Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_19-cv-02960/USCOURTS-azd-2_19-cv-02960-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

RHN Incorporated,

Plaintiff/Counter-Defendant,

v. 

CNA National Warranty Corporation, et al., 

Defendants/CounterClaimants.

No. CV-19-02960-PHX-GMS

LEAD CASE

No. CV-19-4516-PHX-GMS

ORDER 

CNA National Warranty Corporation,

Plaintiff, 

v. 

RHN Incorporated, et al.,

Defendants.

Pending before the Court is Defendant Counter-Claimant CNA et al. (“CNA”)’s 

Motion for Sanctions (Doc. 43). For the following reasons the motion is granted in part and 

denied in part. 

BACKGROUND

On February 13, 2020 the parties participated in a teleconference with the Court 

about RHN Inc. et al. (“RHN”)’s alleged failure to comply with the discovery obligations 

imposed by the Mandatory Initial Discovery Pilot (“MIDP”) project. RHN admittedly 

limited its initial investigation and production to Defendant Hooman Nissani and David 

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Arnold, who provide technology support services to RHN and conducted the searches at 

issue. As a result, CNA claimed RHN failed to (1) conduct a reasonable investigation;

(2) identify custodians who possess relevant ESI; and (3) collect, review and produce 

relevant information. RHN asserted that it produced all relevant documents because Mr. 

Nissani was the only person who had communications with CNA and other relevant parties

in relation to the formation and terms of the Dealership Override Agreement (“Override 

Agreement”), which forms part of the dispute in this action. During the February 13, 2020 

teleconference the Court invited CNA to file a motion for sanctions to demonstrate that 

RHN’s production was deficient. This motion followed. 

DISCUSSION

General Order 17-08 codifies the MIDP program. It requires parties to 

(1) investigate and identify all relevant custodians who have or would be expected to have 

relevant information; (2) investigate and identify where all relevant information is located; 

and (3) properly search and produce all relevant information in accordance with the parties’ 

ESI protocol. Relevant information under the MIDP includes information that may be 

relevant to any parties claims or defenses. 

Mr. Nissani explained he “understood the parameters of the search to include 

communications about the formation and terms of the [O]verride [A]greement.” (Doc 44-

2 at 2.) RHN never claims to have investigated, searched, or produced any information 

with respect to the several other claims and defenses at issue in this complex counter-action 

suit.1 Thus, the Court finds RHN failed to comply with the MIDP’s obligations. 

1 CNA identifies the following claims and defenses at issue in this action:

1. How the “business arrangement to sell automobile warranties” was presented to

 RHN;

2. RHN’s understanding of the business arrangement to sell automobile warranties;

3. The negotiation and formation of the Dealership Override Agreement with

 Advance Payment (“Override Agreement”);

4. RHN’s performance or breach under the Override Agreement;

5. RHN’s contention that CNA agreed to modify the terms of the Override

 Agreement;

6. RHN’s contention that CNA failed to comply with the Override Agreement;

7. The negotiation and formation of a profit-sharing agreement;

8. RHN’s contention that CNA failed to comply with the parties’ profit-sharing

 agreement;

9. CNA’s contention that Mr. Nissani’s financial statements were false; and

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Even if the formation and terms of the Override Agreement comprised the only 

dispute in this action, RHN’s production was deficient. First, RHN claims that Mr. Nissani 

was the only person with decision-making authority and, therefore, was the only person 

who possessed relevant communications. However, Mr. Arnold admits that RHN failed to 

search all of Mr. Nissani’s relevant email addresses. (Doc. 44-1 at 2.) Second, Mr. Nissani 

claims that “[t]he parties agreed to remove duplicate documents across custodians, and as 

a result, there is no reason to attempt to search for and collect duplicate emails from [other 

custodians], when Hooman Nissani was on the same emails.” This argument is unavailing. 

The potential for duplicate emails does not excuse RHN from identifying all relevant 

custodians, identifying the whereabouts of all relevant ESI, and producing all relevant 

information. If a search of a single custodian was envisioned, the duplicate policy “across 

custodians” would be superfluous. RHN’s argument that CNA was not prejudiced by its 

limited production because Mr. Nissani was copied on the emails that involved other 

custodians is irrelevant and cannot be sufficiently demonstrated when the documents 

possessed by the other custodians have never been searched. 

Lastly, Mr. Nissani claims to have reviewed his SMS messages to determine which 

messages were relevant for production. However, given Mr. Nissani’s admitted 

misunderstanding of his production obligations, the Court finds RHN’s counsel is more 

equipped to make this determination. In light of the foregoing, the Court orders RHN to 

conduct a reasonable investigation, collection, review, and production of the ESI relevant 

to all claims and defenses at issue in this case from all potential custodians of such 

documents. The Court, however, finds no basis to grant CNA’s requested “temporary 

reprieve from expending further resources in finishing CNA’s privilege log, redactions, 

and document disclosures.” Accordingly, 

IT IS HEREBY ORDERED that Defendant Counter-Claimant CNA’s Motion for 

Sanctions (Doc. 43) is GRANTED in part and DENIED in part.

10. RHN’s defense that Mr. Nissani’s financial statements were accurate.

(Doc. 46 at 3.)

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IT IS FURTHER ORDERED that RHN shall:

1. Fully investigate the case by having RHN’s counsel interview RHN

employees and agents within fourteen (14) days of the date of this order;

2. Identify the names of all custodians who have ESI relevant to any party’s

claim or defense within fourteen (14) days of the date of this order;

3. Identify where – email, server, laptops, cellphones, etc. – the ESI is located

within twenty-one (21) days of the date of this order;

4. Hire a third-party, independent vendor to search and collect the ESI from the

identified sources and custodians in accordance with the parties’ ESI protocol within thirty 

(30) days of the date of this order;

5. Have RHN’s counsel review the collected information and determine what

is/is not relevant to all claims and defenses within forty (40) days of the date of this order;

6. Have RHN’s vendor produce the relevant information forty (40) days from 

the date of this Order and in accordance with the parties’ ESI protocol;

7. Pay CNA the fees and costs it incurred in pursing RHN’s compliance with 

the MIDP. CNA must submit documentation in compliance with LRCiv 54.2 for the Court 

to determine the amount of the sanctions award within thirty (30) days of the date of this 

order. 

IT IS FURTHER ORDERED denying CNA a temporary reprieve from finishing its 

privilege log, redactions, and document disclosures. CNA shall continue discovery in accordance 

with the rules of the Civil Procedure, Local Rules, and Case Management Order (Doc. 41).

Dated this 9th day of April, 2020.

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