eDiscovery Daily Blog

• January 23, 2015

In Ablan v. Bank of America, 11 C 4493 (N.D.Ill. Nov. 24, 2014), Illinois Magistrate Judge Daniel G. Martin recommended that the defendant’s Motion for Sanctions should be granted in part and denied in part, recommending that the plaintiffs be barred from using any new information at summary judgment or at trial that was contained on eight CD-ROMs produced late, but recommending no sanctions for failing to produce or make available documents held by the plaintiff’s outside vendor.

Case Summary

The plaintiffs had been previously sued in state court by third party Tax Strategies Group, LLC (“TSG”), claiming that plaintiff Ablan violated their Financial Representation Agreement with TSG by interfering with TSG’s efforts to obtain financing for the acquisition of a group of CarMax dealerships. The plaintiffs filed this litigation against the defendants in July 2011, while the State Court Litigation was still pending (it was settled a few months later).

The defendants’ current motion was originally a motion for evidence spoliation based upon the plaintiffs’ representations that the documents they received from TSG in the State Court Litigation no longer existed. After the defendants filed their motion, “Plaintiffs located eight (8) CD-ROMs containing discovery produced to Ablan by TSG in the State Court Litigation.” On June 26, 2014, over three months after discovery closed, the plaintiffs produced to the defendants the TSG documents contained on the eight (8) CD-ROMs, which contained over 14,000 pages of documents.

With the documents produced, the defendants were no longer seeking sanctions for spoliation, but did seek sanctions based on the plaintiffs’ failure to timely produce and supplement and identified two alleged discovery violations by the plaintiffs: “(1) Plaintiffs’ failure to timely produce 14,000 pages of TSG documents contained on the eight (8) CD-ROMs in their possession and (2) Plaintiffs’ failure to produce 350,000 TSG documents in the possession of their vendor, Protek”. The defendants requested that the plaintiffs pay defendants’ attorneys’ fees in bringing the motion as well as the defendants’ expert costs associated with reviewing the recently located TSG documents; and that the plaintiffs be barred from relying on or introducing any of the recently located TSG documents at summary judgment or trial.

Court Recommendation

Stating that there is “no explanation in the record as to why Plaintiffs’ initial search failed to uncover the eight (8) CD-ROMs of TSG documents”, Judge Martin found “that Plaintiffs violated Rule 26(e) by failing to timely supplement their production in response to Defendants’ First Set of Requests for Production of Documents. Thus, Rule 37 prohibits Plaintiffs from using any new information on the eight (8) CD-ROMS”. He also found that “Defendants would be prejudiced if Plaintiffs were allowed to rely on new information disclosed for the first time in their untimely production of TSG discovery documents to defeat summary judgment or at trial” and recommended that they be barred from doing so.

Regarding the documents held by the plaintiff’s outside vendor, Judge Martin stated that, although (under Rule 34) parties must produce data within their custody and control (even when not in their physical possession), that the plaintiffs never had possession, custody, or control of the data and did not have the legal right to obtain the data. He disagreed with the defendant that the plaintiffs should be required to subpoena the TSG documents from the vendor, instead finding that “Defendants did not seek an extension of the discovery deadline so that they could subpoena the information from Protek” and stating that “Such a request would very likely have been granted”. Judge Martin also rejected the defendant’s request that the plaintiff pay the defendants’ expert costs associated with reviewing the recently located TSG documents, stating that “there is no evidence that Plaintiffs’ tardy production caused Defendants’ excess expert costs”.

As a result, Judge Martin recommended that the plaintiffs pay defendants’ attorneys’ fees in bringing the motion, but NOT the defendants’ expert costs associated with reviewing the recently located TSG documents, and that the plaintiffs be barred from relying on or introducing any of the recently located TSG documents at summary judgment or trial.

So, what do you think? Should the plaintiffs have had to produce data held by their outside vendor, or was Judge Martin correct in ruling that they did not have custody and control? Please share any comments you might have or if you’d like to know more about a particular topic.

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