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United States District Court, S.D. California

September 20, 2005.

NATIONAL UNITY INSURANCE COMPANY, a Texas Corporation, Plaintiff,

The opinion of the court was delivered by: WILLIAM McCURINE Jr., Magistrate Judge

On or about June 15, 2005, Plaintiff National Unity Insurance Company ("National")served a Subpoena Duces Tecum on third-party witness, Wells Fargo Bank ("Wells") calling for the production of financial records. On July 18, 2005, Wells filed a Motion for a Protective Order and Determination of Costs in Complying with Subpoena. On August 17, 2005, National filed an Opposition to Wells' Motion and Request for Monetary Sanctions as well as Evidentiary Objections. On August 25, 2005, Wells filed a Reply to National's Opposition and Request for Monetary Sanctions. On August 29, 2005, National filed a Motion to Strike the Reply. On September 14, 2005, the parties communicated telephonically with Judge McCurine through his law clerk regarding this dispute. Also on September 14, 2005, Wells provided supplemental documentation requested by the Court. The Court has carefully considered and reviewed all of the above-listed papers along with all supporting documents. Based upon the papers submitted in this case, and for the reasons set forth below, the Court DENIES National's Request to take Judicial Notice, DENIES National's Motion to Strike the Reply, DENIES National's Request for Monetary Sanctions, GRANTS Wells' Motion for Protective Order and GRANTS Wells' Request for Determination of Costs.



  On January 21, 2004, National filed this action for declaratory relief regarding its duty to defend and indemnify the Defendants Karla Lopez, Lopez & Dukes Trucking, Jose Carlos Lopez Ruiz, Saul Medrano, Evangelina Lopez, and Cynthia Dukes (collectively, "Defendants") in an underlying state court action. The underlying action was filed on March 7, 2003 by an individual who suffered serious personal injuries as a result of an accident involving one of Defendants' trucks that is not listed on an insurance policy National issued to Defendants. National contends it owes no duty to Defendants and is entitled to reimbursement of defense costs and indemnity payments because the insurance policy National issued covers only vehicles stored in Mexico and (subject to the policy's terms and conditions) protects the insured only during international trips within a geographically limited area north of the United States-Mexico border. National believes that Defendants made material misrepresentations to procure the subject insurance policy, including the statement that Defendants' business was based in Mexico and the insured truck was stored in Mexico.



  A. Judicial Notice

  National asks the Court to judicially notice (1) The United States House of Representatives Report No. 91-975, (2) Wells' Annual Report for fiscal year 2004 filed with the United States Securities & Exchange Commission, (3) the cases filed by Wells Fargo in Federal courts since the approximate date of service of the subpoena at issue, and 4) 31 C.F.R. § 103.34.

  B. Motion to Strike

  National brings a Motion to Strike Wells' Reply asserting various arguments. First, National states that Wells' Opposition demonstrates that it lied about the existence of a Federal Court decision substantiating its charges.*fn1 (Mot. To Strike at 2.) Second, National states that Wells' Reply and supporting papers are untimely as National received the papers two days late according to its calculation. (Id. at 3.) Third, National asserts that the evidence submitted demonstrates that it is the business policy of Wells to fail to meet time requirements set by Federal Rule of Civil Procedure 45. (Id. at 3-4.) Lastly, National states that Wells is being untruthful regarding its comments about the Arizona State Bar complaint. (Id. at 4-5.)

  C. Sanctions

  1. National's Arguments

  National claims that Wells' conduct regarding this discovery dispute has been inappropriate. "National Unity will spend $12,000 opposing the motion. The court will spend more than the amount requested by Wells Fargo to review the papers and issue a ruling. National Unity could have paid the $1,700 and obtained the documents, but if that had occurred Wells Fargo's conduct in this case would never get examined by a judge." (National's P.&A. at 2.)

  National claims that Wells refused a reasonable amount*fn2 offered by National. (Id.) National believes that Wells is wrongfully profiting from litigants in need of bank documentation. "Wells Fargo's apparent business policy is to demand unreasonable amounts from litigants to process subpoenas, refuse to explain or substantiate its charges and make questionable representations about the rulings of other courts — all in the name of turning its obligations under Rule 45 into another profit center for the bank." (Id.) National suggests that Wells Fargo has no method of determining reasonable costs. (Id. at 6.) "Wells Fargo was apparently willing to negotiate its compensation as if the parties were purchasing a used car and not attempting to comply with a Federal subpoena." (Id.) National also believes that Wells has been untruthful in claiming that another Federal Court had approved of its charges. (Id. at 9.)

  National argues that Wells has no reason to fail to comply with the deadline set in the Subpoena. (Id.) "If Wells Fargo, a company with a 2004 net income of $7 Billion, does not have enough employees to comply with Federal law, it must hire more employees not bring frivolous motions for protective orders." (Id.)

  National also believes that a lay employee of Wells has engaged in the unauthorized practice of law. (Id. at 4-5.) "Mr. Jay faxed a letter to National Unity's counsel which purported to be an objection to the subpoena pursuant to Federal Rule of Civil Procedure 45(c)(2)(B)." (Id.)

  National concludes that Wells should be sanctioned in the amount of the costs National incurred in the meet and confer process and opposing Wells' Motion for lying about the fact that other courts have approved its subpoena processing charges, filing a frivolous Motion for Protective Order, not timely responding to the Subpoena, and not timely objecting to the Subpoena. (Id. at 23-24.) For these reasons, National feels that its request that Wells be sanctioned in the amount of $11,430 is justified. (Id. at 24.)

  2. Wells' Arguments

  Wells claims that National blames it for protecting itself from threats of applications for contempt. (Reply at 1.) "This is hardly sanctionable conduct and, contrary to National's contention, Wells' request for reimbursement is authorized by law." (Id.) Further, Wells points out that "National calls Wells' employees and its counsel `liars' without any factual basis, wildly speculates that Wells runs a profit center on subpoena requests, also generalizes and speculates about Wells' business policies in connection with subpoenas." (Id.) Additionally, Wells believes that National involved two state bars needlessly for the purpose of gaining leverage in negotiations regarding this dispute. (Id.)

  In response to the accusation that responding to subpoenas is a profit center for it, Wells explains that it loses approximately $2.5 million each year in responding to subpoenas. (See Decl. of Smith, pg. 2.) Wells explains in great detail the process it must go through to respond to subpoenas similar to the one in question. (See Id., pgs. 2-4.) Regarding the alleged misconduct on the part of Mr. Jay, Wells notes that The State Bar of Arizona has rejected the complaint and closed the file accordingly. (Id. at 5.) Responding to the complaint that Wells did not comply with the deadline set in the Subpoena, Wells states that it should have been provided with more than twelve days to respond. (Id.) Through the letter of Mr. Jay, Wells believes that it made a timely objection to National's Subpoena. (Id.) Wells continues that National's implications that one must hire an attorney to objecting to discovery is absurd. (Id.)

  D. Protective Order

  1. Wells' Arguments

  Wells claims that "a protective order is necessary because Wells requires an extension of time to comply with documents requested in the Subpoena, and is also entitled to an order protecting it from incurring significant expense resulting from the inspection and copying." (Wells' P.&A. at 1-2.) Wells does not object substantively to the documents requested although it feels that it was provided with insufficient time to comply. (Id. at 1.)

  a. Time for Compliance

  Regarding the request for additional time to comply, Wells explains that it "processes over 22,000 subpoena requests per year, and often receives requests for priority in matters involving national security, terrorism, and criminal cases." (Id. at 3.) The Subpoena called for the production of the documents twelve (12) days after it was served.*fn3 Additionally, Wells points out that it assigns priority to requests pursuant to Court Orders. (Id.)

  Wells points out that National threatened to file applications for contempt although Wells repeatedly informed National that it could not comply with the deadline. (Reply at 1.)

  b. Cost of Compliance

  Wells' initially responded to the Subpoena by informing National that its "fee for producing those records were $2.00 per item, and $25.00 per hour for research and copying time." (Id. at Ex. B.) Wells also reiterated to National that the Subpoena requested 1, 340 specific items to be retrieved from the archives. (Id.) Wells acknowledges that as of July 12, 2005, National limited production so as to reduce the number of items to 1, 043. (Id. at 4.) At this time, Wells reduced it demand to $1.68 per item. (Id.)

  Wells claims that it "is entitled to reimbursement of expenses, including attorneys' fees and costs in complying with the Subpeona."*fn4 (Id. at 7.) Wells emphasizes that the determination of what is a significant cost does not depend on the non-party's ability to pay. (Id.)

  According to the Declaration of David Smith, Wells calculates the cost of complying with the Subpoena request as $2,730.00. (Id. at 8.) Alternatively, if National limits its request to items after January 1, 2000, it calculates its cost of complying with the Subpoena as $1,752.24. (Id.) "The actual cost to Wells of reproducing microfilm records is calculated to be $1.68 per item."*fn5 (Id.) Wells explains that this amount does not cover all the subpoena-processing department's expenses in complying with the request. (Id.)

  2. National's Arguments

  a. Time for Compliance

  National claims that Wells has never properly or timely objected to the subpoena although it continues to hold the requested documents.*fn6 (National's P.&A. at 4.) National believes that it did not set an unreasonable or illegal compliance date. (Id.) National indicates that it considers the statement that Wells gives priority to subpoenas directed to national security and terrorism investigations offensive. (See Id. at 6.) It concludes that any objection*fn7 to the time for compliance made was untimely. (Id. at 5.)

  b. Cost of Compliance

  In order to resolve the dispute, National offered to pay Wells $15.00 per hour as well as $.25 per page for copies. (Id.) National explains that it made such an offer to avoid involving the Court although it does not believe that Wells is entitled to any compensation. (See Id.) Further, National states that since federal law requires Wells to maintain the designated documentation, it will not incur any additional cost in responding to the Subpoena. (Id. at 11.) Finally, National claims that Wells has not carried its burden of proving undue burden and expense in responding to the Subpoena. (Id. at 18.)



  A. Judicial Notice

  Federal Rule of Evidence 201


(a) Scope of Rule. This rule governs only judicial notice of adjudicative facts.
(b) Kinds of facts. A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.
(d) When mandatory. A court shall take judicial notice if requested by a party and supplied with the necessary information.
B. Sanctions

  1. Authority

  Federal courts have the inherent authority to enforce compliance with their orders. Gompers v. Buck's Stove & Range Co., 221 U.S. 418, 31 S.Ct. 492, 501 (1911); Gifford v. Heckler, 741 F.2d 263, 265 (9th Cir. 1984). The power to hold a person in contempt is given by statute:

A court of the United States shall have power to punish by fine or imprisonment, at its discretion, such contempt of its authority, and non other, as —
(3) Disobedience or resistance to its lawful writ, process, order, rule, decree, or command.
18 U.S.C. § 401. The Court has wide latitude in determining whether a party has acted in contempt of its orders. Gifford v. Heckler, 741 F. 2d 263, 266 (9th Cir. 1984). The civil contempt power exists to permit the Court to deal with two situations. First, it allows the Court to coerce a noncomplying party to comply with Court orders. Second, the Court may use its civil contempt power to force a disobedient party to compensate innocent parties for the damages caused by its noncompliance with the Court's orders. General Signal Corp. v. Donallco, Inc., 787 F.2d 1376, 1380 (9th Cir. 1986) (citing case). 2. Elements

  There are three elements necessary for a showing of civil contempt. First, there must be a valid court order that is clear in its commands. Balla v. Idaho State Board of Corrections, 869 F.2d 461, 465 (9th Cir. 1989) (court order must be "specific and definite"). Second, there must be actual notice to the parties of the terms of the order. Fed.R.Civ.P. 56(d). Third, the party must have violated the order. General Signal Corp., 787 F.2d at 1379; U.S. v. Rylander, 656 F.2d 1313, 1318 (9th Cir. 1988), 492 U.S. 906 (1989); Perry v. O'Donnell, 759 F.2d 702, 705 (9th Cir. 1985); Donovan v. Mazzola, 716 F.2d 1226, 1240 (9th Cir. 1983).

  3. Possible Sanctions

  Local Rule 83.1 (a) states that failure of counsel or any party to comply with an order of the court "may be ground for imposition by the court of any and all sanctions authorized by statute or rule or within the inherent power of the court, including, without limitation, dismissal of any actions, entry of default, finding of contempt, imposition of monetary sanctions or attorneys' fees and costs, and other lesser sanctions." Local Rule 83.1 (b) states that the court may order monetary sanctions to be paid to the nonappropriated fund of the court.

  C. Protective Order

  Federal Rule of Civil Procedure 26 (c)) states that upon motion by a party or by the person from whom discovery is sought, the Court may issue an Order to protect a party from annoyance, embarrassment, oppression, or undue burden or expense as justice so requires as long as two requirements are met. First, the motion must be accompanied by a certification that the movant has, in good faith, conferred or attempted to confer with other parties in an effort to resolve the dispute with no court action. Fed.R.Civ.P. 26 (c)). Second, the movant must demonstrate good cause for the protective order. Id.

  D. Determination of Costs

  Federal Rule of Civil Procedure 45 (c)(2)(a) states that a person not a party or an officer of a party will be protected from significant expense resulting from inspection or copying demands. V.


  A. Judicial Notice

  As noted above, National requests that this Court take judicial notice of four (4) items. This Court will not take judicial notice of any of the submitted documentation as they have no relevance to the present dispute.

  1. United States House of Representatives Report No. 91-975

  Nothing in the United States House of Representative Report No. 91-975 ("Report") speaks to a bank's absorption of production costs. The Report concerns the requirement of insured banks to maintain certain records. The requirement to maintain certain records does not eliminate any costs of production of documentation.

  2. Wells' Annual Report for fiscal year 2004 filed with the United States Securities & Exchange Commission

  Wells' annual report for any fiscal year has no relevance to the present dispute. Clearly, National requests this Court to judicially notice the annual report in order to show that Wells is financially able to absorb the costs of production. Wells' financial ability to pay does not require it to do so.

  3. Cases filed by Wells in Federal Courts Since Date of Subpoena

  This Court is not concerned with the number of cases Wells has filed in Federal Courts since the date of the Subpoena as they have no bearing on the current dispute.

  4. 31 C.F.R. § 103.34

  31 C.F.R. § 103.34 pertains to additional documents to be made and retained by banks. For the same reasons discussed in section "I" of this discussion, this is irrelevant to the present dispute.

  For the reasons discussed above, National's request for the Court to take judicial notice of the above-listed items is hereby DENIED.

  B. Sanctions

  As discussed above, National believes that Wells should be sanctioned monetarily because Wells allegedly lied about another District Court having validated the $1.68 charge per copy, filed a frivolous Motion for Protective Order, not timely responding to the Subpoena, and not timely objecting to the Subpoena.

  First, Wells has produced the Order from a District Court in Arizona validating the $1.68 charge as noted above. It would have been wise for Wells to have given National a copy of the Order when asked. Wells has not given any explanation as to why it did not turn over the requested Order earlier. Second, Wells' Motion for Protective Order is not frivolous. Due to all that had taken place up to the filing of the Motion as discussed throughout this Order, Wells was justified in having concerns about being properly reimbursed. Wells had no reason to believe it would be properly reimbursed if it did not involve the Court. Next, Wells did not timely respond to the Subpoena because of the present dispute. Wells was waiting for word from the Court before providing the documentation. Due to the urging of National, Wells produced the documentation with the understanding that National would pay any costs the Court ordered. Such behavior is not sanctionable as Wells never took the position that it would not provide the requested documents. Lastly, Wells employee, Mr. Jay, sent a letter objecting to the request. National was aware of the objections before the responses were due. Although the objection was not formal or done through an attorney, this Court will not sanction a party for failing to meet all standard formalities. This is especially true in this case since Wells has made it clear throughout this period that it was willing to comply with the Subpoena.

  This Court finds no reason to sanction Wells for its conduct.

  C. Motion to Strike

  As discussed earlier, National brings a Motion to Strike the Reply because Wells has been untruthful about the State Bar complaint and has a business policy to fail to meet time requirements.

  First, this Court notes that the State Bar complaint has no bearing on the actual dispute presently before the Court. The matter need not have appeared in any of the papers pertaining to this dispute. The commentary provided by both parties has been left out of the Court's analysis. Next, this Court finds the statement that it is Wells' business policy to fail to meet time requirements a gross and irresponsible exaggeration. After careful examination of the papers, nothing indicates that Wells has such a policy and it is only National's manipulation of Wells' statements that results in such a conclusion. Finally, this Court notes that National complains that Wells' Reply is one day late according to its calculation. This Court finds that although Wells' Reply was untimely, it will not be stricken. National's papers contained a multitude of accusations and insults to which this Court finds it reasonable to allow Wells to respond. Further, the Court requested further documentation regarding the dispute from the parties even after the date of the Reply. Therefore, justice does not require the striking of the document.

  D. Protective Order

  The Court finds that Wells has fulfilled all the elements required to obtain a Protective Order. Wells properly brought forth a Motion for a Protective Order out of concern that it might have to absorb the costs of the requested copies.*fn8 The Court cannot say that its concern that National would not properly reimburse it was unreasonable. Through the Motion for a Protective Order and other papers submitted by both parties, it is undisputed that Wells attempted in good faith to confer with National in an attempt to resolve the dispute with no court action. Wells attempted to discuss both the deadline for compliance with the Subpoena and its charge for each copy. It is also undisputed that National originally requested approximately 1,340 items. It later limited its request to 1, 043 items. This Court finds that either of these numbers of items constitutes good cause for a Protective Order regarding the costs of production. Wells is not a party to this action and National requests a significant number of items to be retrieved and produced for its own litigation. This Court will not require Wells to absorb such costs as they constitute undue expenses. Therefore, Wells' Motion for a Protective Order is hereby GRANTED.

  E. Determination of Costs

  As this Court grants Wells' Motion for a Protective Order, Wells' request for a Determination of Costs is also GRANTED. As discussed above, Wells has provided a detailed description of the process it must go through to comply with the Subpoena.*fn9 This Court accepts Wells' calculation of costs that results in the $1.68 demand. Further, this Court notes that an Arizona District Court has found the $1.68 per item a proper reflection of Wells' actual cost of production.*fn10



  For the reasons discussed above, this Court DENIES National's Request for Judicial Notice, DENIES National's Request for Sanctions, DENIES National's Motion to Strike, GRANTS Wells' Motion for Protective Order, and GRANTS Wells' Request for a Determination of Costs.

  Therefore, National will reimburse Wells for the documents produced at the rate of $1.68 per copy. Wells is not entitled to any reimbursement above that amount. The reimbursement must be received in full on or before October 7, 2005.



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