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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: November 4, 2018

Party Sanctioned for Excessive Attorneys’ Eyes Only Designations

On October 18, 2018, Justice Masley of the New York County Commercial Division issued a decision in Callsome Solutions Inc. v. Google, Inc., 2018 NY Slip Op. 32716(U), sanctioning a party for making excessive attorneys’ eyes only confidentiality designations, explaining:

Our court system is dependent on all parties engaged in litigation abiding by the rules of proper practice. Accordingly, 22 NYCRR Section 130-1.1 (a) empowers courts with discretionary authority to sanction attorneys or parties, in the form of costs and fees, for frivolous conduct. Conduct is frivolous if: (1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension modification or reversal of existing law; (2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another, or (3) it asserts material factual statements that are false. To preserve the integrity of the court system, sanctions are imposed to deter future frivolous conduct and vexatious litigation and dilatory or malicious litigation tactics.

Various factors are considered to determine whether conduct is frivolous. First, and foremost is the broad pattern of conduct by the offending attorneys or parties. A corollary consideration is whether the conduct was continued when it became apparent, or should have been apparent, that the conduct was frivolous, or when such conduct was brought to the attention of the parties or to counsel.

Google contends that Callsome has failed to establish frivolous conduct as defined by Rule 130-1.1 (c). According to Google, its conduct here can hardly be frivolous because: (1) the designations were appropriately and thoughtfully applied to protect the confidentiality of the work of the Google Play security and policy enforcement teams; (2) Google has repeatedly accommodated Callsome’s demands for de-designations and its good faith efforts should not be construed as an admission of misconduct; and (3) a contrary finding would have a chilling effect on future offers to compromise.

AEO designations shall be made as sparingly as possible since they have severe consequences affecting the adversary’s investigation, attorney client communications, the search for truth, and the judicial system, which is inevitably drawn into the discovery process.

The court is hard pressed to see how Google’s voluminous AEO designations were appropriately applied. The large number of designations, reviews, re-reviews, trickle of de-designations, culminating in a wholesale de-designation on the eve of argument of this motion does not support Google’s assertion of appropriateness. Further, Google’s admitted use of AEO designations to punish Callsome for causing the enforcement action also evidences that the AEO designations were not appropriate. While using AEO designations as a litigation tactic certainly requires strategic thinking, it does not constitute the thoughtfulness contemplated.

While Google characterizes its de-designation of almost all of its previously designated AEO documents following the February 2018 court conference as good faith cooperation, the court sees a strategy to maliciously injure. Google’s wholesale de-designation confirms that Google’s initial designations were not made in good faith. That Google has de-designated on at least five occasions illustrates this point. Each time, Callsome was compelled to re-review.

Google’s actions appear to be an effort to thwart judicial scrutiny of its designations. Significantly, Google became noticeably proactive in its de-designation efforts only after the court became involved and the issue of sanctions was raised. Indeed, after the February 2018 court conference, the slow trickle of de-designated documents to Confidential quickened as Google de-designated nearly all its previously designated AEO documents. Submitting a box of 228 documents for the court’s review after Callsome’s effective argument for sanctions does not negate this appearance. Indeed, it exemplified Google’s strategy of document dumps and allowed the court to review and confirm Callsome’s allegations.

A slow trickle of corrections does not rectify initial improper designations. For instance, Google originally designated as AEO 32 documents because they allegedly contained the type of information that, as a matter of practice, Google considers highly sensitive and does not divulge publicly, particularly not to individuals who created the apps. However, the court reviewed the 32 documents Google referenced and found these documents contained correspondences sent by Callsome to Google describing certain suspension notices and the circumstances surrounding receipt of the suspension notices. They also included correspondences from Google to Callsome requesting additional information about the suspended apps. (Id.) Not only are these documents bereft of highly sensitive information, but there can be no argument that divulging them to Callsome posed some sort of risk because these correspondences were drafted by or sent to Callsome.

Google also originally designated AEO 36 documents that concern or otherwise reveal market share research conducted internally by Google personnel. However, Google’s categorization of these documents as market share research was disingenuous. The court reviewed the 36 documents and confirmed that these documents contain correspondences among Google personnel from 2013, who discuss a different app that allegedly fueled bad behavior on Google Play. They have nothing to do with market share research — assessment of the percentage of the market for a product or service that a company supplies. Google’s conduct demands attention if it is to be stopped.

Although Google justifies its bulk de-designation as due to the passage of time, Google rejected this exact reason for de-designating when Callsome raised this months before this motion was filed. Google offers no credible explanation for what changed in that short time. Recycling Callsome’s objection suggests that Google’s original justification was baseless.

Additionally, Google’s pattern of improper conduct continued even after the parties’ February 2018 conference with the court, as its attempt to extract concessions from Callsome was improper. Google’s March 6, 2018 offer to compromise was nothing of the sort. No public policy is served by crediting Google’s purported offer of compromise, the sincerity of which is belied by the impractical nature of its deadline: 24 hours. Before it could consider Google’s offer, Callsome had to cross-reference this latest batch of de-designated documents against earlier designations.

AEO designations are not negotiable. Discovery is either “extremely sensitive” technical data or commercially sensitive or strategic plans, or research and development or not. Either documents are truly secret and their disclosure will be harmful to the owner of the document or not. If not, then the discovery may be protected by a designation of confidential and the discovery remains unavailable to the public, but usable by the parties for the purposes of this litigation only. A party cannot over designate documents then hold the improperly designated documents hostage until the adversary surrenders. Such conduct will not be countenanced by this court. Google argues that its conduct is not egregious by comparison to others who were sanctioned for pursuing meritless claims, withholding relevant evidence and deliberately violating a court order to produce evidence.

However, Google is not immunized because other parties have done worse or because there were even more documents and depositions that could have been improperly AEO designated. There were serious consequences of Google’s improper designations, not only delay, but also the impact on the communications between Callsome and its attorney.

In sum; Google’s conduct flouts widely accepted rules of civility embedded in New York litigation, and in particular the Commercial Division. Google adopted a pattern of partially complying with demands for disclosure, resulting in a delay in the completion of discovery. By providing piecemeal de-designations, only when prompted, and dropping its designations, only when threatened with court review, Google effectively prevented the expeditious resolution of this litigation, as it was Google’s excessive AEO designations, not Callsome’s challenges of those designations, that caused the delay here. This pattern of dilatory conduct is precisely the type of chronic noncompliance that breeds disrespect in a culture in which cases can linger for years without resolution.

AEO designations seek to protect one party from injury – usually injury to the party’s business – that might occur if the information is revealed to the party’s competitor. If Google was concerned that Callsome might not protect Google’s secrets, then it could have amended the Confidentiality Agreement to add penalties for violation of the confidentiality designation e.g. financial; over designation is not the solution. As a result, Google successfully shifted the burden of reviewing its designations to Callsome. To allow such improper use of the Confidentiality Agreement is to reward that behavior.

(Internal quotations and citations omitted).

This decision is about a practice that may not be apparent to clients, but that can be a problem in litigation involving trade secrets and other highly-sensitive business information. Courts will allow very sensitive evidence to be disclosed only to counsel, and not to their clients, because of the danger of competitors getting each other’s trade secrets. This decision shows that abusing the right to designate highly sensitive documents as attorneys’ eyes only can get a litigant in trouble. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding whether a litigant’s conduct has crossed the line from creative to sanctionable.

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