Federal Deposit Insurance v. McCaffree
Federal Deposit Insurance v. McCaffree
Opinion of the Court
MEMORANDUM AND ORDER
This matter comes before the court upon Defendants Carl McCaffree’s and Sam McCaffree’s Motion to Compel (ECF No. 80). After the McCaffrees’ motion to compel had been fully briefed, both the McCaffrees and the Federal Deposit Insurance Corporation, as receiver of the Columbian Bank and Trust Company (FDIC-R) began filing additional briefs without leave of the court. The briefs provided additional factual information about the discovery dispute before the court. The briefs also updated the court about which parts of the motion to compel were now moot or potentially moot because the FDIC-R had complied with the McCaffrees’ requests. But the briefs also contained additional arguments and disputed positions.
The seven briefs now pertaining to this motion to compel have complicated and prolonged the task of resolving the McCaffrees’ motion. After reviewing all of the filings, it is unclear what, if any, of the discovery dispute remains left to resolve. While the court appreciates and encourages litigants to work together to resolve discovery disputes — even after a party files a motion to compel — the manner in which the McCaffrees and the FDIC-R have chosen to update the court has been less than helpful. In the future, if the parties wish to file additional briefs, they shall first seek leave of the court. If they wish to inform the court that a portion of a motion to compel is now moot, they shall do so through an additional joint filing that clearly outlines which portions of the dispute the parties’ have resolved. Given the briefing on the motion to compel, the court realizes that this memorandum and order may rule on issues the parties have resolved.
I. Procedural Conference Requirement
The Federal Rules of Civil Procedure and this district’s local rules require a moving party to confer with opposing counsel about the discovery dispute at issue before filing a motion to compel.
II. Background
FDIC-R, brings this action against former directors and executive officers of the Columbian Bank, alleging the bank suffered losses in excess of $56 million as a result of the defendants’ negligence, gross negligence, and breach of their fiduciary duties regarding the approval of 20 large commercial loans.
The FDIC has compiled a database of approximately 3.7 million electronically stored documents. These include documents the FDIC obtained from the bank, including documents that were stored on Columbian’s file server and the desktop computers of a number of bank employees and scanned documents. In addition, the database includes documents the FDIC subpoenaed from borrowers following the The FDIC has organized the documents into folders by using search terms, such as the names of the directors and officers of Columbian, the loans referenced in the complaint, and other relevant search terms. After removing duplicate copies of documents, this process has reduced the number of relevant, or potentially relevant, documents to approximately 60,000, divided into folders based upon search terms. Defendants’ counsel have been provided with a list of the search terms used by the FDIC to prepare the folders. closing of the bank.
The parties have agreed that defendants will provide plaintiff with any additional search terms they wish to have applied to the entire database of documents. Unless objected to, additional folders will be prepared based upon the results of those additional search terms. After this has been accomplished, a third-party web hosting service, will make all the folders available for defendants’ counsel to review online using a Web-based service known as Relativity. The parties have agreed to share jointly Relativity’s monthly charges. Copies will be made of documents selected by defendants except for documents that plaintiff believes are privileged. Any such documents will be listed by plaintiff on a privilege log and will not be produced to defendants unless so ordered by the court. All other documents selected by defendants will be number-stamped and will contain language reciting any confidentiality requirements and restrictions imposed by the court.3
To understand the context in which this dispute arises, a brief discussion of the Columbian Bank’s filing systems and the FDIC-R’s efforts in preserving and producing these documents is necessary.
A. Columbian Bank’s Filing Systems
According to the declaration of Mark McCaffree, who served as the vice president of Columbian Bank and sat on its board of directors, the bank utilized a dual-filing sys
Mark McCaffree’s declaration also states that Columbian Bank maintained a “loan file” for each of its loans. The loan file was stored both within the hard-copy system and within DocStar. In DocStar, an electronic file bearing the borrower’s name would contain individual subfolders for each loan. Generally, these subfolders were named by the loan number. If the borrower had more than one loan at the bank, the bank would also maintain a “master file” containing documents relevant to all of the loans. The bank did this to avoid duplicate documents appearing in each of the respective loan subfolders. Therefore, if there was a master file in existence, the respective loan subfolders likely would not contain all of the records pertinent to those loans.
B. The FDIC’s Efforts to Capture, Store, and Produce Documents
On August 22, 2008, the Office of the State Bank Commissioner of Kansas closed Columbian Bank and appointed the FDIC as receiver of the bank pursuant to 12 U.S.C. § 1821.
Throughout this case, Lockheed Martin uploaded and continues to upload documents from Columbian Bank, which are stored in a database called Relativity. According to the FDIC-R, Lockheed Martin manages Relativity, processes information, and retrieves documents and other information requested by the parties. Additionally, Lockheed Martin has provided training on Relativity to the McCaffrees’ defense counsel, legal assistants, and other employees at counsel’s law firm. Lockheed Martin has also provided training to counsel representing co-defendant Jimmy Helvey.
The FDIC-R produced to defendants the inventory of the 110 boxes of documents obtained from the bank by the FDIC-R or its contractors. The FDIC-R states that while all of the contents of the boxes were scanned, only some of the electronically imaged contents of the boxes were uploaded to Relativity. The same is true of other documents and information in the FDIC-R’s possession. The documents uploaded to Relativity were those that contained one or more of the parties’ agreed upon search terms. The inventory provided to defendants specified which documents or files within the boxes were uploaded to Relativity. The FDIC-R also invited defendants to designate additional boxes, files, or documents they would like uploaded to Relativity, but the FDIC-R says that defendants did not select any additional materials. According to the FDIC-R, Lockheed Martin activated a feature on Relativity that should allow defendants to view the entire contents of each box on the inventory list that was uploaded to Relativity, just as those documents were arranged in the original hard copy files.
C. Problems with Production
After agreeing to utilize Relativity and splitting the cost with the FDIC-R for maintaining Relativity, the McCaffrees claim they have uncovered shortcomings with the system. For one, the McCaffrees contend
The MeCaffrees state they have also encountered problems with the way the FDIC-R has preserved and produced DocStar ESI. Because of the nature of the bank’s dual-filing system, the MeCaffrees anticipated that Relativity would contain at least two copies of each loan file and two copies of each master loan file — a version that existed in hard copy and a version that existed in DocS-tar. The MeCaffrees had understood that the FDIC-R had imaged Columbian Bank’s documents at the time the bank was closed. But they say that certain documents contained in the master files (that would pertain to multiple loans taken out by individual borrowers) were not produced. DocStar is a proprietary service, and the FDIC-R did not continue to contract with DocStar after the bank went into receivership. As result, the FDIC-R apparently captured documents stored in DocStar but was not able to preserve DocStar’s system of organizing folders where the documents were maintained. For example, the master files stored on DocStar would not be readily accessible. But the FDIC-R contends defendants should be able to reassemble the master files by searching the DocStar documents on Relativity by the bank’s loan numbers for the target files or by searching for documents containing the term “master file” combined with the name of the target loans.
In one of their supplemental briefs, the MeCaffrees state that even though the FDIC-R did not maintain the DocStar system, it has come to light that the bank that purchased from the FDIC some of Columbian Bank’s assets has maintained DocStar. The vice president of operations at Citizens Bank and Trust Company, the purchasing bank, in response to an inquiry from the FDIC-R’s counsel, stated in an e-mail that, “the file structure in DocStar did not change when Citizens took over the Columbian branches.”
III. Discussion
The MeCaffrees contend that the FDIC-R should have reasonably anticipated litigation against the bank’s directors and/or executive officers on August 22, 2008, the day it assumed control of the bank — the same day it presented to Columbian Vice President Mark McCaffree a letter giving notice of potential claims against the officers and directors of the bank. Because of this, the MeCaffrees say FDIC-R was under an obligation to preserve relevant documents, including the location and placement of these documents. The MeCaffrees contend that the FDIC-R has not lived up to its discovery obligations because it has failed to conduct a reasonable search for all responsive documents. They point to facts suggesting the incomplete production of documents associated with certain loans and cite problems with the means of production — for example, the initial suppression of relevant metadata and incorrect meta-data associated with files. The MeCaffrees also contend that the FDIC-R should be responsible for obtaining from another bank documents responsive to the MeCaffrees’ requests for production because these documents may not have been imaged by the FDIC-R at the time of the bank’s closing and because the FDIC-R has the legal right to obtain these documents on demand.
After this motion became ripe, the parties, without leave of the court, filed additional briefs that containing supplemental facts and arguments. Among other things, the briefs informed the court that a number of issues raised in the MeCaffrees’ motion to compel are now moot. In the MeCaffrees’ most recent filing, they informed the court that they still seek an order requiring the FDIC-R to locate and produce all responsive documents available from Citizens Bank, and if a document is no longer available, the MeCaffrees request that the FDIC-R be required to identify where the document is located and state the person or entity that has control of the document. The MeCaffrees also seek an order requiring the FDIC-R to produce for inspection and copying all original Bank loan and underwriting files for the relevant loans that are in the FDIC-R’s possession or control. They also seek an order requiring the FDIC-R to supplement its responses to Interrogatories Nos. 10 and 11, as it has agreed to do. It appears this portion of the motion is now moot because on November 14, 2012, the FDIC-R filed a Notice of Service that states it has served supplemental responses to these interrogatories.
A. The FDIC-R’s Obligations in Responding to Discovery Requests
The MeCaffrees argue the FDIC-R failed to fully preserve relevant information once it reasonably anticipated litigation and that the FDIC-R has failed to respond in full to their requests for production. As to the FDIC-R’s duty to preserve documents, the present record does not establish that the FDIC-R failed to preserve relevant documents, but it does raise concerns about whether the MeCaffrees have received all documents responsive to their discovery requests.
1. The FDIC-R’s Duty to Preserve Documents
“Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.”
There is nothing in the present record that establishes the FDIC-R failed to properly preserve documents and evidence. It appears the FDIC-R captured the vast majority, if not all, of the evidence and documents the FDIC-R knew or should have known were relevant to litigation at the time when it assumed control of the bank and began efforts to image the bank’s files. And the McCaffrees have not pointed to any authority that establishes the FDIC-R was under a duty to maintain Columbian Bank’s filing system in the same manner Columbian Bank maintained it. The FDIC-R, unlike most litigants, was also in the unique position of preserving another entity’s documents. The fact that the FDIC-R perhaps failed to image certain bank employees’ computer hard drives is not itself evidence that the FDIC-R failed to properly preserve documents given what the FDIC-R would have likely known at the time. For example, it would be reasonable to expect that the majority of documents pertaining to the loans at issue would be maintained in the bank’s loan files. If pertinent documents existed on employee hard drives, it would also be reasonable to assume that the bank would place those documents in the loan files as well.
The bulk of the remainder of the discovery issues the McCaffrees address appear to have more to do with the method of production of ESI. But the court is faced with conflicting information on this point. For example, the McCaffrees detail the difficulties they have encountered in attempting to locate responsive documents and replicating certain files. But the FDIC-R says the McCaffrees should be able to do this. So, while this is insufficient for a finding that the FDIC-R failed to properly preserve evidence — at least based on the present record — it is also good reason, as explained below, to require the FDIC-R to supplement its production.
2. The FDIC-R’s Duties in Responding to Discovery Requests
As for the FDIC-R’s obligations in responding to the McCaffrees’ discovery requests, the McCaffrees have come forward with some evidence suggesting the FDIC-R failed to produce responsive documents. This seems more a result of the large quantity of documents available for production and the fact that both parties believed, perhaps mistakenly, that their agreed method of production utilizing Relativity would capture all responsive documents. Nevertheless, it is the FDIC-R’s duty to conduct a reasonable search for documents responsive to the McCaffrees’ discovery requests in light of the fact that the McCaffrees have called into question the reliability of the parties’ agreed method of production using Relativity.
Fed.R.Civ.P. 34(b)(2)(E) applies to producing documents or ESI in response to a discovery request. It states that “[ujnless otherwise stipulated or ordered by the court” the producing party “must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request.]”
Here, the parties agreed to a specified method of production of ESI.
But while the FDIC-R may have complied with the spirit of the parties’ agreement regarding production of ESI, it is likely that production in this manner has been incomplete and also fraught with problems. As detailed in background section, the McCaffrees have encountered multiple issues with the Relativity database that has made the search for relevant documents cumbersome. Also troubling is that certain documents referenced in some of the Loan Approval Request forms were not produced as part of the complete loan packages presented to the board for approval. The FDIC-R points out that it is possible that these documents were not part of the file at the time it seized control of the bank. However, given the nature of the problems with Relativity, it appears just as likely, if not more so, that these documents were not properly identified as responsive and therefore not produced. The McCaffrees also' say that master files pertaining to multiple loans have not been fully produced, and the McCaffrees contend they have not received two copies of each of the loan files for the loans issue in this case — both the hard-copy version and the DocStar version. And they say they are missing underwriting documents.
Generally, when a party responding to discovery requests states that it has fully responded, the court will not compel further responses unless the moving party has presented information that calls into question the veracity of the responding party’s representation.
The majority of the problems the MeCaffrees cite pertain to various loan packages, loan files, underwriting documents, and documents associated with the board’s loan-approval process, including minutes memorializing board meetings and documents presented to the board. The McCaffrees’ discovery requests, however, encompass other categories of documents. For example, some requests seek information that may or may not be contained in Relativity, such as requests for materials provided to or prepared by an expert in anticipation of the expert’s testimony.
Because the McCaffrees have come forward with evidence suggesting the FDIC-R has made an incomplete production as to documents related to the loans at issue in this case, information presented to the board, information generated from board meetings, or the board’s loan-approval process, the FDIC-R is ordered to conduct a reasonable search to locate and produce additional responsive documents to the extent additional responsive documents exist. These include Request for Production Nos. 14-18, 20, 24, 36-47, 49-79, 82, and 83. Additionally, if any responsive documents or files are not within the FDIC-R’s possession, custody, or control, the McCaffrees ask the court to order the FDIC-R to state the disposition of the document, including where it is currently located and the identity of the person or entity that has possession, custody, or control. If the McCaffrees seek this information, they are free to serve a discovery request on the FDIC-R. The court declines to compel more than what the McCaffrees sought in their discovery requests.
When the FDIC-R is conducting a search for additional responsive documents, it is required to search and produce all documents within its custody, possession, or control.
The McCaffrees have produced the FDIC-R’s Purchase and Assumption Agreement with Citizens Bank, which gives the FDIC-R the legal right to obtain certain documents from Citizens Bank. Article VI of the Agreement applies to records. Among other
The Assuming Bank agrees to permit the Receiver and the Corporation access to all Records of which the Assuming Bank has custody, and to use, inspect, make extracts from or request copies of any such Records in the manner and to the extent requested, and to duplicate, in the discretion of the Receiver or the Corporation, any Record in the form of microfilm or microfiche pertaining to Deposit account relationships; ... The party requesting a copy of any Record shall bear the cost (based on standard accepted industry charges to the extent applicable, as determined by the Receiver) for providing such duplicate Records. A copy of each Record requested shall be provided as soon as practicable by the party having custody thereof.27
The FDIC-R does not contest that it has the legal right to obtain certain documents from Citizens Bank. From the face of the agreement, it is clear that the FDIC-R does retain the legal right to obtain copies of some documents responsive to the McCaffrees’ discovery requests, and in fact, after this motion was fully briefed, the FDIC-R produced to the McCaffrees certain documents maintained by Citizens Bank. But based on the present briefing, the court is not convinced that the agreement gives the FDIC-R the right to obtain from Citizens Bank original tiles for the McCaffrees to inspect, and the court is not convinced the agreement gives the FDIC-R unfettered access to the DocS-tar electronic storage system maintained by Citizens Bank.
Other than pointing the court to selected provisions of the 56-page Purchase and Assumption Agreement, the McCaffrees have not discussed in detail the scope of what they believe the agreement entitles the FDIC-R to obtain. The McCaffrees have suggested they themselves are entitled to inspect and copy original loan and underwriting files for the loans at issue in this case. To the extent the FDIC-R has in its possession original loan and underwriting files, this would be permissible.
The same is true of documents maintained by Citizens Bank in DocStar. Issues regarding DocStar may in fact be moot at this juncture. The McCaffrees say that it appears the FDIC-R has produced DocStar documents maintained by Citizens Bank.
B. Costs and Attorney Fees
The MeCaffrees request that the court award them costs and attorney fees incurred as a result of filing this motion to compel and costs and fees incurred as a result of reviewing documents in an effort to locate files that were not maintained in the Relativity database. Both requests are denied. The court has not granted in full the MeCaffrees motion to compel, and therefore, the court declines to award costs and fees.
The MeCaffrees have encountered difficulties with the Relativity database and have made a showing that it is reasonably likely some responsive documents have not been produced. The FDIC-R, however, has maintained that its contractors have addressed all of the MeCaffrees’ concerns and that all responsive documents have been uploaded to Relativity. While the record is sufficient to require the FDIC-R to search for additional responsive documents, it is not sufficient to sanction the FDIC-R because of unanticipated difficulties resulting from parties’ agreed method of production. There are also genuine disputes between the parties concerning Relativity’s capabilities and what documents are available through Relativity. For all of these reasons, the MeCaffrees’ request for costs and fees is denied.
Accordingly,
IT IS THEREFORE ORDERED that Defendants Carl McCaffree’s and Sam McCaffree’s Motion to Compel (ECF No. 80) is hereby granted in part and denied in part.
IT IS FURTHER ORDERED that within thirty (30) days from the date of this order the FDIC-R shall: (1) conduct a search for documents responsive to Requests Nos. 14-18, 20, 24, 36-47, 49-79, 82, and 83, including obtaining responsive documents from other entities to the extent the FDIC-R has the legal right to request to obtain these documents on demand; (2) to the extent additional responsive documents exist, the FDIC-R shall supplement its responses to these discovery requests; (3) to the extent the FDIC-
IT IS SO ORDERED.
. Fed.R.Civ.P. 37(a)(’); D. Kan. Rule 37.2.
. See generally Am. Compl., ECF No. 58.
. Scheduling Order at 4-5, ECF No. 35.
. Decl. of Mark McCaffree in Supp. of Defs. Carl McCaffree’s and Sam McCaffree’s Mot. to Compel at 1, ECF No. 82-10.
. Pk’s Mem. in Opp’n to Defs. Carl and Sam McCaffree's Mot. to Compel at 3, ECF No. 90.
. Pk's Mem. in Opp’n to Defs. Carl and Sam McCaffree’s Mot. to Compel at 8, ECF No. 90.
. Defs. Carl McCaffree’s and Sam McCaffree’s Mot. to Compel at 8, ECF No. 81.
. Id. at 9.
. E-mail from Larry Taft to Charles Getto at 1, ECF No. 102-2 (sealed).
. See Notice of Service at 1, ECF No. 128.
. School-Link Techs., Inc. v. Applied Res., Inc., No. 05-2088-JWL, 2007 WL 677647, at *3 (D.Kan. Feb. 28, 2007) (quoting Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003)).
. Pouncil v. Branch Law Firm, No. 10-1314-JTM-DJW, 2012 WL 777500, at *5 (D.Kan. Mar. 7, 2012) (quoting School-Link Techs., 2007 WL 677647, at *3).
. Zubulake, 220 F.R.D. at 217.
. Fed.R.Civ.P. 34(b)(2)(E)(i).
. The McCaffrees devote an additional portion of their brief to arguing the FDIC-R has not maintained the documents as they were kept in the usual course of Columbian Bank's business. The McCaffrees rely on case law addressing what it means to produce documents as they were kept in the usual course of business. See SEC v. Kovzan, No. 11-2017-JWL, 2012 WL 3111729, *9 (D.Kan. July 31, 2012) (opining that the producing party must provide some level of guidance to the discovering party when production involves a large, disorderly mass of documents),
. See Scheduling Order at 4 — 5, ECF No. 35.
. See Hock Foods, Inc. v. William Blair & Co., LLC, No. 09-2588-KHV, 2011 WL 884446, at *8 (D.Kan. Mar. 11, 2011) ("The Federal Rules require a party to conduct a reasonable search for responsive information.”).
. The McCaffrees attached to their motion the FDIC-R's responses to their discovery requests, which specifically reference Relativity documents. See generally Pl.’s Resps. To Defs. Carl McCaffree and Sam McCaffree’s Reqs. for Pro-due. Of Docs., ECF No. 82-2. The McCaffrees did not attach their original discovery requests, which would provide information about whether they specified that documents should be produced in hard-copy format in addition to the electronic production. The party propounding discovery requests typically specifies the form or forms of production. See Fed.R.Civ.P. 26(b) advisory committee's note to the 2006 amendments (stating that the party requesting ESI may designate the form or forms in which it should be produced and noting that specifying the forms of ESI is more important than when a party requests hard-copy documents but also stating that a party may specify hard copy as the requested form).
. See Sonnino v. Univ. of Kan. Hosp. Auth., 220 F.R.D. 633, 639 (D.Kan. 2004) (denying a motion to compel as to discovery requests to which the defendant stated it had fully responded).
. Pl.’s Reps, to Defs. Carl McCaffree and Sam McCaffree’s Reqs. for Produc. of Docs, at 4, ECF No. 82-2.
. See Stouder v. M & A Tech., Inc., 2011 WL 673763, at * 3 (D.Kan. Feb. 17, 2011) (stating that the court will not compel parties to produce more than what was specifically sought in the discovery requests).
. Fed.R.Civ.P. 34(a)(1).
. Noaimi v. Zaid, 283 F.R.D. 639, 641 (D.Kan. 2012) (emphasis omitted) (citing Ice Corp. v. Hamilton Sundstrand Corp., 245 F.R.D. 513, 517 n. 14 (D.Kan. 2007)).
. Purchase and Assumption Agreement at 32, ECF No. 82-9.
. Id. at 11.
. Id. at 32.
. For example, the if the FDIC-R still has the original files associated with the Lockhaven Estates loan, the McCaffrees should be entitled to inspect and copy these documents.
. Defs. Reply to FDIC-R’s Resp. to Notice of Supp. Facts and Addendum to the Mot. to Compel at 4, ECF No. 121.
. See id. at 5; see also Pl.’s Mem. in Opp'n to Defs. Carl and Sam McCaffree’s Mot. to Compel at 12, 15, ECF No. 90.
. See Fed.R.Civ.P. 37(a)(5)(C).
. See Pl.’s Mem. in Opp’n to Defs. Carl and Sam McCaffree’s Mot. to Compel at 12, 15, ECF No. 90.
Reference
- Full Case Name
- FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver of The Columbian Bank and Trust Company v. Carl L. McCAFFREE
- Cited By
- 9 cases
- Status
- Published