SYMBRIA, INC., et al., Plaintiffs, v. John R. CALLEN, et al., Defendants Case No. 20 C 04084 United States District Court, N.D. Illinois, Eastern Division Signed January 19, 2024 Counsel Jacob Deniro Rhode, Benjamin Guthrie Stewart, Carson Emens Miller, Collin L. Ryan, Michael L. Scheier, Keating Muething & Klekamp PLL, Cincinnati, OH, Matthew John O'Hara, Terrence Joseph Sheahan, Gia Fonte Colunga, James R. Figliulo, Katlyn DeBoer Krysan, Lillian Marie Grappe Lamphere, Smith, Gambrell & Russell, LLP, Chicago, IL, Jason Paul Stearns, Smith Gambrell & Russell LLP, Tampa, FL, for Plaintiffs. James R. Figliulo, Lillian Marie Grappe Lamphere, Smith, Gambrell & Russell, LLP, Chicago, IL, for Intervenors Matthew O'Hara, Smith Gambrell & Russell, Freeborn & Peters LLP. 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. Rowland, Mary M., United States District Judge ORDER *1 Before the Court are Plaintiffs’ objections to Magistrate Judge Weisman's Report and Recommendation (R&R) addressing Defendants’ Motion for Sanctions and to Claw Back Certain Emails [755]. On July 24, 2023, Judge Weisman recommended that the Court grant in part Defendants’ motion. [800]. For the reasons stated below, the Court adopts in part, rejects in part, and modifies in part the R&R as consistent with this Order. The Court finds Plaintiffs violated the claw back provision but finds that Plaintiffs’ counsel[1] did not violate their duty of candor. I. Background The Court assumes familiarity with the magistrate judge's thoughtful R&R describing the background of this conflict in detail. [800] at 1-3. The origin of the conflict arose in October 2020 when the Court was supervising expedited discovery [43] because Plaintiffs’ motion for preliminary injunction was pending [39]. Plaintiffs’ initial complaint asserted that Defendant Dilmas had been employed by Plaintiff Symbria Rehab, Inc. (Symbria) where he served as a Regional Director of Operations. [38] ¶¶ 84-85. Plaintiffs allege, in part, that in February of 2019, Dilmas began a “campaign” of misappropriating Symbria's trade secrets by forwarding confidential work emails to his personal email address. Id. ¶¶ 91-95, 97-110. As the R&R recounts, Plaintiffs moved to compel Dilmas to make all his electronic devices available for forensic analysis by an independent forensic examiner. [86]. Dilmas’ counsel argued, among other things, overbreadth given the personal nature of many items stored on those devices. [103] at 2. This is always a difficult balance for a court. The Court recalls this conflict because it had the unfortunate twist, according to Dilmas’ counsel, that an attorney representing Plaintiffs was divorced from a former colleague of Dilmas’ at Symbria who began dating Dilmas after the divorce. Id. at 2-3. Dilmas thus alleged that counsel had a personal conflict in seeking all of Dilmas’ ESI. This is not an allegation easily forgotten. Despite these concerns, the Court allowed the imaging after entering a Protocol for Forensic Investigation and Analysis (Forensic Protocol) providing that material responsive to certain search result “hit data” would be reviewed by the producing party for privilege and relevance. [157-1] ¶¶ 8-11. The extensive claw back provision provided a further basis for this Court to allow the intrusion into all Dilmas’ devices so early in the case. Id. ¶ 19. *2 Although not specifically called for in the Forensic Protocol, the independent forensic examiner, Protek, created the spreadsheet at issue. The parties had a dispute over the spreadsheet, among other things, and requested the Court to conduct an in camera review. [153]. Plaintiffs’ motion to compel production of the spreadsheet assured the Court that the spreadsheet contained no substantive information: “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.” [157] ¶ 9 (emphasis added). The Court recalls conducting the review—the data was contained on a thumb drive and contained thousands of entries. The Court's review was limited to verifying the spreadsheet, as represented by Plaintiffs, contained no information that needed to be extensively reviewed by Dilmas’ counsel for relevance or privilege. Rather, the data apparent to the naked eye was limited to email to/froms, email subjects, and dates. In the midst of expedited discovery in January of 2021, the Court ordered production of this large set of limited data for attorneys’ eyes only. [158]. Two years later, in early 2023, Plaintiffs relied on emails extrapolated from the spreadsheet during depositions. [800] at 3. Plaintiffs accessed the content of the emails about two years before, in February 2021, by (1) searching the email worksheet of the spreadsheet for key words, (2) clicking the hyperlinks of the emails in which the key words appeared, (3) being routed to the event column of the tags worksheet corresponding to the emails thus (4) ascertaining the text of the email, and (5) converting that text (in html format) into a more reader friendly version via text software.[2] [800] at 3 (citing [777] ¶¶ 23-25). This prompted Defendants to file a motion for sanctions seeking dismissal of the case or destruction of all the emails. [755] at 18. The magistrate judge determined that Plaintiffs’ conduct violated the claw back provision and Plaintiffs’ counsels’ ethical obligations “when they failed to correct the representation they made to [this Court] that the spreadsheet did not contain any content created by Mr. Dilmas.” [800] at 4-5 (citing LR 83.50 (adopting the ABA's Model Rules of Professional Conduct that include a rule requiring candor with the court)). The magistrate judge then thoroughly considered the range of sanctions authorized by Fed. R. Civ. Pro. 37(b)(2)(A)(v) and the court's inherent authority “to manage judicial proceedings and to regulate the conduct of those appearing before it, and pursuant to that authority ... impose appropriate sanctions to penalize and discourage misconduct.” [800] at 3-4 (quoting Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 775-76 (7th Cir. 2016) (footnote omitted)). The magistrate judge recommended Plaintiffs be ordered to (1) return or destroy the emails they obtained from the spreadsheet and any associated work product and (2) reimburse Defendants for the reasonable fees and costs expended on the motion for sanctions. Id. at 11. II. Analysis Plaintiffs filed timely objections to the Report and Recommendations [806, 808].[3] When a party objects to a magistrate judge's report and recommendation on a dispositive matter, the Court “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); see Fed. R. Civ. P. 72(b). De novo review requires a court “to decide the case based on an independent review of the evidence and arguments without giving any presumptive weight to the magistrate judge's conclusion.” Mendez v. Republic Bank, 725 F.3d 651, 661 (7th Cir. 2013). “A district judge may be persuaded by the reasoning of a magistrate judge ... while still engaging in an independent decision-making process.” Id. The Court is not required to conduct a new evidentiary hearing. United States v. Raddatz, 447 U.S. 667 (1980); Pinkston v. Madry, 440 F.3d 879, 893 (7th Cir. 2006). After conducting the required review, the Court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1)(C); see also Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 760 (7th Cir. 2009) (“The magistrate judge's recommendation on a dispositive matter is not a final order, and the district judge makes the ultimate decision to adopt, reject, or modify it.”). A. Claw Back Provision *3 In their objections, Plaintiffs argue that they “simply read the [claw back] provision differently” because “[t]he Magistrate [Judge] applied it to any document a party did not intend to produce.” [808] at 3. Plaintiffs believe it applied only to if there was an assertion of “attorney-client privilege” or “any other ground on which production ... should not be made.” Id. Plaintiffs imply the only reason to not produce the documents is, essentially, privilege. Plaintiffs gloss over the inadvertent production prong of this provision and focus only on whether the material is privileged. They deign upon themselves then the task of performing the privilege review for the Defendants. That misses the point. The material was inadvertently produced because Protech assured all parties that it would not be produced. There is nothing in the Forensic Protocol that defines “inadvertent production” to only documents that are protected by privilege. To the contrary, the language reads “any other ground on which production ... should not be made—differentiating the basis from privilege—for return of documents. As to the inadvertence, “[t]here is no bright-line rule for determining whether a disclosure was inadvertent; instead, courts look at the circumstances surrounding the disclosure.” Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimatntec, 529 F.3d 371, 388 (7th Cir. 2008). Plaintiffs stressed during the oral argument the importance of context. The Court agrees. The context here is critically important. Before the Court ordered production, Plaintiffs rhetorically asked, “[h]ow can a computer file name or email subject be privileged or contain personal information?” [157] ¶ 9. Plaintiffs further stated, “[t]he content of the emails, text messages, and files are not contained whatsoever within the[ ] [speadsheet].” Id. As the Magistrate Judge aptly put it, Plaintiffs argument that the production was not inadvertent “rings hollow, at best.” [800] at 4. The emails were either produced inadvertently or they were produced via misrepresentation. Plaintiffs cannot have it both ways. As the R&R concluded, the “plain language” of the claw back applies to the production because the emails were produced “in reliance on plaintiffs’ representation that [the spreadsheet] did not contain the content of any emails.” [800] at 4 (emphasis added). This is a “ground on which production ... should not have been made.” Plaintiffs dispute that the Forensic Protocol is a court order that triggers the sanctions provision under Rule 37. [808] at 4. The Seventh Circuit has “signaled a willingness to broadly construe what constitutes a court order for purposes of imposing sanctions under Rule 37.” Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 776 n.3 (7th Cir. 2016); Brandt v. Vulcan, Inc., 30 F.3d 752, 756 (7th Cir. 1994) (“[C]ourts have broadly interpreted what constitutes an “order” for purposes of imposing sanctions.”). Here, the Forensic Protocol specifically provides that Protek will conduct a search of the forensic images of Dilmas’ devices “using the Court-approved search criteria attached hereto.” [157-1] ¶ 9 (emphasis added). Moreover, Symbria relied upon, and the Court enforced the Forensic Protocol in compelling production of Dilmas’ devices [104] and the spreadsheet. [111]; [158]. Thus, the Court finds that the Forensic Protocol is a court order for purposes of Rule 37. Finally, Plaintiffs assert that they did not violate the claw back provision because in April of 2023 when contacted by Defendants, they complied with the Forensic Protocol and promptly “return[ed] ... [the] material” to Defendants and agreed to stop using it for any purpose. [157-1] at ¶ 19. Defendants dispute this assertion. This argument rings hallow because Plaintiff otherwise strogly imply that if they had reviewed the material and found privileged information, they would have returned that material. Waiting for the Defendants to assert their rights under the claw back provision, in the circumstances of this scenario, strikes the court as playing with semantics. Because of the misrepresentations by Protech, Defendants did not have an opportunity to exercise their rights under the claw back.[4] *4 Plaintiffs object to the sanction that precludes them from using “relevant” emails from the spreadsheet as well as fee-shifting for the costs of the motion. [808] 3-5. Rule 37 prohibits courts from imposing sanctions if the party's actions were “substantially justified” or sanctions would be unjust. Fed. R. Civ. P. 37(b)(2)(C). When evaluating whether sanctions are “unjust,” “courts may consider the nature of the offending party's discovery failures and the degree of prejudice and harm visited upon the prevailing party relative to the prevailing party's own abuses of the discovery process (if any).” DR Distributors, LLC v. 21 Century Smoking, Inc., 513 F. Supp. 3d 839, 960 (N.D. Ill. 2021). First, as discussed Plaintiffs position on the plain language of the Forensic Protocol was not substantially justified. Second, Plaintiffs attempt to turn the tables by pointing to the relevance of certain emails and alleged discovery violations by Defendants is unpersuasive and was costly. After review of the briefing and materials, the Court agrees with the magistrate judge's samling method and his determination that Defendants had a good faith basis for failing to produce the 25 documents and/or the failure to do so did not prejudice Plaintiffs. [800] at 7-9. Overall, Plaintiffs gained early access to evidence by assuring the Court that no such substantive material would be produced. When it was produced pursuant to a Forensic Protocol, which contained a vigorous claw back provision, they ignored the language about inadvertent production. By reading that provision as only requiring return of documents that are privileged, Plaintiffs took it upon themselves to conduct Defendants privilege review. And this took place after Defendants were assured by Protech that the data in question would not contain any substantive material. Plaintiffs’ objections are overruled. The Court adopts the recommendation that an appropriate sanction is ordering Plaintiffs to return or destroy the emails they obtained from the spreadsheet, as well as any associated work product, and reimburse Defendants for the reasonable fees and costs associated with the motion.[5] B. Duty of Candor Plaintiffs’ counsel filed objections to the R&R's finding that they violated ABA Model Rule of Professional Conduct 3.3(a)(1) that provides: “A lawyer shall not knowingly ... fail to correct a false statement of material fact ... made to the tribunal by the lawyer.” [800] at 4-5; [806] at 5-10; L.R. 83.50. Plaintiffs’ counsel argues that the failure to correct the previous statement was not made “knowingly” with an intent to deceive. [806] at 11-14. This Court diverges from the magistrate judge on this point and agrees that the knowledge requirement is missing. As discussed, the Court finds that Plaintiffs are incorrect that the spreadsheet is not subject to the claw back provision. Nevertheless, like the magistrate judge, the Court find that Plaintiffs’ counsel's representation that the spreadsheet created by the Protek did not contain substantive content was an accurate representation at the time the statement was made. [800] at 5. Additionally, Dilmas’ counsel was in possession of the spreadsheet at issue. He had an opportunity to review the material prior to providing it to the Court for an in camera review and producing it to Plaintiffs. It was possible for him to have discovered that there was substantive content and raised it with the Court. Finally, the Court reviewed the spreadsheet at issue in camera. The Court limited that review as described, but as the entire production was given to both Defendants and the Court, there is not sufficient evidence to establish that Plaintiffs’ counsel's failure to correct his previous statement was a knowing “fail[ure] to correct a false statement of material fact”. Therefore, the Court rejects the Report and Recommendation's finding that Plaintiffs’ counsel violated their duty of candor and modifies the Report and Recommendation accordingly.[6] III. Conclusion *5 For the reasons stated, the Court adopts in part, rejects in part, and modifies in part Magistrate Judge Weisman's July 24, 2023 Report and Recommendation [800]. Defendants’ Motion for Sanctions and to Claw Back Certain Emails [755] is granted in part. Plaintiffs are ordered to return or destroy the emails they obtained from the spreadsheet and any associated work product and reimburse Defendants for reasonable fees and costs they expended on the motion. Footnotes [1] “Plaintiffs’ counsel” refers to the attorneys at Smith, Gambrell & Russell, LLP, formerly with Freeborn & Peters LLP, who served as counsel for Plaintiffs at the time of the events in 2020 and 2021. Plaintiffs current counsel, lawyers in the firm of Keating, Muething & Klekamp PLL, were not involved in the events relating to that finding because they first appeared in February 2023. On December 18, 2023, the Court granted Plaintiffs’ counsel's motion to withdraw their appearances for Plaintiffs. On January 12, 2024, the Court granted Plaintiffs’ counsel's motion to intervene to address the magistrate judge's finding that they violated their duty of candor. [884, 885]. [2] As Dilmas explained it, Protek created a spreadsheet that contained six tabs. The “Emails” tab apparently listed every Dilmas email on the subject device (regardless of relevance to the case) from 2019 to the date Protek imaged the drive. That tab listed over 2928 rows of emails, and for each email contained up to 130 columns of information about that email. Another tab labeled “Tags” was inexplicably used by Protek to embed html code of the actual content of the emails. This tab lists 3452 rows of “Tags”. [758] at 6. [3] Plaintiffs filed initial objections [806] arguing the R&R erred in considering Plaintiffs’ counsel's violation of their ethical duty of candor to the Court. Plaintiffs then filed “additional” objections to the R&R [808] arguing that the R&R erred in finding Plaintiffs violated the claw back provision contained in the confidentiality order. These two filings resulted in Plaintiffs exceeding the page limit without seeking leave of court. [4] Further, the Court allowed production of the spreadsheets for attorneys’ eyes only (AEO). And yet, Plaintiffs admit to using extracted emails twice in February 2023 without complying with an AEO classification. [771] at ¶¶40-41. In light of the misrepresentation by Protech, the Court was denied the opportunity to determine whether these emails should be designated AEO. [5] The Court concurs with magistrate judge's determination that Plaintiffs did not act willfully or in bad faith and Defendants request for the sanction of dismissal is not warranted. [800] at 6. [6] The Court has described the extensive steps Plaintiffs took to find and extract the emails. Plaintiffs took a risk handling the matter in this way. The better course would have been to have flagged the issue with Defendants and the Court. Instead, Plaintiffs chose to ask for forgiveness as opposed to permission. Northwestern Nat'l Ins. Co. v. Baltes, 15 F.3d 660, 663 (7th Cir. 1994) (“[l]awyers and litigants who decide that they will play by rules of their own invention will find that the game cannot be won”).