DECISION AND ORDER

RUDOLPH T. RANDA, District Judge.

This action arises from a June 28, 2012, contract by Feed.Ing B.V. ("Feed"), a Netherlands business, to sell potato mix for use in the pet food industry to Principle LLC ("Principle"), a Wisconsin business that specializes in sourcing commodities and ingredients for the pet food industry. Kevin Zimmer ("Zimmer"), the president of Principle, and Sven Gravendeel ("Gravendeel"), the chief executive officer of Feed, negotiated the contract.

International diversity jurisdiction is afforded over Principle's action pursuant to 28 U.S.C. § 1332(a)(3), and over Feed's third-party action against Zimmer pursuant to 28 U.S.C. § 1332(a)(2). This Decision and Order addresses Feed's summary judgment motion and Zimmer's motion to dismiss Feed's Third Amended Third-Party Complaint ("Third-Party Complaint") for failure to state a claim. (ECF Nos. 31, 54.)

MOTION FOR SUMMARY JUDGMENT

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Summary judgment should be granted when a party that has had ample time for discovery fails to "make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. If the moving party establishes the absence of a genuine issue of material fact, the non-moving party must demonstrate that there is a genuine dispute over the material facts of the case. Id. at 323-24. The Court must accept as true the evidence of the nonmovant and draw all justifiable inferences in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment is appropriate only if, on the record as a whole, a rational trier of fact could not find for the non-moving party. Rogers v. City of Chi., 320 F.3d 748, 752 (7th Cir. 2003).

Relevant Facts1

Feed and Principle entered into an initial contract in January 2012 whereby Principle agreed to purchase potato mix from Feed for delivery between February 23 and March 5, 2012. In March 2012, Principle and Feed entered into their second contract when Principle agreed to purchase additional potato mix from Feed for delivery between March 27 and August 20, 2012. Contracts between Feed and Principle were negotiated orally, via email, or by some combination of the two.2 By June of 2012, Principle had bought 110 container loads of potato mix from Feed.

After taking delivery under the January and March agreements, Principle informed Feed that in order to meet customer specifications it was blending the Feed potato mix with higher protein. Feed assured Principle that it would correct the low protein levels for future shipments

On June 27, Feed sent Principle an email that stated in relevant part:

(Zimmer Decl. Ex. D.) (ECF No. 48-4.) Principle responded "Sounds good." (Id.)

On June 28, Feed and Principle exchanged emails as follows:

On June 29, Feed sent the following confirmation to Principle:

Remarks N.[A].

(Id. at Ex. D.) (ECF No. 33-4.) (Emphasis added.)

On June 29, Feed informed Principle that it was struggling to secure insurance against international exchange rate fluctuations. This "hedge" was critical to the success of Feed's export business model because its margins were very tight. (Gravendeel Decl. ¶ 7.) (ECF No. 33.) Feed brought the issue to Principle's attention, in part, to provide notice of its rights under the General Terms and Conditions allowing Feed to adjust the price or include additional charges.

In the same email exchange Principle wrote, "I have a signed agreement from you that I have traded against. If I need to buy product elsewhere—you need to let me know." Feed responded, "[y]ou have my word on the product and the volume . . . I do not want to let you down because I have given my word and that is twhe [sic] only thing that is important to me." (Gravendeel Decl. ¶ 7, Ex. E.) (ECF No. 33-5.)

On or about July 2, Ron Sturn ("Sturn") of Principle sent an email to defendant Jerry Ball ("Ball") claiming that Feed's potato mix had fat and protein contents of about 3% and moisture content of about 11.5%. Ball forwarded the email to Gravendeel and Zimmer. On July 3, Principle replied to Ball and Feed: "The protein has been 3-4% and the moisture 11-12%. We have had to blend up every load of material to make this work in our model. I'm not complaining—just letting you [Ball] know what to expect . . ." (Emphasis added.) (Gravendeel Decl. ¶ 9, Ex. G.) (ECF No. 33-7.) In that same email Principle wrote: "[Feed]—where do we stand on the sign[ed] contract you forwarded to me for new crop? The Euro currency is headed back down and again in my opinion it will hit parity with the US$ before [it] goes to $1.50." (Id.)

In about August 2012, Principle's inventory of potato mix began to grow. The demand Principle had speculated on slowed down or did not materialize, and it faced greater competition in the marketplace which further reduced demand for its potato mix.

On August 6, Principle wrote to Feed:

(Zimmer Decl. Ex. G.) (ECF No. 48-7.) (Emphasis added.) Feed responded:

(Id.)

Between August 2012 and March 2013, Feed delivered and Principle accepted 3,046.58 metric tons of potato mix in 44 shipments. Feed had committed significant resources and "tooled up" to supply Principle with the contracted quantities (Gravendeel Decl. ¶ 11) and refused to supply potato mix to other customers, all in reliance on its contract with Principle. From August through December of 2012, Principle took minimal deliveries. Meanwhile, Feed did what was commercially feasible to accommodate Principle's slow consumption rate. Feed incurred storage charges exceeding $954,000 for storing potato mix that it purchased in reliance on the June contract. Feed lost profits in the amount of $11,380,800.

Analysis

Feed seeks summary judgment on its breach of contract counterclaim against Principle for its failure to purchase the remaining 21,967 metric tons of the potato mix under the June contract, and summary judgment dismissing Principle's breach of contract claim for allegedly inferior product because quality was never part of the contract and Principle failed to properly reject the goods.

Principle agrees that a June contract exists because it had a meeting of the minds with Feed for the purchase of 25 containers of potato mix at 48.5 cents per pound over four weeks, but argues that almost every other fact is disputed precluding Feed from obtaining summary judgment. Principle contends that part of the reason it did not order the anticipated amount of potato mix is because Feed had previously breached the agreement by supplying deficient potato mix, and therefore summary judgment should be granted in Principle's favor. Principle also states that its attempt to mitigate damages and perform for its customers was reasonable and defeats Feed's waiver argument. Principle also points out that Feed's motion does not address Principle's conspiracy claim against it.

In reply, Feed asserts that the only issue is whether the one-year term of the contract was ambiguous such that extrinsic evidence could be considered. And with respect to Principle, the only issue is whether it waived or is barred from bringing its quality claims now.

Principle and Feed are in apparent agreement that the substantive law of Wisconsin applies to their dispute. Under these circumstances, this Court must apply Wisconsin law as enunciated by the highest state court or otherwise by the intermediate appellate courts of the state. See Kutsugeras v. AVCO Corp., 973 F.2d 1341, 1346 (7th Cir. 1992); see also Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

Contract interpretation presents a question of law. Estate of Kriefall v. Sizzler USA Franchise, Inc., 342 Wis.2d 29, 47-48, 816 N.W.2d 853, 862 (Wis. 2012). Wisconsin courts construe contracts to determine and give effect to the intentions of the parties. Id. Parties are presumed to express their intentions in the language of the contract. Id. "Where the language of a contract is unambiguous and the parties' intentions can be ascertained from the face of the contract, [the courts] give effect to the language they employed." Id. The interpretation of contracts involving a transaction in goods also may be affected by provisions of the Wisconsin UCC, Wis. Stat. ch. 402. See id.

The parties are merchants because they deal in the goods in question. See Wis. Stat. § 402.104(3). Thus, the UCC affects the parties' obligations with respect to the sale and purchase of the potato mix. See Wis. Stat. § 402.102. Section 401.103(2), Wis. Stats., specifically states that common law principles of law and equity "supplement" the UCC "[u]nless displaced by the particular provisions of [Wis. Stat.] chs. 401 to 411."

Because the contract between the parties was for the sale of goods in excess of $500, Wis. Stat. § 402.201 is applicable, and it provides:

(Emphasis added.)

There is a writing sufficient to show that a contract for sale was made. Neither party signed the contract, however the parties agree they formed a contract. Thus it is enforceable. See Wis. Stat. § 401.201(3)(b).3

Feed and Principle disagree on the terms of the June contract, however the interpretation of a contract is a question of law for the Court. See Estate of Kriefall, 816 N.W.2d at 862. Principle contends that it agreed to purchase 25 containers of potato mix per week for four weeks at 48.5 cents per pound. However Feed stated, "we can quote the earlier mentioned 48.5 cents per pound for all destinations based on the current spread of shipments per 4 weeks." When read in context the phrase does not support Principle's contention that the contract was a four-week contract. The plain words of the contract refer to "spread of shipments per 4 weeks," not shipments over a period of four weeks. Moreover, the purported four-week contract is contrary to Principle's June 28 response, "ok fine confirmed," to Feed's inquiry as to whether the contract was confirmed for one year based on the volumes mentioned at 48.5. The oneyear duration of the June contract is not ambiguous.

Additionally § 402.207, Wis. Stat., provides:

Feed sent written confirmation of the contract on June 29. It states that the duration of the contract is from June 29, 2012 through June 28, 2013—a one-year period—and that Principle will buy 25,000 metric tons of potato mix from Feed over that time period which will be delivered in 19.5 metric ton amounts, with payments of $1,069.24 per metric ton due 14 days after invoice date. The confirmation agreement from Feed is also unambiguous. Thus the contract is enforceable against Principle because there is no evidence upon which a reasonable jury could find that Principle objected to the contract within 10 days of receipt of the June 29 confirmation. See Wis. Stat. § 401.201(2).

The next issue is quality. Feed asserts that Principle waived its right to pursue a breach of the agreement on quality under the UCC and common law, and its claim is also barred by its Terms and Conditions which apply to the June contract as a matter of law.

Section 402.602, Wis. Stats., provides:

(Emphasis added.)

Section 402.605, Wis. Stats., provides:

(Emphasis added.) The facts before the Court disclose that despite Principle's complaints about protein content and moisture, it used the potato mix and paid the invoices. Furthermore, despite construing the evidence in the light most favorable to Principle, there are insufficient facts upon which a reasonable jury could find that Principle seasonably rejected the potato mix.

Feed has submitted sufficient proof of its damages: lost profits of $11,0380,800 plus $954,000 in storage fees, which have not been disputed by Principle. Therefore, the Court grants Feed's motion for summary judgment on its breach of contract counterclaim against Principle for failure to purchase the remainder of the product mix under a one-year supply contract and dismissing Principle's breach of contract claim based on allegedly inferior product Principle has not presented any evidence upon which a reasonable jury could find that it rejected the goods.

Zimmer's Motion to Dismiss Third-Party Complaint

Zimmer contends that Feed's claims pleading alter ego liability should be dismissed because the Third-Party Complaint does not contain sufficient facts to justify piercing the corporate veil warranting dismissal of the breach of contract and alter ego liability. (First and Second Claims). He also maintains that to the extent that Feed's claims for intentional and negligent misrepresentation (Third and Fourth Claims) seek to recover in tort for claims arising out of the contract, they are barred by the economic loss doctrine.

For a complaint to withstand a Rule 12(b)(6) motion, a claimant is required to provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2) The pleading must include more than mere legal conclusions or a recitation of the cause of action elements, but does not require detailed factual allegations. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The pleading must meet a plausibility threshold; mere possibility is not enough. Id. at 570. Plausibility means there are enough facts in the complaint for a reviewing court to draw a reasonable inference that the pleader is entitled to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, the Court need not accept as true its legal conclusions; "[t]hreadbare recitals of a cause of action's elements, supported by mere conclusory statements," do not suffice." See id. at 663 (citing Twombly, 550 U.S. at 555).

Even after Twombly, courts must still approach motions under Rule 12(b)(6) by "constru[ing] the complaint in the light most favorable to the plaintiff, accepting as true all well-pleaded facts alleged, and drawing all possible inferences in her favor." Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). This threshold requires a court to utilize its judicial experience and common sense within the context of the facts to determine whether the pleading meets the plausibility standard. Iqbal, 556 U.S. at 679.

Consumer's Co-op of Walworth Cnty. v. Olsen, 142 Wis.2d 465, 484, 419 N.W.2d 211, 217-18 (Wis. 1988), states that there are three elements to establish alter-ego liability: (1) complete dominating control not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity to the transaction had at the time no separate mind, will or existence of its own, (2) such control was used to commit a fraud, wrong, dishonest or unjust act against plaintiff's legal rights, (3) which causes injury or unjust loss complained of.

The Third-Party Complaint alleges that Zimmer and Principle have no separate existence because Zimmer comingled funds or assets with Principle, failed to segregate funds of Principle, diverted company funds or assets for other than corporate uses, treated Principle's assets as his own, failed to maintain formalities to be observed by limited liability companies, failed to adequately capitalize Principle with unencumbered capital both at inception and when it took on substantially greater liabilities and risk, and/or treated Principle's assets and employees as his own. (Third-Party Compl. ¶ 23.) (ECF No. 46.) These threadbare recitals of the first element for alter ego liability are fleshed out with the following factual allegations. Specifically, Feed alleges that on March 19, 2007, when Principle obtained limited liability company status, Zimmer placed virtually no at-risk capital in the corporation. As of May 31, 2007, Principle's bank account had a balance of only $5,965.26 and, consequently, its ability to pay debts as they became due was extremely compromised, with its bank account dipping to a balance of $3,000 or under at least six times during its first year of business. (Id. at ¶ 24.) Prior to October 14, 2009, Zimmer engaged in fraud by paying his girlfriend instead of himself so he could declare less money. Principle's bank records also show that in numerous instances Zimmer withdrew money from Principle when his personal bank account had less than $1,000 only to have the exact same amount deposited to Principle's account a short time later. Zimmer also made a practice of using Principle's funds to pay for personal expenses such as his personal cell phone. (Id. at ¶ 25.)

However the three elements of Consumer's Co-op, 419 N.W.2d at 220-21, emphasize the need to connect the alleged wrongdoing with the plaintiff's alleged injury. Despite construing Feed's factual allegations and the reasonable inferences from those facts in the light most favorable to Feed, it has not alleged sufficient facts to establish a plausible claim for alter ego liability because its alleged injury in 2012 is not adequately connected with Zimmer's alleged control of Principle in 2007 and prior to October 14, 2009. The second claim does not sufficiently allege a basis for alter ego liability. Consequently, the first claim for breach of contract which is predicated on Zimmer's alter ego liability also fails to state a claim for relief.

Kaloti Enterprises, Inc. v. Kellogg Sales Co. 283 Wis.2d 555, 580, 699 N.W.2d 205, 216 (Wis. 2005), explains that economic loss results from "a product failing in its intended use . . . or failing to live up to a contracting party's expectations." (Citations omitted). "The economic loss doctrine is 2017based on an understanding that contract law and the law of warranty, in particular, is better suited than tort law for dealing with purely economic loss in the commercial arena.'" Id. (Citations omitted). The fraud in the inducement exception applies to economic losses when: (1) the claimant can establish the five elements of a fraudulent misrepresentation;4 (2) the fraudulent misrepresentation occurred before the contract was formed; and (3) the fraudulent misrepresentation was "extraneous to" rather than interwoven with the contract. Id. at 219 (citing Digicorp, Inc. v. Ameritech Corp., 262 Wis.2d 32, ¶ 52, 662 N.W.2d 652, 663 (Wis. 2003)). As to fraud that is "interwoven," "the misrepresentations relate to the breaching party's performance of the contract and do not give rise to an independent cause of action in tort." Id. at 217 (Citation omitted).

The crux of Feed's misrepresentation claims against Zimmer is that on at least June 28, 29, and July 3, 2012, Zimmer represented that Principle would accept delivery of and pay for the potato mix under the contract (Third-Party Compl. ¶¶ 33-34), but Principle and Zimmer had no intention of performing their obligations under the contract—their only intention was to treat it as an options contract to hold against Feed if the market price of potato mix continued at or above the level Feed had bound itself to. (Id. at ¶ 36.) Principle and Zimmer failed to disclose that they were relying on market speculation, which was a material fact that would have affected Feed's decision to enter into the contract. (Id. at ¶ 35.)

The Third-Party Complaint does not allege that Zimmer intended to treat the contract as an options contract before the contract was formed. Moreover, the intent to treat the contract as an options contract rather than a supply contract for the purchase 25,000 metric tons of potato mix over the one-year contract period is not extraneous to the contract. It is interwoven with Principle's agreement to perform under the terms of the contract. See Kaloti Enters., Inc., 699 N.W.2d at 217.

This case is distinguishable from Kaloti which involved a Kellogg agent who, knowing that Kellogg had changed its business model by selling its products directly to large market retailers, solicited and obtained an order from a wholesaler knowing that the wholesaler bought products from Kellogg in order to resell them to these same large stores and would not have placed the order if it had known that Kellogg was going to sell directly. The information withheld from the wholesaler was extraneous to the contract and fell within the exception to the economic loss doctrine. Zimmer's alleged intent not to perform according to the terms of the contract is not extraneous to the contract, and therefore Feed's misrepresentation claims (Third and Fourth Claims) are also dismissed as barred by the economic loss doctrine. Zimmer's motion to dismiss the Third-Party Complaint is granted and Zimmer is dismissed from this action.

Summary

This Decision and Order grants relief to Feed on its breach of contract counterclaim against Principle, and dismisses Principle's breach of contract claim against Feed. It dismisses the Third-Party Complaint, and Zimmer is no longer a party to this action. The conspiracy claim of the Second Amended Complaint remains pending against Feed; and Natural Balance Pet Foods and Ball remain defendants in the action.

At this juncture, the Court will conduct a telephonic scheduling conference. The purpose of the conference call is to establish a scheduling order which will limit the time:

The scheduling order may also:

The time limitations set forth in the scheduling order may only be modified for good cause and with the Court's consent. Fed. R. Civ. P. 16(b)(4).

The parties should be prepared to discuss the matters listed in Civil Local Rule 16(a)(1). Please refer to Attachment A. Special attention should also be given to Rule 26(f)(1), which requires the parties to conduct a settlement/discovery conference at least 21 days prior to the initial scheduling conference described above. The Rule 26(f) conference may be conducted by telephone. Rules 26(f)(2) and (3) mandate that the parties, within fourteen (14) days of their conference: (1) file a written report outlining the proposed discovery plan they have developed at their Rule 26(f) conference; and (2) make the required initial disclosures under Rule 26(a) regarding witnesses and documents. In addition to the matters specified in Rules 26(f)(2) and (3), the Court requests that the proposed discovery plan submitted by the parties include one or two sentences stating the nature of the case. The written report must include the telephone numbers where the parties can be reached for this call.

In addition, this Court is participating in the Seventh Circuit Electronic Discovery Pilot Program and has adopted the Principles Relating to the Discovery of Electronically Stored Information. Counsel should be fully prepared to discuss methods and techniques to accomplish cooperative fact-finding in their case at the initial status conference. Before the initial status conference, counsel must also meet and discuss the Principles Relating to the Discovery of Electronically Stored Information. At the initial status conference, counsel must be prepared to discuss what agreements they have reached regarding discovery of Electronically Stored Information ("ESI") and what area of disagreement they have with regard to discovery of ESI. After discussing the matter with counsel, the Court will determine whether to enter the Standing Order Relating to the Discovery of Electronically Stored Information in their particular case. (Please refer to Attachments B & C).

NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY ORDERED THAT:

Feed's motion for summary judgment (ECF No. 31) on its breach of contract counterclaim and dismissing Principle's breach of contract claim is GRANTED;

Zimmer's motion to dismiss the Third Party Complaint (ECF No. 54) is GRANTED, and Zimmer is DISMISSED from this action;

The parties must participate in a telephonic scheduling conference to be conducted on November 12, 2014 at 9:30 a.m. (Central Time). The Court will initiate the call.

Attachment A

Civil L. R. 16. Pretrial Conferences; Scheduling; Management; Alternative Dispute Resolution.

(a) Preliminary Pretrial Conferences.

Attachment B

CONSIDERATION OF ISSUES CONCERNING ELECTRONICALLY STORED INFORMATION ("ESI")

Experience teaches that unless conducted with careful planning and a spirit of cooperation, discovery of ESI can result in an unnecessarily high level of conflict, expense and delay in resolving cases on the merits. That is why the Court has endorsed The Sedona Conference® Cooperation Proclamation dated July 2008.

To further advance the goal of having parties conduct discovery of ESI in a cooperative and costeffective manner, this Court has adopted the Standing Order Relating to the Discovery of Electronically Stored Information. At the Rule 26(f) planning conference, the parties shall address the issues discussed in the Standing Order, including but not limited to those set forth in Section 2.01(a)(1)-(5). In the report of the planning conference, the parties shall set forth:

(a) Whether they anticipate discovery of ESI in the case;

(b) What agreements they have reached regarding discovery of ESI; and

(c) What areas of disagreement they have with regard to discovery of ESI.

After reviewing the report of the planning conference and discussing the matter with the parties, the Court will determine whether the Standing Order should apply in this case.

Attachment C

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

This Court is participating in the Pilot Program initiated by the Seventh Circuit Electronic Discovery Committee. Parties and counsel in the Pilot Program with civil cases pending in this Court shall familiarize themselves with, and comport themselves consistent with, that committee's Principles Relating to the Discovery of Electronically Stored Information. For more information about the Pilot Program please see the web site of The Seventh Circuit Bar Association, www.7thcircuitbar.org. If any party believes that there is good cause why a particular case should be exempted, in whole or in part, from the Principles Relating to the Discovery of Electronically Stored Information, then that party may raise such reason with the Court.

General Principles

Principle 1.01 (Purpose)

The purpose of these Principles is to assist courts in the administration of Federal Rule of Civil Procedure 1, to secure the just, speedy, and inexpensive determination of every civil case, and to promote, whenever possible, the early resolution of disputes regarding the discovery of electronically stored information ("ESI") without Court intervention. Understanding of the feasibility, reasonableness, costs, and benefits of various aspects of electronic discovery will inevitably evolve as judges, attorneys and parties to litigation gain more experience with ESI and as technology advances.

Principle 1.02 (Cooperation)

An attorney's zealous representation of a client is not compromised by conducting discovery in a cooperative manner. The failure of counsel or the parties to litigation to cooperate in facilitating and reasonably limiting discovery requests and responses raises litigation costs and contributes to the risk of sanctions.

Principle 1.03 (Discovery Proportionality)

The proportionality standard set forth in Fed. R. Civ. P. 26(b)(2)(C) should be applied in each case when formulating a discovery plan. To further the application of the proportionality standard in discovery, requests for production of ESI and related responses should be reasonably targeted, clear, and as specific as practicable.

Early Case Assessment Principles

Principle 2.01 (Duty to Meet and Confer on Discovery and to Identify Disputes for Early Resolution)

(a) Prior to the initial status conference with the Court, counsel shall meet and discuss the application of the discovery process set forth in the Federal Rules of Civil Procedure and these Principles to their specific case. Among the issues to be discussed are:

(b) Disputes regarding ESI that counsel for the parties are unable to resolve shall be presented to the Court at the initial status conference, Fed. R. Civ. P. Rule 16(b) Scheduling Conference, or as soon as possible thereafter.

(c) The attorneys for each party shall review and understand how their client's data is stored and retrieved before the meet and confer discussions in order to determine what issues must be addressed during the meet and confer discussions.

(d) If the Court determines that any counsel or party in a case has failed to cooperate and participate in good faith in the meet and confer process or is impeding the purpose of these Principles, the Court may require additional discussions prior to the commencement of discovery, and may impose sanctions, if appropriate.

Principle 2.02 (E-Discovery Liaison(s))

In most cases, the meet and confer process will be aided by participation of an e-discovery liaison(s) as defined in this Principle. In the event of a dispute concerning the preservation or production of ESI, each party shall designate an individual(s) to act as e-discovery liaison(s) for purposes of meeting, conferring, and attending court hearings on the subject. Regardless of whether the e-discovery liaison(s) is an attorney (in-house or outside counsel), a third party consultant, or an employee of the party, the e-discovery liaison(s) must:

(a) be prepared to participate in e-discovery dispute resolution;

(b) be knowledgeable about the party's e-discovery efforts;

(c) be, or have reasonable access to those who are, familiar with the party's electronic systems and capabilities in order to explain those systems and answer relevant questions; and

(d) be, or have reasonable access to those who are, knowledgeable about the technical aspects of e-discovery, including electronic document storage, organization, and format issues, and relevant information retrieval technology, including search methodology.

Principle 2.03 (Preservation Requests and Orders)

(a) Appropriate preservation requests and preservation orders further the goals of these Principles. Vague and overly broad preservation requests do not further the goals of these Principles and are therefore disfavored. Vague and overly broad preservation orders should not be sought or entered. The information sought to be preserved through the use of a preservation letter request or order should be reasonable in scope and mindful of the factors set forth in Rule 26(b)(2)(C).

(b) To the extent counsel or a party requests preservation of ESI through the use of a preservation letter, such requests should attempt to ensure the preservation of relevant and discoverable information and to facilitate cooperation between requesting and receiving counsel and parties by transmitting specific and useful information. Examples of such specific and useful information include, but are not limited to:

(c) If the recipient of a preservation request chooses to respond, that response should provide the requesting counsel or party with useful information regarding the preservation efforts undertaken by the responding party. Examples of such useful and specific information include, but are not limited to, information that:

(d) Nothing in these Principles shall be construed as requiring the sending of a preservation request or requiring the sending of a response to such a request. Principle 2.04 (Scope of Preservation)

(a) Every party to litigation and its counsel are responsible for taking reasonable and proportionate steps to preserve relevant and discoverable ESI within its possession, custody or control. Determining which steps are reasonable and proportionate in particular litigation is a fact specific inquiry that will vary from case to case. The parties and counsel should address preservation issues at the outset of a case, and should continue to address them as the case progresses and their understanding of the issues and the facts improves.

(b) Discovery concerning the preservation and collection efforts of another party may be appropriate but, if used unadvisedly, can also contribute to the unnecessary expense and delay and may inappropriately implicate work product and attorney-client privileged matter. Accordingly, prior to initiating such discovery a party shall confer with the party from whom the information is sought concerning: (I) the specific need for such discovery, including its relevance to issues likely to arise in the litigation; and (ii) the suitability of alternative means for obtaining the information. Nothing herein exempts deponents on merits issues from answering questions concerning the preservation and collection of their documents, ESI, and tangible things.

(c) The parties and counsel should come to the meet and confer conference prepared to discuss the claims and defenses in the case including specific issues, time frame, potential damages, and targeted discovery that each anticipates requesting. In addition, the parties and counsel should be prepared to discuss reasonably foreseeable preservation issues that relate directly to the information that the other party is seeking. The parties and counsel need not raise every conceivable issue that may arise concerning their preservation efforts; however, the identification of any such preservation issues should be specific.

(d) The following categories of ESI generally are not discoverable in most cases, and if any party intends to request the preservation or production of these categories, then that intention should be discussed at the meet and confer or as soon thereafter as practicable:

Principle 2.05 (Identification of Electronically Stored Information)

(a) At the Rule 26(f) conference or as soon thereafter as possible, counsel or the parties shall discuss potential methodologies for identifying ESI for production.

(b) Topics for discussion may include, but are not limited to, any plans to:

Principle 2.06 (Production Format)

(a) At the Rule 26(f) conference, counsel and the parties should make a good faith effort to agree on the format(s) for production of ESI (whether native or some other reasonably usable form). If counsel or the parties are unable to resolve a production format issue, then the issue should be raised promptly with the Court.

(b) The parties should confer on whether ESI stored in a database or a database management system can be produced by querying the database for discoverable information, resulting in a report or a reasonably usable and exportable electronic file for review by the requesting counsel or party.

(c) ESI and other tangible or hard copy documents that are not text-searchable need not be made text-searchable.

(d) Generally, the requesting party is responsible for the incremental cost of creating its copy of requested information. Counsel or the parties are encouraged to discuss cost sharing for optical character recognition (OCR) or other upgrades of paper documents or non-text-searchable electronic images that may be contemplated by each party.

Education Provisions

Principle 3.01 (Judicial Expectations of Counsel)

Because discovery of ESI is being sought more frequently in civil litigation and the production and review of ESI can involve greater expense than discovery of paper documents, it is in the interest of justice that all judges, counsel and parties to litigation become familiar with the fundamentals of discovery of ESI. It is expected by the judges adopting these Principles that all counsel will have done the following in connection with each litigation matter in which they file an appearance:

Principle 3.02 (Duty of Continuing Education)

Judges, attorneys and parties to litigation should continue to educate themselves on electronic discovery by consulting applicable case law, pertinent statutes, the Federal Rules of Civil Procedure, the Federal Rules of Evidence, The Sedona Conference® publications relating to electronic discovery1, additional materials available on web sites of the courts2, and of other organizations3 providing educational information regarding the discovery of ESI.4