In the first two segments of this six-part series on third party discovery, we discussed the concept of “control” and its varied interpretations depending on the jurisdiction. This piece looks at the “indicia” of control for Rule 34(b) purposes. It should come as no surprise that the Rule 34 analysis is a highly factual one, with a focus on the relationship between the company and the third party. The following are some indicia a court might consider.

Contractual provisions

Contractual right to obtain documents on demand: In some instances, the contractual arrangement between a company and a third party explicitly permits the company to obtain documents from the third party on demand or upon giving “reasonable notice.” In many cases, this will be sufficient to establish the company’s “control” for purposes of Rule 34(b). For example, see Boucher v. First Am. Title Ins. Co., in which the defendant had control of documents in possession of third party agents where contractual provision required agents to provide documents related to policies at “any reasonable time upon request” from defendant, and Rosie D. v. Romney, et al., in which the party had control of documents in possession of several managed care organizations where contract required organizations to maintain books, records, and other compilations of data pertaining to the contract and provided party with the right, upon reasonable notice, to examine and copy the information.

Right to conduct audits: Contractual provisions giving the company the right to audit documents belonging to a third party have also been held sufficient to establish control. Such provisions have included the following:

[Company] shall have the right to conduct … full and comprehensive inspections or audits of [Contractor]…

Should [Company] request an audit on [Contractor’s] premises… [Contractor] shall make available all pertinent records, data, information, and files to [Company]….

Intellectual property: Contractual provisions related to who owns the work product of a third party have also served as evidence of a company’s legal right to obtain documents where the intellectual property covered by the provision is being sought in the litigation, such as in the case of Ice Corp. v. Hamilton Sundstrand Corp.:

The property rights in all inventions, patents, designs, process data and information and improvements thereto (“Intellectual Property”) owned by [Company] prior to or created by [Company] or [Vendor] under this [Agreement]… shall at all times remain vested in [the Company] or immediately vest in [the Company] as they are created.

Agency relationship

“Control” has also been found where the requesting party has made a showing that the parties have a principal-agent relationship. A principal-agent relationship may be formed by an express contract or it may be implied from the parties’ course of conduct. In Barton v. RCI, LLC, a travel company was found in control of a hotel chain’s documents where, inter alia, an agreement authorized hotel chain to act on travel company’s behalf. The travel company’s procedures manual demonstrated that travel company was “deeply involved in nearly every aspect” of hotel chain’s sales.

Other factors

In addition to these traditional indicators, courts have also considered the following factors in determining whether a company has “control” of a third party’s documents for purposes of Rule 34(b):

Access to a shared database: If employees of the company have remote access to a database maintained by a third party, the court is likely to find that the company has the legal right or practical ability to obtain documents in that database. The Southern District of New York ruled in SEC v. Strauss, “[A]n agreement with a third party possessor granting a party access to documents, along with an actual mechanism for getting the documents, gives that party the ‘practical ability to obtain’ the documents and so is sufficient to establish that party’s control.”

Company email address: If employees of a third party are issued company email addresses, this may be adequate to establish control for Rule 34(b) purposes. A U.S. District Court ruled in Hageman v. Accenture, LLP that the defendant had “control” over emails stored on a third party’s server notwithstanding the parties’ formal agreement that third party had ownership of information stored on the server where defendant’s employees had third party email addresses and could obtain information sent from or received by those addresses as part of their normal day-to-day work.

Document exchange: Control may also be established where the parties frequently exchange documents, and there is no reason to believe the third party would refuse to provide documents to the party to the litigation upon request. The Southern District of New York ruled in Alexander Interactive, Inc. v. Adorama, Inc., “To determine a responding party’s ‘practical ability’ to obtain documents from a non-party, courts in this district have looked to the existence of cooperative agreements or contracts between the responding party and non-party, the extent to which the non-party has a stake in the outcome of the litigation, and the non-party’s past history of cooperating with document requests.” Meanwhile, in GenOn Mid-Atlantic LLC v. Stone Webster, Inc., the same court said that the defendant had “practical ability” to obtain documents where the business relationship left “little doubt” that the third party would have complied with a timely request to preserve and share documents. And in the Ice Corp. case mentioned above, the court held that irrespective of any legal entitlements, the defendants had the “practical ability to obtain” documents in the hands of a third party where defendants “failed to persuade the court that they could not simply ask, or employ their ‘right or ability to influence’” the third party to obtain documents.

Participation in the litigation: In conjunction with other factors, the court may also look at whether the third party is participating in the litigation and/or stands to benefit from it. In Hitachi, Ltd. v. AmTRAN Tech. Co. Ltd., the defendant was ordered to produce records of its agent where, inter alia, the agent was a financially interested party and actively participated in the litigation. And in Costa v. Kerzner Int’l Resorts, Inc. the defendants were ordered to produce documents of non-party parent company and affiliates where, inter alia, non-parties had a direct financial interest in the outcome of the litigation.

If some or all of these indicators are present, a court may find that a company has an obligation to preserve the third party’s documents. In the next article in this series, we will discuss how to satisfy that obligation.