United States v. McGraw-Hill Companies, Inc.
2014 U.S. Dist. LEXIS 105857
C.D. Cal.2014Background
- This is a discovery dispute over subpoenas to six non-parties related to credit-rating practices preceding the financial meltdown.
- S&P seeks production from non-parties: RBS Securities, NCUA, Bank of America/Merrill, Countrywide Securities, Deutsche Bank Securities, and Citigroup Global Markets/CitiBank.
- Non-parties object to subpoenas and request cost-shifting under Rule 45(d)(2)(B)(ii).
- The court previously denied some motions and ordered S&P to file motions to compel against the largest third parties to break the logjam.
- The court adopts a two-step framework for cost-shifting, focusing on whether expenses are significant and whether they are incurred as a result of compliance with the order.
- The disposition imposes deadlines for production and contemplates sanctions and potential cost-shifting once production is complete.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether costs of non-party production must be shifted to S&P. | S&P argues costs should shift to the requesting party where expenses are significant. | Non-parties contend there should be no cost-shifting beyond reasonable expenses. | Costs may be shifted to S&P for significant expenses, not all costs. |
| What constitutes an “expense” and when expenses are “significant” under Rule 45. | Legal Voice supports moving costs to the requesting party when expenses are significant. | Non-parties contend expenses must result from compliance and be significant to the payer. | Expense must result from compliance; significance depends on the non-party’s ability to bear costs. |
| Whether the traditional seven-factor cost-shifting framework remains controlling post-amendment. | N/A | N/A | The court finds the seven-factor test obsolete; focus is on two factors: expense and significance. |
| Timing and mechanism for production and potential sanctions/cost-shifting. | N/A | N/A | Parties must meet-and-confer within 15 days; production within 30 days; court will consider sanctions and cost-shifting thereafter. |
Key Cases Cited
- In re Exxon Valdez, 142 F.R.D. 380 (D.D.C. 1992) (pre-1991 Rule 45 factors survive some applications before amendment)
- CBS, Inc. v. United States, 666 F.2d 364 (2d Cir. 1982) (guideline for nonparty reimbursement and discovery scope)
- Pollitt v. Mobay Chem. Corp., 95 F.R.D. 101 (S.D. Ohio 1982) (multifactor framework for costs in discovery)
- Linder v. Calero-Portocarrero, 251 F.3d 178 (D.C. Cir. 2001) (analyze ‘significant’ expenses and non-party ability to bear costs)
- Legal Voice v. Stormans Inc., 738 F.3d 1178 (9th Cir. 2013) (two-factor test: expenses to non-party and whether expenses are significant)
- IBM v. United States, 62 F.R.D. 528 (S.D.N.Y. 1974) (discovery cost considerations and discretionary principles)