June's Notable Cases and Events in E-Discovery

1. In United States v. Asgari, 918 F.3d 509 (6th Cir. Mar. 19, 2019), the U.S. Court of Appeals for the Sixth Circuit reversed a district court’s order granting defendant’s motion to suppress inculpatory emails in a visa fraud and trade secrets case because the good-faith exception to the exclusionary rule applied.

In 2012, federal agents received information that an Iranian scientist, defendant Sirous Asgari, was working under an improper visa at Case Western Reserve University’s Swagelok Center in Cleveland, Ohio. Id. at 511. Upon further investigation, federal agents learned that the Center’s scientists worked on cutting-edge metallurgy research, including research into corrosion-resistant technology funded by the United States Navy. Federal agents prepared an affidavit and a warrant to search the content of defendant’s personal email account for evidence of two crimes: (1) that defendant made materially false statements in his visa application and (2) that defendant violated U.S. sanctions law prohibiting exports of “any goods, technology, or services to Iran.” Based on the government’s submissions, a magistrate judge issued a warrant. After reviewing the material uncovered from this initial search, the government obtained a second warrant to search additional emails. Subsequently, a grand jury indicted defendant on 13 counts of stealing trade secrets, wire fraud and visa fraud. Defendant moved to suppress the email evidence, arguing that the government’s first warrant was deficient.

The district court granted defendant’s motion to suppress. According to the district court, “[n]othing in the [initial] affidavit used to obtain the [first] search warrant approaches probable cause.” The court further held that the good-faith exception created by United States v. Leon, 468 U.S. 897 (1984), did not apply. In United States v. Leon, 468 U.S. 897 (1984), the Supreme Court created good-faith exceptions to the exclusionary rule as a safe harbor for reasonable mistakes made by law enforcement. Asgari, 918 F.3d at 512. Under Leon, “[i]f a neutral magistrate finds probable cause and issues a warrant, investigators may rely on the magistrate’s judgment, and courts will consider the resulting evidence so long as two exceptions to the good-faith rule do not apply.” The first exception applies when warrant applications are “so lacking in indicia of probable cause as to render official belief in its existence entirely unreasonable.” Id. (quoting Leon, 468 U.S. at 923). The second exception applies when the warrant application contains intentional or reckless falsehoods that mislead the magistrate judge.

The district court found that the Leon good-faith exceptions did not apply in this case because (1) the government’s initial affidavit lacked indicia of probable cause and (2) the affidavit also contained intentionally false statements and misleading omissions. The district court then suppressed the emails obtained from the second search, characterizing them as “ill-gotten gains from the [first] warrant.” Subsequently, the government appealed the district court’s order granting the defendant’s motion to suppress.

The Sixth Circuit underscored that the principal issue on appeal was whether the district court was correct in suppressing the evidence uncovered from the first warrant. Indeed, “[i]f probable cause supports the [first] warrant or if the good-faith exception to the exclusionary rule applies, the government may use the information obtained from that search and the search connected with the [second] warrant in this prosecution.” Id. at 511-12.

Disagreeing with the district court’s decision, the Sixth Circuit determined that the issue of probable cause was inconsequential because the Leon good-faith exceptions applied to the affidavit supporting the warrant.

With respect to the first exception, the Sixth Circuit stated that the 10-page warrant application “was not the kind of ‘bare bones’ affidavit barred by Leon.” Id. (quoting Leon, 468 U.S. at 915). Rather, the initial warrant application first detailed the federal agent’s extensive experience and training before then listing “several facts that would permit a reasonable officer to believe that probable cause existed to search for evidence of both crimes.” The affidavit detailed, among other things, government records indicating that defendant failed to list Cleveland on his visa applications and, further, that the kind of visa defendant possessed did not permit him to work or “conduct research that will benefit a United States institution.” Also, the affidavit explained that a federal agent interviewed the director of the Swagelok Center, who informed him that the center possessed instruments that were not available in Iran. Id. at 512-13. Further, the initial affidavit suggested that the defendant’s home institution, Sharif University, had ties to the Iranian government. Ultimately, in the Sixth Circuit’s view, the facts and evidence listed in the initial affidavit, when taken together, were enough to suggest that defendant may have lied on his visa application and sought to conceal the true purpose of his travel to the United States to facilitate a scheme to send technology back to Iran. The Sixth Circuit did not hold that the first warrant application met the probable cause standard but rather that the initial affidavit contained enough information such that “investigators operating in good faith reasonably could have thought the warrant was valid.”

As to the second exception to the Leon good-faith rule, the Sixth Circuit held that none of the alleged errors contained in the government’s initial affidavit constituted knowing falsehoods or deliberate omissions. Id. at 515. The district court identified five primary errors, all located in paragraph nine of the government’s initial affidavit. The Sixth Circuit viewed the first two alleged errors — government omissions related to the contents or requirements of defendant’s visa applications — as “minor omissions” that should not be characterized as deliberate or reckless. The Sixth Circuit stated that the next two alleged errors — one involving a government assertion of defendant’s intent to visit his children and the other involving an assertion about Case Western’s “instrumentation” not being available in Iran — were not mistakes at all. And the final alleged error — a government allegation connecting defendant’s home institution to the Iranian government — “d[id] not show a deliberate or reckless disregard for the truth.” Id. at 516. On appeal, defendant identified a handful of other factual allegations in the government’s initial affidavit, arguing that these facts indicate that the government misled the magistrate judge. But again, the Sixth Circuit found that these minor discrepancies were insufficient to show bad faith, much less “intentional or reckless lies.”

Because the Sixth Circuit held that the Leon good-faith exceptions to the exclusionary rule applied in this case, it reversed the district court’s order granting defendant’s motion to suppress and remanded the case for further proceedings consistent with its opinion.

2. In Wild Fish Conservancy v. Cooke Aquaculture Pac., LLC, 2019 WL 1755306 (W.D. Wash. April 19, 2019), District Judge John C. Coughenour granted plaintiff’s motion to re-open defendant’s Rule 30(b)(6) deposition because defendant produced over 30,000 documents in the days prior to the deposition and failed to adequately prepare its witness to fully and unevasively answer questions on two of the 33 listed topics. The judge denied plaintiff’s motion for attorney’s fees and expenses because of the large number of topics and subparts in the deposition notice and the 100 hours defendant spent preparing for the two-day deposition.

Plaintiff filed a citizen suit against defendant under the Clean Water Act, alleging, among other things, that defendant failed to adequately inspect and maintain eight Atlantic salmon farms it operated, in violation of defendant’s National Pollutant Discharge Elimination System permits. Id. at *1. During discovery, plaintiff served defendant with a deposition notice pursuant to Fed. R. Civ. P. 30(b)(6) containing 33 topics for which it sought testimony from defendant. Topic 8 sought information regarding inspections defendant conducted on the anchoring components at each of its facilities, and topic 10 sought information regarding any maintenance defendant had undertaken at its facilities since 2012. Defendant designated its general manager to testify on its behalf, and, a few days prior to the deposition, defendant produced over 30,000 pages of documents. According to defendant, this production was responsive to plaintiff’s previous document requests and topics 8 and 10 of the deposition notice.

Following a two-day deposition, plaintiff filed a motion to compel, for sanctions, and to modify the case schedule. Plaintiff contended that defendant’s witness was “unable and/or unwilling to testify on” topics 8 and 10 in the deposition notice. Id. (internal quotation marks omitted). In plaintiff’s view, rather than answering questions related to topics 8 and 10, defendant’s witness repeatedly stated that the relevant information plaintiff sought could be found in the records defendant produced a few days before the deposition. Plaintiff thus asked the court to re-open the deposition to allow the witness to respond fully to questions regarding topics 8 and 10. Id. at *2. Plaintiff also sought an award of fees for bringing its motion and for its expenses in having to conduct an additional deposition and requested a 45-day trial continuance based on defendant’s delay in providing discovery responses.

At the outset, the court noted that “a corporation has a duty to make a conscientious good-faith effort to designate knowledgeable persons for Rule 30(b)(6) depositions and to prepare them to fully and unevasively answer questions about the designated subject matter.” Id. (internal quotation marks omitted). After reviewing the deposition transcript, the court concluded that defendant’s Rule 30(b)(6) witness “was not adequately prepared to testify about the matters included in topics 8 and 10 of plaintiff’s deposition notices.” The court noted that defendant’s witness failed to provide answers responsive to topics 8 and 10 and instead vaguely referred plaintiff to the large quantity of documents produced just days before the deposition. Id. at *3. In the court’s view, “[t]he combination of Defendant’s last-minute disclosure of documents and [the witness’] references to documents in ‘the record’ frustrated Plaintiff’s ability to develop testimony regarding topics 8 and 10.” Thus, the court ruled that defendant had not met its obligation under Rule 30(b)(6) and, under Rule 37, it ordered that plaintiff would be allowed to depose defendant’s witness for one additional day not to exceed seven hours.

With respect to plaintiff’s motion for fees, the court ruled that while defendant failed to adequately prepare its witness for two of the 33 topics listed in the deposition notices, the witness was not so ill-prepared as to warrant an award of expenses or other monetary sanctions. Id. at *4. The plaintiff had designated 33 topics for the deposition, several with multiple subparts, and the witness had spent 100 hours preparing for the deposition. As to the continuance, however, the court ruled that plaintiff had demonstrated good cause to modify the case schedule because defendant’s delay in producing discovery prevented plaintiff from adequately preparing its expert witness within the case’s current deadlines.

3. In Langley v. International Business Machines Corp., 2019 WL 1559146 (W.D. Tex. Apr. 10, 2019), Magistrate Judge Andrew W. Austin denied the defendant’s motion to compel the plaintiff to identify the source of leaked documents because such information would not lead to relevant evidence.

In this age discrimination case, the plaintiff alleged that IBM terminated his employment “to make room for younger workers” in violation of the Age Discrimination in Employment Act. Id. at *1. The plaintiff relied on a number of documents to support his claim, including “slides from presentations made to high level decision makers” and planning documents from various IBM business groups. When asked at his deposition for the identity of the individual(s) who provided the documents to plaintiff, on the advice of counsel, the plaintiff refused to reveal the source of such information, claiming “informant’s privilege.” The defendant then filed a motion to compel the plaintiff’s testimony on this subject and for sanctions.

IBM claimed it required the informants’ names so that it could explore with these individuals (1) whether they made statements the plaintiff attributed to them and whether they had personal knowledge of such matters; (2) whether they made statements that could exonerate IBM; (3) details of the produced documents (who wrote them, who reviewed them, etc.); and (4) whether the individuals had other information that might undercut the plaintiff’s claims. The plaintiff countered that he had not relied on any statements but instead relied on the documents themselves. He argued that he had answered all questions posed about the documents aside from who had provided them and asserted that (1) the identity of his sources was irrelevant because IBM had access to the documents themselves, and (2) the identity of his sources was subject to the “informant privilege” because the plaintiff was “a conduit for providing these documents to the [Equal Employment Opportunity Commission] to aid the government in its investigation of IBM’s conduct.”

Magistrate Judge Austin found that because the informant’s privilege can be cited only by the government, it did not apply in this case. However, the magistrate judge found that making a final determination on this matter was unnecessary, as the requested information was also irrelevant. Id. at *2.

Magistrate Judge Austin agreed with the plaintiff that the records at issue were created and used by IBM, and IBM could undoubtedly find the documents. IBM could also determine authors, versions and custodians. He also found that IBM mischaracterized the plaintiff’s testimony, as nothing in plaintiff’s testimony suggested that any relevant information could be gained from knowing the identity of the informants. “Rather, it appears that — understandably — IBM wants to plug its leak, and that is the primary motivation for its demand for this information.” In the magistrate judge’s view, this motivation was not sufficient to support a motion to compel, especially one coupled with a request for sanctions. Therefore, he denied the motion.

In closing, the magistrate judge criticized IBM’s failure to raise this issue at an earlier time, prior to the plaintiff’s deposition. He also expressed his concern that IBM had not yet produced the original versions of the leaked documents and ordered their production within 20 days. Id. at *3.

4. In In re CA Investment (Brazil) S.A., 2019 WL 1531268 (D. Minn. April 9, 2019), Magistrate Judge Steven Rau ruled that a Brazilian company could obtain discovery pursuant to 28 U.S.C. § 1782 from a bank based in Minnesota on matters relating to proceedings pending in Brazil and Singapore.

This case arose from a contract dispute involving three Brazilian companies: Eldorado Brasil Celulose S.A. (Eldorado), J&F Investimentos S.A. (J&F), and CA Investment Brazil S.A. (CA). J&F and CA own the outstanding shares of Eldorado, with J&F holding the majority of voting shares.

In early 2017, following a corruption probe by Brazilian authorities, J&F (along with its owners and several others) entered into a plea agreement that required it to pay several billion Brazilian reais in fines. To fund these fines, J&F sought to sell its interest in Eldorado, and, in September 2017, it entered into a two-phase share purchase agreement with CA, in which CA would purchase all of J&F’s Eldorado shares. The first phase went forward as planned. But in July 2018, when CA remitted payment to J&F to finalize the second phase of the purchase, J&F refused to close the deal, apparently because of changes in global markets that had increased Eldorado’s value.

CA then sought relief in the Brazilian courts, which referred the matter to arbitration. In February 2019, J&F approved, over the objection of CA, the issuance of $500 million in new bonds listed on the Singapore Exchange Securities Trading Limited by an Eldorado affiliate. Soon thereafter CA commenced dual actions in Singapore courts, and in connection with these lawsuits, sought discovery from a variety of U.S.-based entities, including the trustee of the proposed bonds, U.S. Bank based in Minneapolis, Minnesota. CA asserted that U.S. Bank had possession, custody or control of documents relating to statements in the bond offering memorandum.

The magistrate judge began his analysis by citing the applicable statute, 28 U.S.C. § 1782:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made ... upon the application of any interested person ...

This statute permits discovery for use in a foreign proceeding “where the Applicant establishes that (1) the discovery is sought from a person found in this district, (2) the discovery is for use in a proceeding before a foreign tribunal, and (3) the applicant is an ‘interested person’ before such foreign tribunal.” In re CA Investment, 2019 WL 1531268, at *3 (quoting In re Hallmark Capital Corp., 534 F. Supp. 2d 951, 953–54 (D. Minn. 2007)). Magistrate Judge Rau concluded that all three elements had been satisfied. U.S. Bank conducts its trustee services from St. Paul, Minnesota. CA sought to use the discovery in the various foreign proceedings, and CA was an “interested person” within the meaning of § 1782.

U.S. courts are not required to grant § 1782 applications, however, simply because a party satisfies these elements, and the Supreme Court has established four factors for courts to consider in deciding whether to grant a request for discovery under § 1782:

1. whether the person from whom discovery sought is a participant in the foreign proceeding
2. the nature of the foreign tribunal, the character of the foreign proceedings and the receptivity of the foreign tribunal to federal judicial assistance
3. whether the request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies
4. whether the request is unduly intrusive or burdensome

Id. (citing Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65 (2004)) (paragraph breaks added).

In Magistrate Judge Rau’s view, all of these factors argued in favor of granting CA’s request:

U.S. Bank is not a participant to the foreign proceedings and is outside their jurisdictional reach. U.S. Bank is an entity that likely has information related to the bond offering memorandum. There is no indication that any of the foreign proceedings would reject evidence obtained by CA Investment in the United States. Nor is there any indication that CA Investment is attempting to circumvent foreign proof-gathering procedures through this application. And finally, the discovery sought is narrowly tailored to information known to U.S. Bank related to the proposed bond offering at dispute in each of the foreign proceedings.

Magistrate Judge Rau therefore granted CA’s request for discovery, which he indicated would be governed by the Federal Rules of Civil Procedure and the local rules of the District of Minnesota. Id. *4.