ARISTA RECORDS LLC, et al. Plaintiffs v. MYXER, INC., et al. Defendants A-09-CV-134-LYA-09-CV-135-LY United States District Court, W.D. Texas, Austin Division Filed April 09, 2009 Austin, Andrew W., United States Magistrate Judge ORDER *1 Before the Court are Plaintiffs' Motion to Compel Responses by Harris Preston to Plaintiffs' Subpoena for Documents, filed February 24, 2009 (Clerk's Doc. No. 1, in A-09-CV-134), and Plaintiffs' Motion to Compel Responses by 1320 MV, LP to Plaintiffs' Subpoena for Documents, filed February 24, 2009 (Clerk's Doc. No. 1, in A-09-CV-135), along with the accompanying responses, replies, appendices, and surreplies. These matters were referred to the undersigned for resolution on March 4, 2009. Because the two cases involve subpoenas served on related third parties in the same underlying litigation, the Court will consider the motions in a consolidated fashion. On March 31, 2009, a hearing was held in which the Court heard oral arguments on the motions. After reviewing the parties' briefs, relevant case law, as well as the entire case file, the Court enters the following Order. I. PROCEDURAL HISTORY AND BACKGROUND On June 16, 2008, Arista Records, L.L.C. and several other recording labels (collectively “Plaintiffs”) filed suit against Myxer, Inc. (“Myxer”) in the Central District of California under Case Number CV 08-03935. Plaintiffs allege that Myxer is liable for copyright infringement because it operates an internet website that permits users to upload and exchange copyright-protected electronic files that can be used as mobile phone ring tones. 1320 is not a party to this litigation but rather is a shareholder of Myxer. 1320's sole business purpose is to act as a vehicle through which Harris Preston & Partner's investors hold their investment in Myxer. Harris, Preston & Partners (“HPP”) is a private equity investment partnership that identifies potential investment opportunities for its partners, who then decide individually whether to participate in any proffered investment. HPP identified Myxer as a potential investment opportunity, and the HPP partners who wished to invest in Myxer became limited partners in 1320 as a vehicle through which they could make that investment. One of the two directors of HPP testified that HPP does not own any shares in Myxer, nor is it a partner in 1320. Ron Harris, one of the two HPP directors, is also a board member of Myxer, as 1320's investment is sufficient to permit it to select on of Myxer's board members. Plaintiffs have issued document subpoenas to both 1320 and HPP related to their litigation against Myxer. To date, HPP has not produced anything in response to Plaintiffs' subpoena. 1320 has produced responsive hard copy documents, but it has yet to produce the electronically stored information it possesses. As indicated at the hearing, the dispute between the parties is mostly concerned with the production of the ESI, and who should bear the cost of its production. The electronic documents at issue are on a computer maintained by Ron Harris, and are organized in ten Microsoft Outlook folders. All of the documents in these ten “Myxer folders” have been extracted from Outlook, and organized into a Concordance database, and can be searched with search terms. Additionally, there are potentially responsive documents contained in Mr. Harris' sent and deleted email folders. However, the sent and deleted folders have not been entered into a database, due in part to the large number of documents contained in the folders and the fact that many—if not most—of the documents would be irrelevant to the underlying litigation. As a result, the entire dispute between the parties is centered on the electronic documents, all of which are contained on Mr. Harris' computer. II. ANALYSIS *2 Under Federal Rule of Civil Procedure 45, a court may quash or modify a subpoena if it (1) fails to allow a reasonable time for compliance; (2) requires a person who is not a party to travel more than 100 miles from where the person resides; (3) requires disclosure of privileged or protected matter; or (4) subjects a person to undue burden. FED. R. CIV. P. 45(c)(3)(A)(i)-(iv); Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 817–18 (5th Cir. 2004). The moving party has the burden of proof to demonstrate that compliance with the subpoena would be “unreasonable and oppressive.” Wiwa, 392 F.3d at 818. “Whether a burdensome subpoena is reasonable ‘must be determined according to the facts of the case,’ such as the party's need for the documents and the nature and importance of the litigation.” Linder v. Dep't of Defense, 133 F.3d 17, 24 (D.C. Cir.1998) (quoting Northrop Corp. v. McDonnell Douglas Corp., 751 F.2d 395, 407 (D.C. Cir.1984)). To determine whether compliance with the subpoena presents an undue burden, courts consider: (1) the relevance of the information requested; (2) the need of the party for the documents; (3) the breadth of the document request; (4) the time period covered by the request; (5) the particularity with which the party describes the requested documents; and (6) the burden imposed. Wiwa, 392 F.3d at 818. Further, if the person to whom the document request is made is a non-party, the court may also consider the expense and inconvenience to the non-party. Id. A court may find that a subpoena presents an undue burden when the subpoena is facially overbroad. Id. A. Motion to Compel Responses by HPP As mentioned above, Plaintiffs issued a subpoena to HPP, and HPP has failed to produce anything in response to this subpoena. According to HPP, its only connection to 1320 and Myxer is that HPP identified Myxer as a potential investment opportunity for its investors. HPP stated on the record that it does not possess any documents that are related to Myxer or 1320, as any documents that still exist that were created or received prior to the formation of 1320 were transferred to the custody of 1320 upon its creation. Thus, HPP states that it does not have possession, custody, or control over any documents responsive to request numbers 1, 2, 4, 5, 6, 7, 11, 12, 14, 15, and 16. HPP also asserts that there are no responsive documents to request numbers 8, 9, 10, 13, and 17, as HPP has never received anything of value from Myxer (Request No. 8), HPP did not invest in Myxer (Request No. 9), HPP has no indemnity agreement with Myxer (Request No. 10), HPP has no rights to participate in or control the operations of Myxer (Request No. 13), and HPP has not produced documents in connection with any prior litigation involving Myxer (Request No. 17). HPP states that the only responsive document in its custody, possession, and control is its organizational chart (Request No. 3), and that document is not relevant to any claims or potential claims at issue. The Court agrees, and will therefore sustain HPP's objection to Request No. 3. HPP is merely an equity investment firm that presented the prospect of investing in Myxer to its investor pool, and Plaintiffs have not shown how the organizational structure of HPP is relevant to any potential causes of action for contributory or vicarious infringement or to Plaintiffs' claims against Myxer. Accordingly, the Court will DENY the motion to compel as to HPP.[1] B. Motion to Compel Responses by 1320 *3 1320 challenges Plaintiffs' subpoena on several grounds. Specifically, 1320 objects to the requests by arguing that (1) many of the requests in the subpoena are overly broad; (2) Plaintiffs should be required to get Myxer's documents from Myxer; (3) five of the requests seek documents that are not relevant; (4) certain requests seek proprietary and confidential information; and (5) responding to the requests would create an undue burden on 1320. Notwithstanding these objections, the primary focus of the arguments at the hearing was on the burden that 1320 would suffer if forced to identify responsive documents in a pool of over 165,000 documents in the “sent” and “deleted” folders of Ron Harris' Outlook Express account, maintained on his computer at HPP. The parties did not base their arguments on individual requests, but instead addressed the objections globally, by general categories. For example, a good portion of the hearing was dedicated to e-mails 1320 or HPP may have exchanged with Myxer, and what categories or types of information contained within these e-mails is discoverable. This, however, appears to be a non-issue. In their reply, Plaintiffs specifically agreed that they would obtain Myxer documents from Myxer itself. See Pl. Reply (Clerk's Doc. No. 8, in A-09-CV-135 LY) at 4. The reply cites a letter from Plaintiff's counsel (Karen Thorland) to 1320's attorney, in which Ms. Thorland states: [A]fter discussions with Myxer's counsel in which Myxer has committed to producing email correspondence with its investors, Plaintiffs are now willing to proceed as follows. 1320 MV and Harris Preston & Partners, for now, may exclude email communications with Myxer from their respective productions. Appendix to Motion to Compel, Exh. O (Clerk's Doc. No. 2, in A-09-CV-135). In the letter, Ms. Thorland states that this agreement would obviate a claim of undue burden, “specifically, any claim that the requested discovery is burdensome because it calls for documents duplicative of those that will be produced by Myxer.” Id. Because Plaintiffs have committed to obtaining email communications between 1320 or HPP and Myxer from Myxer, the Court will not address any issues related to this category of documents, and will deny the motions to compel as moot to the extent they seek this category of documents. Thus, the focus of the Court's attention will be on any documents—other than communications with Myxer—that 1320 or HPP may have that are responsive to Plaintiffs' requests and discoverable under the Federal Rules of Civil Procedure. 1. Sent and Deleted Folders As noted above, the ten Myxer folders kept on Ron Harris' computer have already been loaded into a searchable database. The much larger set of “sent” and “deleted” emails have not. 1320 argued in its briefing that it would be too expensive to search for responsive documents in these folders, especially given the likelihood that relevant information would not be found in these folders. But counsel for 1320 conceded at the hearing that these two folders could be greatly reduced in size by using Outlook to search for emails sent to or received by the few individuals who Harris or HPP communicated with related to Myxer. Further, the fact that there is a need to do this search is largely the result of how Harris chose to handle Myxer-related communications after receiving notice to retain documents. Specifically, Harris testified that in March 2007, when he was instructed not to delete e-mails or other documents related to Myxer, the only thing he did to change his normal practices was to cease emptying his “sent” and “deleted” folders in Outlook. Thus, he continued to file e-mails that he deemed to be of “substance” in one of the ten Outlook folders mentioned earlier and continued to delete or to leave in the “sent” folder Myxer messages he deemed of no value. But to make sure that he did not erase any of the Myxer messages in the “sent” or “deleted” folders, he has not emptied those folders in over two years. The result is that those two folders now contain 165,000 documents, no doubt the vast majority of which are completely irrelevant to the dispute before the Court. Harris could have avoided this situation had he decided to simply create an eleventh Myxer-related Outlook folder, into which he could have filed all of the post-March 2007 correspondence on Myxer that he did not choose to retain for his own business purposes. By not segregating the Myxer messages from all of the other deleted and sent messages after March 2007, Harris created the very situation 1320 now contends creates a burden on it in responding to Plaintiffs' subpoena. *4 There is no dispute that these folders contain some Myxer-related documents. Further, as noted earlier, counsel for 1320 conceded at the hearing that these two folders could be greatly reduced in size by using Outlook to search for emails sent to or received by the individuals who Harris or HPP communicated with related to Myxer. Thus, the Court will order 1320 to take reasonable steps to reduce the number of potentially responsive documents in these two folders to those related to Myxer.[2] In doing this, 1320 does not have to locate email communications it had with Myxer, as Plaintiffs will obtain those documents from Myxer. But 1320 will still have to take steps to attempt to locate within the “sent” and “deleted” folders any documents or communications it or HPP exchanged with other third parties during the inquiry into the prudence of an investment in Myxer, as well as communications it had with its partner investors regarding the potential investment in Myxer, and communications it has had with the 1320 investors since the time of their investment. Similarly, any communications among HPP employees or directors about Myxer—both before and after the Myxer investment—must be included. The Court intends by this directive that 1320 will make a “first pass” over the “sent” and “deleted” folders to narrow the number of emails to those more likely to be responsive, by using Outlook or other methods that would not require a full blown, individualized review of these records. 2. Agreeing on Search Terms After 1320 collects this smaller universe of the sent and deleted email, those emails shall be entered into the same database which contains the other ten Myxer folders. The parties are then ORDERED to meet, confer and agree on search terms to use so that discoverable documents from these emails can be produced to Plaintiffs. To aid the parties in understanding what the Court determines to be discoverable, the Court will address the issues raised both in the briefing and at the hearing regarding 1320's and HPP's objections to the requests. Specifically, as noted earlier, 1320 contends that five requests seek irrelevant information, and it should not have to produce confidential information.[3] 1320 objects to request 15, contending that what HPP told its investors about the Myxer investment is irrelevant and thus not discoverable. The Court disagrees. In the Ninth Circuit, where the action is pending, a party is liable for contributory infringement where it had knowledge or reason to know of direct infringement and induces or materially contributes to the infringement. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1019–1020 (9th Cir. 2001). Plaintiffs contend that information HPP obtained in its due diligence investigations of Myxer, and the information HPP passed on to its investors, is discoverable, since it may discuss Myxer's business model and address potential copyright infringement liability, as that would have been something no doubt anticipated by Myxer and its investors. Plaintiffs argue that HPP's and 1320's internal discussions, research, and independent reasons for investing in Myxer (regardless of what Myxer may have told them) will shed light on both Myxer's and 1320's actual or constructive knowledge of infringement by Myxer, as well as any contribution by 1320 to such infringement. The Court agrees. Accordingly, 1320 must produce any documents addressing these issues. 1320 also objects to requests 7 and 13, which seek documents addressing the rights of 1320 to manage or control Myxer, and documents indicating Myxer's financial condition. With respect to the vicarious infringement claim, a party may be liable for vicarious copyright infringement where it has the right and ability to supervise or control the infringing activity and has a direct financial interest in the infringing activities. A&M Records, Inc., 239 F.3d at 1022. Plaintiffs argue that information related to the decision to invest in Myxer, and HPP's and 1320's communications with Myxer both before and after that investment, will shed light on the level of control and supervision of Myxer exercised by 1320, as well as 1320's financial interest in Myxer's business. The Court agrees and believes information related to these issues is relevant and discoverable. *5 1320 also objects to Plaintiffs' request number 3, which seeks information regarding the organization of 1320. The Court agrees that Plaintiffs have failed to demonstrate that this information is discoverable. This does not mean that Plaintiffs are not entitled to know who the investors of 1320 are, but rather only that however 1320 is structured does not appear to be probative of whether 1320 is liable for vicarious or contributory infringement, nor does it relate in any way to Plaintiffs' claims against Myxer in the underlying litigation. Another issue HPP and 1320 were concerned with is the sharing of confidential information. This issue was addressed the last time the parties were before the Court, so the Court will largely restate what it said before. In this case, there is a protective order in place, under which any party or third party responding to discovery may, at the time of disclosure, designate disclosed information as confidential. Civil cases often require the disclosure of trade secret information, and courts often utilize protective orders to protect such information. 1320 has offered nothing to show that these measures are inadequate to protect its confidential business information, or, to the extent 1320 might be in possession of it, Myxer's confidential business information. Accordingly, the Court does not believe that discovery can be withheld on the grounds that it is confidential business information. Rather, 1320 should utilize the procedures in the Court's protective order to protect any confidential business information it may have to disclose in discovery. Again, to make matters clear, the Court's intention is that 1320 will take initial steps to locate within the sent and deleted folders documents related to Myxer. Those documents will then be added to the searchable database containing the ten Outlook folders. The parties will then meet and reach agreements regarding the search terms that they will use to locate within this database those documents that would be responsive to the Plaintiffs' subpoena, as discussed above. The parties are far more knowledgeable regarding the details of this case than the undersigned, and are therefore much more able than the undersigned to know what terms to use for this purpose. The Court further expects that, as professionals acting in good faith and cooperatively, counsel will not need Court assistance on this aspect of the discovery. 3. Costs At the hearing, the parties both discussed the issue of who should have to pay the costs associated with collecting and reviewing 1320's documents. Not surprisingly, each party thought the other should have to pay. The Court believes that 1320 should have to pay the costs associated with narrowing the universe of sent and deleted emails, as this is necessary primarily because of Mr. Harris' archiving practices. As for the costs of entering the documents into the database with the ten Myxer folders, and searching those folders for responsive documents, the Court believes that Plaintiffs and 1320 should share the costs of this equally. Finally, any costs related to reviewing documents for privilege should be paid by 1320. SIGNED this 9th day of April, 2009. Footnotes [1] As noted, HPP testified that it transferred custody of all documents related to 1320 and Myxer to 1320, and 1320 likewise testified that these documents are in its possession. The notion that the custody of the documents changed hands from HPP to 1320 when 1320 was created is of course primarily a fiction, albeit one recognized by the law. It appeared from the hearing testimony that both before and after 1320 was created the vast majority of the documents were physically kept on Ron Harris' computer, where they remain today. Nevertheless, the evidence demonstrates that the entity that now controls those documents is 1320 and not HPP. As a result, HPP cannot be compelled to produce documents it does not possess or control, and the party the Court will focus on with regard to the documents—and hold responsible for producing them—is 1320. This means that the Court will not sanction any future claim by 1320 that any responsive documents are not in its control, but rather are in the control of HPP, or some related entity. [2] The most obvious of these would be to use Outlook to search by recipient or sender and to narrow the field to those persons HPP or 1320 knows would have been in the universe of people Harris or others communicated with regarding Myxer. By making this observation, the Court by no means intends to suggest that this is the sole method 1320 may—or should—employ to locate Myxer-related communications among the 165,000 documents in the “sent” and “deleted” folders. [3] The other objections raised by 1320, see supra at 5, have been resolved by the previous discussion.