Discovery Demands From Nonparties

New York Law Journal

Before launching into the title topic of this column, we briefly call the reader’s attention to Adams v. Genie Industries Inc.,¹ a May 11 products liability decision by the Court of Appeals, which rejects the notion, advocated by some, that there is a post-sale duty upon manufacturers and sellers to recall or retrofit a product that a claimant alleges to be defective.

The Court tersely addressed the issue: “We have never imposed a post-sale duty to recall or retrofit a product and the facts of this case provide no justification for creating one.” Indeed, the trial court was deemed to have erred in submitting this theory to the jury but, since it had no impact on the outcome of the case, the error was deemed harmless. Thus, when a seller discovers risks after the sale that were not known beforehand, the seller’s duty is to warn, not to recall or retrofit.

Now, on to the question of discovery

In Kooper v. Kooper,²  the Appellate Division, Second Department, on May 11, clarified the principles applicable to discovery demands directed to nonparties. In doing so, the Second Department aligned itself with decisions of the First Department that had earlier dispensed with the need for the party seeking discovery from the nonparty to show that “special circumstances” justify the discovery demands.

Considering the “special circumstances” standard as a kind of vestigial remnant from a provision of the New York Civil Practice Law and Rules (CPLR) that was eliminated by a 1984 amendment, the Second Department now holds: “we disapprove further application of the ‘special circumstances’ standard in our cases” except in a limited area dealing with expert witnesses (where the “special circumstances” language was retained by the Legislature). While the First and Second departments now apparently see eye to eye on this aspect of the threshold showing required when nonparty discovery is sought, the position of the Appellate Division, Third Department, will need to be addressed in the near future since, as Kooper observes, the Third Department continues to use the “special circumstances” rubric.³

What is at stake here is how easy or difficult it should be to intrude upon a nonparty’s time, privacy and, likely, its pocketbook (in the form of expenses to provide disclosure). There are competing tensions. We want pretrial discovery to proceed efficiently and smoothly so that speedy and inexpensive justice can be done through orderly litigation. That’s more easily said for the parties in the case. They have to litigate and that means getting and giving discovery. But for nonparties, those third persons who may have no stake in the litigation and who would like to concentrate on going forward with their business and private lives without disruptive, distractive intrusions or demands to provide videotaped depositions or to produce private or confidential documents, discovery demands can be a nightmare.

Party litigants have their retained counsel in the case so discovery-related labor and expense are foreseeable and expected. But nonparties served with notices of deposition and/or subpoenas to produce documents (or other materials) could easily be shocked from a state of calm to one of extreme turbulence. An incoming nonparty discovery demand could be as discomforting as a plunge into icy waters. And, depending on circumstances, quite expensive too. Who will represent nonparties when their equilibrium is threatened by high-anxiety intrusion? Should they hire lawyers to protect their interests? Keep in mind that discovery today may include all manner of electronically stored information including e-mails that most persons would like to keep private. As the parties to a lawsuit square off to beat each other up, who will protect the nonparties from abuse?

The Kooper decision seems sensitive to such issues since the court discusses high road principles regarding a justification for nonparty discovery even as it throws out the “special circumstances” requirement. The question is, will trial courts be listening to this call for extra vigilance by an already overworked judiciary? Will they do so months from now when Kooper’s freshness fades? Or will courts, eager to expedite prompt case handling, override nonparty discomfort and expense in pursuit of what they may consider to be a higher calling, the timely disposition of cases?

‘Reasons’ Required

Let’s examine Kooper more closely to refresh our recollections about the “high road” approach that should balance individual case needs with protections against abuse of nonparties. Justice Daniel D. Angiolillo’s opinion for the court looks to find the “underlying considerations which are appropriate and relevant to the trial court’s exercise of its discretion in determining whether a request for discovery from a nonparty should go forward or be quashed.”⁴

In the Kooper case itself, a matrimonial dispute, the defendant served six subpoenas on five financial institutions. Plaintiff moved to quash. Three of the nonparties had produced the demanded documents. Each subpoena stated: “The circumstances or reasons said disclosure is sought or required are to identify and value certain marital property, which is material and necessary in the prosecution or defense of this action.”

The trial court granted plaintiff’s motion to quash on the ground defendant had failed to explain sufficiently why the nonparty discovery was necessary. The Appellate Division upheld the order quashing subpoenas directed to the two financial nonparties as a provident exercise of the Supreme Court’s discretion. The defendant’s reasons set forth on the face of each subpoena “amounted to no more than a statement that the information would be relevant and material.” In opposition to the motion to quash, defendant “failed to add to this showing,” arguing only generally that neither the plaintiff nor the nonparties had shown prejudice or inconvenience.

In the context of this case, however, this was not deemed enough. The defendant sought the nonparty discovery prior to expiration of plaintiff’s time to respond to discovery demands directed to her. She responded with some 27,000 pages of documents. Yet, defendant did not review the material produced by plaintiff “to ascertain whether the information sought from the various nonparties was supplied by the plaintiff” in those discovery responses. Had defendant done that, “it may have obviated the need for, or significantly narrowed and focused, the subpoenas served on the nonparties.” Since defendant did not sufficiently show the circumstances and reasons nonparty discovery was warranted, the order quashing the subpoenas was justified.

Justice Angiolillo’s opinion explains why the procedural guidelines for nonparty discovery require the party seeking disclosure, when challenged, to make a sufficient showing notwithstanding that the “special circumstances” threshold requirement is no longer deemed applicable and notwithstanding that CPLR 3120, as amended in 2002, dispensed with the need to file a motion, instead requiring only service of a subpoena duces tecum for the production of documents in the possession, custody or control of a nonparty witness. Kooper reasons as follows.

New York’s disclosure regime is guided by the principle in CPLR 3101(a) of “full disclosure of all matter material and necessary in the prosecution and defense of an action.” The term “material and necessary” is to 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. The test is one of usefulness and reason.” When a challenge to a discovery request is advanced, therefore, the party seeking discovery “must first satisfy the threshold requirement that the disclosure sought is material and necessary.” This pertains to requests to parties as well as nonparties.

Entitlement to discovery is tempered, however, by the trial court’s authority to impose restrictions on “unduly burdensome” demands and to prevent abuse via a protective order where the discovery request may cause unreasonable annoyance, expense, embarrassment, disadvantage or other prejudice to any person or the courts. The “material and necessary” showing, if satisfied when discovery is challenged by a nonparty, is grounds to deny a motion to quash. But there are “additional considerations” beyond materiality and necessity when disclosure requests go to a nonparty.

Relevant Factors

Appellate Division case law subsequent to the CPLR amendments mentioned earlier held that the nonparty must “be given notice stating the circumstances or reasons such disclosure is sought or required.” The purpose of such notice is “presumably to afford a nonparty who has no idea of the parties’ dispute or a party affected by such request an opportunity to decide how to respond.”⁵  Thereafter, the Second Department continued to enforce the notice requirement to state circumstances and reasons for seeking the nonparty disclosure.

Subpoenas were considered “facially defective” and “unenforceable” without such requisite notice. The First Department initially so held but, in the Velez decision, determined that lack of such notice was not fatal if remedied eventually by a showing in response to a motion to quash. Nonetheless, in Velez the First Department also said that “the better practice, indeed the mandatory requirement of CPLR 3101(a)(4) is to include the requisite notice on the face of the subpoena or in a notice accompanying it.”⁶

Kooper next considered the interpretations of the “circumstances and reasons” terminology. How much of a recital was enough? Here too, the Appellate Division departments had differed over time. Some Including the Second Department, from historical practice, spoke in terms of a showing of “special circumstances,” although more recent Second Department case law avoided the “special circumstances” rubric.⁷  In Kooper the court dispelled doubt and disapproved use of the “special circumstances” language, except with respect to discovery from expert witnesses where it remains a factor in CPLR 3101(d)(1)(iii).

Nevertheless, courts involved in nonparty discovery disputes must take into account a number of relevant factors. One is whether the demanding party is able to obtain the requested disclosure from the adversary litigant or only from independent sources. “A motion to quash is, thus, properly granted where the party issuing the subpoena has failed to show that the disclosure sought cannot be obtained from sources other than the nonparty…” A motion to quash is properly denied when it is shown that the evidence cannot be obtained from other sources. Yet another factor is whether discovery from the nonparty is “warranted.” The court declined to set forth a comprehensive list of circumstances or reasons for every case because circumstances necessarily vary from case to case. Instead, the trial court is given discretion to supervise discovery and set reasonable terms and conditions for disclosure. The court must balance competing interests.

“We emphasize,” said the court, that “more than mere relevance and materiality is necessary to warrant disclosure from a nonparty.” The court’s reading of CPLR 3101 includes “the concepts of need and relevance within the threshold ‘material and necessary’ standard which all discovery must preliminarily meet.” The fact that the CPLR includes a separate subsection of the statute for nonparties indicates that discovery from parties and nonparties is not subject to identical considerations.

When CPLR 3101(a)(4) includes the language, “circumstances or reasons such disclosure is sought or required” from a nonparty, this indicates that “something more than mere relevance is required” if the discovery request is challenged. “As a matter of policy, nonparties ordinarily should not be burdened with responding to subpoenas for lawsuits in which they have no stake or interest unless the particular circumstances of the case require their involvement.”⁸

Interestingly, in a decision issued just a week prior to Kooper, the Second Department in Kondratick v. Orthodox Church in America⁹ reversed a trial court’s order quashing two subpoenas served upon a nonparty bank. The panel observed that “unlimited disclosure is not permitted” and that a party seeking disclosure from a nonparty witness must not only show the disclosure is “material and necessary” but “must also set forth circumstances or reasons why disclosure is sought or required from a nonparty.” Here, however, the litigant seeking nonparty disclosure “satisfied this requirement” as the information was relevant, material, necessary and “unavailable through other means.” Kondratick, however, gave no indication that Kooper’s elaborate message was soon forthcoming.

Conclusion

When it comes to discovery demands directed to nonparties, something more than skimpy boilerplate recitations of materiality and necessity may be required in the notice or subpoena directed to the nonparty. When mere conclusory verbiage is recited by the requesting party, the notice or subpoena may be vulnerable to attack, particularly so in courts within the Second Department.

The nonparty or opposing party litigant can move to quash or for a protective order. In an era when, for example, electronically stored information may magnify the nonparty’s burdens of search, retrieval and review or create significant expense, the CPLR’s protective order provisions, generously worded to alleviate and prevent “unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person,” should be remembered and used.

Michael Hoenig is a member of Herzfeld & Rubin.

Endnotes

1.  2010 NY Slip Op 04022 (N.Y. Ct. App. May 11, 2010).
2.  2010 NY Slip Op 04147 (App. Div., 2d Dept., May 11, 2010).
3.  Kooper, NY Slip Op 04147, at p. 8 (citing cases).
4.  Id. Slip Op at p. 2.
5.  Id. Slip Op at p. 6 (quoting from Velez v. Hunts Point Multi-Serv. Ctr. Inc., 29 AD3d 104 (1st Dept. 2006).
6.  Id. Slip Op at pp. 6—7 (indicating that the Fourth Department, in dicta, has followed the First Department’s reasoning).
7.  Id. Slip Op at pp. 7—9.
8.  Id. Slip Op at pp. 9—0.
9.  2010 NY Slip Op 03877 (2d Dept. May 4, 2010).