A new proposed Commercial Division rule on e-discovery from nonparties emphasizes cooperation, proportionality and easing the burden on nonparties

April 29, 2014

Electronic Discovery and Evidence Law Alert


A proposed new Commercial Division rule annexing guidelines on e-discovery from nonparties presses parties to cooperate and alleviate burdens on nonparties to steer clear of disputes.

Earlier this month, the Office of Court Administration issued a proposed new rule for the Commercial Division of the New York State Supreme Court, which provides guidelines for electronic discovery of nonparties. Public comment on the proposed rule is requested by May 28, 2014.

The Federal Rules of Civil Procedure were amended in 2006 to address the challenges posed by discovery of electronically stored information (ESI), but the New York Civil Practice Law & Rules (CPLR) has not yet been similarly updated. To fill this gap in New York procedural law and provide rules relating to e-discovery, the Chief Administrative Judge of New York has exercised her authority to adopt procedural regulations, which the Judge may do without prior legislative approval so long as the regulations do not conflict with, and are consistent with, the CPLR and existing law.[1] It was this authority on which the Chief Administrative Judge relied when she adopted the Rules of the Commercial Division, and the Chief Administrative Judge is using this authority again in proposing the new rule, Commercial Division Rule 34. The rule and its guidelines are recommended by the Commercial Division Advisory Council, with input from the Chief Administrative Judge’s Working Group on Electronic Discovery—two groups that have played a significant role in bringing the Commercial Division into the 21st century.

Proposed Rule 34 to 22 NYCRR § 202.70 states that parties and nonparties should abide by the Guidelines for Discovery of ESI from Nonparties appended to the rules. In addition to promoting efficiency, cooperation and informal dispute resolution, the Guidelines focus on cost and proportionality. This focus seeks to reasonably limit the burdens imposed on non-litigants, who are sometimes on the receiving end of broad discovery requests and any response, whether they comply or object, may be both expensive and time-consuming.

There are six Guidelines, the first of which suggests that parties discuss nonparty discovery “as early as permissible in an action.” When engaging in these recommended early discussions, the Guidelines encourage the nonparty and requesting party to contemplate the potential cost of preservation, retrieval, review and production in the context of the litigation at hand. “Guideline III” defines the following “proportionality factors” for the requesting party to consider in crafting its discovery requests:

  • the nature of the litigation,
  • the amount in controversy,
  • the expected importance of the requested ESI,
  • the availability of the ESI from another source,
  • the relative accessibility of the ESI, and
  • the expected burden and cost to the nonparty.

These factors likewise serve as a framework for discussion between the nonparty and requesting party during a meet-and-confer process, which is suggested in “Guideline V.” They should also discuss the scope of discovery, the timing and form of production and ways to reduce cost and burden—all with an eye toward resolving disputes through negotiation or by calling on the court’s law clerks or special referees before resorting to motion practice.

The Guidelines also suggest actions to be taken by nonparties. Upon receiving a request for ESI, “Guideline II” states that a nonparty should promptly issue a preservation notice or litigation hold that reasonably covers the requested ESI. In addition, “Guideline IV” provides that any objection to the discovery of ESI should be stated with particularity.

“Guideline VI” states that the requesting party should defray the nonparty’s reasonable production expenses in accordance with CPLR 3111 and 3122(d). No further reference to the CPLR is made, other than the statement that the Guidelines are not intended to modify or replace any part of the CPLR. “Guideline VI” then recommends that the defrayed costs should include a wide variety of expenses, including attorneys’ fees for privilege review, the cost of e-discovery consultants and the cost of disruption of the nonparty’s business.

Proposed Commercial Division Rule 34 and the accompanying Guidelines are sorely needed as part of the continuing effort of the New York courts to establish rules governing electronic discovery. In the busy Commercial Division, which is the venue for complex cases that typically involve voluminous ESI, such a rule should provide more consistent standards in addressing e-discovery of nonparties. The frustration of the failed efforts to amend the CPLR, despite the fact that its drafters operated before the advent of electronic discovery, make amendments like proposed Rule 34 even more critical.

While the Guidelines reflect a commendable effort, there is more that the Guidelines could do to achieve their goal of efficient nonparty discovery. For example, while the Guidelines encourage the requesting party and nonparty to discuss form of production, they could easily go farther and recommend that the requesting party provide for the form of production in the subpoena. In this way, if the requesting party seeks a form of production that the nonparty finds convenient or at least unobjectionable, that issue would be immediately resolved and there would be no need for the party and nonparty to meet and confer on the form of production. In addition, to help contain the cost of the nonparty’s privilege review, the Guidelines might suggest that the party and nonparty consider entering into a clawback agreement, such as that described in Rule 502 of the Federal Rules of Evidence, which may also be submitted to the court to be entered as an order. The Office of Court Administration and the Commercial Division Advisory Committee may consider annexing a proposed form clawback agreement to the Guidelines. Privilege review may prove to be less costly and time-consuming if the nonparty is assured that any inadvertent production of privileged information would be returned pursuant to an agreed-upon procedure outlined in such a clawback agreement or court order.

The Guidelines state that the reasonable production expenses of the nonparty, which the CPLR requires the requesting party to “defray,” may include the “cost of disruption to the nonparty’s normal business operations.” While it is true that business disruption costs were referenced in one decision of the Appellate Division, First Department, involving electronic discovery of a nonparty, we submit that that business disruption costs should only be considered in unique factual situations, similar to the facts of that First Department case, and should not be considered in the ordinary course. See Tener v. Cremer.[2] To clarify this nuance, we suggest that some qualifying language should be added to “Guideline VI. C.”

In Tener, a defamation case, the subpoenaed nonparty claimed that the information plaintiff sought was not reasonably accessible and it could not produce it, but the plaintiff contended that there was good cause to search for that information because it was likely the only information that could identify the individual who defamed plaintiff.[3] The court remanded the case for a hearing to determine whether the nonparty’s data could be restored and produced and, if so, the plaintiff would pay for the nonparty’s costs of production and the court “should consider whether to include in that allocation the cost of disruption to [the nonparty’s] normal business operation.”[4] The Tener court noted that one of the reasons why business disruption costs should be considered was because “plaintiff waited one year before sending the subpoena and preservation letter,” thereby rendering it even more difficult and more expensive to access the information. Had the Tener plaintiff not waited one year to serve the subpoena and preservation letter, it is not clear whether the First Department would have instructed the trial court to consider awarding the costs of business disruption. Thus, it is only in the appropriate case, with facts similar to those in Tener, that the costs of business disruption should be considered.[5] We respectfully suggest that some qualifying language be added to the beginning of the sentence in “Guideline VI. C.,” such as “In the appropriate case,” or “When the facts warrant,” to better reflect the holding of the First Department in Tener that the nonparty’s costs of business disruption should only be considered in those unique cases in which the facts warrant awarding such costs.

The same Guideline provides that the nonparty’s expenses may include the costs of business disruption “to the extent such cost is quantifiable.” This language is helpful, as it is not at all clear whether the costs of business disruption can be quantified in any meaningful way or, if such costs can be quantified, how that is done. The one New York case that cited Tener and awarded the costs of business disruption, Estate of Tilimbo,[6] utterly fails to explain whether it was actually awarding costs of business disruption and, if so, how it calculated such costs. In Estate of Tilimbo, the issue was whether an 86-year-old woman was unduly influenced when she conveyed certain real property and the court ordered that the computer of the lawyer, a nonparty, who allegedly represented that woman in conveying the property, should be examined by computer experts.[7] Because the nonparty lawyer could not operate his law practice without his computers, the court limited the access the movants had to the nonparty’s computers to a specified time and ordered that, if the computers were not returned on time, the movants had to pay $200 for each hour of delay. No rationale was provided to explain how the court concluded that $200 per hour was the correct amount to be paid to the nonparty and no evidence was cited to support the $200. What proof would be sufficient to quantify the costs of business disruption is an issue yet to be resolved.

Although Rule 34 states that parties and nonparties “should adhere” to the Guidelines, the only enforcement mechanism available to a party seeking e-discovery from a recalcitrant nonparty is still a motion to compel. The Guidelines suggest that the party and nonparty should use motion practice “only as a last resort.” The most practical approach is to discuss any anticipated nonparty subpoenas with the court during the preliminary conference to appraise the court as to the significance of the information to be sought through nonparty subpoenas and the party’s willingness to work within the framework of the Guidelines to secure the information from the nonparties. Thus, should any dispute later arise, the court would be familiar with the issues relating to nonparty discovery and may be more effective in quickly and efficiently resolving any dispute.

Proposed Rule 34 and the Guidelines provide an instructive road map to use proportionality concepts and the meet-and-confer process to help identify and limit, if not avoid, disputes in seeking electronic discovery from nonparties. They are a welcome addition to the Commercial Division Rules. Until the CPLR is amended to address more completely electronic discovery issues on a statewide basis, the Chief Administrative Judge should be encouraged to continue to promulgate rules, such as proposed Rule 34, to provide guidance and certainty to practitioners and jurists in New York State courts.

  1. N.Y. CONST. art. VI, § 30; N.Y. Jud. Law §§211(1)(b); 212(2)(d).
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  2. Tener v. Cremer, 89 A.D.3d 75, 82 (1st Dep’t 2011).
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  3. Id. at 82.
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  4. Id.
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  5. This would comport with Rule 45(d)(1) of the Federal Rules of Civil Procedure, which provides that a nonparty may be entitled to “lost earnings and reasonable attorney’s fees” but only as a sanction against a party that fails to take “reasonable steps to avoid imposing undue burden or expense” on the subpoenaed nonparty.
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  6. 36 Misc. 3d 1232(A) (Surrogate’s Ct. Bronx 2012).
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  7. Id. at *1-2.
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