Court Opinion

ID: 3194520
Source: CourtListenerOpinion
Date Created: 2016-04-15 12:01:39.980084+00
Date Added: 2024-06-11T14:36:20.140434
License: Public Domain

In the United States Court of Federal Claims
                                 No. 12-286C
                            (Filed: April 14, 2016)

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NORTHROP GRUMMAN SYSTEMS
CORPORATION,

                     Plaintiff,
                                             Motion to Compel; Work Product
                                             Doctrine; Spoliation; RCFC 37;
v.                                           RCFC 26; Discovery Sanctions.

THE UNITED STATES,

                     Defendant.

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      John W. Chierichella, Washington, DC, with whom was Anne B. Perry
and David S. Gallacher, for plaintiff.

       Cameron Cohick, Jennifer E. LaGrange, Barbara E. Thomas, Rebecca
S. Kruser, Trial Attorneys, United States Department of Justice, Civil Division,
Commercial Litigation Branch, with whom were Benjamin C. Mizer, Principal
Deputy Assistant Attorney General, Robert E. Kirschman, Jr., Director, Martin
F. Hockey, Jr., Assistant Director, for defendant. Janine Castorina and
Michael F. Kiely, United States Postal Service, Law Department, of counsel.

                                   ORDER

        On January 28, 2016, plaintiff filed three discovery related motions: 1)
a motion to compel and for spoliation sanctions; 2) a motion for sanctions for
failure to meet court ordered discovery deadlines; and 3) a motion to amend
the discovery schedule. Defendant opposed each of those motions and cross-
moved for its own amended schedule. The motions are fully briefed, and oral
argument was held on April 4, 2016. We have already ruled on the cross
motions for a new schedule by separate order. We begin with a brief recital
of the procedural background of this case.
        This case was filed in 2012 and concerns two contracts between
Northrop Grumman and the United States Postal Service (“USPS”) regarding
a flat mail sequencing system (“FSS”). The first contract was to design and
build a prototype, and the second contract was for the manufacture of several
more of the systems. Plaintiff alleges breach of the production contract and
seeks reformation of the contract and damages resulting primarily from alleged
changes made by USPS to the design. Defendant counterclaims for the costs
it alleges were incurred during the delay in production of the systems.

        The court adopted the parties’ joint proposed discovery schedule in
February of 2013, which would have concluded fact discovery on July 3, 2015,
and all discovery by January 15, 2016. Document production was to have been
completed by January 31, 2014.

       On May 29, 2015, more than year after the initial deadline for document
production, plaintiff moved to compel documents not yet produced by
defendant and for sanctions for defendant’s failure to meet discovery
deadlines. Defendant moved to amend the schedule to conclude document
discovery by September 4, 2015. We denied the motion to compel, in no small
part due to defendant’s representations that it could conclude document
production by September 4, 2015, and adopted defendant’s proposed schedule.

        On September 4, 2015, defendant made a significant document
production of just over four million documents. It followed that shortly on
September 11, 2015, with nearly 2.3 million additional documents. That was
followed by a December 21, 2015 production of 521,737 documents that it had
initially withheld in September for privilege review.

       Also on September 4, 2015, defendant discovered a collection of
documents initially thought to have been provided to defense counsel by
USPS, known as the “.194 drive,” and thus presumed to have been already
produced. Re-review by counsel in October 2015 suggested that not all of
these documents had been provided to him nor then produced to plaintiff. This
prompted a request in November 2015 by Department of Justice to USPS to
again provide the .194 drive documents. After that was completed and counsel
was able to compare with the list of documents already produced to plaintiff,
it was discovered that the .194 drive documents had not been fully produced.
On February 4, 2016, defendant completed that production by sending another
453,795 documents to plaintiff.

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       This re-review and late-production of the .194 documents prompted
further questions from USPS agency counsel to known document custodians
at USPS. This effort resulted in another slate of documents thought to have
been produced earlier, and on March 29, 2016, defendant sent 67,000 more
documents to plaintiff. Defendant continues privilege review of documents
produced in 2015 and beyond.

I. Motion To Compel And For Spoliation Sanctions

         Plaintiff asks the court to compel defendant to produce documents
regarding the Postal Service’s review and evaluation of Northrop’s Request
for Equitable Adjustment (“REA”) in 2009 and to compel defendant to allow
plaintiff to examine deponents regarding that same subject. Defendant has
withheld or clawed back such documents as being work product generated in
anticipation of litigation. Plaintiff argues that these documents are considered
to have been the product of USPS’s ordinary course of business and not
generated in anticipation of litigation. In the alternative, plaintiff argues that,
if litigation could have been anticipated as early as 2009, then defendant has
intentionally or negligently destroyed many documents that might have
otherwise been discoverable.

        Plaintiff submitted an REA on March 31, 2009. It followed that up
with a certified claim under the Contracts Disputes Act on July 8, 2010.
Northrop submitted two more certified claims thereafter. USPS instituted a
litigation document hold in November of 2010. Plaintiff argues that the
litigation hold should have been instituted as soon after March 31, 2009 as
practicable, which is to say that submission of Northrop’s REA put the agency
on notice of impending litigation. Thus, in plaintiff’s view, the 2010
document hold was 19 months too late.

        Plaintiff believes that a large quantity of documents were destroyed
prior to the litigation hold. Plaintiff points to the general volume of documents
produced for the various years at issue, finding a marked decline in the number
of documents from the period prior to the hold being instituted. Plaintiff also
points to the deposition testimony of two deponents who testified that they did
not receive notice of a litigation hold until shortly before their depositions in
2015. All of this leads plaintiff to ask for spoliation sanctions against
defendant, the particulars of which would be cemented after defendant
undertakes a forensic analysis of destroyed documents and whether any might
be recoverable.

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       Defendant maintains two seemingly inconsistent positions regarding
these issues. First, defendant asserts that the agency’s internal review and
evaluation regarding Northrop’s 2009 REA is wholly protected by the work
product doctrine. Defendant believes that the earliest documents and
discussions within USPS regarding Northrop’s REA were made or conducted
in preparation for impending litigation. Thus relevant documents are not
generally discoverable and defendant need not produce a witnesses for
deposition regarding the subject.

        In response to the spoliation sanction request, however, defendant
maintains that USPS was under no duty to preserve documents until well later
than 2009. Defendant points to the differing views among USPS personnel
involved in review of the REA and certified claims as to whether litigation was
anticipated, arguing that a duty to preserve evidence does not arise until a
critical mass of those involved should have reasonably believed litigation to
be forthcoming.

       Mr. Robert D’Orso was the Contracting Officer (“CO”) assigned to
review the REA and the first certified claim. In a declaration submitted along
with defendant’s opposition, he states that he viewed the submission of the
REA as a point of no return due to the number of issues raised and the dollars
associated with them. Foreseeing no significant concessions from either side,
he concluded that litigation was inevitable after the submission of the March
2009 REA.

        By contrast, Mr. David Milnes, the CO for the production contract, did
not take such a pessimistic view upon receipt the REA. It was not until
September 2010, after the submission of the July 2010 certified claim and a
subsequent cost proposal from Northrop that he believed that negotiation
would fail and that litigation was likely. Similarly, Mr. Charles Smith, who
was involved in the review of the REA and certified claims, testified that he
did not think litigation likely until sometime after Northop’s submission of its
first certified claim and the government’s denial of the second and third
certified claims in 2012.

       Rule 26(b)(3)(A) of this court’s rules encapsulates the work product
doctrine. It provides that, “ordinarily, a party may not discover documents and
tangible things that are prepared in anticipation of litigation or for trial.”
RCFC 26(b)(3)(A). This protects documents and other evidence that is
otherwise not privileged so long as it was generated in anticipation of

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litigation. In re EchoStar Commc’ns Corp., 448 F.3d 1294, 1301 (Fed. Cir.
2006). This protection can be overcome, however, upon a showing of
“substantial need” and that the party cannot obtain the substantial equivalent
“without undue hardship.” RCFC 26(b)(3)(A)(ii).

        Spoliation sanctions are appropriate when the party who had control
over the destroyed evidence had an obligation to preserve it at the time of
destruction, the destruction was the product of a “culpable state of mind,” and
the destroyed evidence was relevant. Jandreau v. Nicholson, 492 F.3d 1372,
1375 (Fed. Cir. 2007). The culpability requirement need not be met by a
showing of intentionality or bad faith; ordinary negligence can meet the test.
See United Med. Supply Co. v. United States, 77 Fed. Cl. 257, 268-70 (2007).
The level of scienter may be relevant to the severity of the sanction, however.
Id. at 270-71.

       We find the relevant date when USPS should have began preserving
documents to have been upon receipt of the REA in 2009. The declaration of
Mr. D’Orso is conclusive. He was the CO in charge of responding to the REA
and the first certified claim. He had the responsibility and power to obligate
the agency in response to Northrop’s initial submission of its claims. We find,
in these circumstances, that his view controls.1

       Defendant is correct when it states that the test is an objective one, but
that does not make Mr. D’Orso’s statements any less relevant or reasonable.
Mr. D’Orso detailed in his declaration that his experience in dealing with
Northrop indicated to him the difference qualitatively and quantitatively
between plaintiff’s earlier REAs and the 2009 REA that led to litigation.
Those earlier, smaller REAs were tied to specific requests for change orders
from the government. The 2009 REA, on the other hand, was cumulative and
comprehensive in scope. Further, it was apparent to Mr. D’Orso, at the time
of the 2009 REA, that the relationship between the parties had broken down
and that each found the other’s performance to be lacking. These are objective
indicia of the reasonableness of the anticipation of litigation at that time.

1
  Nor was he alone in his view. In correspondence between the parties in
February 2016, defendant claimed the work product protection covered a May
7, 2009 email between USPS employees, one of whom was an attorney,
because it was generated in the course of evaluating the REA and was thus
made in anticipation of litigation.

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        In anticipation of that holding, we directed defendant to submit to
chambers documents dated from March 31, 2009 to November 17, 2010 that
were withheld or clawed back on the basis of only the work product doctrine
for in camera review. After review of those documents, we confirm that they
are subject to the work product doctrine protection.

         As we held above, USPS was on notice as of the date of the 2009 REA
that litigation was likely. Documents dealing with the agency’s response to the
REA, evaluating litigation risk both in terms of contractual language and
dollars associated, are plainly work product and are thus to be protected from
production unless plaintiff can make a showing of need and hardship. We find
that plaintiff has not met that burden.

        The sheer volume of documents already produced and not claimed as
privileged militates against overcoming the work product protection for these
few documents. Additionally, although the passage of time always has the
effect of dimming recall, from the deposition transcripts and declarations we
reviewed in deciding these motions, plaintiff’s efforts to plumb the depths of
agency personnel’s recall has been far from fruitless. Further, the nature of
this case suggests against a showing of need. The agency’s initial views with
regard to the arguments presented in the 2009 REA are not likely to be
necessary to an argument that will largely depend on contract interpretation
and the parties’ actual conduct in performance of the contract, none of which
is alleged to have been lost from memory. Plaintiff has not overcome
defendant’s assertion of the work product doctrine.

        As to the question of spoliation, we have established that the agency
was late in implementing a litigation hold for documents regarding the FSS
contracts. We also know that at least two USPS employees were unaware of
the hold until 2015. Others were made aware earlier but after 2009. The
possibility of spoliation exists. Plaintiff’s quantitative argument that we
should infer mass destruction of relevant documents, especially emails, from
the difference in the numbers of documents produced prior to the hold versus
the number after is unpersuasive, however. Any number of explanations could
account for this difference. As defendant points out in its opposition, the
emails produced to it by plaintiff follow the same pattern, a spike in number
after 2011. This, defendant argues, is indicative of a rise in the level of work
on the project and not a deficiency in production.

                                       6
        Absent something more concrete, we are not prepared to impose a harsh
sanction under these circumstances. Plaintiff’s request that defendant
undertake a costly and time intensive forensic analysis of potentially missing
data is unwarranted at this time, as is imposition of any negative inference. At
most, defendant was negligent in not issuing a litigation hold earlier. There
has been no suggestion of bad faith or intentional destruction of relevant
documents in the face of impending litigation. Nor has plaintiff made a
showing that information contained in possibly lost emails is unavailable to it
through other sources

         That is not to say, however, that the court is sanguine about the
potential of spoliation. Accordingly, plaintiff’s motion is denied without
prejudice to the possibility that it can ask for a spoliation sanction in the future
if it can make a more concrete showing of missing information relevant to its
case in chief or defense to the counterclaim that is otherwise unobtainable.

II. Motion For Sanctions

       Plaintiff also asks the court to impose sanctions on the government
under rule 37 for failure to meet the court ordered document discovery
deadlines. Plaintiff requests that defendant be barred from using any late-
produced documents as evidence in its defense and affirmative counterclaim,
that defendant reimburse plaintiff for the cost of electronic hosting of millions
of pages of late-produced documents, and asks for reimbursement for the cost
of bringing this motion. Plaintiff finds especially egregious the fact that
defendant proposed the current September 4, 2015 deadline, at least partially,
as an assurance to plaintiff and the court that sanctions were unwarranted last
year.

       Rule 37(b)(2)(A) permits “just” sanctions when a party “fails to obey
an order to provide or permit discovery.” This includes the possibility of
prohibiting the offending party from “supporting or opposing designated
claims or defenses, or from introducing designated matters in evidence.”
RCFC 37(b)(2)(A)(ii). Courts have generally imposed a proportionality
standard in crafting sanctions under this rule. See, e.g., Olcott v. Del. Flood
Co., 76 F.3d 1538, 1557 (10th Cir. 1996); Morris v. United States, 37 Fed. Cl.
207, 213 (1997). A rule 37 sanction is appropriate when the failure is due, not
to inability or other justifiable excuse, but to some fault on the part of a party
against whom it is sought. See Societe Internationale Pour Participations v.
Rogers, 357 U.S. 197, 2012 (1958); Hendler v. United States, 952 F.2d 1364,

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1368 (Fed. Cir. 1991). Subsection (C) further contemplates payment to the
aggrieved party of its “reasonable expenses, including attorney’s fees, caused
by the failure, unless the failure was substantially justified.” RCFC
37(b)(2)(C).

        As a general matter, we are sympathetic to plaintiff. Discovery has
been ongoing for over three years and the deadline for document production
has twice passed and been extended. We are mindful, however, that the bulk
of the late-produced documents complained of were produced only one week
after the deadline had passed, and plaintiff has not alleged any specific
prejudice associated with that one week slippage. Defendant explained that
this was due to a technical limitation on the part of its IT contractor.
Additionally, the December 2015 production was the result of further privilege
review of the documents produced in September, which revealed that half a
million more documents were discoverable rather than privileged. We do not
find any prejudice to plaintiff from these productions nor do we find that the
government intentionally disregarded the deadline. The interest of justice
would not be met with a sanction for these two lapses.

        The other two later productions, although smaller in quantity, are
troubling. Both are the result of what can, at best, be described as negligence
on the part of USPS or, at worst, a reckless disregard of its obligation to timely
produce relevant documents to plaintiff. Defendant argued that these lapses
were justified by the decentralized nature of the Postal Service and the
resulting difficulty in assuring that all documents had been produced. We find
that unconvincing, however, when both sets of the latest-produced documents
were from locations or repositories known to USPS well in advance and both
of which had been the subject of assurances from USPS personnel that they
had been sufficiently plumbed for relevant materials. Those representations
were either untruthful or negligently made. It is clear that these lapses were
not justified. Greater care should have been taken to meet court ordered
deadlines. Plaintiff has had to take depositions in the interim without the
benefit of having reviewed those documents. A sanction is warranted.

       In view of the foregoing, the following is ordered:

       1. Plaintiff’s motion to compel and for spoliation sanctions is denied
       without prejudice to plaintiff’s ability to again move for more specific
       spoliation sanctions if warranted.

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2. Plaintiff’s motion for sanctions for failure to meet discovery
deadlines is granted in party and denied in part. It is denied as to the
September and December 2015 productions. It is granted with regard
to the documents produced after that.

3. Accordingly, defendant is sanctioned as follows:

       A. Defendant is precluded from using documents produced
       after December 2015 either in defending plaintiff’s claims or in
       support of its counterclaim to the extent that those documents
       were not produced earlier. Any documents produced prior to
       2016 that are duplicated in the 2016 productions are not
       precluded. Defendant’s duty to supplement earlier document
       production continues should it discover yet more relevant
       documents, but it is precluded from making affirmative use of
       those documents.

       B. The Postal Service is directed to pay half of plaintiff’s
       attorney’s fees in bringing the motion for sanctions for failure to
       meet deadlines. The parties are directed to cooperate in
       attempting to determine the appropriate amount plaintiff will be
       reimbursed by May 20, 2016. The parties are directed to file a
       status report by May 23, 2016, indicating if the amount and
       means of payment have been agreed to.

                                            s/Eric G. Bruggink
                                            Eric G. Bruggink
                                            Judge

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