Iowa Public Employees' Retirement System v. Bank of America Corporation

Background

Plaintiffs alleged that defendants conspired to boycott new market entrants, including SL-x, to preserve their position as prime-broker intermediaries and charge excessive fees. The court had previously denied certain defendants’ motion to dismiss those claims.

SL-x later filed separate lawsuits against defendants based on substantially similar allegations. Those lawsuits were consolidated, assigned to Judge Sullivan, and stayed at the discovery stage while a motion to dismiss remained pending. In this case, defendants served third-party subpoenas on SL-x. SL-x sought an order shifting the costs of complying with those subpoenas to defendants.

Rule 45 Standard

Federal Rule of Civil Procedure 45 requires a subpoena order to protect a person who is neither a party nor a party’s officer from significant expenses resulting from compliance. The court agreed with appellate courts holding that this protection is mandatory, not merely discretionary.

Court’s Analysis

The court found that SL-x was a third party to this litigation and that complying with the subpoenas would impose a significant expense. Even defendants estimated that SL-x’s electronic-discovery vendor costs could exceed $100,000. The court also considered SL-x’s representations that it had no annual revenue and had not had customers or clients for many years.

The court recognized that the parallel lawsuits created competing concerns. Defendants might otherwise obtain in this case materials they would have sought in the parallel lawsuits, where discovery was stayed. Conversely, shifting the costs to defendants could require them to fund discovery that SL-x might later have to produce in its own lawsuits.

Ruling

The court granted in part SL-x’s motion to shift costs. Defendants must bear SL-x’s reasonable expenses for complying with the third-party subpoenas. The parties were expected to negotiate the scope of discovery and reasonable fees in good faith, and the court would resolve disputes about discovery costs or attorneys’ fees if necessary.

The order included two conditions. First, if the motion to dismiss in SL-x’s parallel lawsuits is denied and those lawsuits proceed to discovery, SL-x must repay defendants for discovery costs advanced in this case. Second, if later discovery shows that SL-x has a monetary interest in the outcome of this case unrelated to its own lawsuits, the court will reconsider the order. Judge Katherine Polk Failla directed the Clerk of Court to terminate the motion at docket entry 229.