SYMBRIA, INC., et al., Plaintiffs, v. JOHN R. CALLEN, et al., Defendants Case No. 20 C 4084 United States District Court, N.D. Illinois, Eastern Division Signed July 24, 2023 Counsel Jacob Deniro Rhode, Benjamin Guthrie Stewart, Carson Emens Miller, Collin L. Ryan, Michael L. Scheier, Keating Muething & Klekamp PLL, Cincinnati, OH, Matthew D. Anderson, Freeborn & Peters LLP, Chicago, IL, Matthew John O'Hara, Terrence Joseph Sheahan, Gia Fonte Colunga, Katlyn DeBoer Krysan, Lillian Marie Grappe, Smith, Gambrell & Russell, LLP, Chicago, IL, Jason Paul Stearns, Smith Gambrell & Russell LLP, Tampa, FL, for Plaintiffs. Garry L. Wills, Joseph Ramos, Marc H. Kallish, Roetzel & Andress LPA, Chicago, IL, for Defendants John R. Callen, MedRehab Alliance, LLC, MedRehab Alliance Interstate, LLC, Illinois Ancillary Services Network, LLC, Pearl Health Care Services, Inc., MedRehab Therapy Associates of Illinois, LLC, Joint & Neuro Rehab Associates, LLC. Kevin Michael O'Hagan, Lisa C. Burns, Paige Manley Canepari, Sean Gifford Rohan, O'Hagan Meyer, LLC, Chicago, IL, for Defendant United Methodist Homes & Services. Brian J. Williams, Cozen O'Connor, Chicago, IL, for Defendant Christos V. Dilmas. Michael John Scotti, III, Garry L. Wills, Joseph Ramos, Marc H. Kallish, Roetzel & Andress LPA, Chicago, IL, for Defendants MedRehab Alliance Holdings, Inc., Joint & Neuro Rehab Associates of Chicago LLC. Thomas G. Griffin, Alla Cherkassky Galati, Caitlin Mallory McAuliffe, Matthew W. Casey, Walker Wilcox Matousek LLP, Chicago, IL, for Defendant Chicago Rehabilitation Collective PLLC. Marc H. Kallish, Roetzel & Andress, LPA, Chicago, IL, for Defendant Kathleen Rice. Weisman, M. David, United States Magistrate Judge REPORT AND RECOMMENDATION *1 The case is before the Court on defendants’ joint motion for sanctions and to claw back certain emails of defendant Dilmas. For the reasons set forth below, the Court recommends that the motion [ECF 755] be granted in part. Background In October 2020, plaintiffs filed a motion to compel defendant Dilmas to make his electronic devices available for forensic examination by Protek, an independent forensic examiner. (See ECF 86.) Plaintiffs argued that Mr. Dilmas would not be prejudiced by the forensic examination because Protek “[would] not turn over any files, documents, or communication to Plaintiffs that have not been first reviewed by Dilmas’ counsel.” (Id. ¶ 31.) Judge Rowland granted plaintiff's motion and ordered Mr. Dilmas to turn his electronic devices over to Protek to be examined in accordance with the parties’ stipulated protocol for forensic investigation. (ECF 104.) The protocol calls for Protek to create a forensic image of each of Mr. Dilmas's devices, conduct a search of the images using Court-approved search criteria, segregate “hit data” that contains specified terms, and give the segregated data to defense counsel to review for privilege and relevance. Defendants would then produce relevant, non-privileged data. (See ECF 157-1 ¶¶ 8-11.) The protocol also requires Protek to investigate each device for activity relating to data downloads, deletions, obfuscations, and transfers made during the relevant period. (Id. ¶ 12.) It further provides: If information subject to a claim of attorney-client privilege, attorney work product or any other ground on which production of such information should not be made to a party is nevertheless inadvertently produced to such party, such production shall in no way prejudice or otherwise constitute a waiver of, or estoppel as to any claim of privilege, work product or other ground for withholding production to which the producing Party would otherwise be entitled. If a claim of inadvertent production is made, pursuant to this Paragraph, with respect to information then in the custody of the other Party, such Party shall promptly return to the claiming Party or person that material as to which the claim of inadvertent production has been made, and the receiving Party shall not use such information for any purpose. (Id. ¶ 19.) After conducting the mandated investigation, Protek created, among other things, spreadsheet 20-A161-KC-MD02_2020-11-16_Report.xlsx (“the spreadsheet”). Counsel for Mr. Dilmas asserted that they should receive the spreadsheet before counsel for plaintiffs, so they could review the contents for relevance and privilege. Counsel for plaintiffs disagreed and said it should be sent to both sides simultaneously because it did not “disclose or contain the substantive content of the devices.” (ECF 771-1, 11/5/20 Email from Anderson to Griffin). Protek confirmed this representation. (See ECF 771-2, 11/5/20 Email to Anderson & Griffin from Chval (stating that the spreadsheet did not contain “the user-created content of files, email messages, etc.”).) Plaintiffs filed a motion to compel production of the spreadsheet, saying: “The content of the emails, text messages, and files are not contained whatsoever within [the spreadsheet]. Rather, the spreadsheet[ ] contain[s] information such as file names, email senders/recipients, email subjects, dates, and times—the type of information found on a privilege log.” (ECF 157 ¶ 9.) In January 2021, after reviewing the spreadsheet in camera, Judge Rowland ordered Mr. Dilmas to produce it to plaintiffs. (ECF 158.) Neither Judge Rowland's order nor her statements on the record suggest that she substantively reviewed the emails in the spreadsheet before issuing the order. Rather, the record plainly reflects that she accepted plaintiffs’ and Protek's representations that the spreadsheet did not contain any substantive content and made her decision accordingly. *2 In early February 2021, plaintiffs’ counsel discovered that, contrary to the representation they made to defendants and the Court, the spreadsheet did contain portions of emails and other content created by Mr. Dilmas. They found the emails by searching the email worksheet of the spreadsheet for key words, clicking the hyperlinks of the emails in which the key words appeared and being routed to the event column of the tags worksheet corresponding to the emails, which is where the email text appears. (ECF 771 ¶¶ 23-24.) The text in the event column is in html format, i.e., the words are interspersed with code, and thus is difficult to read. (Id. ¶ 25.) So, plaintiffs pasted the text into text software and saved the html text in .html file format to remove the computer code from the text. (Id.) Plaintiffs’ counsel did not tell defense counsel or the Court that the spreadsheet contained content created by Mr. Dilmas. Defense counsel did not realize that it did until plaintiffs’ counsel used emails they obtained from the spreadsheet as exhibits in depositions in early 2023. Defendants demanded that plaintiffs return the emails they obtained from the spreadsheet in accordance with the protocol. Plaintiffs refused but produced to defendants the emails they obtained from the spreadsheet in the reformatted layout and agreed not to use any information from the spreadsheet until defendants’ claw back request was resolved. This motion followed. Discussion Rule 37(b)(2)(A)(v) authorizes a range of sanctions, including the dismissal of a suit, for a party's failure to comply with the court's discovery orders.... Apart from the discovery rule, a court has the inherent authority to manage judicial proceedings and to regulate the conduct of those appearing before it, and pursuant to that authority may impose appropriate sanctions to penalize and discourage misconduct. Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 775-76 (7th Cir. 2016) (footnote omitted). “A court may invoke its inherent authority to sanction sua sponte,” Fuery v. City of Chi., 900 F.3d 450, 468 (7th Cir. 2018), but any such sanction “must be premised on a finding that the culpable party willfully abused the judicial process or otherwise conducted the litigation in bad faith,” Ramirez, 845 F.3d at 776. Plaintiffs argue that any kind of sanction is unwarranted because the claw back provision of the protocol[1] only applies to privileged material that is inadvertently produced, and the spreadsheet emails are not privileged. But the plain language of the provision states that a party who inadvertently receives “information subject to a claim of attorney-client privilege, attorney work product or any other ground on which production of such information should not be made” must return it to the party who produced it. (See ECF 157-1 ¶ 19) (emphasis added). It may be, as plaintiffs assert, that the parties intended the claw back provision to apply only to privileged material. But that is not what it says. Moreover, plaintiffs’ assertion that defendants’ production of the spreadsheet emails was not inadvertent, and thus not subject to the claw back provision, rings hollow, at best. Defendants produced the spreadsheet to plaintiffs pursuant to a Court order and in reliance on plaintiffs’ representation that it did not contain the content of any emails. Thus, they did not intentionally give the emails to plaintiffs. Moreover, there is no dispute that plaintiffs refused to return the emails when defendants asked them to do so. Thus, the record establishes that plaintiffs violated the claw back provision of the protocol. The record also shows that plaintiffs’ counsel violated the Court's ethical rules when they failed to correct the representation they made to Judge Rowland that the spreadsheet did not contain any content created by Mr. Dilmas. See LR 83.50 (“Applicable disciplinary rules are the Model Rules adopted by the American Bar Association.”); Am. Bar Ass'n Rule Prof'l Conduct 3.3(a)(1) (“A lawyer shall not knowingly ... make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer.”). Plaintiffs say they believed that statement was true when they made it, and the Court accepts that representation.[2] But when plaintiffs later learned that the statement was false, they were obligated to correct it. Plaintiffs say they did not do so because they assumed Judge Rowland, who had already reviewed the spreadsheet, knew that it contained emails. The notion that a federal district court judge with a docket of more than 300 civil cases would have time to follow the hyperlink of each of the nearly 3,000 emails on the spreadsheet and parse the html format to deduce that the content of the emails was contained in it is simply fantastical. Moreover, even if that assumption were reasonable, it would not have relieved plaintiffs of the duty to correct their misstatement. Sanction for Violation of the Claw Back Provision *3 While plaintiffs’ violation of the claw back provision is not laudable, it does not rise to the level necessary to warrant the imposition of sanctions pursuant to the Court's inherent authority. Plaintiffs say they refused to return the emails because they interpreted the claw back provision as applying only to privileged material. This explanation is not entirely persuasive, given the language of the provision, but it suggests that plaintiffs’ violation of the claw back provision was not a willful abuse of the judicial process, as required to impose inherent authority sanctions. See Fuery, 900 F.3d at 463-64 (7th Cir. 2018) (sanctions imposed under inherent authority require a finding of bad faith “[m]ere clumsy lawyering is not enough”); Ramirez, 845 F.3d at 782 (affirming sanction of dismissal for witness tampering); Mohammed v. Anderson, No. 18 C 8393, 2019 WL 3943669, at *3 (N.D. Ill. Aug. 21, 2019), aff'd, 833 F. App'x 651 (7th Cir. 2020) (pro se plaintiff's “orchestrated and long-running campaign of harassment” of defendant and defense counsel was sanctionable pursuant to court's inherent authority). For the same reason, the sanction of dismissal under Rule 37 is not appropriate. Dismissal as a discovery sanction requires “both a failure to comply with a discovery order and a showing of willfulness, bad faith, or fault.” Patterson ex rel. Patterson v. Coca-Cola Bottling Co. Cairo-Sikeston, 852 F.2d 280, 283 (7th Cir. 1988) (per curiam) (emphasis in original). “Fault, in contrast to wilfulness or bad faith, does not require a showing of intent, but presumes that the sanctioned party was guilty of ‘extraordinarily poor judgment’ or ‘gross negligence’ rather than mere ‘mistake or carelessness.’ ” Ramirez, 845 F.3d at 776 (quoting Marrocco v. Gen. Motors Corp., 966 F.2d 220, 224 (7th Cir. 1992)). As noted supra, plaintiffs’ belief that the claw back provision was not applicable, while not legally sound from our vantage point, does not rise to the level of “willfulness, bad faith, or fault.” Thus, a Rule 37 dismissal is not an appropriate sanction for the protocol violation. Alternatively, defendants ask the Court to sanction plaintiffs by ordering them to return or destroy the emails they obtained from the spreadsheet and any work product derived from them. Plaintiffs argue that precluding them from using the emails is not an appropriate sanction because some of them should have been, but were not, produced by defendants in response to plaintiffs’ discovery requests. To explore that contention, the Court chose twenty-five emails at random from the spreadsheet and asked the parties to explain why the emails should or should not have been produced. Plaintiffs say defendants did not produce eight “highly relevant and responsive” emails of the twenty-five the Court identified. (ECF 790 at 3.) The first such document, forensic extract 443-1, consists of two emails. The first is an email dated November 8, 2019 from Amanda Ambrose of Rehab Collective to Christine Irvine of Plymouth Place that says, “See attached from Kathy [Rice] that I've added JNR logo to.” (Id., Ex. 1.) The second is a November 11, 2019 email from Ms. Irvine to, among others, Mr. Dilmas forwarding the first email and attaching the forms. (Id.) Defendants admit that the forms to which Ms. Ambrose added the JNR logo came from Symbria but say they did not intentionally withhold them from production. Rather, because the emails and attached forms do not contain the words “Symbria” or “Alliance Rehab,” which were the search terms defendants used to identify documents for production, they were not produced. Defendants subsequently produced the forms, as plaintiffs admit, but plaintiffs say they are still prejudiced because defendants did not produce the emails with the forms, which they say, “connect[ ] the chain of individuals and entities that were involved in Defendants’ [misappropriation] scheme.” (ECF 790 at 5.) But plaintiffs knew from other documents defendants produced that defendants put their logos on Symbria forms and that Ms. Ambrose, Ms. Irvine, and their employers were involved in that effort. (See, e.g., ECF 779, Ex. I.) So plaintiffs did not need this email to know that defendants were “rebranding” Symbria documents. *4 The next document, forensic extract 1336, is a May 2020 email chain among Joint and Neuro employees Vic Arellano and Mr. Dilmas and MedRehab employees Brad Miller, Kathleen Rice, and Kevin Lindsey attaching a manual that was copied from a Symbria document. (ECF 790, Ex. 3.) Plaintiffs say they were prejudiced by the nondisclosure of this email because they were unable to ask Mr. Miller about it during his deposition. Plaintiffs admit, however, that defendants produced another email that Mr. Arellano sent to Mr. Miller with the manual attached and that they asked Mr. Miller about it during his deposition. (ECF 790 at 6.) Thus, plaintiffs suffered no prejudice. Next are forensic extracts 2458-1, 3452, and 3795, which plaintiffs say are relevant to their claim that defendants improperly solicited business from a facility called Bridgeway. Extract 2548-1 is a March 2020 email chain between Sheridan Healthcare Services, the company that provided therapy services to Bridgeway before MedRehab, and John Callen discussing the transition to MedRehab. (ECF 779-2.) Extract 3452 is a March 11, 2020 email from Mr. Callen to two MedRehab employees asking them to contact a Bridgeway employee who wanted to stay on at the facility when MedRehab took over. (ECF 790, Ex. 11.) Extract 3795 is a February 26, 2020 email from an employee of Sheridan Healthcare Services to Mr. Callen relating to the provision of services to Bridgeway. (Id., Ex. 12.) Plaintiffs contend that all three are responsive to their requests for documents relating to defendants’ solicitation of Bridgeway. Defendants say extracts 2548-1 and 3452, which were generated after they entered into an agreement with Bridgeway, are not responsive to the solicitation requests. Moreover, they say extract 3795, which refers to Bridgeway as BSL, was not produced because BSL was not one of plaintiffs’ search terms. The next document is forensic extract 2498-1, an invitation to a Chicago Rehab Collective benefits enrollment meeting that was also sent to certain MedRehab Alliance, Plymouth Place, and Joint and Neuro employees. (Id., Ex. 13.) Plaintiffs claim that the document should have been produced because it is relevant to their alter ego theory of liability. As defendants point out, however, they were not required to produce any alter ego discovery until April 17, 2023 (see ECF 738), years after the Protek spreadsheet was created, and the email does not contain any of the alter ego search terms. Forensic extracts 1341 and 2140 are emails relating to defendants’ contact with Thorek Hospital. The former is March 19, 2020 email from Mr. Callen to two people at Thorek asking them to sign an NDA so Mr. Callen could send them “the Rehab Ops Analysis Data form.” (ECF 790, Ex. 14.) The latter is an undated email in which Mr. Dilmas asks Ms. Ambrose to set up a call with Thorek. (Id., Ex. 15.) Plaintiffs say the Rehab Ops Analysis form referred to in extract 1341 is a Symbria document, and both emails show that defendants used it to compete with Symbria. Defendants say the emails were not produced because Thorek was not among the search terms plaintiffs gave them and, in any event, defendants produced other emails between Mr. Callen and Thorek to which the form was attached. Having reviewed the emails and considered the parties’ arguments, the Court finds that defendants had a good faith basis for failing to produce the identified documents and/or their failure to do so did not prejudice plaintiffs.[3] As a result, ordering plaintiffs to destroy the emails they obtained from the spreadsheet is an appropriate sanction. *5 Defendants also ask the Court to sanction plaintiffs by giving defendants leave to issue discovery to Protek to determine why the emails were contained in the spreadsheet and ordering plaintiffs to pay the fees and costs defendants incurred in connection with the Protek forensic examination and their motion for sanctions. Protek's examination of Mr. Dilmas's devices occurred before the protocol violation, so there is no basis for shifting those costs to plaintiffs. There is also no basis for allowing defendants to conduct discovery of Protek, as it would do nothing to redress the protocol violation or shed light on the issues in this case. The Court agrees, however, that ordering plaintiffs to reimburse defendants for the reasonable fees and costs they expended on this motion is also an appropriate sanction for plaintiffs’ violation of the claw back provision. Sanction for Ethical Violation “Courts have the inherent authority to sanction abuse of the judicial process and enjoy discretion in selecting the most appropriate form of sanction.” Zeidler v. A & W Restaurants, Inc., 71 F. App'x 595, 600 (7th Cir. 2003) (citations omitted). “In determining whether to sanction an attorney for an attorney's ethical violation, a court considers ‘the seriousness of the violations and whether the violations were intentional, as well as the nature and extent of prejudice suffered or likely to be suffered by the parties in the future as a result of the violation.’ ” Mullen v. GLV, Inc., 334 F.R.D. 656, 664 (N.D. Ill. 2020) (quoting Landmark Am. Ins. Co. v. Deerfield Constr., Inc., No. 15 C 1785, 2017 WL 157858, at *16 (N.D. Ill. Jan. 12, 2017)). In January 2021, plaintiffs’ counsel told Judge Rowland that the spreadsheet did not contain any emails. (ECF 157 ¶ 9.) The next month, counsel discovered that the spreadsheet actually did contain emails, but they did not tell the Court that their contrary representation was wrong. (ECF 771 ¶ 23.) In fact, the Court did not learn that the spreadsheet contained emails until May 2023 when defendants filed their motion for sanctions. Plaintiffs’ counsel say their violation of the duty of candor was not intentional but, as discussed above, their assumption that Judge Rowland knew the spreadsheet contained emails was wholly unreasonable. Nonetheless, the prejudice defendants say they suffered as a result of the ethical breach—that plaintiffs were allowed “to improperly mine ... emails that they were not supposed to have for a period of more than two years” (ECF 758 at 16)—can be remedied by plaintiffs’ destruction of the emails and associated work product. Accordingly, the Court recommends that that sanction be imposed for plaintiffs’ counsel's violation of the duty of candor. Conclusion For the reasons set forth above, the Court recommends that defendants’ motion for sanctions [ECF 755] be granted in part and plaintiffs be ordered to return or destroy the emails they obtained from the spreadsheet and any associated work product and reimburse defendants for the reasonable fees and costs they expended on this motion. SO ORDERED. ENTERED: Footnotes [1] Because the parties assume that the protocol, which is titled “Stipulation” and signed only by the parties, is a court order, the Court does as well. [2] We have no reason to believe that plaintiffs’ counsel knew their statement about the spreadsheet was false when they made it. But Judge Rowland relied on plaintiff's representation that the spreadsheet did not contain any emails when she ordered defendants to turn it over to plaintiffs. Had plaintiffs subsequently told her that the statement was false, she may have reconsidered that ruling. She was unable to do so, however, because counsel violated their duty of candor. [3] The fact that plaintiffs did not seek sanctions or an order to compel after reviewing the spreadsheet emails undercuts their claim of prejudice. If, as plaintiffs argue, the undisclosed emails were crucial to their case or suggested that defendants withheld other critical evidence, why did they not file an appropriate motion? Moreover, plaintiffs’ claim that they were prejudiced because these documents were not produced makes little sense given their stated belief that Judge Rowland reviewed the documents in the spreadsheet before she ordered defendants to produce it. If they believed Judge Rowland gave them full access to the spreadsheet emails how are they prejudiced by defendants’ failure to produce them?