Brown v. Tellermate Holdings Ltd., No. 2:11-cv-1122, 2014 U.S. Dist. LEXIS 90123 (S.D. Ohio July 1, 2014)

Case Law Summaries by ZapprovedTo put it mildly, “[d]iscovery did not go smoothly” in Brown v. Tellermate Holdings Ltd., an age discrimination case stemming from the termination of the plaintiffs’ employment. According to the court, “significant problems arose in this case for one overriding reason: counsel fell far short of their obligation to examine critically the information” that Tellermate gave them about the existence and availability of the documents the plaintiffs requested. In other words, “‘trial counsel must exercise some degree of oversight to ensure that their client’s employees are acting competently, diligently and ethically in order to fulfill their responsibility to the court.” Because Tellermate did not meet this standard, it “did not produce documents in a timely fashion, made unfounded arguments about their ability and obligation to do so, caused the Browns to file discovery motions to address these issues, and, eventually, produced a key set of documents which were never subject to proper preservation.”

After numerous delays by Tellermate in responding to the plaintiffs’ discovery requests, followed by several motions to compel and court orders, the plaintiffs filed a motion seeking judgment and other sanctions. Primary among Tellermate’s discovery missteps leading to this motion was the failure to preserve information from business application Salesforce.com, a repository of sales contacts and results. The plaintiffs requested information from this system for themselves as well as their former colleagues to illustrate that their performance was satisfactory.

Initially, Tellermate claimed it would produce any nonprivileged documents responsive to the request at a “time and place to be mutually agreed upon by counsel.” No information was forthcoming, despite the plaintiffs’ efforts: Tellermate argued it did not maintain the information in hard copy, could not print historical records from the application, and that the request for information should be directed to Salesforce.com. Therefore, the plaintiffs moved to compel the documents. Then Tellermate asserted that it was “‘contractually prohibited from providing Salesforce.com information — including information Tellermate inputs into it — to third parties’” and that it could not produce the information because it could only access the information “in real time.” Though Tellermate characterized the plaintiffs’ request for Salesforce data as “‘misguided’” and “‘illegitimate,’” in truth, Tellermate’s own responses were the sole source of any disingenuousness: none of these statements were true. For example, any Tellermate employee with a username and password could access current and historical information.

Tellermate’s counsel also made a number of misstatements about the Salesforce.com data that called their entire approach to discovery into question: they simply failed to ask “the right questions . . . of the right people.” For example, they failed to speak to anyone about accessing or retrieving information in the plaintiffs’ accounts or any other accounts, and they ignored the need to tell employees not to alter any information in Salesforce.com even after receiving a preservation notice. They also neglected to verify Tellermate’s level of access to Salesforce.com data or to verify whether the application itself backed up Tellermate’s data. Moreover, the contract between Tellermate and Salesforce.com — produced by Tellermate in discovery — indicated that Tellermate retained control over its data. For these reasons, the court ruled that “counsel’s performance … fell well below what is required and expected of an attorney in this situation, and compounded the problem created by Tellermate when its representatives … told [counsel] things that were untrue.”

In short, Tellermate did not comply with its duty “to provide full, truthful, and appropriate discovery responses,” nor did its counsel “make a reasonable investigation before taking Tellermate at its word.” Instead, Tellermate “knew that every statement it made about its control over, and ability to produce, the salesforce.com records was not true when it was made.” Further, Tellermate’s counsel made “untrue statements repeatedly, in emails, letters, briefs, and during informal conferences with the court, over a period of months, relenting only when the court decided that it did not believe what they were saying.” In short, counsel’s behavior “violated what has been referred to as ‘the most fundamental responsibility’ of those engaged in discovery, which is ‘to provide honest, truthful answers in the first place and to supplement or correct a previous disclosure when a party learns that its earlier disclosure was incomplete or incorrect.’” This was particularly egregious where counsel should have recognized the ludicrousness of the assertions about the way Salesforce.com worked in light of how the plaintiffs and other employees used the system as well as Tellermate’s contract with Salesforce. The court characterized Tellermate’s counsel’s actions as “more than just an abdication of responsibility; it was deliberate obfuscation of the issue.”

Combined with the other issues in the case, the Salesforce.com issue created “a pattern” where the company failed either to “learn or communicate the truth about matters related to discovery” while its counsel failed “to make the reasonable inquiries required by [Federal Rule of Civil Procedure] 26(g).” Thus, both Tellermate and its counsel had to share the responsibility for the discovery problems in the case, and sanctions were appropriate.

Given the “extremely serious nature of [Tellermate’s], and counsel’s, strenuous efforts to resist production of these documents and the strident posture taken with both opposing counsel and the court,” coupled with counsel’s misrepresentation and “complete abdication” of their responsibilities, the actions were “simply inexcusable “ and “either grossly negligent or willful acts, taken in objective bad faith.” Because the acts of Tellermate and its counsel could not remedy the loss of data or the loss of its reliability, the “only realistic solution” was to preclude Tellermate from using any evidence that tended to show it terminated the plaintiffs for their performance — in other words, obviating Tellermate’s ability to articulate an affirmative defense to the plaintiffs’ claims. The court found this sanction “commensurate with the harm caused by Tellermate’s discovery failures, and is also warranted to deter other similarly-situated litigants from failing to make basic, reasonable inquiries into the truth of representations they make to the court, and from failing to take precautions to prevent the spoliation of evidence.” The court also awarded the plaintiffs the fees and costs associated with various discovery motions.

Takeaways

Counsel cannot passively direct clients to preserve documents; they must recognize they have a participatory role in the process — especially because they certify to the court by signing pleadings that they have made a “reasonable inquiry” into the facts and that their statements are complete and correct. Accordingly, at the outset of a case, counsel must take affirmative steps to speak to custodians to determine all sources of potentially discoverable information, include those sources in a litigation hold notice, and instruct all custodians to preserve that information. Furthermore, they should investigate a company’s protocols and confirm that no potentially relevant information — regardless of whether stored on premises, in the cloud, or elsewhere — is overlooked and could be subject to destruction.

Finally, if counsel lack the appropriate technical background to fully assess the scope of their clients’ data repositories and how they operate, then they must take steps to retain knowledgeable specialists who can assist them by spotting potential issues and conferring with service providers to ensure no digital stone is left unturned.

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