The Standard For, and New Guidelines to Govern, Securing Non-Party Discovery

By: Leo K. Barnes Jr.*

*Mr. Barnes, a member of Barnes & Barnes, P.C. in Melville,
practices commercial litigation and can be reached at lkb@barnespc.com

 

A recent decision from the Court of Appeals clarifying the standard to obtain non-party discovery, coupled with proposed new guidelines for obtaining electronically stored information (“ESI”) from non-parties in Commercial Division cases, provide the Commercial Division practitioner with an easier avenue to obtain non-party disclosure for matters pending within the Second Department, and offer concrete guidelines for securing ESI from non-parties.

 

Non-Party Discovery Does Not Require Counsel to Establish

That the Material Cannot Be Secured from Other Sources

In early April 2014, the Court of Appeals issued an opinion clarifying the standard for obtaining discovery from non-parties.   According to the decision in Kapon v. Koch, 2014 WL 1315590 (2014), Petitioner, the chief executive officer of wine retailer and auctioneer, commenced a special proceeding to quash deposition subpoenas served on them by a wine collector against a seller who allegedly sold the collector 149 bottles of counterfeit wine through the Petitioners’ auctions and private sales.  The Petitioners asserted that the subpoenas were defective, arguing that CPLR 3101(a) contained distinctions between the standard warranting disclosure from parties and nonparties.

 

After highlighting the legislative history concerning non-party discovery and tracing the interpreting common law, the Court of Appeals noted that a distinction existed in the manner that Courts interpreted non-party discovery standards.  For example, the First and Fourth Departments of the Appellate Division “adopted a ‘material and necessary’ standard, i.e., that the requested discovery is relevant to the prosecution or defense of an action.”  In contrast, and imposing a heightened burden upon one seeking non-party discovery in the Second and Third Departments, those Departments required the proponent “to meet the ‘material and necessary’ standard and more. Specifically, in those Departments, a motion to quash a subpoena will be granted if “the party issuing the subpoena has failed to show that the disclosure sought cannot be obtained from sources other than the nonparty, and properly denied when the party has shown that the evidence cannot be obtained from other sources.”

 

The Court of Appeals adopted the First and Third Department’s jurisprudence on this issue, rejecting the Second and Third Department’s interpretation that non-party discovery required a demonstration that the material sought cannot be obtained from other sources:

 

We conclude that the “material and necessary” standard adopted by the First and Fourth Departments is the appropriate one and is in keeping with this State’s policy of liberal discovery. The words “material and necessary” as used in section 3101 must “be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity” (Allen v. Crowell–Collier Publishing Co., 21 N.Y.2d 403, 406 [1968] ). Section 3101(a)(4) imposes no requirement that the subpoenaing party demonstrate that it cannot obtain the requested disclosure from any other source. Thus, so long as the disclosure sought is relevant to the prosecution or defense of an action, it must be provided by the nonparty [underlining added].

 
New Guidelines for Securing ESI
From Non-Parties in Commercial Decision Cases

 

In that same vein, a few days after the Court of Appeals issued the Kapon opinion, the Commercial Division Advisory Council proposed a new Commercial Division Rule 34, providing draft guidelines to govern efforts to obtain ESI from non-parties. Of course, CPLR 3111 and CPLR 3122(d) each provide that a non-party’s reasonable production expenses shall be defrayed by the party seeking discovery. However, there is limited interpretation of the same.   These proposed guidelines resolve the issue and provide, inter alia, as follows:

  • A nonparty receiving a request for the discovery of ESI is encouraged to promptly issue a preservation notice/litigation hold concerning the requested ESI. Until the scope of the request has been determined by agreement or court order, the preservation notice/litigation hold should reasonably cover the requested ESI.
  • A party seeking ESI discovery from a nonparty should reasonably limit its discovery requests, taking into consideration the following proportionality factors: (1) the nature of the litigation; (2) the amount in controversy; (3) the expected importance of the requested ESI; (4) the availability of the ESI from another source, including a party; (4) the relative accessibility of the ESI; and (5) the expected burden and cost to the nonparty.
  • The requesting party and the nonparty should seek to resolve disputes through informal mechanisms and should initiate formal motion practice only as a last resort. The requesting party and the nonparty should meet and confer concerning the scope of the ESI discovery, the timing and form of production, ways to reduce the cost and burden of the ESI discovery (such as the use of advanced analytic software applications and other technologies that can screen for relevant and privileged ESI), and the requesting party’s defrayal of the non-party’s reasonable production expenses.

Most significantly, the final proposed guideline will serve to eliminate uncertainty concerning the scope of costs that the proponent will bear in order to obtain the non-party ESI.  Indeed, the scope of costs will provide the proponent with cause to pause in order to carefully evaluate the true value of the requested ESI in light of the fact that the proponent “shall defray” the non-party’s reasonable production expenses, which may include the following: (1) fees charged by outside counsel and e-discovery consultants; (2) the costs incurred in connection with the identification, preservation, collection, processing, hosting, use of advanced analytical software applications and other technologies, review for relevance and privilege, preparation of a privilege log (to the extent one is requested), and production; (3) the cost of disruption to the nonparty’s normal business operations to the extent such cost is quantifiable; and (4) other costs as may be identified by the nonparty.

These two developments concerning the standard for, and guidelines governing, efforts at obtaining non-party discovery provide the Commercial Division practitioner with a consistent statewide standard and corresponding certainty concerning the cost for obtaining ESI from a non-party.

 

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