Plaintiffs’ Request for Fees under FRCP 16(f) Denied Where Parties Equally Culpable in Signing Muddled Discovery Order
In Babcock Power, Inc. et. al. v. Kapsalis et. al., Case No. 13-717 (W.D. Ky., Sept. 14, 2016), Plaintiffs hired Defendant Kapsalis as CEO and entered into a confidentiality/nondisclosure agreement limiting his outside business activities while employed by Plaintiffs and limiting his business activity after termination for one year. When Kapsalis left Plaintiffs, he began to work for Express Group Holdings. Plaintiffs filed suit thereafter, alleging that Kapsalis copied confidential and proprietary information from his work computer onto another device and that he emailed himself client and customer contacts to his personal email account from his work computer.
During discovery, the parties negotiated search terms to review Kapsalis’ hard drives and the server of Express to be conducted by a third party called Digital Strata. During the search term negotiations, Digital Strata had discussions over the phone with the parties’ technology experts and email correspondence with the parties’ counsel. An agreed order was entered with the search terms to be conducted by Digital Strata, and the parties agreed to split the cost of the searches. The agreed order provided that Digital Strata would create a file listing report of the Express server in a spreadsheet or database format. The parties agreed that any items listed thereon must be produced by Express. Through a series of emails, Digital Strata produced file listing reports for Kapsalis’ hard drives as well as various other emails with lists and information. After several disputes about the lists created and some narrowing down, Digital Strata produced 764 documents purporting to be Plaintiffs’ trade secrets, stating in its email that none of these documents were found on the Express server. Plaintiffs argued that this was incorrect, asserting that Digital Strata did not properly compare file names with the backups. Plaintiffs filed a Motion to recover their counsel fees and to direct Express to perform additional searches of its server.
The court looked at FRCP 16(f), which provides for imposition of fees and costs if a party fails to obey a scheduling or other pretrial order. The court denied the motion, finding that the parties were equally culpable in the messy transaction, and also finding that the failure to produce the file listing report for the Express server did not change any outcome, and that the wording in the Agreed Order was partially to blame. The court listed myriad reasons why fees were not appropriate as well as indicating that it had even further reasons it would not set forth in the opinion. The gist of the court’s ruling was that parties must be concise with the court and with each other when doing agreed discovery orders.