As businesses continue to invest in technology, the amount and variety of information they maintain in electronic form grows in exponential quantities. As such, many companies now find themselves recipients of third-party subpoenas seeking electronically stored information (ESI) in addition to traditional paper discovery. The costs of responding to such requests can be substantial. Nonetheless, the Federal Rules of Civil Procedure (as well as most state procedural rules) permit the discovery of ESI from nonparties to litigation. Accordingly, in-house counsel should take a proactive approach when responding to a subpoena and be mindful of their rights to seek relief from overbroad requests and/or to shift some or all of those costs to the party seeking such information.
Assuming the third party is unable to reach an agreement to limit the subpoena to a reasonable scope and time frame, the party may seek relief pursuant to Federal Rule of Civil Procedure 45, which provides that a “person responding to a subpoena need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost.” For example, if a subpoena seeks ESI dating back multiple years and the older data is available only on backup tapes, such historical data is arguably not readily available in light of the additional costs to restore the data. The courts are generally mindful of the high costs associated with the collection and production of ESI and are reluctant to impose such costs on third parties. However, a court may still order discovery from such sources if the requesting party shows good cause. In this regard, a party can show good cause by demonstrating that the data is critical to the litigation and that the party has no alternative to obtain such records.
For example, in the 2007 case Guy Chemical Company, Inc. v. Romaco AG, the defendant sought electronic business records from the plaintiff’s customer, a third party to the litigation. The third party had access to such records, but the request required the third party to search for and locate the records through an outside computer firm at a cost of approximately $7,000. The court held such cost to be indicative “that the information is not reasonably accessible absent undue burden." The court further noted that the "non-party status is a significant factor to be considered in determining whether the burden imposed by a subpoena is undue.” Thus, the court concluded that “it is not [the third party’s] lawsuit and they should not have to pay for the costs associated with someone else's dispute.” The court then ordered the third party to produce the requested records to the defendant, but on the condition that the defendant bears the associated costs.
Obviously, questions of reasonableness and balancing the burden of third-party compliance with the benefit of the material sought ultimately depend upon the particular circumstances of each case. However, knowing and exercising the rights provided by the rules of civil procedure can help you limit the burdens associated with responding to third-party discovery. Indeed, sometimes the mere threat of cost shifting alone motivates the party seeking third-party discovery to take a more reasonable view as to what information they really need.
Thus, the takeaway here is that when receiving a subpoena for records including ESI, in-house counsel should first engage the party seeking such records to limit the requests to a reasonable time and scope to avoid undue burden. However, if this is not possible, in-house counsel should be mindful of the rights and procedures pursuant to the Federal Rules of Civil Procedure (and any corollary rules under applicable state procedural rules) to avoid any undue burden associated with ESI and/or to shift the cost of such discovery as appropriate to the party seeking such information.