Procaps S.A. v. Patheon Inc.

Full title: PROCAPS S.A., Plaintiff, v. PATHEON INC., Defendant.

Court: UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION

Date published: Dec 1, 2014

CASE NO: 1:12-cv-24356-JG (S.D. Fla. Dec. 1, 2014)

Opinion

CASE NO: 1:12-cv-24356-JG

12-01-2014

PROCAPS S.A., Plaintiff, v. PATHEON INC., Defendant.

REPORT AND RECOMMENDATION OF THE SPECIAL MASTER TO DENY PROCAPS' MOTION FOR A FORENSIC EXAMINATION

Plaintiff, Procaps S.A. (Procaps) moved to compel a forensic examination of information stored in electronic storage information systems by Defendant, Patheon Inc. (Patheon). DE 559. The motion is directed not just at Patheon's electronically stored information (ESI) but also that of Banner Pharmcaps, Inc. and affiliated companies (collectively, "Banner") (companies acquired by Patheon, as explained below) "that may contain information or data relevant to this case." DE 559, p. 1. Procaps also seeks its attorneys' fees and costs in bringing the motion. Id. In June 2014, Procaps had signaled to the Court that it would be filing this motion. Hence, when the Court referred to me for resolution pending issues associated with the Court's Orders requiring a forensic examination of Procaps' electronic storage media, DE 568 (July 14, 2014), the Court also referred Procaps' anticipated motion to me for this Report and Recommendation. Id.

My Report and Recommendation follows. I first discuss the background allegations or facts to give a context to Procaps' motion. I then review the Court's Order granting Patheon's motion for a forensic examination of Procaps' electronic storage information systems, DE 341 (February 28, 2014), since Procaps believes that Patheon's conduct warrants issuance of a similar order. Next I discuss the positions of the parties as set forth in lengthy memoranda. After that I review in detail the case law relied upon by Procaps to justify the relief that it seeks and the case law relied upon by Patheon to justify its opposition to Procaps' motion. I then apply the applicable legal standards to the facts as presented by the parties. I conclude that Procaps has not made a sufficient showing to warrant a forensic examination of Patheon's electronic storage information systems.

Background

Discovery-related motions must have a context anchored in the claims or defenses of the parties. Fed. R. Civ. P. 26(b)(1). The following background information provides that context. The information comes from the Complaint, DE 1 (December 10, 2012) or the parties' filings in connection with their cross motions for summary judgment (DE 506 and DE 507, both dated May 19, 2014, are proposed summary judgment orders prepared by the parties) or the Court's Order granting in part and denying in part the parties' cross motions for summary judgment, DE 565 (July 30, 2014).

In December 2012, Procaps filed this action for damages under the antitrust laws, Florida's Deceptive and Unfair Trade Practices Act (FDUPTA), and the Florida common law of unfair competition.

Procaps and Patheon had entered into a seven-year "Collaboration Agreement" in January 2012 by which they would work together to sell "softgel" products in the United States. Procaps is in Columbia. It manufactures softgel capsules for pharmaceutical companies. Patheon is in the United States. It has commercial manufacturing and pharmaceutical development services relationships with the pharmaceutical industry in the United States and throughout other parts of the world. Procaps had a slight presence in the United States and wanted to expand it as well as increase its business in other parts of the world. Patheon had limited manufacturing capabilities in the United States and sought to take advantage of Procaps' significant manufacturing capabilities to increase its offerings to its pharmaceutical customers. The marriage appeared sensible enough to both companies that they agreed to contribute their unique skills to the collaboration and offer pharmaceutical customers branded softgel products. By May 2012, the collaborators were offering "P-Gels" —a branded softgel capsule development and manufacturing service—to pharmaceutical companies in the United States, Europe, and several other countries within the "Territory" covered by the Collaboration Agreement.

A few months later, Patheon decided to buy Banner, whom Procaps refers to as its "fiercest competitor." DE 559, p. 1. The acquisition was made, Procaps says, after Procaps disclosed to Patheon confidential and proprietary information relating to soft gel manufacturing. Id. Patheon announced the acquisition in October 2012 following some period of time of negotiations. The purchase was completed in December 2012.

Procaps was not happy about this decision. It sued on December 10, 2012, originally naming Banner as a defendant and including an injunction count to stop the acquisition or require Patheon to divest itself of Banner's softgel manufacturing capabilities and facilities to a third party within a six-month period as provided for in the Collaboration Agreement. The latter did not occur. Banner was later dropped as an independent party. Procaps never pursued an injunction.

Irrespective of Rule 26(d)(1), on December 14, 2012, Procaps also served Patheon and Banner with document requests covering 81 categories of documents. DE 559, p. 1, 7.

Procaps' main claim against Patheon sounded not in breach of contract but in antitrust. The Collaboration Agreement required the collaborators, among other obligations, to allocate customers. Once Patheon bought Banner, Procaps alleged that Patheon became a competitor to Procaps. When two competitors agree to divide customers, that sounds like a contract in restraint of trade, which, depending upon a number of factors, can be a violation of Section 1 of the Sherman Act. And that's what Procaps alleged: that Patheon's decision to buy Banner converted a lawful Collaboration Agreement into a per se violation of the antitrust laws. Saying it could not participate in unlawful activity, Procaps alleged that it was deprived of the benefits of the Collaboration Agreement—i.e., profits from future sales—and therefore suffered damage.

For its part, Patheon did not believe that Banner and Procaps were meaningful competitors because Banner did not actively pursue the business of softgel product development services or commercial manufacturing outsourcing, which was the focus of the Collaboration Agreement. Presumably consistent with this belief, Patheon initially proposed to include Banner's business in the Collaboration but that approach was ultimately rejected by Procaps. As noted earlier, the Collaboration Agreement contained a provision that gave Patheon six months to divest itself of assets. Unsurprisingly (having just bought Banner), Patheon retained the Banner assets but said it continued to look, and would continue to look, for opportunities for the companies under the Collaboration Agreement. Procaps, however, refused to move forward without a divestiture of the competing Banner assets.

Because Procaps' refusal to perform under the Collaboration Agreement was not "cured," Patheon insisted that the Collaboration Agreement was thereby terminated and formally declared this to be the case in July 2013. Procaps, however, insisted that the Agreement was still in effect. As noted above, it felt that it could not take advantage of the Collaboration Agreement's provisions because it would be dividing markets with a competitor in violation of the antitrust laws. Thus, Procaps says, it lost out on potential profits from future sales that would have been made had the collaborators approached the marketplace as they had done in 2012 before the Banner acquisition, and originally planned to do in the years that followed.

Procaps also argued that Patheon was liable under the Florida Deceptive Trade and Unfair Practices Act (FDUPTA) and under Florida's common law of unfair competition. Procaps was most concerned that it revealed confidential information to Patheon about its manufacturing operations only to later learn that Patheon was buying Procaps' competitor, Banner. For its part, Patheon insisted that it had kept from Banner any confidential information it learned from Procaps.

In its Order addressing summary judgment motions filed by both parties, the Court decided that the case would not be allowed to proceed on the basis of a per se violation of the antitrust laws but instead would be tried on the basis of a rule of reason antitrust claim. DE 565, p. 3-4, 25-37.

The Court granted summary judgment to Patheon on the FDUPTA claim for any recovery theories other than the practices represented by Procaps' claim under Section 1 of the Sherman Act. DE 565, p. 43-44.

The Court later rejected Procaps' motion for reconsideration of this ruling. DE 603. It reiterated that Procaps failed to produce any evidence that Patheon had misused Procaps' confidential information or disclosed it to a third party. DE 603, p. 11. The Court refused to accept the theory that access to confidential information is equivalent to engagement in an "unfair act" under FDUPTA. Otherwise, the Court explained, a breach of a contract with a confidentiality clause in it would be converted into a FDUPTA claim, and the Florida Supreme Court has said that is not the purpose behind FDUPTA. DE 603, p. 12 (citing PRN, Inc. v. Beacon Prop. Mgmt., Inc., 842 So.2d 773, 777, n.2 (Fla. 2003).

However, the Court did allow one opening to Procaps. If it turned out that discovery from a forensic analysis of Patheon's electronically stored information was to be permitted, and such discovery produced "substantial and bona fide evidence that supports Procaps' FDUPTA claim (of actual misuse of confidential information)," then, the Court said, Procaps may file a renewed motion on the scope of its FDUPTA claim. DE 603, p. 16.

The Court also granted Patheon's summary judgment motion on the unfair competition claim. DE 565, p. 44-51.

Patheon then filed a "Motion for Judgment." DE 581. It argued that Procaps had conceded it was only pursuing a per se antitrust claim and, therefore, Procaps should not be permitted to pursue a rule-of-reason antitrust claim. The Court denied that motion. DE 607. It did require Procaps to respond to certain discovery that had not previously been answered because of reliance on a per se antitrust theory. After this discovery is completed, the Court also allowed Patheon, if it chose to do so, to file another summary judgment motion limited solely to the issue of whether Procaps has established a prima facie antitrust claim under a rule of reason analysis. DE 607, p. 3-4.

The discovery deadline in this matter was March 10, 2014. DE 94, p. 5, DE 603, p. 2, 16. The Court's Order dated October 2, 2014, DE 603 pp. 17-20, held that various discovery motions of the parties were untimely filed since the parties could not by stipulation extend deadlines set by local rule and the Court's Scheduling Order. The Court did provide for two exceptions pertinent to the referral to the Special Master:

If (1) the discovery provided by Procaps to Patheon as part of the Court-ordered forensic analysis of Procaps' ESI, [or] (2) any similar discovery which might be provided in connection with Procaps' motion to compel a forensic analysis of Patheon's ESI, ..., yields any substantively significant evidence warranting further discovery, then the party or parties receiving the evidence may (after consulting with opposing counsel) file a motion for additional discovery, limited to issues arising out of the newly-provided evidence.

DE 603, p. 20. The Court was quick to add it was not expressing a view on the outcome of its referral to the Special Master or whether it would accept any recommendation for further discovery should the Special Master recommend it. Id. at 20, n.4.

The Court's Order Granting Patheon's Motion for Forensic Examination

Procaps argues that Patheon's conduct is comparable to the conduct that prompted the Court to grant Patheon's motion for a forensic examination. So before turning to Patheon's conduct, for comparative purposes, I set forth below the Court's findings underlying its Order Granting Defendant's Motion for a Forensic Analysis of Plaintiff's Electronic Media. DE 341 (February 28, 2014):

• Procaps' counsel recognized the need for a litigation hold notice because it referenced one in its November 2012 engagement letter with Procaps. But it failed to realize that its client did not issue a litigation hold notice in response to the engagement letter. DE 341, p. 4.

• The action was filed in December 2012. The first formal litigation hold was not issued by Procaps until February 27, 2014, when the Court ordered that one be issued. DE 341, p. 1-2.

• Procaps' counsel did not travel to Colombia where Procaps is based to meet with Procaps' information technology team or other executives to "discuss how relevant or responsive" ESI would be located. DE 341, p. 2.

• Procaps' counsel did not retain "an ESI retrieval consultant to help Procaps implement a litigation hold or to search for relevant ESI and documents." DE 341, p. 2.

• Based on deposition testimony from Procaps' executives and employees, Procaps self-collected ESI and documents, and allowed some of its executives to use a single search term to collect emails. DE 341, p. 4.

• Illustratively, Procaps' Director of Business Development (Alvaro Franco), "the primary liaison with Patheon in the Collaboration Agreement" and "[p]erhaps the most important Procaps fact witness in this case," testified "that he was never given instructions on how to search for ESI and documents and decided for himself whether something was relevant"; that he "searched for emails containing only the term 'Patheon'"; and that the search protocol he followed was one he generated

without assistance from counsel. DE 341, p. 4. Mr. Franco did not search for "emails using other search terms (such as 'Banner,' 'Collaboration Agreement,' 'softgels,' 'soft gels,' etc.) and did not do anything else to locate and collect responsive ESI and other documents." DE 341, p. 5.

• Many of Procaps' executives, including its Chief Executive Officer, "testified that they never saw Patheon's document requests."

• A Fed. R. Civ. P. 30(b)(6) witness for Procaps testified that he "did not know if Procaps had backup tapes or an automated deletion process and, if so, whether that process was suspended when litigation began." DE 341, p. 5.

• A separate Procaps executive "testified that his ESI and document collection focused only on emails to or from Patheon - and did not include internal emails discussing Patheon or emails where he was copied but not directly addressed." DE 341, p. 5 (emphasis in original).

• Several Procaps' employees testified that they did not receive "instructions from counsel to retain relevant evidence." DE 341, p. 5.

• Procaps' counsel conceded that the "document and ESI search was inadequate." DE 341, p. 2.

Procaps argued to the Court that there was no showing that any documents had been deleted or destroyed. The Court responded by saying,

Even if true, this argument does not address the indisputable conclusion that the ESI and document searches were inadequate - a scenario which strongly suggests that some (and perhaps even a significant amount of) responsive discovery from Procaps has not

yet been located and mandates a comprehensive forensic search of Procaps' ESI and other sources of relevant documents.

DE 341, p. 6.

Against this backdrop, I turn now to Procaps' arguments in support of its motion.

Procaps' Arguments

Procaps summarized its arguments:

1. Patheon failed to issue litigation hold notices to "all relevant custodians" until "as late as 7 months" after the date that Patheon "concedes it anticipated litigation" and "5 months after receiving Procaps first document requests." DE 559, Ex. 4. (DE 559-4 is Patheon's responses to Procaps Fifth Set of Interrogatories, which explains Patheon's ESI and document production process.)

2. Patheon did not suspend deletion of backup tapes until "well after discovery commenced." DE 559, Ex. 4.

3. Patheon's former President - North American Operations, Peter Bigelow, was not asked to preserve relevant documents. DE 559, Ex. 5. (DE 559-5 is an unproofed "realtime" transcript of a deposition of Mr. Bigelow.) Procaps says that Mr. Bigelow is a "critical" witness for Patheon (citing DE 394 at 4; DE 459).

4. Patheon did not engage an outside ESI vendor to collect relevant ESI. It self-collected them, Procaps argues. DE 559, p. 3 and Ex. 4. Referring to the Court's February 28 Order granting Patheon's Motion for a Forensic

Examination (DE 341, p. 2), Procaps notes that Patheon criticized Procaps for not retaining an "ESI retrieval consultant."

5. Patheon's collection of ESI consisted "only of asking certain custodians (timeframe and names unknown) to locate folders where potentially relevant documents could be stored, and then copying those folders or files themselves." DE 559, Ex. 4.

6. Patheon did not run search terms on its electronic information systems, email servers, or backup tapes "before delivering documents to its counsel." DE 559, Ex. 4.

7. No search terms were run on "Banner's systems, email servers, or backup tapes at any time." DE 559, Ex. 4.

8. Patheon's counsel ran "only" 17 search terms, including derivatives, on documents it received from Patheon. These search terms did not include "basic relevant terms" such as "Banner" or "Collaboration Agreement." The search terms included "only" 9 Procaps' employee names. The search terms did not include the names of any Banner employees. DE 559, Ex. 4.

9. Patheon produced 1% of the documents that were collected by Patheon. The production included "only 14 internal Banner emails." DE 418, p. 4.

10. Based on a review of metadata, Patheon produced documents from "only 1 identifiable Banner custodian" and Patheon produced "no documents from 49 other Banner custodians identified by Patheon in its interrogatory answers." DE 559, p. 4.

11. Patheon took "no action to preserve Banner's electronic databases and infrastructure as they had existed when the lawsuit was filed." DE 559, Ex. 6. (DE 559-6 is Patheon's "Supplemental Objections and Responses to Procaps Fifth Set of Interrogatories.")

12. Patheon "did not search for and produce documents from every custodian." DE 559, Ex. 3. (DE 559-3 is an email from Mac McCoy, Procaps' counsel, to Mike Klisch, Patheon's counsel dated February 24, 2014.)

13. In December 2013, a year after service of discovery requests, Patheon "admitted that Cooley's search terms did not pick up all relevant documents." DE 559, Exs. 2 and 3. Thirty days before the discovery deadline, "Patheon produced for the first time new documents, including relevant emails and notes of important meetings between Patheon and Procaps employees relating to the collaboration." Id.

Then relying on its Proposed Order on Patheon's Motion for Summary Judgment, DE 508-1, pp. 27-36, Procaps points out that ESI relating to Procaps' "confidential and proprietary information resides somewhere in Patheon or Banner's computer systems, yet it was not produced." DE 559, p. 5.

Procaps explains that Patheon conceded in response to this Court's Order (DE 483) that there were "no written policies, procedures, guidelines or instructions between Patheon and Banner regarding the protection of Procaps' information." DE 559, p. 5.

Procaps adds that Patheon never sent formal instructions to its employees to refrain from disclosing Procaps' confidential information to Banner employees. "It is presumptively clear that there is relevant information at Patheon, and/or exchanged with Banner, that remains hidden in, if not deleted from, their computer systems and ESI," Procaps writes. DE 559, p. 6-7.

Procaps then elaborates on these arguments.

Patheon issued its first litigation hold notice on December 22, 2012. DE 559, Ex. 4, p. 2. Procaps argues that this notice was at least two months late, since Patheon should have issued a litigation hold notice no later than October 22, 2012—the date by which the parties reasonably anticipated litigation, citing to DE 318, p. 1-2. Procaps added that Patheon's privilege log contained documents created between October and November 2012 that were withheld as work product, meaning that Patheon anticipated litigation in this time period. DE 559, Exs. 7-8. (DE 559-7 and 559-8 are excerpts from Patheon's privilege log.)

In reaction to Procaps' misfeasance in this regard, Procaps cites Patheon's words (from Patheon's moving papers seeking a forensic examination of Procaps' electronic information storage systems, DE 318, p. 1-2) that a failure to issue a timely litigation hold created a "pervasive risk that ESI was lost" after October 22. Procaps also notes, by analogy, that its failure to issue a timely litigation hold was "one of the principal justifications" cited by the Court in ordering a forensic analysis of Procaps' ESI. (DE 341, p. 4). DE 559, p. 6.

Procaps also argues that the breadth of the hold was limited. The December 22, 2012 notice was sent to "those employees" Patheon "believed could have non-duplicative documents or data." DE 559, Ex. 4, p. 2.

Procaps did not have a copy of the initial notice and did not know who the recipients were and argued that Patheon's refusal to share this information "strongly suggests that many key custodians did not receive proper litigation holds until April/May 2013, if at all, well after Patheon had searched for and retrieved documents responsive to Procaps' document requests." DE 559, p. 6, n. 2.

But Procaps believes that when Patheon re-issued the hold notice in April/May 2013, this time it went to the majority of Patheon's "approximately 160 custodians." Procaps concludes that during this delay of seven months between October 22, 2012 and April/May 2013 the following occurred:

Accordingly, when Patheon was searching for and retrieving documents responsive to Procaps' first document request, the majority of its custodians likely had not received a litigation hold notice. Without timely litigation hold notices, those custodians would have been deleting, transferring, exporting, or otherwise destroying relevant documents in the ordinary course.

DE 559, p. 7.

Procaps does not cite to the discovery record to support this conclusion. Rather it cites to Nacco Materials Handling Group, Inc. v. Lilly Co., 278 F.R.D. 395, 403 (W.D. Tenn. 2011) for the proposition that a party's failure to circulate a litigation hold to 153 employees was deficient and "'likely to result in the destruction of relevant evidence.'" DE 559, p. 7.

Procaps repeats that Mr. Bigelow "testified that no one instructed him to preserve or not destroy documents or to search for and produce relevant information about this case." DE 559, p. 7 citing DE 559, Ex. 5.

Citing DE 559, Exs. 4, 6 and DE 375-12 (DE 375-12 is a March 11, 2014 Declaration of Michael J. Klisch, counsel for Patheon), Procaps then says that Patheon's interrogatory answers and declarations failed to state when Patheon's litigation hold "procedures" were implemented and suggests that these hold procedures occurred after April/May 2013. DE 559, p. 7-8.

Procaps also says that there is "no evidence that Banner issued a litigation hold notice to anyone, at any time, or implemented any litigation hold of its ESI before it was acquired by Patheon." DE 559, p. 8.

Procaps then again cites Nacco, 278 F.R.D at 403, for the proposition that the failure to issue a timely litigation hold warrants a full forensic examination of Patheon and Banner's ESI. DE 559, p. 8.

Procaps also argues that Patheon's failure to use an outside ESI vendor and Cooley's "inadequate" search terms warrant a forensic analysis. Procaps first notes that Patheon and the Court criticized Procaps' counsel for using custodians to search for relevant documents instead of retaining an ESI consultant. DE 559, p. 8, citing DE 341, p. 2. It then says that Patheon similarly eschewed the use of an ESI consultant and also self-collected documents "with the help of individual custodians and IT personnel." DE 559, p. 8 and Ex. 4.

As for search terms, as noted earlier, Procaps explains that Cooley ran "only" 17 search terms, including derivatives; excluded "Banner" or "Collaboration Agreement"; included "only" 9 Procaps employee names; and excluded any Banner employee names. DE 559, p. 8.

Procaps contrasts the 17 terms used by Patheon with the more than 100 search terms proposed by Patheon to apply to Procaps' documents that were forensically, or otherwise, retrieved in response to the Court's February 28 Order (DE 341). It then points out that of the three million documents collected by Patheon, DE 559, Ex. 4, p. 21, only 35,000 documents, or about 1%, were produced. DE 559, p. 9.

Then, Procaps points out, on February 17, 2014, "less than one month before the discovery deadline," Patheon produced internal e-mails and other documents responsive to Procaps' original discovery requests. Patheon apparently acknowledged that these documents "did not respond to Patheon's search terms used in the response to earlier" requests for production. DE 559, p. 9, Ex. 2. (DE 559-2 is a February 28, 2014 email to Natalie Carlos, Procaps' counsel, from Mary Kathryn Kelley, Patheon's counsel.) Patheon argued that, "Common sense dictates that other relevant documents exist that 'did not respond' to Patheon's deficient search terms." DE 559, p. 9.

Procaps argued that Patheon did not preserve Banner ESI and failed to search Banner's systems, email servers, or backup tapes for relevant documents. DE 559, p. 10. It based this argument on Patheon's response to an interrogatory where, it says, Patheon failed to identify any Banner database that it searched. It notes that Patheon explained that Banner documents and ESI became integrated into Patheon's systems and concludes from this statement that Patheon "never preserved Banner's ESI." DE 559, p. 11.

It further notes that the 17 search terms that Patheon used to identify responsive documents did not include the term "Banner" or the names or email addresses of Banner custodians. DE 559, p. 11.

Finally, Procaps argues that Patheon should pay the cost of the forensic analysis it seeks, "including applicable special master fees and costs." It also seeks its attorneys' fees for bringing its motion. DE 559, p. 12.

Patheon's Response to Procaps' Motion

Patheon's response has a very different view of the facts.

With respect to the timing of issuance of litigation hold notices, Patheon says that it issued a litigation hold to key players and expanded the recipient list as new key players were identified. DE 568, p. 18. Thus there was nothing improper about expanding the list of recipients in April and May 2013, Patheon insisted.

Patheon further notes that it does not have an automated deletion program and, thus, "does not automatically delete emails or files residing on any company server or hard drive as a matter of course." It also explained that it preserved all of its email and file server backup tapes for the period October 2012 through April 2013. DE 568, p. 19, DE 568-1, Para. 5. (DE 568-1, which is an August 14, 2014 Declaration of Michael J. Klisch, counsel for Patheon.)

Patheon points out that its counsel met with Patheon's IT Department and collected more than three million documents to which it applied search terms. DE 568, p. 18.

Patheon does not challenge the proposition that it had a duty to preserve that was triggered in October 2012. Instead, it says that for Procaps to argue that something was irretrievably lost between October 2012 and December 2012 when its first hold notice was issued is "rank speculation." DE 568, p. 19.

Patheon further says that, in fact, it has preserved its email and file server backup tapes for the time period October 2012 through April 2013 so that it has adequately preserved "this ESI even if one ignores the litigation hold notices." DE 568, p. 19-20.

With respect to Banner ESI, Patheon argues that its only obligation was to preserve Banner ESI that is relevant to the dispute, citing Point Blank Solutions, Inc. v. Toyobo Am. Inc., 2011 WL 1456029 (S.D. Fla. April 5, 2011). Patheon said it agreed to produce only portions of Banner's ESI and thus there is no factual basis to conclude that "Banner ESI was subject to sweeping preservation obligations." DE 568, p. 20.

Patheon says it placed a litigation hold on "all Patheon employees who could have provided any information about Procaps to Banner" and "on literally dozens of former Banner employees." DE 568, p. 20-21. It said it preserved "all communications between Patheon and Banner personnel," asked all of the custodians interviewed "about the existence and location of responsive Banner ESI, "affirmatively sought to identify and collect responsive ESI from any Banner employee who had it," and "searched for and preserved those documents responsive to Procaps' Banner-related" requests for production. DE 568, p. 1-7, 21. And it adds that Procaps has not shown that any relevant Banner ESI was deleted. Id.

Patheon also insists it did not allow employees to self-collect ESI. In contrast with the practices criticized in Jones v. Bremen High School District 228, 2010 WL 2106640, *7 (N.D. Ill. May 25, 2010) and Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 630 (D. Colo. 2007) where counsel were not involved in the document collection process, it points out that counsel supervised and was "intimately involved in every facet of the collection process." DE 568, p. 7, 22.

Citing to its responses to Procaps Fifth Set of Interrogatories attached to Procaps' motion for a forensic analysis (DE 559-4, p. 14-15), Patheon explained that after counsel interviewed Patheon employees, counsel worked with Patheon's IT Department and collected (1) all custodians' emails located on Patheon's email server and email archives; (2) computer file folders; (3) user-created files residing on custodians' computer hard drives; (4) file server directories; (5) shared server folders; (6) other external media such as flash drives; and (7) relevant hard copy files.

With respect to Procaps' position on Mr. Bigelow, Patheon points out that he is a former employee who left Patheon in October 2011, three months before the Collaboration Agreement was signed. He had post-employment consultant work but it was limited and ended in February 2012. Patheon says it had no authority over him after this date and notes that Mr. Bigelow testified he was not involved in the final Collaboration Agreement and could not recall negotiating any of its terms, and he testified he had no relevant hard copy documents or ESI. DE 568, p. 23-24. Patheon also notes that Procaps did not seek documents or ESI from Mr. Bigelow and that it produced more than 300 emails and attachments sent to or from Mr. Bigelow. DE 568, p. 24.

Patheon's response to the Procaps argument about the use of only 17 search terms was that, in fact, it ran 33 search terms after testing and sampling more than 50 search terms. Patheon said that the number 17 comes from Procaps treating similar terms as one. As an example, Patheon explained that Procaps treated "andres w/2 nitola" and "anitola@procaps.com.co" as one term, not two terms. DE 568, p. 24, n. 19. The latter would pick up any emails and the former would pick up any reference to the full name, Patheon explained.

As to the argument about the failure to use "Banner," Patheon argued that if it had used the word "Banner," it would have captured every email anyone from Banner wrote, DE 568, p. 25 (presumably because the Banner email addresses had the word "Banner" in them). Thus, Patheon said, it was not comparably situated with Procaps, where the failure to use the word "Banner" in Procaps' employee searches was faulted by the Court. DE 341, p. 4. Patheon also explained that while it did not use "Collaboration Agreement," it did use "collab*" in several search strings. DE 568, p. 26.

As for Banner employees, using their names would have captured all of their documents rather than responsive documents, Patheon argued. DE 568, p. 25. And as to names of the nine Procaps employees that were used, Patheon adds that Procaps does not identify other names that should have been used or why. Nor does Procaps explain, Patheon emphasizes, what categories of documents Procaps thinks are missing. Id. Finally, Patheon argues that it used the word "Procaps" in its search and that term would have picked up emails for any Procaps employees. Id.

Patheon also rejects the notion that it has an obligation to search the records of every person who receives a hold notice, arguing that its only obligation is to interview employees "who were reasonably likely to have non-duplicative, responsive documents." DE 568, p. 26-27 (citing Point Blank Solutions, Inc. v. Toyobo America, Inc., 2011 WL 1456029, *11 (S.D. Fla. April 5, 2011). While I could not find support in this page citation for this proposition, this statement begs the question since we do not know how many of the 150 litigation hold notice recipients had responsive documents. So Patheon adds another defense: Procaps has not identified any person whose ESI was not searched and who would likely be in a position to have relevant information. DE 568, p. 27.

As to the fuss over the late production of 25 documents, Patheon says that five of these documents did not contain a search term and the fact that twenty documents were missed in its production is not inconsistent with its obligations. Patheon cites Reinsdorf v. Skechers U.S.A., Inc., 296 F.R.D. 604, 615 (C.D. Cal. 2013), where the court, in denying a motion for reconsideration to reopen discovery, reminded the movant that Rule 34 searches must be reasonable, not perfect. Patheon adds, "Finding a few documents in the course of responding to new discovery or preparing witnesses for deposition is not unusual nor is it any indication that the search process was inadequate." DE 568, p. 27. Patheon also notes that five of the documents were hard copy notes that inadvertently had not been produced sooner; four documents were duplicates of other documents; and the remaining eleven documents were found in a search in response to Procaps' fourth document request. Citing Memry Corp. v. Kentucky Oil Tech., N.V., 2007 WL 832937, *3-4 (N.D. Cal. March 19, 2007) where the court rejected a request for a forensic examination where, among other reasons, there were only two missing e-mails out of thousands of documents produced, Patheon says that late discovery of these documents does not justify a forensic analysis.

In addressing Procaps' complaints about Patheon's handling of Banner documents, Patheon explains that there were numerous meet-and-confer sessions between May 2013 and June 2013 on this subject and Patheon expressly put limits on what it would produce from Banner files:

Patheon also objected to production of any Banner documents or ESI from outside the Field and Territory, as those terms are defined in the Collaboration. Patheon maintained this objection throughout the meet and confer process, during which it was addressed by the parties at length. Because Banner conducted very little business in the Field and Territory, this objection significantly limited the scope of Banner documents and ESI subject to production.

Specifically with respect to Procaps' RFPs that called for production of Banner information, Patheon also objected to any broad-based document production and only agreed to produce documents "sufficient to show" the information sought by the RFP. This objection also significantly limited the scope of Banner documents and ESI subject to production.

DE 568, p. 3. It says that Procaps never challenged these limitations before the Court and any attempt to do so now is untimely. DE 568, p. 3-4, 28-29.

Patheon further argues that by searching all of the email of all Patheon employees who reasonably could have communicated with Banner employees and by searching the email of the Banner executive who had substantive communications with Patheon before the acquisition, it engaged in a reasonable search. It says that Procaps never answers the question of what information was overlooked by Patheon's approach to Banner's documents. Patheon adds that the burden and expense of searching Banner's email and file servers and backup tapes are not justified since such a process would generate "largely irrelevant data." DE 568, p. 29-30.

Patheon also takes issue with Procaps' argument that there was a flaw in the production process since Patheon produced only 35,000 documents out of three million documents that were collected. Patheon says that Procaps has not identified any categories of ESI that are missing. If it had, the response would have been a motion to compel, not a motion for a forensic analysis, it adds. DE 568, p. 30.

Patheon also says it produced 700 emails and attachments that were sent to or from a person with a Banner email address so that it was wrong of Procaps to say that Patheon produced only 14 internal Banner emails. DE 568, p. 30.

Patheon also explains that it produced documents from the files of eight Banner employees, not one, and that it collected documents from other Banner employees whose files turned out not to contain responsive information. DE 568, p. 31.

It concludes its Banner document discussion by saying that there is no Banner category of documents and no Banner employee that Procaps can identify as associated with a failure to produce. It says again that if this were the case, it would have expected Procaps to file a motion to compel but suggests that this was not done because Procaps' position is based on speculation. DE 568, p. 31.

Procaps' Reply Memorandum

Procaps' reply memorandum did not identify any documents missing from Patheon's production. Rather, it focused on the "likely" loss of ESI because of the timing of the issuance of a hold notice by Patheon. DE 585, p. 2 ("Most egregious is Patheon's failure to preserve (and likely spoliation of) Banner's relevant ESI" and "for at least two months prior to the December 2012 acquisition, Banner's employees, particularly its IT department, would have likely moved, deleted, purged, or otherwise modified its ESI...."); DE 585, p. 3 ("Every indication is that potentially relevant documents have been withheld, lost or destroyed"). Much of Procaps response is focused on the parties' exchanges over Patheon's limitations on the production of Banner ESI. DE 585, p. 4-6. Procaps also makes an argument-by-argument response to Patheon's characterization of Procaps' original arguments. DE 585, p. 12-26.

Supplemental Memoranda

I held a lengthy hearing on the Procaps' motion on October 6, 2014 and thereafter invited the parties to make supplementary filings by October 14, 2014 with any additional arguments they wished to make in light of the information learned during the hearing.

Procaps' supplemental memorandum, DE 606, focused on the disclosure during the hearing that Patheon's December 2012 litigation hold notice was sent to six custodians (and two IT employees), and excluded Patheon's:

• chief executive officer;

• vice president for corporate development;

• executive vice president for corporate development and strategy and general counsel;

• vice president for market intelligence and portfolio strategy;

• senior communications expert;

• chief human relations officer;

• vice president for business development for Europe and "Asia Pacific";

• European Account Executive;

• vice president for business development for North America;

• executive director of global science technology and pharmaceutical development services;

• associate director of "PDS Liquid Fill"; and

• business development manager.

DE 606, p. 2-3. The last four of these individuals are persons to whom, Procaps says, it "exposed its Confidential Information, and whom Procaps trained on its new technologies, softgel formulation and development." DE 606, p 3. All of these individuals received the hold notice in April or May 2013, rather than December 2012.

Procaps also complained about the handling of "Banner ESI" arguing that Patheon had no backup storage media for the period between October 24, 2012, the date that Patheon anticipated litigation, and December 29, 2012 when Patheon collected a mirror image of all of its ESI. Procaps argues that: (1) Patheon does not know how far back in time emails contained on the imaged data go for a legacy Banner employee; (2) Patheon integrated emails from Banner's email system into Patheon's email system only for emails that existed as of the date of the integration; (3) Patheon collected and searched emails of only two Banner employees and did not run search terms on Banner databases or file servers but instead ran targeted searches for Banner ESI to respond to limited discovery requests; (4) Patheon produced some documents from the files of six Banner employees but did not search their emails; and (5) Patheon did not interview or collect documents or ESI from key Banner employees including Peter Beckers, the Chairman of Banner's Board of Directors, and Banner sales personnel, "including Hugh Press and Anthony Taylor who communicated with Patheon about Procaps' Collaboration Agreement and sales opportunities." DE 606, p. 2-4.

At DE 606, p. 12-14, Procaps also set forth the "precise relief" it is seeking:

(1) forensic imaging, running of expanded search terms, and an attempt to recover forensically any user-created files deleted between October 24, 2012 and December 29, 2012 on all "Sources" (defined, Procaps says, in DE 493, Para. 6) of Patheon and Banner ESI for the six non-IT custodians (listed at DE 606, p. 12-13) who received the December 2012 litigation hold;

(2) forensic imaging and running of expanded search terms on all Sources of 29 "key" custodians (listed at DE 606, p. 13) who received the April/May 2013 litigation holds, "and an attempt to forensically recover any user-created files deleted between October 24, 2012 and the date on which each of them actually received a litigation hold"; and

(3) forensic imaging of Patheon's December 2011, and December 29, 2012, and July 2013 backups or "snapshots" of ESI "in order to run the expanded search terms on legacy Banner email and file server information" for certain Banner custodians listed at DE 606, p. 13-14.

For its additional briefing, DE 604, Patheon emphasizes again that it preserved its email and server data and Banner's email and server data. DE 604, p. 1. It argued that Procaps' position is, in essence, that Patheon should have searched the files of more Banner custodians and should have used more search terms. It says no authority exists to warrant a forensic examination of electronic information storage systems on these bases and concludes that Procaps' motion is, in fact, a motion to compel discovery, which is no longer timely. DE 604, p. 2-4. Patheon also defended the reasonableness of its document and ESI search, DE 604, p. 5-9, and the reasonableness of the scope of its initial litigation hold. DE 604, p. 9-10.

With this summary of the parties' positions, I turn now to Procaps' characterizations of the legal standard that Procaps believes is applicable here.

Discussion of Applicable Legal Principles

Cases Relied Upon by Procaps. Procaps cites quite a number of cases in support of its motion. In its initial memorandum, Procaps relied on Brocade Communications Systems, Inc. v. A10 Networks, 2012 WL 70428, *2-3 (N.D. Cal. Jan. 9, 2012); Weatherford US L.P. v. Innis, 2011 WL 2174045 (D. N.D. June 2, 2011); Nacco Materials Handling Group, Inc. v. Lilly Co., 278 F.R.D. 395, 406 (W.D. Tenn. 2011), and Balboa Threadworks, Inc. v. Stucky, 2006 WL 763668 (D. Kan. Mar. 2, 2006), for the proposition that courts have "frequently ordered forensic examinations of a defendant's ESI in misappropriation cases with less compelling facts than those here." DE 559, p. 5 (emphasis added).

In its reply memorandum, Procaps' argued that to obtain a forensic analysis it must show "'discrepancies or inconsistencies in a response to a discovery request or the responding party's unwillingness or failure to produce relevant information.'" DE 585, p. 9, quoting White v. Graceland College Center for Professional Dev. & Lifelong Learning, Inc., 2009 WL 722056, *7 (D. Kan. 2009). To justify this conclusion, the magistrate judge in White cited five cases: Koosharem Corp. v. Spec Personnel, LLC, 2008 WL 4458864, at *2 (D.S.C. Sept.29, 2008); Ferron v. Search Cactus, L.L. C., 2008 WL 1902499, at *2 (S.D.Ohio April 28, 2008); P.J. ex rel. Jensen v. Utah, 247 F.R.D. 664, 672 (D.Utah 2007); Orrell v. Motorcarparts of Am., Inc., 2007 WL 4287750, at *7 (W.D.N.C., Dec.5, 2007), and Ameriwood Indus., Inc. v. Liberman, 2006 WL 3825291 (E.D.Mo. Dec.27, 2006), as amended, 2007 WL 685623 (E.D.Mo. Feb.23, 2007). 2009 WL 722056 at *7, n.17. Procaps, in its initial motion, had already cited Balboa Threadworks and Weatherford but re-cited them in its reply memorandum, added Koosharem and Ameriwood, and then cited three more cases in support of its motion: Peskoff v. Faber, 240 F.R.D. 26, 31 (D.D.C. 2007); Seven Seas Cruises S. De R.L. v. V. Ships Leisure SAM, 2011 WL 772855, at *5 (S.D. Fla. February 19, 2011) (report and recommendation adopted, 2011 WL 772902 (S.D. Fla. February 28, 2011); and Wynmoor Community Council, Inc. v. QBE Insurance Corporation, 280 F.R.D. 681. 687 (S.D. Fla. Mar. 5, 2012).

During the October 6 hearing, I asked counsel for Procaps to identify the "best case" in support of Procaps' position. DE 606, Exhibit 1, p. 84. In its Supplemental Memorandum, Procaps argued that it provided sufficient evidence that Patheon's executives actively deleted or discarded relevant ESI after October 24, 2014, as a direct result of Patheon's failure to issue a litigation hold by that date. I discuss this testimony later, but in support of the consequence of this statement, Procaps cited Nacco Materials Handling Gp., Inc. v. Lilly Co., 278 F.R.D.395, 406 (W.D. Tenn. 2011). It then cited Nacco five more times in its supplemental memorandum, having cited it three times in its initial memorandum in support of its motion. Procaps characterized Nacco's holding as follows:

ordering forensic analysis because party's circulation of litigation hold letter to only 7 out of 160 employees, instead of issuing a

companywide hold to all 'key employees,' was deficient and 'likely to result in the destruction of relevant evidence'.

DE 606, p. 8. Since it was cited nine times by Procaps in two memoranda and was invoked in Procaps' supplemental memorandum in response to my request for Procaps' "best case," Nacco merits further analysis since it does not stand for the proposition for which Procaps cites it.

In Nacco, the defendant, Lilly Co., was a former authorized dealer for Yale, a manufacturer of lift trucks. Yale operated a secure website solely for its authorized dealers to give them access to information for, among other things, "the service of Yale lift trucks, including the parts and manuals for performing maintenance and diagnosing performance problems, proprietary software, and pricing information and strategy." 278 F.R.D. at 397 (record citation omitted). Even though Lilly had been terminated as a Yale dealer, Lilly employees continued to access Yale's secure website through access information provided by a former Lilly employee, Wolfe. Wolfe had access information because he had become employed by KMH Systems, Inc., which was an authorized Yale dealer. Id.

Yale discovered that Lilly employees had accessed the Yale website using Wolfe's credentials. Yale notified KMH. KMH investigated and confirmed that Wolfe's ID and password were communicated to Lilly. KMH then fired Wolfe and advised Yale and Lilly by letter of the results of its investigation. Id. at 397-98. After Lilly received the letter, Clark, Lilly's President, asked Lilly's IT Director, Robertson, to block all access to Yale's website from Lilly's computers. Robertson then had a firewall installed. Id. at 398.

A month later, on February 25, 2011, Yale sued Lilly. On March 9, 2011, Yale also sent Lilly a letter demanding that Lilly preserve electronically stored information. Id. Clark then forwarded this "hold letter" to Robertson and six other employees. His transmittal email to Robertson read, "Frank, is there anything you need to do to our system to insure that information is not lost." Id. The hold letter was sent to a separate Lilly location once Lilly learned that an employee at this second location had also improperly accessed Yale's website. Then, in June or July 2011, Lilly sent a note to the entire company directing employees not to delete files. Id. at 398-99.

There was no dispute about the improper access: in response to requests for admission, Lilly admitted that its employees had accessed the Yale website. Id. at 399. Hence, it was not surprising that, shortly after suit was filed and a venue transfer motion was granted, Yale's motion for expedited discovery was granted: the court ordered a computer forensics examination of Lilly's computers to determine which of them were used to access Yale's website. Id.

Evidence of access was subsequently found on seventeen Lilly computers. The court then ordered Lilly to produce a Rule 30(b)(6) witness to answer questions about Lilly's access to Yale's website. Id.

Lilly produced its President, Clark, who testified that seven employees of Lilly's 160 employees, had accessed Yale's website. Clark further testified that the only action that Lilly took to preserve evidence of access to the website was to transmit Yale's litigation hold demand letter in March 2011 to these seven employees. Id. at 400. He was otherwise unable to answer several questions that had been pre-submitted to Lilly for the deposition. Id. at 401.

Yale filed a motion to "prevent further spoliation," to obtain its fees and costs incurred in conducting the Rule 30(b)(6) deposition, and to have Lilly pay the cost of the forensic examination of Lilly's computers previously ordered by the court as well as the cost of imaging and examining Lilly's remaining computers. With respect to the Rule 30(b)(6) claim, the court found that Lilly failed to comply with the court's Rule 30(b)(6) order:

Clark was not prepared to testify as to several topics. For example, Clark was unable to state with certainty the identity of persons to whom the KMH ID and password were disseminated or the portion of the website accessed, downloaded, viewed, copied, or forwarded by each employee who accessed the website. Clark had not spoken with each employee, who admittedly had accessed the website, to determine whether they had provided the KMH access information to any other Lilly employees or to determine what portion of the website each employee accessed, downloaded, copied, or disseminated. Nor had Lilly examined the computers of each employee who admittedly accessed the site to determine if any information from Yale's secure website had been downloaded, copied, or forwarded.

Id. at 401. It then awarded court reporter and transcript costs and attorneys' fees as a sanction against Lilly under Rule 37 because Lilly failed to produce a knowledgeable Rule 30(b)(6) witness, and ordered a new Rule 30(b)(6) deposition with a knowledgeable witness. Id.

Acting under its inherent authority, the court then addressed Yale's demand for fees for the prior forensic examination and to have Lilly pay for imaging and examining Lilly's remaining computers. In this context, the court said it had to answer four questions: (1) when the duty to preserve arose, (2) what the scope of the duty to preserve consisted of, (3) whether the hold and search and collection efforts were sufficient, and, (4) if not, whether sanctions should be imposed on Lilly including payment for the costs of the forensic examinations and mirror imaging of its own computers. Id. at 402.

The court first held that Lilly had a duty to preserve electronic evidence once the complaint was filed in February 2011.

What was Lilly supposed to preserve? Given the allegations of the complaint, and Lilly's admissions concerning improper computer access, the court was very specific:

Given the allegations concerning computer access, which Lilly did not deny, Lilly's duty to preserve potentially relevant ESI was very broad. Here, Lilly had a duty to preserve any electronic evidence of access to Yale's site, such as Lilly's server logs or Internet history. In addition, Lilly had a duty to preserve any electronic data downloaded from Yale's secure dealer website onto any Lilly computers, plus hard copies of data downloaded from Yale's secure website which were in existence at the time Lilly was served with the complaint, as well as data obtained after being served with the complaint.

Id. at 403.

The court then turned to Lilly's efforts to preserve and collect this electronic data. The court first faulted Lilly for failing to take "immediate action" to preserve this electronic data, and then, upon receipt of the litigation hold letter, failing to issue a written company-wide litigation hold. The court then explained:

Instead, Clark simply circulated the litigation hold letter to seven Lilly employees out of Lilly's 160 employees without any additional instruction. The failure to issue a written litigation hold is "likely to result in the destruction of relevant evidence." [citing Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Secs., LLC, 685 F.Supp.2d 456, 465 (S.D.N.Y .2010)]. These seven employees, however, were not even all the "key players," who had admittedly accessed Yale's secure dealer website. Clark did ask Robertson if there was anything Lilly needed to do to Lilly's computer system to make sure information was not lost, but there is no evidence that

Robertson ever responded to Clark or took any action. Lilly did not take any steps to prevent emails from being deleted, to prevent data from being overwritten, or to identify and preserve backup tapes which might contain the only electronic evidence of access to Yale's secure dealer website.

Id.

This quote contains the language cited by Procaps in its original moving papers and supplemental memorandum. The reference to Pension Committee is to the part of the opinion in which Judge Scheindlin explains that after her Zubulake decisions "the failure to issue a written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant evidence." 685 F.Supp.2d at 465 (emphasis in original). This part of the opinion was later rejected by the Second Circuit in Chin et al. v. The Port Authority of New York & New Jersey, 685 F.3d 135, 162 (2nd Cir. 2012) ("Howard Chin argues that the Port Authority's failure to even issue a litigation hold regarding the promotion folders at any point between 2001 and 2007 amounted to gross rather than simple, negligence. We reject the notion that a failure to issue a 'litigation hold' constitutes gross negligence per se. Contra [Pension Committee v. Banc of Am. Secs.]. Rather, we agree that 'the better approach is to consider [the failure to adopt good preservation practices] as one factor' in the determination of whether discovery sanctions should issue." (citation omitted)).

And in Nacco itself, the court did not rest its ultimate decision on the failure to issue a litigation hold. Rather, it considered a host of failings:

Lilly took no steps, of which the court is aware, to collect evidence from the key players or to search key players' computers to see if ESI existed or had been deleted. It appears that Lilly left collection efforts to its employees to search their own computers with no

supervision or oversight from management. Lilly did not follow up with its employees to determine what efforts were taken to preserve and collect relevant evidence, and Lilly failed to document any of its search and collection efforts. Indeed, it is not even clear who was in charge of the preservation, search, and collection efforts at Lilly. Although Lilly was probably not equipped to conduct computer searches itself, Lilly failed to retain a technical expert.

In summary, after the duty to preserve was triggered, Lilly failed to timely issue an effective written litigation hold, to take appropriate steps to preserve any existing electronic records, to suspend or alter automatic delete features and routine overwriting features, and to timely and effectively collect ESI. Therefore, the court finds that Lilly breached its duty to preserve relevant evidence.

Id. at 404.

Yet, the court's decision to order a forensic analysis still did not follow from this determination. What Yale was seeking was an order requiring Lilly to pay for a forensic examination of Lilly's computers that had already been undertaken plus the cost of mirror imaging and analyzing the 17 hard drives of computers that were used to access Yale's website, and the cost of mirror imaging Lilly's remaining (approximately 100) computers. Id. at 404.

Lilly's response was that there was no proof of destruction of relevant evidence and, in any event, Yale's own server logs showed when access was made and that was the best evidence of unauthorized use of Yale's website. Id.

Before deciding how to resolve the parties' differences, however, the court had to determine Lilly's culpability. It determined that, at a minimum, Lilly was negligent in its preservation efforts:

Here, within approximately two weeks after being served with Yale's complaint, Lilly instituted a very limited written litigation hold by forwarding Yale's preservation letter to seven employees, then later

to two more. Despite sending the letter to ultimately nine employees, Lilly took no other affirmative steps to preserve electronic data. Lilly did not issue any directive to employees to alter delete functions in its email program, to preserve Internet logs, or to preclude overwriting on its computers and servers. In addition, Lilly failed to proceed to collect potentially relevant documents and ESI from key players. Based on these facts alone, the court finds at this time that Lilly's conduct was, at a minimum, negligent in discharging its discovery obligations.

Id. at 405 (footnote omitted).

Yale could not show that relevant evidence was, in fact, destroyed, however. That left the court with Lilly's admission that its employees accessed Yale's secure website, allowing the court to conclude:

[I]t seems probable—even very likely—that some relevant ESI, such as Internet history or server logs that show Lilly's employees accessed Yale's secure dealer website, existed when Lilly's duty to preserve attached but may have been lost by Lilly's failure to copy data on its server or preserve back-up tapes. The potentially missing server logs or back-up tapes may have been the only source for that information.

Id. at 405.

Saying that a court should impose the least harsh sanction that can provide an adequate remedy, the court observed that severe sanctions were not warranted "because Yale has not presented sufficient evidence of relevance and prejudice...." Id. at 405. But because of Lilly's negligence, and because the only way to determine if relevant evidence was lost or destroyed was a forensic examination, the court ordered Lilly to pay for the forensic examination that had already been conducted by Yale. Id. at 406.

The court further ordered, at Lilly's expense, a forensic examination of the hard drives of computers of nine employees "who admittedly accessed" Yale's secure dealer website. If that analysis revealed "relevant information or destruction of relevant information," then the court said it would allow Yale to petition the court to conduct forensic analyses of the remaining mirror imaged hard drives. Id.

The court rejected Yale's request to mirror image all of the remaining Lilly computers. Instead, because Lilly admitted that the computers in the parts department were used to access Yale's website, the court ordered the mirror imaging of the hard drives of these computers. Id. at 406-07. Yale was also able to show that Yale's diagnostic software was downloaded and such software would only be useful for Lilly's service department. So the hard drives of the service department computers were also ordered to be imaged. "As to the other departments, Yale has not established a sufficient connection to its claims, and the likelihood that relevant information would be revealed by mirror imaging is small. Yale's request is denied as to these computers." Id. at 407.

The court then repeated why it was requiring Lilly to bear the costs of this work: "Lilly is required to bear these costs because its preservation and collection efforts were woefully inadequate. Parties must take their duty to preserve ESI seriously. In order to avoid sanctions, such as these, parties must cooperate and voluntarily preserve, search for, and collect ESI." Id.

The court in Nacco did not, as Procaps characterizes the holding, order a forensic analysis because Lilly circulated a litigation hold letter to only 7 out of 160 employees. It ordered a forensic analysis initially in response to a motion for expedited discovery solely for the purpose of determining whether Lilly's computers were used to access a Yale computer server—a fact Lilly readily admitted—which resulted in a determination that 17 out of 35 computers were used to access Yale's server. Then, as a sanction, it ordered Lilly to pay for the costs of this work. It further ordered a forensic analysis of the computers of nine employees who admitted accessing Yale's server. Finally it ordered mirror images of computers in two departments where access to Yale's server admittedly occurred or had to have occurred because of diagnostic software that was found on Lilly's servers. And these requirements were imposed on Lilly because:

• Lilly admitted that its employees accessed Yale's server.

• Knowing that improper access had occurred, Lilly did not issue a timely litigation hold to all key players once the complaint was served.

• Lilly took no steps to collect evidence from the key players or to search key players' computers to see if ESI existed or had been deleted.

• Lilly left collection efforts to its employees to search their own computers with no supervision or oversight from management.

• Lilly did not follow up with its employees to determine what efforts were taken to preserve and collect relevant evidence.

• Lilly failed to document any of its search and collection efforts.

• It was not clear who was in charge of the preservation, search, and collection efforts.

Nacco echoes the Court's February 28 Order and, as this discussion demonstrates, cannot be read to hold that a forensic examination was ordered because 153 out of 160 persons did not receive a hold notice.

The other decisions cited by Procaps present fact patterns very different from the one that exists here and undermine Procaps' argument that forensic examinations have been ordered "in misappropriation cases with less compelling facts than those here." DE 559, p. 5.

Brocade Communications Systems, Inc. v. A10 Networks, Inc., 2012 WL 70428 (N.D. Calif. Jan. 9, 2012) involved a number of claims, including trade secret misappropriation. At the Rule 30(b)(6) deposition of the defendant, A10's witness admitted that 196 of Brocade's source code files were on the hard drive of a laptop computer of an employee, Ron Szeto, when he left plaintiff's employment and joined defendant's employment. Mr. Szeto had represented the opposite: he said that when he left defendant's employment, he had not retained any information that related to plaintiff or its business. Id. at *2. A10 had also claimed that Mr. Szeto did not know that the source code files were on his hard drive and that he never looked at, modified, or deleted them. A10 also admitted, however that Mr. Szeto's computer drive had been imaged, and that the source code files were transferred from the imaged drive to Mr. Szeto's "current computer hard drive at A10." Id. Based on these facts, the court ordered a forensic examination in connection with the trade secret misappropriation claim:

Thus, Brocade has shown that forensic imaging and analysis of the deleted files is relevant to at least Brocade's trade secret misappropriation and copyright claims, and to testing the veracity of A10's claims as to whether any of Brocade's source code files on Mr. Szeto's hard drives were accessed while A10 was developing the source code for the AX Series devices, or whether any of Brocade's source code files on Mr. Szeto's hard drives were ever deleted. It is unlikely that Brocade would be able to obtain this relevant information from other sources given A10's 30(b)(6) witness's apparent inability and/or unwillingness to provide this information.

Thus, Brocade's need for the discovery outweighs A10's burden and cost of locating, retrieving, and producing the information.

Id.

Balboa Threadworks, Inc. v. Stucky, 2006 WL 763668 (D. Kan. March 24, 2006) did not involve a motion for forensic examination. The issue in this case was whether defendants—a husband and wife team—wrongfully copied digital embroidery designs and then sold at least one of the designs to a third party in violation of the copyright laws and the Lanham Act. Id. at *1. The parties agreed that defendants' computers should be mirror imaged at plaintiff's expense; they could not agree on how many of them should be mirror imaged. Id. at *2, n. 1, *4. The court allowed all of defendants' computers and related storage media to be imaged. But the court prohibited any searches of this media until the parties agreed on a search protocol. The court also suggested sequentially searching the imaged drives to determine whether computers that defendants said were not used in the embroidery business should still be searched. Id. at *4. This case has no application to the facts here.

Weatherford US L.P. v. Innis, 2011 WL 2174045 (D. N.D. June 2, 2011) involved a terminated employee, Innis, who returned to his place of employment on the evening of his termination on August 12, 2009, shortly before midnight, logged onto Weatherford's intranet site using his work computer, and downloaded a number of files on a thumb drive. Three weeks later, Innis formed a competing oil services company, Noble Casing, and shortly after he did that, Weatherford sued him claiming that the files he downloaded were unlawfully misappropriated, among other claims. Id at *1. In a deposition, Innis admitted that he downloaded the files but said he never opened the files. Id. Innis also produced the thumb drive. A forensic examination of the thumb drive by Weatherford's expert revealed that two files were accessed on August 19 (a week after the termination), that an Apple Mac computer was used to access files on the drive on August 24, and files could have been copied off the drive on September 25. Based on this report, Weatherford sought access to all computers and portable storage media used by Innis's employees. Innis objected leading ultimately to a motion to compel the production. Id. at *1-2.

The court granted the motion based on the specificity of Weatherford's claim, Innis's admissions, and the inconsistency between Innis's testimony and the expert's findings:

Here, Weatherford's claims are neither vague nor unsubstantiated. Weatherford claims that Innis transferred the Weatherford files that he had downloaded to a thumb drive to other computers and used the confidential information to get Noble Casings off the ground. Innis's acknowledgment that he downloaded Weatherford files to a thumb drive without permission is itself enough to provide a nexus between Weatherford's claims and its need for images of the defendants' computers. In addition, Weatherford has proffered the opinions of a forensic expert that the materials on the thumb drive have been accessed despite Innis's claims to the contrary.

Id. at *4.

White v. Graceland College Center for Professional Dev. & Lifelong Learning, Inc., 2009 WL 722056, *7 (D. Kan. 2009) involved a Family Medical Leave Act claim by a former employee against her employer. The parties had a dispute over the creation dates of certain emails and attachments that had been exchanged between plaintiff's former supervisors. Defendants had produced the documents in hard copy. Plaintiff sought the native version of the ESI to attempt to show that a decision to fire her was made earlier than reflected in the hard copy documents produced by defendants. The magistrate judge ordered the production and defendants complied with the order. Id. at *1. Plaintiff then retained a computer expert who found discrepancies between the creation and sent dates of the emails and attachments in question but could not draw any other conclusions without more information about a particular email attachment entitled "CC Basic Form 06092004.doc." Id. at *2. Defendants were unable to explain the discrepancies. Id. at *8. Plaintiff then sought an order compelling defendants, in part, to produce mirror images of certain hard drives for a forensic examination, and to allow a computer expert to verify the accuracy of the system clocks of the computers used to create the email attachment. The court rejected the latter request and also refused to require production of a mirror image of the hard drives in question for a forensic analysis. Instead, the court ordered the parties to have their computer experts confer and inspect appropriate hard drives or computers "regarding the location of information pertaining to the creation or modification of the email attachment 'CC Basic Form 06092004.doc.'" Id. at *8.

In Koosharem Corp. v. Spec Personnel, LLC, 2008 WL 4458864 (D.S.C. Sept. 29, 2008), the district court had granted plaintiffs' motion to compel production of documents including emails sent or received on a home computer. Defendants had produced a number of emails but not a single one was an accurate copy of the original email because the dates and times on each email had been modified. In addition, emails were separated from their attachments, and the emails attributed to one individual did not have this individual's name as a recipient of the email. Making matters worse, a litigation hold notice was not issued by defendants' new employer and defendants themselves worked off of home computers for a month after leaving plaintiffs' employment and, it was alleged, they emailed confidential information from their former employer to their home computers shortly before they left to work for the new employer. Id. at *1. Plaintiffs sought a forensic analysis of the home computers and, under these circumstances, the court agreed: "The only issue before this court is whether forensic analysis should be conducted on the subject computers because of the defendants' failure to produce documents and because of relevant electronic information stored on the computers. This court finds that such forensic analysis is appropriate in this case." Id. at *2. The court further split the costs of this work equally between the parties. Id. at *4.

In Ferron v. Search Cactus, L.L.C., 2008 WL 1902499 (S.D. Ohio Apr. 28, 2008), the key question was whether certain emails received by plaintiff, a lawyer, were solicited or unsolicited. If the latter, the lawyer would have a claim under an Ohio consumer sales practices law. Defendants argued that plaintiff's computer systems contained "the only available documentary evidence that can show the pathways taken by Plaintiff to solicit the emails or the absence of those pathways." They sought to forensically inspect plaintiff's computer systems:

to ascertain whether Plaintiff's efforts with respect to receiving the emails and visiting the websites (that are at the heart of this action) constituted a consumer transaction under the OCSPA, or whether Plaintiff's opening of the emails and any attempts to obtain free merchandise were part of a business designed to profit from email litigation.

Id. at *1. Plaintiff had not produced this information and apparently had made no efforts to preserve this information. Id. The parties apparently had also agreed that a forensic computer expert had to have access to plaintiff's computers to obtain the information. Id. The court ratified that agreement because plaintiff's computers "contain the only available documentary evidence of his visits to the websites in issue and such evidence has not otherwise been produced." Id. at *2.

P.J. ex rel. Jensen v. Utah, 247 F.R.D. 664 (D.Utah 2007) involved a claim by plaintiffs that defendant doctors had improperly referred plaintiffs to the Division of Children and Family Services and then made omissions and misrepresentations to a juvenile court, all in connection with a civil rights claim brought by the plaintiffs who had been arrested and charged with refusing to allow their child to undergo chemotherapy. Id. at 669. Defendants sought production of plaintiffs' home computer and "crashed hard drive," a request to which plaintiffs agreed. But the parties could not agree on a search protocol. Defendants then filed a motion to compel production of the computers. Defendants sought to discover research plaintiffs had conducted on their child's medical condition and also to show that plaintiffs had altered, deleted, or failed to timely produce certain emails. The magistrate judge rejected the latter demand because there was no support provided for the contention, but held that defendants were entitled to discover the Internet research conducted by plaintiffs on their child's medical condition since plaintiffs had produced only the printed copies of the research that they had conducted. Id. at 672.

Orrell v. Motorcarparts of Am., Inc., 2007 WL 4287750, at *7 (W.D.N.C., Dec. 5, 2007) resulted in a forensic examination—paid for by the requesting party—of a home computer where the producing party and her husband had given conflicting testimony about the information contained on the computer before it allegedly crashed and where the producing party had her laptop "wiped" using "Evidence Eliminator" software before she returned the laptop to the defendant, her former employer who had terminated her services.

Ameriwood Indus., Inc. v. Liberman, 2006 WL 3825291 (E.D. Mo., Dec. 27, 2006) was another former employer versus former employee case involving, among other claims, misappropriation of trade secrets. Plaintiff filed a motion to compel seeking, among other things, a mirror image of computers used by defendants, including home computers. Id. at *1-2. Defendants protested saying they had already disclosed relevant, responsive documents after searching through their electronically stored information. Id. at *3. However, plaintiff filed with the court an email sent from the personal email account of one of the defendants to an employee of Samsung, one of plaintiff's customers. The email was not produced by Lieberman. Id. The failure to produce that email was enough evidence to persuade the court that something was amiss:

In light of the Samsung email, the Court finds that other deleted or active versions of emails may yet exist on defendants' computers. Additionally, other data may provide answers to plaintiff's other pertinent inquires in the instant action, such as: what happened to the electronic files diverted from plaintiff to defendants' personal email accounts; where were the files sent; did defendants store, access or share the files on any portable media, when were the files last accessed; were the files altered; was any email downloaded or copied onto a machine; and did defendants make any effort to delete electronic files and/or "scrub" the computers at issue.

Id.

Despite the Samsung email, the court still required plaintiff to demonstrate good cause for plaintiff's forensic demand because the cost of imaging hard drives and recovering deleted information was so high. Id. The court found good cause in part because the home computers were alleged to have been used to secrete and distribute plaintiff's confidential information. Id. at *5. However, the court ordered plaintiff to pay the costs of imaging and forensically examining defendants' computers and imposed other procedures to protect against disclosure of confidential or private information contained on the hard drives of the computers. Id. at *5-6. Before the forensic examination, defendants erased information from the hard drives and the court granted a default judgment as a sanction after finding defendants' explanations for the erasure "rang[ed] from the improbable to the impossible." 2007 U.S. Dist. LEXIS 74886, *18 (E.D. Mo. July 3, 2007).

In Peskoff v. Faber, 240 F.R.D. 26, 31 (D.D.C. 2007), Peskoff had testified about his persistent use of email to communicate with Faber. Faber's search for emails however did not result in the production of any emails for the period mid-2001 through mid-2003. There was no explanation for the gap. The magistrate judge ordered counsel to collaborate with the magistrate to obtain requests for proposals for bids from qualified computer forensic technicians to examine computers to determine whether there existed emails between Peskoff and Faber during this gap period. A bid for $33,000 was later accepted with the magistrate judge ordering the producing party to pay this amount because the information sought was relevant and not duplicative, the producing party had failed to preserve relevant backup tapes and suspend auto-delete tools, had failed to conduct searches previously suggested by the magistrate, and was unable to explain these failings. 2008 WL 2649506 (D.D.C. July 7, 2008).

Seven Seas Cruises S. De R.L. v. V. Ships Leisure SAM, 2011 WL 772855 (S.D. Fla. Feb. 19, 2011) involved contract and tort claims by cruise ship owners against cruise ship managers. In the course of proceedings, the magistrate judge granted a motion to compel production of electronically stored information. Specifically, the court ordered defendants to provide to plaintiffs an affidavit setting forth the following:

the steps taken by Defendants to respond to Plaintiffs' ESI requests including: identifying which of Defendants' employees' laptops and

computers had been searched; explaining why certain documents were apparently missing from Defendants' ESI production; and, specifying what search terms Defendants used in conducting ESI searches. The Order stated that if, based upon the affidavit the Plaintiffs believed that additional discovery was needed, the Plaintiffs could file a renewed motion to compel.

Id. at *1 (record citation omitted).

After entry of this order, plaintiffs returned to court because of gaps in defendants' production.

Specifically, Plaintiffs contend that Defendants only searched and produced the ESI for nine total employees and failed to search various other employees' computers who likely have information relevant to this matter. In addition, Plaintiffs assert that the Defendants failed to produce complete information for those employees whose ESI was previously searched and produced prior to the instant Motion being filed. In support of their claims, Plaintiffs submitted a detailed list of nineteen different employees/custodians and/or email addresses that were not searched by the Defendants, and which Plaintiffs claim likely have information relevant to this matter. In addition, Plaintiffs have identified specific time frames of missing ESI for those persons whose ESI had already been searched and turned over to Plaintiffs. By way of example, Plaintiffs point to the Defendants' production of Mr. Richard Evenhand's ESI, and assert that ESI is missing from Mr. Evenhand's inbox prior to June 2008, and after May 2009; and from his Outbox prior to May 2008 and after May 2009. Plaintiffs make similar claims for three other custodians, Antonio Favuzzi, Lorenzo Malvarosa and Andrea Zito.

Id. at *2 (record citations and footnote omitted).

In its analysis of these contentions, the court lamented the failure of counsel to discuss issues in dispute early in the litigation under Rule 26(f). The court then explained that defendants' searches for electronically stored information were "wholly inadequate," but it was also "less certain" that defendants failed to produce any information that was not already in the possession of plaintiffs or that was necessary for plaintiffs to properly prosecute their claims.

When the undersigned questioned counsel for the Plaintiffs at the hearing whether the unproduced ESI was likely to produce materials not already in Plaintiffs' custody, Counsel responded that because there was uncertainty as to what the new ESI searches might yield, that he was unable to make that determination. However, Counsel again stressed that the continual failure of the Defendants to conduct proper ESI searches to this point undermined the Plaintiffs' faith in their ability to conduct proper searches now. Thus, the potential prejudice to Plaintiffs in this regard is purely speculative at this point.

Id. at *4.

Nonetheless, the court concluded that once the January 19 order was entered, defendants should have obtained e-discovery consulting assistance since they were otherwise not familiar with searching for and producing electronically stored information and, therefore, defendants' failure to complete a "thorough and accurate" search for such information hindered plaintiffs' ability to "fully and timely respond" to defendants' motion for summary judgment. Id.

As a result the court ordered defendants to retain a third-party vendor to conduct searches of electronically stored information of certain custodians and to "re-search" certain electronic information that had been recently produced by defendants. The court denied a request to use this vendor to re-search all of the electronically stored information produced prior to plaintiff's filing of its motion to compel because of a prior finding by the court that prior search efforts were "reasonable under the circumstances of this case" and the "cost of utilizing more intensive search methods outweighs the potential benefit." Id. at *5, n. 5.

Wynmoor Community Council, Inc. v. QBE Insurance Corporation, 280 F.R.D. 681 (S.D. Fla. Mar. 5, 2012) is another case cited by Procaps that bears no resemblance to this matter. Plaintiffs filed suit on October 22, 2010 to recover insurance monies for losses incurred in 2005 by damage from Hurricane Wilma. Defendant's second request for production sought data from electronic media. Plaintiffs failed to respond to this request. A motion to compel was filed. On October 28, 2011, plaintiffs said they were "diligently working on the electronic material" and sought more time to respond. Defendant later learned from plaintiffs' chief information officer (Mr. Holthausen) that as of February 1, 2012, at least, he had made no effort to retrieve electronically stored information from plaintiffs' computers. Id. at 686. Plaintiffs finally responded to the motion to compel and the request for production at the same time, on January 11, 2012, considerably after the 30 days allowed by Rule 34 to make a response. Plaintiffs' response to the second request for production also consisted of blanket objections to every request including an objection that the second request seeking electronic copies mimicked a first request for production to which plaintiffs said they had already responded with hard copy documents, albeit also after the 30 days required by Rule 34. Id.

Because the response to the second request was untimely served, the court held that plaintiffs had waived their objections to the second request. Id. Even if the objections had been timely filed, the court explained that plaintiffs did not provide evidence in support of their objections.

The Plaintiffs are seeking damages arising to their properties from the Defendant's alleged breach of an insurance contract. They are forty-six condominium associations whose combined losses could be substantial. Mr. Holthausen testified that not all of Plaintiffs' ESI would necessarily be found in hard copy format. Additionally,

Plaintiffs have no policy in place for generating hard copies of e-mails between employees, or any e-mail policy whatsoever. Further, in light of the evidence of an unusually large spate of document shredding, some of which may have been unauthorized by Plaintiffs' CFO, there is at least the possibility that hard copy evidence germane to this litigation may have been destroyed that would not otherwise be available to the Defendant absent access to ESI stored in Plaintiffs' computer systems. For example, ESI relating to work orders pre-dating Hurricane Wilma could prove relevant to the condition of Plaintiffs' properties prior to the storm. Despite Keith Arnold's testimony that he would never authorize the destruction of maintenance work orders, Defendant alleges that very few pre-Hurricane Wilma work orders have been produced in hard copy. Therefore, responsive ESI stored on Plaintiffs' computers would not necessarily be duplicative of the hard copy discovery the Plaintiffs have already provided in this case. Finally, Plaintiffs have evidently made no efforts to identify ESI, deleted or otherwise, responsive to Defendant's request for production although, according to the Plaintiffs' CIO, they presently lack the capability to undertake a search of their computer system for responsive ESI, this does not relieve them of their discovery obligation.

Id.

Given this record, defendant sought to create forensic images of plaintiffs' electronic storage media. Defendant argued that plaintiffs had not produced any electronically stored information and that a forensic examination would produce a mirror image of each computer's hard drive. The court explained that in evaluating a request for a forensic analysis, the court "should consider 'whether the responding party has withheld requested information, whether the responding party is unable or unwilling to search for the requested information, and the extent to which the responding party has complied with discovery requests.'" Id. at 687 quoting John B. v. Goetz, 531 F.3d 448, 460 (6^th Cir. 2008).

th

As for the work orders that were supposedly kept in electronic format, plaintiffs said that the drive containing their pre-Wilma maintenance work order had crashed during the hurricane, "and therefore, there are no work orders in electronic format predating the storm in its computer system." Id. at 687. Plaintiffs' chief information officer said the data were unrecoverable, but also conceded that the recovery of this data was not a high priority and that he was not an expert in computer forensics. Id. Plaintiffs also claimed that only a few of its employees had work-related email accounts and there was no policy on saving emails on plaintiffs' servers. Under these circumstances, the court held that the forensic examination was warranted:

It would appear that Plaintiffs are either unwilling or unable to conduct a search of their computer systems for documents responsive to Defendant's discovery requests. In light of the foregoing, the Court believes that a forensic examination of Plaintiffs' computers is warranted. Although Mr. Holthausen is of the opinion that the work orders in electronic format pre-dating Hurricane Wilma are unrecoverable, he is not a forensic expert by his own admission. Furthermore, there may be other documents contained on Plaintiffs' computer system that are responsive to Defendant's second request for production. There is no way to know for sure because according to Mr. Holthausen, he was unaware of this lawsuit until a few months ago and he has not made any effort to retrieve ESI in response to Defendant's discovery requests. The Plaintiffs' properties are extensive and the potential damages in this case considerable. Defendant is entitled to employ the discovery process to assist in preparing its defense.

Id. at 687 (citation omitted).

Cases Relied Upon by Patheon. Before turning to the application of the principles set forth in the cases relied upon by Procaps, I discuss the case law advanced by Patheon in support of its view that the facts here will not support the ordering of a forensic examination of its ESI storage systems.

In an Eleventh Circuit decision, In re Ford Motor Company, 345 F.3d 1315 (11 Cir. 2003), the district court, without a hearing and before Ford had a chance to respond, granted plaintiff's (Russell's) motion to compel direct access to two Ford databases to conduct searches for claims related to the unlatching of a seatbelt buckle. Id. at 1316. Accepting Ford's writ of mandamus, the Court of Appeals reversed because of a failure by Russell to show "some non-compliance" with the discovery rules:

While some kind of direct access might be permissible in certain cases, this case has not been shown to be one of those cases. Russell is unentitled to this kind of discovery without—at the outset—a factual finding of some non-compliance with discovery rules by Ford. By granting the sweeping order in this case, especially without such a finding, the district court clearly abused its discretion.

Id. at 1317.

Powers v. Thomas M. Cooley Law School, 2006 WL 2711512 (W.D. Mich. September 21, 2006) involved, in part, a plaintiff's claim that the law school had not complied with a court order to perform a thorough computer search for "work orders" that were in issue. Id. at *2. After this claim was shown to be incorrect at a hearing, plaintiff's counsel sua sponte sought to conduct a forensic search of the law school's computer systems. Plaintiff wanted to attempt to extract certain work orders from a prior software system which the law school did not attempt to search because it would not be reasonably practicable to do so for the short period of time that the systems in question had overlapped. Id. After the court learned that the law school had produced quite a number of hard copy work orders from this prior system during this overlap period, the court rejected the request. Plaintiff then moved for reconsideration. Relying on In re Ford, the court denied the motion:

The discovery process is designed to be extrajudicial, and relies upon the responding party to search his records to produce the requested data. In the absence of a strong showing that the responding party has somehow defaulted in this obligation, the court should not resort to extreme, expensive, or extraordinary means to guarantee compliance. Forensic inspection of computer hard drives is an expensive process, and adds to the burden of litigation for both

parties, as an examination of a hard drive by an expert automatically triggers the retention of an expert by the responding party for the same purpose. Furthermore, examination of a hard drive inevitably results in the production of massive amounts of irrelevant, and perhaps privileged, information. ... This court is therefore loathe to sanction intrusive examination of an opponent's computer as a matter of course, or on the mere suspicion that the opponent may be withholding discoverable information. Such conduct is always a possibility in any case, but the courts have not allowed the requesting party to intrude upon the premises of the responding party just to address the bare possibility of discovery misconduct.

Id. at *5 (citations omitted).

Patheon also relies on two other cases that have invoked In re Ford to reject requests for forensic examinations. In Mirbeau of Geneva Lake LLC v. City of Lake Geneva, 2009 WL 3347101, at *1 (E.D. Wis. October 15, 2009), the court, after earlier explaining that "[o]nly if the moving party can actually prove that the responding party has concealed information or lacks the expertise necessary to search and retrieve all relevant data, including metadata or residual data, is it proper for the moving party to initiate the searches of the other party's ESI," Id. at *1, denied a motion to compel defendant to produce computers for a forensic analysis because the plaintiff failed to demonstrate why "a more rigorous discovery process, with extensive forensics analysis of the computers by the plaintiffs, is needed in this case." Id. at 2.

In Daimler Truck N. Am. LLC v. Younessi, 2008 WL 2519845, at *3 (W.D. Wash. June 20, 2008), defendant left plaintiff's employment and went to work for a competitor, Cascadia, a non-party. Daimler wanted to search Cascadia's computers for communications between defendant and Cascadia's owner, and between Cascadia's owner and other of Daimler's employees. The court agreed with Daimler that the information sought was highly relevant but because Cascadia was cooperating with Daimler, was a nonparty, and was Daimler's competitor, it refused to allow Daimler to conduct the analysis:

Here, Daimler also requests to copy Cascadia's hard drives, a process which might reveal not just privileged, but also trade secret information. Having Cascadia search its own computers is an appropriate compromise here because of the unique status of Daimler as a direct competitor and of Cascadia as a nonparty to the underlying suit. The elaborate copying which took place in [Playboy Enterprises, Inc. v. Welles, 60 F.Supp.2d 1050 (S.D. Cal. 1999)] is not necessary because there are no allegations of documents being destroyed and Cascadia has shown that it is responsive and willing to cooperate with Daimler's reasonable requests.

Patheon also invokes Memry Corp. v. Kentucky Oil Tech., N.V., 2007 WL 832937, (N.D. Cal. March 19, 2007). This decision involved a claim for a forensic inspection sought by a requesting party, STC, who argued that a producing party, KOT, failed to produce "numerous responsive documents." Id. at *3. The magistrate judge explained that "a mere desire to check" on another party's production is not a "good enough reason" to allow the inspection. In addition, STC was unable to demonstrate sufficient flaws in KOT's production to warrant a forensic analysis: "STC can only point to two missing emails out of thousands of documents produced in this discovery-intensive case. While KOT's document production may not have been absolutely perfect, the flaws do not rise to the level of necessitating production of hard drives." Id. at *4.

Memry was cited in Downs v. Va. Health Sys., 2014 U.S. Dist. LEXIS (W.D. Va. June 2, 2014). In this case, a request to image and examine home computers of a plaintiff was rejected where there was no proof of fault by the plaintiff in complying with her discovery obligations; significant confidentiality and privacy issues were raised given that the end of the relevant time period was three years earlier; no duty to preserve was applicable to the home computers; the benefit of the request was outweighed by the burden and expense associated with it; and on the "current record," the defendants had "failed to justify a broad, and frankly drastic, forensic computer examination of the plaintiff's two family computers." Id. at *9.

In reaching these conclusions, the district court summarized the case law above:

[F]ederal courts "have been cautious in requiring the mirror imaging of computers where the request is extremely broad in nature and the connection between the computers and the claims in the lawsuit are unduly vague or unsubstantiated in nature." John B. v Goetz, 531 F.3d 448, 459-60 (6th Cir. 2008) (quoting Balboa Threadworks, Inc. v. Stucky, 2006 U.S. Dist. LEXIS 29265, *9 (D. Kan. Mar. 24, 2006) (citations omitted). Likewise, it is not surprising that "mere skepticism that an opposing party has not produced all relevant information is not sufficient to warrant drastic electronic discovery measures." John B., 531 F.3d at 460 (citing McCurdy Group, LLC v. Am. Biomedical Group, Inc., 9 Fed. Appx. 822, 831 (10th Cir. 2001). '"[A] mere desire to check that the opposition has been forthright in its discovery responses is not a good enough reason' for a court order compelling an exhaustive computer forensic examination." Nola Spice Designs, LLC v. Haydel Enters., 2013 U.S. Dist. LEXIS 108872, *7 (E.D. La. Aug. 2, 2013) (quoting Memry Corp. v. Kentucky Oil Technology, N.V., 2007 U.S. Dist. LEXIS 22488 (N.D. Cal. Mar, 19, 2007). On the other hand, restrained and orderly computer forensic examinations have been permitted, where the moving party has demonstrated that the opposing party has defaulted in its discovery obligations by unwillingness or failure to produce relevant information by more conventional means. White v. Graceland College Center etc., 2009 U.S. Dist. LEXIS 22068, *22, 24-25 n. 17 (D. Kan. Mar. 18, 2009).

Id. at *8 (emphasis in original).

Discussion

I have exhaustively discussed the case law invoked by the parties because from the outset of my review of Procaps' motion, I wanted to be certain I was not misapprehending a legal principle being advanced by Procaps to justify the discovery on discovery it was seeking.

As I read the case law presented by Procaps, it requires more of a showing than was made here to warrant "forensic imaging, running of expanded search terms, and an attempt to forensically recover any user-created deleted files" in the period October 24, 2012-December 29, 2012 or October 24, 2012-April/May 2013, and the "forensic imaging" of certain backup tapes or already imaged "snapshots" and running of "expanded search terms" on "legacy Banner email and file server information," as sought by Procaps. DE 606, p. 12-14.

Patheon's Search Process. The evidence supports Patheon's view that it conducted a reasonable search for ESI. Its outside counsel interviewed employees to identify sources of relevant ESI. It does not tell me when counsel interviewed which employees, but it does say that it interviewed "more than 30 custodians," DE 375-12, p. 3, and given the nature of this case, that is not an insubstantial number. Counsel also used a checklist for the interviews, DE 375-12, p. 3, which is always a good practice assuming the checklist is a robust one. Here, I am told that the interviews "included a discussion of the case, potentially relevant documents, and ways to locate potentially relevant documents (such as relevant keywords and folder locations)." DE 375-12, p. 3-4. That sounds robust, or at least, this description has not been undermined by any deposition testimony of interviewees since no such testimony was provided to me.

The employees interviewed then identified responsive electronic documents and those documents, totaling three million in number, were collected by Patheon's IT employees. Id. at 4. Patheon collected "all emails maintained by each of the Custodians, including those residing on live email server and emails stored in PST archives." Id. I take the latter to mean individual archives on an employee's computer hard drive and not a network email archive of some kind, but the point is that emails that were maintained by employees at the time of their interview were collected without culling.

Patheon also (1) collected potentially relevant folders identified by interviewees on their computer hard drives; (2) collected all of an interviewee's "user-created" files from the interviewee's computer where the interviewee believed that relevant files were maintained by the interviewee, but the individual could not identify a specific location for the files; (3) collected all files on a "home directory" if the interviewees stored files in this location; (4) collected "shared server folders" identified during interviews and ESI stored "on other media such as flash drives"; and (5) collected "potentially relevant hard copy files" which were converted to an electronic format. Id.

Thereafter, there was a quality control step and a de-duplication step. Metadata was preserved to allow reviewers to see the source of each document. A date restriction was added. And then search terms were applied to the document set after the search terms were tested and sample documents were reviewed "to ensure that the search terms were comprehensive." Id. at 5.

Absence of evidence of flaws warranting a forensic examination. Could there be flaws in this process? There could be. Patheon might have missed an important custodian. A custodian might have omitted a relevant folder. Emails that had been deleted by custodians would not have been picked up. (My understanding is that they were not automatically captured otherwise by Patheon except on backup tapes which, I understand, were not restored for review).

But discovery on discovery is not permitted because of possibilities. In denying a motion for a forensic examination in the context of a Rule 26(b)(2)(B) claim, the court in Bradfield v. Mid-Continent Cas. Co., 2014 U.S. Dist. LEXIS 128677 (M.D. Fla. Sept. 15, 2014) explained that "broad and uninformative responses by Defense counsel that Defendant is entitled to all information reasonably calculated to lead to the discovery of admissible evidence, and that he cannot prove a negative, do nothing to aid the Court" in determining if good cause exists to order production of reasonably inaccessible data. Id. at *9. The court added that while a party might not know what reasonably inaccessible data sources might contain to support a showing of good cause, in this case there was ample information available to the requesting party: "Here, however, there is an abundance of evidence from Plaintiffs' counsel himself, Mr. Milgrim, as well as the experts, which should undoubtedly give Defense counsel enough information to articulate some basis for why the intrusive search he proposes is necessary due to its importance to the issues at stake in this action. Yet, he has failed to do so." Id. at *10. See also Klayman v. City Pages, 2014 U.S. Dist. LEXIS 150253, *14 (M.D. Fla. October 22, 2014) (where defendants had represented that their production had been complete and had otherwise properly objected to discovery requests, "Plaintiff's mere speculation that more documents must exist is not a sufficient basis for the Court to order an invasive search of Defendants computers and telephone records.")

Procaps did not provide me with any testimony or other information to suggest that Patheon omitted a key custodian from the interview process. To the contrary it agreed that there was no issue with the collection of emails from custodians beyond the 30 to 35 that were interviewed. DE 606-1, p. 76. ("Mr. Rosenthal, is there an issue over the collection of e-mails from custodians beyond the 30 to 35? ... MR. ROSENTHAL: No.")

Procaps also has not identified any testimony from a custodian to suggest that relevant files were intentionally or accidentally overlooked by a custodian during the interview process. Procaps did not identify any categories of missing documents. For example, unlike in the fact patterns in the cases cited by Procaps, Procaps does not attempt to tie any of its complaints of alleged document retention/production misfeasance to any element of proof of its case or its rebuttal of any defenses raised by Patheon. Cf., e.g., Nacco, supra (the forensic examination was limited to determining the scope of illegal access to Yale's proprietary databases admitted to by Lilly and the basis for the lawsuit); Brocade, supra (misappropriation of trade secrets was in issue and there was an admission that 196 of Brocade's source code files were on the hard drive of a computer of a former employee of plaintiff and now an employee of defendant); Balboa, supra (where copyright and Lanham Act claims were being made, imaging defendants' computers for evidence of copyrighted digital embroidery designs); Weatherford, supra (another misappropriation case where a former employee downloaded employer information onto a thumb drive without permission and used the information to start a competing business).

There is also, as Procaps readily acknowledges, DE 606-1, p. 62-63, no evidence of spoliation. In the lengthy recitation of Procaps' view of the facts from its various memoranda, Procaps uses "likely spoliation," or "likely deleted, purged or otherwise modified," or similar words, but Procaps' belief of what it thinks is likely is not a substitute for record evidence that Patheon destroyed electronic evidence relevant to this matter.

Testimony of James Mullen. The absence of evidence of deleted ESI was the subject of considerable discussion in the October 6 hearing. See, e.g., DE 606-1, p. 146-56. In its supplemental brief following that hearing, DE 606, Procaps pointed me to the testimony of the CEO of Patheon, James Mullen, as evidence of deletion of emails and text messages. DE 606-2. Mr. Mullen was deposed on February 14, 2014, about three and one-half weeks before discovery closed.

In the case of text messages, Mr. Mullen testified that he used two mobile phones in 2013 with which (1) he texted colleagues about business and (2) that had been changed out. DE 606-2, p. 265-66. In the Mullen transcript pages provided to me, there was no discussion of the nature or number of Mr. Mullen's texting topics. There was no information provided to me to suggest that Procaps had an interest in seeing texts on Mr. Mullen's then current mobile device to get an idea of the types of topics covered in his text messages. (That may be because of Mr. Mullen's statement that a review of them would result in a "fantastic conversation with my children." Id. at 265.) Nor is there any proof that Patheon captured text messages of its employees on any of its servers. In other words, a forensic analysis of Patheon's electronic information storage systems would not retrieve these text messages.

As for emails, Mr. Mullen testified, "I frequently delete some e-mails after I read them if I don't think I have any reason to refer to them." Id. at 266. Mr. Mullen did not receive a litigation hold notice until April or May 2013. He was asked if he deleted emails before he received a hold notice and he answered, "It's possible. I don't know." Id. at 267. When the questioner broadened the question of deletion back to his arrival at Patheon through December 2012, he answered simply, "I don't know." Id. And when the examiner pressed by asking, "Do you have all of them?" Mr. Mullen answered, "I do not know, because I do not know whether I deleted any of them." Id. Finally, when confronted with the number of emails Mr. Mullen receives daily and his estimate of the much fewer emails he had in his mailbox, he was asked again about deleting emails before he received a hold notice, and he testified: "Before then, if I deleted them, I deleted them. I have no idea. You can go back through the tapes and the records. Because they're all going to sit up in our archives." Id. at 269.

What is the significance of this testimony here? Procaps never explained to me what role Mr. Mullen might play in Procaps' proof of its claims. His emails could not modify the terms of the Collaboration Agreement. Rather, from my survey of other filings, Procaps has already advised the Court that it has documents from Patheon that will prove horizontal market allocation:

In short, Procaps will present evidence to the jury from Patheon's own documents and witnesses, as well as from Dr. Blair, proving that the horizontal market allocation resulting from the exclusivity provisions of the Collaboration Agreement after the Banner acquisition interfered with the competitive process and injured competition in the relevant markets. This kind of evidence is more than sufficient for Procaps to make out a prima facie case under an appropriately structured rule of reason.

"Procaps' Memorandum in Opposition to Patheon's Motion for Judgment and Alternative Motion for Leave to File a Second Motion for Summary Judgment," DE 595, p. 11.

Nor could Mr. Mullen's emails change the definition of the relevant market. That definition has been agreed to by the parties already. "Procaps' Response to Patheon's Motion to Compel Production of Documents and Interrogatory Responses," DE 600, p. 4, n.3 ("The Court has limited the 'relevant market' in this case to the United States by adopting, with Procaps' assent, 'Patheon's uncontested market definitions' [DE 524 at pp. 29 n.7, 37]."

And Procaps has not raised in any of its submissions to me any issues with Patheon's production that affected its expert's ability to prepare an expert report or Procaps' ability to put on a damages case.

Mr. Mullen's testimony might have prompted a request by Procaps' counsel to Patheon's counsel to inquire about the accuracy of Mr. Mullen's recollections, and, if he had in fact deleted emails between October 2012 and April 2013, what steps Patheon had taken or would take to evaluate the impact of any such deletions. They might have been told what I was told at the October 6 hearing by Patheon's counsel: Mr. Mullen was interviewed and "we did not discover or learn or have any reason to believe that he was deleting or had deleted relevant e-mails." DE 606-1, p. 79. They might have evaluated whether Mr. Mullen's emails were produced from other sources (emails are sent to, or received from, another person), so Patheon might have produced emails that Mr. Mullen might have deleted. Or Patheon could have done what Mr. Mullen suggested, gone to "archives" to see what was there (as noted above, Patheon has all of its email and filer server backup tapes dating back to October 2012).

Illustratively, a case cited by Patheon unwittingly makes the point. Major Tours v. Colorel, 2009 WL 344671 (D.N.J. October 20, 2009) involved alleged racial profiling in commercial bus inspections. The motion in question was one for a protective order regarding plaintiffs' request for copies of emails located on backup tapes stored by the New Jersey Department of Transportation (NJDOT). To do so would have cost the NJDOT about $1.5 million. Id. at *1. The relevant time period for discovery was 2000 through 2007. Plaintiffs' focus on backup tapes related to a commercial bus investigation unit that was part of the NJDOT until July 2003 and became part of the Motor Vehicle Commission (MVC) after that. Scattered NJDOT backup tapes existed for the period between 2000 and April 2003. Backup tapes existed for the period April 2005 forward for the MVC. NJDOT backup tapes existed for the period April 2003 forward. Plaintiffs were hopeful that emails from the period 2000 to April 2003 would exist on some of these backup tapes, but no one could say with any certainty whether this would be the case if the backup tapes were restored. Id. at *2. Defendants had otherwise "harvested" 152,000 emails from custodians, reviewed 135,000 of them, and produced 70,000 that contained one or more hits of the search terms agreed to by the parties. Id.

The magistrate judge first held that backup tapes are "typically classified as inaccessible" under Fed. R. Civ. P. 26(b)(2) and plaintiffs had not "credibly rebutted" defendants' estimate of the time and cost to retrieve the requested emails. Id. at *3. The court then held that, in any event, good cause under Rule 26(b)(2)(B) did not exist to order the production under a benefit-burden analysis:

In the Court's view the most important considerations are the fact that defendants have already produced tens of thousands of relevant documents, a substantial number of depositions have been and will be taken, there is no evidence of intentional spoliation, and the requested e-mails are likely to be of marginal benefit and cumulative of documents already produced. The Court concludes that the slim likelihood that new relevant evidence may be discovered does not outweigh the substantial burden and expense that must be spent to retrieve the requested e-mails on defendants' 2500 backup tapes.

Id. at 4. However, plaintiff's compromise proposal to search 15 NJDOT backup tapes was allowed by the court with plaintiff, however, having to shoulder one-half of the search costs. Id. at *6. Despite the court's view that the emails would be cumulative of existing evidence, the fact that the case involved issues of public importance and plaintiff insisted that a search would produce relevant emails persuaded the court to allow this much more modest production subject to partial 'cost-shifting. Id.

Here, Mr. Mullen's testimony might have prompted a discovery-related response, perhaps involving at least sampling of some backup tapes, if Procaps felt it was important to follow up. However, this testimony does not, in the context of the facts as a whole, warrant a forensic examination of Patheon's electronic information storage systems.

Testimony of Geoffrey Glass. Procaps also referred me to the testimony of Geoffrey Glass, a former Patheon executive, who now is in charge of Banner Life Sciences. DE 606, p, 6. Mr. Glass apparently received information from Procaps under the Collaboration Agreement. He testified that after Patheon acquired Banner and he was put in the position of "leading our proprietary products business unit," he "asked for the materials that were on my personal computer to be isolated and eventually expunged so that I did not have access to them." DE 606-3, p. 343. He then added, "From when I went over to take over the Banner Life Sciences newly created business unit, we isolated and expunged proposal information." Id. Procaps acknowledges that it was appropriate to screen Mr. Glass from Procaps "Confidential Information" after Patheon became a competitor, but then says that the deletion of information from Mr. Glass's computer violated its duty to preserve relevant ESI. DE 606, p. 7. But I fail to see how expungement of allegedly confidential information that Procaps provided to Patheon represents a loss of ESI when Procaps was the source of the information in the first instance.

And unlike the unlawful misappropriations of information that are the fulcrum of much of the forensic examination case law, here, there was an agreement that resulted in the transfer of information from Procaps to Patheon. Mr. Glass testified that he was not aware that Procaps ever marked as confidential any information actually provided under the Collaboration Agreement. DE 606-3, p. 343. Whatever the accuracy of that testimony, the Court has already held in its summary judgment order that Procaps' claims of Patheon's misuse of confidential information were not substantiated by the evidence:

The heart of Count V is that by coupling the Banner acquisition with Patheon's access to Procaps' confidential information, Patheon is now going to be able to use Procaps' confidential information to unfairly compete with Procaps. To that end, Procaps makes much of the fact that Patheon executive Geoffrey Glass, who had access to Procaps' confidential information, is now in charge of the Banner unit in Patheon.

The problem for Procaps is two-fold. First, mere possession of information, even in Mr. Glass' head, is insufficient to establish a common law unfair competition claim in the context of this case. Rather, Florida law requires proof, at a minimum, that defendant improperly used or disclosed the allegedly confidential information to unfairly compete with plaintiff.
...

[T]here is no evidence that Patheon has improperly used or disclosed Procaps' confidential information. Indeed, Procaps has previously conceded that it "cannot pinpoint any specific piece of confidential information that [Patheon has] actually misused" and that it cannot pinpoint damages proximately caused by the alleged misuse of its confidential information. [ECF Nos. 138, pp. 6-7; 333, p. 12, ¶ 25]. Moreover, Procaps also revealed that it could not "describe the specific, actual competitive harm that has occurred from any actual misuse of this Confidential Information, other than the fact that Procaps' direct competitor possesses its most sensitive confidential business information." [ECF No. 333-8, p. 17].

The Court understands that it may be difficult for Procaps to have direct evidence that its confidential information was misused. But Procaps has not presented any circumstantial evidence of misuse.

For instance, there is no evidence that Patheon used Procaps' confidential information post-acquisition to: change its prices to be below Procaps' prices; incorporate Procaps' manufacturing procedure in its own facilities; or reverse engineer Procaps' technology or products. Indeed, as the Court is intimately familiar with the parties' discovery requests, it does not appear that Procaps even tried to get that information by, for example, requesting to inspect Patheon/Banner's manufacturing or development facilities. And the time to conduct that kind of discovery has long since passed.

DE 565, p. 48-49. There are no discovery shortcomings identified in Procaps' submissions on its motion that would warrant a forensic examination to look for any such evidence.

Mr. Glass also testified that he deleted an email that was shown to him during his deposition apparently again because of the sensitivity to Procaps of the Banner acquisition ("The reason I did it was because of the potential sensitivities raised given the context and situation that we were in and I was taking conservative actions given that situation and context and I thought it prudent of a partner to do so.") DE 606-3, p. 40. Again, the email in question was in Procaps' possession. So this ESI was not lost. And no other aspect of Mr. Glass's action to delete one email warrants a forensic examination of Patheon's electronic information storage systems.

I will address two other additional points made by Procaps on this topic. Procaps argues that Mr. Glass's decision to "expunge" data relating to Procaps' "proposal information" from Mr. Glass's ESI justifies a forensic examination under Nacco, 278 F.R.D. at 404, where, Procaps says, the court admonished a party who did not perform an ESI search for relevant documents "until after it installed a 'firewall' in the system to prevent its employees from misappropriating plaintiff's information, and did not search for ESI that was downloaded before the firewall's implementation, including 'collect[ing] evidence from the key players or search[ing] key players' computers to see if ESI existed or had been deleted'." DE 606, p. 11-12, n. 6. I fail to see the connection here. In Nacco, the former dealer, Lilly, admitted that its employees illegally accessed Yale's proprietary database and this malfeasance was compounded by a number of discovery sins that followed as catalogued above. Here, Procaps provides the information in question under the Collaboration Agreement. Had Mr. Glass accessed the information once he became head of Banner Life Sciences and misused it, there might be some symmetry with Nacco. But he did just the opposite; he made sure he could not access it by having it expunged.

Procaps also argued that the (1) vice president for business development for North America (Joe Principe); (2) executive director of global science technology and pharmaceutical development services (Anil Cane); (3) associate director of "PDS Liquid Fill" (Edgar Jaynes); and (4) business development manager (Peter Franck), were exposed to "its Confidential Information," and "trained on [Procaps'] new technologies, softgel formulation and development." DE 606, p 3. Yet they did not receive a litigation hold notice until April or May 2013. Id.

I am not sure what the point is of this observation. If these individuals were deposed, they could have been asked about their retention of the Confidential Information or what use, if any, they made of it. I assume that they were not asked because I was not presented with any testimony from them that compromised Patheon's ESI production. If they were not deposed, then I assume that their exposure to this Confidential Information was being planned as the subject of trial testimony. But while saying that persons exposed to Procaps' Confidential Information did not receive a hold notice until the Spring of 2013 might have given rise to a demand at a meet-and-confer session for follow up, or a motion to compel depending upon the response to such a demand, it does not warrant compulsion of a forensic examination of Patheon's electronic storage media.

Retention of an ESI consultant. Patheon did not engage an outside ESI vendor to collect relevant ESI. Referring to the Court's February 28 Order, Procaps notes that Patheon criticized Procaps for not retaining an "ESI retrieval consultant." If Procaps reads the Court's February 28 Order as saying that if a party to litigation does not retain an ESI retrieval consultant, a forensic examination is warranted, I disagree with the reading. The Court's February 28 Order must be read as a whole. Trying to isolate one sentence and then divorcing that sentence from the facts to create a stand-alone legal proposition does not produce a fair reading of the February 28 Order.

In any event, Patheon's IT employees were involved in the ESI retrieval process. There is no evidence in the record to suggest that they were not effective.

Suspending deletion of backup tapes. Procaps argued that Patheon did not suspend deletion of backup tapes until well after discovery commenced. DE 559, p. 3. Even if that were the case, it would not justify a forensic examination of Patheon's accessible electronic storage systems. But Patheon has explained that, in fact, it has preserved all of its email and file server backup tapes for the period October 2012 through April 2013. DE 568, p. 19, DE 568-1, Para. 5.

Peter Bigelow. Procaps complained that Mr. Bigelow was never asked to preserve or not delete relevant documents. DE 559, p. 3. Mr. Bigelow was Patheon's former President - North American Operations. Procaps described him as a "critical" witness for Procaps. That may be so, but Mr. Bigelow left Patheon in October 2011, three months before the Collaboration Agreement was signed. He stayed on as a consultant until February 2012. Suit was not filed until December 2012. Apparently, he testified that he had no relevant hard copy documents or ESI. DE 568, p. 23-24. Patheon also informed me that Procaps did not seek documents or ESI from Mr. Bigelow and that it produced more than 300 emails and attachments sent to or from Mr. Bigelow. DE 568, p. 24. It is not clear to me why Procaps believed Patheon had an obligation to tell a former employee to preserve or not delete relevant documents, just as it is not clear to me why Procaps thinks that a former employee would take with him Patheon documents after leaving its employment. I do not discern any basis for a forensic examination of Patheon's electronic storage systems based on what Mr. Bigelow said.

Untimely litigation holds. search terms , and Banner ESI. In the end, Procaps' argument comes down to this: the Court's order granting Patheon's motion for a forensic analysis was not premised on the loss of ESI, but on the "mere possibility of relevant documents not being 'located' because of the lack of a timely litigation hold and the use of inadequate search terms in collecting documents." DE 585, p. 11. Specifically, Procaps invokes this holding of the Court:

Procaps' counsel stresses that there is no evidence that any ESI or other documents have been deleted or purged with no chance of being recovered. Even if true, this argument does not address the indisputable conclusion that the ESI and document searches were inadequate - a scenario which strongly suggests that some (and perhaps even a significant amount of) responsive discovery from Procaps has not yet been located and mandates a comprehensive forensic search of Procaps' ESI and other sources of relevant documents.

DE 341, p. 5-6. It argues that just as Procaps' ESI and document searches were inadequate, so were Patheon's based on the timing of the hold notices, the failure to "preserve, collect and produce relevant documents"; and the "total alteration or destruction of Banner's ESI and infrastructure" as they existed in October 2012 and December 2012. DE 585, p. 11.

I address each of these points below.

Hold notices . There is no dispute that Patheon had a duty to preserve at least by October 24 2012, that it issued its first hold notice on December 22, 2012 to six individuals (eight, if two IT employees are included), and that subsequent hold notices were not sent to several dozen additional employees until April and May 2013.

Patheon cites to two cases that take a measured view of delayed litigation holds.

Rahman v. Smith & Wollensky Restaurant Group, 2009 WL 773344 (S.D.N.Y. March 18, 2009) is a restaurant-related employment discrimination case where 100,000 guest checks were produced by the defendant. So-called "table assignment sheets" had gaps in their production. A witness for defendant testified that a litigation hold was instigated in "Summer of 2008, maybe" rather than in August 2006 when suit was brought. The magistrate judge held that this delay in and of itself did not prove spoliation had occurred or that other action was warranted:

Mr. Chiovaro's isolated statement, however, is insufficient evidence to support a finding of spoliation.Even assuming there was, in fact, no litigation hold until the summer of 2008, the plaintiff has failed to establish that any gap in the Table Assignment Sheet production is attributable to the failure to institute litigation hold at an earlier date. Moreover, the guest checks undeniably contain table assignment information that the plaintiff can use to analyze his claims, thus seriously diminishing the importance of the Table Assignment Sheets to the plaintiff's case. In sum, the new evidence from Mr. Chiovaro's deposition does not alter my previous conclusion: the plaintiff is not entitled to further discovery related to table assignments.

Id at *6 (footnote omitted).

Haynes v. Dart, 2010 WL 140387 (N.D. Ill. January 11, 2010) was a purported class action against Cook County and several of its employees in connection with alleged deprivation of mental health treatment and humane confinement conditions, among other claims, by pre-trial detainees at the Cook County Jail. Suit was brought in August 2008. Id. at *1. The superintendent of the jail division housing the named plaintiffs, Miller, was not a defendant; he only became superintendent in January 2009. Rather, Miller was identified by plaintiffs as a person who may have information regarding conditions of confinement. Id. at *1-2.

Miller was deposed in October 2009. He testified that he took notes during a meeting with his predecessor, and during weekly meetings with other jail administrators. He did not keep these notes and said he was never told to retain documents relevant to the case. Separately, defendants did not put a litigation hold in place until November 2009, about 15 months after the lawsuit was filed. Id. at *2, 4. Based on this testimony and inaction, plaintiffs moved for sanctions.

The district court first noted that the "materiality of Miller's notes is entirely speculative" because "plaintiffs' counsel never questioned Miller about the content of his notes."

With respect to the delay in issuing the litigation hold, the court explained that the steps that a party "must take to satisfy its obligation to preserve evidence may vary from case to case." Id. at *4 (citing Danis v. USN Communications, Inc., 2000 WL 1694325 , *4 (N.D. Ill. October 23, 2000). The failure to institute a litigation hold in a timely manner is "relevant to the court's consideration, but it is not per se evidence of sanctionable conduct." Id. (citing Danis). The court then explained the background facts. The case was one of approximately 800 lawsuits pending against the Sheriff's Office, and "the establishment of a formal litigation hold in each case could cause an undue burden." Id. at *4. Plaintiffs' claims and discovery requests were also broad, leading the court to conclude that it was not "objectively unreasonable" for the defendant to decide that "a large-scale litigation hold" was not required. The court did not excuse the failure to instruct Miller to retain documents, but then added that this failure was no consequence on the facts presented:

But plaintiffs do not provide a sufficient reason to conclude that defendants failed to comply with their discovery obligations. There is no evidence that relevant documents were destroyed pursuant to a routine destruction policy that defendants failed to curb. At issue here are personal notes that Miller may have jotted down during meetings, and that may relate to allegations in plaintiffs' broad complaint. The court is not persuaded that plaintiffs were deprived of discovery necessary to prosecute their case. Defendants have responded to plaintiffs' written discovery requests, and have produced over 10,000 pages of documents to date.

Furthermore, plaintiffs do not demonstrate any substantive prejudice from a failure to preserve Miller's notes, Plaintiffs' admitted reason for deposing Miller was to determine whether he "implemented new policies or procedures that were correcting some of the problem conditions" that existed during the tenure of his predecessor, defendant Snooks. But Miller's testimony shows he made no changes to relevant operating policies or procedures while he was superintendent. Miller was able to answer counsel's pointed questions about the substance of his transition meeting with Snooks. Plaintiffs do not present the court with any reason to infer that defendants' failure to preserve Miller's notes caused the loss of responsive documents material to plaintiffs' case. The same is true with respect to notes Miller may have taken during the weekly preaccountability and accountability meetings. Miller testified that he retains copies of written agendas, presentations, and handouts circulated at these meetings. He also stated that secretaries from the sheriff's executive staff are present at accountability meetings and that they take handwritten notes. There is no evidence the

secretarial notes were destroyed, and plaintiffs do not explain why their notes would be insufficient.

Id. at *4 (record citations omitted).

In denying the motion for sanctions, the court added that Plaintiffs' motion "appears to be a thinly-veiled attempt to extend the discovery deadlines previously set and significantly extended twice by this court and to obtain at least twelve more depositions, in addition to the fifty-five depositions already conducted or planned." Id. at *5 (emphasis in original).

For its part, as noted already, Procaps relies heavily on Nacco for the proposition that a delayed hold notice results in deleted documents. It also relies on the Court's February 28, 2014 Order suggesting that Procaps delay in issuing a formal litigation hold notice was enough of a basis to require a forensic examination that the same result should apply here.

I have already explained above why Nacco is a very different case than we have here. It is not comparable either factually or legally to the circumstances presented in Procaps' motion.

And while I cannot speak for the Court, one cannot read the Court's February 28, 2014 Order in parts. Taken as a whole, the Order is premised on a number of discovery miscues, including a 16-month delay in issuance of any litigation hold to anyone and the failure of counsel to play any role in the discovery process. DE 341, p. 3-6.

I do not know what discovery topics were pressed in depositions of Patheon witnesses during the discovery period, but I do know that Procaps has not presented me with persuasive evidence that the delayed litigation holds resulted in the loss of any information relevant to Procaps' ability to prosecute its case or address any of Patheon's affirmative defenses.

Patheon also made it clear that it:

(1) has all Banner emails from the time period October 10, 2012 forward, DE 606-1, p. 42, 67;

(2) has a December 29, 2012, snapshot of Patheon's entire electronic storage system, including emails, id. at 65;

(3) also has a December 29, 2011 snapshot of Patheon's email system, id.;

(4) and has a July 2013 Banner email system snapshot as well, id. at 70.

In addition, Patheon does not have an automatic deletion policy applicable to emails, DE 568-1, p. 1-2, and has preserved its email and file server backup tapes for the period October 2012 through April 2013, id. at 2.

It does seem clear that before discovery closed, Patheon did not identify which custodians received the December 2012 hold notice and which ones received the April/May 2013 notice. Patheon says Procaps did not ask this question theretofore. DE 606-1, p. 9. Procaps says it asked the question of when the hold notice was issued, apparently in March 2014, just before discovery closed, id. at 15-16, and did not know at the time that there was more than one hold notice. Id. at 16. As I understand what happened after that, Procaps wanted to take a Rule 30(b)(6) deposition to mirror what Patheon did when it learned about Procaps' discovery conduct (as recited in the Court's February 28, 2014 Order). The Court rejected that request but required Patheon to answer interrogatories on the subject, which Patheon answered on April 8, 2014. DE 559-4. That answer did not distinguish the dates when custodians received the hold notice because that question was not literally asked and the Court did not require Patheon to do more. Id. at 16-23. Procaps first learned of which custodians received hold notices on what dates during the October 6, 2014 hearing.

Had the parties discussed custodians and hold notice dates during their meet-and-confer sessions or had questions along these lines been asked early in the case, Procaps would have learned of the multiple notices and to whom they were directed. It then would have had a number of options, including requesting that Patheon confirm that its interview processes addressed email retention issues before a recipient received a hold notice and asking questions on this topic in depositions of key players, and depending upon the results, asking Patheon to review email server backup data for one or more custodians. If the facts warranted it, Procaps might also have filed a motion to compel production of emails stored in backup media.

But the parties are no longer in a discovery mode, and the referral to the Special Master is limited to Procaps' motion to compel a forensic examination. Without some information to demonstrate that the delayed hold notices have resulted in deletions of relevant information, not duplicated in what has been produced; or gaps in, or missing categories of, documents; or testimony that suggests that the delayed hold notices may have prejudiced Procaps in a material way, the record on the hold notice issuance dates does not support compulsion of a forensic examination of Patheon's (which includes Banner's) electronic storage media.

Search terms . During the October 6 hearing, I learned that Patheon's search terms were not disclosed until interrogatory answers were served by Patheon in April 2014 because Procaps apparently had not earlier asked to see the search terms used by Patheon until near the end of discovery. DE 606-1, p. 196-97.

Despite the dictates of Rule 26(f), both sides elected early on in the matter to go their separate ways on the issue of search terms, instead of discussing them collaboratively. Patheon's counsel explained at the October 6 hearing what happened:

We came up with our search terms, tested them like we described, and we collected documents that way. And Procaps did exactly the same thing.

So had Procaps reached out to us in the beginning of the case and said, "Hey, look, this is the way we want to do it. We want to negotiate search terms at the very beginning of the case," we certainly would have done that.

DE 606-1, p. 200. Parties should talk about search terms at the beginning of the case, not until a couple of weeks before a discovery cut off after search terms had already been applied months earlier to produce documents.

Both counsel should be chastened here because both sides should have put the issue of search terms on their Rule 26(f) check list for discussion. A case cited by Patheon makes the point, FDIC v. Brudnicki, 291 F.R.D. 669, 677, n.12 and 679 (N.D. Fla. 2013) (discovery protocol appended to the court's opinion required defendants and plaintiff to collaborate on a set of search terms and designation of custodians, the court earlier stating: "the Court expects the parties to work together, notwithstanding which side first proposes the search terms"). One cited by Procaps does also. Seven Seas Cruises S. De R.L. v. V. Ships Leisure SAM, 2011 WL 772855, at *5 (S.D. Fla. February 19, 2011) ("it appears that many of the disputes related to the production of e-discovery could have been significantly narrowed, if not totally avoided, had the Parties held an ediscovery conference early-on in the litigation as required by Federal Rule of Civil Procedure 26(f), wherein issues regarding disclosure and production of ESI could have been thoroughly discussed"). See also, e.g., In re Seroquel Products Liability Litig., 244 F.R.D. 650, 662 (M.D. Fla. 2007) ([W]hile key word searching is a recognized method to winnow relevant documents from large repositories, use of this technique must be a cooperative and informed process.")

If both parties had followed such a cooperative approach from the outset, the myriad discovery problems presented in this case, and the substantial time and cost associated with addressing discovery-related motions, would have been substantially reduced or perhaps even avoided.

But, for these purposes, the point is that Procaps' complaints about Patheon's failure to use "Banner" or "Collaboration Agreement" as search terms do not resonate where Procaps mimics language from the Court's February 28 Order about search terms not used by Procaps but the parties are not similarly situated for this purpose. For Procaps to use "Banner" made sense because Banner is a competitor and this case is in large part about impacts to competition. For Patheon to use "Banner" as a search term would have generated every document containing the word Banner—an overinclusive and wasteful exercise. In addition, Patheon used "collab* as part of its search term process which would have picked up "Collaboration" and "Collaboration Agreement."

And, in any event, complaints about search terms are the province of meet-and-confer discussions, Rule 16 conferences, or motions to compel or for a protective order early in discovery before production occurs or while it is occurring. Illustratively, in a case cited by Procaps, Seven Seas Cruises S. De R.L. v. V. Ships Leisure SAM, 2011 WL 772855, *1 (S.D. Fla. Feb. 19, 2011) there was reference to an order granting a motion to compel requiring a producing party to specify the search terms being used in conducting ESI searches.

Patheon acknowledged that it did not run search terms on Patheon's electronic storage media but rather ran them on the emails of 30-35 custodians and electronic documents it retrieved based on interviews of these custodians. DE 559-4, p. 15. As noted above, one could find fault with this system in some circumstances but where, as here, counsel was heavily involved in the interviewing process, and signed discovery responses under the mandate of Rule 26(g), and Procaps has not identified flaws or omissions in the ESI produced, this is not one of those circumstances.

Procaps also argues that Patheon never produced Procaps "confidential and proprietary information" that "resides somewhere in Patheon or Banner's computer systems" as evidence that Patheon's search terms were inadequate. DE 606, p. 15. I do not know if Procaps requested production of information that it produced to Patheon. I do know that Mr. Glass said that he did not want to have it once he was put in charge of Banner Life Sciences and he had it expunged from systems to which he had access. I also know that Procaps knows what it provided to Patheon and the Court has already found that the discovery conducted by Procaps did not produce evidence that the information was misused. But while this potential quirk in Patheon's production might have meaning in the context of a motion to compel, it does not warrant a forensic examination of Patheon's electronic information systems.

Procaps adds that it would be unduly prejudicial and it would be patently unfair if it was not permitted to have a forensic examiner run expanded search terms on the three million documents that Patheon is holding. Id. This is not an argument in support of a forensic examination. A forensic examiner is not needed to run expanded search terms. Rather, this is an argument attacking search terms used by Patheon's counsel and that could have been and should have been the subject of discussion a long time ago in this matter. In any event, I am powerless to act on Procaps' request because running expanded search terms on a dataset is not within the scope of the referral to me by the Court.

On this record, Procaps' arguments about Patheon's search terms do not warrant an order permitting a forensic examination of Patheon's electronic information storage systems.

Banner's ESI . The issues related to Banner's ESI also are discovery issues, not forensic examination issues.

There was no evidence presented to me that Patheon had control over Banner's documents before the acquisition of Banner was consummated on December 4, 2012. See DE 606-1, p. 46, DE 565, p. 11. Patheon issued its first hold notice just a few weeks later. Procaps says that Banner should have issued a litigation hold in October before the acquisition was consummated, DE 559, p. 8. Why? It was yet owned by Patheon. I was not advised that Banner had been sent a demand letter of a kind that would have justified issuance of a document retention notice. In any event, there is no evidence in the record that Banner failed to retain any ESI between October and December.

In response to Procaps' requests for production, Patheon imposed limits on its searches of Banner information. Those limits were never the subject of a motion to compel. DE 606-1, p. 167-72. Patheon objected to the breadth of Banner-related requests to produce and agreed to produce "documents sufficient to show" the information requested. DE 568-4, p. 1-2. It also limited its agreement to produce Banner documents to those related to the "Field" and "Territory," words of art representing areas covered by the Collaboration Agreement. DE 568-6. Again, there was no motion practice over these articulated limitations.

Procaps made attempts to convert into something nefarious Patheon's integration of Banner's ESI into Patheon's system after December 4, but having studied the record, I do not see any harm to Procaps. As noted above, Patheon has Banner employees' emails from October 2012 forward. It has a December 29, 2012 mirror image of Patheon and Banner's electronic documents. There is no testimony, and there are no documents that suggest, that any Banner-related ESI has been lost. If Banner ESI was critical to Procaps' prosecution of its claims, I would assume that Procaps deposed key players at Banner. If it did conduct such depositions, apparently there was no testimony that would have supported a motion to compel a forensic examination, because none was presented in Procaps' submissions on the motion. If it did not conduct depositions of any Banner employees, I am hard pressed to see why these persons would all of a sudden became critical custodians of material ESI.

In all events, if Patheon failed to produce relevant ESI from Banner employees, the response should not be a motion to compel a forensic examination, but a motion to compel production, which is not the subject of the Court's referral to the Special Master. Based on the record presented to me by the parties, all of the issues associated with Banner ESI are outside of the referral because none of these issues represent, in the Eleventh Circuit's parlance, "some non-compliance with discovery rules" by Patheon. In Re Ford, supra, 345 F.3d at 1317.

Procaps' plea for a re-search of Patheon's ESI. Procaps makes a final plea based on two Southern District of Florida decisions and Nacco. It writes:

All Procaps is seeking at this time is the collection and searching of Patheon's ESI by a neutral, third-party examiner, to include forensic imaging and the recovery and searching of deleted ESI, to ensure that all relevant discovery has been collected, searched, and produced in this case. Requiring a party to "re-search" its ESI is not an extraordinary remedy uncommon in a case of this magnitude. See Seven Seas Cruises S. De R.L. v. V. Ships Leisure SAM, 2011 WL 772855, at *5 (S.D. Fla. Feb. 19, 2011) (requiring party to "re-search" ESI of custodians with approved search terms with a neutral e-discovery consultant because of deficient search and production), report and recommendation adopted, 2011 WL 772902 (S.D. Fla. Feb. 28, 2011); Wynmoor Community Council, Inc. v. QBE Ins. Corp., 280 F.R.D. 681, 687 (S.D. Fla. Mar. 5, 2012); Nacco, 278 F.R.D. at 406.

DE 606, p. 9. The premise here—that there is deleted ESI that Procaps does not itself have—is not supported by the evidence. That point aside, the reference to Nacco, 278 F.R.D. at 406, is to the part of the court's opinion where the court sanctioned Lilly because it was negligent in performing its discovery obligations. In this context, the court wrote that "additional discovery in the form of searches for relevant evidence is needed," and sanctioned Lilly to pay the cost of imaging 17 hard drives "because Lilly's deficient preservation and collection efforts necessitated these actions." Id. Procaps has not shown Patheon's preservation and collection efforts to be deficient in the manner that Lilly's efforts were deficient.

The citation to Seven Seas makes the point made above: if a party has evidence of discovery "defalcations," 2011 WL 772855 at *3, the party should bring a Rule 37 motion. In Seven Seas, defendants "conceded that not all relevant requested ESI was produced" and added, "in hindsight, an E-discovery consultant/vendor should have been retained to assist in searching for the responsive electronic information." Id. Defendants also agreed at a hearing before the court "to re-run the recent searches conducted by the Defendants, and to also run searches on all of the custodians that Plaintiffs complained had never been searched but should have been." Id. In its written opinion following this hearing, the court said, "it is clear that the Defendants have failed to properly conduct complete, thorough and timely searches of ESI responsive to Plaintiff's discovery requests." Id. at *4. As a result, the court concluded that defendants "should be sanctioned pursuant to Rule 37, for failing to fully cooperate in discovery and make full disclosures." Id. at *5. The court then ordered defendants, located overseas in two different countries, id. at *3, to utilize a third party vendor to perform searches on defendants' ESI, having explained earlier that defendants' failure in this area "is the result of a lack of familiarity and/or training in searching for and producing ESI," id. at *4-5, and later explaining, "it appears that Defendants attempted to conduct e-discovery searches by using their own IT department, and belatedly learned that their internal department was not up to the task." Id. at *6. The court also required defendants to pay plaintiffs' attorneys' fees and costs "based upon the Defendants' repeated and continued failure to conduct full and complete ESI searches, as well as Defendants' failure to retain a consultant with the requisite experience and technical knowledge to conduct such searches." Id.

The court, however, refused to order a "re-search" of ESI previously produced by defendants using a third-party ESI consultant to ensure, as plaintiffs argued, that the prior searches were "complete and performed accurately." Id. at *5. That would not only take too long, the court said, but the evidence showed that the prior "steps taken by Defendants to locate and produce ESI, generally speaking, were reasonable under the circumstances of this case; and, the cost of utilizing more intensive search methods outweighs the potential benefit." Id. at *5, n.5.

Procaps urges that the facts here are comparable to those in Seven Seas because Patheon failed (1) "to search for and retrieve relevant ESI from Banner Custodians who likely possess(ed) responsive information," (2) "to search Banner's ESI and databases prior to 'integration' for relevant documents;" (3) "to search for relevant documents 'post-collection' using adequate search terms;" and (4) "to search available backup tapes between October 24, 2012 and April/May 2013 for ESI deleted by Mr. Mullen, and possibly other 'key employees' because they did not receive timely litigation holds." DE 606, p. 11.

But the only similarity between this case and Seven Seas is the court's admonishment of counsel for their failure to communicate and cooperate with each other on e-discovery issues identified in Rule 26(f). 2011 WL 772855 at *4 and *5, n.5. Here we are not dealing with evidence of discovery defalcations. The evidence reflects that Patheon conducted a reasonable search and, unlike in Seven Seas, Patheon's IT Department apparently knew how to collect documents following the interview process that was conducted here. What Procaps refers to as "gaps" are not gaps at all. Procaps has not identified a particular Banner custodian whose email was not collected, or whose ESI beyond email appears to be missing either because of gaps in dates or gaps in substantive categories of ESI. Patheon imposed limits on production of Banner ESI, and advised Procaps of the limitations. The parties should have discussed search terms, custodians, preservation, backup tapes, and other issues pertinent to e-discovery at the beginning of the case; had they done so their differences could have been addressed without the need for the number of discovery motions filed in this matter and it is likely the Court would not have been confronted with any motions seeking forensic examinations. And as noted above, the time to have pushed Patheon on Mr. Mullen's testimony was after the testimony was given in a meet-and-confer process followed by a motion to compel if needed.

A forensic examination was not even in issue in Seven Seas. And based on Procaps' four alleged "failures," it is not here either. What may have resulted in further discovery by Patheon had these issues been raised in a Rule 16, Rule 26, or Rule 37 context does not come within the referral to me of the merits of a forensic examination because none of these alleged failures would give rise to a forensic examination under the legal principles articulated in the case law cited by Procaps.

Procaps also cites Wynmoor to support its plea for a redo of discovery. It writes:

Additionally, "forensic images" of ESI are appropriate where, as here, a party (1) has "withheld requested information"; (2) is "unable or unwilling to search for the requested information"; and (3) has not complied with discovery requests. See Wynmoor, 280 F.R.D. at 687 (S.D. Fla. 2012) (ordering forensic exam of plaintiff's computer systems because plaintiffs were "either unwilling or unable to conduct a search of their computer systems for documents responsive to Defendant's discovery requests").

DE 606, p. 11 (emphasis added).

Wynmoor, as discussed earlier, is a forensic imaging case where the producing-party plaintiffs were "either unwilling or unable to conduct a search of their computer systems for documents responsive to Defendant's discovery requests." 280 F.R.D. at 687. Plaintiffs' assistant administrator had testified in a deposition that the hard drive containing electronic copies of maintenance work orders crashed during Hurricane Wilma. No effort had been made to attempt to recover the work order data by plaintiffs even though this information was an important component of the defenses to plaintiffs' claims. Plaintiffs were not helped by evidence of "an unusually large spate of document shredding," so that "there is at least the possibility that hard copy evidence germane to this litigation may have been destroyed that would not otherwise be available to the Defendant absent access to ESI stored in Plaintiffs' computer systems." Id. at 686. Nor were Plaintiffs helped by their failure to conduct any searches for ESI: "Plaintiffs have evidently made no efforts to identify ESI, deleted or otherwise, responsive to Defendant's request for production." Id. at 686.

Procaps may believe that Patheon has withheld requested information, is unable or unwilling to search for information requested, or has not complied with discovery requests, but its beliefs are not enough. The facts of Wynmoor bear no resemblance to the facts here where ESI was searched for and produced, and no credible evidence of missing ESI important to the prosecution of Procaps' claims has been submitted.

Conclusion

For the reasons set forth above, I recommend that Procaps' Motion to Compel Forensic Examination of Patheon and Banner's ESI, DE 559, be denied.

It is also my recommendation that each side bear its own fees and costs in connection with Procaps' motion. Neither side should be rewarded for engaging in discovery "hide-and-seek." Procaps' arguments might have become unnecessary had they confronted Patheon early on with Rule 26(f) issues. From my review of the papers, Patheon's approach to discussion of topics identified in Rule 26(f) and the case law set forth above mirrored Procaps' "go-it-alone" approach. Because the parties discussed so little early, they agreed on even less at the outset, and when that happens cases end up with over 600 docket entries.

Finally, I have considered and, in the context of the referral, rejected all of Procaps' arguments. To the extent I have not expressly addressed one of them above, it is because I did not feel a need to add further discussion to this already lengthy Report.

Respectfully Submitted,

/s/ John M. Barkett

John M. Barkett, Esq.

December 1, 2014

CERTIFICATE OF SERVICE

I hereby certify that on this 1st day of December 2014, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send a notification of such filing (NEF) to counsel of record.

/s/ John M. Barkett