Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-02493/USCOURTS-azd-2_11-cv-02493-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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Richard G. Himelrick (004738)

TIFFANY & BOSCO, P.A.

Third Floor Camelback Esplanade II

2525 East Camelback Road

Phoenix, Arizona 85016-4237

Telephone: (602) 255-6000

Facsimile: (602) 255-0103

rgh@tblaw.com

Special Master

UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

SGD Engineering Limited, an Israeli 

corporation,

Plaintiff,

vs.

Lockheed Martin Corporation 

Incorporated, a Maryland corporation,

Defendant.

Case No.: 2:11-cv-2493-DGC

Special Master’s Preliminary 

Report and Recommendation

1. Introduction

Defendant Lockheed Martin Corporation contracted to build an aircraft pod for 

Toshiba. The pod was to house radar equipment on F-15 military aircraft. Lockheed 

subcontracted construction of the pod to Plaintiff SGD Engineering Ltd. SGD sued 

Lockheed for allegedly breaching the subcontract by refusing to pay in full for SGD’s 

work. Lockheed counterclaimed for lost profits and liquidated damages it incurred to 

Toshiba because of SGD’s allegedly untimely and defective performance.

In connection with the parties’ document production, Lockheed served a privilege 

log. Lockheed revised the privilege log several times in response to objections and 

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concerns expressed by SGD. After the parties were unable to resolve their differences 

over the sufficiency of Lockheed’s Fourth Privilege Log, the Court appointed me as a 

special master to prepare a report and recommendation. See Doc. 64.

Lockheed’s Fourth Privilege Log contains 653 entries. Objections were 

withdrawn and the documents produced for 147 entries, leaving 506 entries in dispute. 

Many, probably most of the entries, involve multiple documents.

Shortly after my appointment, I scheduled a telephone conference with the parties. 

During the conference, the parties summarized their positions and agreed upon a schedule 

to brief their positions. So that I could better understand the controversy, I ordered the 

parties to each select five documents listed on the privilege log to be produced for me to 

confidentially review. See Doc. 65. The parties designated the documents as ordered, 

and Lockheed provided them to me.

On March 22, 2013 SGD filed its opening memorandum. See Doc. 66. Lockheed 

responded on March 27, 2013. See Doc. 69.

Lockheed’s Response did not address SGD’s objections. Instead, Lockheed 

focused exclusively on what it called a fraudulent document that was attached as Exhibit 

O to SGD’s Opening Memorandum. Lockheed’s Response asked that SGD’s claims be 

dismissed and that Lockheed be awarded fees and costs. A few days later, Lockheed 

filed a Motion for Sanctions in which it renewed its request for dismissal with fees and 

costs. See Doc. 71.

2. SGD’s Erroneous Summary

The SGD document that is in dispute is a composite exhibit that is attached as 

Exhibit O to SGD’s Opening Memorandum (Doc. 66). SGD represented that Exhibit O 

was a copy of Lockheed’s Fourth Privilege Log with an additional column added to list 

SGD’s objections to Lockheed’s privilege claims. But as Lockheed points out, at least 32 

of the entries are erroneous. These errors are in the column that contains Lockheed’s 

description of the basis for its privilege claims. In general, the errors involve omitted 

words that added detail to the basis for Lockheed’s privilege claims.

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SGD does not dispute the errors in the summary exhibit that it prepared. SGD 

filed a Notice of Errata (Doc. 70) admitting the errors. SGD candidly admitted that it 

could not reconstruct how the errors occurred. See id. at 2.

SGD had no incentive to create a misleading exhibit. The nature of the errors is 

such that they would be immediately obvious to Lockheed and would deflect attention 

from the privilege-log issues on which SGD wants a ruling. Besides that, SGD made no 

attempt to hide the correct version of Lockheed’s privilege log. To the contrary, Exhibit 

N to SGD’s Opening Memorandum (Doc. 66) is a correct copy of Lockheed’s Fourth 

Privilege Log. For these reasons, I find that SGD’s errors were unwitting and occurred 

without any intent to mislead.

It is also significant that Lockheed did not meet or confer with SGD about SGD’s 

errors before Lockheed filed its Response requesting sanctions. If that had been done, it 

seems almost certain that SGD would have conceded the mistake and would have filed a 

corrected exhibit as was done when SGD discovered its mistake. That would have 

expedited matters and allowed the parties to move forward on briefing the privilege-log 

issue on which I was assigned to report. Instead, the case has been stalled because of 

Lockheed’s requests for sanctions.

Finally, I note that I did not rely on SGD’s erroneous exhibit or waste time 

because of it. The only time that I spent regarding SGD’s erroneous exhibit is 

attributable to Lockheed’s requests for sanctions.

Under these circumstances—involving unintentional errors that were promptly 

acknowledged and corrected—I recommend that Lockheed’s Motion for Sanctions (Doc.

71) be denied.

3. Lockheed’s failure to respond to SGD’s objections.

Lockheed’s Response (Doc. 69) focused exclusively on SGD’s erroneous exhibit. 

Lockheed did not respond to the alleged deficiencies in its privilege log that were briefed 

by SGD. 

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On March 28, 2012, I prepared a Memorandum to Counsel, Exhibit A, that

explained that Lockheed needed to respond to SGD’s objections. A response is needed to 

enable me to prepare a report and recommendation on the sufficiency of Lockheed’s 

privilege log. In my Memorandum to Counsel I explained some of the major issues that I 

wanted Lockheed to address in a supplemental brief. Those issues, and other objections 

raised by SGD, still require a response from Lockheed.

In its Motion for Sanctions, Lockheed states that it will file a supplemental 

response by April 5, 2012.

4. Recommendation

I recommend that (1) Lockheed’s Motion for Sanctions be denied, (2) Lockheed 

be allowed until April 5, 2013 to file a complete response to SGD’s objections, and (3)

SGD be given until April 10, 2013 to file a reply. I request that the time for my final 

report and recommendation be extended to April 17, 2013.

Dated: April 1, 2013.

 s/ Richard G. Himelrick

Richard G. Himelrick

TIFFANY & BOSCO, P.A

Third Floor Camelback Esplanade II

2525 East Camelback Road

Phoenix, Arizona 85016

Special Master 

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CERTIFICATE OF SERVICE

I hereby certify that on April 1, 2013, I electronically filed the foregoing with the 

Clerk of the Court using the CM/ECF system which will send notification of such filing 

to the e-mail addresses denoted on the Electronic Mail notice list, and I hereby certify 

that I have mailed the foregoing document or paper via the United States Postal Service 

to the non-CM/ECF participants indicated on the Manual Notice list.

I certify under penalty of perjury under the laws of the United States of America 

that the foregoing is true and correct. 

 s/ Shelley Boettge

Shelley Boettge

540262

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