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Levy v. Gutierrez

United States District Court, D. New Hampshire

March 28, 2019

Adam S. Levy, et al.
v.
Thomas Gutierrez, et al.

          MEMORANDUM ORDER

          Joseph N. Laplante, United States District Judge.

         In this putative securities law class action, defendant Apple, Inc. has moved to compel GT Advanced Technologies, Inc. (“GTAT”), a non-party, to produce certain documents regarding GTAT's sapphire production capacities, as well as a privilege log.[1] In the underlying complaint, class plaintiffs allege GTAT, its former directors, and Apple materially misled GTAT's investors about GTAT's ability to produce sapphire materials for Apple. Apple seeks the requested sapphire production data from GTAT to rebut plaintiffs' claim.

         GTAT opposes Apple's request, arguing that Apple's requested searches are disproportionate to the needs of this case and unduly burdensome. GTAT filed for Chapter 11 bankruptcy three days before class plaintiffs began filing complaints and was released thereafter of all liability arising from this action. In addition, GTAT has produced over 250, 000 documents to the parties, already has incurred more than $64, 000 in costs responding to Apple's subpoena, and estimates that it will incur about $200, 000 more in costs if ordered to comply with Apple's requested keyword and custodian searches.

         After considering Apple and GTAT's arguments and the evidence submitted in support thereof, the court grants Apple's motion to compel and orders GTAT to produce documents responsive to Apple's outstanding document requests with a privilege log within 21 days of this Order. In addition, the court grants GTAT's request that Apple cover part of GTAT's future expenses for reviewing and producing these documents, including the creation of a privilege log, as required by Fed.R.Civ.P. 45(d)(2)(B)(ii)'s mandatory cost-shifting provision.

         Accordingly, Apple and GTAT shall meet and confer no later than Tuesday, April 2, 2019 to negotiate the further keyword and custodian searches to be performed, as well as how to fairly apportion costs. The cost-shifting negotiations should take into consideration GTAT's central role in the underlying facts of this case, but also GTAT's post-bankruptcy resources. Apple shall not be responsible for any costs incurred by GTAT in opposing Apple's motion to compel or from further negotiations relating to its compliance with Apple's subpoena. If Apple and GTAT cannot reach an agreement, they may schedule a telephone conference with the court to receive further guidance.

         I. Background

         The court draws the following background from Apple and GTAT's briefing for the present motion:

         In this putative class action, plaintiffs allege that GTAT, GTAT's former directors, and Apple made materially false and misleading statements in connection with the offer and sale of securities issued in 2013 and 2014 by New Hampshire-based GTAT. The putative class consists of individual and institutional entities who acquired GTAT securities between November 5, 2013 -the day after GTAT executives announced a purportedly lucrative agreement with Apple - and October 6, 2014, when GTAT filed for Chapter 11 bankruptcy. Broadly speaking, plaintiffs assert that GTAT executives knew from the start that the agreement was doomed to fail and that those executives reaped substantial profits while investors lost millions of dollars.

         In March 2016, GTAT emerged from bankruptcy as a restructured entity. As part of GTAT's bankruptcy plan, the bankruptcy court deemed all claims against GTAT prior to March 2016, including claims arising in this action, to be satisfied, discharged, and released in full. Since then, GTAT has become a privately-owned company with a workforce downsized from approximately 1, 000 employees pre-bankruptcy to about 100 current employees. GTAT maintains that its resources are limited, and that the proper management of such resources are critical for the company to succeed post-bankruptcy.

         In September 2018, Apple served GTAT with a subpoena to produce additional documents. The subpoena included proposed search terms for each document request. Thereafter, Apple and GTAT met and conferred on multiple occasions to narrow Apple's requests but were unable to reach an agreement for several requests, including Request 13. Instead, GTAT proposed a limited production using a narrower set of search terms, from which Apple could review the resulting production before determining whether additional searches were necessary. GTAT did not serve formal objections until November 2018.[2] At the end of December 2018, GTAT produced approximately 8, 000 documents, incurring approximately $23, 700 in contract attorney fees and $41, 000 fees from Akin Gump in December.[3]

         Apple subsequently notified GTAT that it believed GTAT's production was deficient and requested that GTAT complete additional keyword searches for documents responsive to Request 13 for the period leading up to the Apple-GTAT agreement across at least 23 custodians. GTAT estimates that compliance with Apple's requests will require it to review more than 100, 000 documents, incurring more than $148, 000 in additional contract attorney fees and over $50, 000 in additional fees to Akin Gump.[4]Apple maintains that it should not pay any portion of GTAT's review or production costs.

         II. Applicable legal standard

         Under Federal Rule of Civil Procedure 26(b)(1):

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

Apple, as “[t]he party seeking information in discovery over an adversary's objection[, ] has the burden of showing its relevance.” Caouette v. OfficeMax, Inc., 352 F.Supp.2d 134, 136 (D.N.H. 2005) (DiClerico, J.).

         “Although discovery is by definition invasive, parties to a law suit must accept its travails as a natural concomitant of modern civil litigation.” Cusumano v. Microsoft Corp., 162 F.3d 708, 717 (1st Cir. 1998). Non-parties have a different set of expectations. See Id. Where, as is the case here, a party seeks discovery from a non-party, the party seeking discovery “must take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena.” Fed.R.Civ.P. 45(d)(1). Furthermore, when discovery is ordered against a non-party, the court must take steps to “protect a person who is neither a party nor a party's officer from significant expense resulting from compliance.” Id. 45(d)(2)(B)(ii). This may include ordering the party seeking discovery to share at least enough of the cost of compliance to render the remainder “nonsignificant.” See Linder v. Calero-Portocarrero, 251 F.3d 178, 182 (D.C. Cir. 2001) .

         III. ...


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