In Recent Trade Secret Case, Georgia Court of Appeals Finds Imposition of Discovery Burden Greater than the Federal Rules Permit Is Within Trial Court’s Discretion

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Discovery in trade secret cases can be arduous and burdensome, especially when voluminous electronic business records are involved.  In a recent trade secret case, the Georgia Court of Appeals addressed some of the discovery issues that frequently arise in these types of cases.  Hull v. WTI, Inc., 2013 WL 2996191 (Ga. App., June 18, 2013).

In Hull, WTI, Inc. (“WTI”) filed a complaint against six defendants alleging breach of contract, trade secret misappropriation, and various business torts.  Some Defendants, including former employee Hull, counterclaimed for breach of contract and trade secret misappropriation, among other claims.

Discovery in the case escalated quickly.  As frequently occurs in trade secret cases, the parties entered into a protective order regarding confidential and trade secret information.  The protective order allowed the parties to designate documents as confidential or as attorneys’-eyes-only.  The protective order further provided that any party could request a producing party to alter the confidentiality designation of a document in production and that, if the parties could not agree, the trial court would resolve the dispute.

WTI filed a motion to compel, presenting two main arguments to the court.  First, WTI sought to compel Defendants to withdraw the attorneys’-eyes-only designation from many of the documents bearing it.  Defendants had designated roughly 95% of the documents it had produced as attorneys’-eyes-only.  When WTI sent Defendants a letter that provided examples of documents that had been so labeled without justification, Defendants withdrew the designation as to those examples only, leaving 83% of their total production still labeled attorneys’-eyes-only.

Second, WTI sought to compel Defendants to organize the more than 156,000 pages of documents produced by identifying which documents were responsive to each of nearly 100 requests for production.  WTI argued that the unorganized manner in which the documents were produced prevented WTI from determining which documents Defendants would rely upon to support their defenses and counterclaims.

When faced with the herculean (or, perhaps, Sisyphean) task of organizing these documents Defendants relied upon Federal Rule of Civil Procedure 34(b)(2)(E), which provides that a party may produce documents either organized by request or as kept in the ordinary course of business.  Though the Georgia Civil Practice Act provides no direct guidance on the permissibility of the latter course, Defendants argued that the Georgia court should allow them to follow the Federal Rule on point.

Defendants also argued that the manner of production was adequate for another reason.  Defendants had gone to the trouble of making the document production searchable by certain fields – file names, email subject lines, etc.  However, WTI could not conduct full-text searches of the electronic files.

On WTI’s motion to compel and for sanctions, the trial court held that Defendants were required to designate each document responsive to each request served on each Defendant.  The trial court also held that Defendants had abused the attorneys’-eyes-only designation and ordered them to re-designate their document production.  Finally, the trial court awarded $7500 in attorneys’ fees to WTI.

On interlocutory review, the Court of Appeals affirmed all of the trial court’s rulings.  Addressing Defendants’ discovery obligations with respect to their document production, the Court of Appeals was careful to address the interplay between the trial court’s holding and the Federal Rules.  “The trial court did not hold that the [Georgia Civil Practice Act] prohibits a party from responding to discovery by delivering its documents as kept in the usual course of business.  Rather, the court held that these defendants, in this case, with this document production, did not fulfill their obligations under the [Georgia Civil Practice Act].”  Id. at *4.

Nonetheless, the Georgia trial court did impose upon Defendants a discovery burden greater than what likely would have been permitted under the Federal Rules.  And, though the Court of Appeals noted that Georgia procedure generally follows the Federal Rules, it affirmed on the grounds that the trial court’s ruling under the circumstances of the case was not an abuse of discretion.

Hull may thus prove useful for business litigators facing the prospect of reviewing an opposing party’s unorganized document dump by allowing them to contest that the production of business records as kept in the ordinary course of business is sufficient.