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Randall S. Degeer v. M. Scott Gillis

December 8, 2010


The opinion of the court was delivered by: Nan R. Nolan United States Magistrate Judge


Defendants M. Scott Gills, Joseph R. Shalleck, and Leroy J. Mergy (hereinafter collectively referred to as "Defendants") move to compel non-party Huron Consulting Services LLC's ("Huron") compliance with a subpoena (Doc. 92). For the following reasons, Defendants' motion to compel is granted in part and denied in part.


Plaintiff Randall S. DeGeer ("DeGeer") and Defendants are in the management consulting business. Prior to March 2006, Defendants owned and were engaged in a management consulting practice known as MSGalt & Company, LLC. On March 31, 2006, Defendants, MSGalt & Company, LLC and Huron entered into an Asset Purchase Agreement ("APA") to acquire Defendants' consulting practice. The APA provides that in addition to an up-front payment, Defendants would receive from Huron certain deferred payments on the assets sold (the "Earn-Out payments"). In July 2006, DeGeer joined Defendants' management consulting practice at Huron as Managing Director of Huron in the Galt division. DeGeer alleges that he and Defendants were partners for the purpose of generating fees for Huron as the Galt division of Huron and for the purpose of splitting the Galt Earn-Out payments each year among themselves. DeGeer says he dissolved the parties' partnership on May 18, 2009. DeGeer then resigned from Huron in late October 2009. Defendants were the practice leaders of the Galt division at Huron from March 2006 through December 2009. On December 31, 2009, Defendants bought back the Galt & Company assets from Huron.

On November 5, 2009, DeGeer filed what eventually became a five-count complaint alleging that Defendants failed to abide by the terms of the partnership agreement to pay a bonus or incentive compensation for DeGeer services in 2008 and 2009 as a Managing Director of the Galt division of Huron. DeGeer claims entitlement to a bonus calculated on the basis of a formula applied to annual Earn-Out payments made by Huron to Defendants' liability corporation. DeGeer alleges breach of contract, breach of partnership agreement, promissory estoppel, quantum meruit, and breach of fiduciary duty. DeGeer seeks in excess of $3,153,000, exclusive of interest and costs, in his second amended complaint.

Defendants answered and filed counterclaims for breach of fiduciary duty, tortious interference with business expectancy, and breach of contract against DeGeer. Defendants allege, among other things, that as a result of DeGeer's wrongful conduct, they were precluded from successfully negotiating an agreement with Huron extending their Senior Management Agreements with Huron and the Galt division relationship on terms similar to those set forth in the APA, including an up-front payment of at least $45 million and continuing Earn-Out payments, and were instead forced to buy back the Galt & Company assets on December 31, 2009. Defendants further allege that DeGeer usurped and diverted to his own benefit business and business opportunities belonging to Defendants and the Galt division. Defendants seeks in excess of $45 million in damages and lost profits.

On May 26, 2010, the district court referred this case here for discovery supervision and resolution of discovery motions. Over the course of this hard fought litigation, this Court has been required to rule on numerous discovery motions, including even a dispute as to the location of the depositions of Defendants. Once again the Court finds itself immersed in a discovery dispute that could likely have been avoided by the exercise of a little more cooperation and compromise among counsel.

The chronology of events pertinent to the present discovery dispute is as follows. On March 9, 2010, Defendants served a subpoena for production of documents upon Huron, a nonparty to this litigation. Huron is a management consulting firm with over 1,900 employees, and each of the parties to this action was employed as a Managing Director in the Galt division of Huron. Defendants' subpoena directed to Huron contains 15 requests: (1) all documents contained in the personnel file of DeGeer; (2) all documents reflecting, referring or relating to any offers of employment to DeGeer; (3) all documents reflecting, referring or relating to any negotiations concerning any of the terms or conditions of DeGeer's employment; (4) all documents reflecting, referring or relating to any suggested, proposed, potential or actual changes to any of the terms or conditions of DeGeer's employment; (5) all documents reflecting, referring or relating to the termination of DeGeer's employment; (6) all documents stored or contained in any computers, laptops, BlackBerrys, smart phones and any similar devices used by DeGeer, including without limitations, such documents stored on any tapes backing up any such devices; (7) all documents constituting, reflecting, referring or relating to any communications to which DeGeer was a party;

(8) all documents constituting, reflecting, referring, or relating to any agreements to which DeGeer was a party; (9) all documents reflecting, referring or relating to DeGeer's status as a "whistleblower;" (10) all documents reflecting, referring or relating to DeGeer's performance or conduct as an employee of Huron, including, without limitation, any investigation or review of his performance or conduct; (11) all documents reflecting, referring or relating to prospective, potential or projected client billings by DeGeer; (12) all documents reflecting, referring or relating to marketing activities concerning actual or potential clients (including, without limitation, Anglo American, Cynthia Carroll, Dow Chemical, Rohm Haas, Alcoa, Belden, and Synventive) by DeGeer;

(13) all documents reflecting, referring or relating to any bonus or incentive compensation claimed by or paid to DeGeer; (14) all documents reflecting, referring or relating to any claim of DeGeer to a portion of any earn-out paid or payable by Huron to Galt; and (15) all documents stored or contained on any tapes backing up any computers, laptops, BlackBerrys, smart phones, and other similar devices used by Joanne McCollum.

On March 23, 2010, Huron objected to Defendants' subpoena as overly broad and unduly burdensome. (Doc. 128, Exh. B). Huron did not question the relevance of Defendants' requests. With regard to Request No. 12 and potential clients, Huron indicated that an agreement as to specific search terms would need to be reached before any reasonable search for responsive documents could be conducted because the term "potential clients" was undefined. Huron stated that it had already gathered some of the documents sought by the subpoena and was in the process of gathering more. With regard to the remaining documents, Huron stated that it was "committed to working with [Defendants] to identify th[e] proper scope and provide the information reasonable and necessary to [the] lawsuit that can be provided without improperly imposing undue burden upon Huron." Id. Huron noted that "the information sought by the subpoena that is located on approximately 330 back up tapes dating back to July 1, 2007 is not reasonably accessible and will not be produced absent an agreement significantly limiting the scope of the request and whereby Huron is compensated for the cost of restoring and searching such back up tapes for the information requested." Id. On May 14, 2010, Huron's counsel produced a CD containing DeGeer's personnel file and stated that a copy of the hard drive of DeGeer's computer would be produced shortly. (Doc. 92, Exh. D). Huron's counsel also indicated that "[t]he remaining discovery, which consists largely of searching the electronic email files is ongoing. As you know, we deferred our decision on the backup tapes until you could see DeGeer's computer image and determine what you need." Id.

In a May 19, 2010 email to Huron's counsel, Defendants' counsel complained that Huron had rejected defense counsel's requests to disclose the search terms it developed to locate documents responsive to the subpoena. (Doc. 92, Exh. C). Huron's counsel responded the same day and suggested that Defendants provide Huron with the search terms they think would produce responsive documents as a way of narrowing the requests. Id. (stating "[s]ince only you seem able to divine what you are looking for, I suggest you provide us with the search terms you think [] will produce what you want as a way of narrowing your requests."). Defense counsel responded: "Given that your team has been working on compliance with the subpoena (or at least been thinking about it) during the 10 weeks since it was served, it would be helpful if you disclosed to us the search terms you have developed for particular requests." Id. On May 28, 2010, defense counsel followed-up with Huron's counsel regarding Huron's production in response to the subpoena and stated in part: "We have received no emails in response to our subpoena. We also have no indication of the search terms you have used to collect any emails despite our request that you provide it." Id.

On June 17, 2010, defense counsel emailed Huron's counsel and stated in part: By email on May 19, I reiterated our request that you disclose the search terms that your team had developed since service of the subpoena on March 9 so that we could consider and suggest refinements. I also again offered to consider temporal limitations as to any particular requests you might identify as problematic or burdensome. You never responded to that email or to our earlier efforts to facilitate Huron's compliance with the subpoena in light of your conclusory assertions of burden and expense. (Doc. 92, Exh. B). On June 30, Huron's counsel explained in an email to defense counsel:

[I]n response to the Plaintiff's document subpoena Huron converted and searched in house the same data base it needs to search for your remaining response. Because of the large volume of data to be searched (estimated at 25GB) and the burdensome demands made on Huron's personnel who have other jobs to accomplish this and other production in a reasonable time frame, Huron determined that any subsequent requests requiring the search of large electronic databases would have to be sent out and the requesting party charged for the third party costs. In light of your objection and the fact that this database was previously searched without charging the cost to the plaintiff, Huron has approved doing this again in-house without charging your client the cost. Any additional requests involving the search of large electronic databases will have to be sent out, however, and Huron will insist on recovering costs.

Id. In his July 12, 2010 email to Huron's counsel, defense counsel stated in part:

You consistently refused to disclose any details regarding Huron's databases or the searches it has conducted, or intends to conduct, to comply with the subpoena. In fact, you have ignored my repeated written requests that you reveal the search terms your client had developed so that we might be in a position to propose refinements and limitations. This has precluded the cooperation and collaboration essential to meaningful and efficient e-discovery.


On July 30, 2010, Defendants filed the motion to compel which is presently before the Court. (Doc. 92). In that motion, Defendants sought an order compelling Huron to comply in full with the subpoena issued by Defendants. Huron's response to the motion indicated that it had fully complied with each of the requests in the subpoena. Huron also stated that it preferred to address and resolve any outstanding issues relating to Huron's production without court intervention. Accordingly, on August 4, 2010, the Court ordered Defendants and Huron to continue to meet and confer in good faith in an attempt to resolve any issues regarding Huron's compliance. (Doc. 102). The Court also ordered Huron to prepare a privilege log identifying any responsive documents withheld. Id.

On August 24, 2010, defense counsel emailed Huron's counsel and asked that "certain information regarding the search Huron has conducted to date and the 'Cravath' database you referenced at the hearing on August 4" be provided in order to comply with the Court's order requiring that Defendants and Huron attempt to resolve issues regarding Huron's production without court intervention. In that email, defense counsel stated in part:

You did not disclose the existence of the Cravath database until the eve of the hearing on the motion to compel, five months after service of the subpoena. Please (i) describe the general content of the database and (ii) the manner in which it is organized, and (iii) advise as to whether there are separate files or folders relating to DeGeer and/or Galt.

The most recent production by Huron on August 3 appears to be quite limited in temporal scope and in terms of the individuals whose emails are included (i.e., Sawall, Robison, Holdren and DeGeer). Please (i) describe the general content of the database searched and (ii) identify the time frames and names included in Huron's search for responsive documents. (Doc. 114, Exh. A).

Huron produced its privilege logs on August 30, 2010. With regard to the backup tapes and Cravath database, Huron stated that both databases would be largely duplicative of what Huron had already produced:

1. The computer backup tapes. As we have discussed numerous times, we have insisted that you pay the costs of converting and searching these files if you wish data from them produced. We also suggested that the only purpose of searching these tapes would be to discover something deleted prior to 2010 and thus you might pick one or two dates prior to any likely deletions of material you were looking for. Due to the nature of backups, these will contain multiple copies of the same thing and thus are expensive to convert and search.

2. The database maintained by Cravath in regard to the SEC proceeding. Again, this should be duplicate of what we already produced except for something deleted after August 2009 when this database was assembled. Our position has been since you raised the possible existence of this database months ago that we should not be required to produce documents from it but we have offered to have Cravath search it at your cost.

(Doc. 114, Exh. B). The next day, defense counsel responded by email after a preliminary review of Huron's privilege logs. As to the backup tapes and Cravath database, defense counsel stated:

Your letter last night refers to "computer backup tapes" and to the database of Huron documents maintained by Huron's attorneys at Cravath. You now disclose that about 15, 000 documents in the Cravath database relate to the "Galt matter" and repeat your concern over possible duplication. Unless and until you provide a general description of the database searched to date, and identify the individuals searched and search terms used, as most recently requested in my emails of August 24 and yesterday, you are continuing to preclude the kind of meaningful "meet and confer" ordered by Judge Nolan. You have provided no basis for any possible agreement to avoid duplication, and it is impossible to discuss limitations or refinements with regard to searches you have consistently failed to reveal. Moreover, we are still not in a position to determine whether or to what extent it may be necessary to resort to backup tapes. (Doc. 114, Exh. C).

In response to the points in defense counsel's email of August 31, 2010, Huron counsel explained in part:

[W]e have spent more meet and conference time on this subpoena by several multiples than I have ever spent in 40 years of practice. A lot of this was wasted in trying to get your cooperation in either narrowing your scope [by] giving us search terms, neither of which you were willing to do despite numerous oral and written requests and suggestions to you as to how you might do this.

We are not required to identify which documents relate to each of your requests. Many of these requests overlap and we searched by records custodian, not by individual topics. Although we ended up searching the same custodians twice because we had already done a search on two topics which overlapped your topics for DeGeer's original subpoena, we did not rerun those search terms on the same data but instead sent you the same documents we sent DeGeer's attorney since most such documents were relevant to your request. We then searched the same data custodians again for additional terms suggested by your much more expansive requests. We did not, however, run an independent search for each of your items. Not only would that have produced incredible duplication, it would have been unreasonable costly.

We believe, as we have stated, that our client has fulfilled its obligation to make a reasonable search in response to your subpoena. We do not claim that there is no more that can be searched. There are of course hundreds of Huron employees whose data could be searched since we searched only those likely to have something requested. As we have not discussed numerous times, there are two other possible data searches:

1. The first is the backup tapes. These of necessity are not only expensive to convert and search but they will be incredibl[y] duplicative. Since the computers were backed up one or more times a day during the period when this system was operating, these tapes will not only contain another copy of many of the items we have produced, they are likely to contain hundreds of copies of such items. You may, however, wish to search some of these tapes since you have insisted that Gary Holdren and others immediately deleted their emails. If he got emails and also deleted them between backups, the deleted emails will not appear on the backup tapes either. On the other hand, some deleted emails might be on the tapes. No one will know until the tapes have been searched whether there are any such documents on them which were not already picked up and produced on the emails of other recipients from the sender and how many. We have merely asked that you pay for the costs if you want to engage in this likely to be a needle in a giant haystack search. We have even suggested that you can cut your costs by selecting a few relevant dates before and after things you think might have existed would have been sent in order to cut costs and time.

2. The second database is the Cravath maintained database which was prepared in the same way we did our production by searching data custodians. Cravath did this for purposes of the SEC investigation and the Securities Act litigation. Thus, its focus was different as I have explained over and over. The fact that they only accumulated approximately 15,000 total documents (including privileged ones), relevant to the Galt transactions, which is substantially less than we have produced without even counting privileged documents, should indicate that, to the extent relevant to your subpoena, these document should be largely duplicative.

Cravath did, however, search the custodians at a different time (August 2009) then we did and ran their period from January 1, 2005 while we ran ours from January 1, 2006 as you requested and they searched some people we did not. We also searched a number of people they did not due to our search not trying to look at the other three acquisitions involved in the restatement. Thus, there are likely to be at least a few documents relevant to your requests that might not have been produced by us. Cravath can do this search if you wish although we believe once again that out client is not required to do this. All our client asks is that you select and get our approval for search terms and that you pay Cravath for the search. (Doc. 114, Exh. D). At the end of his September 3, 2010 letter, Huron's counsel identified the custodians searched by Huron and the custodians searched by Cravath. Id.

The reference to the "Cravath" database in counsel's correspondence refers to Huron's New York counsel, Cravath, Swain & Moore LLP. As Huron's counsel explained, Cravath prepared a database and searched data custodians in August 2009 for purposes of a SEC investigation and a Securities Act litigation filed against Huron resulting from an earnings restatement by Huron involving the payment of acquisition and earn-out compensation in four Huron acquisitions, including Galt. The Cravath search ran from January 1, 2005, while the Huron ...

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