Non-Party Sanctioned by Special Master for Recalcitrance in Responding to Subpoena

The non-party recipient of a Rule 45 subpoena in In re Intel Corp. Microprocessor Antitrust Litig., 2007 LEXIS 97229 (D. Del. Dec. 13, 2007) was found by the Special Master to have engaged in obstruction and other misconduct in responding (or, more precisely, failing to respond) to a subpoena. The misconduct included:

1. Taking the position that its data is a trade secret and shall not be produced, while maintaining that they are easily obtained from the sources." ***

2. Refusing to comply with the subpoena until it was narrowed, while at the same time refusing to provide either a data sample or a description of the data fields in question. ***

3. Taking the position that the Class Plaintiffs had to "verify" whether any of them had purchased a Intel based computer from Fry's [the recipient of the subpoena].

4. Participating in the process that led to the entry of the Protective Order that was entered in this case..., invoking the protection of the Protective Order for its meet and confer correspondence ...and then taking the position that the Protective Order did not apply to the production of Fry's data***.

5. Taking the position that it did not have to produce the data because the Class Plaintiffs were seeking the same data from other nonparties.

Fed.R.Civ.P. 53 governs special masters, and Rule 53(c)(2) authorizes the master to impose sanctions:

Sanctions. The master may by order impose on a party any noncontempt sanction provided by Rule 37 or 45, and may recommend a contempt sanction against a party and sanctions against a nonparty. [Emphasis added.]

The Special Master held that the conduct described above was sanctionable not under the powers specified in the Rule but under the inherent power of the court. The Special Master further held that inherent power sanctions were awardable on a showing of willfulness that did not necessarily rise to the level of bad faith, quoting the Third Circuit’s decision in Republic of Philippines v. Westinghouse Elec. Corp., 43 F.3d 65 (3d Cir. 1995):

Although we stated in Landon v. Hunt, 938 F.2d 450 (3d Cir. 1991), that "a prerequisite for the exercise of the district court's inherent power to sanction is a finding of bad faith conduct" (id. at 454), that statement should not be read to require a finding of bad faith in every case, regardless of the sanction contemplated. Landon addressed the propriety of assessing attorneys' fees against a litigant; thus, we followed the Supreme Court's decision in Chambers, which also involved assessment of attorneys' fees. Landon, 938 F.2d at 454. Under the American Rule, attorneys' fees ordinarily may not be shifted to a losing party. However, the Court in Chambers had relied on an exception to that rule allowing fees to be shifted when the losing party exhibited "bad faith." Chambers, 501 U.S. at 45-46, 111 S.Ct. at 2133. As Justice Scalia pointed out in his dissent, however, the fact that fee-shifting as a sanction requires a finding of bad faith "in no way means that all sanctions imposed under the courts' inherent authority require a finding of bad faith." Id. at 59, 111 S.Ct. at 2140. Thus, a court need not always find bad faith before sanctioning under its inherent powers: "[s]ince necessity does not depend upon a litigant's state of mind, the inherent sanctioning power must extend to situations involving less than bad faith." Id. Subpoena recipient ordered to pay half of the cost of the Special Master in resolving the dispute.

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