Court Opinion

ID: 2647903
Source: CourtListenerOpinion
Date Created: 2013-12-31 18:25:20.414639+00
Date Added: 2024-06-11T09:08:18.643915
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

LEGAL VOICE, FKA Northwest               No. 12-35224
Women’s Law Center,
             Non-Party-Appellant,           D.C. No.
                                         3:07-cv-05374-
                v.                            RBL

STORMANS INC., DBA Ralph’s
Thriftway; RHONDA MESLER;                  OPINION
MARGO THELEN,
              Plaintiffs-Appellees.

     Appeal from the United States District Court
       for the Western District of Washington
     Ronald B. Leighton, District Judge, Presiding

                Argued and Submitted
        October 10, 2013—Seattle, Washington

               Filed December 31, 2013

     Before: A. Wallace Tashima, Susan P. Graber,
         and Mary H. Murguia, Circuit Judges.

              Opinion by Judge Tashima
2               LEGAL VOICE V. STORMANS, INC.

                           SUMMARY*

                             Discovery

    The panel affirmed the district court’s denial of sanctions
under Fed. R. Civ. P. 45(d)(1), reversed the denial of costs
under Fed. R. Civ. P. 45(d)(2)(B)(ii), and remanded in an
appeal related to a discovery dispute that arose in an action
challenging Washington’s rules that require pharmacies to
maintain a representative assortment of drugs for which there
is patient demand and to dispense prescription drugs and
drugs approved by the Food and Drug Administration for
“restricted distribution,” unless one of several enumerated
exceptions applies.

    Plaintiffs served a subpoena duces tecum seeking
production on documents on the Law Center, a non-party that
had participated in the rule-making process and was among
the organizations that had reported incidences of pharmacists
refusing to dispense emergency contraception. The Law
Center raised various objections to the subpoena and
requested in the alternative that, if it were compelled to
produce any documents, that plaintiffs be required to
reimburse the costs of compliance pursuant to Rule
45(d)(2)(B)(ii).

    The panel first rejected plaintiffs’ assertion that it lacked
jurisdiction over the appeal because the Law Center did not
immediately appeal any of the three orders related to the
discovery dispute, but appealed only after final judgment was

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
              LEGAL VOICE V. STORMANS, INC.                     3

entered in the action. The panel held that a non-party may
appeal an interlocutory order within thirty days after entry of
final judgment to the same extent that a party may appeal
such an order.

    The panel held that Rule 45(d)(2)(B)(ii) requires the
district court to shift a non-party’s costs of compliance with
a subpoena, if those costs are significant. Thus, rather than
considering whether compliance with a subpoena was unduly
burdensome, the district court should have considered only
whether that cost was significant. Applying the correct
standard, the panel concluded that the $20,000 expended by
the Law Center was “significant.” Accordingly, the panel
reversed the district court’s denial of costs and remanded for
a determination of the proper allocation of costs under Rule
45(d)(2)(B)(ii).

     The panel concluded that the district court did not abuse
its discretion in declining to impose sanctions under Rule
45(d)(1). The panel held that given that there was at least
some ambiguity in the meaning of the district court’s first two
discovery orders, the district court did not abuse its discretion
in finding that plaintiffs did not necessarily act in bad faith in
interpreting the orders in the way they did.

                          COUNSEL

Scott A. Smith (argued) and Daniel J. Gunter, Riddell
Williams P.S., Seattle, Washington, for Non-Party-Appellant.

Steven T. O’Ban (argued) and Kristen K. Waggoner, Ellis, Li
& McKinstry, PLLC, Seattle, Washington, for Plaintiffs-
Appellees.
4               LEGAL VOICE V. STORMANS, INC.

                              OPINION

TASHIMA, Circuit Judge:

    Legal Voice, f/k/a Northwest Women’s Law Center
(“Law Center”), appeals the district court’s denial of
sanctions and costs under Federal Rule of Civil Procedure
45(d) (“Rule 45(d)”).1 We must determine first whether we
have jurisdiction over this appeal and, if so, whether the
district court abused its discretion in denying the Law
Center’s requests for costs and sanctions. As to the first
question, we conclude that we have jurisdiction. As to the
merits, we affirm the district court’s denial of sanctions, but
reverse the district court’s denial of costs.

                                    I.

    This appeal relates to a discovery dispute that arose in this
action challenging Washington’s rules that require
pharmacies to maintain a representative assortment of drugs
for which there is patient demand and to dispense prescription
drugs and drugs approved by the Food and Drug
Administration for “restricted distribution,” unless one of
several enumerated exceptions applies. The Washington
State Board of Pharmacy (“Board”) promulgated the rules in
April 2007 in response to its concern that there was a lack of
clear authority regarding the destruction or confiscation of
lawful prescriptions. The Board became concerned with this
problem in early 2006 when it received reports of incidents

    1
      The 2013 amendment to the Federal Rules of Civil Procedure
renumbered Rule 45. Rule 45(c), which was in effect when the district
court entered its orders and the parties argued this appeal, was renumbered
and now appears, without substantive change, as Rule 45(d).
              LEGAL VOICE V. STORMANS, INC.                  5

across the country in which pharmacists had refused to
dispense emergency contraception, including one instance in
which a pharmacist ripped up a patient’s prescription. The
Law Center was among the organizations bringing these
reports to the Board’s attention. The Law Center was also a
member of a task force that participated in the rule-making
process. The task force held a series of meetings and
developed the draft text of the rules that were ultimately
approved by the Board and that are the subject of the
underlying action.

    Stormans, Inc., doing business as Ralph’s Thriftway,
Rhonda Mesler, and Margo Thelen (“Plaintiffs”) filed suit
challenging the rules. In this action, Plaintiffs served a
subpoena duces tecum on the Law Center seeking production
of fourteen categories of documents. Among the requested
documents were any communications concerning the
challenged regulations between the Law Center and the
Board, the Washington State Human Rights Commission, the
Governor’s Office, and other advocacy groups. The
subpoena also sought internal Law Center communications
pertaining to the regulations, as well as general information
concerning the Law Center’s membership and employees.
The Law Center objected to the subpoena on various grounds,
including that the requested documents were irrelevant,
protected by the First Amendment, and protected by the
attorney-client privilege. When Plaintiffs filed a motion to
compel, the Law Center raised these objections and requested
in the alternative that, if it were compelled to produce any
documents, Plaintiffs be required to reimburse the costs of
compliance pursuant to Rule 45(d)(2)(B)(ii). On October 28,
2008, the district court granted the motion to compel as to six
of the fourteen categories of documents and denied the
motion as to the remaining requests. The district court further
6             LEGAL VOICE V. STORMANS, INC.

ordered that “[e]ach party will bear its own costs incurred in
connection with these motions.”

    Plaintiffs and the Law Center thereafter disputed the
scope of the district court’s order. The Law Center asserted
that the compelled production was limited to actual
communications with government decision-makers, while
Plaintiffs asserted that the Law Center was required to
produce any documents, including internal documents,
“related to” such communications. The Law Center (and
other advocacy groups) then filed a motion for clarification.
In that motion, the Law Center sought additional clarification
on the issue of costs. The district court issued a second order,
explaining that it had previously sought “to draw a distinction
between (A) actual communications between Non-Parties and
those persons or entities responsible for promulgating the
regulations that are the subject of this dispute and (B) internal
communications among Non-Parties, their members, allies
and affiliates related to why or how they communicated to
government decision-makers.” The district court stated that
it had intended to compel production of the former, but not
the latter. As to the issue of costs, in its order of November
24, 2008, the district court held that “[t]he scope of
production has been sufficiently limited by the Court such
that the cost of producing said documents should not be
overly burdensome.”

    The district court’s efforts at providing clarification
proved futile; Plaintiffs and the Law Center continued to
dispute the scope of the required production. Plaintiffs filed
another motion to compel, seeking, inter alia, “information
related to mental impressions or internal communications
concerning actual communications . . . with governmental
agencies involved with rulemaking,” and “information related
             LEGAL VOICE V. STORMANS, INC.                  7

to internal communications . . . related to ‘why or how to
communicate to governmental agencies.’” In opposing this
motion, the Law Center renewed its request for costs and
fees. In support of its opposition to the motion, the Law
Center filed the declaration of Lisa Stone, its Executive
Director, claiming that the Law Center had by then incurred
roughly $20,000 in expenses in complying with the subpoena.
That this amount was expended in the Law Center’s
compliance efforts is unchallenged.

    On March 3, 2009, the district court denied Plaintiffs’
second motion to compel. It referred to the previous
distinction it had drawn between external and internal
communications. The district court rejected the Law Center’s
renewed request for costs and fees without explanation,
stating only that it was denying “all motions or requests for
fees or sanctions.”

    The Law Center did not immediately appeal any of the
three orders related to the discovery dispute. On March 22,
2012, thirty days after final judgment was entered in this
action, the Law Center filed a notice of appeal. The Law
Center appeals only the district court’s denial of costs and
sanctions under Rule 45(d).

                             II.

    Plaintiffs contend that this court lacks jurisdiction over
the Law Center’s appeal because the Law Center, as a non-
party, was required to appeal within thirty days of the entry
of the respective orders denying costs and sanctions, making
the appeal filed after entry of final judgment untimely. We
disagree.
8             LEGAL VOICE V. STORMANS, INC.

    We have not addressed whether a non-party may appeal
a collateral order after final judgment, rather than only within
thirty days of the entry of the order. Although we have
previously considered our jurisdiction over non-party appeals
of interlocutory orders, none of these cases addressed whether
a non-party may await final judgment to appeal such an order.
In United States v. Columbia Broadcasting System, Inc.,
666 F.2d 364 (9th Cir. 1982), for example, we addressed
whether the collateral order doctrine permitted non-party
witnesses to appeal an order denying their motion for
reimbursement before entry of final judgment. Id. at 365.
We concluded that such an immediate appeal was
permissible. Id. Columbia Broadcasting, however, did not
address whether a non-party may also appeal an interlocutory
discovery order after entry of final judgment.

    SEC v. Capital Consultants LLC, 453 F.3d 1166 (9th Cir.
2006) (per curiam), similarly did not address the precise
question presented here. In Capital Consultants, we
considered whether we had jurisdiction over an appeal of an
interlocutory order, filed before entry of final judgment, that
was neither rendered final pursuant to Federal Rule of Civil
Procedure 54(b) nor appealable under the collateral order
doctrine. Id. at 1170–75. We concluded that we did not.
Like Columbia Broadcasting, Capital Consultants said
nothing about whether a non-party may appeal a collateral or
interlocutory order after entry of final judgment. See also
David v. Hooker, 560 F.2d 412, 416–17 (9th Cir. 1977)
(holding that an order directing a non-party to pay attorney’s
fees as a sanction was immediately appealable, but not
addressing whether a non-party can appeal a collateral
discovery order after the entry of final judgment).
                LEGAL VOICE V. STORMANS, INC.                          9

    Whether a non-party may appeal an interlocutory order
after entry of final judgment is therefore an open question in
this circuit. We now hold that a non-party may appeal an
interlocutory order within thirty days after entry of final
judgment to the same extent that a party may appeal such an
order.

    Several circumstances persuade us that a non-party may
appeal an interlocutory order after entry of final judgment.
First, appeal after final judgment is the default rule under
28 U.S.C. § 1291 and Federal Rule of Appellate Procedure 4.
Thus, our decision today merely applies the general rule to
non-parties. Moreover, our prior cases have generally held
that even when parties may immediately appeal an
interlocutory order, they are not required to do so. Hook v.
Ariz. Dep’t of Corr., 107 F.3d 1397, 1401 (9th Cir. 1997) (“A
party does not lose the right to appeal an interlocutory order
by not immediately appealing and waiting for the final
judgment.”). In other words, had Plaintiffs wanted to appeal
the orders at issue in this case, they could have awaited final
judgment. Id. Plaintiffs’ proposed rule would therefore
allow parties either to appeal immediately upon entry of the
order or to await the entry of a final judgment, but would
require non-parties to appeal within thirty days of the entry of
the order or lose the right to appeal. We reject a rule with this
effect; all potential appellants should be in the same position
with regard to the timing of an appeal from the same order.2

   Plaintiffs’ proposed rule also would promote piecemeal
appeals. In this case, such a rule would have required the

 2
   It would also remain an open question under Plaintiffs’ proposed rule
whether, if one party appeals after the entry of a final judgment, a non-
party may then file a cross-appeal from the same order.
10            LEGAL VOICE V. STORMANS, INC.

Law Center to appeal each of the three separate orders
denying sanctions. Further, similar orders could have
followed as discovery continued. Indeed, it was unclear at
the time of the entry of each of these orders whether there
would be future discovery requests for which the district
court might order sanctions and/or costs. Accordingly,
Plaintiffs’ proposed rule would have required at least three
separate appeals, and possibly more. Obviously, a rule
requiring only non-parties immediately to appeal an
interlocutory discovery order of this nature promotes
inefficiency. See Dickinson v. Petroleum Conversion Corp.,
338 U.S. 507, 511 (1950) (recognizing “the inconvenience
and costs of piecemeal review” as one of the most important
considerations when determining whether an order can be
appealed).

    Finally, Plaintiffs will suffer no prejudice if the Law
Center is permitted to appeal now. The record contains no
indication that Plaintiffs have in any way relied on their belief
that the Law Center’s time for appeal had expired, nor do
Plaintiffs identify any substantive right that would be
prejudiced by permitting this appeal to proceed. Moreover,
the appeal of the discovery orders coincided with the State’s
appeal of the decision on the merits, so the Law Center’s
appeal after entry of judgment did not disturb the finality of
the case or draw out its conclusion.

    For these reasons, we hold that a non-party may appeal an
interlocutory order after the entry of final judgment to the
same extent a party can appeal such an order. We now turn
to the merits of the Law Center’s claims.
              LEGAL VOICE V. STORMANS, INC.                  11

                              III.

     Rule 45(d) provides two related avenues by which a
person subject to a subpoena may be protected from the costs
of compliance: sanctions under Rule 45(d)(1) and cost-
shifting under Rule 45(d)(2)(B)(ii). The latter provision
applies to non-parties only, while the former applies to parties
and non-parties alike. With little explanation, the district
court decided neither to impose sanctions nor to shift costs.
Reviewing the district court’s denial of discovery sanctions
and costs for abuse of discretion and its interpretation of the
Federal Rules of Civil Procedure de novo, we reverse the
district court’s denial of costs under Rule 45(d)(2)(B)(ii), but
affirm the denial of sanctions under Rule 45(d)(1).

                              A.

    Rule 45(d)(2)(B)(ii) states that, when a court orders
compliance with a subpoena over an objection, “the order
must protect a person who is neither a party nor a party’s
officer from significant expense resulting from compliance.”
The rule was amended in 1991, and we have not interpreted
the rule since its amendment. The leading Court of Appeals
decision to have analyzed the rule since the 1991 amendment
is Linder v. Calero-Portocarrero, 251 F.3d 178 (D.C. Cir.
2001), which held that the amendment made cost shifting
mandatory in all instances in which a non-party incurs
significant expense from compliance with a subpoena. Id. at
182. It further noted that “the 1991 changes were intended
‘to enlarge the protections afforded persons who are required
to assist the court.’” Id. (quoting Fed. R. Civ. P. 45 advisory
committee’s note to the 1991 amendment). Based on this
analysis, the Linder court held that only two considerations
are relevant under the rule: “[1] whether the subpoena
12           LEGAL VOICE V. STORMANS, INC.

imposes expenses on the non-party, and [2] whether those
expenses are ‘significant.’” Id. If these two requirements are
satisfied, “the court must protect the non-party by requiring
the party seeking discovery to bear at least enough of the
expense to render the remainder ‘non-significant.’” Id.

    We agree with the D.C. Circuit’s analysis of the amended
rule and hold that Rule 45(d)(2)(B)(ii) requires the district
court to shift a non-party’s costs of compliance with a
subpoena, if those costs are significant. The plain language
of the rule dictates our conclusion. The rule states that the
district court’s order compelling compliance with a subpoena
“must protect a person who is neither a party nor a party’s
officer from significant expense resulting from compliance,”
Fed. R. Civ. P. 45(d)(2)(B)(ii) (emphasis added), and
provides no exceptions. This language leaves no room for
doubt that the rule is mandatory. Thus, when discovery is
ordered against a non-party, the only question before the
court in considering whether to shift costs is whether the
subpoena imposes significant expense on the non-party. If
so, the district court must order the party seeking discovery
to bear at least enough of the cost of compliance to render the
remainder “non-significant.” See Linder, 251 F.3d at 182.

    Under this regime, we conclude that the district court
erred in its interpretation of Rule 45(d)(2)(B)(ii) by framing
the issue in terms of undue burden, rather than significant
expense. The district court denied costs and sanctions
because it found that “[t]he scope of production has been
sufficiently limited by the Court such that the cost of
producing said documents should not be overly burdensome.”
(Emphasis added.)         Rather than considering whether
compliance was unduly burdensome, the district court should
have considered only whether that cost was significant.
                  LEGAL VOICE V. STORMANS, INC.                    13

Applying the correct standard, we have no trouble concluding
that $20,000 is “significant.” See Linder, 251 F.3d at 182
(noting that $9,000 may be sufficiently significant to justify
cost-shifting). Therefore, the district court was required to
shift enough of the cost of compliance to render the
remainder non-significant. Accordingly, we reverse the
district court’s denial of costs under Rule 45(d)(2)(B)(ii) and
remand for its determination of the proper allocation of costs.

                                     B.

    Unlike Rule 45(d)(2)(B)(ii), Rule 45(d)(1) is
discretionary.3 Although our precedent on this issue is not
extensive, we have provided some guidance for when Rule
45(d)(1) sanctions are appropriate. See, e.g., Mount Hope
Church v. Bash Back!, 705 F.3d 418, 425 (9th Cir. 2012);
Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792, 814
(9th Cir. 2003). Merely losing a motion to compel does not
expose a party to Rule 45 sanctions. See Mount Hope
Church, 705 F.3d at 425–27. Similarly, while failure
narrowly to tailor a subpoena may be a ground for sanctions,
the district court need not impose sanctions every time it
finds a subpoena overbroad; such overbreadth may
sometimes result from normal advocacy, which we have said
should not give rise to sanctions. See id. at 426. A court

 3
     Rule 45(d)(1), then labeled 45(c), provided in full:

               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. The issuing court must enforce this
          duty and impose an appropriate sanction – which may
          include lost earnings and reasonable attorney’s fees –
          on a party or attorney who fails to comply.
14            LEGAL VOICE V. STORMANS, INC.

may, however, impose sanctions when a party issues a
subpoena in bad faith, for an improper purpose, or in a
manner inconsistent with existing law. See id. at 425, 428;
Mattel, 353 F.3d at 814.

    Considering these factors, we conclude that the district
court did not abuse its discretion in declining to impose
sanctions under Rule 45(d)(1). Although the district court
denied the motion to compel as to eight of the fourteen
categories requested, we cannot say that the subpoena was so
facially overbroad that the district court’s denial of sanctions
was an abuse of discretion.

     We are also not persuaded that Plaintiffs so clearly acted
in bad faith or with an improper motive that we may reverse
the denial of sanctions on this ground. We recognize that
Plaintiffs requested internal Law Center communications
“related to” communications with government decision-
makers after their first request was denied. Although this
may be an indication of vexatious conduct, a second attempt
to compel discovery of internal communications after the first
request was denied is not so egregious as to compel a finding
of bad faith. Furthermore, Plaintiffs’ conduct may have been
reasonable, given that there was some ambiguity in the
district court’s first and second orders. The first order merely
listed without discussion the categories for which the motion
was granted, and these could reasonably have been read to
include internal documents related to communications with
government decision-makers. And although the second order
was more specific in compelling the production of only
external communications, there appears to have remained
some uncertainty regarding whether the order encompassed
internal documents that recounted communications with
government decision-makers. Given that there was at least
              LEGAL VOICE V. STORMANS, INC.                 15

some ambiguity in the meaning of the district court’s first two
discovery orders, we cannot conclude that the district court
abused its discretion in finding that Plaintiffs did not
necessarily act in bad faith in interpreting the orders in the
way they did.

     Finally, when considering Rule 45(d) sanctions, we have
put “more emphasis on the recipient’s burden than on the
issuer’s motives.” Mount Hope Church, 705 F.3d at 428–29.
Given that we have already determined that some or all of the
costs of compliance must be shifted to Plaintiffs under Rule
45(d)(2)(B)(ii), the imposition of sanctions would be largely
duplicative, because the mandatory cost-shifting should
alleviate the significant burden suffered by the Law Center.
Accordingly, we conclude that the district court did not abuse
its discretion in denying sanctions under Rule 45(d)(1).

                             IV.

    For the foregoing reasons, we reverse the district court’s
denial of costs under Rule 45(d)(2)(B)(ii) and remand for
consideration of the proper allocation of costs; further, we
affirm the district court’s denial of sanctions under Rule
45(d)(1). Appellant shall recover of Plaintiffs-Appellees its
costs on appeal.

    AFFIRMED in part, REVERSED and REMANDED
in part.