E-Discovery Update: Nonparty Subpoenas: Shifting Costs Back to the Requesting Party

November 3, 2015

All companies dislike incurring expenses in connection with document production, but it is particularly distasteful to do so in connection with matters in which the company has no stake. Luckily, in those instances, companies can invoke Federal Rule of Civil Procedure 45(d)(1) to shift the costs of production back to the requesting party. Rule 45(d)(1) provides that the requesting party has a duty to take reasonable steps to avoid imposing undue burden or expense on the responding party. A recent federal New York case relied on this language to award a third party not only the costs of the attorneys’ fees associated with the review and production of documents in connection with a third-party subpoena, but also the attorneys’ fees associated with responding to the motion to compel filed by the seeking party.

In Sonoma County Assoc. of Ret. Emp. v. Sonoma County, 1:15-mc-191, Dkt. 31 (S.D.N.Y. Oct. 6, 2015), the Sonoma County Assoc. of Retired Employees (SCARE) subpoenaed Towers Watson Delaware, Inc., a nonparty to the suit, to produce documents that required legal review to protect the confidentiality of third-party information. Towers agreed to produce the documents but requested SCARE pay for the costs. SCARE refused and moved to compel production. During a telephone conference, the judge ordered Towers to produce the documents and SCARE to bear the costs of reviewing and producing the documents, including the vendor costs and the attorney costs. Towers then filed a motion for its legal fees incurred in connection with responding to the motion to compel.

The court awarded Towers its fees. The court was not persuaded by SCARE’s argument that it would be unjust to award attorneys’ fees, since its subpoena was reasonable. Instead, the court focused on the fact that Towers was a nonparty and stated that “payment by a party issuing a subpoena of the reasonable production costs incurred by a non-party is warranted where the non-party has no stake in the litigation” Id. at 3. The court said Towers was entitled to its attorneys’ fees in opposing the motion to compel since SCARE “failed to fulfill its Rule 45 duty to ‘avoid imposing undue burden or expense upon a person subject to the subpoena’ when it initially refused to pay the reasonable cost of legal review that was required to protect the confidentiality of third-party information.” Other federal courts have similarly held that it is inappropriate to tax a third party with a significant cost and burden related to litigation in which it is not a party. See Guy Chemical Company v. Romaco, 243 F.R.D. 310, 313 (N.D. Ind. 2007)(stating that “[n]on-party status is a significant factor to be considered in determining whether the burden imposed by a subpoena is undue” and noting that because the third party is not part of the lawsuit, it “should not have to pay for the costs associated with someone else’s dispute”). Of course, if a company has an interest in the outcome of the case, even though it is not a party, it is less likely that a court would be willing to shifts costs back to the requesting party.

A company receiving a nonparty subpoena should request reasonable costs of complying with the subpoena from the requesting party when it has no stake in the litigation. The cost-shifting rule, when asserted, should also help persuade requesting parties to more narrowly tailor subpoenas such that discovery costs are minimized for all parties and the just, speedy and inexpensive determination of the action or proceeding is advanced.