Subpoenas for Business Records Explained

What Subpoena for Business Records Is

A subpoena is a command to a witness to appear at a deposition or be present at trial. Subpoenas are issued by court clerks, and they are otherwise known as court-issued subpoenas. The actual subpoenas we are often dealing with are not technically court-issued but are actually private subpoenas which are valid so long as certain requirements are met in the subpoena issuance.
It is important to note that subpoenas for business records differ from these court-issued subpoenas. Subpoenas for business records command the third party (the business) to produce business records/documents for the court’s in camera review.
A subpoena for business records is often used in litigation for the discovery of information which is solely in the possession of a third party non-litigant. In other words , subpoenas for business records can be used to obtain business records or other information from companies that may have information relevant to your case, but who are not a party to your case.
In addition, subpoenas for business records can be sent to any third party that you have a reasonable basis to believe may hold information relevant to your case.

Types of Business Records Subpoenaed

Numerous types of business records may be subject to subpoena. Business records can include financial records, such as loan agreements, and financial documents, such as tax returns and checking account and credit card statements. Records of communications, including emails, texts, and even social media, may be subpoenaed. For companies that rely on technology and software to operate, transaction histories, internal correspondence, and electronic mail — or other forms of electronic data such as cloud-based storage — may be sought by subpoena.
Some subpoenas will request specific electronic documentation. For example, when litigation involves allegations of theft or misuse of data, such as trade secrets or other intellectual property, subpoenaing parties in those cases may seek computer maintenance records that may help establish the storage and dissemination of electronic data. Internal emails that have been archived by a company may also be subpoenaed in connection with investigations involving trade secrets and other proprietary information. Communication records, such as historical information from mobile devices, social media platforms, and email providers may also be the target of a subpoena. Electronic data may be the subject of a subpoena if there is reason to believe it contains information relevant to the dispute.

Legal Guidelines for Serving Subpoena

In most jurisdictions, a subpoena must contain the name of the court in which the action is pending, against each party, action number, title and number of the subpoena, and any applicable range of dates for record subject to subpoena.
Under the rules of the Federal Rules of Civil Procedure (FRCP) 45(a)(1), FRCP 34(b)(2)(C) and FRCP 34(b)(2)(B), a subpoena must set forth the following: (If you are not using or following the FRCP, similar rules apply in most state jurisdictions.). In addition to the approved federal or state rules, each court may have its own local rules and standing orders that must be followed. In California, for example, California Code of Civil Procedure Section 1985 requires that that a deposition subpoena for business records have the following: It is important to have possession of the rules of court for the jurisdiction before issuing a subpoena. Failure to comply with the rules may allow the recipient to object to or quash the subpoena. Most courts have a minimum and maximum dollar amounts and requirements of notice before a subpoena can be issued. Many times, a Declaration of Counsel may be required and failure to file and serve the Declaration timely can be the basis for quashing the subpoena. If a witness is a company/entity as opposed to an individual, the subpoena must be served on the company and the custodian of records, and a corporate representative must appear with the documents at the deposition.

Response to Subpoenas by Businesses

Upon receipt of a subpoena for records, the initial step a business should take is to contact counsel. This is so for several reasons. First, when a business receives a subpoena requesting its records, there is often a cover letter from counsel for the party serving the subpoena that informs the business of the documents sought and other particulars. Additionally, a business may receive a letter from opposing counsel seeking a stipulation to provide these documents as requested in the subpoena. Before acting in anyway, it is important for the business to determine whether it has retained counsel or whether counsel for the business has been retained to act on its behalf in regard to that specific subpoena (something that does not frequently occur at large businesses) and if so which set of attorneys will be responsible for responding to the subpoena and/or any letter from counsel for the opposing party.
Second, if a business is handling the subpoena internally (with no legal counsel involved) without having spoken to any legal counsel about it, it will often attempt to comply with the subpoena by providing the documents within the time frame set forth in the subpoena, or even a version or "summary" of the requested records . If a business does not have legal counsel and is attempting to comply with the subpoena, then the business will often not know how to protect (or assert) any privileged information contained in documents it provides in response to that subpoena. A business that has in-house counsel should immediately notify counsel of the subpoena and provide an opportunity for counsel to review the documents prior to their production to ensure compliance with applicable laws and to prevent the inadvertent disclosure of privileged materials.
Finally, a business may need to object to certain portions of the subpoena, or certain definitions contained in the subpoena. In this instance, it is very important that the business does not unilaterally redact certain documents (which it believes are privileged or irrelevant) prior to making the documents available to the other side. The safest route is to produce all documents as they are and argue over privilege issues later. By making a selection of redacted portions and providing them to the other side at some early point in the case (prior to appearing at deposition or trial), counsel for the parties may become frustrated that the documents had been redacted and discovery that could have been taken to establish a legal privilege or other grounds for objection has now been waived.

Legal Ramifications of Non-Complying With Subpoenas

It is the first section of the statute to mention consequences to an entity, that if an entity fails to comply with a subpoena to produce business records, then the court may compel the entity to comply and award the requesting party its reasonable expenses incurred in obtaining the subpoena. And while the statute does not explicitly provide statutory damages for an entity’s refusal to comply, a trial court order can force production of records together with a monetary award for attorney’s fees and costs. An entity is not required to produce records that are not relevant or not within its power, possession, custody, or control. Nevertheless, there are potential consequences of failing to comply. In Light v. Smith, 307 N.C. 832 at 835 (1983), the North Carolina Supreme Court held:
A court may find a person in contempt of court for failure to produce a document in compliance with an administrative subpoena "unless the person has refused to produce the document and it is evident from all the circumstances that the document is not in his possession, custody or control." Absent such evidence, the court must assume the validity of the subpoena and its applicability to respondent.
This means, if a business entity refuses to produce documents in response to a subpoena, that business entity will be subject to contempt proceedings unless the business can demonstrate that the documents are not within its possession, custody or control. And while contempt is not a favored remedy, it is available and may be appropriate in certain instances. See Wright v. United Services Auto Ass’n, 123 N.C. App. 627 (1996). And in a case where the plaintiff’s attorneys have engaged in bad faith conduct, the court can preclude that plaintiff from producing certain documents based upon the failure to comply with a subpoena. See Kanipe v. Durham, 109 N.C. App. 847 (1993) ("Under the circumstances shown in this case, where the attorneys for plaintiff had substantially failed to comply with discovery under G.S. 1A-1, Rules 26 through 37, the trial court acted within its discretion in refusing to allow plaintiffs to use those documents as evidence in opposition to the motion for summary judgment.") Finally, if a business entity is attempting to avoid production of business records in a pending proceeding, a court can issue a protective order and award attorneys’ fees. In that regard, Rule 26 of the North Carolina Rules of Civil Procedure contemplates the possibility that discovery documents may be sought over zealous or on improper grounds by a party and thus courts are empowered "upon objection, or on its own initiative, that justice requires protection of a party or of a person from annoyance, embarrassment, oppression, or undue burden or expense…by…forbidding the discovery, or by limiting the scope of the discovery to the time period and/or subject matter involved." N.C. R. Civ. P. 26(c) (emphasis added).

Safegarding of Private Business Records

Understanding Subpoenas for Business Records
Companies, from large corporations to small firms, often find themselves in need of safeguarding confidential or proprietary business information against disclosure to third parties in response to a subpoena. There are several general strategies a business can deploy in order to protect its information. First, the company can negotiate the terms of the subpoena to specifically limit issues related to the types of documents to be disclosed, the timeframe for providing those documents, and to limit disclosure to certain categories of individuals , such as in-house personnel versus outside counsel.
Another option available to businesses is to redact confidential information if the request is through a civil lawsuit. Generally, the Federal Rules of Civil Procedure allow for redactions to be made in manually and electronically stored information in response to a request to produce documents. If there is a concern that redactions may be insufficient or otherwise untrustworthy, a court may also be petitioned for a protective order that limits the scope and extent of disclosure and also allows for in camera review of any disputed documents by the judge presiding over the litigation.