MOTION FOR COSTS OF COMPLYING WITH SUBPOENA DENIED: February 7, 1994 GSBCA 10396 HERITAGE REPORTING CORPORATION, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent, and DEPARTMENT OF JUSTICE. Marc F. Efron and Stephanie B. N. Renzi of Crowell & Moring, Washington, DC, counsel for Appellant. John E. Cornell, Seth Binstock, and Edmund W. Chapman, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Stuart Frisch, James J. Roby, and Barbara H. Linden, Office of the General Counsel, Justice Management Division, Department of Justice, Washington, DC. WILLIAMS, Board Judge. On November 15, 1989, Heritage Reporting Corporation (Heritage) filed an appeal with the Board claiming that the General Services Administration (GSA) breached a Federal Supply Schedule contract for court reporting services by knowingly allowing mandatory user agencies to procure these services from sources outside the contract. The Department of Justice (DOJ) was one such mandatory user agency covered by the contract. Because DOJ was not a party to this appeal, Heritage secured discovery of relevant DOJ documents via subpoena. This matter comes before the Board on DOJ's motion for costs of complying with this subpoena. Background Procedural History On April 11, 1990, Heritage served a subpoena on the Department of Justice seeking all documents related to DOJ's acquisition of professional verbatim reporting and transcription services between August 1, 1988, and July 31, 1989, the period of Heritage's contract. On April 23, 1990, DOJ filed a motion to quash the subpoena alleging that the subpoena was unreasonable and unduly burdensome. DOJ's Motion to Quash Subpoena at 3. DOJ further argued that court reporting of grand jury proceedings was outside the scope of the GSA Federal Supply Schedule contract. Id. at 5. Finally, DOJ requested that, in the event the Board ordered production, the Board require Heritage to advance DOJ the costs of compliance. Id. at 7. On May 15, 1990, the Board denied DOJ's motion to quash, and refused to declare that grand jury proceedings were outside the scope of the contract, in the context of a motion to quash. Heritage Reporting Corp., GSBCA 10396, 90-3 BCA 22,977. The Board found that Heritage had an unquestionable need for the documents, which were the heart of the appellant's proof. Id. Further, the Board stated that, in order to decide whether grand jury proceedings were outside the Schedule contract, it needed a fully developed record and that the issue should not be decided "in the context of a discovery motion by a nonparty." Id. at 115,388. The Board deferred DOJ's request that Heritage advance DOJ the costs of complying with the subpoena to permit DOJ to develop the record further on its request for costs. We reasoned: "[w]ithout having a better understanding of what the costs of this production will be, we cannot decide whether or how to apportion them." Id. On June 15, 1990, DOJ filed a motion to stay discovery against it and to modify appellant's subpoena, and in the alternative, to condition DOJ's compliance on appellant's payment of costs to the DOJ. DOJ's Motion to Stay Discovery Against the Department of Justice and to Modify Appellant's Subpoena, and in the Alternative, to Condition the Department's Compliance on Appellant's Payment of Costs to the Department. Specifically, DOJ requested that the Board stay all discovery as to it pending the Board's determination of whether grand jury proceedings were covered under the contract. Id. In addition, in the event the Board deemed the issues in DOJ's motion to be beyond the scope of what could be raised by a nonparty, DOJ moved to intervene "for the limited purpose of making this motion." Id. at 3. In its motion papers, DOJ represented that it "made an offer to Heritage to stipulate to the fact that the Department purchased court reporting services from nonschedule vendors during the relevant period of time, so that the issue of liability could be tried prior to the production of the vast majority of material encompassed by [its] subpoena." Memorandum in Support of Motion to Stay Discovery Against the Department of Justice and Other Relief at 3; see id. at 8 ("[DOJ] has offered and is still willing to stipulate . . . that it utilized nonschedule vendors during the relevant period of time."). DOJ further argued that liability could not be established on this stipulation alone, stating: There are numerous additional factual and legal questions which must be resolved in order for a determination on the ultimate issue of liability to be made. These involve primarily a sorting out of the respective rights and duties of the parties to this litigation. For example, (1) whether GSA had an obligation or ability to force other agencies to comply with the mandatory schedule; and if so, (2) whether that obligation included a duty to notify other federal agencies of the existence of the mandatory schedule; (3) whether any such obligation or ability extended to all cases, or applied only to instances brought to GSA's attention; and (4) whether GSA acted in reasonable compliance with whatever obligation it is found to have had with respect to enforcement. There are similar issues of fact and law respecting Appellant's rights and duties, including (1) whether Heritage had a duty to notify agencies of its contract and (2) whether Heritage had a duty to notify GSA of any suspected breaches. Then, it must also be determined whether GSA or Heritage breached any such duty that either might have had. Id. at 8-9. By order dated July 27, 1990, the Board denied DOJ's request to intervene and granted the motion to stay discovery regarding court reporting services for grand jury proceedings pending resolution of whether such proceedings were within the scope of the contract. Heritage Reporting Corp., GSBCA 10396, 90-3 BCA 23,164.[foot #] 1 On August 13, 1990, respondent filed a motion for partial summary relief requesting that the Board rule that court reporting services for depositions in Article III court proceedings and grand jury proceedings were outside the scope of Heritage's Schedule contract and claim. The Board denied this motion, finding that there were genuine issues of material fact in dispute because the contract was ambiguous as to its coverage of these types of services. Heritage Reporting Corp., GSBCA 10396, 91-1 BCA 23,379, at 117,291-92. The Board further ----------- FOOTNOTE BEGINS --------- [foot #] 1 The Board directed respondent to file its motion for partial summary relief in August 1990. ----------- FOOTNOTE ENDS ----------- ordered that "[a]ll discovery, including production of grand jury invoices by DOJ shall proceed apace." Id. at 117,292. In order to obtain the documents that Heritage sought via the subpoena, Heritage was required to file several motions to compel. In its first motion, dated February 8, 1991, Heritage complained that DOJ was limiting its search to invoices paid between September 1988 and September 1989, which could exclude work performed during the contract period (August 1, 1988, through July 31, 1989) for which payment was made after September 1989. The Board granted Heritage's motion to compel and extended the time period in which DOJ was required to search its headquarters offices for responsive records through December 1989. Heritage Reporting Corp., GSBCA 10396, 91-2 BCA 23,845, aff'd on reconsideration, 91-2 BCA 23,884.[foot #] 2 On April 24, 1991, Heritage filed a motion to compel production of documents in the United States Attorneys' Offices, on the ground that DOJ's search of these offices was inadequate. On June 13, 1991, Heritage filed a third motion to compel claiming that the search of DOJ headquarters' offices was too narrow in that DOJ had limited its search to documents under only two internal codes, representing depositions and grand jury proceedings. Heritage requested that the Board order DOJ to determine where documents resided in addition to those two code designations and to produce all responsive documents regardless of code. By order dated July 16, 1991, the Board granted appellant's April 24 and June 13 motions in part. Heritage Reporting Corp., GSBCA 10396 (July 16, 1991). With the Board's intervention during a conference call, the parties formulated survey questions to be posed to the U.S. Attorneys' Offices designated to ascertain when grand jury transcripts were ordered, so that an appropriate cutoff date for search of those documents could be established. Conference Memorandum (July 16, 1991). The Board cautioned DOJ that no further delays in complying with the subpoena would be tolerated. Id. In the ensuing months, DOJ suggested a statistical approach to valuing grand jury services in lieu of producing documents, and the parties and DOJ attempted to agree on such a methodology. Conference Memoranda (Aug. 28, 1991, Sept. 19, 1991, Sept. 27, 1991). On October 4, 1991, the parties advised the Board that they could not agree on a methodology; the Board, therefore, orally granted appellant's motion to compel, but ordered the parties to agree on a search cutoff and a deadline by which the eighty-eight U.S. Attorneys' Offices would have to comply with the subpoena. Conference Memorandum (Oct. 7, 1991). No agreement was reached, and on October 22, 1991, the Board ordered that the search cutoff would be December 1990 and that production ----------- FOOTNOTE BEGINS --------- [foot #] 2 DOJ sought reconsideration, claiming the motion to compel should have been denied. ----------- FOOTNOTE ENDS ----------- of U.S. Attorneys' Offices' documents could be done on a "rolling" basis, with the first installment due on November 29, 1991, with installments every thirty days and all responsive documents due by March 27, 1992. Heritage Reporting Corp., GSBCA 10396 (Oct. 24, 1991). The Board rescheduled the hearing which had been set for April 7-10, 1992, to April 20-24, 1992. Id. On January 24, 1992, the parties advised the Board that they were close to settling this appeal, so the Board ordered DOJ to cease and desist all efforts associated with complying with the subpoena so as to avoid unnecessary work and expense. Heritage Reporting Corp., GSBCA 10396 (Jan. 27, 1992). On March 31, 1992, GSA and Heritage filed a stipulation of settlement which recited that the Government agreed to pay Heritage $7,254,525.60. Stipulation of Settlement (Mar. 31, 1992). That amount was to be allocated among some seventy-one various federal agencies or components, including DOJ, as set forth in the stipulation. Id. DOJ requested that the Board "decline to allocate liability among nonparty agencies." Letter from DOJ to the Board (Apr. 14, 1992). On April 21, 1992, the parties, Heritage and GSA, filed a stipulation and an Offer of Award which provided in part: The Department of Justice breached the contract by ordering 2,351,627 pages of transcripts through contracts other than the federal supply schedule contracts. Using Appellant's formula for determining damages, this agency would be liable to Appellant for $ 7,662,659.00. Recognizing the inherent risks and uncertainties of litigation, Appellant and Respondent negotiated a settlement of a lesser amount, with an allocation of $ 2,681,287.95 for this agency. Offer of Award Pursuant to Board Rule 36(e) at 12 (Apr. 21, 1992). On June 2, 1992, the Board held oral argument on the issue of whether or not the Board could approve the allocation of liability among the agencies. DOJ presented a detailed oral argument opposing allocation by the Board. On August 25, 1992, Heritage and GSA filed a joint request that the Board issue a judgment for appellant in the amount of $7,254,525.60, and dismiss the appeal with prejudice. In accordance with the parties' stipulation, judgment was entered for the requested amount. Heritage Reporting Corp., GSBCA 10396, slip op. at 7 (Aug. 28, 1992). The judgment was to be paid from the permanent indefinite judgment fund, and the Board expressly refused to adopt the allocation of liability among the user agencies and GSA requested by Heritage and GSA. Id. at 8. DOJ's Costs of Complying with the Subpoena and Heritage's Costs in Pursuing Compliance In its brief in support of its motion for the costs of complying with Heritage's subpoena, DOJ claims that it is entitled to $49,335.35 which represents DOJ's: (1) labor costs of $37,142.45 and (2) photocopying costs of $12,192.50. Department of Justice's Brief in Support of its Motion for Costs of Complying with Heritage's Subpoena at 5 (DOJ's Brief). According to the Acting Assistant Director of the Financial Management Staff of the Executive Office of United States Attorneys, $32,610.90 of this total amount was incurred in the eighty-eight United States Attorneys' Offices. Affidavit of Michael T. McDonough (March 20, 1992) 2-4. That represents the cost of retrieving and copying responsive documents and includes the amount of clerical and/or professional time which was spent retrieving and/or redacting the documents. Id. The remaining $16,724.45 was incurred by United States Department of Justice departmental components. Affidavit of Leon J. Lofthus (March 20, 1992) 3, 7. Heritage represented that it expended hundreds of hours as well as tens of thousands of dollars in pursuing DOJ's compliance with its obligations in this appeal. Appellant's Opposition to DOJ's Motion for Costs of Complying with the Board's April 1990 Subpoena (Appellant's Opposition) at 3. Discussion In support of its motion for the costs of complying with Heritage's subpoena, DOJ argued: (1) DOJ turned over to Heritage approximately 121,000 pages of documents and expended more than 2,800 hours of time searching for and redacting a sizeable portion of these documents in over 100 DOJ offices; (2) DOJ used a reasonable fee schedule to calculate the reimbursement that it is claiming; (3) DOJ was a nonparty and, therefore, "powerless" to control the scope of litigation and discovery; and (4) DOJ made a good faith effort to comply with the Board's directions. DOJ's Brief at 6-11. In its opposition to DOJ's motion, Heritage responded that (1) for all practical purposes, DOJ is a party to the litigation; (2) the scope of the subpoena was reasonable, non-intrusive and critical to Heritage's case; (3) the costs incurred by DOJ are partially attributable to DOJ's own inefficient recordkeeping practices; and (4) DOJ was uncooperative in responding to the requests and, therefore, caused Heritage to incur significant expenses as well. Appellant's Opposition at 4-8. In our order of May 15, 1990, denying DOJ's motion to quash our subpoena, we articulated seven factors to be weighed in deciding whether to award costs of complying with a subpoena. Heritage Reporting Corp., 90-3 BCA 22,977. Those factors are: the witness' nonparty status; the scope of the discovery; the invasiveness of the request; the extent to which the producing party must separate responsive information from privileged or irrelevant material; the reasonableness of the costs of production; the extent to which the production disrupts the ordinary business of the producing party or requires the employment of additional personnel; and the extent to which the costliness of the production is entirely the product of the recordkeeping scheme of the producing entity. Id. at 115,389; see, e.g., United States v. Columbia Broadcasting System, 666 F.2d 364, 371-72 n.9 (9th Cir. 1982), cert. denied, 457 U.S. 1118 (1982), and authorities cited therein; Delozier v. First Nat'l Bank of Gatlinburg, 109 F.R.D. 161, 164 (E.D. Tenn. 1986); Fox v. House, 29 F. Supp. 673, 677 (E.D. Okla. 1939). Subsequent to our May 15, 1990, order, Federal Rule of Civil Procedure 45 was amended effective December 1, 1991, to include the following provision: "an order to compel production shall protect any person who is not a party or an officer of a party from significant expense resulting from the inspection or c o p y i n g c o m m a n d e d . " Fed. R. Civ. P. 45(c)(2)(B).[foot #] 3 In In re Exxon Valdez, 142 F.R.D. 380, 383 (D.D.C. 1992), the United States District Court for the District of Columbia applied amended Federal Rule of Civil Procedure 45(c)(2)(B) and noted that "'protection from significant expense' does not mean that the requesting party necessarily must bear the entire cost of compliance, particularly where, as here, doubt has been cast on the subpoenaed party's status as a nonparty." Id. The court explained: While the drafters of new Rule 45 clearly intended to expand the protection for non-parties such as disinterested expert witnesses . . . there is no indication that they also intended to overrule prior Rule 45 case law, under which a non-party can be required to bear some or all of its expenses where the equities of a particular case demand it. Id. In addition, the Exxon Valdez court found it relevant to inquire whether, inter alia, "the putative non-party actually has an interest in the outcome of the case." Id. (citing Pollitt v. Mobay Chemical Corp., 95 F.R.D. 101,105 (S.D. Ohio 1982). Here, considering the seven factors articulated in our earlier ruling as well as amended Federal Rule of Civil Procedure 45(c)(2)(B) and the Exxon Valdez dicta, we conclude ----------- FOOTNOTE BEGINS --------- [foot #] 3 This rule governs all civil actions in United States District Courts pending as of December 1, 1991, and, while not binding on this Board, provides guidance. Rule 1(c). 58 Fed. Reg. 69,251 (1993) (to be codified at 48 CFR 6101.1). ----------- FOOTNOTE ENDS ----------- that appellant should not bear any of DOJ's costs of compliance with the subpoena. DOJ's status in this litigation is a critical factor prompting this result. DOJ can hardly be characterized as a disinterested nonparty. Rather, DOJ admittedly procured court reporting services outside the contract, allegedly breached the contract, and may, if liability is allocated in another forum, be held responsible for part of the $7.25 million settlement.[foot #] 4 Further, although a nonparty, DOJ actively participated in this case, by objecting to discovery, voicing its view that grand jury proceedings were outside the scope of the contract,[foot #] 5 and opposing the parties' request that the Board in adopting the stipulated settlement, allocate liability among the user agencies. DOJ filed numerous submissions, and its counsel frequently participated in telephonic conferences and oral argument. DOJ was the only one of the many user agencies to participate so extensively in this litigation. Finally, in deciding whether to reimburse DOJ's costs of complying with the subpoena, we cannot ignore DOJ's actions in this litigation. DOJ endeavored to curtail discovery against it, and after being ordered to comply with the subpoena, was unable to do so completely or on schedule. The subpoena at issue was reasonable in scope -- directed at obtaining evidence regarding DOJ's acquisition of court reporting services during the contract period. Such evidence was clearly relevant. Yet, appellant was forced to expend considerable resources, tens of thousands of dollars, filing motions to compel, monitoring DOJ's compliance efforts, and seeking Board intervention to obtain full discovery. We do not suggest that DOJ lacked good faith here; compliance ----------- FOOTNOTE BEGINS --------- [foot #] 4 In GSA's view, DOJ's allocated liability is over $2.6 million -- a matter DOJ vigorously disputes. [foot #] 5 DOJ complained that it "was compelled to produce tens of thousands of documents relating to [the] . . . transcription of grand jury proceedings without the benefit of a hearing, let alone a definitive ruling by the Board, that grand jury proceedings and depositions . . . in . . . Article III court litigation are, in fact, covered by GSA's Federal Supply Schedule . . . contract." DOJ's Brief at 7-8. This argument overlooks the fact that the Board stayed discovery on grand jury proceedings pending resolution of respondent's motion for a ruling that such proceedings were outside the scope of the contract. Further, the Board denied that motion, finding that the contract was ambiguous and genuine issues of material fact existed. Thus, the issue of grand jury proceedings as well as all other issues regarding liability were to be heard at trial, after discovery -- as is typical. DOJ's continuing complaint regarding producing the grand jury documents in pretrial discovery is baseless. ----------- FOOTNOTE ENDS ----------- with the subpoena was difficult given DOJ's legitimate need to segregate grand jury materials, DOJ's recordkeeping system, and the decentralized location of numerous responsive documents in the eighty-eight U.S. Attorneys' Offices. But the difficulty of compliance does not warrant shifting DOJ's costs of compliance to appellant, given both DOJ's involvement in the appeal and its stake in the outcome. As the United States Court of Appeals for the District of Columbia recognized: The power to exact reimbursement . . . is soundly exercised only when the financial burden of compliance exceeds that which the party ought reasonably be made to shoulder. And what is reasonable will depend . . . upon the circumstances of each case. Securities & Exchange Commission v. Arthur Young & Co., 584 F.2d 1018, 1033 (D.C. Cir. 1978), cert. denied, 439 U.S. 1071 (1979). DOJ's costs of complying with the subpoena in the amount of $49,335.35 were not unreasonable given DOJ's status as a mandatory user of the contract at issue, its involvement in this litigation, and its stake in the outcome. Decision The Department of Justice's motion for costs of compliance with a Board subpoena is DENIED. ____________________________ MARY ELLEN COSTER WILLIAMS Board Judge