CellTrust Corporation v. ionLake, LLC

Background

CellTrust moved for sanctions under Federal Rule of Civil Procedure 37 and Local Rule 1.3 based on several aspects of ionLake’s discovery conduct. The parties had a protective order allowing confidentiality designations and a more restrictive attorney-eyes-only designation, which limits access to attorneys and certain permitted recipients. Their electronically stored information agreement required them to meet and confer about search methods and use narrowly tailored search terms.

CellTrust served its first document request about one month before the fact-discovery deadline. The parties later met and conferred, and CellTrust provided search terms. IonLake then produced more than 35,000 documents totaling over 400,000 pages. IonLake designated the entire production attorney-eyes-only, explaining that the designation was necessary to meet the agreed production deadline and avoid separating related information. The production included public documents such as pleadings, patents, newsletters, and magazines.

After CellTrust objected, the parties met and conferred. IonLake spent approximately 30 hours reclassifying documents and served an updated production. The parties also addressed allegedly unsupported entries in ionLake’s privilege log. IonLake reviewed the log, redesignated many entries, and produced additional material. A document that CellTrust believed might have been deleted was later located and produced, along with the executive summary and drawing associated with it. IonLake also later produced deposition transcripts and exhibits that CellTrust had requested.

Court’s analysis

The court held that parties have an implied duty to review documents in good faith before designating them attorney-eyes-only under a protective order. Although no fixed percentage automatically makes an attorney-eyes-only designation improper, the court found that designating 100 percent of ionLake’s production was not justified on this record.

IonLake argued that the designation was a temporary measure adopted for efficiency because CellTrust’s search terms produced approximately 35,000 documents. The court rejected that explanation. IonLake had possessed CellTrust’s search terms for more than a month without objecting to them and did not show that it tried to meet and confer about the search terms or production scope after learning the volume of responsive material. Its production notice also did not state that the designation was preliminary or that redesignation would occur. The court concluded that ionLake’s initial blanket designation did not satisfy the duty of good faith and violated the spirit and terms of the protective order.

Because ionLake had already reviewed and reproduced the material, the court did not order another review. Instead, relying on Rule 37(b)(2)(C) and the protective order’s fee provision, it imposed a monetary sanction. The court found that a larger award would not have a useful effect and would increase the costs of the litigation.

The court denied sanctions based on the September 13 republication of the production link. Counsel represented that the September 4 and September 13 productions were identical, and the court found that the republication reflected a professional courtesy based on incomplete information from a third-party vendor, not gamesmanship.

The court also denied sanctions concerning the privilege log. It emphasized that the parties met soon after CellTrust raised its concerns, ionLake promptly reviewed the entries and made changes, and CellTrust had not provided the privilege log or identified which entries remained unsupported. The court denied the spoliation request because the allegedly missing document was ultimately found and produced, and the record did not support intentional destruction of evidence. The court declined to infer that the time taken to produce the deposition transcripts was unreasonable and found no established pattern of discovery abuse. It also denied CellTrust’s request to extend the deadline for non-dispositive motions because ionLake had already produced the documents it had agreed to produce and the court was not ordering additional production.

Disposition

The order states that CellTrust’s Motion for Sanctions Against Defendants was GRANTED IN PART and DENIED IN PART. IonLake was ordered to pay CellTrust $1,000 within 30 days for the blanket attorney-eyes-only designation of its electronic production. The court left prior consistent orders in effect and stated that failure to comply with the order or prior orders could lead to appropriate remedies and sanctions.