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Home / Expert Opinion / Advocate's View / Advocate’s View: COA gives meaning to ‘control’ in document discovery

Advocate’s View: COA gives meaning to ‘control’ in document discovery

Jeremy M. Sher

Jeremy M. Sher

CPLR Article 31 governs the production of documents in a person’s “possession, custody or control,” CPLR 3111 (production of materials at deposition); CPLR 3120(1)(i) (production in response to a notice to produce or subpoena duces tecum). A person responding to a discovery demand (“Responding Party”) is not required to produce documents outside its possession, custody or control, Orzech v. Smith, 12 AD3d 1150, 1151 (4th Dept. 2004). Whether a document is in a Responding Party’s possession, custody or control is a threshold issue in determining if the document must be produced.

The definitions of “possession” and “custody” are self-evident. For example, an individual has possession or custody of documents maintained on his personal computer or in a storage locker. However, until a recent Court of Appeals decision, it has been difficult to determine what “control” means in New York practice.

The CPLR does not define “control,” and New York case law interpreting the term is sparse. I learned this when a Responding Party claimed it did not have to produce financial documents located in its accountant’s office. Another Responding Party argued that records concerning a slip-and-fall on its property were not discoverable because they were located in its security provider’s office.

These Responding Parties did not contend they were unable to access or obtain the requested documents. Instead, they claimed that the documents were not discoverable because they happened to be in the office of a separate entity, even though that entity worked for the Responding Party. These Responding Parties did not have the documents within their possession or custody, but arguably had them within their control.

I expected to find New York case law rebutting these arguments against production, but my research yielded little. A short Fourth Department decision held that a Responding Party had to produce materials concerning an audit because the auditor was the Responding Party’s agent or employee, Main Place Pharm. Corp. v. Cent. Buffalo Project Corp., 55 AD2d 1007, 1007 (4th Dept. 1977).

An even older and shorter First Department case held that a Responding Party’s objection to producing documents outside his possession was inadequate, because the Responding Party did not establish that the documents were also outside his custody and control, Fugazy v. Time, Inc., 24 AD2d 443, 444 (1st Dept. 1965). Absent from these cases, or any other New York decisions I could find, was a definition of “control” establishing when a Responding Party must produce documents in another entity’s hands.

Responding Parties in federal cases also must disclose relevant and non-privileged materials within their possession, custody or control, Fed. R. Civ. P. 26(a)(1)(A)(ii) (initial disclosures of materials that may be usable to support claims or defenses); Fed. R. Civ. P. 34(a)(1) (document requests); Fed. R. Civ. P. 45(a)(1)(A)(iii) (subpoenas). In contrast to state courts, several federal courts have addressed the meaning of “control” in the discovery context.

The U.S. Supreme Court considered the meaning of “control” with respect to document requests more than 50 years ago, Societe Internationale pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 US 197 (1958). The U.S. government sought production of banking records in connection with a Swiss company’s efforts to recover assets that the government had seized under the Trading with the Enemy Act, Id. at 198-200.

The Swiss company argued that it did not “control” the records because Swiss law made it a crime for the company to disclose them, Id. at 204. The court concluded that the Swiss company had “control” of the records even if it did not have the legal right to produce them in discovery. While the court based its decision on the special objectives of the Trading with the Enemy Act, federal courts continue to define “control” broadly, Id. at 204-05.

In an influential Rule 34 decision, a federal court considered whether NASDAQ market-maker defendants — such as Goldman Sachs and UBS — had to produce transcripts of their current and former employees’ depositions before the Department of Justice Antitrust Division, In re NASDAQ Mkt.-Makers Antitrust Litig., 169 FRD 493, 530-31 (SDNY 1996). The court construed “control” under Rule 34 to include all documents that a Responding Party has a legal or practical ability to obtain on demand, Id. at 530.

The court held that the defendants had control over an employee’s deposition transcript if the defendants had briefed or provided counsel for that employee with respect to his deposition, or had merely advised the employee “of the possibility of ordering a copy of [his] … transcript,” Id. at 531.

Following NASDAQ Market-Makers, a federal court considered whether the assignee of a bank’s claim had possession, custody or control of documents held by the bank’s successor-in-interest, Bank of N.Y. v. Meridien Biao Bank Tanz., 171 FRD 135 (SDNY 1997). The court “examine[d] the relationship between” the bank, the assignee, and the bank’s successor to determine whether the assignee “has the practical ability to obtain documents” from the successor, Id. at 147.

The court compelled the assignee to produce because it showed an ability to retrieve documents from the successor and excusing it from discovery would yield an unfair result for the plaintiff, Id. at 147-49. The court also compelled the assignee to produce documents in the possession of the bank’s auditor, noting that a Responding Party has control of documents held by its accountant, Id. at 154.

In keeping with these decisions, the Second Circuit has stated that Rule 34 requires production of documents to which a Responding Party has “access and the practical ability to possess,” Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F3d 130, 138 (2d Cir. 2007). Therefore, if a federal court Responding Party can freely obtain a document held by a third-party, it “controls” that document for discovery purposes and must produce it absent an objection. It follows that a Responding Party need not produce “documents that it does not possess or cannot obtain,” Id.

The Court of Appeals interpreted the term “control” for the first time in April 2013 — but in a decision concerning post-judgment enforcement, not discovery. The court considered whether CPLR 5225(b) permitted a judgment creditor to obtain a turnover order against the foreign subsidiary of the bank that held the judgment debtor’s assets, Commonwealth of N. Mariana Is. v. Can. Imperial Bank of Commerce, 21 NY3d 55, 57 (2013).

The judgment creditor argued that it could enforce its judgment against the subsidiary because it had constructive possession of the judgment debtor’s assets, Id. at 117. The court noted that CPLR 5225(b) is only applicable to entities that have “possession or custody” of the judgment debtor’s assets. Citing the NASDAQ Market-Makers and Bank of New York cases, the court held that “control” refers to constructive possession, while “possession or custody” refers to actual possession. Since CPLR 5225(b) does not reach assets in the “control” of a garnishee, actual possession of the assets is required, and the judgment creditor could not obtain a turnover order against the subsidiary, Id. at 118-19.

That the Court of Appeals had to cite federal cases from the 1990s to define “control” illustrates the lack of state law precedent in this area. But the court found a workable definition of “control” in federal court precedent. New York courts should follow the Court of Appeals’ lead and adopt the federal “practical ability” test for determining when a Responding Party controls requested documents.

Applying this standard would add clarity to an uncertain area of practice and be consistent with New York’s policy of liberal disclosure.

Jeremy M. Sher is an associate with the law firm of Leclair Korona Giordano Cole LLP. He concentrates his practice in the areas of commercial, securities and employment litigation. He can be reached at jsher@leclairkorona.com or through the firm’s website at www.leclairkorona.com.

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