Discovery from 3rd Party Vendors

A company outsourcing payroll, human resources and other business services to third parties is standard operating procedure today.  However, what happens when there are discovery requests for a party’s business information hosted by a third-party?

Such discovery requests caused a court to play butcher to carve out the discovery obligations of the parties and third-party vendors in Bush v. Ruth’s Chris Steak House, Inc.

Bush v. Ruth’s Chris Steak House, Inc., is an employment dispute. The first dispute with third-party discovery involved the Defendant’s applicant tracking database. The Defendant did not produce the information, because their third-party vendor maintained it. Bush v. Ruth’s Chris Steak House, Inc., 2012 U.S. Dist. LEXIS 86351, at *10 (D.D.C. June 18, 2012).

The Plaintiffs argued that the Defendants needed to produce and bear the costs of production, because the information was under the Defendant’s custody and control. Id.

The Defendant countered that they did not have “possession” of the applications and that they did “not have control because they have neither possession of the documents nor an employment relationship with the third party vendors, such that Defendants would have a legal right to obtain the documents at issue ‘on demand.’” Id.

As such, the Defendant took the position the Plaintiffs needed to either 1) pay for the production or 2) do a Rule 45 request to the third-party. Bush, at *10-11.

The key issue was whether the Defendant had “control” of the requested discovery.

Case law states the following on “control”:

Control does not require that the party have legal ownership or actual physical possession of the documents at issue, but rather “the right, authority or practical ability to obtain the documents from a non-party to the action.”

Bush, at *11.

The Court did not spend a much time carving up the issue of control, finding it would require a large investment of judicial resources to determine if the Defendant actually controlled its vendor. As such, the cost of $500 for producing the information was to be divided between the parties. Bush, at *12-13.

The other discovery at issue were the employee tests that allegedly were the barriers for advancement for the female employees. Bush, at *13.

A third-party maintained the tests and scores. The third-party stated retrieving the test data would take 40 or more hours. The cost was $150 an hour for the work (so at least $6,000). Id.

The Defendant also maintained the tests in the personnel files, but refused to compile the records, arguing that a prior Court Order stated they were not required to “compile results from review of employee records.”  Id.

The Court was blunt: “The test data sought is in Defendants’ possession, and therefore must be disclosed under Rule 34.”  Id.

The Court explained the prior Order applied to human resource data, not test records. Moreover, the issue of test data was discussed in another area of the Court Order and was not excluded from production. Bush, at *13-14.

Bow Tie Thoughts

Companies use third-party vendors extensively in modern business. Courts will not likely tolerate producing parties using those relationships as a shield from production. Courts will either focus on whether the producing party had “control” of their data; order the producing party to bear the production costs; split the costs between the parties; or require a third-party request in some situations.

My instincts tell me it will likely be the producing party who has to take the laboring oar in ordering the production of data hosted by a third-party vendor. It is very easy for information hosted by a third-party to fall under the Stored Communication Act or other privacy laws regulating hosted data. Moreover, a Rule 34 request can force the producing party to consent to disclosure under the Store Communication Act in order to respond to the request, opposed to requiring the third-party to seek consent from the actual party. As such, focusing on the party and their control over their data is likely the direct approach in requesting such information, opposed to Rule 45 requests on the third parties.