D. Mass.: Discovery Probing State of Mind Allowed in Breach of Contract Case for Healthcare SaaS

This past week, Judge Allison D. Burroughs issued a decision, Healthedge Software v. Sharp Health Plan, 2021 U.S. Dist. LEXIS 88061 (D. Mass. May 6, 2021), granting the Plaintiff's motion to compel the disclosure of how the Defendant collected and searched its ESI, and granting in part the Defendant's motion to compel document production in response to repeated requests. HealthEdge contracted to provide SaaS to Sharp, to be used in its business of providing healthcare service plans. Sharp complained that Healthedge took too long to implement the software, and that it was ineffective. Healthedge brought the action seeking a declaratory judgment that it did not breach the contract, and Sharp counterclaimed alleged breach of contract and fraud.

Judge Burroughs' opinion states that, "this case is a prime example of the discovery issues that can arise when the parties (and their counsel) fail to engage in cooperative planning regarding ESI." Id. at *7. She directed the parties to meet and confer on search terms and custodians to use in collection and review, and specifically ordered Sharp to submit a collection and search protocol with a list of terms and custodians. She acknowledged that it would be unduly burdensome to require Healthedge to review hundreds of thousands of documents, and gave it permission to make a counterproposal before proceeding with review. Despite this the Court rejected limiting the Plaintiff's discovery to its communications with Sharp. "Sharp is entitled to probe HealthEdge's state of mind in connection with the allegedly fraudulent representations contained in its response to the RFP, and it is possible that documents and communications not involving or directly concerning Sharp may be relevant to that issue." Id. at *9.

Sharp was ordered to disclose the custodians it collected data from, and reveal the date ranges, keywords, and deduplication techniques it used to pare down this data. Search terms are not to be considered privileged information. If Healthedge determines that Sharp's approach was deficient, the parties are required to negotiate a new protocol.

The Court also found that Healthedge's source code was relevant in this case and should be produced, and that a confidentiality stipulation could be devised that would provide adequate protection. Healthedge's objection to contention interrogatories about which documents support its claims was upheld since the requests were premature.

E.D. Tex.: Definition of Encrypted Digital Information Transmission for Claim Construction Chart

This week, Magistrate Judge Roy S. Payne issued a decision, Personalized Media Communs. v. Apple Inc., No. 2:15-cv-01366-JRG-RSP, 2021 U.S. Dist. LEXIS 51825 (E.D. Tex. Mar. 19, 2021), granting the Plaintiff's motion for reconsideration of a claim construction chart prepared for the consideration of a jury.

The parties contested the definition of 'encrypted digital information transmission', which PMC argued should mean, "signals sent or passed from one location to another location to convey digital information which is in encrypted form; 'digital information' includes instructions/commands and data.", and Apple said should be defined as, "a transmission from one location to other locations that includes digital information in unintelligible or unusable form." Id. at *2. This is a patent case in which there was a previous Federal Circuit ruling that found that PMC's invention is distinguished from prior art because it used digital programming rather than analog programming. The Federal Circuit defined 'an encrypted digital transmission' as all-digital. The term in question was previously found to be limited to digital information, but not to transmission from one point to multiple points (meaning it could encompass point-to-point transmissions.)

PMC claims that Apple's use of PMC's FairPlay technology to decrypt digital files in QuickTime, iTunes, and AppleTV infringed its patent. Apple's position is that the presence of analog synchronization signals meant there was no infringement.

Judge Payne ordered that the claim construction chart be updated to define 'encrypted digital information transmission' as, "all-digital information that has been encrypted and moved between at least two devices". Id. at *11.

Failure to Meet Discovery Deadlines is Lack of Due Diligence, Not Lack of Sophistication

Last week, Judge Adam M. Conrad issued a decision, Lunsford v. JBL Communications, LLC, No. 19 CVS 3973, 2021 NCBC LEXIS 17 (N.C. Super. Mar. 3, 2021) granting in part and denying in part the Defendant's motion for sanctions. The Plaintiffs missed deadlines to respond to discovery requests. After the motion for sanctions was filed, Lunsford produced illegible documents that did not comply with the ESI protocol. At this time, it had also failed to begin to search a mobile phone and email accounts which clearly had responsive data. The Court had previously issued an order imposing sanctions on the Plaintiffs, ordering them to pay expenses, and set a 30-day deadline when the Plaintiffs failed to propose one themselves.

The Plaintiffs missed the deadline, but the Defendant consented to a request for an extension for another month. Again, no production was actually made. Altogether the Plaintiffs had more than four months to make a production since an order was issued to resolve the discovery dispute. The Plaintiffs then stated that it would take them additional time to review more than 160,000 pages of responsive material, and de-duplicate it, noting that counterclaim defendants would need to review their production. The request for more time was denied, and the Court ordered the parties to meet to propose a discovery schedule, and prepare to produce responsive ESI on a rolling basis. The Plaintiffs proposed a rolling schedule, but also indicated that they would not be able to follow it. They missed the first deadline, and said they could no longer follow the schedule, and also that they no longer would hire an electronic discovery vendor because it would be too expensive. They also disclosed that they had to review 160,000 documents rather than 160,000 pages.

The Plaintiffs only disclosed at a February 2021 hearing that they had re- engaged the electronic discovery vendor to conduct a review that would take 12 weeks. They also conceded at this hearing that their prior promises to produce documents were based on “ blind optimism”. Id. at *14.

Noting the Plaintiffs' failure to produce documents on dates they had selected themselves, Judge Conrad stated that, "At the hearing, Plaintiffs' counsel pleaded inexperience with the complexities of ESI discovery and a need to coordinate with counsel for the other counterclaim defendants. Neither is an excuse. At every step, the Court invited Plaintiffs to set the pace . . . Plaintiffs cannot justify their habitual failure to live up to their own estimates of the time needed to meet their discovery obligations as a lack of sophistication. It shows, instead, an unjustified lack of diligence." Id. at *17-18. He concluded that sanctions were warranted because of the prejudice suffered by the Defendant, and to ensure respect for the judicial process.

The Court ordered that the Plaintiffs should be prohibited from introducing evidence to support their affirmative claims and defenses, or opposing any of the Defendant's counterclaims or defenses. They were ordered to produce all responsive documents by May 10, 2021. Expenses and attorney fees were awarded as well. The Court declined the Defendant's request to order an adverse inference that a contract had been breached, and also to dismiss the Plaintiffs' claims. Judge Conrad also declined a request to hold the Plaintiffs in contempt, since the purpose of contempt is not to punish. "Because the Court has set a new deadline for document production, imprisoning Plaintiffs for violating the Sanctions Order would be punitive, not remedial." Id. at *24.