Stormans Inc v. Mary Selecky, 738 F.3d 1178

Background

Washington Board of Pharmacy adopted rules requiring pharmacies to maintain representative drug assortments and to dispense certain FDA-approved or restricted-distribution drugs; rules prompted by reports of pharmacists refusing or destroying prescriptions.
Legal Voice (formerly Northwest Women’s Law Center), which participated in rulemaking, was subpoenaed by plaintiffs Stormans, Inc. et al. for 14 categories of documents, including communications with government actors and internal communications.
District court compelled production of six categories (limited to actual communications with government decisionmakers), denied the rest, and initially ordered each party to bear its own costs; later clarified scope but denied the Law Center’s repeated requests for cost-shifting and sanctions.
Law Center incurred roughly $20,000 complying with the subpoena and appealed the district court’s denial of sanctions and cost-shifting under Federal Rule of Civil Procedure 45(d).
Ninth Circuit held it had jurisdiction (non-parties may appeal interlocutory orders within 30 days after final judgment) and reviewed the denial of sanctions and costs for abuse of discretion (and rule interpretation de novo).
Court affirmed denial of Rule 45(d)(1) sanctions but reversed denial of cost-shifting under Rule 45(d)(2)(B)(ii), concluding the district court applied the wrong standard and must allocate costs so remaining burden is non-significant.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Ninth Circuit has jurisdiction over a non-party appeal of interlocutory discovery orders filed after final judgment	Law Center: appeal timely filed within 30 days after final judgment	Plaintiffs: non-party must appeal within 30 days of each interlocutory order	Non-parties may appeal interlocutory orders within 30 days after final judgment (affirmed jurisdiction)
Whether Rule 45(d)(2)(B)(ii) requires cost-shifting when a non-party incurs significant expense complying with a subpoena	Law Center: $20,000 is significant; district court must shift costs	Plaintiffs: district court’s finding that production was not overly burdensome suffices to deny costs	Rule 45(d)(2)(B)(ii) is mandatory; if expenses are significant, court must shift enough costs to render remainder non-significant (reversed and remanded)
Proper standard for evaluating non-party burden under Rule 45(d)(2)(B)(ii)	Law Center: standard is "significant expense," not "undue burden"	Plaintiffs: district court properly considered burden and scope	Court: district court erred by applying undue-burden test; must use "significant expense" standard
Whether Rule 45(d)(1) sanctions were warranted for issuing an overbroad subpoena	Law Center: Plaintiffs acted in bad faith and vexatiously pursued internal documents	Plaintiffs: discovery attempts were reasonable; any ambiguity excused follow-up requests	Abuse-of-discretion standard met; no abuse by district court in denying sanctions (affirmed)

Key Cases Cited

United States v. Columbia Broadcasting Sys., Inc., 666 F.2d 364 (9th Cir. 1982) (discusses non-party appeals of interlocutory orders)
SEC v. Capital Consultants LLC, 453 F.3d 1166 (9th Cir. 2006) (limits on interlocutory appeals absent collateral-order finality)
David v. Hooker, 560 F.2d 412 (9th Cir. 1977) (non-party fee orders and appealability)
Linder v. Calero-Portocarrero, 251 F.3d 178 (D.C. Cir. 2001) (interprets amended Rule 45(d)(2)(B)(ii) as mandating cost-shifting for significant expense)
Mount Hope Church v. Bash Back!, 705 F.3d 418 (9th Cir. 2012) (guidance on when Rule 45(d)(1) sanctions are appropriate)
Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792 (9th Cir. 2003) (sanctions standards for discovery abuses)
Hook v. Arizona Dep’t of Corr., 107 F.3d 1397 (9th Cir. 1997) (parties need not immediately appeal interlocutory orders)
Dickinson v. Petroleum Conversion Corp., 338 U.S. 507 (1950) (recognizes costs and inconvenience of piecemeal appeals)