SHELL OFFSHORE, INC. v. ENI PETROLEUM US LLC ET AL. CIVIL ACTION NO. 16-15537 United States District Court, E.D. Louisiana Filed August 28, 2017 Counsel Deborah DeRoche Kuchler, Janika D. Polk, Skylar B. Rudin, Kuchler Polk Schell Weiner & Richeson, LLC, New Orleans, LA, for Shell Offshore Inc. Geoffrey L. Harrison, Pro Hac Vice, Alexander L. Kaplan, Ashley L. McMillian, Pro Hac Vice, Susman Godfrey, LLP, Houston, TX, Emily Lippold Gummer, Robert S. Stassi, Russell L. Foster, Seth E. Bagwell, Carver, Darden, Koretzky, Tessier, Finn, Blossman & Areaux, New Orleans, LA, for ENI Petroleum U.S., L.L.C. Wilkinson, Jr., Joseph C., United States Magistrate Judge ORDER AND REASONS ON MOTION *1 Defendant Eni Petroleum US LLC (“Eni”) filed a Motion to Compel Improperly Withheld Information. Record Doc. No. 99. Plaintiff Shell Offshore Inc. (“Shell”) filed a timely memorandum in opposition. Record Doc. No. 103. Eni received leave to file a reply memorandum. Record Doc. Nos. 104, 107, 108. Shell was the operator of four oil wells in the “Popeye” field offshore Louisiana. Shell brought this action under the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 et seq., against Eni, the majority interest owner in the Popeye wells, for breach of contract and to collect an open account.[1] Shell alleges that Eni breached the Unit Operating Agreement by refusing to pay its share of billings for abandoning the wells. Eni counterclaimed for breach of contract and bad faith, alleging that Shell decided to use the Atwood Condor, an ultra-deepwater drilling rig, to abandon the Popeye wells without approval from Eni, not because the Atwood Condor “was the best (or even a suitable) rig” for the job, but because Shell was in a long-term contract for its own account that obligated Shell to pay about $650,000 per day for the Atwood Condor, whether or not it used the rig. Eni’s memorandum in support of motion to compel, Record Doc. No. 99-1 at p. 6. Eni alleges that Shell did not have drilling work in 2015 for the Atwood Condor .... [T]he $650,000/day rate was several times more than the roughly $150,000/day market rate for other available drilling rigs.... Shell chose to use its idled high-above-market-rate Atwood Condor to [abandon] the Popeye wells because ... Shell self-servingly sought to reduce its own multi-hundred million dollar rig idle problem to the multi-ten-million-dollar financial detriment of its Popeye partners Eni-LLC and Exxon. Id. Eni’s motion to compel presents the logistically difficult issue whether Shell improperly redacted allegedly non-responsive information contained within materials that it produced in response to Eni’s Fed. R. Civ. P. 34 requests for production without any relevance objection. For the following reasons, IT IS ORDERED that Eni’s motion is GRANTED IN PART AND DISMISSED WITHOUT PREJUDICE IN PART, pending the further discussions required herein. Eni seeks to compel production of unredacted copies of all materials that Shell produced with redactions marked “Withheld as Non-Responsive,” which consist of more than 1,200 documents from more than 11,000 that Shell has designated as confidential pursuant to the protective order entered in this case. Record Doc. No. 45. Eni did not provide the court with all of the disputed documents, but submitted 50 of Shell’s redacted documents with its original memorandum and one with its reply as examples. The exhibits consist of emails, minutes of meetings and Power Point presentations. Eni argues that Shell’s redactions removed relevant and responsive information, were made in bad faith and render many documents near-meaningless. The exhibits include a few documents that Shell produced to Eni twice, presumably from different custodians’ files, where the second copy contains fewer redactions than the first. *2 Eni also contends that Shell refused to confer in good faith regarding its redactions. Eni asserts that it offered to provide Shell with a sample of documents that showed improper redactions, but that Shell “refused to review and reconsider its tens of thousands of improper redactions” and “unreasonably” demanded that Eni “identif[y] each individual document with which it has an issue and state[ ] the specific reason.... As Eni-LLC explained to Shell, Eni-LLC takes issue with every redaction Shell has made ....” Eni’s memorandum, Record Doc. No. 99-1 at pp. 12-13. Shell denies that it refused to confer in good faith. Shell asserts that Eni refused to engage in meaningful discussions because Eni disputed every redaction, unreasonably refused to identify a single document that Eni challenged and wanted Shell to remove all of its confidential designations and all of its redactions, thus denying Shell the chance to review any specific challenged redactions and resolve the disputes. Shell’s memorandum, Record Doc. No. 103 at pp. 1-3. Shell acknowledges that, upon review of the 50 exhibits that Eni identified as problematic, some information “should not have been redacted.” Id. at p. 10. Shell agrees to produce unredacted versions of the following: • Exhibit 13: Shell will remove the redactions of information that pertains to the Popeye wells only, which has already been produced in Exhibit 14. • Exhibits 15 and 22: Shell will remove the redactions of information under the headings “Rig Interface Planning” and “Tooling” only. • Exhibits 17 through 20: Shell will remove the redactions of the rig rates. • Exhibit 40: Shell will remove the first and last of three redactions, but not the middle one. • Exhibits 42, 44, 45 and 50: Shell will remove the redactions. • Exhibit 46: Shell will remove the redactions in the e-mails that were written by Eni employees Gary Clifford and Karen Pulpan. Id. at pp. 10, 12-13. Accordingly, IT IS ORDERED that Eni’s motion to compel is GRANTED IN PART in that, no later than September 8, 2017, Shell must remove the improper redactions it has identified in Exhibits 13, 15, 17-20, 22, 40, 42, 44, 45, 46 and 50 and produce new copies of these documents to Eni with the redactions removed. As to the remaining redactions at issue, Shell argues that information pertaining to assets and wells other than the Popeye wells and the Atwood Condor rig is non-responsive and/or irrelevant to the issues in this case. Shell contends that, although the redacted documents contain relevant information that is responsive to Eni’s requests for production and thus the documents were produced, the redacted information relates to other assets and wells and is highly sensitive, proprietary and confidential. Shell argues that the Joint Agreement and Order on Production of Electronically Stored Information (the “Joint Agreement”) entered by the court, Record Doc. No. 74, permits the redactions. The Joint Agreement allows redactions based on non-responsiveness when the redacted information is “Confidential Information” as defined by the Protective Order in this case, Record Doc. No. 45. The Joint Agreement provides that there shall be no redactions for (non)responsiveness except for Confidential Information as defined by the Protective Order. Any decision on redactions will be made in good faith on a document-by-document basis. The Parties agree to work together in good faith to resolve any disputes over redactions. Record Doc. No. 74 at § 8(b). The Protective Order provides that a party may designate as “Confidential Information” *3 (a) information that contains trade secrets; (b) research, technical, commercial or financial information that the party has maintained as confidential; and (c) other confidential or proprietary information that is not generally known by the public and that a party would not normally reveal to third parties or would cause third parties to maintain as confidential. Record Doc. No. 45 at ¶ 4. The parties have not cited, and my research has not located, any binding decision by the Fifth Circuit or persuasive recent decisions by any other appellate court regarding the propriety of unilateral redactions for non-responsiveness such as Shell made in its otherwise responsive and relevant documents. In the district courts, there is a split of authority on the question of whether relevance is a proper ground for redactions. Compare Spano v. Boeing Co., 2008 WL 1774460, at *2 (S.D. Ill. Apr.1 6, 2008) (holding that redaction is appropriate); Schiller v. City of New York, 2006 WL 3592547, at *7 (S.D.N.Y. Dec. 7, 2006) (same) with ArcelorMittal Cleveland Inc. v. Jewell Coke Co., 2010 WL 5230862, at *2-3 (N.D. Ohio Dec. 16, 2010) (holding that redaction is not permitted under Fed. R. Civ. P. 34); Beverage Distribs., Inc. v. Miller Brewing Co., 2010 WL 1727640, at *4 (S.D. Ohio Apr. 28, 2010) (same); Medtronic Sofamor Danek, Inc. v. Michelson, 2002 WL 33003691, at *4-5 (W.D. [Tenn]. Jan. 30, 2002) (same). Del. Display Grp. LLC v. Lenovo Grp. Ltd., No. 13-2108-RGA, 2016 WL 720977, at *6 n.11 (D. Del. Feb. 23, 2016); compare also Diak v. Dryer, Costello & Knox, P.C., 33 F.3d 809, 813 (7th Cir. 1994) (retiree claimed a right to pension benefits and had redacted all information from his tax returns except amounts he received as pensions; affirming denial of motion to compel unredacted returns because district court found after in camera review that redacted information was irrelevant), and Kirsch v. Brightstar Corp., 68 F. Supp. 3d 846, 857 (N.D. Ill. 2014) (citing Diak, 33 F.3d at 813; RBS Citizens, N.A. v. Husain, 291 F.R.D. 209, 222-23 (N.D. Ill. 2013); Abbott v. Lockheed Martin Corp., No. 06-cv-0701, 2009 WL 511866, at *3 (S.D. Ill. Feb. 27, 2009)) (“Redacting documents that are non-responsive to a plaintiff’s document requests and irrelevant to the litigation is appropriate.” However, after in camera review, the court held that the 12 documents at issue were “potentially relevant” and compelled their production.), and Louis Vuitton Malletier v. Tex. Int’l P’ship, No. H-10-2821, 2012 WL 5954673, at *6 & n.2 (S.D. Tex. May 14, 2012) (without in camera review, denying motion to compel unredacted documents because plaintiff’s descriptions of redactions “reveal that the information is ... nonresponsive in that it relates to stores not located at the” shopping center at issue and one document “clearly would not be relevant to any of the issues in this case even if it is responsive to a broad request for production”), with U.S. ex rel. Simms v. Austin Radiological Ass’n, 292 F.R.D. 378, 385-86 (W.D. Tex. 2013) (discussing cases and deciding after in camera review that party “may [not] unilaterally redact information it believes is irrelevant or non-responsive”), and Beverage Distribs., 2010 WL 1727640, at *3-5 (The court distinguished cases that approved redactions because “the number of redacted documents appeared to be small, and the content of the redactions was readily apparent, ... there was little or no burden placed on the court to review a large volume of redacted documents, and ... the redactions involved a single type of document and one or two discrete categories of allegedly irrelevant information.” The court granted plaintiff’s motion to compel unredacted materials where defendants had substantially redacted “many thousands of pages” of responsive documents on the basis of irrelevance, finding that “it would be impossible to divide them into a few discrete categories about which relevancy arguments could conveniently and intelligently be made. For the same reason, an in camera review of each redacted document and the corresponding unredacted original would be unnecessarily burdensome and time-consuming.”). *4 Of these two positions, the Delaware Display Group court found the interpretation disallowing redaction to be more persuasive. Since the producing party is ordinarily “not harmed by producing irrelevant information or by producing sensitive information which is subject to a protective order,” redactions are unnecessary and, as this motion demonstrates, disruptive. The Court should be “burdened with an in camera inspection of redacted documents ... only when necessary to protect privileged material whose production might waive the privilege.” Del. Display Grp., 2016 WL 720977, at *6 n.11 (quoting Beverage Distribs., 2010 WL 1727640, at *4). Although the Delaware judge adopted this position, he expressed some misgivings about it after reviewing the disputed documents in camera and he suggested that unilateral redactions might be appropriate in different circumstances: I ... am skeptical of the relevance of the redacted portions of the documents. Further, I recognize that the information sought is sensitive. If the documents at issue were configured in another manner, perhaps the result here would be different. As it stands, the documents are relevant and there is no basis upon which Plaintiffs can make redactions. The sensitive information is protected from further disclosure by the Protective Order. Therefore, I reluctantly conclude that Plaintiffs must produce unredacted versions of the royalty reports. Id. (emphasis added). In Cyris Jewels v. Casner, No. 12-CV-1895, 2016 WL 2962203 (E.D.N.Y. May 20, 2016), plaintiff claimed that the City of New York had failed to protect him from childhood abuse by his foster parents. Because the City could not locate any of plaintiff’s own foster care records, he sought to compel the City to produce the records of non-party foster children who had lived in the same homes. The court weighed the proportionality factors of Fed. R. Civ. P. 26(b)(1), granted the motion to compel and allowed the City to redact non-party personal identifiers, but rejected the “City’s argument that it may redact information (within responsive, otherwise relevant documents) that it deems irrelevant to plaintiff’s claims.” Id. at *5. The court reasoned that [t]he documents, in their entirety, are relevant to plaintiff’s claims. As the magistrate judge explained, “plaintiff is entitled to get a full picture of what was going on in the home.” ... The City’s unilateral action has apparently raised the plaintiff’s suspicions, and has deprived the plaintiff of context.... Because the City has produced certain documents twice – once ... with limited redactions, and a second time ... with more substantial redactions – it is possible to evaluate whether the redactions did in fact cover irrelevant material. Although the City provided examples of redactions that may well be irrelevant to plaintiff’s claims ..., plaintiff has established that other redactions covered plainly relevant material. Id. (emphasis added). Although the cases about redacting for non-responsiveness are in conflict, [t]hese decisions are not necessarily irreconcilable. The themes which pervade each of them are (1) that redaction of otherwise discoverable documents is the exception rather than the rule; (2) that ordinarily, the fact that the producing party is not harmed by producing irrelevant information or by producing sensitive information which is subject to a protective order restricting its dissemination and use renders redaction both unnecessary and potentially disruptive to the orderly resolution of the case; and (3) that the Court should not be burdened with an in camera inspection of redacted documents merely to confirm the relevance or irrelevance of redacted information, but only when necessary to protect privileged material whose production might waive the privilege. *5 [Beverage Distributors,] 2010 WL 1727640 at *4. “Redaction is, after all, an alteration of potential evidence” and “a party should not take it upon him, her or itself to decide unilaterally what context is necessary for the non-redacted part disclosed, and what might be useless to the case.” Evon v. Law Offices of Sidney Mickell, No. S-09-0760, 2010 WL 455476, at *2 n. 1 (E.D. Cal. 2010). Furthermore, “[i]t is a rare document that contains only relevant information.” Bartholomew v. Avalon Capital Group, Inc., 278 F.R.D. 441, 451 (D. Minn. 2011). Oftentimes, “irrelevant information within a document that contains relevant information may be highly useful to providing context for the relevant information.” Id.; see also In re State Street Bank & Trust Co. Fixed Income Funds Inv. Litig., Nos. 08-1945, 08-333, 2009 WL 1026013, at *1 (S.D.N.Y. 2009) (“[Unilateral] redactions are generally unwise. They breed suspicions, and they may deprive the reader of context.”); In re FedEx Ground Package Sys., Inc. Emp’t Practices Litig., No. 3:05-MD-527, 2007 WL 79312, at *5 (N.D. Ind. 2007) (“Generally, the Federal Rules provide no procedural device for unilateral redaction by a party and it is a procedure that is not favored.”). U.S. ex rel. Simms, 292 F.R.D. at 385-86. The factors cited by the courts that disallowed a producing party’s redactions for non-responsiveness or irrelevance would in many cases weigh against allowing the party to redact information that it deems non-responsive. The instant case differs from those decisions because Shell and Eni expressly agreed in the Joint Agreement, Record Doc. No. 74 at § 8(b), that a party may redact Confidential Information, as defined by the Protective Order, for non-responsiveness. Shell, in its opposition to Eni’s motion to compel, relies primarily on the definition of Confidential Information as “confidential or proprietary information that is not generally known by the public and that a party would not normally reveal to third parties or would cause third parties to maintain as confidential.” Record Doc. No. 45 at ¶ 4. Despite Shell’s admitted errors in making some redactions on the exhibits, there is no evidence that it acted in bad faith when it relied on these court orders to justify its redactions. Neither the Joint Agreement nor the Federal Rules of Civil Procedure require Shell to produce non-responsive, irrelevant information about wells, assets and strategies that are not at issue in this litigation. Contrary to Eni’s argument, a producing party always makes the initial decision whether a particular document is relevant and responsive to another party’s discovery requests. This court should not be burdened with assessing the relevance of every redacted document produced. The Federal Rules contemplate that discovery will generally “be effectively managed by the parties” without the need for judicial assistance until “the parties are legitimately unable to resolve important differences and when the parties fall short of effective, cooperative management on their own.” Fed. R. Civ. P. 26, official comment to 2015 amendment, Federal Civil Judicial Procedure and Rules 151 (Thomson Reuters 2017). On the other hand, as some of the exhibits demonstrate and as Shell acknowledges by admitting that some redactions were inappropriate, Shell’s system of redacting information from more than 1,200 documents within a universe of more than 11,000 produced documents was not perfect. Shell has produced no evidence to sustain its burden that the redacted information is in fact trade secret or confidential, proprietary information of the type contemplated both by the protective order and Fed. R. Civ. P. 26(c)(1)(G) as appropriate for redaction. In addition, Shell’s redactions in the subject lines, titles and headings of documents and within sentences often alter the readability or understanding of the context of the unredacted parts. The exhibits contain many instances where such redactions deprive the unredacted portions of context and where within-sentence redactions render the sentence nearly incomprehensible. See, e.g., Exhibit 18 at p. 1; Exhibit 35 at pp. 1-2; Exhibit 38. *6 The court cannot determine the remainder of this motion on the current state of the record. The parties’ arguments are based solely on relevance and fail to address the proportionality factors of Rule 26(b)(1), which must be considered along with relevance. Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Fed. R. Civ. P. 26(b)(1) (emphasis added). In addition, the parties’ arguments and submissions fail to address whether actual evidence that Shell might provide could establish the trade secret, commercially sensitive or proprietary nature of the redacted information. The parties disagree whether they engaged in meaningful discussions to resolve their discovery disputes before Eni filed its motion to compel. Shell’s redactions may be sustainable to a large extent on proportionality or confidentiality grounds, but the parties have failed to provide the court with information needed to make the proportionality analysis, particularly as to the importance of some of the redacted materials and the burden, expense and likely benefit of the requests. Accordingly, IT IS ORDERED that, no later than September 15, 2017, counsel for both sides must confer in good faith and in person (not by email or letter) to discuss in detail all aspects of the proportionality evaluation concerning the redacted information and to attempt to resolve their disputes. At that conference, Shell must provide Eni with evidence supporting its argument that the redacted information actually constitutes trade secret, commercially sensitive, proprietary information. Shell’s failure to provide such evidence by that date will result in waiver of that objection to production of that redaction by Shell. Counsel are directed to contact me by telephone during that conference if it appears that I might informally attempt to resolve any dispute they might identify. IT IS FURTHER ORDERED that, no later than September 22, 2017, after the parties have met and conferred in good faith, Shell must produce to Eni copies of all previously produced, partially redacted documents that the parties agree were improperly redacted, are relevant to the claims and defenses of the parties and are proportional to the needs of the case, with redactions removed as agreed. By the same date, Shell must produce to Eni copies of all previously produced, partially redacted documents with restored tables of contents, cover pages, titles, section headers, PowerPoint slide titles, subject lines and words within sentences that were previously redacted. Eni’s right to file a new motion to compel, with both parties specifically addressing all proportionality considerations, with evidence, if necessary, is expressly preserved, if their dispute in this regard cannot be resolved. Informed by what they learn at the conference, the parties should have a better understanding about all proportionality considerations and the nature of Shell’s evidence, if any, in affidavit form or otherwise, supporting its assertion that it has redacted only non-responsive and confidential commercial information from whatever materials remain in dispute. The court’s decision concerning any subsequent motion and whether to permit discovery of additional materials would then also be informed by information developed at the conference between counsel. *7 New Orleans, Louisiana, this 28th day of August, 2017. Footnotes [1] The court recently granted Eni’s motion to dismiss Shell’s unjust enrichment claim. Record Doc. No. 117.