment, and
unfair competition. Additionally, these records are relevant to Jim Hawk’s
claim for damages and for disgorgement of Crossroads’ profits.
The court also finds that the request is neither vague nor ambiguous.
“The party objecting to discovery as vague or ambiguous has the burden to
show such vagueness or ambiguity.” Clark v. Unum Grp., No. 4:20-CV-04013KES, 2021 WL 4134520, at *5 (D.S.D. Sept. 10, 2021) (quoting Stoldt v.
Centurion Indus., Inc., 2005 WL 375667, at *2 (D. Kan. Feb. 3, 2005)). The
extent of Crossroads’ objection here is a parenthesized restatement of RFP No.
21. Docket 110 at 7. This is not sufficient. Additionally, responding parties
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must “exercise reason and common sense to attribute ordinary definitions to
terms and phrases utilized” in requests. Clark, 2021 WL 4134520 at *5. Reason
and common sense dictate that this request seeks records or statements issued
by a bank regarding Crossroads’ accounts, and it should easily be understood
by Crossroads as such.
Finally, the request is neither cumulative nor duplicative. Though
Crossroads has already produced a number of financial documents for its
Sioux Falls and Luverne locations, such as six years of income statements and
commission sales reports for the Individual Defendants, none address fixed
and variable costs. Docket 111 ¶ 6, Docket 105-1 at 46, 116, 145. Crossroads
does not dispute this. See Docket 110 at 7-9. Thus, the court orders
Crossroads to produce bank statements and records for its Sioux Falls and
Luverne locations from 2018 to the present.
III.
Request for Production No. 22 – Income Tax Returns
Jim Hawk requests production of “[a]ll income tax returns filed by
Crossroads for the period of time from 2018 through the present.” Docket 1051 ¶ 13. Crossroads objects, claiming this request is vague, ambiguous, and
irrelevant. Docket 110 at 7-9. It also objects on the grounds that tax returns
are generally not discoverable. Id. at 8.
Although there is no absolute privilege preventing the discovery of tax
returns, courts generally disfavor their disclosure. E.E.O.C. v. Ceridian Corp.,
610 F. Supp. 2d 995, 996 (D. Minn. 2008); Johnson v. Kraft Foods N. Am., Inc.,
236 F.R.D. 535, 539 (D. Kan. 2006); Harvest Meat Co. v. Robert Dairy Co., 2005
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WL 3470340, *4 (D. Kan. Dec. 19, 2005). The court applies a two-part test in
determining whether disclosure is appropriate. Glenford Yellow Robe v.
Allender, 2010 WL 1780266, *4 (D.S.D. Apr. 30, 2010). “[F]irst, the court must
find that the returns are relevant to the subject matter of the action. Second,
the court must find that there is a compelling need for the returns because the
information contained therein is not otherwise readily obtainable.” Id. (citing
Hilt v. SFC Inc., 170 F.R.D. 182, 189 (D.Kan.1997)). The party seeking
production has the burden of showing relevancy. Hilt, 170 F.R.D. at 189. Once
relevancy is shown, the burden shifts to the resisting party “to show that other
sources exist from which the information is readily obtainable.” Id.
Jim Hawk has shown that the tax returns are relevant because they
would aid in assessing damages and evaluating changes in the growth of
Crossroads’ business following the actions alleged in this lawsuit. Docket 105
at 14. Although Crossroads incorrectly places the burden under the second
prong on Jim Hawk, it ultimately does show that other sources exist from
which the information sought by Jim Hawk is readily obtainable. Docket 110 at
8. Crossroads has produced numerous financial documents concerning its
Luverne and Sioux Falls locations. Docket 111 ¶ 6. These include six years of
income statements and commission sales reports for the Individual
Defendants. Docket 111 ¶ 6; Docket 105-1 at 46, 116, 145. These documents,
in addition to those to be produced under the court’s order on RFP No. 21,
readily provide the financial growth information Jim Hawk seeks through
Crossroads’ tax returns. Jim Hawk fails to explain what further information
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these tax returns will provide that the other records will not. See Docket 105 at
14-15; Docket 113 at 5. Thus, the motion to compel discovery as to RFP No. 22
is denied.
IV.
Request for Production No. 33 – Documents Identifying Customers
and Customer Targets
Jim Hawk initially requested that Crossroads, “[p]roduce any and all
documents and other information that identify Crossroads’ customers and
customer targets for the period January 1, 2017 to present.” Docket 105-1
¶ 13. During the meet and confer, the parties agreed to narrow this request to
their mutual customers. Docket 105-1 at 83, 116, 149. These customers have
already been identified through Jim Hawk’s production of its customer list and
Crossroads’ subsequent comparison of that list with its own. Docket 105-1 at
121, 123; Docket 110 at 20-21. Jim Hawk stipulated that documents
responsive to this request can include “sales records, invoices, ESI, text
messages, notes, memos, handwritten comments, calendar entries, or any
other standard business documentation.” Docket 105 at 13, Docket 113 at 6.
Thus, RFP No. 33 is seeking any such documents, created since 2017, that
reference mutual customers.
Crossroads claims that RFP No. 33 has been satisfied by its
supplemental answer to Interrogatory No. 5. Docket 110 at 19-22.
Interrogatory 5 requests a list and other identifying information for past and
current customers. 4 RFP 33, on the other hand, requests documents related to
Interrogatory 5: “Identify with specificity each current or prospective client or
customer Crossroads has in the past done business with or currently does
4
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the customers identified as mutual customers. Thus, Crossroads’ response to
Interrogatory 5 cannot satisfy its document production obligations of RFP 33.
Crossroads also argues that it is unable to respond to RFP 33 because it
does “not maintain a list of prospective, target customers, and that no such
documents identifying prospective or target customers exist.” Docket 110 at 22
(citing to Docket 111). A party cannot turn over information that does not exist.
But Jim Hawk has made it clear that it is not just asking for target lists.
Docket 105 at 13; Docket 113 at 6. RFP 33 seeks documents that identify
mutual, past and current customers. Thus, the court orders Crossroads to
produce all documents that identify mutual customers for the period of
January 1, 2017 to present.
V.
Request for Production No. 55 – Documents Regarding Business
Cost of Money and Capital Structure
In the final disputed RFP, Jim Hawk requests that Crossroads:
Produce any and all documents and other information related to
Crossroads’ overall business and Crossroads’ business cost of
money and capital structure, including but not limited to the cost of
both short and long term debt (including interest rate terms such as
fixed rates and/or floating rate provisions and borrowing capacity
such as line of credit capacity), the return on short term
investments, and internal rates of return or hurdle rates used for
capital budgeting purposes related to its service, parts and trailer
sales business for the period January 1, 2017 to present.
business with, or from which Crossroads has contacted, solicited or attempted
to solicit business, for the time period of December 1, 2018 through the
present. For each such client or customer, provide the full name, the nature of
Crossroads’ relationship with the customer, if applicable, and the duration of
Crossroads’ relationship with the customer, if applicable.” Docket 105-1 at 16.
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Docket 105-1 ¶ 13. Crossroads objects, claiming this request is overly broad,
irrelevant, and “vague and ambiguous because the Defendant does not
understand what information is being sought by this request.” Docket 110 at 9.
Crossroads argues that this request is overbroad because it cannot
discern what documents Jim Hawk is seeking. “[A] document request may be
overly broad on its face if it uses an omnibus term such as ‘relating to,’
‘pertaining to,’ or ‘concerning,’ ” unless “the omnibus phrase modifies a
sufficiently specific type of information, document, or event, rather than large
or general categories of information or documents” Brown Bear v. Cuna Mut.
Grp., 266 F.R.D. 310, 320 (D.S.D. 2009) (quoting U.S. Fire Ins. Co. v. Bunge N.
Am., Inc., 2007 WL 1531846, at *7 (D.Kan. May 25, 2007)).
In Brown Bear, the plaintiff asked the defendants to provide “all
documents relating to any review, analysis, discussion, interpretation, or
research pertaining to your use or potential use of the time filing limitation
or supplemental filing limitation in any individual state, any group of states, or
in any context in which no specific states are mentioned[.]” Id. Although this
request used an omnibus phrase, the court found the request was not
overbroad on its face because the plaintiff had provided precise definitions in
previous, similar litigation and the defendant was deemed to have had
extensive knowledge of the terminology in use. Id. Similarly in U.S. Fire, the
court found two discovery requests were not overbroad on their face when they
had been specifically defined in the requesting party’s documents. U.S. Fire Ins.
Co., 2007 WL 1531846 at *7. The relevant requests sought “[a]ll
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communications between You and any other person or entity … relating to any
of the Sites,” and “[a]ll reinsurance contracts, agreements or treaties which You
believe or contend may afford any right to reinsurance with respect to Bunge's
[requesting party’s] claims relating to any of the Sites,” respectively. Id. at *3.
The court found that the omnibus term “relating to” modified the term “Sites.”
Id. at *7 This term had been specifically defined in the requesting party’s
document request to encompass three property sites at issue. Id. Unlike the
two requesting parties in Brown Bear and U.S Fire, Jim Hawk has not clarified
or specified the terms to which the omnibus phase refers.
Here, Jim Hawk requests “documents and other information related to
Crossroads’ overall business and Crossroads’ business cost of money and
capital structure.” Docket 105-1 ¶ 13. The omnibus phrase “related to” is only
further modified by “overall business” and “business cost of money,” which are
general categories of information that do little to clarify the types of
documentation Jim Hawk is requesting. Crossroads has asked for clarification
and explanation numerous times regarding which documents are being
requested. Docket 105-1 at 95, 123, 128, 145, 152-53. In response, Jim Hawk
merely regurgitated the language of RFP No. 55 and stated that Crossroads’
internal financial team should understand this request. Id. at 126. Jim Hawk
also purports to have “produced some similar financial information” that
mirrors the information it is requesting from Crossroads. Id. at 116.
Crossroads asked for the Bates number of these documents so it could identify
which documents Jim Hawk was referencing, but Jim Hawk has not provided
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these Bates numbers. Id. at 154; Docket 110 at 10. Because RFP 55 uses an
omnibus phrase that does not “modif[y] a sufficiently specific type of
information, document, or event” and because Jim Hawk has not assisted in
clarifying this request, RFP No. 55 is, on its face, overbroad. Brown Bear, 266
F.R.D. at 320. Thus, the motion to compel discovery as to RFP No. 55 is
denied.
VI.
Proposed Additional ESI Search Terms
Jim Hawk requests an order compelling Crossroads to provide full and
complete ESI production using seven search terms in dispute. Docket 105 at
15. Crossroads objects to these search terms on the basis that they are
overbroad, unduly burdensome, not proportional to the needs of the case
regarding cost, and unreasonably cumulative and duplicative. Docket 110 at
19.
A.
Legal Standard for ESI
ESI discovery is governed by the broad scope of Federal Rule of Civil
Procedure 26(b). It may be limited, however, if the party resisting discovery can
establish that ESI is “not reasonably accessible because of undue burden or
cost.” Fed.R.Civ.P. 26(b)(2)(B). “Reasonably accessible” refers to the degree of
effort in accessing the information, not simply the accessibility of the material’s
format. See Bagley v. Yale Univ., 307 F.R.D. 59, 65 (D. Conn. 2015) (ESI that
was immediately accessible from a search of the defendant university’s
employees’ computers were not necessarily reasonably accessible because of
the additional costs associated with reviewing it).
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If ESI is not reasonably accessible, discovery may nevertheless be
ordered “if the requesting party shows good cause, considering the limitations
of Rule 26(b)(2)(C).” Fed. R. Civ. P. 26(b)(2)(B). In addition to the three limiting
factors of Rule 26(b)(2)(C), 5 courts have adopted the seven-factor test outlined
in the Advisory Committee notes to determine whether there is good cause.
See Fed. R. Civ. P. 26 Advisory Committee's Note to 2006 Amendment;
Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 321-24 (S.D.N.Y. 2003); W.E.
Aubuchon Co. v. BeneFirst, LLC, 245 F.R.D. 38, 43 (D. Mass. 2007); Helmert v.
Butterball, LLC, 2010 WL 2179180, *8 (E.D. Ark. May 27, 2010). These factors
are: (1) the specificity of the discovery request; (2) the quantity of information
available from other and more easily accessed sources; (3) the failure to
produce relevant information that seems likely to have existed but is no longer
available on more easily accessed sources; (4) the likelihood of finding relevant,
responsive information that cannot be obtained from other, more easily
accessed sources; (5) predictions as to the importance and usefulness of the
further information; (6) the importance of the issues at stake in the litigation;
(C) When Required. On motion or on its own, the court must limit the
frequency or extent of discovery otherwise allowed by these rules or by local
rule if it determines that:
(i)
the discovery sought is unreasonably cumulative or
duplicative, or can be obtained from some other source that
is more convenient, less burdensome, or less expensive;
(ii)
the party seeking discovery has had ample opportunity to
obtain the information by discovery in the action; or
(iii)
the proposed discovery is outside the scope permitted by
Rule 26(b)(1).
See Fed. R. Civ. P. 26(b)(2)(B) and (C).
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and (7) the parties' resources. Fed. R. Civ. P. 26 Advisory Committee's Note to
2006 Amendment.
B.
Reasonable Accessibility
Jim Hawk originally requested Crossroads conduct an ESI search of
various devices for 13 individuals — the nine Individual Defendants and four
additional Crossroads employees — by applying 99 different search terms to
the sources of data. Docket 105 at 15; Docket 105-1 at 112-13. Thus far,
Crossroads has conducted searches and produced documents using 92 of
those terms. Docket 110 at 12-13. Crossroads contends that the remaining
seven search terms — “trailer sale*, phone* w/10 contact!*, Pricing!*, Tour*,
Order* w/10 part*, Mechanic*, Inside sale*” — dramatically increase the
volume of ESI to be reviewed. Id.
Like the disputed ESI in Bagley, here there is no question as to the
immediate accessibility of the raw data. Bagley, 307 F.R.D. at 65. The issue is
whether Crossroads’ burden and expense in reviewing and winnowing down
the search results constitutes an undue burden or cost. Id. These search terms
are estimated to result in 42,216 documents for review. Docket 112 at 11.
Crossroads and its ESI vendor estimate the price for processing and applying
analytics to this additional data to be between $3,150-$4,275. Docket 111-4.
Crossroads further provides a high-end cost estimate of $114,586.29 for 600
hours of attorney time to review the documents. Docket 110 at 16-17. Jim
Hawk does not dispute any of these estimates. See Docket 105 at 8-11,15;
Docket 113 at 8-9. Instead, it argues that these additional expenses are
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proportional to the needs of the case because the search terms are only being
pulled from a discrete six-month period. Docket 113 at 9. This argument is
unpersuasive. It is the amount of documents produced, not the period of time
to which these search terms are applied, that results in burdensome costs. The
court finds that the ESI produced by using the seven search terms in dispute is
not reasonably accessible.
C.
Good Cause Exception
The court next turns to whether Jim Hawk has shown “good cause,”
analyzing the factors laid out above. As to the first factor, the request is
sufficiently specific because the search terms are specifically laid out. This
factor weighs in favor of Jim Hawk. The second factor favors Crossroads. There
has been extensive discovery in this case, including the production of phone
records and text messages for the Individual Defendants, commission sales
reports, sale invoices, and financial income statements (including those
compelled by this order). Docket 105-1 at 68, 141, 145. Likewise, Crossroads
has already produced ESI responsive to 92 search terms of 13 employees’ data.
Id. at 123, 156-60. A vast quantity of information is already accessible from
these sources. The third factor is irrelevant because spoilage of previous
electronic data is not at issue.
The fourth and fifth factors favor Crossroads. Crossroads and its ESI
vendor assert that the relevancy rate of these search terms will be incredibly
low. Docket 110 at 11-19. Specifically, they have utilized a continuous active
learning (CAL) model to determine the relevancy of previous searched ESI. Id.
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at 14. This model has deemed 7% of its total ESI review as relevant. Id. at 15.
The last 2,000 documents reviewed by this model have not exceeded a
relevancy rate of 5%. Id. at 14. Crossroads expects further review of ESI to have
a similarly low rate of relevance. Id. at 15. Jim Hawk does not dispute these
figures. See Docket 105 at 8-11, 15; Docket 113 at 8-9. Instead, it argues that
Crossroads cannot “represent with any degree of certainty, that there will be no
discoverable documents produced from these searches.” Docket 113 at 8. Jim
Hawk then provides one sentence explanations for how each search term
corresponds with facts alleged in this case Id. at 8-9. 6 These rebuttals do not
persuade the court of the likelihood of finding information important to the
case. The sixth factor favors Crossroads. Although the claims in this case are of
substantial importance to the parties, they are not of public concern. Compare
W.E. Aubuchon Co., 245 F.R.D. at 44 (localized breach of fiduciary duty claim
against administrator of ERISA plan), with Major Tours, Inc. v. Colorel, , 2009
WL 3446761, at *4 (D.N.J. Oct. 20, 2009) (the sixth factor weighed in favor of
“broad discovery” because of allegations of racial discrimination by public
employees) and U.S. ex rel. Guardiola v. Renown Health, 2015 WL 5056726, *8
(D. Nev. Aug. 25, 2015) (qui tam actions “imbue[d] . . . with heightened
importance” because they are “an important means of addressing fraud claims
For example, Crossroads objects to the search term “trailer sale*” as it is
found in many of the custodians’ email signature blocks. Docket 110 at 16.
This provides a hit on nearly every email in question with no regard to
relevancy. Id. Jim Hawk responds to this simply with, “Jim Hawk knows that
Crossroads was making ‘trailer sales’ to Jim Hawk’s customers after hiring its
employees in an effort to divert the business.” Docket 113 at 8.
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on behalf of taxpayers”). Finally, the seventh factor is neutral because neither
party has provided the court with any information about their resources. See
W.E. Aubuchon Co., 245 F.R.D. at 44 (where both parties did not provide the
court with any information about their resources, the court weighed the
seventh factor as neutral “[g]iven the lack of information available to the
Court”).
“A court should not treat the ‘good cause’ factors as a checklist; rather,
the factors should be weighed by importance.” Helmert, 2010 WL 2179180, at
*9. In Helmert, the requesting party had no idea what discoverable information
would be obtained by accessing not reasonably accessible backup tapes. Id.
The court found this low likelihood of finding relevant, responsive information
to be the most important “good cause” factor weighing in favor of the resisting
party. Id. Likewise, the low relevancy rate of current ESI and Jim Hawk’s
failure to show a heightened likelihood that new and relevant information may
be discovered using the search terms in dispute is the most important “good
cause” factor here. The substantial burden and expense required to produce
the sought ESI documents cannot be justified by this low likelihood. Id.; see
also Fed. R. Civ. P. 26(b)(2)(C)(iii); and Fed. R. Civ. P. 26(b)(1). Thus, Jim Hawk
fails to show good cause for the discovery of documents that are not reasonably
accessible. As a result, the motion to compel discovery as to the seven ESI
search terms in dispute is denied.
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VII.
Attorneys’ Fees
Jim Hawk seeks an award of attorneys’ fees incurred in bringing this
motion to compel. Docket 104 ¶ 9. When a motion to compel is granted in part
and denied in part, apportionment of attorneys’ fees is governed by Federal
Rule of Civil Procedure 37(a)(5)(C). Under this rule, the court “may, after giving
an opportunity to be heard, apportion the reasonable expenses for the
motion[,]” but may not award costs if the exceptions in Rule 37(a)(5)(A) apply.
Haukaas v. Liberty Mut. Ins. Co., No. 4:20-CV-04061-KES, 2022 WL 1719412,
at *7 (D.S.D. May 27, 2022) (citing to Hurley v. State Farm Mut. Auto Ins. Co.,
2012 WL 1600796, at *5 (D.S.D. May 7, 2012)). Those exceptions are when the
movant filed the motion before a good faith effort to resolve the dispute without
court action, the resisting party’s lack of response or objection was
substantially justified, or “other circumstances make an award of expenses
unjust.” Fed. R. Civ. P. 37(a)(5)(A)(i)-(iii). The court will only consider these
exceptions regarding the portions of the motion on which Jim Hawk prevailed,
as the court will not award fees for the portions which failed. See Haukaas,
2022 WL 1719412, at *8.
Both parties agree that Jim Hawk did attempt to resolve the discovery
disputes over Interrogatory 6, RFP 21, and RFP 33 with Crossroads before filing
this motion. Docket 104 ¶ 8; see generally Docket 105-1. Thus, the exception
under 37(a)(5)(A)(i) is inapplicable.
Under the “substantially justified” exception, “[t]he party resisting
sanctions bears the burden of showing that its position was substantially
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justified.” Mgmt. Registry, Inc. v. A.W. Cos., 2020 WL 1910589, at *13 (D. Minn.
Apr. 20, 2020) (citing Bah v. Cangemi Inc., 548 F.3d 680, 684 (8th Cir. 2008));
see Kirschenman v. Auto-Owners Ins., 2012 WL 1493833, at *2 (D.S.D. Apr. 27,
2012) (awarding attorneys’ fees for the requests for production for which the
defendant “ma[de] no argument as to how it was substantially justified in
refusing to answer”). “[S]ubstantial justification means that ‘reasonable minds
could differ as to whether the party was justified in resisting the discovery
sought.’ ” Kirschenman, 2012 WL 1493833, at *1 (cleaned up) (quoting Oyen v.
Land O’Lakes, Inc., 2009 WL 536606 (D.S.D. Mar. 3, 2009)). The presence of
objections to discovery requests alone does not demonstrate that “reasonable
minds could differ.” Id. at *2.
Here, Crossroads has the burden of showing that its position was
substantially justified. Mgmt. Registry, 2020 WL 1910589, at *13. It has
provided no explanations as to how their objections were “substantially
justified.” Docket 110 at 23. The presence of its objections to Interrogatory No.
6, RFP No. 21, RFP No. 33 are not enough to show that they are “substantially
justified.” Kirschenman, 2012 WL 1493833, at *2. Thus, the exception under
37(a)(5)(A)(ii) is inapplicable.
The court finds no evidence that other circumstances make an award of
expenses unjust, so the exception under Rule 37(a)(5)(A)(iii) is inapplicable.
Because none of the exceptions to Rule 37(a)(5)(C) are applicable, the court
may apportion the reasonable expenses for this motion. Thus, the motion for
attorneys’ fees is granted, and Jim Hawk is directed to submit an affidavit of its
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costs and attorneys’ fees associated with Interrogatory No. 6, RFP No. 21, RFP
No. 33 within 28 days of this order, along with an accounting of attorney hours
and a description of what those hours represent in terms of attorney work.
Crossroads will have 21 days thereafter to file objections to the hours or
amount of fees requested. Jim Hawk will then have 14 days to file a reply if it
wishes to do so.
CONCLUSION
It is ORDERED that Jim Hawk’s motion to compel (Docket 104) is
granted as to Interrogatory No. 6, RFP No. 21 as limited herein, and RFP No.
33. Jim Hawk’s motion is denied as to RFP No. 22, RFP No. 55, and the
Proposed Additional ESI Search Terms.
It is FURTHER ORDERED that Jim Hawk is entitled to reasonable costs
and attorneys’ fees for bringing this motion to compel. Jim Hawk must file an
affidavit with proof of service setting forth the time reasonably spent on this
motion attributable to Interrogatory No. 6, RFP No. 21, and RFP No. 33, the
hourly rate requested for attorneys’ fees and costs, and any factual matters
pertinent to the motion for attorneys’ fees within 28 days of this order.
Crossroads’ objections to the allowance of fees are due within 21 days after
receipt of service of Jim Hawk’s motion and affidavit. Crossroads may, by
counter affidavit, controvert any of the factual matters contained in Jim Hawk’s
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motion and may assert any factual matters bearing on the award of attorneys’
fees. D.S.D. LR 54.1(C). Jim Hawk will have 14 days after service of defendants’
response in opposition to file a reply.
DATED July 29, 2022.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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