Spears et al v. Washington Mutual, Inc. et al, No. 5:2008cv00868 - Document 583 (N.D. Cal. 2014)
Court Description: ORDER DENYING 564 MOTION FOR REIMBURSEMENT OF COSTS BY JPMORGAN CHASE BANK, N.A.. Signed by Judge Ronald M Whyte on 12/8/2014. (rmwlc2, COURT STAFF) (Filed on 12/8/2014)
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Spears et al v. Washington Mutual, Inc. et al Doc. 583 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA United States District Court For the Northern District of California 10 SAN JOSE DIVISION 11 12 FELTON A. SPEARS, JR. and SIDNEY SCHOLL, on behalf of themselves and all others similarly situated, Case No. 5-08-CV-00868-RMW 13 ORDER DENYING MOTION FOR REIMBURSEMENT OF COSTS BY JPMORGAN CHASE BANK, N.A. Plaintiffs, 14 v. 15 16 FIRST AMERICAN EAPPRAISEIT (a/k/a eAppraiseIT, LLC), a Delaware limited liability company, [Re Docket No. 564] 17 Defendant. 18 19 20 21 Non-party JPMorgan Chase Bank, N.A. (“Chase”) moves for an order compelling plaintiffs to reimburse Chase for costs incurred in responding to discovery. Dkt. No. 564. For the reasons explained below, the court DENIES the motion. 22 I. Background 1 23 24 25 In this certified RESPA class action, plaintiffs sought discovery from Chase relating to loans issued by Washington Mutual Bank, F.A. (“WMB”). Chase, as the entity that purchased all of the plaintiff class members loans from the FDIC after WMB went into receivership, has WMB’s loan 26 27 1 28 For more detailed background of the underlying litigation, see Spears v. First Am. eAppraiseIT, No. 5-08-CV-00868-RMW, 2014 WL 4647679 (N.D. Cal. Sept. 16, 2014) (Summary judgment order). ORDER Case No. 8-CV-00868-RMW LM -1- Dockets.Justia.com 1 files for most or all of the class. Plaintiffs sought discovery on the loan files, and served three 2 subpoenas on Chase. 3 December 3, 2012 Subpoena: The December 3 subpoena requested information related to 4 approximately 230,000 WMB loans. See Declaration of John M. Sorich (“Sorich Decl.”) Ex. A. 5 Chase objected to the subpoena, in part on the basis that the subpoena was unduly burdensome. 6 Sorich Decl. Ex. B. Chase then filed a motion to quash or modify the December 3 subpoena. Dkt. 7 No. 275. After further meet and confers between Chase and plaintiffs, Chase agreed to produce the 8 “requested information in the form of spreadsheets reflecting electronically available data for the 9 approximately 200,000 loans at issue.” Dkt. No. 564 at 3; Sorich Decl. Ex. C. This agreement also United States District Court For the Northern District of California 10 responded to a subpoena from defendant EA. Chase also agreed to produce 450 sample loan files, as 11 a substitute for producing every loan file, which also alleviated some of Chase’s discovery 12 obligations to EA. Sorich Decl. ¶ 7. 13 June 5, 2013 Subpoena: The June 5 subpoena requested documents and electronic 14 information relating to WMB and EA’s quality control measures. Sorich Decl. Ex. D. Chase again 15 filed objections to the subpoena, including “unduly burdensome” objections. Sorich Decl. Ex. E. 16 After meeting and conferring, Chase and plaintiffs agreed to a search of 13 custodians and specific 17 search terms. Sorich Decl. Ex. F. 18 September 24, 2013 Subpoena: The September 24 subpoena sought nine categories of 19 information. Chase produced responses to five of those categories. “Because the costs incurred 20 responding to the September 24 Subpoena consisted primarily of attorneys’ fees, Chase has decided 21 not to pursue these costs in this action.” Dkt. No. 564 at 5. 22 In addition to responding to the three subpoenas identified, Chase asserts that it spent “over 23 $600,000 in attorney’s fees” to review its production for “privileged information or information 24 statutorily required to be withheld under the Bank Secrecy Act. Chase is not seeking reimbursement 25 of these costs in this action.” Sorich Decl. ¶ 20. 26 27 In total, Chase represents that it produced “over 334,000 pages of documents” and now seeks reimbursement of $455,589.52 in expenses. Dkt. No. 564 at 1. 28 ORDER Case No. 8-CV-00868-RMW LM -2- II. Analysis 1 2 A. Chase Cannot Seek Reimbursement Under Rule 45(d) For Discovery Not Ordered by the Court, When Chase Did Not Notify Plaintiffs It Would Seek Reimbursement 3 Chase seeks reimbursement under Federal Rule of Civil Procedure 45(d). Rule 4 5 6 7 8 9 United States District Court For the Northern District of California 10 11 45(d)(2)(b)(ii) provides (emphasis added): (d) Protecting a Person Subject to a Subpoena; Enforcement. (2) Command to Produce Materials or Permit Inspection. B) Objections. A person commanded to produce documents or tangible things or to permit inspection may serve on the party or attorney designated in the subpoena a written objection to inspecting, copying, testing or sampling any or all of the materials or to inspecting the premises—or to producing electronically stored information in the form or forms requested. The objection must be served before the earlier of the time specified for compliance or 14 days after the subpoena is served. If an objection is made, the following rules apply: 12 (i) At any time, on notice to the commanded person, the serving party may move the court for the district where compliance is required for an order compelling production or inspection. 13 14 (ii) These acts may be required only as directed in the order, and the order must protect a person who is neither a party nor a party’s officer from significant expense resulting from compliance. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs argue that Chase cannot recover costs under Rule 45(d) unless the production is a result of a court order. Plaintiffs also argue that Chase did not notify plaintiffs that it would seek reimbursement until after production was underway. Plaintiffs are correct that Chase did not produce any of the documents at issue in this motion in response to a court order. Therefore, if Rule 45(d) requires a court order before cost shifting is permitted, Chase’s motion must be denied. Plaintiffs and Chase also agree that if documents are produced by a non-party pursuant to court order, cost shifting is mandatory for “significant” costs. Fed. R. Civ. Pro. 45(d)(2)(B)(ii); Legal Voice v. Stormans Inc., 738 F.3d 1178, 1184 (9th Cir. 2013). Chase argues that Rule 45(d) does not necessarily require a court order to shift costs. The court agrees with Chase that requiring a court order to award costs creates a perverse incentive to bring all discovery disputes to the court, needlessly multiplying litigation. Dkt. No. 573 at 2. ORDER Case No. 8-CV-00868-RMW LM -3- 1 Requiring litigation of discovery disputes would conflict with the purpose of Rule 45, which is to 2 “avoid imposing undue burden or expense on a person subject to the subpoena,” Rule 45(d)(1), and 3 a sounder policy is to encourage parties to meet and confer and come to an agreed resolution of 4 discovery disputes. The court sees no reason why a party and a non-party could not negotiate a 5 reasonable resolution of the discovery dispute (e.g., to a limited production in response to a 6 subpoena), and agree on reimbursement of costs from compliance, or agree that the non-party 7 reserves its right to seek reimbursement, and then proceed with discovery without requiring the 8 intervention of the court. The cases cited by plaintiffs in support of its rigid court order requirement are all district 10 United States District Court For the Northern District of California 9 court cases outside of the Ninth Circuit. See Dkt. No. 571 at 7-8, citing North American Rescue 11 Products, Inc. v. Bound Tree Med., LLC., No. 2:08-CV-101, 2009 WL 4110889 (S.D. Ohio Nov. 19, 12 2009); DNT, LLC v. Sprint Spectrum, LP, 750 F. Supp. 2d 616, 626 (E.D. Va. 2010); Tutor-Saliba 13 Corp. v. United States, 32 Fed. Cl. 609 (1995); Angell v. Kelly, 234 F.R.D. 135 (M.D.N.C. 2006); 14 McCabe v. Ernst & Young, LLP, 221 F.R.D. 423 (D.N.J. 2004). 15 Although plaintiffs argue that Legal Voice, a Ninth Circuit case addressing Rule 45, requires 16 a court order before cost shifting is allowed, the court does not agree. Legal Voice did not address 17 the issue of cost shifting without a court order. The Ninth Circuit stated both that “when a court 18 orders compliance with a subpoena over an objection” it must award costs, and that cost shifting is 19 required “to shift a non-party’s costs of compliance with a subpoena.” 738 F.3d at 1184. Legal 20 Voice leaves open the issue of cost shifting in the absence of a court order. 21 The court also recognizes the rationale provided in the cases refusing to shift costs where the 22 party seeking discovery did not know that the non-party would seek reimbursement or did not 23 consent to reimbursement. Angell v. Kelly, 234 F.R.D. at 139 (due to lack of notice, “it would not be 24 fair to say that defendant Kelly agreed to pay for attorney’s fees resulting from the production of the 25 documents” (footnote omitted)); McCabe, 221 F.R.D. at 427 (“expedient compliance does not 26 outweigh the prejudice that would ensue to Plaintiffs if required to pay exorbitant counsel fees 27 absent an opportunity to address their subpoenas and mitigate counsel fees.” (footnote omitted)). 28 ORDER Case No. 8-CV-00868-RMW LM -4- Accordingly, to balance the competing concerns of (1) protecting a non-party who must 1 2 respond to discovery, (2) encouraging negotiated resolution of discovery disputes, and (3) providing 3 requesting parties with adequate notice of the costs associated with their discovery requests, the 4 court concludes that costs may be shifted under Rule 45(d)(2)(B)(ii) if the requesting party is on 5 notice that the non-party will seek reimbursement of costs. See also North American Rescue 6 Products, 2009 WL 4110889 at *14 (“A non-party’s failure to follow Rule 45, however, does not 7 mean that reimbursement is foreclosed under all circumstances. Courts have recognized that, where 8 a non-party voluntarily complies with a subpoena without strictly adhering to Rule 45, it is 9 reasonable to consider whether the non-party and party have reached some voluntary agreement United States District Court For the Northern District of California 10 regarding reimbursement.”); Tutor-Saliba, 32 Fed. Cl. at 611 (“a nonparty must move to quash the 11 subpoena or otherwise indicate its intention to seek costs before, and as a condition of, responding” 12 (emphasis added). In this case, it is clear from the record that Chase, plaintiffs, and defendant were working to 13 14 find acceptable discovery that would not be excessively costly. For example, plaintiffs repeatedly 15 sought electronic information, rather than physical documents. See, e.g., Sorich Decl. Ex. 3 (letter 16 from plaintiffs to Chase: “You will let me know if any of the items are not electronically available 17 so was can consider if there is alternative information electronically available that will serve our 18 purposes.”). Plaintiffs also sought reduced production of the loan files, requiring Chase to produce 19 only about 500 loan files, in contrast to potentially 200,000 files. 2 However, it is not clear that Chase informed plaintiffs it would seek reimbursement of costs 20 21 until well after production was underway or complete. First, Chase’s boilerplate “unduly 22 burdensome” objection to the subpoenas is not sufficient to put plaintiffs on notice that it would 23 seek reimbursement. Second, none of the supporting documents submitted to the court in connection 24 with the motion for costs show that Chase ever conditioned its negotiated responses to plaintiffs’ 25 subpoenas on the right to seek reimbursement. 3 Although the motion asserts that “[d]uring such 26 2 27 28 The fact that Chase and the parties negotiated reduced productions does not, by itself, preclude Chase from reimbursement. In negotiating a reduced production Chase could have insisted on reimbursement, or reserved its right to seek reimbursement from the court. 3 Chase did request costs in connection with production of physical HUD-1 forms, but that production never occurred and is not at issue. ORDER Case No. 8-CV-00868-RMW LM -5- 1 negotiations and subsequently, Chase has maintained that it was entitled to recover its costs and 2 would seek to recover reasonable costs of complying with the subpoenas,” the court does not see 3 any evidence of this, and especially no evidence discussing costs associated with the December 3 4 and June 5 subpoenas. Dkt. No. 573 at 1; Sorich Decl. ¶ 8. 5 The record reflects that when Chase notified plaintiffs of specific costs associated with 6 production, plaintiffs objected to any reimbursement and directed Chase not to incur the costs. For 7 example, when Chase notified plaintiffs that it would cost $60,000 to review OptisValue messages, 8 plaintiffs objected, and Chase did not produce the information. Dkt. No. 573 at 8. Indeed, in 9 connection with the OptisValue messages requested in the September 24 subpoena, plaintiffs stated United States District Court For the Northern District of California 10 that “After approximately a year of negotiations about this data, which your client [Chase] 11 represented to the Court and to Plaintiffs that Chase agreed to produce, your email yesterday 12 afternoon was the very first time Plaintiffs have ever heard of any cost to them of producing this 13 data -- much less a price tag of $60,000. Plaintiffs’ position is that they should pay nothing for this 14 data, given that your client has never raised this issue to us or to the Court.” Hurt Decl. Ex. 1 (email 15 from plaintiffs to Chase). Chase then replied, “For clarification, are you saying that Plaintiffs will 16 not reimburse Chase for any of the costs it has already incurred and will incur in producing the 17 requested data?” Id. (email from Chase to plaintiffs). This exchange demonstrates that Chase and 18 plaintiffs had not come to any private agreement on reimbursement. 19 In addition to the assertion that reimbursement was discussed throughout the negotiations, 20 Chase points to its motion to quash and motion for reimbursement related to the HUD-1 forms. 21 Chase’s December 28, 2012 motion to quash the December 3 subpoena explained that producing 22 data related to 230,000 loan files would be unreasonably expensive. Dkt. No. 275 at 4. The motion 23 to quash also asserted, in a footnote, the Chase would be “entitled to ‘reasonable compensation’ so 24 as to protect Chase from incurring significant expense.” Id. at 4 n.1. The motion did not address the 25 expense related to any smaller production, and the motion was never refiled after being vacated for 26 failure to comply with Magistrate Judge Lloyd’s Standing Order. Dkt. No. 276. 27 28 Chase also expressly requested reimbursement relating to production of the HUD-1 forms, which the court did order Chase to produce. See Dkt. Nos. 353, 359, 362, 395. Chase’s request was ORDER Case No. 8-CV-00868-RMW LM -6- 1 limited costs relating to producing the HUD-1 forms, which Chase estimated would cost $2.2 2 million. Dkt. No. 395. In response, plaintiffs successfully moved to bifurcate the liability and 3 damages portions of the case, in large part to avoid incurring the expense. Dkt. No. 389. Plaintiffs’ 4 behavior throughout the litigation indicates that they actively sought to reduce discovery costs and 5 actively disputed any assertions by Chase that they would be required to reimburse discovery 6 expenses. Chase’s silence regarding recovering productions costs beyond the OptisValue messages 7 and HUD-1 forms did not put plaintiffs on notice that Chase would seek those costs later. 8 9 Based on the record presented, Rule 45(d) does not require the court to shift production costs onto plaintiffs. The record also reflects that it would be unfair to require plaintiffs to reimburse United States District Court For the Northern District of California 10 Chase for costs relating to the negotiated productions, which were designed to significantly reduce 11 Chase’s production costs, where Chase failed to inform plaintiffs that it would later seek 12 reimbursement of over $450,000. Accordingly, the motion for costs is DENIED. 13 B. Chase’s Costs Did Not “Result From Compliance” With Plaintiffs’ Subpoenas 14 Chase has also failed to establish that the costs “resulted from compliance” with plaintiffs’ 15 16 subpoenas. McGraw-Hill, 2014 WL 3810328, at *3 (citing Legal Voice, 738 F.3d at 1184). Plaintiffs argue that Chase’s production was actually the result of compliance with 17 subpoenas from plaintiffs and defendant. For example, the spreadsheets produced in response to the 18 December 3 subpoena addressed “not only [plaintiffs’] subpoena, but also the majority of the loan 19 items in [defendant’s] subpoena.” Sorich Decl. Ex. C (letter from plaintiffs to Chase). The sample 20 loan files were also requested as a follow on to defendant’s subpoena. Id. (discussing sample loans: 21 “We had planned to issue a separate subpoena for them, but since [defendant] has raised the issue by 22 asking for all of the appraisals, we should address it now . . . I believe that if we get copies of the 23 sampled properties, [defendant] will not have a good reason for needing copies of the rest.”); Dkt. 24 No. 541 at 4. 25 Chase responds that the EA subpoenas seeking similar discovery were withdrawn, and 26 therefore the production was only in relation to plaintiffs’ subpoenas. Dkt. No. 573 at 6-7. Chase 27 negotiated with EA to produce a subset of the information requested, which is why the subpoenas 28 were “withdrawn.” Chase also negotiated with plaintiffs for a reduced production, and now seeks ORDER Case No. 8-CV-00868-RMW LM -7- 1 costs. To the extent that EA’s subpoenas were “withdrawn,” plaintiffs’ subpoenas would be as well. 2 It is clear from the parties’ submissions that Chase’s production was a result of subpoenas from both 3 parties. It would therefore be unfair to require plaintiffs to bear these costs alone, and costs would 4 have to be allocated between EA and plaintiffs. Chase’s motion does not propose any allocation. As 5 costs are being denied for the reasons explained above, the court does not make any allocation. 6 III. Order 7 For the reasons explained above, the court DENIES the motion for reimbursement. 8 9 United States District Court For the Northern District of California 10 Dated: December 8, 2014 _________________________________ Ronald M. Whyte United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER Case No. 8-CV-00868-RMW LM -8-
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