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SMS Demag AG v. Xtek

June 26, 2007


The opinion of the court was delivered by: Garnett Thomas Eisele United States District Judge


Presently before the Court are Plaintiff's Motion to Compel Xtek, Inc. to Pay Cost of Document Production (Docket No. 150) and Plaintiff's Motion to Compel and for Protective Order (Docket No. 166).

I. Plaintiff's Motion to Compel Xtek, Inc. to Pay Cost of Document Production (Docket No. 150)

Plaintiff SMS moves the Court for an Order directing Defendant Xtek to pay the cost of SMS's document production in the amount of $65,812.18. In support of its motion, Plaintiff submits the invoice from the copy service, Behrens & Schuleit, which (as translated and converted into U.S. Dollars) includes $12,397.50 for document preparation, $5,681.34 for copying, $28,778.70 for printing drawings, $5,918.06 for database programming, $2,434.00 for cancellation cost, and $10,489.99 in tax. Plaintiff also sets forth its costs compared to Defendant's costs, and sets forth Xtek's objections and its response to those objections.

Specifically, Plaintiff states that on April 19, 2007, Xtek objected to the failure of SMS to explain the cancellation cost, database programming/hr, and whether the copying expenses were incurred in making copies or duplicates of documents actually requested by Xtek or whether documents were copied that were not required by Xtek, suggesting that this issue be resolved by Xtek's document inspection in Germany. Also, Plaintiff states that Xtek complained that SMS copied approximately the same number of documents that Xtek copied, but SMS's copying expenses exceeded Xtek's.

In a letter dated May 7, 2007, Plaintiff responded to the objection to the cancellation cost, database programming, and document preparation as follows:

1. Cancellation Cost. The copy company ("B&S") had done production planning and had allocated resources for the copy work for Xtek. After Xtek demanded that SMS stop copying, B&S's planned and allocated capacities were no longer needed. However, the cancellation of the order cost B&S money because it had allocated resources that otherwise would have been available for other work. This is the basis for the cancellation cost.

2. Database Programming. Database Programming was necessary in order to put the Bates numbering on the copies, and to retrieve and convert old Word Perfect-formatted electronic versions of documents (no longer supported by SMS's presently used computer software) to PDF format.

3. Document Preparation per Hour. This is the cost of organizing the documents for copying, which included removing them from files and removing paper clips and staples in order to feed the originals through the copy machine.*fn1

Plaintiff stated that all of the documents copied were called for by one or more of Xtek's original document requests.*fn2 Plaintiff also explained that the copies made included many drawings, which are more expensive to copy than standard sheets of paper.*fn3 Finally, Plaintiff stated that Xtek's copying charge to SMS for drawings was $1.25 per square foot, but SMS's per square foot charge to Xtek for copying drawings is estimated to be about $0.57 per square foot.*fn4

In its motion, Plaintiff adds that its copying charge for sheet pages is $0.12 per page, approximately half of what Xtek's copy service charged. As to the database programming charge, Plaintiff states that Xtek charged $2,249.20 for Bates labeling for about 45,000 documents, while SMS's copy service charged $5,918.20 for Bates numbering as well as converting the format of documents for the same number of documents. Plaintiff also states that the cancellation charge was the result of Xtek's demand to cancel the copying order. Plaintiff explains that the document preparation charge cannot be compared with Xtek's summary of charges because Xtek's vendor did not provide an itemization of that charge, and there is insufficient information to compare the charges.

Xtek first argues that Plaintiff's motion was prematurely filed because on the day Plaintiff filed its motion, Xtek requested an explanation of how the cancellation costs, database programming and document preparation costs were calculated, and why it was being charged to retrieve and convert electronic documents. Xtek states that it did not receive a response from SMS. Additionally, Xtek states that it also indicated that it would be in a better position to respond to the issues raised after reviewing the documents in Germany.

However, Xtek states that after review of the documents in Germany, and after consulting with SMS's representative, it is clear that the document production expenses are not reasonable. In her affidavit, Monica H. McPeek, an attorney for Xtek, states that on May 23, 2007, during document inspection, Xtek asked to speak with the person "familiar with SMS's archives."*fn5 She also states that Xtek asked Dr. Sunderman, SMS's designee, whether SMS had made any attempt to remove documents from its production that were not responsive to Xtek's document requests.*fn6

She states that Dr. Sunderman indicated that non-responsive documents had not been removed, and that he admitted that many of the over 750 binders of documents that were produced were not reviewed by anyone at SMS to determine whether they were responsive to Xtek's requests. Xtek asserts that the request included those documents that SMS had already copied for Xtek.*fn7

Xtek also asserts that SMS has refused to provide a statement from the copy company explaining the charges for cancellation cost, database programming, and document preparation. Xtek further states that SMS has refused to provide the written agreement or communications between SMS and the copy service to determine if the cancellation costs were ever discussed or agreed to by SMS. Xtek argues that the cancellation cost would not have bene necessary if SMS had produced only those documents that were responsive to Xtek's document requests, rather than attempting to "pull off a 'document dump'". Xtek also states that although exact numbers cannot be known at this time, since Xtek is still negotiating the copying of the documents with SMS, the number of documents that were actually responsive to Xtek's document requests represent a very small percentage of the total number produced.

Additionally, Xtek states that it asked SMS for an explanation of what database programming was actually performed, why it was necessary to convert electronic files, and why the documents were not simply provided in electronic format, as required by the Federal Rules of Civil Procedure. Xtek also states that it requested an itemization of the database programming fee associated with Bates labeling versus document conversion and why the process took a week. Xtek further alleges that SMS did not have all of the documents to be produced available for inspection on the first day of inspection in Germany, and other deficiencies with the document inspection.

SMS replies by stating that Xtek's challenges are based upon "Xtek counsel's ethically-challenged direct communications with an SMS employee in the course of Xtek's inspection of SMS documents." SMS also states that Xtek has failed to provide concrete examples of documents that had been copied but purportedly not requested since Xtek had the opportunity to review the "separately-maintained collection of SMS documents that had already been copied" at the document inspection in Germany.

SMS states that Ms. McPeek's affidavit is misleading because SMS produced only binders having responsive documents and had removed no documents from such binders because had it done so, SMS would have destroyed the integrity of its files and created chaos. It also states that the general content of each binder is ascertainable by SMS's indexes.

The Court, in its Order dated February 16, 2007 Order, stated:

[A] summary of expenses and supporting documentation of any copying expenses incurred by the parties in producing documents shall be submitted to opposing counsel. It is further ordered that the party receiving said documents will communicate receipt of the summary of expenses and supporting documentation and any objections to the claimed expenses to opposing counsel within two business days of receipt of said summary and supporting documentation. If the party receiving said documents has no objection to the claimed expenses, the receiving party shall submit payment of the claimed expense within five business days of receipt of the summary and supporting documentation. The producing party shall ship the documents within two business days of receipt of payment.

If, however, the party receiving said documents objects to the claimed expenses, the parties will attempt to resolve the issue within three business days of notice of the objection. If the matter cannot be resolved within three business days after notice of the objection, the parties are directed to informally notify the Court of the dispute. If necessary, the Court may require the parties to file motions on the issue. In resolving any ...

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