GMO Gamecenter USA, Inc. v. Whinstone US, Inc.

Background

The parties submitted competing positions about additional searches for documents referring to GMO or the Texas Agreement as part of a larger group or business strategy. Judge John P. Cronan had previously ruled that this discovery was relevant to the claims and defenses, but left the question of proportionality to Magistrate Judge Katharine H. Parker.

Under Federal Rule of Civil Procedure 26(b)(1), discovery must concern nonprivileged information relevant to a claim or defense and must be proportional to the needs of the case. Proportionality considers factors including the importance of the issues, the amount in controversy, the parties’ access to information and resources, the value of the discovery, and whether its burden or expense outweighs its likely benefit.

Search Terms

The court concluded that many of GMO’s proposed search terms were overbroad. Whinstone had already searched for and responded to requests concerning termination of the Texas Agreement, and the parties had engaged in significant discovery and several depositions. The court found little factual basis for believing that broad terms such as “Legacy” or “legac AND client” would produce meaningful, additional documents. It therefore narrowed the searches and directed Whinstone to use the terms listed in Appendix A.

The court also rejected GMO’s suggestion that Whinstone produce every nonprivileged document containing GMO’s proposed search terms without first conducting a responsiveness review.

Custodians

The parties disputed whose emails and custodial documents should be searched. Whinstone proposed limiting the search to Jeff McGonegal and Chad Harris. GMO proposed searching eight custodians: Jeff McGonegal, Kevin Haugen, Chad Harris, Megan Brooks-Anderson, Gordon Zhang, William Jackman, Jason Chung, and Ghazaleh Barman. GMO argued that searching only McGonegal and Harris would not capture all responsive communications and identified Zhang as an important custodian concerning termination of legacy contracts.

The court ordered searches of McGonegal, Harris, and Zhang. It found that searching additional custodians beyond Zhang was not proportional because substantial discovery had already occurred and additional custodians were likely to produce duplicative results.

Date Range

GMO proposed beginning the search on January 1, 2021. Whinstone argued that communications before May 26, 2021, were likely to create false hits because Riot’s acquisition of Whinstone did not close until May 26, 2021. The court found that expanding the search to January 2021 was disproportionate and ordered a search covering May 26, 2021, through October 31, 2023.

Supplemental Discovery

GMO requested that Whinstone and Riot produce certain board minutes, board presentations, investor presentations, and financial projections concerning mining scenarios at the Rockdale facility without using search terms. The court found that GMO had not explained why those documents could not be located through the ordered or previously used searches. It denied GMO’s request as disproportionate to the needs of the case. The court stated that responsive, nonprivileged documents in those categories found through the ordered searches must still be produced.

Ruling

Judge Parker ordered Whinstone to run the Appendix A search terms against the emails and custodial documents of Jeff McGonegal, Chad Harris, and Gordon Zhang for the period from May 26, 2021, through October 31, 2023. Whinstone had to produce responsive, nonprivileged documents and provide a privilege log for documents that were redacted or withheld by the close of fact discovery. The court denied GMO’s request for independent production of the specified supplemental materials without using search terms.