Rule 26(g) Sanctions for Failure to Supervise Document Collection and Review

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In Optronic Tech, Inc. v. Ningbo Sunny Elec. Co., Ltd., 2020 WL 2838806 (N.D. Cal. June 1, 2020), sanctions were imposed against defense counsel, essentially because the court determined that trial counsel had attempted to hand off their Rule 26(g) obligations to their client’s inside counsel.

There were several key points.  Defense counsel discussed with defendant’s outside counsel in China how the defendant should search for and produce documents.  Defense counsel then permitted the outside counsel to make subsequent decisions regarding the documents to be produced.  Defendant’s written responses to the document requests stated that it “will produce relevant, non-privileged documents responsive to this request, to the extent such documents are located in the course of a reasonable search.”  However, some responsive and damaging documents were withheld. Defense counsel stated that it did not know that the documents had been withheld.  The court explained that defense counsel “has candidly acknowledged that it does not know what decisions [defendant] made about how to proceed with document collection or how it conducted the search for responsive documents.”  After initially giving guidance to the client, the court determined that defense counsel did not adequately follow up to determine if the client followed defense counsel’s advice.

The decision is noteworthy for several reasons.  First, sanctions were imposed under Fed.R.Civ.P. 26(g), not under Rule 37(e).  Second, the court ordered defendant to describe its search and collection methodology.  Third, the court explained counsel’s Rule 26(g) duty to supervise the collection and production process in the context of communications with outside counsel.

First, in Optronic, the court imposed sanctions under Rule 26(g) for a discovery failure in responding to document requests.  Rule 26(g) is the attorney certification rule.  The court did not act under Rule 37, which governs a litigant’s failure to make disclosures or cooperate in discovery.

Second, faced with a discovery failure, the Court ordered defendant to “submit a declaration from a person with knowledge describing with specificity how [defendant] conducted a search for documents responsive to [plaintiff’s] post-judgment document requests.”

The order demonstrates the limits on the attorney-client privilege when spoliation occurs.  See The Hon. P. Grimm, M. Berman, et al., “Discovery About Discovery: Does the Attorney-Client Privilege Protect All Attorney-Client Communications Relating to the Preservation of Potentially Relevant Information?,” 37 U.Balt.L.Rev. 413, 429 (2008).  In this context, courts routinely require the disclosure of at least some attorney-client communications.

Third, the court explained counsel’s duties under Rule 26(g).  It held that counsel are required to make reasonable efforts to ensure that responsive documents are produced.  Self-identification and self-preservation present well-known dangers.  It has long been established that quality control is a key requirement to assure client compliance.

Defense counsel was unable to demonstrate compliance.  Instead, defendant stated that, according to its Chinese counsel, it “has been unable to locate any individual competent to sign a declaration describing with specificity how [defendant] conducted a search for documents responsive to [plaintiff’s] post-judgment document requests.”

Many state bar opinions hold that an attorney has an ethical duty to either be competent or associate with someone who is competent.  See, e.g., Calif. Formal Op. 11-0004.

Defendant’s response explained why defense counsel was unable to describe the search and collection.  Defendant “acknowledged that its counsel had not personally collected the documents but had instead provided guidance to [defendant] and [defendant’s] Chinese counsel about what to collect for production.”  In football parlance, it was a hand off.

That was not enough.  The court held that counsel have “significant responsibility to ensure that a client complies with its discovery obligations….”

The 1983 Advisory Committee Note states that Rule 26(g) “obliges each attorney to stop and think about the legitimacy of a discovery request, a response thereto, or an objection.” Defense counsel’s inability to explain how documents were collected and reviewed squarely presented the question of whether defense counsel had met the Rule 26(g) standard when it certified that it “will produce relevant, non-privileged documents responsive to this request, to the extent such documents are located in the course of a reasonable search.”  The court wrote: “The question, then, is whether [defendant’s counsel] failed to make the reasonable inquiry required by Rule 26(g) when signing [defendant’s] document request responses representing that all responsive documents would be produced.”

In imposing sanctions, the court wrote: “It is not enough for counsel to provide advice and guidance to a client about how to search for responsive documents, and then not inquire further about whether that advice and guidance were followed. This is particularly true here,” given prior issues. [emphasis added].

Defense counsel’s follow up was faulty.  While counsel followed up to see if all documents were collected, “if that follow up did not include inquiring about what the client did (and by [defense counsel’s] own account it did not) then the follow up was not reasonable in these circumstances.” [emphasis added].

The court elaborated, writing that it “does not conclude that counsel must always personally conduct or directly supervise a client’s collection, review, and production of responsive documents…. However, in the circumstances presented here, the Court finds that [defendant’s counsel] did not make a reasonable effort to ensure that [defendant] produced all the documents responsive to [plaintiff’s] requests and thus violated its obligations under Rule 26(g)(1)(B).”  As such, it awarded attorney’s fees jointly against defense counsel and the defendant, in an amount to be determined.  It is noteworthy that defense counsel had moved to withdraw as counsel and the withdrawal motion was granted while the sanctions motion was pending.

As a postscript, the defendant continued to obstruct.  The court held its president in civil contempt and ordered him to pay $4 million under the sanctions order plus some additional fees.  Choi v. 8th Bridge Capital, Inc., No. 217CV08958CASAFMX, 2020 WL 3964035, at *4 (C.D. Cal. July 13, 2020).



For another interesting view of Optronic, see D. Cohen, “Outside Counsel Sanctioned for Not Adequately Supervising Client’s E-Discovery Activities,” Exterro.