After thirty years of uncertainty, New York State’s highest court clarifies the standard for obtaining discovery from a nonparty

Introduction

Addressing an issue that has divided the departments of the New York Appellate Division for multiple decades, New York’s highest court has finally clarified the standard for enforcing subpoenas to nonparties in civil litigation.

Until this month, the departments of the Appellate Division were evenly split with respect to what is required of a party subpoenaing a nonparty.  The First and Fourth Departments have held that a party subpoenaing a nonparty need establish only that the requested discovery is relevant to the prosecution or defense of an action.  The Second and Third Departments, however, have required an additional showing by the subpoenaing party that it is unable to obtain the requested disclosure from any other source.   

On April 3, 2014, in Matter of Kapon v. Koch, 2014 N.Y. Slip Op. 02327, the New York Court of Appeals sided with the First and Fourth Departments, holding that the New York Civil Practice Law and Rules (the “CPLR”) “imposes no requirement that the subpoenaing party demonstrate that it cannot obtain the requested disclosure from any other source.”  Rather, the Court held that a party subpoenaing a nonparty need show only that “the disclosure sought is relevant to the prosecution or defense of an action.”  The Court held that this was the proper interpretation of the CPLR because it reflected “the State’s policy of liberal discovery.”

The Decision

In 2009, William Koch commenced a fraud action in California alleging that he had been sold bottles of counterfeit wine through a retailer and auctioneer (the “California Action”).

In early 2012, Koch, as part of the California Action, served nonparty subpoenas for deposition testimony on two New Yorkers, who in turn moved in New York to quash the subpoenas under the CPLR. 

Both the Supreme Court in Manhattan and the First Department denied the Petitioners’ motions to quash, finding that the Petitioners had failed to show that the deposition testimony sought was irrelevant to the prosecution of the California Action.  Petitioners sought review by the Court of Appeals, calling upon the Court to clarify what is required of a party subpoenaing a nonparty, namely, whether it is enough to show that the discovery sought is relevant to the action (as the First and Fourth Departments have held), or whether an additional showing of unavailability of another source is required (as the Second and Third Departments have held).

CPLR 3101(a)(4) provides that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof, by . . . any other person, upon notice stating the circumstances or reasons such disclosure is sought or required.”  (emphasis added).

Prior to its amendment in 1984, Section 3101(a)(4) required the party seeking disclosure from the nonparty to first obtain a court order based on “adequate special circumstances.”  The statute was amended in 1984 to eliminate the requirement of the court order, and to dispense with the “adequate special circumstances” threshold.  In their place, the CPLR imposed upon the subpoenaing party the obligation of describing in the subpoena “the circumstances or reasons such disclosure is sought or required” (emphasis added). 

In practice, this has typically entailed a short statement in a subpoena explaining the relationship of the information sought to the underlying lawsuit.  But, the 1984 amendment gave rise to the aforementioned intermediate court split.  The First and Fourth Departments adopted a “material and necessary” standard:  a showing that the requested discovery is relevant to the prosecution or defense of an action.  See Velez v. Hunts Point Multi-Serv. Ctr., 29 A.D. 3d 104 (1st Dept. 2006); Hauzinger v. Hauzinger, 43 A.D. 3d 1289 (4th Dept. 2007).  The Second and Third Departments required not only a demonstration of relevance, but also a showing by the party issuing the subpoena “that the disclosure sought cannot be obtained from sources other than the nonparty.”  See, e.g., Kooper v. Kooper, 74 A.D. 3d 6, 17 (2d Dept. 2010). 

In an opinion by Judge Eugene F. Pigott, Jr., the New York Court of Appeals resolved the split and sided with the First and Fourth Departments, holding that “so long as the disclosure sought is relevant to the prosecution or defense of an action, it must be provided by the nonparty,” and that the subpoenaing party need not show unavailability from other sources.  This, the Court ruled, is consistent with “the State’s policy of liberal discovery.”  Applying the clarified rule to the facts at issue, the Court found that the petitioners had “failed to meet their burden of establishing that their deposition testimonies were irrelevant in the California Action.”

The Court also noted that, although the nonparty bears the initial burden of proof on a motion to quash, the subpoenaing party must still state, either on the face of a subpoena or a notice accompanying it, “the circumstances or reasons such disclosure is sought or required.”  This requirement helps “apprise a stranger to the litigation” of how the information it possesses fits into the broader litigation.

Implications

Nonparty subpoenas impact New York litigants on a routine basis.  They also impact bystanders to litigation who find themselves to be the target of nonparty discovery in New York.  This new decision underscores the relative ease with which parties can obtain discovery from nonparties in a New York state court action, and, correspondingly, the difficulty faced by nonparties seeking to quash subpoenas.  New York’s highest court has embraced anew the CPLR’s liberal approach toward discovery, even when nonparties are on the hook.  Parties serving subpoenas should take comfort knowing that one potential barrier to obtaining nonparty discovery has been cleared by the Court.  Nonparties seeking to limit the impact of subpoenas should explore doing so through negotiation, by focusing attack on the more onerous aspects of subpoenas, or by attempting to shift costs back to the party demanding discovery. 

Finally, although the law surrounding enforcement of nonparty subpoenas has been clarified in New York state court, it is important to note that, in the federal context, New York federal courts may still look to the availability of material from other sources when addressing the enforcement of a nonparty subpoena.  See, e.g., Anwar v. Fairfield Greenwich Ltd., No. 09 Civ. 118 (VM)(FM), 2013 WL 6172443, at *3 (S.D.N.Y. Nov. 26, 2013) (holding that, when determining whether to allow third party discovery under Federal Rule of Civil Procedure 45, a court must “consider whether information is necessary and whether it is available from any other source”) (emphasis added); Solomon v. Nassau County, 274 F.R.D. 455, 461 (E.D.N.Y. 2011) (in the context of addressing a motion to quash a third party subpoena, taking into account whether “the discovery can be obtained from some other source that is more convenient or less burdensome”) (quotations omitted).