Search Team

Search by Last Name
Banner image

Commercial Litigation

Sanctions for Failure to Conduct a Reasonable Inquiry Into Factual/Legal Basis for Discovery Responses

December 7, 2016

Commercial Litigation

Sanctions for Failure to Conduct a Reasonable Inquiry Into Factual/Legal Basis for Discovery Responses

December 7, 2016

Back to Fish's Litigation Blog


Recently in Rodman v. Safeway, Inc., 2016 WL ­­­5791210 (N.D. Cal. Oct. 4, 2016), U.S. District Judge Jon S. Tigar imposed monetary sanctions of $688,644 because of the failure of Safeway and its counsel to conduct a reasonable inquiry before serving a discovery response stating that Safeway had no documents showing the “Special Terms” of its pre-2006 online agreements with consumers who ordered home delivery of groceries from Safeway stores. The Court’s sanctions order serves as a grim reminder of the importance of counsel’s having a sufficient grasp of her client’s electronic systems and the scope of what the client has (and, importantly, has not) done in searching for highly relevant documents requested during discovery.

Rodman was a consumer class action case filed on behalf of Safeway customers who, when ordering the delivery of groceries online, were charged prices higher than in-store prices for the same goods, despite online contract terms assuring that the prices would be the same as they would pay in the brick-and-mortar store from which their order was collected for delivery. After the Court had entered a summary judgment in favor of the plaintiff class based on contract terms in effect from 2006 forward, class counsel requested that Safeway produce the corresponding terms of agreements in effect earlier than 2006. After conducting a search of its internal systems, including a “legacy drive” containing electronically stored records for the earlier time periods in question, Safeway’s counsel served discovery responses indicating that Safeway had no responsive documents. But shortly before the case was scheduled to go to trial in October 2015 – and months after the close of discovery – Safeway produced ten “highly relevant” newly discovered documents, including some showing that the contract terms applicable to the earlier time period were the same as those pertaining to the later time period.  That, of course, meant that no trial would be necessary since the parties stipulated that the newly discovered documents meant that the Court’s prior summary judgment would be expanded to include the earlier time period.

What went so terribly wrong for Safeway? This case was, after all, “high stakes’ litigation – the damages, including prejudgment interest, awarded as a result of the stipulated summary judgment for the pre-2006 class claims amounted to almost $42 million, not a niggling sum for a company that reported net income of just over $113 million for 2014. Even in a day when “proportionality” concerns may justify less than all-out efforts to comply with discovery obligations in smaller cases, the amount in controversy in Rodman clearly justified a thoroughgoing investigation of Safeway’s systems.

It developed that the Safeway executive who had conducted the initial search for relevant documents on the “legacy drive” had used search terms that he thought were adequate, but the method he employed only searched for those terms appearing in file names stored on the legacy drive and did not include any search of the content of those files. Only when preparing for trial did it occur to anyone at Safeway to run a new search, and after consulting the “help” directory, conduct a search that would include file content, not just file names.  Moreover, it came to light that some of the key documents were filed in folders bearing titles that should’ve warranted further scrutiny – “Special Terms,” “OldSiteDesign,” “OldSiteDesign\sitedesign\Registration,” and “Screen Grabs for Site Tutorial.”

Rule 26(g), FRCP, “requires a signing attorney to certify that a reasonable inquiry has been made with respect to the factual and legal basis for any discovery . . . response.” Furthermore, under Rule 26(g)(3), when an attorney makes such a certification “without substantial justification” the court “must impose an appropriate sanction” on the lawyer, her client, or both. Under the circumstances, the Court in Rodman had little difficulty in finding that Safeway’s initial search of the legacy drive, while not carried out in bad faith, was inadequate, both because of the failure to search the content of files on the drive and also the failure to recognize that several of the file names themselves merited more careful inspection as possibly containing information about the terms and conditions set forth on earlier versions of the Safeway website.

While the Court’s sanction was substantial, it would have been even greater had the Court not also assigned some responsibility to counsel for the plaintiff class. When they took the deposition of the Safeway employee and asked him specifically whether he had searched the content of the files on the legacy drive, as opposed to merely searching for terms used in the names of the files, he answered that he didn’t know. Yet plaintiff’s counsel failed to follow up on this vague response, prompting the Court to award only 2/3 of the sanctions sought.

In September 2016 The Sedona Conference – a voluntary organization of lawyers, judges and scholars that has published extensively on topics related to e-discovery – released a Working Group Commentary devoted to e-discovery production processes that are “defensible” when, like Safeway, a litigant is called to account for the reasonableness of its efforts to respond to discovery requests for electronically stored information, or “ESI.” (The Sedona Conference Commentary on Defense of Process is available here. Many of the suggestions made there would have been helpful to a litigant like Safeway. While noting that “[t]o be reasonable, an e-discovery process need not be perfect, nor even the best available option, and it does not have to identify all discoverable ESI” (p. 5), it provides this word of caution in” Principle 5” (of 12 “Principles” discussed in the Commentary):

Principle 5. When developing and implementing an e-discovery process, a responding party should consider how it would demonstrate the reasonableness of its process if required to do so. Documentation of significant decisions made during e-discovery may be helpful in demonstrating that the process was reasonable. (p. 19).

Embedded in this general “principle” are some fundamentally sound points that Safeway would have done well to heed.  For example, a commitment to “[d]ocumentation of significant decisions” helps a responding party (and, importantly, its outside counsel) to spot gaps in its approach to searching for responsive electronic documents. If nothing else, perhaps documenting each of the steps taken by the Safeway employee who conducted the initial search would have exposed that his methodology only permitted a search of file names, not of file content.

Orderly documentation of the steps taken in implementing a discovery process begins at the outset of the case. Some federal districts – including the Northern District of California, the forum in Rodman – have actually prescribed a “checklist” to be used by the parties in preparing for their initial Rule 26(f) meet and confer session. Among other things, that checklist requires each party to list by name a “discovery liaison” – an individual who will serve as the key person responsible for ensuring that each party’s discovery obligations are fulfilled. The “discovery liaison is required by the Northern District of California’s E-discovery Guidelines to:

  • Be knowledgeable about the party’s e-discovery efforts;
  • Be familiar with, or gain knowledge about, the party’s electronic systems and capabilities in order to explain those systems and answer related questions; and
  • Be familiar with, or gain knowledge about, the technical aspects of e-discovery in the matter, including electronic document storage, organization, and format issues, and relevant information retrieval technology, including search methodology.

The idea behind this requirement is, of course, that the company representative who knows that “the buck stops” at his or her inbox will, hopefully, be more apt than most to “sweat the small stuff” of e-discovery compliance.

Finally, while the party to the case certainly is responsible for fulfilling its Rule 26(g) discovery obligations, it is, in the end, the producing party’s attorney whose signature on discovery responses triggers the “certification” that “a reasonable inquiry has been made with respect to the factual and legal basis for any discovery . . . response.” Not every lawyer – not even every good, seasoned trial lawyer – can be a master of all aspects of the e-discovery process. But as the Sedona Commentary points out (at p. 11):

As with other areas of the practice of law, it is important for an attorney to know when he or she does not have the requisite knowledge—to “know what they do not know”—and in those situations, to engage expert(s) with the appropriate technical knowledge, competence and experience.

Beyond needing to “know what they do not know,” attorneys also need to understand that present day ethical standards may require lawyers to update their understanding of the technology underlying important e-discovery decisions. A 2015 opinion by the Standing Committee on Professional Responsibility of the State Bar of California (reported online here) determined that “[d]epending on the factual circumstances, a lack of technological knowledge in handling e-discovery may render an attorney ethically incompetent to handle certain litigation matters involving e-discovery. . . even where the attorney may otherwise be highly experienced.”

We all have learned from our own mistakes (and, having done so, we also know that learning from the mistakes of others is far less painful).  With that in mind, perhaps Rodman v. Safeway, Inc. and the Sedona Conference Commentary on Defense of Process should both be required reading for your firm’s or company’s next in-house e-discovery seminar.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of Fish & Richardson P.C., any other of its lawyers, its clients, or any of its or their respective affiliates. This post is for general information purposes and is not intended to be and should not be taken as legal advice.

Related Tags

commercial litigation
Class action
consumer class action

Blog Authors

Tommy Jacks | Of Counsel

Tommy Jacks is Of Counsel to the Austin office of Fish & Richardson. His practice emphasizes general commercial litigation. Mr. Jacks has over 45 years of experience in general litigation on a wide range of complex commercial, trade secrets, qui tam, class action, professional...

Leave a Reply

Your email address will not be published. Required fields are marked *