## Facts

- Former Tellermate sales employees sued Tellermate and related entities/individuals for age discrimination after their termination on August 22, 2011.
- The plaintiffs sought sales performance data to test defendants’ claim that the terminations were for poor sales.
- The relevant sales data was maintained on Salesforce.com, a third-party platform used by Tellermate.
- During discovery, defendants and counsel represented that Tellermate could not access or print its Salesforce sales data and suggested plaintiffs obtain the records from Salesforce instead.
- The court found that reasonable inquiry would have shown Tellermate’s employees routinely printed Salesforce reports and that Tellermate owned its sales data under its Salesforce contract.
- After an April 2013 order compelling production, defendants did not meaningfully comply until January 2014.
- During the delay, older sales data was lost or destroyed, and Salesforce’s retention limits prevented reconstruction.
- Defendants produced roughly 50,000 pages marked “attorneys’ eyes only,” limiting the plaintiffs’ ability to review materials central to their claims.
- Plaintiffs moved for Rule 37(b) sanctions (including default judgment) and to strike the “attorneys’ eyes only” designations.

## Issues

1. Whether defendants violated federal discovery obligations by misrepresenting access to and control over cloud-hosted sales data, delaying compliance with discovery orders, and making sweeping “attorneys’ eyes only” designations.
2. What sanctions were appropriate under Fed. R. Civ. P. 37(b), including whether default judgment was warranted.

## Decision

- The court granted plaintiffs’ motion for sanctions under Rule 37 based on serious discovery misconduct.
- The court denied the request for default judgment, choosing lesser sanctions tailored to remedy prejudice and deter repetition.
- The court granted the motion to strike defendants’ “attorneys’ eyes only” designations as overbroad and unjustified.
- The court ordered corrective discovery actions and imposed sanctions with monetary and evidentiary components.

## Legal Principles

- A party may not obstruct discovery by falsely or recklessly misrepresenting whether it has responsive information or can obtain access to it.
- For discovery purposes, “possession, custody, or control” includes electronically stored information a party has the legal right or practical ability to obtain from a third-party service provider.
- Counsel must make reasonable inquiry into a client’s information systems before making factual representations in discovery.
- Noncompliance with discovery orders and delay that results in loss of relevant information supports Rule 37(b) sanctions.
- “Attorneys’ eyes only” designations are exceptional and must be narrowly supported; mass designation without adequate justification may be struck and may support sanctions.

## Conclusion

The court found that defendants’ discovery conduct—misstatements about access to cloud-hosted sales data, delayed compliance with a production order leading to loss of information, and indiscriminate “attorneys’ eyes only” designations—warranted substantial Rule 37 sanctions and removal of the restrictive confidentiality designations, but not the case-ending remedy of default judgment.


Brown v. Tellermate Holdings Ltd. (Tellermate II), No. 2:11-cv-1122, 2014 WL 2987051 (S.D. Ohio July 1, 2014)