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Brown v. Barnes and Noble, Inc.

United States District Court, S.D. New York

December 23, 2019

KELLY BROWN and TIFFANY STEWART, Individually and on behalf of all others similarly situated, as Class/Collective representative, Plaintiffs,
v.
BARNES AND NOBLE, INC., Defendant.

          OPINION & ORDER

          KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE.

         Plaintiffs have moved to compel documents that Defendant Barnes & Noble, Inc. (“BN”) has withheld on the grounds that they are protected by the attorney-client privilege or the work product doctrine. Plaintiffs also seek sanctions against BN for its delayed disclosure of its privilege log in the form of their attorneys' fees and costs associated with their Motion to Compel. BN opposes the Motion, contending that it did not unreasonably delay production of its privilege log and that the documents are properly designated as privileged and/or work product. BN also seeks its attorneys' fees and costs in connection with having to respond to Plaintiffs' Motion to Compel, contending that it was brought in bad faith.

         BACKGROUND

         Plaintiffs bring this nationwide putative class and collective action pursuant to the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et seq., and certain state laws, contending that BN improperly paid its Café Managers as exempt, salaried employees rather than hourly, overtime-eligible employees. During discovery, Plaintiffs learned that BN hired Right Management Consultants in 2005 to assist with a job analysis of the Café Manager position. The purpose of the job analysis was to, among other things, assess whether Café Managers were properly classified as exempt from overtime. Plaintiffs also learned that, in 2016, BN reclassified Café Managers as non-exempt after the United States Department of Labor (“DOL”) announced that the salary threshold to qualify for the FLSA executive exemption was going to increase to $47, 476.[1] To date, BN has produced the Right Management study, all of the underlying materials pertaining to the study, and certain documents related to that reclassification decision. Defendants produced their privilege log to Plaintiffs on September 24, 2019-the very end of discovery.

         The bulk of the documents Plaintiffs seek through the instant Motion pertain to the 2005 study and the 2016 reclassification decision. Additionally, one document relates to an email concerning a California lawsuit filed against BN, alleging that California Café Managers were improperly paid as exempt from overtime. Two other documents pertain to emails concerning a Pennsylvania lawsuit filed against BN, alleging that Pennsylvania Café Managers were improperly paid as exempt from overtime.

         Plaintiffs argue that the emails listed on Defendant's privilege log should have been identified much earlier in discovery, given that the documents came from Michelle Smith, BN's Vice President of Human Resources, and Brad Feuer, BN's General Counsel, two custodians that BN knew had pertinent documents responsive to Plaintiffs' document requests. Specifically, Plaintiffs state that BN should have located and listed the documents on their log while collecting other documents pertaining to the 2005 study and 2016 reclassification decision and preparing Smith for her deposition. Plaintiffs argue that BN's late production of a privilege log, identifying what Plaintiffs believe are critical documents, has prejudiced them in discovery. Plaintiffs also contend that BN should be deemed to have waived privilege by virtue of their failure to comply with their discovery obligations and by asserting a good faith defense to Plaintiffs' FLSA claims.

         BN has maintained that Smith made the decisions about whether Café Managers should be classified as exempt during the entire period relevant to this litigation. Smith interacted with BN's General Counsel, Brad Feuer, and other in-house lawyers (e.g., Allison Spivak, former Director of Legal Affairs for Human Resources), as well as outside counsel on wage and hour issues. In-house attorneys commented on strategy concerning the 2005 study and how it might impact the wage and hour lawsuit pending in California at the time (the “Reinard Litigation”) and also on draft documents and strategy pertaining to the 2016 reclassification of Café Managers. Additionally, Smith interacted with lawyers from Bryan Cave Leighton Paisner LLP in connection with the 2005 study and with lawyers from Jackson Lewis P.C. regarding the 2016 rule change announced by the DOL that precipitated the change to the Café Managers' classification from exempt to non-exempt. She also shared draft documents pertaining to the 2016 reclassification of Café Managers with lawyers from Jackson Lewis. Notwithstanding her consultation with attorneys regarding the 2005 job study and 2016 reclassification of Café Managers, BN submits that its good faith defense is based solely on Smith's decision-making and not on advice from counsel. It, therefore, argues that it has not waived privilege because its good faith defense is not based on reliance on advice of counsel.

         BN also vigorously disputes that it delayed production of a privilege log. It explains that it did not conduct a search of Smith's or Feuer's emails until the parties agreed on a protocol to search Electronically Stored Information (“ESI”). The parties did not reach an agreement on that protocol until April 2019. BN then reviewed and produced documents in tranches through September 2019. Plaintiffs learned of the documents at issue in this Motion when BN produced its privilege log in September 2019, days before the close of discovery.

         DISCUSSION

         The purpose of discovery is to allow the parties to litigate based on complete information because “[m]utual knowledge of all the relevant facts gathered by both parties is essential to proper litigation.” Hickman v. Taylor, 329 U.S. 495, 507 (1947). The Federal Rules of Civil Procedure (the “Rules”) are designed to achieve this purpose in the most economic, efficient and fair way, and it is essential that parties follow the Rules. However, the Rules are designed to be general and flexible so they can be applied in the myriad cases before the federal courts. As a result, competing obligations under the Rules can create tension.

         The present dispute highlights the problem with the current procedure for negotiating ESI protocols and the lack of clarity in the Rules about what constitutes a reasonable inquiry for purposes of responding to discovery requests prior to searching emails pursuant to a negotiated ESI protocol. Plaintiffs served discovery requests in 2017 that called for documents pertaining to any job studies or classification decisions for the Café Manager position. BN searched for such documents and produced them. BN also identified Smith and Feuer as relevant custodians of records early on, and both witnesses no doubt assisted in the collection of relevant documents. These included documents pertaining to the 2005 study and 2016 reclassification decision, which were produced early in discovery. It is unclear where and how BN obtained all these documents. However, BN maintains that it did not undertake a formal review of Smith's or Feuer's emails - the location of the documents listed on their privilege log - until an agreed-upon ESI protocol was in place in order to conserve costs and avoid having to redo its search, review, and production process. Unfortunately, it took the parties six months to negotiate and agree on an ESI protocol. It then took BN an additional six months to review and produce documents from the relevant custodians, after which it produced its privilege log.

         A. Whether BN Conducted a Reasonable Inquiry for Relevant Documents

         Several Rules are pertinent to the Court's resolution of the current dispute. The first relates to BN's obligation to conduct a reasonable inquiry for documents and information responsive to Plaintiffs' document requests. When BN produced certain documents pertaining to the 2005 study and 2016 reclassification decision, its attorneys certified, pursuant to Federal Rule of Civil Procedure 26(b), that they had made a reasonable inquiry and that BN's disclosures were complete and accurate when made. Fed.R.Civ.P. 26(g). “The duty to make a ‘reasonable inquiry' is satisfied if the investigation undertaken by the attorney and the conclusions drawn therefrom are reasonable under the circumstances. It is an objective standard similar to the one imposed by Rule 11. . . . Ultimately, what is reasonable is a matter for the court to decide on the totality of the circumstances.” Fed.R.Civ.P. 26 advisory committee's note to 1983 amendment.

         The Court also notes that “[n]othing in Rule 26(g) obligates counsel to disclose the manner in which documents are collected, reviewed and produced in response to a discovery request.” Karl Schieneman and Thomas C. Gricks III, The Implications of Rule 26(g) on the Use of Technology-Assisted Review, 7 Fed. Cts. L. Rev. 239, 254 (2013); see also Entrata, Inc. v. Yardi Systems, Inc., 2:15-cv-00102, 2018 WL 5470454, at *6 (D. Utah Oct. 29, 2018) (upholding decision denying Yardi's motion to compel production of the methodology and results of Entrata's technology assisted review (“TAR”) process); Winfield v. City of New York, 15-CV-05236 (LTS) (KHP), 2017 WL 5664852, at *9 (S.D.N.Y. Nov. 27, 2017) (discussing degree of transparency required by the producing party as to its ESI process). Thus, a producing party arguably could choose to adopt the ESI protocol it deems best aimed at locating relevant documents, consistent with its obligation under Rule 26, without disclosing its process to the requesting party.

         However, the Rules also require cooperation in discovery to achieve a just, speedy, and inexpensive determination of a case. Where ESI is concerned, this typically means the parties are expected to meet and confer about custodians of relevant ESI, date ranges for searches of ESI, and other search parameters. Fed.R.Civ.P. 1 and 26(f); see also, e.g., Winfield, 2017 WL 5664852, at *7 (recognizing that collection, review and production of ESI requires cooperation between the parties); UnitedHealthcare of Fla., Inc. v. American Renal Assocs. LLC, No. 16-cv-81180-Marra/Matthewman, 2017 WL 4785457, at *4 (S.D. Fla. Oct. 20, 2017) (“Courts expect that counsel will endeavor to cooperate and reach agreements early in litigation regarding . . . the method of search (keyword, TAR, combination) . . . .” (internal quotation marks and citation omitted)).

         Here, BN did not plow forward with ESI discovery without consulting with Plaintiffs; rather, the parties met and conferred on an ESI process. Although the process was time-consuming, the drawn-out negotiation and finalization of the ESI protocol was not caused by bad faith of either side. In this Court's experience, the negotiation of ESI protocols takes an inordinate amount of time and tends to delay, rather than expedite, discovery. Disputes frequently arise about which and how many custodians' records will be searched, search terms, the scope of so-called seed sets used in some active learning TAR processes, and appropriate sampling and quality control processes.

         Furthermore, negotiations tend to be protracted because they often involve testing and refining of search parameters. Once documents are loaded onto a review platform, attorneys then must review the documents to train any predictive coding algorithms, and determine the documents that will be produced and those that will be withheld on privilege or work product grounds.[2] The review process itself is time-consuming. The average rate of review is about 40-60 documents per hour, though the rate of review can vary considerably based on the complexity of the documents and the experience of the reviewers. Assuming a case involves review of 100, 000 documents, it would take 2000 hours for an attorney to review these documents for production if reviewing them at a rate of 50 documents per hour.[3] See Blackrock Allocation Target Shares: Series S Portfolio v. Bank of New York Mellon, 14 Civ. 9372 (GBD)(HBP), 2018 WL 2215510 (S.D.N.Y. May 15, 2018) (recognizing special challenges of ESI discovery, including voluminous data).

         Finally, ESI collection and review can be expensive. ESI vendors charge for hosting and processing data, as well as testing and refining search protocols. And, depending on the hourly rates for the review team, the review process in the hypothetical case mentioned above involving 100, 000 documents could cost $500, 000 or more. One recent study reported that legal document review can represent 70 percent or more of the cost of a litigation. See Jennifer Booton, Don't send another email until you read this, MarketWatch (Mar. 9, 2015), https://www.marketwatch.com/story/your-work-emails-are-now-worth-millions-of-dollarsto-lawyers-2015-03-06. The cost involved makes it imperative that reviewer time not be wasted by having to repeatedly redo searches and reviews of documents. Technology is improving and ultimately may provide tools at lower costs that provide greater efficiency and may eliminate the need for negotiated ESI protocols. In the meantime, however, litigants, who often distrust that their adversaries are searching in all the right places and in all the right ways for relevant documents, must engage in the time-consuming process of meeting and conferring about eDiscovery. Requesting parties who engage in this process must be mindful of the costs and time associated with ESI production, consistent with their obligation under Rule 1.

         Here, the parties cooperated and updated the Court regularly on their progress with the ESI protocol. Prior to conducting its formal ESI search, BN searched for documents responsive to Plaintiffs' discovery requests and produced significant quantities of documents. It is unclear what process it undertook, but the Court has no reason to doubt BN's representation that it did not locate the documents on its privilege log until earlier this year, when it implemented the agreed upon search protocol on Smith's and Feuer's email. The ...


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