Companies are routinely served with subpoenas for litigation in which they are not parties. Responding to these subpoenas can involve significant expenditure of time and money, in addition to disruption and distraction. In many cases, the subpoenas also may demand a deposition from the company, requiring further expense and distraction for preparation. While there are more traditional options such as moving to quash or reduce the scope of a subpoena, the company still may be forced to spend legal fees and costs to comply. To avoid these burdens, in some instances, the company should consider a strategy of shifting some of the costs and fees associated with compliance to the party issuing the subpoena by taking advantage of recent appellate and district court decisions aimed at protecting the subpoenaed non-parties.
Federal Rule of Civil Procedure 45 governs discovery of non-parties by subpoena. A court must protect a non-party subject to a subpoena if it “requires disclosure of privileged or other protected matter” or the subpoena “subjects a person to undue burden.” Fed. R. Civ. P. 45(d)(3)(A). Importantly, Rule 45(d)(2)(B)(ii) states that, when a court orders compliance with a subpoena over an objection, “the order must protect a person who is neither a party nor a party’s officer from significant expense resulting from compliance.”
The Ninth Circuit Court of Appeals provided clarification on this cost-shifting rule in its decision Legal Voice v. Stormans, Inc., 738 F.3d 1178 (9th Cir. 2013) (reversing a district court’s denial of costs where the district court considered whether compliance was unduly burdensome for the subpoenaed non-party, rather than considering only whether the cost of producing documents was significant, when deciding whether to shift costs at all). As the Court explained, the leading Court of Appeals decision that analyzed the rule since the 1991 amendment was Linder v. Calero–Portocarrero, 251 F.3d 178 (D.C. Cir. 2001), where the D.C. Circuit held that the amendment made cost shifting mandatory in all instances in which a non-party incurs significant expense from compliance with a subpoena. Id. at 182.The plain language of this rule dictates its mandatory nature. The Linder court held that only two considerations are relevant under the rule: “ whether the subpoena imposes expenses on the non-party, and  whether those expenses are ‘significant.’” Legal Voice at 1184. If these two requirements are satisfied, “the court must protect the non-party by requiring the party seeking discovery to bear at least enough of the expense to render the remainder ‘non-significant.’” Id. In the Legal Voice decision, the Ninth Circuit agreed with the D.C. Circuit’s analysis of the amended rule and held that Rule 45(d)(2)(B)(ii) requires the district court to shift a non-party’s costs of compliance with a subpoena, if those costs are significant. Thus, when discovery is ordered against a non-party, the only question before the court in considering whether to shift costs is whether the subpoena imposes significant expense on the non-party. If so, the district court must order the party seeking discovery to bear at least enough of the cost of compliance to render the remainder “non-significant.” See Linder, 251 F.3d at 182; Legal Voice, 738 F.3d at 1184.
What constitutes a “significant” cost is at the discretion of the district court. Sound Sec., Inc. v. Sonitrol Corp., No. 3:08-cv-05359-RBL, 2009 WL 1835653, at *1 (W.D. Wash. June 26, 2009). That said, the Ninth Circuit had “no trouble concluding that $20,000 is ‘significant.’” Legal Voice, 738 F.3d at 1185 (citing Linder, 251 F.3d at 182 (noting that $9,000 may be sufficiently significant to justify cost-shifting)). Case law prior to the 1991 amendment to Rule 45 provided certain equitable factors for courts to consider when deciding how much of the expense to shift, namely: “(1) whether the non-party has an interest in the outcome of the case; (2) whether the non-party can more readily bear its costs than the requesting party; and (3) whether the litigation is of public importance.” In Re Exxon Valdez, 142 F.R.D. 380, 383 (D.D.C. 1992) (internal citations omitted); see Linder, 251 F.3d at 182. The Ninth Circuit also suggested that other factors to be considered when apportioning discovery costs include: “(1) the scope of the discovery; (2) the invasiveness of the request; (3) the extent to which the producing party must separate responsive information from privileged or irrelevant material; and (4) the reasonableness of the costs of production.”United States v. Columbia Broadcasting System, Inc., 666 F.2d 364, 371 n.9 (9th Cir. 1982); see alsoCallwave Commc'n, LLC v. Wavemarket, Inc., C 14-80112 JSW (LB), 2014 WL 2918218, at *3 (N.D. Cal. June 26, 2014). Furthermore, the Ninth circuit and other courts have held that the cost of compliance with a subpoena by a non-party extends "well beyond" the costs of photocopying and shipping associated with production, and "legal work done to facilitate compliance may also be considered a cost of compliance reimbursable under Rule 45(d)(2)(B).” Pacific Gas and Electric Co. ("PG&E") v. Lynch, 2002 WL 32812098, *3 (N.D. Cal. 2002); Crandall v. City & Cnty. Of Denver, Colorado, No. 05-C-00242-MSK-MEH, 2007 WL 162743, at *1.
Due to the discretionary nature of the rule, despite Legal Voice's clear instruction, even if the cost of producing documents is significant, it does not mean that the requesting party must necessarily bear theentire cost of compliance when the court considers the equitable factors in apportioning the costs. For an example of this, more recently the Northern District of California shifted half the costs of compliance with a subpoena to the requesting party in a motion to compel. See e.g. Callwave Commc'n v. Wavemarket, Inc., Docket No. 35, C 14-80112 JSW (LB), (N.D. Cal. August 28, 2014). Relying on the decision in Legal Voiceand weighing the equitable factors, the Court shifted half the costs associated with compliance with Plaintiff Callwave's subpoena to non-party, Wavemarket, on motion to compel documents. Additionally, the Court granted Wavemarket the reasonable costs and attorney's fees associated with the supervision of source code review. Id.
These recent developments should encourage more non-parties to pursue cost-shifting when faced with a subpoena compelling production of information, documents, and other tangible things. Legal Voice is an important ruling for non-parties who are faced with the prospect of spending significant time and money complying with a subpoena in another party's lawsuit. Further, as the Northern District of California's recent ruling in Callwave Commc'n shows, attorney's fees may also be appropriately granted as a reasonable cost of compliance. These Court's decisions are equally significant to the requesting party, discouraging Rule 45 subpoenas from containing overly broad and unduly burdensome requests in order to avoid the risk of having to bear the associated costs.
Practical guidelines to follow to shift costs under the Rule 45 regime:
- As a non-party faced with overly broad and burdensome discovery requests from a party to a litigation in which you are not involved, make sure to properly object and refuse to comply in order to trigger Rule 45(d)(2)(B)(ii).
- Estimate the costs of compliance to the requesting party's subpoena as specifically as possible, including the details of the time and all associated expenses.
- If the cost estimate is "significant," put the requesting party on notice from the outset.
- Attempt to obtain an agreement with the requesting party for reimbursement of such costs.
- Absent an agreement, seek protection from the court.
- Keep a detailed record of the expenses involved in compliance with the subpoena.
- Non-parties can expect some reimbursement for costs and reasonable attorneys fees when responding to a Rule 45 subpoena. However, do not expect that the requesting party will cover the entire cost of compliance. Legal Voice states that the district court need only to shift enough of the cost to render the remainder of the cost of compliance "non-significant." The Court will weigh the equitable factors to determine the exact amount to apportion between the requesting party and subpoenaed non-party.