The Result of Disobeying Multiple Court Orders? Default Judgment

Red Wolf Energy Trading, LLC v. Big Capital Management, LLC

D. Mass. September 8, 2022

Why This Case Is Important

This case is a great example of how it’s nearly impossible for parties to hide relevant data from the court. In most cases, parties will get caught, with severe consequences ensuing.

Overview

In this case involving trade secrets, the plaintiff moved for sanctions against the defendants for failing to produce relevant Slack and Google documents even though multiple court orders required the production of this data.

The plaintiff claimed that the defendants tried to steal their software and code to start a competing business. During discovery, the plaintiff requested documents relevant to this issue; subsequently, the plaintiff claimed that the defendants did not produce all requested data, specifically from Google Suite and Slack data sources.

The judge grated the plaintiff’s motion to compel and required the defendants to review prior productions to determine if these productions were incomplete. After review, the defendants claimed that all relevant documents were produced.

But depositions of the defendants’ key custodians revealed that not all relevant Slack messages were included. Again, the defendants assured the court that they conducted a “good faith” search for these documents, and all were produced. Among other discovery errors and misrepresentations, eventually it became clear that 47 documents found on one of the key custodians’ computers weren’t originally produced.

Due to these misrepresentations and incomplete productions, the plaintiff filed a second motion for sanctions.

Ruling

• Production of Relevant Nonparty Data. The court ruled that data in actual possession by non-party players’ agents was within the players’ control under FRCP 34, 45. The court ordered that the non-party players run searches over their agents’ data, but limited the scope to results related to agents’ representation of their employer.
• Possession, Custody, Control. The court noted that this standard applies to third parties and not just the responding party in the case. Within the 9th Circuit, “materials in the possession of an agent are within the ‘control’ of the responding person and must be produced."

Legal Analysis

By, David Cohen, Esq., Chair - E-Discovery Group, Reed Smith LLP

This opinion is consistent with two e-discovery case trends of 2022: (1) the extension of discovery to newer data sources like Slack, and (2) the willingness of courts to impose sanctions for discovery violations. Here the Court relied on FRCP 37(b)(2), which authorizes sanctions, including default judgments, for failure to obey discovery orders.