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Entrata, Inc. v. Yardi Systems, Inc.

United States District Court, D. Utah

February 26, 2019

ENTRATA, INC., a Delaware corporation, Plaintiff,
YARDI SYSTEMS, INC., a California corporation Defendants.



         Before the court is Plaintiff Entrata, Inc.'s Emergency Motion to Strike Yardi's Supplemental Expert Reports of Gordon Rausser and Richard Hoffman, (ECF No. 456). Entrata's Motion is well-taken. As discussed below, the court finds that Yardi has acted in bad faith. Sanctions are appropriate and will be issued. However the court declines to strike the expert reports at this time. The court sets a hearing to determine the appropriate sanctions.


         “Entrata and Yardi are each software and technology companies, and each makes and sells various competing property management software products.” (Am. Compl. ¶ 6, ECF No. 55 at 3.) According to Entrata, it “was the first comprehensive property management software provider to offer a single-login, open-access, ‘Platform as a Service' (PaaS) system.” (Am. Compl. ¶ 9, ECF No. 55 at 4.) “PaaS systems provide for a range of functionalities, such as marketing available units, processing rental applications, organizing and storing resident information, taking and responding to maintenance requests from residents, managing utility usage and costs, and processing rent payments . . . .” (Am. Compl. ¶ 9, ECF No. 55 at 4-5.) Entrata states “[t]hese features of a PaaS system are made possible through integration with a separate core accounting software service.” (Am. Compl. ¶ 9, ECF No. 55 at 5 (emphasis added).)

         “Shortly after its founding, ” Entrata's “primary focus” was on “property website management [products] that were designed for use with existing third-party core accounting database software products (such as Yardi's Voyager Residential software product, )” (Voyager). (Am. Compl. ¶ 14, ECF No. 55 at 4 (emphasis added).) According to Entrata, “Yardi is the dominant provider of core accounting database software for use by the multi-family housing industry in the United States.” (Am. Compl. ¶ 18, ECF No. 55 at 8 (emphasis added).) According to Entrata, “[i]n 2003, when [it] was founded, Yardi had already long been, since 1984, in the business of providing property management accounting software.” (Am. Compl. ¶ 20, ECF No. 55 at 9 (emphasis in original).) Entrata asserts that “Yardi's products did not then include specialized tools or integration products . . . focused on providing services to residents and prospective residents, such as . . . rental applications, payments, and maintenance request processing.” (Am. Compl. ¶ 20, ECF No. 55 at 9 (emphasis in original).)

         Entrata further alleges that “[a]s a result of the limitations of Yardi's core accounting software products . . . and for Yardi's own benefit to enable it to meet the needs and demands of its customers, Yardi-at least initially-actively encouraged third parties, including Entrata, to develop specialized modules or plug-ins to interface with Yardi's core accounting software, including Voyager.” (Am. Compl. ¶ 20, ECF No. 55 at 9.) Entrata alleges that when “third-party integration products (including products offered by competitors such as Entrata) began to threaten Yardi's dominance and control in the market for core accounting and property management database software, Yardi responded by” “undertaking initiatives to damage and/or undermine the performance and marketability of those third-party integration products.” Yardi also allegedly responded by “undertaking to expand beyond its original core accounting software (i.e., Voyager) and offering products intended to leverage Yardi's existing dominance in core accounting software into the adjacent product category for integration products, thereby supplanting those competitors who offered third-party products that posed a threat to Yardi's dominance . . . .” (Am. Compl. ¶ 21, ECF No. 55 at 9-10.)

         Entrata began working with Yardi in 2004. (See Am. Compl. ¶ 26, ECF No. 55 at 15.) Entrata alleges that “Yardi had . . . been more than happy to encourage an ecosystem of software developers . . . to invest in creating complementary software products that enhanced the value of the Yardi core accounting software” but “Yardi began to change course as early as 2008-2009 as those firms began to mature and Yardi sensed a potential threat to competition.” (See Am. Compl. ¶ 42, ECF No. 55 at 20.) Entrata alleges that, to quell these threats, Yardi engaged in a “pattern of unfair, unlawful, and anti-competitive actions against” Entrata. (Am. Compl. ¶ 7, ECF No. 55 at 3.)

         yCRM Data and Expert Reports

         On August 4, 2017, Magistrate Judge Warner entered an Order requiring the parties to “substantially complete document productions” by September 29, 2017. (See ECF No. 115.) On October 6, 2017, Entrata filed a Motion alleging that “Yardi willfully failed to comply with the September 29 deadline for substantial completion of document productions” by dumping “about 1.3 million documents” on Entrata on that date. (See ECF No. 129 at 2 (emphasis in original).) On November 17, 2017, Magistrate Judge Warner “ordered” Yardi “to review its September 29, 2017 document production and produce to” Entrata “only those documents that [were] responsive to” Entrata's discovery requests. (See ECF No. 162 at 4.) According to Entrata, Yardi's reproduction consisted of 161, 112 documents, but Entrata was nevertheless forced “to continue to incur the cost and burden of searching and reviewing Yardi's original, massive document dump to identify relevant documents.” (ECF No. 177 at 11 n. 5.)

         On December 7, 2017, Entrata sent Yardi a letter complaining that there was a gap in Yardi's document production relating to its “yCRM database.” (See ECF No. 171-6.) “yCRM” “stands for ‘customer relationship management.'” (Schindelbeck Decl. ¶ 6, ECF No. 453-23 at 4.) The yCRM Database is a tool Yardi uses to manage its “relationships and interactions with its customers and potential customers.” (Schindelbeck Decl. ¶ 6, ECF No. 453-23 at 4.) In the yCRM database, Yardi “classifies Companies by what Yardi believes their predominant business to be, such as commercial, multi-family, single-family, affordable housing, student housing, manufactured housing, military housing, senior housing, or condo/co-op, or the opportunities [Yardi] believe[s] are relevant to [its] business.” (Schindelbeck Decl. ¶ 6, ECF No. 453-23 at 5-6.)

         In its December 7, 2017 letter, Entrata stated that it “thoroughly searched Yardi's massive document production” and had not found yCRM data it believed was “highly relevant and responsive to [its] discovery request.” (See ECF No. 171-6 at 2.) Based on its review of Yardi's production, Entrata believed “any yCRM data produced to date [was], at best, extremely incomplete.” (ECF No. 171-6 at 3.)

         On December 18, 2017, Yardi, through one of its attorneys, Matthew Richards, responded to Entrata's letter. (See ECF No. 171-2 at 8.) Matthew Richards appears to have taken the position that Yardi had presented the yCRM data in the same format that Entrata had disclosed its “customer relationship management database” to Yardi (ECF No. 171-2 at 8.) On January 30, 2018, Matthew Richards wrote an email to Entrata's lead counsel, David Cross regarding yCRM data, stating that “Yardi ha[d] met its document production obligations.” (ECF No. 171-2 at 2.) On January 31, 2018, David Cross replied in an email and specifically addressed Matthew Richard's letter and his statement about Entrata's customer relationship management database. (See ECF No. 171-2 at 2.) Mr. Cross wrote:

As I explained on Friday, we're happy to consider any argument that Entrata has not produced all the data it was obligated to produce, although we've no reason to believe that's the case. I invited you to identify - just as we did regarding Yardi's yCRM database - (1) the categories of data you believe exist and are responsive to your requests; (2) the discovery requests you contend call for that data; and (3) testimony and/or documents establishing that those categories of data actually exist. Although we provided this information in detail regarding Yardi's yCRM database, you've provided no such information regarding any database maintained by Entrata.

(ECF No. 171-2 at 2.)

         On February 7, 2018, Entrata filed a Motion Regarding Yardi's Client Relations Management Database (yCRM), (ECF No. 171). In this Motion, Entrata sought “to compel production” of responsive yCRM data from Yardi. (See ECF No. 171 at 2.) In this Motion, Entrata stated that the yCRM data “is highly relevant to such issues as market definition, market power, and injury to competition.” (ECF No. 171 at 2.)

         In support of this Motion, Entrata included a declaration of Dr. James R. Kearl, one of Entrata's experts retained “to evaluate economic issues related to Entrata's antitrust and tort claims against Yardi . . . .” (See Kearl Decl. ¶ 3, ECF No. 171-4 at 2.) In this declaration, Dr. Kearl explained “why the data in the Yardi yCRM database” was “important for [his] economic analysis in this matter.” (See Kearl Decl. ¶ 4, ECF No. 171-4 at 3.) Dr. Kearl stated:

In this matter, Entrata alleges a relevant market where the customers are Enterprise-level (managing >1, 000 units) conventional multifamily property managers. I understand the yCRM data would allow me to distinguish between customers who are in the alleged market and those that are not . . . For instance, the yCRM data appear to distinguish between conventional multifamily managers and managers of specialty multifamily housing (e.g. student, affordable, military, etc.).

(See Kearl Decl. ¶ 5, ECF No. 171-4 at 3.) Dr. Kearl further provided that “[t]he yCRM data also appear to contain information on Yardi customers and prospective customers, wins/losses against competitors, the customers' product usage of Yardi and non-Yardi products, customer unit information, customer billing, revenue, and pricing information.” (Kearl Decl. ¶ 6, ECF No. 171-4 at 3-4.) Dr. Kearl also stated that this information was “relevant to market definition and market share.” (See Kearl Decl. ¶¶ 7-10, ECF No. 171-4 at 4-5.)

         On February 14, 2018, Yardi filed its Opposition to Entrata's Motion. (ECF No. 174.) In this Opposition, Yardi represented that it had “searched for, identified, and produced documents from Yardi's yCRM system and other common company locations” that were responsive to Entrata's requests for production. (ECF No. 174 at 2-3.) Yardi also represented that it had “met its discovery obligations.” (ECF No. 174 at 3.) On March 27, 2018, Yardi filed a Supplemental Memorandum in Opposition to Entrata's Motion in which it stated that it was “not hiding information.” (ECF No. 200.)

         On April 3, 2018, Entrata filed its Reply in support of its Motion. (ECF No. 206.) In this Reply, Entrata alleged that “Yardi [had] not disputed any of the following facts:”

Yardi has not produced responsive data contained in its yCRM database regarding such highly relevant issues as customer pricing, unit counts, wins and losses, revenue, and communications (Dkt. No. 179 at 5-6);
• Yardi has produced only reports that its employees chose to generate from the yCRM database only for business purposes wholly unrelated to this litigation and thus without any regard to what yCRM data is relevant to this litigation (Opp. at 2-3);
• Those reports and the other tens of thousands of documents Yardi misleadingly cites as containing responsive information contain only some (in fact, only a fraction) of the relevant, responsive yCRM data (Dkt. No. 179 at 9; Dkt. No. 171-4 (“Kearl Decl.”));
• The little data contained in the documents Yardi cites is historical and thus does not provide the current or even accurate information that the withheld data would provide because the data changes significantly over time (Dkt. No. 179 at 9-10);
• Yardi could easily produce the responsive yCRM data it is intentionally withholding as a data file or report for a fraction of the time and expense it has forced Entrata (and now this Court) to incur in seeking this important information (Dkt. No. 179 at 3);
• The burden and expense for Entrata to cobble together yCRM data dwarfs the burden and expense for Yardi to produce the requested yCRM data in a single, comprehensive file or report (id); and
• The yCRM data produced and cited by Yardi yields only an incomplete, outdated, and inaccurate data set because it is dispersed across tens of thousands of overlapping, inconsistent, and conflicting reports generated by different employees, at different times, looking at different sets of fields and containing changing data over a period of several years (id. at 9-10).

(ECF No. 208 at 5-6 (emphases in original).)

         On May 4, 2018, Magistrate Judge Warner issued an Order requiring that “the yCRM data . . . be produced pursuant to Rule 34 to the extent any data is responsive to Entrata's requests for production.” (ECF No. 212 at 3.) Magistrate Judge Warner ordered Yardi to “produce any yCRM data that is responsive to Entrata's request for production within fourteen (14) days of the date of this order.” (ECF No. 212 at 3.)

         According to Entrata, in response to Magistrate Judge Warner's order, “Yardi produced fourteen data files on May 18, 201[8], ” which it-“[a]t the time”-“represented to be all the responsive portions of Yardi's yCRM database . . . .” (Cross Decl. ¶ 2, ECF No. 252 at 2.)

         Entrata's review of Yardi's May 18, 2018 yCRM production led Entrata to believe that Yardi's production was incomplete. (See Cross Decl. ¶ 3, ECF No. 252 at 2.) On May 23, 2018, one of Entrata's attorneys, Robert Manoso, sent one of Yardi's attorneys, John Foote, an email stating, in relevant part:

In addition, our experts have determined that there are many companies reported as having residential units in the [Top Companies Report] that are not included in either the Companies or Clients files produced from the yCRM database . . . In summary . . . it appears that companies representing nearly 1.2 million residential units are not included in the yCRM database. By the end of the day today, please supplement your yCRM production with this additional data as required by the Court's Order.

(ECF No. 252-3 at 4.)

         In this email, Robert Manoso further provided:

Yardi failed to comply with Entrata's requests and delayed for months. The Court rejected Yardi's arguments as meritless and ordered production. Yardi's deliberate, continued non-compliance and delay now means Yardi has willfully violated the Court's Order. We have been and continue to be willing to work with you to help get us the data we are entitled to, but our efforts have been ...

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