United States: Spoliation & Third Party Subpoenas

Last Updated: January 14 2020
Article by James Beck

Someone asked us the other day whether spoliation sanctions could lie against a non-party for alleged loss/destruction of electronically stored information sought through a third-party subpoena. On the one hand, assuming there is personal jurisdiction, the substantive discovery rules do not vary between parties and non-litigants subjected to valid subpoenas. On the other hand, other than monetary sanctions, Rule 37(e), regarding discovery sanctions for spoliation appears directed solely against parties.

So we thought we'd take a look.

Initially, we should be clear that we are discussing whether a third-party subpoena creates a duty to preserve – not whether such a duty exists in the absence of any legal process. In the latter situation there is pretty clearly no duty. Shamrock-Shamrock, Inc. v. Remark – a recent case involving Florida state discovery rules – demanded a subpoena as a prerequisite to any third-party preservation duties:

[L]itigants may employ various legal mechanisms to impose upon a third party a duty to preserve necessary evidence. For example, a third party may be required to produce particular evidence it possesses in response to a subpoena. . . .

In this case, there was no statute, contract, or discovery request that would impose a clearly defined duty on [a third party] to preserve any potentially relevant evidence. Thus, a duty would arise only through [the party's] purported knowledge of [the] pending litigation. . . . As such, [plaintiff] would like us to announce that [the third party] owed a duty to it based on the foreseeability of litigation. Considering the traditional approach to defining legal duty, we decline to do so. Indeed, such a broad pronouncement would be tantamount to declaring a general legal duty on any nonparty witness to anticipate the needs of others' lawsuits. There are innumerable circumstances in which a nonparty to litigation may have evidence relevant to a case and may know of its relevance. But that knowledge, by itself, should not give rise to a duty to safeguard the evidence in anticipation of litigation.

271 So. 3d 1200, 1205–06 (Fla. App. 2019) (rejecting independent action for spoliation for lack of duty) (citation omitted). Accord In re Delta/AirTran Baggage Fee Antitrust Litigation, 770 F. Supp.2d 1299, 1307-08 (N.D. Ga. 2011) (rejecting "sweeping and novel theory of spoliation" that a subpoena served in different litigation could create a preservation duty to plaintiffs in other litigation). But see Woods v. Scissons, 2019 WL 3816727, at *4 (D. Ariz. Aug. 14, 2019) (third party's spoliation "imputed" to party absent any subpoena at all where spoliator was "not a disinterested non-party").

Nor are we addressing third-party subpoenas directed against the federal government (such as the FDA). These are governed by departmental regulations issued pursuant to United States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951). We addressed that issue, here.

The first place we tried, the Sedona Principles, downloadable here, turned out to be a dud. The "meat" in the principles is in what are called "comments." Comment 5(a) has a section on "Preservation by non-party in response to Rule 45 subpoena," which states:

Case law concerning the preservation obligations of a subpoenaed non-party in litigation is not well defined. Some courts have noted that the issuance of a subpoena creates a duty to preserve. However, since Rule 45 imposes duties on the requesting party and the court to shield a non-party from undue burden and expense, there may be some question whether an overbroad subpoena creates a duty to preserve.

Sedona Principles, Public Comment Version, at 44 (3d ed. 2017) (footnotes omitted). The Principles simply suggest that a "good practice for the requesting party" is to "to engage the non-party in good faith discussions about the scope of the subpoena, sources of potentially responsive ESI, and the costs of preserving and producing relevant ESI." Id.

The footnotes cited one case, In re Napster, Inc. Copyright Litigation, 462 F. Supp.2d 1060 (N.D. Cal. 2006), but in that case the third-party subpoena target had, by the time sanctions were sought, been joined as a party. Id. at 1065. Further, the third–party target "acknowledged a duty to preserve documents . . . based on plaintiffs' subpoena." Id. at 1068. Thus the issue we're interested in was effectively conceded in Napster.

The question seems to arise most frequently in connection with securities litigation subject to the stay provisions of the Private Securities Litigation Reform Act, which imposes preservation obligations only on "parties" during the duration of the stay. 15 U.S.C. §78u-4(b) (3)(C)(i). Several courts have decided to improve upon the statute by permitting "preservation subpoenas" directed at third parties in order "to impose an affirmative duty on those parties to preserve the evidence." New York State Teachers' Retirement Systems v. General Motors Co., 2015 WL 1565462, at *5 (E.D. Mich. April 8, 2015). "[P]reservation subpoenas . . . impose[] a legal obligation on third parties to take reasonable steps to preserve relevant documents." In re Heckmann Corp. Securities Litigation, 2011 WL 10636718, at *5 (D. Del. Feb. 28, 2011). In In re Tyco International, Ltd., Securities Litigation, 2000 WL 33654141 (D.N.H. July 27, 2000), such subpoenas would "give specified third parties notice of the action and impose upon them only a duty to preserve certain relevant evidence," id. at *5, but had to be particularized, and could not "call for the preservation of an open-ended, boundless universe of materials." Id. at *4 (citation and quotation marks omitted). Tyco relied on a similar order entered in In re Grand Casinos, Inc. Securities Litigation, 988 F. Supp. 1270 (D. Minn. 1997), holding that third-party subpoenas "would further Congress' intent by subjecting relevant evidence to a 'stay put' directive . . . in [the hands] of third-parties," which in turn strongly implied that a subpoena imposed a preservation duty on the third party receiving it.. Id. at 1272. See Avenue Capital Management II, LP v. Schaden, 2015 WL 758521, at *3 (D. Colo. Feb. 20, 2015) ("preservation subpoenas . . . put those parties on notice of their duty to preserve certain documents"); In re Refco, Inc., 2006 WL 2337212, at *4 (S.D.N.Y. Aug. 8, 2006) ("courts have generally permitted plaintiffs in PSLRA actions to issue subpoenas [to] specified third parties [that] . . . impose upon them . . . a duty to preserve certain relevant evidence in their possession"). None of these cases have involved any claim that a third-party's preservation obligation extended to actions taken before any subpoena was received – indeed, the rationale is the opposite, these subpoenas are justified precisely to create the sought after duty. See Neibert v. Monarch Dental Corp., 1999 WL 33290643, at *1 (N.D. Tex. Oct. 20, 1999) ("The only obligation imposed on the identified non-parties by the proposed subpoenas . . . is that they not destroy any records presently in their possession or which come into their possession at a later date").

Similar results have occurred in a number of non PSLRA cases. In City of Lindsay v. Sociedad Quimica y Minera de Chile S.A., 2012 WL 2798966, at *5 (E.D. Cal. July 9, 2012), the court assumed that it could hold in contempt "any third party that fails to comply with the issued subpoenas," which assumes that such subpoenas necessarily impose a duty to preserve on a third-party recipient. Id. at *5. See In re Broiler Chicken Grower Litigation, 2017 WL 3841912, at *4 (E.D. Okla. Sept. 1, 2017) ("subpoenas to third parties [will] ensure that they too retain evidence"); Garcia v. Target Corp., 276 F. Supp. 3d 921, 925 (D. Minn. 2016) ("third-party subpoenas" mean that "third parties will be on notice of any obligation to preserve evidence"); Bright Solutions for Dyslexia, Inc. v. Doe 1, 12015 WL 5159125, at *3 (N.D. Cal. Sept. 2, 2015) ("the entities that have the information . . . are not parties and thus have no duty to preserve absent a court order"); Johnson v. U.S. Bank National Ass'n, 2009 WL 4682668, at *2 (S.D. Ohio Dec. 3, 2009) (third party subpoena obliges recipient "to describe responsive documents and protect them for subsequent production"); In re Rosenthal, 2008 WL 983702, at *8 (S.D. Tex. March 28, 2008) (third-party who "disregards a subpoena . . . may be found in contempt"). Again, these cases all seem (in some, the discussion is quite brief) to focus on post-subpoena evidence. See Swetic Chiropractic & Rehabilitation Center, Inc. v. Foot Levelers, Inc., 2016 WL 1657922, at *3 (S.D. Ohio April 27, 2016) (a "non-party . . . does not have a duty to preserve information absent a court order"); Koncelik v. Savient Pharmaceuticals, Inc., 2009 WL 2448029, at *2 (S.D.N.Y. Aug. 10, 2009) (it "is certain is that without preservation subpoenas, the third party corporations in possession of potentially relevant information are free to destroy that information").

Some cases do suggest that no independent preservation duty arises even from receipt of a third-party subpoena. Gambino v. Payne, 2015 WL 1823754 (W.D.N.Y. April 22, 2015), stated flatly that "the only duty under a subpoena to preserve materials is when the served party claims a privilege or protection from the subpoena and has to preserve the materials until the privilege or protection issue is settled. Id. at *5. In Comeens v. Harden Manufacturing Corp., 2014 WL 12650101 (N.D. Ala. April 3, 2014), the plaintiffs "fail[ed] to explain how issuing third-party subpoenas" would be any more effective at preserving documents "than the anti-spoliation letters [they had] already issued. Id. at *2. Goodman v. Praxair Services, Inc., 632 F. Supp. 2d 494 (D. Md. 2009), conducted an elaborate "control" analysis concerning allegedly spoliated documents held by a third party, id. at 515-16, that would have been entirely unnecessary if the third-party itself had a preservation obligation. Id. at 516 ("conclud[ing] that [defendant] did not have the sufficient legal authority or practical ability to ensure the preservation of documents prepared by" the third party). In Novak v. Kasaks, 1996 WL 467534, at *2 (S.D.N.Y. Aug. 16, 1996), the court separately ordered "that all non-parties upon whom subpoenas have been served in this action are to preserve all documents and other materials responsive to such subpoenas."

Courts also tend to be more sensitive to burdens imposed on nonparties by overly broad third-party subpoenas. Rule 45 itself requires requesting parties to "take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena." Fed. R. Civ. P. 45(d)(1). "[I]t has been consistently held that 'non-party status' is a significant factor to be considered in determining whether the burden imposed by a subpoena is undue." United States v. Amerigroup Illinois, Inc., 2005 WL 3111972, at *4 (N.D. Ill. Oct. 21, 2005) (citations omitted). Thus, "[n]on-parties have a different set of [discovery] expectations" and "concern for the unwanted burden thrust upon non-parties is a factor entitled to special weight in evaluating the balance of competing needs." Cusumano v. Microsoft Corp., 162 F.3d 708, 717 (1st Cir. 1998) (citations omitted). "[T]he undue burden calculus is more protective of non-parties than it is for parties." Charles v. Quality Carriers, Inc., 2010 WL 396356, at *1 (S.D. Ind. Jan. 28, 2010).

[T]he considerations of proportionality, efficiency, and judicial economy that govern the [subpoena] requests are case-specific. . . . Plaintiffs have not identified any non-PSLRA case where a court lifted a stay while a motion to dismiss was pending to permit the serving of document preservation subpoenas on hundreds let alone thousands of third-parties covering a 10-year time period and thousands of products.

In re Broiler Chicken Antitrust Litigation, 2017 WL 1682572, at *5 (N.D. Ill. Apr. 21, 2017). "[N]on-parties have greater protections from discovery and that burdens on non-parties will impact the proportionality analysis." Hume v. Consolidated Grain & Barge, Inc., 2016 WL 7385699, at *3 (E.D. La. Dec. 21, 2016) (quoting E. Laporte & J. Redgrave, "A Practical Guide to Achieving Proportionality Under New Federal Rule of Civil Procedure 26," 9 Fed. Cts. L. Rev. 19, 57 (2015)). "[T]he Court should be particularly sensitive to weighing the probative value of the information sought against the burden of production on the non party." Fears v. Wilhelmina Model Agency, Inc., 2004 WL 719185, at *1 (S.D.N.Y. Apr. 1, 2004).

[I]t is not [the subpoenaed persons'] lawsuit and they should not have to pay for the costs associated with someone else's dispute. Not only is it fundamentally unfair for non-parties to bear the significant litigation costs of others, but also if this Court were to allow litigating parties . . . to impose such a burden on non-parties, then the likelihood of cooperation by non-parties in the future would be placed in jeopardy.

Guy Chemical Co. v. Romaco AG, 243 F.R.D. 310, 313 (N.D. Ind. 2007).

We’ve discussed the law essentially straight up in this post. In any given case we could find ourselves on either side of the issue.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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