Update: District Court Sets Aside $300,000 Apple Sanction
Last 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. 880].
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 order.
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.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.