United States District Court, D. Arizona
ORDER
Honorable Susan M. Brnovich, United States District Judge.
Pending
before the Court are nonparty AmSurg L.L.C.'s
(“AmSurg”) identically titled motions:
“Motion by Non-Party Defendant AmSurg LLC to Modify
Subpoenas Directed to Bank of America.” (Doc. 177,
“Mot. 1”; Doc. 195, “Mot. 2”.) Both
Defendants and AmSurg filed responsive pleadings to each
motion. (Doc. 183, “Resp. to Mot. 1; Doc. 185,
“Reply to Mot. 1”; Doc. 200, “Resp. to Mot.
2”; Doc. 201, “Reply to Mot. 2.) The Court held
oral argument on January 13, 2020 and issues the following
Order:
I.
BACKGROUND
Defendant
ECY and Plaintiff AmSurg Holdings, Inc. (“AmSurg
Holdings”) entered into a joint venture in October 2005
to operate a surgery center in Yuma, Arizona called The Yuma
AZ Endoscopy ASC, LLC (“Yuma Endo”). (Doc. 46
¶¶ 15-16, “FAC”.) Among other things,
the complaint alleges Defendants-including certain Yuma Endo
board members appointed by ECY-breached fiduciary duties to
the joint venture to aid the success of a newly established
surgical center competing with Yuma Endo. (See
generally FAC.) Plaintiff AmSurg Holdings' complaint
survived Defendants' Motion for Summary Judgment, (Doc.
62), and discovery is ongoing. Plaintiff AmSurg Holdings is a
wholly owned subsidiary of parent company and nonparty
movant, AmSurg. (Mot. 2 at 1, n.1.)
The
AmSurg motions at issue share a factual nexus and are
similarly argued. Broadly, the motions concern four subpoenas
issued by Defendants to compel the production of financial
records for specific Bank of America accounts. (See
Doc. 122, “*4969 Subpoena”; Doc. 154,
“*6372 Subpoena”; Doc. 174, “*6380
Subpoena”; Doc. 189, “Unredacted Accounts
Subpoena”). Defendants issued the second subpoena to
Bank of America in April 2019, seeking Yuma Endo records from
AmSurg's Account No. *6372.[1] (See *6372 Subpoena.)
AmSurg describes Account No. *6372 as a “concentration
account” held to benefit over 200 affiliated ambulatory
surgery centers (“ASC's”), including Yuma
Endo, in which Plaintiff AmSurg Holdings holds an interest.
AmSurg consolidates each ASC's finances into this account
every evening, apparently to reduce banking fees otherwise
unavailable to an individual ASC. (Mot. 1 at 2-3; Mot. 1,
Exh. A ¶ 4, “Page Decl.”) AmSurg maintains
they observe careful procedures-similar to those used for an
attorney's trust account-to ensure accurate accounting
for each ASC's finances. (Mot. 1 at 3; Reply to Mot. 2 at
2, n.1.) Upon receipt, Bank of America conveyed the *6372
Subpoena to AmSurg. Noting the subpoena sought records for
account *6372 only as they related to Yuma Endo, AmSurg
informed Bank of America that information relating to all
ASC's other than Yuma Endo should be redacted. (Mot. 1,
Exh. B ¶ 2, “Thompson Decl.”) Bank of
America allegedly then consulted with Defendants, who agreed
with the need for redactions, provided Bank of America review
their appropriateness.[2] (Id. ¶ 3.) AmSurg then
reviewed the 300, 000 pages of records associated with
account *6372 and redacted all information not pertaining to
Yuma Endo. (Id.) Following AmSurgs' redactions
and Bank of America's subsequent review, Defendants
received 10, 500 pages of records for *6372. (Id.
¶ 4.)
Like
the *6372 Subpoena, the third subpoena sought production of
all records pertaining to Yuma Endo, but for a separate
account-AmSurg L.L.C.'s Bank of America Account No.
*6380.[3] (*6380 Subpoena.) Account *6380 functions
similarly to *6372. As the “disbursement account”
for the 200-plus AmSurg-affiliated ASC's,
“[c]hecks, purchasing cards and ACH payments . . . are
cut from this account.” (Mot. 1 at 3.) Account *6380 is
subject to the similarly “vigilant” accounting
practices used for *6372. (Id.) The fourth subpoena
seeks production of unredacted records from *6372 and *6380.
II.
LEGAL STANDARD
Federal
Rule of Civil Procedure 45(d)(3)(B)(i) permits a court to
quash or modify a subpoena “[t]o protect a person
subject to or affected by a subpoena” if the subpoena
requires disclosing confidential commercial information.
Fed.R.Civ.P. 45(d)(3)(B)(i). “Ordinarily a party has no
standing to seek to quash a subpoena to someone who is not a
party to the action, unless the objecting party claims some
personal right or privilege with regard to the document
sought.” 9A Charles Wright & Arthur Miller, Federal
Practice & Procedure, §2459 (3d ed. 2008). A party
thus has standing to challenge a subpoena served on another
entity only upon showing a personal right regarding the
subject matter of the subpoena. See Blotzer v. L-3
Communications Corp., 287 F.R.D. 507, 509 (D. Ariz.
2012) (citing Delta Mech., Inc. v. Garden City Grp.,
Inc., No. 2:06-cv-01095 JWS, 2010 WL 2609057, at *2 (D.
Ariz. 2010)).
A
subpoena issued under Rule 45 is subject to Rule 26's
relevance standard. See Fed. R. Civ. P. 45(d)(a),
advisory committee's note to the 1970 Amendment
(“[T]he scope of discovery through a subpoena is the
same as that applicable to Rule 34 and other discovery
rules.”); Exxon Shipping Co. v. U.S. Dep't of
Interior, 34 F.3d 774, 779 (9th Cir. 1994) (applying
both Rule 26 and Rule 45 standards to rule on a motion to
quash subpoena); see also Xcentric Ventures, L.L.C. v.
Borodkin, 934 F.Supp.2d 1125, 1144 (D. Ariz. 2013)
(“Any information sought by means of a subpoena must be
relevant to the claims and defenses in the underlying case.
More precisely, the information sought must be reasonably
calculated to lead to admissible evidence.”) (quotation
omitted); Transcor, Inc. v. Furney Charters, Inc.,
212 F.R.D. 588, 591 (D. Kan. 2003) (acknowledging courts
consider whether the subpoena “is overly broad or
seeking irrelevant information under the same standards set
forth in Rule 26(b)” when addressing a motion to quash
subpoena duces tecum).
Rule
26, in turn, provides that “[p]arties may obtain
discovery regarding any non-privileged matter that is
relevant to any party's claim or defense . . . . Relevant
information need not be admissible at the trial if discovery
appears reasonably calculated to lead to the discovery of
admissible evidence.” Fed.R.Civ.P. 26(b)(1); see
also Surfvivor Media, Inc. v. Survivor Productions, 406
F.3d 625, 635 (9th Cir. 2005) (“Relevant information
for purposes of discovery is information ‘reasonably
calculated to lead to the discovery of admissible
evidence.'”) (quoting Brown Bag Software v.
Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992)).
“The mere ‘relevance' standard, however, does
not apply to non-parties.” R. Prasad Indus. v. Flat
Iron Envtl. Solutions Corp., No. CV-12-08261-PCT-JAT,
2014 WL 2804276, *2 (D. Ariz. June 20, 2014) (citing Dart
Indus. Co. v. Westwood Chem. Co., 649 F.2d 646, 649 (9th
Cir. 1980) (“While discovery is a valuable right and
should not be unnecessarily restricted . . ., the
‘necessary' restriction may be broader when a
nonparty is the target of discovery.”)). “To
obtain discovery from a nonparty, a party must demonstrate
that its need for discovery outweighs the nonparty's
interest in nondisclosure.” R. Prasad Indus.,
2014 WL 2804276, *2.
III.
DISCUSSION
AmSurg
redacted all information in account *6372 not pertaining to
Yuma Endo, emphasizing such information is confidential and
beyond the subpoenas' scope. It seeks modification to
reflect that understanding. Defendants complain “the
documents are so heavily redacted that the production has
been rendered nearly worthless.” (Thompson Decl. ¶
5.) Instead, they seek unredacted disclosure of the complete
records from accounts *6372 and *6380 regardless of
connection to Yuma Endo. (Resp. to Mot. 2 at 4.) AmSurg wants
to limit the subpoenas only to records related to Yuma Endo,
or, alternatively, to tender copies of the records to a
“mutually-agreeable, neutral third party qualified to
perform an accounting of the accounts at issue.” (Reply
to Mot. 2 at 5.) The question for the Court is whether the
financial records of entities unrelated to this dispute are
relevant and override AmSurg's interest in
nondisclosure.[4]
The
Court weighs the relevance of the records sought against
AmSurg's interest in nondisclosure. As mentioned
previously, when considering a motion to quash, courts look
to Rule 26 to define the permissible scope of discovery
applicable to a Rule 45 subpoena. Brown v.
Sperber-Porter, No. CV-16-02801-PHX-SRB, 2017 WL
10409840, at *2 (D. Ariz. Nov. 6, 2017). Rule 26 allows
parties to obtain discovery on any non-privileged matter
relevant to a party's claims or defenses. Fed.R.Civ.P.
26(b)(1). But the relevance standard does not apply to
nonparties. R. Prasad Indus., 2014 WL 2804276, *2.
Instead, a party's need for discovery must outweigh the
non-parties' interest in non-disclosure. Id.
Defendants argue disclosure of the unredacted records,
including financial records of ASC's other than Yuma Endo
in which AmSurg also holds an interest, is relevant to their
claims and defenses. Specifically, Defendants contend their
subpoenas for the unredacted records is required to identify:
(1) all accounts where Yuma Endo funds were transferred; (2)
the amount of Yuma Endo funds transferred; (3) whether Yuma
Endo could finance necessary improvements from 2013-2018; (4)
accounting inaccuracies and inconsistencies; and (5) the
value of any benefit to AmSurg from unauthorized use of Yuma
Endo funds. (Resp. to Mot. 2 at 11-12.) Although the above
identifications can seemingly be made with access to the
redacted records from *6372 and *6380, the Court does not
confuse the information's necessity with its
relevance.[5] (Cf. Mot. 2 at 2 (“Redacted
versions of these records . . . provide information necessary
to make these determinations.”)) Defendants do not
adequately explain how the financial records of other
ASC's or AmSurg generally- all non-parties to this
matter-bear on calculating Yuma Endo's
finances.[6]
Defendants'
argument concerning AmSurg's place in the “web of
entities” associated with Plaintiff AmSurg Holdings is
difficult to parse. (See Resp. to Mot. 2 at 7.) The
contention that AmSurg Holdings is an “imposter”
is central to Defendants counterclaims and defenses.
(See Doc. 68 at ⁋ 30.) They now claim nonparty
movant AmSurg is an unknown “affiliate entity of AmSurg
Holdings belonging to a “web of AmSurg-related entities
. . . part of a complex structure of entities that formed and
merged with each other, or with other entities, since the
formation of Yuma Endo.” (Resp. to Mot. 1 at 4.)
AmSurg, however, clarifies repeatedly: “AmSurg . . .
makes clear that it is the 100% owner of AmSurg
Holdings.” (Reply to Mot. 1 at 3; Reply to Mot. 2 at
4). Seemingly, Defendants ask the Court to make a tenuous
inference that because AmSurg may be part of ...