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  • Shelly Albaum

ChromaDex Loses Discovery Dispute

Updated: Dec 4, 2019


Elysium got a rare win this week when Magistrate Judge McCormick in California denied three of ChromaDex's discovery requests. You can read the minutes of His Honor's ruling here:

Discovery Rulings After Telephonic Conference

[UPDATE:] Transcript of Hearing

First, ChromaDex wanted updated information about Elysium's financial condition. ChromaDex has information through 2018, but wanted the most current information, and Magistrate Judge McCormick didn't think that ChromaDex made a good enough case for getting an update.

Second, ChromaDex wanted more complete information about Elysium's costs to produce NR. ChromaDex has invoices from Elysium's manufacturer, but wanted to also count indirect costs, such as R&D. Magistrate Judge McCormick does not explain why ChromaDex is not entitled to cost information other than the invoices.

Third, ChromaDex wanted to get communications transmitted via Slack, a workplace collaboration tool used by Elysium. ChromaDex says that Slack communications are exactly what is meant by "instant messages" that the parties agreed to produce. Elysium says nuh-uh.

Magistrate Judge McCormick ruled that unless Elysium concealed its use of Slack, ChromaDex should have complained earlier about not getting Slack documents, and in any case ChromaDex doesn't have any particular reason to believe that relevant discussions were had over Slack.

Analysis

The first ruling, that ChromaDex isn't entitled to updated financials, seems slightly wrong. If the December financials were relevant, an update would be, too, and it hardly seems like any burden at all for Elysium to output a spreadsheet from its system. This is probably appealable, but probably not very important.

The second ruling, that ChromaDex is only entitled to invoice cost information, seems a little further off. I don't see how full cost information wouldn't be relevant, given ChromaDex's claims, and ChromaDex points to other documents that reflect those costs. Moreover, His Honor provides no explanation whatsoever. So this also seems appealable.

The third ruling, though, seems like plain error, and potentially a big deal.

The whole point of liberal discovery in general, and electronic discovery rules in particular, is to get the relevant facts on the table without requiring aggrieved parties to know what box they got hidden in.

There is no purpose in arguing over whether a Facebook communication is an email or a text message, or whether something that replaces email with another transmission method counts as "messaging." If you read the advertisements for these workplace collaboration tools (and I have tried them all), they EXPLICITLY say that their primary function is to replace email.

Don't believe me? Here's Asana: "Teamwork Without Email:"

Or try BaseCamp: "Less Email:"

Or, most damning of all, "Slack Is Replacing Email in the Workplace:"

One of the most frustrating things about working with lawyers -- and especially the judiciary -- is that so many of them don't understand how technology works.

In light of the obvious equivalence among cloud-based collaboration tool communications and email and other electronic messaging systems, His Honor's treating Slack communications differently from any other electronic messaging system makes no sense.

ChromaDex did not have to make a special showing with respect to emails that there might be relevant communications there before asking for them, and if Elysium was withholding non-privileged relevant communications that were recorded and delivered via Slack instead of some other messaging platform, they should simply be required to produce them, and perhaps sanctioned for failing to do so.

At the very least it should be Elysium's burden to demonstrate why Slack messaging should be treated differently from any other type of electronic communication.

It is frustrating that the parties' "letter briefs" on this issue were not docketed, because then we could better understand what arguments Magistrate Judge McCormick was accepting or rejecting.

But we don't have to be completely in the dark.

Federal courts routinely treat Slack messages just like any other electronic communication:

In Waymo v. Uber Technologies, 2018 WL 646701 (N.D.Cal. 2018), District Judge Alsup treated Slack records just the same as any other electronic communications in the context of destruction of evidence.

A Texas federal court last year made a defendant scrape even the bot-produced messages in Slack to check whether they referred to the plaintiff and therefore had to be produced. BidPrime v. Smart Procure, 2018 WL 6588574 (W.D.Tex.2018).

And just three months ago, right here in the Central District of California, a different Magistrate Judge, Suzanne Segal, required production of omitted Slack messages using the same search terms that were applied to any other electronic databases. Calendar Research v. StubHub, 2019 WL 1581406 (C.D.Cal. 2019)

In other words, not only does Magistrate Judge McCormick's ruling make no sense in fact or law, it is also against the weight of authority, which treats Slack messages as discoverable in exactly the way that ChromaDex asserts, without any special requirements.

Conclusion

So, that's probably why we saw ChromaDex request a transcript last week. His Honor's order looks highly appealable, and if there are any more smoking gun communications that happen to have been transmitted via Slack instead of some other messaging platform, Elysium should not be able to keep those hidden.

Coda

There was one other interesting phrase in His Honor's opinion. Magistrate Judge McCormick said, "During the hearing the parties discussed Elysium’s production of documents about getting NR from Grace..." There was no ruling associated with this discussion, but did Elysium's Mystery NR supplier just get unmasked?


[UPDATE 12/2019:] From subsequent motion exhibits with redaction errors we now know that Elysium's first Mystery NR supplier was PCI Synthesis. The reference to "Grace" above was Elysium's earlier apparent effort to have ChromaDex's supplier, Grace, supply Elysium directly.


We also now have the transcript of the hearing at which Magistrate Judge McCormick ruled that Elysium is entitled to keep responsive Slack messages to itself on the grounds that ChromaDex didn't complain early enough that they weren't getting the Slack messages, and it is clear from the transcript just how improper was the ruling.


The authorities I cited above, along with common sense, show that production of the Slack messages was required from the start, and Elysium's failure to do so should have been met with discovery sanctions, not indulgence.


Here is what ChromaDex's counsel Barrett Anderson told the Magistrate Judge:

CHROMADEX: At the end of 2018, Elysium, as they claim, inadvertently produced, as you probably remember from the prior argument, a whole bunch of text messages. We are looking through those text messages, and we're finding material that they had promised to produce, they'd promised to search for it, it hit on search terms, and it wasn't produced except, apparently, accidentally.


Now we find out that they've been withholding an entire repository of instant messages. They never once disclosed that Slack existed. They never once disclosed that they used it. This -- and we have information that they shared via Slack numbers related to NR. We know that they were communicating using Slack because their CEO testified about it in their deposition. When we found out about that, Your Honor, I have to admit, we were livid. This is an entire repository of messages that they're using to communicate about facts in this case that they never even told us about.


How would we have known to include that in a request in the negotiations about the ESI protocol? And even if we had, Your Honor, they didn't even follow the protocol so we are in a position right now where an enormous amount of potentially relevant information, potentially further sharing of ChromaDex's trade secrets and confidential information happened internally, and we're not in a position to obtain it.


And now what they're telling us is that it's too late; it's too late in the day. Well, Your Honor, on one hand, they can't refuse and conceal all these messages and then, on the other hand, say all of a sudden it's too late. That's now how discovery works. That's not what we understand that Slack was used for, and they haven't even -- Your Honor, point out in their brief -- they haven't even argued that there isn't any responsive material in Slack. They've refused to even collect it and look, and that really, Your Honor, makes us concerned, especially considering all of that very damaging information that they produced in those inadvertently produced text messages.

So, Your Honor, we have a grave concern that there's very relevant, very important information in those Slack messages and that now, at the end of the day, they're trying to use the "too late" card to get out of doing what they were supposed to do from the very beginning.


...The ESI order, where it specifically mentions instant messages, and it puts the burden on the party who has control of those instant messages to divulge them, and if that party thinks that it's going to be too burdensome, they have to tell us why they think it's too burdensome...

Your Honor, we have evidence they were using it in 2016, before we even filed this lawsuit. So we know they've been using it, and as we've come to learn recently, they were using it from before the suit was filed. And if they failed to preserve that evidence, Your Honor, that's a whole other kettle of fish that we don't need to get into today if we can just get those messages and review them.


THE COURT (to Elysium): ...As I said a couple minutes ago, it's my first encounter with Slack here in this context. I don't know what your ability to obtain your communications from Slack is.


ELYSIUM: ...They knew about the existence of Slack, you know, as far back as late August or early September of 2018, when Elysium produced documents that referenced it, and the text messages that counsel references were produced back in December 2018. So they've known about this for a while. They first raised it at the end of March, and we told them that it was not the appropriate time in litigation to process and review these documents, and then they basically didn't bring it to the Court until now [May 2019]...


MR. ANDERSON: ...On the Slack messages, Your Honor, I do feel the need to set the record straight here.


Now, first, Ms. Keranen represented that the parties didn't believe that the ESI order would cover these types of messages, but I have to point you, Your Honor, directly to the ESI order which talks about (reading) The parties shall negotiate a search protocol for the collection, review, and production of text messages and instant messages should either party have a reason to believe that relevant ESI will be found in one of its custodians' text messages or instant messages.


The burden is, clearly, on Elysium to provide us that information. And, Your Honor, the fact that counsel has indicated that it was never anticipated can't be true. It just can't be true. First of all, Elysium's brief and what Ms. Keranen said on the phone are absolutely true. We did produce all of our instant messages because we understood, based on the plain language of the ESI order, that instant messages should be produced.


Now, Elysium makes a number of accusations completely unsupported by any technological understanding of what's going on at ChromaDex about whether our production is complete. Your Honor, I can represent to you right now on the record that every single chat, instant message that was shared in ChromaDex, was shared on the Skype for Business plan, those instant messages are saved in Microsoft Exchange, because they look like emails at that time, and all of them were archived and produced under a reasonable search and review process. We knew that instant messages were included. We searched for them, and we produced them.


Now on the other side, you have Elysium failing to even reveal that they use the system, let alone preserve any of the messages that are in their custody. And, Your Honor, actually, Ms. Keranen's position changes now. In their letter brief they indicated that this was contemplated by the ESI order and we should follow that negotiation, but now they're saying that it wasn't covered so we shouldn’t review it. It's all over the map, Your Honor, and, frankly, whatever it is, they failed to abide by their obligations, and we are deprived of very critical information. So that's the last word I'd like to say on Slack...

#ChromaDex #CDXC #ElysiumHealth #Litigation

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