In Peerless Industries, Inc. v. Crimson AV LLC, the court held that defendants' total reliance on its E-Discovery vendor's ESI collection processes was "insufficient" and granted plaintiff's sanctions motion.
The court concluded that defendants "took a backseat approach" and "let the process proceed through a vendor." In this patent infringement case, the plaintiff complained that defendant, with a non-party supplier company, infringed upon plaintiff's design patent for a certain style of TV mounts. During discovery, the court found that the defendant was "in control" of relevant ESI belonging to the non-party supplier and ordered defendant to "obtain the relevant documents from [the non-party supplier]". According to the court, "[t]his order . . . required defendants to contact individuals at [the non-party supplier] and play a role in obtaining the necessary discovery."
Subsequently, plaintiff filed its motion for sanctions after "it became clear that defendant did not conduct a reasonable investigation regarding [the non-party supplier's] document production or [its] document retention for purposes of this litigation." During deposition testimony, the Managing Director for Crimson could not answer simple questions about the non-party's information systems, custodians, keyword search terms and processes, preservation protocols, or whether any of its employees "were even contacted regarding plaintiff's document requests."
The court therefore concluded that sanctions were appropriate in light of "such a hands-off approach" and continued:
"Because of the control or “close coordination” between the two companies, defendants were required to produce the requested information. Defendants cannot place the burden of compliance on an outside vendor and have no knowledge, or claim no control, over the process. Defendants must produce all responsive documents, even if those documents are held by Sycamore, because we have already determined that the separation of the two companies “‘cannot be used as a screen to disguise the coordinated nature’” of their business."
(Footnote citations omitted.)
The court granted plaintiff's motion for sanctions and ordered that defendant "show that they in fact searched for the requested documents and, if those documents no longer exist or cannot be located, they must specifically verify what it is they cannot produce." The court also ordered that plaintiff submit its bill of costs for the preparation of the motion presumably for payment by defendant.
To read the court's opinion in its entirety, please click here.