Opinion
M8-85 (HB).
April 29, 2008
OPINION ORDER
The Dow Chemical Company ("Dow") requested this Court while sitting in Special Term to order non-party Allen Overy ("A O") to produce documents responsive to Dow's August 1, 2007 subpoena that A O claimed were privileged. The underlying suit is a case in federal court in the Eastern District of Michigan brought by Dow against two of its key employees, J. Pedro Reinhard and Romeo Kreinberg, who allegedly attempted to negotiate one of the largest leveraged buyouts ever with non-party the State General Reserve Fund of the Sultanate of Oman ("SGRF"). Since SGRF could not be subpoenaed, Dow subpoenaed A O, SGRF's lead counsel in the transaction, which never materialized.
A O opposed the motion and in addition requested that the Court issue a protective order pursuant to Fed.R.Civ.P. 45(c)(1), (2)(B)(ii) to shield A O from further expansive and expensive discovery requests and that Dow pay for any of A O's future production that may be ordered. (A O Opp. Mem. 20-22.) After oral argument on March 27, 2008, A O and Dow entered into an agreement that I endorsed, which included an agreement to limit the scope of further discovery. In a separate letter, I resolved the narrowed list of privileged documents in dispute. As a consequence, only costs going forward remain to be resolved.
Rule 45(c)(1) states that "[a] party or attorney responsible for issuing and serving a subpoena must take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena." In addition, Rule 45(c)(2)(B)(ii) states that an order on a motion to compel "must protect a person who is neither a party nor a party's officer from significant expense resulting from compliance." A O, a non-party to the underlying matter, argues that Dow has already imposed an undue burden and expense on it and that going forward the burden should shift to Dow. (A O Opp. Mem. citing In re Application of Law Firms of McCourts McGrigor Donald, 2001 WL 345233 (S.D.N.Y. 2001); In re The Exxon Valdez, 142 F.R.D. 380 (D.D.C. 1992).
As of the date of the hearing, A O had retrieved and reviewed a total of 154,532 documents to determine their responsiveness to Dow's subpoena. (Andrew Rhys Davies Decl. ¶ 3.) That retrieval led to three privilege logs with 1,638 entries based on documents in the New York office and A O expects that production from London may contain up to 3,000 entries. (Id. ¶¶ 4-5.) In addition, A O attorneys and staff worked 2,457 hours, which total approximately $1.3 million in fees, and incurred approximately $360,000 in expenses including electronic discovery. A O requests costs for future production only and does not challenge the costs already incurred. (A O Opp. Mem. 22.)
While costs have been ordered to reimburse third parties when compliance incurs significant expense, as the cases A O cites demonstrate, Dow argues that awarding costs going forward is inappropriate in this case because the SGRF and A O are not innocent or uninterested parties in the underlying matter. (Dow Reply Mem. 8-10.) Citing McCourt and McGrigor Donald, Dow points out that a determination of costs on behalf of non-parties is not necessarily automatic, but in fact is subject to a balancing test including the following inquiries: 1) whether the nonparty actually has an interest in the outcome of the case, 2) whether the nonparty can more readily bear the costs than the requesting party, and 3) whether the litigation is of public importance. 2001 WL 345233, at *1.
Dow argues cost shifting is inappropriate here because of A O's involvement in the attempted acquisition of Dow; A O has failed to represent that A O, rather than SGRF, is bearing these costs; and the litigation is of public importance given the magnitude of the intended buyout and the scandal it caused in the financial community. (Dow Reply Mem. 10.)
Despite the mandatory language of the FRCP, courts in this Circuit have found that a court does have discretion to split the costs between the nonparties and the requesting party when the equities of the particular case demand it. McCourts and McGrigor Donald, 2001 WL 345233, at *1; see also Exxon Valdez, 142 F.R.D. at 383. A O recognized this option in its opposition memorandum and when its request was for costs going forward only, and not for those already incurred as of the date of this motion.
I agree that A O is not the "`quintessential, innocent, disinterested bystander,'" the rule aims to protect. McCourts and McGrigor Donald, 2001 WL 345233, at *2 (quoting In re First American Corp., 184 F.R.D. 234, 242 (S.D.N.Y. 1998)). Like Price Waterhouse, the auditor to the Bank of Credit and Commerce International ("BCCI"), A O, while a non-party, should have reasonably anticipated being drawn into subsequent litigation because of its role as SGRF counsel in its effort to buyout Dow.See In re First American Corp., 184 F.R.D. at 242.
The methodology for cost splitting depends on the case. See, e.g., In re First American, 184 F.R.D. at 243 (where the court reduced non-party Price Waterhouse's request for costs from $211,000 to $75,000 based on its interest in the underlying litigation and some acts of bad faith to avoid production). Here, I have not received any other proposal for the cost splitting; any allegations of inability to pay; nor any estimate of the costs going forward for the London production, except the privilege log estimate noted above from the A O Declaration. Thus, I'm left to estimate based on the expenditures to date. Parenthetically, I doubt that the Government of Oman, who came close to purchasing Dow, will have any trouble covering the expenses for the production, nor that it has refused to do so; nor for that matter would the corporate behemoth Dow. Given the lack of showing of bad faith akin to that described in First American to circumvent production, I will apportion costs going forward on a 50/50 basis: 50% for Dow and 50% for A O. This will serve to reinforce their agreement to limit the scope of production and hopefully avoid any further disputes. The Clerk of the Court is instructed to close this matter and any other pending motions.
Of course the Government of Oman is welcome to write to the Court ex parte to discuss its inability to pay the A O bills associated with the continuing production.