Cartel Asset Management v. Ocwen Financial Corp., 2010 U.S. Dist. LEXIS 17857 (D. Colo. Feb. 8, 2010)

The dispute involved a misapropriation of trade secrets, breach of contract and fraud claims and at the conclusion of the trial, the jury found for Cartel and against Defendant Ocwen Federal Bank FSB awarding compensatory damages of $ 4,900,000 and punitive damages of $ 3,900,000. The jury also found in favor of Cartel and against Defendant Ocwen Technology Xchange on the claims of breach of contract and fraud, and awarded nominal damages of $ 1 and actual and punitive damages of $ 520,000, respectively.

The District Court Judge, Judge Figa ordered a new trial on the issue of damages because “There was no proper nexus between the amounts awarded and the credible evidence in the case as to damages consistent with the three claims at issue.”

Discovery was reopened as to the issue of damages and Defendants objected to several of Plaintiffs’ interrogatories and requests for production on the grounds that the ESI sought was not reasonably accessible because of undue burden or cost. The court noted that Defendants bore the burden of persuasion, which “cannot be sustained with bald generalizations.” Producers must “present details sufficient to allow the requesting party to evaluate the costs and benefits of searching and producing the identified sources.” Id. at *44.

Defendant’s SVP of Sales and Marketing was responsible for gathering responsive information and claimed that “the process of producing responsive information ‘would affect our profitability and ability to serve our clients.’” Id. at *46. The court analogized this statement as “the e-discovery equivalent of an unsubstantiated claim that the ‘sky is falling.’” Id. The declarant’s statement lacked “specific information indicating how the Ocwen Defendants store electronic information, the number of back-up or archival systems that would have to be searched in the course of responding to Plaintiff’s Second Requests, or Defendants’ capability to retrieve information stored in those back-up or archival systems.” Id. at *45.

The declaration was also internally inconsistent. Although Defendants had taken the position that Plaintiffs’ discovery should be limited from June, 2004 to the present, the declarant stated that “retrieval of information…for the time period 1999 to the present would require “the full-time effort of three employees over a period of no fewer than twenty-one days.” Id. at *46. The court was “left to guess” the level of effort required to produce information from the June, 2004 timeframe.

In connection with the first request, declarant stated that he was unaware as to where the information was located, or whether it still existed. This alone troubled the court, given the fact that he and defense counsel had 33 days to locate the information. Nevertheless, he then speculated that it would take at least 90 days to find the documents responsive to the first request, assuming they existed. The court responded that “[t]he benefits of Rule 26(b)(2)(B) cannot be invoked on mere speculation or unsubstantiated assumptions.” Id. at *48.

Declarant also claimed that documents responsive to the fifth request “could potentially reach the thousands,” but then admitted that they probably exist only on backup tapes, as he did not know where they could be located. The court again cited the lack of information “as to the types of databases, storage systems and backup or archival systems that the Ocwen Defendants utilize for electronically stored information (ESI); their policies regarding records management, including the retention or destruction of ESI; or their ESI erasure, modification or recovery mechanisms.” Id. at *49. The court concluded that Defendants’ motion for protective order would be denied to the extent they sought to preclude discovery from the June, 2004 time period.

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