Bldg. Ctr., Inc. v. Carter Lumber, Inc.

Bldg. Ctr., Inc. v. Carter Lumber, Inc., 2017 NCBC 84.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG 16 CVS 4186

THE BUILDING CENTER, INC.,

Plaintiff,

v. ORDER ON PLAINTIFF’S MOTION
FOR DISCOVERY SANCTIONS
CARTER LUMBER OF THE NORTH,
INC., a North Carolina Corporation,
CARTER LUMBER OF THE SOUTH,
INC., a South Carolina Corporation,
and TIMOTHY HURD,

Defendants.

THIS MATTER comes before the Court upon Plaintiff The Building Center,

Inc.’s (“Plaintiff”) Motion for Discovery Sanctions (“Motion for Sanctions”) against

Defendant Carter Lumber, Inc. (“Carter Lumber”) pursuant to Rule 37 of the North

Carolina Rules of Civil Procedure (“Rule(s)”) and the Case Management Order filed

by this Court on June 7, 2016.

On December 30, 2016, six days before the start of scheduled depositions,

Carter Lumber produced to Plaintiff an electronic file consisting of approximately

290,000 pages purporting to be the complete email files of a number of Carter Lumber

employees (the “Electronic File”). The Electronic File contained large numbers of

documents not relevant to the claims in this lawsuit and corrupted files. Carter

Lumber produced the Electronic File without the metadata necessary to review the

files. Plaintiff claims that this “data dump” was for the improper purpose of harassing

and impeding Plaintiff in the discovery process. Plaintiff claims that it incurred

additional costs in excess of $20,000 reviewing the Electronic File.
Carter Lumber, on the other hand, claims that it cooperated fully throughout

the discovery process and produced files in the format requested by Plaintiff. Carter

Lumber also contends that Plaintiff made no meaningful effort to try and resolve the

matter with Carter Lumber before filing the Motion for Sanctions.

THE COURT, having considered the Motion for Sanctions, the briefs and

evidentiary materials filed in support of and in opposition to the Motion, and the

arguments of counsel at the hearing, concludes that the Motion for Sanctions should

be GRANTED, in part, and DENIED, in part, for the reasons below.

A. Factual and Procedural Background

1. The general facts and procedural background of this case are set out in

the Court’s Opinion and Order on Defendants’ Motion for Summary Judgment (ECF

No. 45,) and are not repeated here. Only the facts necessary to resolution of the

Motion for Sanctions are recited herein.

2. On June 6, 2016, the parties jointly filed a proposed Case Management

Order (the “Proposed CMO”). (ECF No. 14.) The Proposed CMO contained an agreed-

upon format for the production of electronic data and did not contain language

anticipating the need for cost-shifting. Instead, the parties agreed to “cooperate as

needed in modifying the [electronic discovery requirements in the CMO] to facilitate

the efficient exchange of electronic records.” (ECF No. 14 at ¶ 6.)

3. The Proposed CMO also expressly recognized that the North Carolina

Rules of Civil Procedure continued to apply. (ECF No. 14 at ¶ I (A).) The Proposed
CMO set a deadline of January 3, 2017 for the completion of fact discovery. (ECF No.

14 at ¶ IV(B).).

4. Also on June 6, 2016, the Court held a hearing on Defendants’ Motion

to Dismiss. (ECF No. 6.)

5. On June 7, 2016, the Court entered a Case Management Order (“CMO”).

The CMO adopted the parties’ proposals regarding electronic discovery. The CMO

also accepted the parties’ agreed-upon deadline of January 3, 2017 for the completion

of fact discovery. (ECF No. 15 at ¶ III (A).)

6. Despite the discovery deadline in the CMO, the parties privately agreed

that they would not conduct discovery until the Court had ruled on Defendants’

Motion to Dismiss. The parties did not request a stay of the discovery period or seek

guidance from the Court regarding suspending their discovery efforts.

7. On October 21, 2016, the Court issued an Opinion and Order denying

Defendants’ Motion to Dismiss. (ECF No. 19.) The parties thereafter began discovery

efforts in earnest.

8. Plaintiff served its first set of Interrogatories and Request for

Production of Documents on May 5, 2016. Despite Plaintiff’s repeated requests,

Carter Lumber did not respond to Plaintiff’s request for documents until November

22, 2016. (Plaintiff’s Mot. for Sanctions, ECF No. 26, at ¶ 2.) Plaintiff produced its

first set of discovery responses on November 28, 2016. (Aff. of Stephen J. Dunn, ECF

No. 31 at ¶ 17.)
9. On December 23, 2016, the Court extended the deadline for completion

of fact discovery until January 17, 2017. The parties subsequently agreed to complete

their respective productions of documents by December 30, 2016. (ECF No. 26 at ¶ 3.)

10. On December 30, 2016, six days before the scheduled start of

depositions, Carter Lumber produced the Electronic File. The Electronic File

contained 107,394 documents, which amounted to 289,112 pages. (ECF No. 26 at ¶ 4;

Pl.’s Br. Supp. Mot. Sanctions, ECF No. 27 at p. 2.) The Electronic File contained the

entire contents of the email accounts of six Carter Lumber employees and was not

limited or culled in any way to include only relevant and responsive documents.

Plaintiff submitted to the Court as exhibits parts of the contents of the Electronic File

containing examples of irrelevant and unresponsive documents, including

advertisements, LinkedIn updates, news stories, Amazon purchases, and personal

communications.

11. In the days following the December 30, 2016 production, the parties

exchanged a flurry of increasingly contentious emails, all submitted as exhibits

relating to this Motion for Sanctions. The scheduled depositions on January 5, 6, and

9 proceeded as planned. (ECF No. 31 at ¶ 62.) Plaintiff cancelled the scheduled

deposition of Carter Lumber’s 30(b)(6) representative, during which Carter Lumber’s

preservation and delivery of electronic data was set to be discussed. (ECF No. 31 at

¶ 64-66.)

12. On January 17, 2017, Plaintiff emailed the Court initiating the process

provided in BCR 10.9 seeking sanctions against Carter Lumber under Rule 37.
Following a telephone conference between the Court and counsel for the parties, the

Court advised Plaintiff that it would need to file a motion in order to pursue its

request for sanctions. Plaintiff filed their Motion for Sanctions on March 20, 2017.

13. Carter Lumber filed its Response on April 7, 2017. Plaintiff filed its

Reply on April 20, 2017. The Motion is ripe for determination.

B. Analysis

14. “Rule 37 gives the trial court express authority. . . to sanction a party

for abuse of the discovery process.” Cloer v. Smith, 123 N.C. App. 569, 573, 512 S.E.2d

779, 781 (1999). Rule 37(b) is flexible by design, in order to provide “broad

discretion . . . to the trial judge with regard to sanctions.” American Tel. & Tel. Co. v.

Griffin, 39 N.C. App. 721, 727, 251 S.E.2d 885, 888 (1979); see also Out of the Box

Developers, LLC v. LogicBit Corp., 2014 NCBC LEXIS 7, *2 (2014). To that end, trial

courts have “inherent authority to impose sanctions for discovery abuses beyond

those enumerated in Rule 37.” Cloer, 123 N.C. App. at 573, 512 S.E.2d at 782.

15. Rule 34 governs the production of documents and electronically stored

information during discovery. Rule 26(b)(1) provides that “the phrase ‘electronically

stored information’ includes reasonably accessible metadata that will enable the

discovering party to have the ability to access such information as the date sent, date

received, author, and recipients.” “Metadata includes information about the

document or file that is recorded by the computer to assist in storing and retrieving

the document file . . . . includ[ing] file designation, create and edit dates, authorship,

comments, and edit history.” Rule 26 (Comment to the 2011 Amendment).
16. Carter Lumber did not review the electronic file to ensure it was limited

to relevant and responsive documents. Rule 34(b) allows parties requesting discovery

of electronically stored information to specify the individual items and/or categories

of items to be inspected “with reasonable particularity” as well as specify the form of

production. Rule 34(b) additionally states that the only proper forms of response are

“(1) permission of inspection as requested; or (2) objection to the request with the

reasons for the objection based on the contents of the document(s) or the fact that the

identified information is “not reasonably accessible because of undue burden or cost.”

The statute does not allow a party to produce large un-reviewed and un-culled

electronic files to another party, at least not without notifying that party of its intent

to do so. At a minimum, Carter Lumber’s conduct here violated the spirit of Rules 26

and 34.

17. In addition, Carter Lumber did not provide the necessary metadata that

would allow Plaintiff to effectively search through the massive electronic file and

discover the relevant information requested. This is a direct violation of Rule 26(b)(1).

18. Other courts have likewise held that a “data dump” of the type that

occurred here is an abuse of the discovery process. See, e.g., ReedHycalog UK, Ltd. v.

United Diamond Drilling Servs., No. 6:07-CV-251, 2008 U.S. Dist. LEXIS 93177, at

*9 (E.D. Tex. Oct. 3, 2008) (“Thus, a producing party may not bury those relevant

documents in the hope that opposing counsel will overlook the proverbial ‘smoking

gun’ as he wades through an ocean of production.”).
19. The Court concludes that Carter Lumber’s production of an un-reviewed

290,000 page electronic file containing large amounts of irrelevant and unresponsive

documents, and without the necessary metadata, was an abuse of the discovery

process and violated the spirit and letter of the Rules of Civil Procedure.

20. Nevertheless, after carefully considering the evidence provided by the

parties and their arguments, the Court concludes that both parties share the blame

for creating the situation that led to Carter Lumber’s production. It seems clear to

the Court that counsel did not engage in a thorough discussion of the potential for

difficulties with electronic production with one another during the Case Management

Conference, and that Carter Lumber’s counsel did not adequately consult with his

client about its ability to produce electronic information in the format required under

the CMO. (See former Business Court Rules 17.1(i) and (r-u)).1

21. Additionally, counsel failed to pursue discovery for over four months

while they waited for the Court’s determination of Defendants’ Motion to Dismiss.

This was done without Court approval or input. That delay left the parties with an

unnecessarily compressed time within which to conduct discovery after the Court

issued its order.

22. Accordingly, the Court concludes, in its discretion, that Plaintiff and

Carter Lumber should share equally the additional cost incurred by Plaintiff as a

result of Carter Lumber’s production of the Electronic File.

1 The Case Management Conference between counsel occurred prior to January 1, 2017,

under the prior Business Court Rules.
23. Plaintiff contends that because of the form in which it was produced,

Plaintiff incurred costs “in excess of $20,000” more than it would have otherwise

incurred in reviewing the Electronic File. (Pl.’s Mem. Supp. Mot. Sanctions, ECF. No.

27 at p. 4.) Plaintiff, however, has not provided the Court with information regarding

the nature of, or documentation supporting, the additional costs. Therefore, on or

before October 5, 2017, Plaintiff shall file with the Court appropriate affidavits and

other documentation of its costs from which the Court will determine each parties’

one-half share. Carter Lumber shall not be allowed to file a response to Plaintiff’s

filing, but the amount of Carter Lumber’s liability for costs shall not exceed $10,000.

THEREFORE, it is ORDERED that:

1. The Motion for Sanctions is GRANTED, in part, and DENIED, in part.

Carter Lumber shall pay one-half of the additional costs incurred by

Plaintiff in reviewing the Electronic File, not to exceed $10,000.

2. On or before October 5, 2017, Plaintiff shall file with the Court affidavits

and other documentation supporting its claim for additional costs. Carter

Lumber shall not be permitted to file a response.2

This the 21st day of September, 2017.

/s/ Gregory P. McGuire
Gregory P. McGuire
Special Superior Court Judge for
Complex Business Cases

2 To the extent Plaintiff seeks an award of attorneys’ fees and costs associated with bringing

the Motion for Sanctions, such request is DENIED.