Hat tip to the team at DLA Piper (Dennis Kiker, Jennifer M. Feldman, Leeanne Sara Mancari and Andrew J. Peck) for their case coverage – very interesting case!

In Optronic Tech., Inc. v. Ningbo Sunny Elec. Co., Ltd., No. 16-cv-06370-EJD (VKD) (N.D. Cal., June 1, 2020), California Magistrate Judge Virginia K. DeMarchi granted in part and denied in part the plaintiff’s motion for sanctions pursuant to Rule 26(g) of the Federal Rules of Civil Procedure against defendant Ningbo Sunny Electronic Co., Ltd. (Ningbo Sunny) and its counsel, granting the plaintiff’s motion for sanctions with respect to Ningbo Sunny’s responses to the plaintiff’s document requests but denying the motion with respect to Ningbo Sunny’s responses to the plaintiff’s interrogatory.

Case Background

In this antitrust case about the sale of telescopes, the Court had previously found that defendant Ningbo Sunny had deliberately withheld certain documents and ordered Ningbo Sunny to “submit a declaration from a person with knowledge describing with specificity how Ningbo Sunny conducted a search for documents responsive to Orion’s post-judgment document requests.”  However, Ningbo Sunny did not comply with the Court’s order to provide more information about how it searched for responsive documents. Instead, Ningbo Sunny filed a noticed that stated: “According to Ningbo Sunny’s Chinese counsel James Zou, Ningbo Sunny has been unable to locate any individual competent to sign a declaration describing with specificity how Ningbo Sunny conducted a search for documents responsive to Orion’s post-judgment document requests.”

Judge’s Ruling

With regard to the response to interrogatory, Judge DeMarchi stated: “the Court is not persuaded that Ningbo Sunny’s original response to the interrogatory is inconsistent with the federal rules, made for an improper purpose, or otherwise unreasonable.” As a result, she denied the plaintiff’s request for sanctions regarding the interrogatory.

With regard to document requests, Judge DeMarchi stated: “Ningbo Sunny’s continued refusal to explain to the Court how it conducted a search for responsive documents and otherwise complied with its discovery obligations only serves to reinforce the Court’s impression that Ningbo Sunny did not comply with its discovery obligations and did not search for and produce the responsive documents it said it would produce.”

According to Judge DeMarchi, that left the question as to whether defendant’s outside counsel “failed to make the reasonable inquiry required by Rule 26(g) when signing Ningbo Sunny’s document request responses representing that all responsive documents would be produced. ‘Rule 26(g) does not require the signing attorney to certify the truthfulness of the client’s factual responses to a discovery request. Rather the signature certifies that the lawyer has made a reasonable effort to assure that the client has provided all the information and documents available to him that are responsive to the discovery demand.’”

Despite a lengthy discussion of what it did do, defendant’s outside counsel (which indicated that its continued representation of Ningbo Sunny was “unreasonably difficult” due to communication issues and ultimately filed a motion to withdraw as counsel) “candidly acknowledged” that it did not know what decisions Ningbo Sunny made about how to proceed with document collection or how it conducted the search for responsive documents.  Noting that the plaintiff had argued that defendant’s counsel “cannot fulfill its obligations under Rule 26(g) if it does not know, and does not inquire into, what Ningbo Sunny did to search for responsive documents or whether Ningbo Sunny followed its advice”, Judge DeMarchi stated “The Court agrees.”

As a result, Judge DeMarchi ordered sanctions, as follows:

“Ningbo Sunny’s document production shall be completed no later than June 26, 2020 and all responsive documents that have not yet been produced shall be produced to Orion by that date. On or before June 26, 2020, Ningbo Sunny shall file with the Court a declaration of a person with knowledge describing with specificity what Ningbo Sunny did to search for and collect responsive documents.”; and

“monetary sanctions are appropriate to compensate Orion for the attorneys’ fees and costs it incurred with respect to: (1) preparing the portion of the joint discovery dispute letter directed to Ningbo Sunny’s failure to comply with its obligations to produce responsive documents; (2) the portion of the March 17, 2020 hearing concerning Ningbo Sunny’s document production and failure to comply with the Court’s March 4, 2020 order; and (3) the briefing and hearing on the portion of Orion’s motion for sanctions that concerns Sheppard Mullin’s failure to conduct a reasonable inquiry regarding Ningbo Sunny’s compliance with its obligation to produce responsive documents”.

So, what do you think?  Should courts give outside counsel firms leeway in Rule 26(g) sanctions disputes when the firm is working with a difficult client?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

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