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Black & Veatch Corporation v. Aspen Insurance UK Ltd.

United States District Court, District of Kansas

February 28, 2014

BLACK & VEATCH CORPORATION, Plaintiff,
v.
ASPEN INSURANCE UK LTD, et al., Defendants.

MEMORANDUM AND ORDER

K. Gary Sebelius U.S. Magistrate Judge

As seen too frequently regarding matters involving electronically stored information (“ESI”), counsel in this case have been unable to cooperate to resolve their discovery disputes without court intervention.[1] Therefore, this matter comes before the Court upon Plaintiff Black & Veatch’s (“B&V”) Motion for Protective Order and Request for Discovery Conference (ECF No. 131). Defendants Aspen Insurance (UK) Ltd., Catlin Lloyd’s Syndicate 2003, Liberty Mutual Insurance Europe (UK) Ltd. (collectively, the “Liability Insurers”); and Defendant Associated Electric & Gas Insurance Service (“AEGIS”) timely filed a response to the present motion. Defendant Factory Mutual Insurance Company (“FMIC”) filed an untimely response[2] indicating that it joins in and incorporates by reference the legal arguments and factual averments contained in AEGIS’s response.[3] However, no substantial delay or prejudice was created by FMIC’s untimely response because the Court must address AEGIS’s arguments regardless. Therefore, FMIC shall be allowed to incorporate the legal arguments and factual averments contained in AEGIS’s response as its own.

As more thoroughly explained below, B&V’s present motion asks the Court to resolve discovery disputes relating to its ESI production. For the following reasons, the Court hereby denies in most respects B&V’s motion.[4]

I. Background

The extensive background of this lawsuit is recounted in the Court’s prior Memorandum and Order and familiarity is presumed.[5] In brief, B&V entered into a series of agreements with American Electric Power Service Corporation (“AEP”) in its own capacity and/or as agent for other power companies (collectively, the “Owners”), to engineer, procure material and equipment for, and construct several wet flue gas desulfurization systems, also known as jet bubble reactors (“JBRs”), for four power plants. After construction of the JBRs, the Owners alleged significant defects to the JBR components. B&V entered into an agreement with the various Owners and paid them a lump-sum for repair costs and also agreed to replace defective components. The total amount incurred by B&V was several millions of dollars. To recover some of the incurred costs, B&V submitted a claim to its professional liability carriers. Further, B&V subsequently filed suit against MTI, a subcontractor who performed work on the JBRs. B&V also brought this breach of contract and declaratory judgment action against various insurance providers seeking damages and an adjudication of rights, duties, and obligations under certain insurance policies.

The insurance policies provided by the various insurers are divided into liability coverage and property coverage. Zurich Insurance Company provided the primary layer of general liability coverage. Defendants Aspen Insurance (UK) Ltd. and Catlin Lloyd’s Syndicate 2003 provided a first layer of excess liability coverage. Defendant Liberty Mutual Insurance Europe (UK) Ltd. provided a second layer of excess liability coverage. In addition to B&V’s liability coverage, AEP and the various Owners of the power plants procured property insurance from Defendants FMIC and AEGIS (collectively, the “Property Insurers”) and Energy Insurance Services, Inc. Energy Insurance Services, Inc. has subsequently been dismissed from this matter.

Turning to the current ESI dispute, B&V alleges that it maintains ESI in the following locations: Documentum, custodian hard drives, and Accounting and Field Management System. Documentum is the equivalent of a “central filing” for ESI. It is an electronic document management program organized and maintained on a project-by-project basis. Documentum includes separate databases for the original JBR installations at each project, one for the overall remediation effort, and one for each JBR remediation project. The custodian hard drives include the hard drives where B&V’s personnel maintain their email and other documents. While Documentum databases relate to specific JBR projects, the custodian hard drives may have the individual’s data for any project he or she might have worked on at any given time. A certain number of custodians have promoted much of their ESI stored on their hard drives to Documentum. However, some email and documents may still be retained solely on the custodian’s hard drive. B&V also states that the Accounting and Field Management System includes ESI pertaining to an accumulation of project costs and accounting data.

In July 2010, B&V harvested data in connection with the litigation involving MTI from Documentum and 31 custodian hard drives relating to the initial JBR construction projects. This data harvest resulted in approximately 350 gigabytes of data after utilizing the search terms agreed to by B&V and MTI. B&V contends that it spent approximately $600, 000 for the MTI production, storage, and privilege review. Before the present litigation began, B&V alleges that it produced over 9 gigabytes of data from files relating to both the initial and the remediation JBR projects to the Defendants. Since the filing of this action, B&V alleges to have made available to the Defendants 98.7 gigabytes of data received from AEP plus the approximately 350 gigabytes of data produced in the MTI litigation. Despite this production, B&V has not produced any additional ESI created before or after July 2010 relating to the original construction and remediation JBR projects. B&V does not dispute that there is relevant information in the post-July 2010 data, but it argues that the respective Defendants’ proposed search terms are too broad.

II. Procedural Conference Requirement

Fed. R. Civ. P. 37(a)(1) and D. Kan. Rule 37.2 require a moving party, in good faith, to confer with opposing counsel before filing a motion to resolve any discovery disputes. When a motion is filed, it “must include a certification that the movant has in good faith conferred or attempted to confer with the person or party failing to make disclosure or discovery in an effort to obtain it without court action.”[6] The duty to confer generally requires counsel to “converse, confer, compare views, consult, and deliberate, or in good faith attempt to do so.”[7] In this case, B&V certifies that the parties have conferred in good faith on multiple telephone conferences and numerous rounds of correspondence to resolve the issues that are the subject to this motion, but have reached an impasse. While the Court recognizes the efforts of the parties to meet and confer regarding the current discovery issue and finds that such efforts satisfy the meet-and-confer requirement, the Court reminds counsel that these conversations require the parties to cooperate with one another. After reviewing email correspondence between the parties, a lack of cooperation was occasionally evident to the Court.[8] Cooperation is necessary in this complex litigation involving vast amounts of ESI in which the parties are in the best position to balance its relevancy and burden of production. “The cooperation process should involve information sharing and dialogue in an attempt to resolve discovery disputes without the necessity of the Court ruling on each issue in dispute.”[9] The parties should continue to strive for such cooperation throughout this litigation.

III. Discussion

Pursuant to Fed.R.Civ.P. 26(c), a “court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.]” The decision to enter a protective order is within the court’s discretion.[10] In fact, the Supreme Court recognizes that “[t]he trial court is in the best position to weigh fairly the competing needs and interests of parties affected by discovery. The unique character of the discovery process requires that the trial court have substantial latitude to fashion protective orders.”[11] Despite this broad discretion, “a protective order is only warranted when the movant demonstrates that protection is necessary under a specific category set out in Rule 26(c).”[12] In addition, the party seeking a protective order bears the burden of establishing good cause.[13] To do this, the movant must make “a particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements.”[14] Additionally, courts are “mindful that the discovery rules are also subject to the injunction of Rule 1 that they be construed to secure the just, speedy, and inexpensive determination of every action.”[15]

In this case, B&V seeks protection from conducting a new search in Documentum for ESI that existed at the time of the July 2010 data harvest relating to the original JBR installations. B&V also requests protection from searching Documentum in the manner suggested by Defendants for ESI related to the original installation and remediation projects that were added to Documentum after the July 2010 harvest. Moreover, B&V argues that protection is necessary from harvesting data from custodian hard drives it has not designated and in the manner Defendants propose to search such hard drives. Finally, B&V requests protection from producing interim accounting ESI from B&V’s Accounting and Field Management System.

A. Production of ESI in Documentum

Defendants request B&V to search Documentum for data that existed prior to the July 2010 harvest using search terms other than or in addition to those used in the MTI litigation. However, the parties’ proposed search terms for this search and all other disputed ESI data searches described herein differ among themselves-each party proposes their own search terms.[16] Defendants also request B&V to run their respective search terms through Documentum databases for information added after the July 2010 harvest relating to the original installation and remediation projects. B&V opposes using both Defendants’ respective search terms and proposes its own list.

Beginning with the pre-July 2010 data, B&V argues that it has already produced over 350 gigabytes from Documentum relating to the original JBR installation making it unreasonable and excessively expensive to conduct further searches. B&V purports that the 350 gigabytes of data is more than sufficient and reasonable to comprise its ESI production involving B&V’s and MTI’s performance on the JBR projects, the “occurrence, ” and the resulting damages. In addition, B&V asserts that some of the search terms (e.g. “calculations, ” “contingency, ” “contract, ” or “credit”) are unduly broad with little prospect of returning substantive data. B&V argues that Defendants’ search terms would lead to unnecessary costs and duplicative document production. B&V is unable to give an estimate of costs of producing data using Defendants’ respective search terms but expects it would be several hundred thousand dollars. B&V does state that it spent approximately $600, 000 for the production, storage, and privilege review of ESI in the MTI litigation.

In the alternative to resolving the search term differences for pre-July 2010 data, B&V proposes shifting some of the costs to Defendants. B&V offers to produce the Documentum databases in their entirety after privileged material and work product is removed and after a clawback agreement is in place. Defendants would then pay for all costs associated with the additional production arising from Defendant’s allegedly expansive search terms.

Turning next to Defendants’ post-July 2010 data request, B&V is willing to harvest this data from Documentum but only to the extent of using reasonable search terms agreed upon by all parties. B&V has agreed to use some, but not all, of Defendants’ proposed search terms. B&V asserts that its own proposed search terms are sufficiently broad to comply with its obligations under the Federal Rules. At their last meet-and-confer conference, B&V purports that it offered to run the Property Insurers’ ...


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