Challenging Third-Party Deposition Subpoenas for Business Records – Disruption of Business
Kristen M. Johnson, Esq.
Schwartz Semerdjian Ballard & Cauley LLP
The discovery process is an essential and helpful aspect of litigation. It is where the issues are clarified and the case is shaped. However, some discovery tools have the potential to be harmful or oppressive to your client—especially when it seeks to involve nonparties. For example, deposition subpoenas for personal appearance and production of business records when served on non-parties has the potential to bring non-parties into a case whether they wish to be involved or not. It is an added expense and sometimes time consuming process that can be burdensome. If the non-party served with the deposition subpoena is a customer or client of your client, then having opposing counsel bring the non-party into the fold has the potential to disrupt your client’s business dealings. Thus, it is important for courts to balance the interest of discovering information from non-parties against the interest of protecting a party’s interest when limiting non-party involvement in litigation.
This article discusses the intersection of 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
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. The subpoena is used to compel the non-party’s attendance, testimony, or production of documents. 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 specific discovery tool utilized when a party in a case is seeking only the production of documents from a non-party. CAL. CODE CIV. PROC. § 2020.020(b). Business records is broadly interpreted to include documents such as journals, account books, reports, correspondence and the like 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).
As with any other discovery methods, discovery is cut off 30 days before the initial trial date. This means that all discovery proceedings must be completed on or before that date, including deposition subpoenas for business records. Pursuant to section 2023.010 and 2024.020 of the California Code of Civil Procedure, discovery is considered completed on the day a response is due or on the day deposition begins. Also, the postponement or continuance of trial does not re-open discovery or the opportunity to serve a deposition subpoena for business records. Thus, requests from non-parties in an action coincide with the timing for traditional discovery requests.
Business Entity’s Right to Privacy
Article I, Section 1 of the California Constitution recognizes an individual’s right to privacy. City of Santa Barbara v. Adamson (1980) 27 Cal.3d 123, 130. The right contained in the California Constitution 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, 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. Thus, when courts determine a business entity’s right of privacy, they must determine whether it is outweighed by the relevance of the information sought to the subject matter of the litigation. “(D)oubts as to relevance should generally be resolved in favor or permitting discovery.” Hecht , Solberg, Robinson, Goldberg & Bagley v. Sup. Ct. (Panther) (2006) 137 Cal.App.4th 579, 595.
The right to privacy may pertain to one of the parties to the action or a third person non-party. Robert I. Weil et al., Cal. Prac. Guide Civ. Pro. Before Trial § 8:296 (2013). Information involving a non-party may be within the recognized zone of privacy protected from discovery in an action between other parties. Coito v. Sup. Ct. (State of Calif.) (2012) 54 Cal.4th 480, 502.
California’s right to privacy is not absolute and disclosure of private information may be ordered if a “compelling public interest” would be served. Britt, supra at 855. Courts recognize “the historically important state interest of facilitating the ascertainment of truth in connection with legal proceedings,” and carefully balance this interest against an individual’s right to privacy to determine if disclosure is appropriate. El Dorado Savings & Loan Assn v. Superior Court (1987) 190 Cal.App.3d 342, 345-46 citing Moskowitz v. Superior Court (1982) 137 Cal.App.3d 313, 316. See also Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355, 377 (recognizing a strong public policy in favor of discovery). “Where it is possible to do so, . . . the courts should impose partial limitations rather than outright denial of discovery.” Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 658.
Challenging Non-Party Deposition Subpoenas
Discovery can easily become complicated when non-parties are brought into the litigation process under a deposition subpoena for business records. The witness subpoenaed, any party, or any consumer whose personal records have been subpoenaed may 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 (holding subpoenas properly quashed where their overbreadth led the court to conclude that the subpoenas were “served for the purpose of annoying and harassment and not really for the purpose of getting information”).
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.
The non-party may also object to responding to discovery. 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.
In light of the often private nature of business interactions, if a party in an action is concerned that its opponent may seek to involve non-parties in the discovery process which has the potential to harass or cause harm to the party, the party has avenues to ensure that its interests are protected. The party seeking to limit discovery should consider a motion for protective order or a motion to quash subpoenas to third parties and may base said motions on grounds such as privacy, relevance, unduly burdensome or harassing. While some of these grounds may not carry as much weight when employed to protect a party from disclosing information during discovery, involvement of a non-party to acquire the information certainly strengthens opposing the discovery.