Defendant Sanctioned For Blanket AEO Designations

5 Jun 2022

In CellTrust Corporation v. ionLake, LLC, et al., Case No. 19-cv-2855 (WMW/TNL) (D. Minn. May 17, 2022), before the Court was Plaintiff’s Motion for Sanctions which presented multiple issues including blanket designation of documents as Attorney’s Eyes Only and spoliation.

With respect to Defendant’s attorney’s eyes only designation, pursuant to the parties’ stipulated protective order, a party was permitted to designate a document “as confidential if the party . . . contends that it contains confidential or proprietary information.” A party was also permitted to “supplement the ‘confidential’ mark’” with AEO, which further restricted access to the confidential document.

The parties agreed to complete their exchange of documents and ESI production on August 23. On August 23, Defendant made their ESI production which consisted of more than 35,000 documents, totaling over 40,000 pages. There was no dispute that all of Defendant’s ESI production was designated AEO under the Protective Order.

Plaintiff’s review of the production revealed numerous public documents. Defendant explained that “[t]he AEO designation was necessitated by [Plaintiff’s] insistence on the August 23 production deadline and [Plaintiff] grossly over encompassing search terms provided well after the July 1, 2021, fact discovery cutoff date” and that rather than delay the production, Defendant produced 35,417 documents that Plaintiff’s ESI terms resulted in.  Defendant also offered to “consider redesignation of any documents [Plaintiff] searches indicate[d] [were] useful to [it] and that [it] believe[d] should be redesignated.”

Courts have held that there is an implicit duty of good faith in Rule 26(c) and the designation of documents under a protective order. Further, “the duty of good faith in the protective order is a duty to review the documents in good faith before designating them as AEO.” There is no “specific bright line test to determine when a party’s designation of discovery as AEO in excess of a certain percentage is deemed presumptively improper.” However, Courts have “condemned parties who have designated 79% or more of their discovery as AEO.”

Defendant contended its initial ESI production was “given a preliminary AEO designation only for the sake of expediency” and that it acted in good faith because there were a lot of documents produced in light of Plaintiff’s broad search terms. 

However, the Court found that if Defendant had met and conferred with Plaintiff after becoming aware of the volume of ESI the search terms would produce, or if Defendant attempted to meet with Plaintiff prior to the search but their efforts were refused, then Defendant would have a stronger argument. Yet, Defendant was in possession of the terms for a month and had no issue with them. It was only when Plaintiff objected to Defendant’s blanket designation that Defendant complained that Plaintiff’s search terms were unreasonable and disproportionate to the needs of litigation. 

The Court was aware that Defendant discovered the volume of respective information only two days before the production deadline. But “[t]he alleged burden imposed by a high-volume production does not provide the producing party or its counsel free reign to choose a given designation and ignore the Court’s order pertaining to that designation.” Moreover, nothing in Defendant’s cover communication indicated that the blanket AEO designation was intended to be “preliminary.” Nor did the record reflect an “understanding that the documents would be redesignated.” Thus, the Court noted that it could hardly be said that Defendant acted in good faith when it designated as AEO the entirety of its ESI production in the first place.

As sanctions, Plaintiff requested that the Court order Defendant to re-review its ESI production and re-designate its documents in good faith as well as pay Plaintiff reasonable expenses, including attorney’s fees, incurred upon review of Defendant’s ESI production. 

Under Rule 37(b)(2), the Court may impose sanctions on a party “who fails to obey an order to provide or permit discovery,” including attorney fees. Fed. R. Civ. P. 37(b)(2)(A), (C). Courts have imposed sanctions under Rule 37(b)(2) for over designation of documents in contravention of a protective order. Further, the Protective Order itself provided for attorney fees as a sanction for non-compliance. 

The Court concluded that Defendant’s ESI production did not comport with the implicit duty of good faith under Rule 26(c) and contravened the terms of the Protective Order. Pursuant to Rule 37(b)(2)(C) and the remedial provision of the Protective Order, the Court sanctioned Defendant in the amount of $1,000.00, reasoning that “any greater award would have little if any positive effect and would serve only to embolden further the recipient party, entrench the parties in their respective positions, and increase the costs of this litigation, making such an award unjust under the circumstances.”  

With respect to Plaintiff’s spoliation claim, in propounding discovery, Plaintiff “expressly requested” an “executive summary analysis,” which Defendant Wade Girard referenced in a deposition taken in a separate lawsuit. The summary was not included with Defendant’s initial production and not identified in its privilege log. The summary was accompanied by some drawings.

Defendant subsequently “agreed to produce the e-mail chain with the executive summary” after concluding the communications were not privileged. Although Defendant initially believed the drawings no longer existed after the laptop held by Defendant Wade Girad was wiped when he left ionLake, Defendant Wade Girad was able to confirm that there was only one drawing and it was produced to the Plaintiffs. 

Plaintiff sought sanctions and asserted that the events that concerned the executive summary presented questions whether there were other documents deleted that it did not know about. 

“The ultimate focus for imposing sanctions for spoliation of evidence is the intentional destruction of evidence indicating a desire to suppress the truth . . ..” Greyhound Lines, Inc. v. Wade, 485 F.3d 1032, 1035 (8th Cir. 2007). “A spoliation of evidence sanction requires a finding of intentional destruction indicating a desire to suppress the truth.” Id. (quotation omitted) (emphasis added); accord Sherman v. Rinchem Co., Inc., 687 F.3d 996, 1006 (8th Cir. 2012). 

In this instance, the allegedly spoliated document was located after additional investigation and ultimately produced and the Court found nothing in the record which indicated spoliation and that the Plaintiff’s request was based on mere speculation.