Update: District Court Sets Aside $300,000 Apple Sanction
week, we wrote that Apple found itself in hot water when a federal magistrate
imposed a $300,000 sanction against the company for failing to meet a Rule 45
(third-party subpoena) document production deadline in the Federal Trade
Commission’s (“FTC”) case against Qualcomm Inc. In the sanction order, the
magistrate cited a similar sanction against Samsung for untimely document production
to Apple in an unrelated suit, Apple Inc.
v. Samsung Elecs. Co., No. 11-CV-01846 (N.D. Cal. Apr. 23, 2012) [ECF No.
Apple appealed the sanction to the district court, arguing: 1) it was a
non-party and could only be sanctioned for contempt under Rule 45(g) of the
Federal Rules of Civil Procedure; and 2) the magistrate failed to consider
whether Apple had taken all reasonable steps within its power to meet the production
deadline. Qualcomm countered that Apple could hardly be considered an uninterested
third party since it had its own related lawsuit against Qualcomm. Further,
Qualcomm alleged that Apple dragged its feet in producing the documents.
The district court came down on Apple’s side and set aside the sanction.
But the ruling was narrowly tailored and leaves open the possibility for
further sanctions against Apple on remand. The district court clarified that
the sanction against Samsung in Apple v.
Samsung was based on Rule 37 of the Federal Rules of Civil Procedure, which
applies only to parties, whereas Apple in this case is a third party responding
to a Rule 45 subpoena. Since Apple is a non-party, Rule 37 does not apply. The
district court did not “opine on the propriety of a sanction or the amount of
any sanction,” but merely ruled that the magistrate’s “source of authority for
the sanctions order is unclear.” See
Order Granting Apple’s Mot. For Relief at 2-3, FTC v. Qualcomm Inc., Case No. 5:17-cv-00220 (N.D. Cal. Feb. 7,
2018). Ultimately, the district court set aside and remanded the sanctions
While Apple has dodged a bullet for now, the magistrate could still
impose sanctions if he finds proper authority to do so on remand. Under Rule 45(g),
the court “may hold in contempt a person who, having been served, fails without
adequate excuse to obey the subpoena or an order related to it.” If the
magistrate finds there was no “adequate excuse” for missing the document
production deadline, Apple could soon be facing the same sanction again.
Unfortunately, the decision leaves high-tech companies with little
guidance as to their responsibilities when they receive a third-party document
production subpoena. Whether or not the magistrate subsequently imposes
sanctions against Apple, and whether those sanctions are upheld, will hopefully
shed more light on the issue.
We will monitor the case and keep you updated on any developments.