This is part two of a three-part series. Part one provided you with a greater understanding of the subpoena process and best practices. The focus of this article is to discuss the particular cost risks that a company faces in responding to a subpoena and how those risks can influence your company’s response.
The risks that a company faces upon being served with a subpoena fall into five categories:
1. Response costs
Response costs represent the company’s time, money and other resources used for complying with the subpoena. They include three items:
- Research and appearance costs,
- Attorneys’ fees
- Reproduction costs
Although most jurisdictions require payment of witness fees, those fees are relatively low (often between $5 and $40 per day). Most jurisdictions do not allow a witness to be compensated for time spent searching his or her records and preparing to testify. Similarly, the cost of seeking an attorney’s advice is an unreimbursed cost that, absent sanctionable conduct, is borne by the witness. Not all courts allow witnesses to be reimbursed for the costs of producing their records and, instead, have ordered reimbursement only when the production costs are great or the document demand is unreasonably broad. As such, a company subpoenaed to testify or produce documents will incur some unreimbursed cost in complying with a subpoena.
Response costs will dictate in large respect how one responds to a subpoena. Obviously, if there is relatively little cost to be incurred in responding, a company may not object to the subpoena or seek to have it modified or quashed. However, if the response costs are great, then it is likely that the company will make some type of objection or motion. Consequently, response costs are an important risk that must be assessed and quantified.
2. Relationship costs
Responding to a subpoena gives rise to a number of other risks that may not be as quantifiable as response costs. One of those risks might be the damage that a company may suffer to its relationship with either of the parties to the lawsuit or the person or entity that is the subject of the subpoena.
For example, in a lawsuit between a salesman and her employer over unpaid sales commissions, a subpoena may be directed to your company in order to learn information about the sales that have taken place. Your company has a relationship with both litigants and does not want either relationship destroyed. However, its decision to comply or not comply may affect both relationships, thereby resulting in a cost to your company.
Not many courts have addressed the issue of the relationship cost on a non-party witness. Those that have confronted the issue have found that a relationship cost, by itself, is an insufficient basis not to comply with a subpoena. However, there have been times when the relationship cost, together with other factors, has justified either a modification or quashing of a subpoena. Thus, although it may not be easily quantified, the relationship cost is a risk that a company must consider and evaluate.
3. Costs of becoming a party
Another risk that a company must consider is the cost of becoming a party to either the lawsuit in which the subpoena has been issued or a future lawsuit. The fact that this cost exists may not justify a modification or quashing of a subpoena. However, if a subpoena is nothing more than a "thinly-veiled fishing expedition," then this cost, combined with other factors, may authorize such relief. Consequently, the cost of becoming involved in the underlying lawsuit is a risk that may have a significant influence on what response you have to a subpoena.
4. Costs of other lawsuits
Generally, the fact that a non-party may become subject to other lawsuits is not a sufficient basis for failing to comply with a properly served subpoena. However, if the risk of being sued is based on a written confidentiality/non-disclosure agreement, then this risk may be a basis to quash or object. It is important as a non-party to understand what risk exists by the disclosure of the requested information or testimony and to take the necessary steps to ensure that notice of the subpoena is given to every party affected by such disclosure, so as to minimize the risk of becoming involved in further lawsuits.
5. Harm from public disclosure
The final risk to address is the harm which may exist from public disclosure of the requested testimony or documents. Generally speaking, the fact that the requested testimony or documents may be embarrassing or place your company in a negative light will not serve as a sufficient basis to refuse to comply. However, there have been instances in the past where courts have quashed or modified subpoenas when compliance would have resulted in the public disclosure of trade secrets or otherwise confidential information. As such, when faced with a subpoena, a company needs to understand and evaluate how public disclosure of the requested testimony or information will affect its business or operations.
Understanding the risks that a company faces when served with a subpoena is an important step in formulating how the company should respond. Without such understanding, you and your company may incur unnecessary costs and other serious consequences, which will be discussed in part three.