Terry v. Register Tapes Unlimited, No. 2:16-cv-0806-WBS-AC, 2018 U.S. Dist. LEXIS 50846
(E.D. Cal. Mar. 27, 2018).

In this breach of contract case, the court imposed monetary sanctions for the defendant’s late and incomplete production of discoverable documents.

The plaintiff, Robert Terry, previously worked for the defendant, Register Tapes Unlimited, Inc. (“RTUI”). Terry alleged that he contracted with RTUI to sell advertising space on grocery store receipts, known as register tapes. He claimed that RTUI agreed to pay him “various percentages of its revenue as compensation” for his services. However, Terry said that RTUI had neither properly compensated him nor accurately advised him of its profits to allow him to calculate the correct payment.

The court previously ruled in Terry’s favor on his motion to compel. It gave him access to RTUI’s financial statements and ordered RTUI to produce a privilege log for any withheld documents. The court also rejected RTUI’s trade secret privilege argument and ordered that the parties file a protective order.

In this opinion, Terry moved for sanctions on three grounds. First, RTUI failed to comply with the court’s February 2, 2018 deadline for production. RTUI did not mail the production until February 5. Second, Terry alleged that RTUI’s production was incomplete. Third, Terry argued that RTUI’s privilege log was “inadequate” and that RTUI withheld documents for which the court had already rejected its privilege claim.

RTUI agreed that its production was late but claimed the “delay was minimal” and not prejudicial. The court rejected RTUI’s claim of “technical difficulties” and its argument that a short delay was unimportant. The court noted that it was “inclined to enforce its own deadlines,” especially where it had already granted RTUI an extension.

On the second point, Terry argued that RTUI’s production was incomplete as it included fewer than 1,000 records, with only 50 occurrences of a disputed term. This limited production did not align with RTUI’s previous claim that it had to cull “tens of thousands of documents.” RTUI also failed to certify that its production was complete. Therefore, the court concluded that “without a sworn statement from [RTUI] that no other responsive documents actually exist, [its] production appears to be inadequate.”

Finally, the court reminded the parties that it had “already overruled [RTUI’s] categorical assertion of trade secret privilege” about its financial records and contracts. Despite that ruling, RTUI’s privilege log included two entries that “essentially recapitulate” the rejected privilege. The court held that RTUI withheld these documents in violation of its explicit order.

RTUI argued that its financial documents and contract negotiations were “very closely held” information that it did not disclose. The court refused this assertion, noting that the protective order “properly manage[s]” this concern.

The court agreed with Terry that RTUI’s privilege log was, overall, inadequate. Regarding its assertion of trade secret privilege, its document descriptions were “not sufficient” to enable other parties to assess RTUI’s privilege claims. Some of those descriptions, the court ruled, were “so vague as to be meaningless.” In sum, RTUI’s privilege log did “not come close to meeting its burden” of establishing an applicable privilege. The court again overruled RTUI’s claims of trade secret privilege.

RTUI didn’t do much better with its assertions of attorney-client privilege. Although the court allowed that these communications were “granted a broad and absolute privilege,” RTUI again failed to provide adequate information in its log. The court ordered RTUI to revise its privilege log to comply with Federal Rule of Civil Procedure 26(b)(5).

To redress these inadequacies, the court ordered financial sanctions in the form of attorneys’ fees. The court also warned RTUI that further deficiencies could result in greater sanctions.

Takeaways on Staying in the Court’s Good Graces

The court here seems to be running out of patience with RTUI, and for good reason. RTUI failed to certify its production as complete, violated Rule 26(b)(5) with an incomplete privilege log, missed a deadline, and disregarded a prior court order. Don’t make discovery harder than it needs to be. Know the applicable rules of court and your jurisdiction’s local rules and follow them to the letter.

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