Optronic Technologies, Inc. v. Ningbo Sunny Electronic Co., Ltd.

Background

After the presiding judge entered judgment for Optronic on its antitrust claims, Optronic served Ningbo Sunny with post-judgment document requests and an interrogatory seeking discovery related to enforcing the judgment. Optronic later moved for sanctions under Federal Rule of Civil Procedure 26(g) against Ningbo Sunny and its counsel, Sheppard, Mullin, Richter & Hampton LLP (Sheppard Mullin).

The discovery disputes involved two subjects. First, Interrogatory No. 4 asked whether Ningbo Sunny or its agents had non-written communications with the Synta Entities or their agents about the litigation during the preceding six months. Ningbo Sunny initially gave a general response and later supplemented it with a list of 18 communications after the court ordered a more detailed answer. Second, Optronic challenged Ningbo Sunny’s production of documents requested for the period beginning November 1, 2016. Ningbo Sunny had produced approximately 9,200 documents, but Optronic argued that the production was incomplete.

The court had previously ordered Ningbo Sunny to provide a declaration specifically describing how it searched for responsive documents. Instead, Ningbo Sunny reported that it could not locate someone competent to sign that declaration. The presiding judge had also found that Ningbo Sunny deliberately withheld two documents that showed conduct inconsistent with its earlier representations to the court.

Rule 26(g) standards

Rule 26(g) requires an attorney who signs written discovery responses to certify, after a reasonable inquiry, that the responses comply with the rules and existing law, are not made for an improper purpose, and are not unreasonable or unduly burdensome or expensive. If a certification violates the rule without substantial justification, the court must impose an appropriate sanction on the signing attorney, the party, or both. The rule uses an objective standard and does not require proof of bad faith.

Certification for disclosures

Optronic relied in part on Rule 26(g)(1)(A), which requires certification that certain initial or pretrial disclosures are complete and correct when made. The court held that this subsection applies to disclosures, not to the discovery responses at issue here. It therefore denied Optronic’s request for sanctions based on an alleged violation of Rule 26(g)(1)(A).

Document requests

The court held that Sheppard Mullin violated Rule 26(g)(1)(B). Ningbo Sunny’s responses represented that it would produce responsive documents, but the court found that Ningbo Sunny had deliberately withheld two responsive documents. The court also concluded that Sheppard Mullin had not made a reasonable effort to ensure that Ningbo Sunny actually searched for and produced all responsive documents.

Sheppard Mullin described providing guidance about custodians, company files, archives, and the collection process, and said it followed up with Ningbo Sunny to try to ensure that all documents had been collected. But counsel acknowledged that it did not know what decisions Ningbo Sunny made about the search or how Ningbo Sunny conducted it. The court concluded that providing advice without determining whether the client followed that advice was insufficient under the circumstances, particularly because the discovery concerned enforcement of the judgment and possible asset transfers.

The court rejected Sheppard Mullin’s claim that its conduct was substantially justified. Although counsel cited confidentiality concerns and a breakdown in communication with Ningbo Sunny, it did not assert that those circumstances prevented counsel from communicating with Ningbo Sunny about the document search or supervising compliance.

Interrogatory No. 4

The court denied sanctions concerning counsel’s certification of Ningbo Sunny’s response to Interrogatory No. 4. It found that the original response was not shown to be inconsistent with the federal rules, made for an improper purpose, or otherwise unreasonable. The later supplemental response was more detailed and complete, but the court concluded that this did not establish that the original response was false.

Sanctions and required corrective action

The court granted Optronic’s motion for sanctions concerning the document requests. Because Sheppard Mullin had been allowed to withdraw as counsel, the court declined to require that firm to supervise the production. Instead, the court ordered Ningbo Sunny’s new counsel to independently ensure compliance. Ningbo Sunny was required to redo, under counsel’s direction and supervision, its collection, review, and production of responsive documents, complete the production by June 26, 2020, and file a declaration describing specifically how it searched for and collected the documents.

The court also found that monetary sanctions were appropriate to compensate Optronic for reasonable attorneys’ fees and costs associated with specified discovery-dispute, hearing, and sanctions matters concerning the document production. Optronic was required to submit a fee application, or the parties could agree on the amount. The court awarded the monetary sanctions jointly against Ningbo Sunny and Sheppard Mullin, but the order did not state a dollar amount.

Disposition

The order granted in part and denied in part Optronic’s motion for sanctions: sanctions were granted with respect to Ningbo Sunny’s document-request responses, while sanctions were denied with respect to Interrogatory No. 4. Sanctions based on Rule 26(g)(1)(A) were also denied.