*1 This case has been referred to the undersigned by the Honorable Elizabeth A. Wolford, pursuant to Section 636(b)(1) of Title 28 of the United States Code, for the determination of all pretrial matters. (Dkt. No. 42) In this lawsuit, plaintiffs allege that defendants engaged in an unlawful price fixing scheme within the caustic soda industry in violation of the Sherman Act. See 15 U.S.C. § 1. The parties are currently engaged in discovery.

On November 4, 2021, the direct purchaser plaintiffs (“DPPs”) moved for a protective order pursuant to Federal Rule of Civil Procedure 26(c)(1), limiting the scope of subpoenas served by defendants on twelve non-party distributors of caustic soda. (Dkt. No. 351) Defendants filed a response in opposition (Dkt. No. 360), DPPs filed a reply (Dkt. No. 372), and the Court heard oral argument on December 2, 2021. For the following reasons, DPP's motion for a protective order is denied.[1]

Rule 26(c) of the Federal Rules of Civil Procedure provides that a court may, for good cause shown, issue an order forbidding or limiting discovery “to protect a party or person from annoyance, embarrassment, oppression or undue burden or expense.” See Fed. R. Civ. P. 26(c)(1). Here, DPPs concede that the non-party distributors possess information both relevant to this lawsuit and discoverable by defendants.[2] Moreover, similar or related documents have already been produced by the non-party distributors in response to subpoena requests from the indirect purchaser plaintiffs (“IPPs”). DPPs argue, however, that the electronic search terms proposed by defendants in the instant subpoena requests are far too broad and would place an undue burden and undue expense on the distributors. DPPs also argue that the distributors should not be required to produce communications and agreements between themselves and defendants, because this material is already in defendants’ possession.

*2 DPPs’ concerns as to the scope of the subpoenas served on the non-party distributors may well be accurate. Indeed, the electronic search terms proposed by defendants appear to be broad. Some of the terms, including those related to chemicals or substances other than caustic soda, may produce large amounts of irrelevant information and should potentially be limited. It may also be the case that requests for communications between distributors and the parties to this action should be more narrowly tailored, or that non-party distributors should not be required to produce information or communications already in the possession and control of defendants.

However, the Court finds that the appropriate parties to challenge the scope of the document requests in the subpoenas are the non-party distributors. The non-parties here are sophisticated businesses, not individuals lacking in finances or corporate knowledge. Indeed, many of the non-party distributors appear to be large, highly profitable companies with significant financial, legal and electronic resources. Defendants indicate that all but one or two of the non-party distributors have already retained counsel in connection with the subpoena requests. In fact, three of the distributors hired the same experienced antitrust counsel who represents DPPs, and that attorney has been actively negotiating with the parties to narrow the scope of the document requests in both the indirect and direct purchaser actions. Many distributors have already produced responsive documents with respect to both the instant subpoenas and those served by the IPPs. In addition, defense counsel indicates that productive meet and confer sessions were ongoing between defendants and many of the non-party distributors as to the scope of the subpoena requests when the instant motion was filed.[3] Thus, the Court finds that it does not make sense to issue a protective order at this juncture, upon the sole request of DPPs, when the actual subpoenaed parties have not sought relief, and many are still actively negotiating the terms of their document production. Should these negotiations ultimately prove unsuccessful, any of the non-party distributors may apply to this Court to quash or limit the subpoenas. If motions to quash are made by any distributors, the Court intends to seek input from DPPs before ruling, specifically regarding relevancy and search terms.[4]

*3 Further, the Court finds that denying the request for a protective order and allowing defendants to continue ongoing discussions with non-party distributors is the most efficient use of judicial resources. Significantly, DPPs note that their motion for a protective order does not waive each individual distributors’ right to challenge the subpoena on any applicable grounds, including overbreadth. In other words, a ruling as to the instant motion would not answer ail potential objections to the subpoenas. Therefore, it makes little sense for the Court to rule on issues of undue burden and relevancy now, only to potentially be required to revisit these same arguments in a subsequent motion to quash brought by the distributors. Moreover, the distributors themselves are in the best position to raise arguments of undue burden, since they have first-hand knowledge of their record-keeping, electronic capabilities, staffing, and other resources.[5]

DPPs also argue that requests seeking information about the non-party distributors’ sales of caustic soda to customers are improper because “downstream discovery” is generally disfavored in direct purchaser antitrust actions. Subpoenas issued under Rule 45 of the Federal Rules of Civil Procedure are subject to Rule 26(b)(1)’s overriding relevancy requirements. See Medstar Health, Inc., v. Beton Dickinson & Co., 09-MC-6027, 2009 U.S. Dist. LEXIS 126196) (WDNY 2009). Rule 26 permits discovery of any “nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” See Fed. R. Civ. P. 26(b)(1).

The Court is not convinced that the downstream requests are irrelevant here. IPPs purchased caustic soda from distributors, and the distributors’ transactional data has already been produced pursuant to the IPPs’ subpoenas. Additional downstream data, including the distributors’ interactions and communications with the indirect purchasers of caustic soda, is relevant to the indirect purchaser action. Downstream data may also be relevant to the direct purchaser action. The disputed document requests seek contracts between distributors and their suppliers; distributors’ communications with market analysts, customers, and suppliers; and distributors’ analysis and tracking of caustic soda prices, purchase decisions, sales of caustic soda and pricing negotiations. Defendants represent that the distributors here are large players in the caustic soda market and that each act as both buyers and sellers of the chemical. Thus, the requested documents are likely relevant to issues such as the characteristics and pricing of the caustic soda market; the extent of competition from distributors and their ability to impact defendants’ pricing; the supply, demand, and discounting for caustic soda as well as other industry characteristics; and potential class wide damages. Moreover, defendants contend that the distributors are a large portion of the putative class, and that variations both internally between distributors and between distributors and other potential class members are relevant to questions of typicality in class certification. Here, the distributors apparently both purchased caustic soda from defendants and sold it back to other class members. This business model may raise questions as to whether distributors benefitted from a price fixing conspiracy and have conflicting interests from other potential class members. See In re Urethane Antitrust Litigation, 237 F.R.D. 454, 462-63 (D. Kan. 2006) (finding that downstream discovery is permitted when it directly bears on class certification issues).[6]

*4 Finally, the Court noted during oral argument that it has taken an inclusive approach to discovery in this case, and that it previously allowed plaintiffs significant leeway with respect to broad discovery requests. The Court sees no reason not to apply the same principals here. See Fed. R. Civ. P. 26(b)(1) (“Relevant information need not be admissible at trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence”).

For the foregoing reasons, DPPs’ motion for a protective order is denied. (Dkt. No. 351) Defendants are directed to continue to meet and confer with non-party distributors regarding the subpoena requests and are encouraged to involve plaintiffs in those negotiations when appropriate. On or before December 29, 2021, the parties are instructed to file either individual status reports or a joint status report. The parties should report on the status of the subpoena responses, including whether it is anticipated that motions to quash will be filed by any of the non-party distributors.

SO ORDERED.

Dated: December 7, 2021

Buffalo, New York

The Court notes that defendants have raised valid questions as to whether DPPs have standing to bring a motion for a protective order in connection with subpoenas served on non-parties. See Langford v. Chrysler Motors Corp., 513 F.2d 1121, 1126 (2d Cir. 1975) (“[A] party usually does not have standing to object to a subpoena directed to a non-party witness.”); US Bank National Association v. PHL Variable Insurance Co., 12 Civ. 6811, 2012 WL 5395249 (SDNY Nov. 5, 2012) (finding that defendant lacked standing to challenge subpoena served on non-party, and noting that “it would be peculiar indeed if a party could circumvent the well-established standing requirements under Rule 45 simply by styling what is effectively a motion to quash as a motion for a protective order.”). However, even assuming DPPs have standing, the motion should still be denied for the substantive grounds stated herein.

DPPs do not seek a protective order prohibiting all discovery from non-party distributors. The subpoenas served on the distributors contain a total of 13 document requests. DPPs do not object to distributors complying with Request Nos. 2, 3, 8, 9, 10 and 11. Instead, DPPs object only to Request Nos. 1, 4-7, and 12-13.

Because the subpoenaed parties here are solvent businesses and not individuals, the Court finds this scenario distinguishable from cases, cited by DPPs, in which courts more strictly limited discovery from absent individual class members. The concern in many of those cases was that individuals may opt out of a class action rather than be forced to retain counsel or comply with onerous discovery requests. See Fishon v. Peolton Interactive, Inc., 336 F.R.D. 67, 69 (SDNY 2020) (“As a practical matter, courts must be careful to avoid the in terrorem effect of extensive absent class member discovery, creating the risk that absent class members could proactively choose to opt out of the class action for fear that if they do not do so, they will be subjected to vexatious or at least burdensome discovery practice.”) In contrast here, most of the non-party distributors have already retained counsel for purposes of both the direct and indirect purchaser antitrust lawsuits, and many are already in the process of complying with or negotiating about the subpoena demands.

Also, should any of the non-party distributors lack the resources to hire counsel, the Court may handle these issues on an individual basis. As noted by defendants, it is likely the burden of responding to the subpoena requests would not fall as heavy on smaller business entities, since they presumably would have less documents to search and review.

DPPs include, in support of their motion for a protective order, affidavits from employees of four distributors. These employees generally indicate that defendants’ requests are unduly burdensome because of the enormous number of documents involved and the time and staffing that would be needed to conduct the necessary searches and document reviews. However, none of the affiants even attempted to conduct any searches using the targeted electronic search terms proposed by defendants, nor did they account for searching the files of only certain agreed-upon custodians, as proposed by defendants. Thus, the Court finds that these affidavits do not provide an accurate measure of the burden on non-party distributors in complying with the document requests.

For these reasons, the Court does not conclude, based on the information presented here, that the downstream requests are irrelevant. However, should the non-party distributors ultimately move to quash the subpoenas, the non-party distributors would not be precluded from arguing relevancy as to any of the disputed requests, and DPPs could also raise relevancy arguments at that time as well.