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Lefta Associates, Ulysses G. Auger Trust, and Lulu H. Auger Trust v. Jack F. Hurley

May 11, 2011


The opinion of the court was delivered by: (Magistrate Judge Carlson)

(Judge Jones)


I. Introduction

We have been called upon in this case to resolve a collateral aspect of some collateral litigation relating to this lawsuit. Specifically, we are charged with the responsibility of resolving an attorneys' fee dispute between a non-party bank, Citizens Bank of Pennsylvania, and the Defendants in this case. This attorneys' fees dispute arose in the context of a subpoena duces tecum which was served on the bank by the Defendants. That subpoena called for the production of substantial bank records, and the Defendants represent that they have agreed to reimburse the bank for more than $5,000 in direct expenses relating to this compelled production. What the Defendants contest, however, is their obligation to also reimburse the bank's legal fees associated with this dispute concerning subpoena compliance, legal fees which are alleged to exceed $17,000.

For the reasons set forth below, we conclude that the Defendants should be required to reimburse the bank for the actual direct costs of production of this material, but will decline the bank's invitation to also assess attorneys' fees against the Defendants in this case.

II. Statement of Facts and of the Case

This collateral attorneys' fees dispute arises in the context of hotly contested civil litigation between the parties, litigation that flows out of a series of commercial lending transactions and loans related to Gateway Gettysburg, a multi-million dollar, multi-use development project in Gettysburg, Pennsylvania. In connection with the discovery in this case, the Defendants served a series of far-reaching, multi-faceted subpoenas duces tecum upon the various banks which had issued loans related to the Gateway Gettysburg project. These financial institutions included the Citizens Bank of Pennsylvania, which was served with a subpoena on November 22, 2010. That subpoena, issued by the Defendants, sought some 30 separate categories of material from the bank relating to various of the bank's loans.*fn1

While the bank did not file objections to the subpoena within 14 days of service of the subpoena as required by the rules, see Fed.Civ.P.45(c)(2)(B), within 22 days the bank moved to quash the subpoena as unduly burdensome and requested reimbursement of its costs, including attorney's fees. (Doc. 50.) Confronted with the collateral dispute, the district court held a telephone conference on Citizens' Motion to Quash on December 15, 2010. As a result of that conference, Citizens Bank agreed to produce all responsive documents it possessed other than: (1) the actual loan documents; and (2) documents pertaining to any governmental or regulatory submission. The Defendants, in turn, agreed to a confidentiality arrangement under which all documents produced would be deemed confidential.

While the district court may have envisioned this mediated result would constitute the end of this collateral dispute, it did not. Instead, on February 24, 2011, Citizens Bank filed a motion for reimbursement of its costs of subpoena compliance, seeking reimbursement of $5,121.83 of copying costs, and $17,762.50 of attorneys' fees, for a total of $22,884.33. (Docs. 66 and 88, p. 2.) In some ways this motion appears to have reflected a very fundamental failure of communications between these litigants. According to Citizens Bank, these attorneys' fees of $17,762.50 consist of the costs of 100 attorney hours devoted to a document review that the bank conducted to determine privilege and relevance issues, "a task that Defendants' attorneys would have had to perform had Citizens' counsel not done so." (Doc. 66, ¶21.) For their part, the Defendants assert that they never requested this service, did not benefit from it, and were never informed of these burgeoning legal fees by Citizens Bank prior to the filing of this motion, contentions which the bank does not seem to directly refute in its pleadings.

Presented with this additional, and renewed, demand for reimbursement from the bank, a demand that the bank characterizes as a "sanction", the district court entered an order which noted that: "To assist the parties in reaching an agreement concerning a reasonable scope of discovery from third party Citizens Bank of Pennsylvania, we conducted a telephone conference with all parties on December 15, 2010. Despite these efforts, in the instant motion Citizens Bank of Pennsylvania now seeks to recover attorney's fees and costs stemming from their compliance with a subpoena that they contend remains overly broad." (Doc. 67.) The district court then referred this fees dispute to the undersigned for resolution. (Id.)

Having been assigned to resolve this dispute, we directed the parties to submit briefs describing their respective positions on this matter.(Doc. 99.) The parties have complied with this briefing schedule, (Docs. 66, 100 and 102), and this fees dispute is now ripe for resolution.

III. Discussion

Rule 45 of the Federal Rules of Civil Procedure governs subpoena practice in federal civil litigation. In its current form, Rule 45 places reciprocal obligations both upon persons issuing, and persons complying with, trial subpoenas. Thus, at the outset "[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." Fed.R.Civ.P.45(c)(1). A person commanded by subpoena to produce material, in turn, has a series of separate, but closely related, obligations. First, that subpoenaed party has an obligation to either promptly comply, or object, to the subpoena. Thus, "[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 . . . . The objection must be served before the earlier of the time specified for compliance or 14 days after the subpoena is served." Fed .R.Civ.P.45(c)(2)(B). The subpoenaed party may also move to quash or modify a subpoena if compliance presents an "undue burden," Fed.R.Civ.P.45(c)(3)(A)(iv), and with respect to electronically stored information, "[t]he person responding need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost. [However] [o]n motion to compel discovery or for a protective order, the person responding must show that the information is not reasonably accessible because of undue burden or cost." Fed.R.Civ.P.45(d)(1)(D).

Rule 45 also confers broad enforcement powers upon the court to ensure compliance with subpoenas, while avoiding unfair prejudice to persons who are the subject of a subpoena's commands. While this authority includes the power to order payment of "reasonable attorney's fees" in some instances, Fed.R.Civ.P.45(c)(1), it is well settled that decisions on matters pertaining to subpoena compliance rest in the sound discretion of the trial court and will not be disturbed absent a showing of an abuse of that discretion. R.J. Reynolds Tobacco v. Philip Morris Inc, 29 F. App'x 880, 881 (3d Cir. 2002). This far-reaching discretion extends to decisions regarding how to enforce compliance with subpoenas, where " '[i]t is well-established that the scope and conduct of discovery are within the sound discretion of the trial court.' Guinan v. A.I. duPont Hosp. for ...

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