Introduction

The proliferation of data and the rise of affordable cloud computing services has led many companies and organizations to outsource their data storage to third parties, a practice that raises numerous issues regarding electronic discovery. Traditional concepts of possession, custody, and control of documents and electronically stored information (ESI) have collided with technological innovations in data management. Moreover, with the explosion of data generally — including email and text messages as well as other data stored in mobile applications or with software as a service (SaaS) providers — information potentially relevant to a litigation can reside in multiple locations and channels, and with multiple entities. Parties to litigation are increasingly finding that ESI relevant to their cases is in the hands of non-parties that often have no interest in the litigation. These non-party data custodians — parties or entities “with no skin in the game” — frequently incur significant burdens and expenses when responding to subpoenas under Rule 45 of the Federal Rules of Civil Procedure (Rule 45). How to comply with unexpected discovery costs arising from litigation that the entity or individual is not involved in, and how to simultaneously control costs and the outlay of employee or vendor time, is a balancing act that non-parties caught in a Rule 45 demand must balance.

The Sedona Conference, a nonprofit research and educational institute, regularly publishes commentaries on law and policy that are often cited by the federal judiciary and that guide attorneys, businesses and organizations on challenging legal issues. Recently, the Sedona Conference released updated guidance, Commentary on Rule 45 Subpoenas to Non-Parties, analyzing the shifting electronic discovery landscape and offering recommendations to courts, litigants and non-parties on the scope, preservation obligations and costs of Rule 45 subpoenas to non-parties. See 22 Sedona Conf. J. 1 (forthcoming 2021) (the Commentary).

Scope and Issuance of a Rule 45 Subpoena

For those issuing Rule 45 subpoenas, the Commentary recommends that litigants avoid seeking information from non-parties that is in the possession, custody or control of a party to the litigation. Commentary at 17. As is increasingly the case with ESI, a company that is a party to litigation may outsource its information technology systems to a non-party. In these circumstances, the non-party may have technical possession and custody of discoverable ESI, but the party often retains control over that information and can access the ESI to assess responsiveness and relevance. Where the party to the litigation has control over the requested documents, document requests via Rule 34 to the party, rather than Rule 45 subpoenas to a non-party, are appropriate. This approach reflects the principle that, where possible, the often costly burdens of discovery should fall on the parties to litigation instead of on non-parties.

The Commentary identifies limited circumstances where subpoenas directed to non-parties would be appropriate when a party retains control over the requested information. If a party to litigation has engaged in misconduct or has otherwise failed to produce or destroyed discoverable information, a Rule 45 subpoena directed at a non-party may be necessary. Similarly, in cases involving a temporary restraining order or preliminary injunction, or where there is a need to authenticate documents, seeking ESI from a non-party may be reasonable.

Where that initial criteria is met and it is determined that the parties do not have possession, custody or control over the discoverable ESI, the Commentary suggests incorporating the concept of proportionality. This analysis will be influenced by the amount in controversy; the burden of collection, review and production; the expenses; the importance of the ESI; and other factors — and tailoring the scope of the non-party subpoena accordingly. See Federal Rule of Civil Procedure 26(b)(1) (Rule 26).

While few courts have considered Rule 26 proportionality in the context of Rule 45 subpoenas, the Southern District of New York and other courts have quashed subpoenas served on non-party witnesses for failing to meet proportionality requirements. Commentary at 13, citing Walker v. H & M Henner & Mauritz, LP, 16 Civ. 3818, 2016 WL 4742334 (S.D.N.Y. Sept. 12, 2016). To facilitate the use of the proportionality standard when shaping the scope of Rule 45 subpoenas, the Commentary recommends that, among other things, the requesting party:

  • Confirm that the requested information cannot be obtained from a party.
  • Give other parties time to raise — and the courts time to address, where necessary — relevance, proportionality, confidentiality and privilege concerns before serving a Rule 45 subpoena on a non-party.
  • Tailor the scope of Rule 45 subpoenas to reflect proportionality considerations.
  • Confer with the non-party to tailor the scope of the subpoena.

Preservation Obligations on Rule 45 Subpoena Recipient

Parties to litigation are likely well versed in their preservation obligations, including the implementation of legal holds instructing an organization’s employees not to delete ESI or other documents that may be relevant to ongoing or anticipated litigation. The Commentary offers non-party custodians of ESI, which often have no knowledge of litigation until they are served with a Rule 45 subpoena, useful guidance that can reduce the burden and cost of preservation. This is particularly helpful in an environment where regulators and privacy regulations increasingly stress — or require — the reduction of and the timely disposition of data that is no longer necessary to the operation of the business or required for regulatory purposes.

According to the Sedona Conference, a non-party “has no obligation to preserve documents prior to receipt of a subpoena or after complying with a subpoena, absent a special relationship to a party to the litigation.” Commentary at 33. The Commentary notes that there are very few cases where a special relationship would trigger preservation requirements, adding that a close working relationship is not enough to do so. Where there is a contractual obligation to a party to preserve its information, a non-party may have preservation obligations prior to receipt of a subpoena.

Moreover, the Commentary states that a non-party served with a Rule 45 subpoena is not required to initiate a formal legal hold process. Instead, non-parties need only take reasonable steps to produce the requested information and ensure that it is not destroyed during the compliance period. Once the non-party has complied with the subpoena and produced the requested documents and ESI, there is no further duty to preserve the information. Commentary at 8.

This guidance may ease the burden on companies that store large quantities of information and assume the law obligates them to continue preserving information until the end of litigation — including litigation to which companies are not a party and about which they may not be fully informed or updated.

In addition to the Commentary’s helpful guidance, we advise companies in receipt of Rule 45 subpoenas to give careful thought — and consider memorializing their analysis and conclusion in writing — when they resume their routine data destruction procedures. When producing the requested documents, they might also consider indicating in writing that they intend to resume their normal data retention policies at that time.

To aid in compliance with the Rule 45 subpoena and preservation determinations thereafter, the Commentary recommends that:

  • The issuing party and non-party recipient should confer soon after issuing or receiving the subpoena due to the limited window for serving objections and responses under Rule 45(d)(2)(B).
  • Parties and non-parties should agree to a reasonable extension of time for the non-party to object or respond to subpoenas.
  • If a non-party objects to producing documents or ESI (and as we suggest above, even when the non-party does not object and produces the responsive material), it should provide a specific date after which it will no longer preserve those documents.

Controlling Costs to Non-Parties

Non-parties frequently face considerable expenses when responding to requests for information. Rule 45(d) provides three ways that a non-party can avoid the unduly burdensome or significant costs of compliance with subpoenas: sanctions, cost-shifting, and quashing or modifying a subpoena.

The Commentary notes that, as to the first method, Rule 45(d)(1) requires a court to order appropriate sanctions, such as lost earnings and reasonable attorneys’ fees, on a party for failing to take reasonable steps to avoid imposing undue burden or expense on a non-party subject to a subpoena. Courts consider factors such as relevance of and need for the documents, how the request is tailored, and the burden to the non-party. Commentary at 43. One’s status as a non-party is a factor that may weigh against disclosure. Id.

As to the second remedy, under Rule 45(d)(2)(B)(ii), a court must order cost-shifting to protect a non-party from significant expenses related to production where, following a timely and specific objection, the requestor moves to compel production and the court orders the discovery, but at significant expense to the non-party. It is of great importance that the objection be specific and detailed. In considering whether a non-party’s expenses are “significant,” courts consider whether the non-party has an interest in the case, the parties’ relative abilities to bear the costs and the reasonableness of the costs of production, among other factors. Commentary at 61-62, citing United States v. McGraw-Hill Cos., 302 F.R.D. 532, 534 (C.D. Cal. 2014). If ordered, the cost-shifting need only make the costs to the non-party non-significant.

As a final measure to cut costs to non-parties, Rule 45(d)(3)(A) requires a court to quash or modify a subpoena that subjects the recipient to undue burden. Courts will consider relevance, the party’s need, the breadth of and time period covered by the request, the burden imposed on the non-party, and the particularity with which the documents or ESI are described. The potential for this outcome should motivate the party issuing the Rule 45 subpoena to keep scope and proportionality top of mind when drafting the subpoena and when meeting and conferring on the non-party’s compliance.

Conclusion

The Commentary recognizes the burden and expense non-party subpoenas can create. To help alleviate these concerns, the Commentary offers a set of 18 “Practice Pointers” for parties, non-parties and courts to consider as the nature of data management continues to shift. Among those recommendations, the following are worth significant note:

  • Litigants should avoid seeking information from non-parties when the information is in the possession, custody or control of a party.
  • Parties issuing subpoenas should incorporate the concept of proportionality.
  • Non-parties are not obligated to preserve documents prior to receiving a subpoena or after compliance.
  • Parties and non-parties should engage in meaningful dialogue regarding compliance with the subpoena soon after it issues to avoid objections.
  • Non-parties may have remedies in the form of sanctions, cost shifting, and/or quashing or modifying a subpoena that is unduly burdensome and imposes significant compliance costs — both monetary and in time outlay.

These and other principles set forth in the Commentary should serve as lodestars for lawyers and entities as they navigate Rule 45 subpoena practice.