Zimmer, Inc. v. Beamalloy Reconstructive Medical Products, LLC

          OPINION AND ORDER

          SUSAN COLLINS UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on several motions regarding discovery disputes between Plaintiff Zimmer, Inc. (“Zimmer”), Defendants Beamalloy Reconstructive Medical Products, LLC, and Beamalloy Technologies, LLC (together “Beamalloy”), and third-party intervenor Howmedica Osteonics Corp., a subsidiary of Stryker Corporation (“Howmedica”). As discussed below, the Court will GRANT IN PART Zimmer's motion to compel (DE 61) and GRANT Zimmer's motion to extend the deadline to complete discovery (DE 64). The Court will also GRANT IN PART Howmedica's motion to intervene (DE 73)^[1] and order the parties to submit an amended proposed protective order.

         I. BACKGROUND

         In the amended complaint, Zimmer alleges that Beamalloy breached the “License and Supply Agreement, ” whereby Beamalloy granted Zimmer licenses to “research, develop, make, have made, promote, use, market, sell, offer for sale, distribute, import/export and otherwise commercialize” certain Beamalloy products, which were created using a titanium nitrite process to coat the physical surfaces of the products. (DE 5 ¶ 9). This process is known as “ion beam enhanced deposition” or “IBED.” (DE 5 ¶ 9). Zimmer alleges that before it could “launch” any device that had been coated using IBED, Beamalloy had to satisfy certain commercialization or validation milestones. (DE 5 ¶ 10). Zimmer claims that Beamalloy never satisfied these milestones and other provisions of the License and Supply Agreement, despite Zimmer paying for experts, analysis, and investing time and resources assisting Beamalloy. (DE 5 ¶¶ 10-20).

         Zimmer also leased certain equipment to Beamalloy to be used in the IBED process, and Beamalloy agreed to make payments for this equipment pursuant to two other contracts, the “Lease Agreement” and the “Security Agreement.” (DE 5 ¶¶ 20-24). Zimmer claims that Beamalloy breached these agreements as well. (DE 5 ¶¶ 20-24). Zimmer is suing Beamalloy for breaching the agreements, a declaratory judgment (declaring that Zimmer has no further obligation to Beamalloy under the agreements), and replevin. (DE 5 ¶¶ 25-44).

         Steve White (“White”) is Beamalloy's current Chief Executive Officer. Bruce Lazear (“Lazear”) is a “lead investor” of Beamalloy and owns the consulting firm Lazear Capital. In Beamalloy's responses to Zimmer's requests for responses to interrogatories, Beamalloy identified White and Lazear as individuals with knowledge relevant to this case. (DE 62-2).

         On June 30, 2017, Zimmer informed Beamalloy of alleged deficiencies in its responses to discovery requests related to White, Lazear, and the testing of products coated using the IBED process. (DE 62-4 at 2, 3). Over a year later, on July 12, 2018, Zimmer had not heard back from Beamalloy and raised these issues again. (DE 62-4 at 8).

         On July 12, 2018, Zimmer emailed Beamalloy to resolve the issue. (DE 62-4 at 8-10). On July 19, 2018, Beamalloy responded that it had produced all “responsive non-privileged documents between Steve White, Lazear, Bob Borel [Beamalloy's president and former CEO], and Beamalloy that [were] in Beamalloy's possession, custody, and control.” (DE 62-5; see also DE 62-7; DE 62-8; DE 62-9).

         On August 12, 2018, two days before Borel's deposition, Zimmer emailed Beamalloy regarding a sizeable gap in the bates numbers of a recent Beamalloy production of documents. (DE 62-11). Beamalloy could not explain the gap. (DE 62-11).

         On August 14, 2018, during Borel's deposition, Beamalloy learned and relayed to Zimmer that the gap in bates numbers was due to Beamalloy's failure to produce two full productions of documents (one production contained 1, 088 documents, and the other contained 1, 575 documents). (DE 62-12). Zimmer was supposed to receive both productions a year earlier. (DE 62-12). Also, during Borel's deposition, Beamalloy's counsel instructed Borel not to answer questions about Beamalloy's use, testing, and discussions with third parties related to the IBED process or equipment. (DE 62-12). Beamalloy's outside counsel claimed that such information was protected under a “proprietary privilege.” (DE 62-12). The parties agreed to continue Borel's and other depositions and extend the discovery deadlines. (DE 62-12).

         After receiving and reviewing Beamalloy's two belated productions, Zimmer continued to allege that Beamalloy had not satisfied its discovery obligations. (DE 62-13).

         During a status conference with the Court on August 21, 2018, Beamalloy revealed that it had not collected documents from Lazear's business email account-that is, his Lazear Capital email account-or from White's personal “America Online” or “AOL” email account. (DE 60; see also DE 62-14). Beamalloy had produced documents showing that both men used these email accounts to conduct business relevant to the parties' claims. (See DE 62-14 at 3; DE 63). However, Beamalloy objected to collecting or producing documents from either email account. (DE 62-14 at 4; DE 62-15). Beamalloy also defended its instruction for Borel to not answer certain questions at deposition, claiming that the questions sought information that was “proprietary” and “privileged.” (See DE 60; DE 62-15 at 3).

         On August 30, 2018, Beamalloy produced its first privilege log to Zimmer. (DE 82 at 3; DE 82-1). Beamalloy withheld 35 documents from production based on a claim of “proprietary privilege.” (DE 82-1). Zimmer responded that Beamalloy must produce the 35 documents because no proprietary privilege exists. (DE 62-16). Zimmer also maintained that it was entitled to discovery of Beamalloy's research and tests of products using the IBED process and Lazear's and White's email accounts. (DE 62-16).

         On September 18, 2018, Zimmer filed the instant motion to compel. (DE 61). In the motion, Zimmer seeks to compel the production of: (1) relevant documents contained in White's AOL account and Lazear's business account (“Email Discovery”); (2) documents (and responses to questions at deposition) regarding Beamalloy's use of IBED related technology, testing and research IBED coated products, or interactions with other manufacturers regarding the IBED process (“Equipment/IBED Discovery”); and (3) the 35 documents Beamalloy withheld on the basis of a “proprietary privilege” (“Privilege Log Discovery”).

         On November 2, 2018, Howmedica filed an emergency motion seeking to intervene in this matter. (DE 73). Howmedica seeks to protect sensitive business information it revealed to or discussed with Beamalloy, which will be produced should the Court grant Zimmer's motion to compel. (DE 73). To do so, Howmedica moves for an amended protective order that restricts or prohibits Zimmer's access to Howmedica's sensitive business information.

         Zimmer and Beamalloy filed responses to Howmedica's motion (DE 82; DE 84), and Howmedica filed a reply (DE 88). Beamalloy responded to Zimmer's arguments (two days before a hearing on Zimmer's motion to compel and Howmedica's motion to intervene) by changing its privilege claim over the 35 documents in its privilege log from “propriety” to “work product.” (DE 84-3; compare DE 82-2, with DE 91).^[2]

         On November 16, 2018, the Court heard oral argument on Zimmer's motion to compel and Howmedica's motion to intervene. (DE 92). Zimmer made an oral motion for Beamalloy to submit the 35 documents in its privilege log for an in camera review. Howmedica and Zimmer agreed that Zimmer's motion to compel would result in the production of documents containing Howmedica's sensitive business information and that the Court should enter an amended protective order. However, Zimmer and Howmedica disagreed as to the nature of the protection that the order should afford. At the conclusion of the hearing, for the reasons stated on the record, the Court stayed all discovery deadlines until the resolution of Zimmer's motion to compel and ordered Beamalloy to submit the 35 purportedly privileged documents for an in camera review by the Court to determine whether they were actually protected. (DE 93).

         On November 30, 2018, Beamalloy submitted 22 documents for an in camera review. (DE 94-DE 115). Beamalloy did not submit 13 of the documents it was ordered to because, prior to its in camera submissions, Beamalloy determined that 13 of the 35 documents were “benign”-that is, not privileged-and turned them over to Zimmer. (DE 93). Zimmer responded to Beamalloy's in camera submission by requesting that the Court order Beamalloy to pay the attorney's fees and costs that Zimmer incurred in litigating the production of the 13 “benign” documents. (DE 116; DE 117; DE 121).

         The Court reviewed Beamalloy's privilege log and the documents submitted in camera, but on the record provided, the Court could not determine whether the documents were privileged. (DE 122). So, on January 15, 2019, the Court advised Beamalloy that its privilege log fell short of establishing that the 22 documents were privileged. (DE 122). The Court then ordered Beamalloy to submit affidavits, declarations, deposition transcripts, or other evidence supporting its claim of work product protection for each of the 22 documents. (DE 122).

         On January 29, 2019, pursuant to the Court's Order of January 15, 2019, Beamalloy submitted the affidavit of its in-house counsel, Attorney Sherri Lazear, along with 19 exhibits attesting to the privileged nature of the 22 documents. (DE 123; DE 126).

         II. MOTION TO COMPEL

         A. Legal Standard

         Under Federal Rule of Civil Procedure 26(b)(1):

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

         A party may file a motion to compel under Rule 37 when the responding party is evasive or provides incomplete disclosures or answers. Fed.R.Civ.P. 37(a)(1).

         Generally, in a motion to compel, the moving party bears the burden of proving that the discovery it is seeking is relevant to the case. See United States v. Lake Cty. Bd. of Comm'rs, No. 2:04 CV 415, 2006 WL 978882, at *1 (N.D. Ind. Apr. 7, 2006) (citations omitted). Relevance for purposes of discovery is construed broadly as “any matter that bears on, or that reasonably could lead to other matters that could bear on, any issue that is or may be in the case.” Chavez v. Daimler Chrysler Corp., 206 F.R.D. 615, 619 (S.D. Ind. 2002). Moreover there “is a strong public policy in favor of disclosure of relevant materials, . . . .” Patterson v. Avery Dennison Corp., 281 F.3d 676, 681 (7th Cir. 2002) (citing Fed.R.Civ.P. 26(b)(2)). “The party opposing discovery has the burden of proving that the requested discovery should be disallowed.” Bd. of Trs. of the Univ. of Illinois v. Micron Tech., Inc., No. 211CV02288SLDJEH, 2016 WL 4132182, at *3 (C.D. Ill. Aug. 3, 2016) (collecting cases).

         In ruling on a motion to compel, the Court weighs the relevance of the discovery subject to the motion and whether ordering production would cause undue burden to the opposing party. See, e.g., Nucap Indus. Inc. v. Robert Bosch LLC, No. 15 CV 2207, 2017 WL 6059770, at *2 (N.D. Ill.Dec. 7, 2017) (citing Patterson, 281 F.3d at 681); Berning v. UAW Local 2009, 242 F.R.D. 510, 514 (N.D. Ind. 2007).

         B. Analysis

         1. Email Discovery

         Zimmer asserts that the content of White's and Lazear's email accounts is discoverable the following reasons: (1) Beamalloy identified White and Lazear as persons with relevant information in its discovery responses and designated them as Rule 30(b)(6) witnesses; (2) Beamalloy has not searched the email accounts using a TAR protocol^[3]; and (3) Beamalloy has produced documents and emails indicating that White and Lazear used their personal email accounts to conduct business on issues relevant to this lawsuit.

         Beamalloy responds that it has already produced all relevant emails in the two email accounts or that Zimmer already has the emails (because the emails requested involve communications with Zimmer). Additionally, Beamalloy has stated that White and Lazear searched their email accounts and provided Beamalloy with any relevant documents they found. Beamalloy claims that it would suffer undue burden in collecting and producing any additional emails. According to Beamalloy, White's AOL account contains approximately 60, 000 emails and Lazear's business account contains approximately 80, 000 emails. Beamalloy claims that to produce these emails it would have to go through and read each one for privilege and relevance.

         Zimmer's arguments are persuasive. First, Beamalloy appears to argue that in a dispute between corporations, the contents of a witness's personal or non-corporate email account are not discoverable solely because a party-corporation does not own the email account's domain. Beamalloy does not support this argument with any authority. In stark contrast, case law appears to support Zimmer's position: If Lazear's and White's email accounts contain information that is relevant or likely to lead to relevant information, then Zimmer is entitled to the Email Discovery. See Co. v. Glob. Bio-Fuels Tech., LLC, No. 112CV1292DNHDJS, 2016 WL 6605070, at *4 (N.D.N.Y. May 20, 2016) (“The Court agrees with Plaintiff's position in this regard and directs that Defendant Behnke assist the Plaintiff's expert to review the status of the disputed email accounts, and to gain access to those accounts if that is possible.”); BCS Int'l, Inc. v. Heiting, No. 09-C-1003, 2011 WL 13216979, at *5 (E.D. Wis. Mar. 24, 2011) (authorizing access to a defendant's non-corporate, web-based email accounts because there was evidence establishing that such discovery was likely to contain or lead to the discovery of relevant evidence). Evidence of record indicates that the email accounts contain relevant discovery. (See, e.g., DE 63; DE 114).

         Second, Beamalloy fails to provide any evidence that Lazear and White went through their respective email accounts and turned over every relevant email. The Court requires more than Beamalloy's “bald assertion” that it fulfilled its discovery obligations. King v. McCarty, No. 11-CV-1126, 2012 WL 12929749, at *3 (C.D. Ill. May 1, 2012) (“Defendants offer nothing except the bald assertion that they did produce this list to contradict this document.”). In any event, Beamalloy has not explained why it relied on Lazear and White to cull documents from their email accounts instead of using a TAR protocol.

         Third, Beamalloy has not demonstrated that it will suffer an undue burden in producing the Email Discovery. Beamalloy has not estimated the expenses or resources to request and produce the Email Discovery, but merely states, without any evidentiary support, that the two accounts contain a combined 140, 000 emails. See, e.g., id. And while Beamalloy's counsel represents that counsel must read every email for relevance and privilege, the Court is confident that counsel can avoid such a task by using a TAR protocol of the type litigated by the parties in December 2017. (See generally DE 47; DE 48). Beamalloy has failed to show that the cost of producing the Email Discovery outweighs its relevance. See, e.g., Bd. of Trs. of the Univ. of Illinois, 2016 WL 4132182, at *3 (collecting cases).

         2. Equipment/IBED Discovery

         a. Beamalloy's Objections^[4]

         Beamalloy asserts that the Equipment/IBED Discovery (both documents and the responses to questions at deposition) concerns events that took place after October 4, 2016 (the day the parties terminated the agreements at issue in this case), and therefore, it is irrelevant. Beamalloy also argues that the Equipment/IBED Discovery is irrelevant to the parties' claims and defense; rather, it relates to potential violations of the parties' confidentiality agreement, codified in Article 9 of the License and Supply Agreement (Zimmer has not asserted a claim for breach of the confidentiality agreement).

         Zimmer responds that it is entitled to the Equipment/IBED Discovery because it relates to Beamalloy's efforts to:

(a) mitigate its damages,

(b) sell, describe, and/or explain its IBED coating to other orthopedic-device manufacturers,

(c) discuss its work with Zimmer with other orthopedic-device ...