You Got a Subpoena for Business Records – Now What?
Although the discovery process is an essential and helpful aspect of litigation, some discovery tools have the potential to be harmful or oppressive—especially when it seeks to involve non-parties. Often times, these burdensome procedures are imposed on business that have only tangential ties to litigation, costing the business both time and money.
This article discusses how to utilize California’s right to business privacy protection when discovery is sought from non-parties. Not only is the non-party permitted to object to becoming involved in the litigation, but a party to the case has options to limit this form of discovery if the party can show that it is outside the permissible scope of discovery or is unduly burdensome or harassing.
Deposition Subpoenas to Non-Parties – What to Expect & Recovery of Costs
When discovery is used to seek information from a non-party in a California lawsuit, California courts utilize deposition subpoenas to bring the non-party within the purview of the court. Cal. Code Civ. Proc. §§2020.010(a)(1), 2025.280(b); Terry v. SLICO (2009) 175 Cal.App.4th 352, 357. The deposition subpoena for “business records” is the tool used to seek the production of documents from a non-party; such records are broadly interpreted to include documents such as journals, account books, reports, and correspondence, as well as electronically stored information about the business entity. Urban Pac. Equities Corp. v. Sup. Court (1997) 59 Cal.App.4th 688, 692-93; Cal. Code Civ. Proc. § 2020.410(a).
Although such subpoenas may request a number of documents, California businesses may charge the party issuing the subpoena for all reasonable costs associated with producing records in a California civil case. These costs include postage, clerical charges and reproduction of documents. Cal. Evid. Code § 1563(b). Payment of costs can be received when the subpoenaed records are delivered, and businesses have no obligation to deliver the records until the payment is made. The only obligation is that you must produce an itemized statement. And, if a party to the litigation merely inspects or makes copies of documents at your place of business, recoverable fees cannot exceed $15.
If subpoenas are requested from a Federal case, similar protections are in place. Federal rules require that subpoenas for business records not be “unreasonable or oppressive”. Federal Rules of Civil Procedure, Rule 45. If they are, the issuing party can be mandated to produce reasonable payment beforehand. Shepherd v. Castle, 20 F.R.D. 184 (D.C. Mo. 1957).
But sometimes a reimbursement of costs is not enough. The hassle of having to produce the documents at all is often a burden enough on a business. Thus, businesses served with business records subpoenas may wish to challenge their duty to respond to the subpoena altogether.
Challenging Non-Party Deposition Subpoenas:
There are at least three ways to challenge a discovery request for business records: asserting a business entity’s right to privacy, moving to quash or limit the motion, or seeking a protective order from the court.
1. Business Entity’s Right to Privacy
Although the California Constitution recognizes an individual’s right to privacy, this right is limited to natural persons and does not extend to corporations. Roberts v. Gulf Oil Corp. (1983) 147 Ca.App.3d 770, 791. To a certain extent, however, business entities also enjoy some privacy protections: “(T)he nature and purposes of the corporate entity and the nature of the interest sought to be protected will determine the question whether under given facts the corporation per se has a protectable privacy interest. Two critical factors are the strength of the nexus between the artificial entity and human beings and the context in which the controversy arises.” Roberts v. Gulf Oil Corp. (1983) 147 Cal.App.3d 770, 796-97 (emphasis added).
Thus, one way to challenge a discovery request is to assert a business entity’s right to privacy.
When courts determine a business entity’s right of privacy, they must first determine whether it is outweighed by the relevance of the information sought to the subject matter of the litigation. If a business entity can establish that the connection is too indirect, a strong case can be made that privacy outweighs the request.
If timely objections are made by the non-party, the party seeking discovery is then required to show a “compelling need” for the nonparty information, often through a motion to compel. A “compelling need” is demonstrated where the information is directly relevant and essential to the fair resolution of the lawsuit. Britt v. Superior Court (1978) 20 Cal.3d 844, 859.
2. Motion to Quash or Limit Subpoena
Additionally, the witness subpoenaed, any party, or any consumer whose personal records have been subpoenaed may also move to quash or limit a deposition subpoena for production of business records before the deposition is to take place. Cal. Code Civ. Proc. §§ 1985.3(g), 1985.6(f), and 1987.1.
A deposition subpoena may be attacked for defects in the form or content as well as if the information sought is “not within the permissible scope of discovery—i.e., privileged, privacy, or attorney work product,” or relevance. Robert I. Weil et al., Cal. Prac. Guide Civ. Pro. Before Trial § 8:598 (2013). For example, the motion can be based on the premise that the subpoena is unduly burdensome because it seeks information regarding topics that are unrelated or beyond the scope of the litigation. Mattel, Inc. v. Walking Mountain Prods. (9th Cir. 2003) 353 F.3d 792, 813-14.
3. Protective Order
Alternatively, any party or witness may seek a protective order against the subpoena or deposition proceeding. Id. at § 8:605. The court may make whatever orders are appropriate to protect any party, witness or consumer from “un-reasonable or oppressive demands, including unreasonable violations of the right of privacy of the person.” Cal. Code Civ. Proc. §§ 1985.3(g), 1985.6(f)(4). “The court exercises wide discretion, and may grant a motion if it concludes that a protective order is necessary to limit attempted discovery which, while it may come within the rules established by other code sections, offends the sense of justice and reason.” Weisman v. Bower (1987) 193 Cal.App.3d 1231, 1238.
So in the event that your business is served with a business records subpoena, keep in mind that you can recover costs and that compliance is not the only option. Whether it’s an attack on the requesting party’s “compelling need,” a motion to quash, or a protective order, there are numerous methods for defending your company’s interests.