Equal Employment Opportunity Commission v. Kronos Inc. ( 2012 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 11-2834
_____________
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,
Appellant
v.
KRONOS INCORPORATED
_______________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(No. 2-09-mc-00079)
District Judge: Honorable Arthur J. Schwab
_______________
Argued June 26, 2012
_______________
Before: SLOVITER, CHAGARES, and JORDAN, Circuit
Judges
(Opinion filed: September 14, 2012)
Corbett Anderson, Esquire (Argued)
Equal Employment Opportunity Commission
5SW24K
131 M Street, N.E.
Washington, DC 20507
Counsel for Appellant
R. Lawrence Ashe, Jr., Esquire (Argued)
Ashe, Rafuse & Hill
1355 Peachtree Street
Suite 500
Atlanta, GA 30309-0000
Terrence H. Murphy, Esquire
Littler Mendelson
625 Liberty Avenue
EQT Plaza, 26th Floor
Pittsburgh, PA 15222
Counsel for Appellee
_______________
OPINION
_______________
CHAGARES, Circuit Judge.
This is our second encounter with this case, which
again requires us to consider the enforcement of an
administrative subpoena issued by the Equal Employment
Opportunity Commission (“EEOC”) seeking to compel
Kronos Incorporated (“Kronos”), a non-party to the
underlying action, to disclose information about its
employment tests. The EEOC issued the disputed subpoena
as part of its investigation into an allegation that Kroger
grocery store violated the Americans with Disabilities Act
(“ADA”), 42 U.S.C. § 12101, et seq., by failing to hire a
disabled applicant after she took an employment test created
by Kronos. We previously held that the EEOC was entitled
to Kronos’s data without the geographic, temporal, and
topical restrictions originally imposed by the District Court
except insofar as the EEOC sought discovery regarding racial
discrimination. We also remanded for the District Court to
conduct a good cause balancing test to determine if a
confidentiality order was warranted.
On remand, the District Court expanded the scope of
its original order, but again placed certain limitations on the
disclosure of information related to the Kronos tests.
2
Regarding Kronos’s request for a confidentiality order, the
court found there was good cause to enter a modified version
of the order we previously reviewed. Finally, the District
Court required Kronos and the EEOC to split evenly the costs
of production.
Although the District Court’s thoughtful handling of
this case reflects its efforts to comply with our mandate and to
strike a balance between the burden on a non-party and the
EEOC’s need for information, we must reverse and remand
for the reasons that follow. We note, however, that we agree
with much of the District Court’s discussion regarding the
need for a confidentiality order, and our remand on this issue
is solely for the purpose of allowing the District Court to
consider how the specific limitations it ordered are tied to
Kronos’s justifiable fears regarding the disclosure of
proprietary information. Similarly, we are reversing the
District Court’s cost-sharing order not because we necessarily
disagree with the result, but to allow the court to make an
individualized determination of whether the costs of
production under the newly expanded subpoena are outside
the scope of what Kronos can reasonably expect to bear as the
cost of doing business.
I.
The underlying facts of this case relate to a charge of
discrimination Vicky Sandy filed with the EEOC on June 30,
2007. Sandy, who is hearing and speech impaired, applied to
work as a cashier, bagger, and stocker at a Kroger grocery
store in West Virginia. As part of the application process,
Sandy took a Customer Service Assessment (the
“Assessment”) created by Kronos and received a low score of
40%. Kroger admitted it relied, at least in part, on the
Assessment when it decided not to hire Sandy.
A.
During the course of its investigation into Kroger’s
hiring practices, on March 11, 2008, the EEOC issued a third-
party administrative subpoena to Kronos. The subpoena
initially sought documents solely related to Kroger, including
any validity studies related to the Assessment. The EEOC
3
later expanded the scope of the subpoena to include the
nationwide use of Kronos’s assessment tests and the tests’
impact on both minority and disabled applicants (like the
District Court, we refer to the modified subpoena as
“Subpoena 2”). Specifically, Subpoena 2 directed Kronos to:
1. Produce any and all documents and data
constituting or related to validation studies or
validation evidence pertaining to Unicru [a
Kronos subsidiary] and/or Kronos assessment
tests purchased by The Kroger Company,
including but not limited to such studies or
evidence as they relate to the use of the tests as
personnel selection or screening instruments.
2. Produce the user’s manual and instructions
for the use of the Assessment Tests used by The
Kroger Company[.]
3. Produce any and all documents and data,
including but not limited to correspondence,
notes, and data files, relating to the Kroger
Company; its use of the Assessment Tests;
results, ratings, or scores of individual test-
takers; and any validation efforts made thereto.
4. Produce any and all documents discussing,
analyzing or measuring potential adverse
impact on individuals with disabilities and/or an
individual[’]s race.
5. Produce any and all documents related to any
and all job analyses created or drafted by any
person or entity relating to any and all positions
at The Kroger Company.
6. Furnish a catalogue which includes each and
every assessment offered by Unicru/Kronos.
Additionally provide descriptions of each
assessment.
EEOC v. Kronos Inc., 620 F.3d 287, 294 (3d Cir. 2010)
(“Kronos I”).
4
Kronos objected and filed a Petition to Revoke the
Subpoena with the EEOC. Kronos claimed that the
information sought by the EEOC included data that was
irrelevant to Sandy’s charge and that much of the information
sought by the EEOC constituted valuable trade secrets that
would be at risk of further disclosure if revealed. The EEOC
denied the petition and, after Kronos failed to provide the
requested information, filed a motion to enforce the subpoena
in district court.
The District Court granted the motion in part, but
limited the scope of the subpoena to documents related to
Kroger’s West Virginia operations and the positions of
cashier, bagger, and stocker, from January 1, 2006 to May 31,
2007. The District Court also refused to allow discovery
related to racial discrimination, since it was not a part of
Sandy’s charge. In sum, the District Court ordered Kronos to
do the following:
1. Produce any user’s manual and instructions
for the use of the Assessment Tests provided to
the Kroger Company.
2. Produce any and all documents and data,
including but not limited to correspondence,
notes, and data files, relating to The Kroger
Company; The Kroger Company’s use of the
Assessment Tests; results, ratings, or scores of
individual test-takers at The Kroger Company;
and any validation efforts performed
specific[ally] for and only for The Kroger
Company.
3. Produce any and all documents discussing,
analyzing or measuring potential adverse
impact on individuals with disabilities, relating
specifically to and only to the Kroger Company.
4. Produce any and all documents related to
any and all job analyses created or drafted by
Kronos relating to the bagger, stocker, and/or
cashier/checker positions at The Kroger
Company.
5
5. Furnish any catalogue provided to The
Kroger Company.
6. Items 1 through 5 are limited to the time
period of January 1, 2006 through May 31,
2007, in the state of West Virginia, for the
positions of bagger, stocker, and/or
cashier/checker.
Id. at 295. At Kronos’s urging, the District Court also entered
a confidentiality order confining the EEOC’s use of discovery
materials obtained from Kronos. The EEOC appealed the
District Court’s decision to us.
B.
In Kronos I, we reversed the District Court’s
geographic and temporal restrictions, as well as the
restrictions related to job description, and affirmed the
District Court’s refusal to allow discovery into racial
discrimination. We also vacated the confidentiality order and
remanded so that the District Court could conduct the proper
good cause balancing test, noting that the District Court
should keep in mind the requirements of the Federal Records
Disposal Act, 44 U.S.C. § 3314. Since the exact language of
our opinion is important for determining whether the District
Court complied with our mandate, a detailed discussion of
that opinion is necessary.
Kronos I required us to consider the scope of the
EEOC’s investigatory power. As we explained, “The EEOC
is empowered to investigate charges of discrimination to
determine whether there is reasonable cause to believe that an
employer has engaged in an unlawful employment practice.”
Id. at 296. This power is not without limits. Instead, “the
EEOC is entitled to access only evidence ‘relevant to the
charge under investigation.’” Id. (quoting 42 U.S.C. § 2000e-
8(a)). We went on to explain:
The relevance requirement is not particularly
onerous. Courts have given broad construction
to the term relevant and have traditionally
allowed the EEOC access to any material that
6
might cast light on the allegations against the
employer. Nonetheless, the EEOC’s power of
investigation is anchored to the charge of
discrimination, and courts must be careful not to
construe the charge and relevance requirements
so broadly as to confer unconstrained
investigative authority upon the EEOC. The
relevance requirement is designed to cabin the
EEOC’s authority and prevent fishing
expeditions. The EEOC bears the burden of
demonstrating relevance.
Id. at 296-97 (citations and quotation marks omitted). We
further explained that the concept of “relevance” may change
during the course of an EEOC investigation, as the EEOC is
permitted to pursue leads that arise during the course of an
investigation even when that new evidence reveals “a broader
picture of discrimination” than the original charge. Id. at 297
(quotation marks omitted).
In examining what constituted relevant evidence for
Sandy’s charge, we noted that the ADA prohibits
employment tests of the type Kronos makes (and Kroger used
in its hiring decisions) when such tests “‘screen out or tend to
screen out’” disabled people and the use of the test is not
“‘job-related for the position in question’” and “‘consistent
with business necessity.’” Id. at 296 (quoting 42 U.S.C. §
12112(b)(6)). Tests of this type may be impermissible under
both disparate treatment and disparate impact theories. Id.Thus, evidence that would “cast light on” either a claim for
disparate treatment or disparate impact caused by the use of
the Kronos assessments would be relevant. Id.The EEOC argued that all job types, geographic areas,
and time periods were relevant, as well as all “Kronos
Assessment instructions and manuals . . . (regardless of
whether Kronos actually provided them to Kroger), [and]
materials related to validation studies and potential adverse
impact based on disability, even if such materials are not
specific to Kroger’s use of the test.” Id. at 297. We agreed,
holding that the District Court had employed “too restrictive a
standard of relevance in limiting the information related to
geography, time, and job position.” Id. Moreover, we held,
7
“the District Court erred in limiting the EEOC’s access to
user’s manuals and instructions, validation information, and
materials pertaining to potential adverse impact on
individuals with disabilities.” Id. We determined that such
information would aid the EEOC by providing “useful
context and important comparative data” for its investigation
of Kroger’s use of the Assessment. Id. at 298 (quotation
marks omitted).
We rejected Kronos’s assertion that Subpoena 2 sought
“information or materials related to assessment tests Kroger
has never purchased and has never used,” and instead held
that the materials sought by the EEOC in Subpoena 2 were
“not so broad as to render the relevance requirement a
‘nullity.’” Id. at 299 (quoting EEOC v. Shell Oil, 466 U.S.
54, 69 (1984)). Specifically, we held that “[t]he District
Court’s decision denying the EEOC access to particular
materials unless they relate only to Kroger was an improper
use of its discretion” because any information in Kronos’s
possession regarding whether the Assessment had an adverse
impact on disabled people, or the validity of the Assessment,
“certainly might shed light on the charge of discrimination.”
Id. We further rejected Kronos’s argument that Sandy’s
charge failed to allege disparate impact, thereby confirming
that evidence related to any disparate impact of the
Assessment on disabled people would be relevant to the
EEOC’s investigation. We summarized our holding on these
issues as follows:
[W]e will reverse the District Court’s judgment
insofar as it limited the scope of the EEOC’s
subpoena in terms of geography, time, and job
description. We will also reverse to the extent
that the District Court’s order limits the
EEOC’s access to validation efforts conducted
solely on behalf of Kroger, documents relating
to potential adverse impact on disabled
individuals to those relating specifically and
only to Kroger, and user’s manuals and
instructions for the Assessment that were
actually provided to Kroger.
Id. at 300.
8
Next, we considered the EEOC’s request for
documents related to any adverse impact that the Assessment
had on the basis of race. We held that such a request was
improper in light of the fact that Sandy’s charge of
discrimination related solely to disabilities. In so holding, we
stated that “the inquiry into potential race discrimination is
not a reasonable expansion of Sandy’s charge” but instead
constitutes “an impermissible fishing expedition.” Id. at 301
(quotation marks omitted).
Finally, we considered the propriety of the
confidentiality order entered by the District Court. 1 We
began by recognizing that “[c]ourts have ‘inherent equitable
power’ to grant orders of confidentiality upon a showing of
good cause” by the party seeking the order. Id. at 301–02
(quoting Pansy v. Borough of Stroudsburg, 23 F.3d 772, 785–
86 (3d Cir. 1994)). We remanded this matter to the District
Court for it to conduct the “good cause balancing test” we
established in Pansy, 23 F.3d at 788, which requires a court to
consider certain factors before issuing a confidentiality order.
Although we did not weigh the Pansy factors
ourselves, we did clarify the principles of law that the District
Court should consider on remand in light of the fact that the
information at stake here was requested by a government
entity. Specifically, we stated that the good cause balancing
test operates under “a strong presumption against entering an
order of confidentiality whose scope would prevent disclosure
of information that would otherwise be accessible under a
relevant freedom of information law.” 2 620 F.3d at 302. We
further cautioned that:
the District Court should be mindful of the
1
It is important to note that the EEOC did not object to, or
stipulated to, the following parts of the confidentiality order:
(1) the prohibition on disclosure of “subpoenaed material to
Sandy or her agents during the investigation”; and (2) the
limitation on disclosure of subpoenaed material to anyone
outside the EEOC, including expert witnesses, unless agreed
upon in writing. Id. at 303 n.8.
2
The relevant disclosure law here is the federal Freedom of
Information Act (“FOIA”), 5 U.S.C. § 552, et seq.
9
statutory scheme governing disposal of
government records. The Federal Records
Disposal Act (“FRDA”) prohibits destruction of
government records except according to its
requirements. 44 U.S.C. § 3314. The FRDA
defines “records” as “documentary materials . . .
made or received by an agency of the United
States Government under Federal law or in
connection with the transaction of public
business and preserved or appropriate for
preservation . . . as evidence of the organization,
function, policies, decisions, procedures,
operations, or other activities of the
Government.” 44 U.S.C. § 3301. Courts must
exercise caution when issuing confidentiality
orders so as not to demand that the EEOC
destroy government documents, including notes
and memoranda, in conflict with the EEOC’s
duty to obey the requirements of the FRDA.
Id. at 303–04 (parenthetical omitted). With those caveats, we
remanded this matter to the District Court.
C.
On remand, the District Court invited the parties to
submit proposed orders that would comply with our mandate.
The EEOC’s proposal differed from both Subpoena 2 and the
District Court’s modified version thereof, seeking, inter alia,
Kronos data related to all of its customers (not just Kroger)
and personal data belonging to test-takers. 3 EEOC v. Kronos
Inc., No. 09-mc-0079, 2011 WL 1085677 (W.D. Pa. Mar. 21,
2011) (hereinafter “Kronos II”). The District Court instead
elected to enforce Subpoena 2 with new modifications that it
believed conformed to our decision in Kronos I. Id. at *14.
3
The District Court found that the parties’ first two proposed
orders were too vague and asked both parties to modify their
first proposed orders to be more specific regarding exactly
what type of information was at issue. The EEOC asserts that
its proposed order was sent pursuant to the District Court’s
instructions for specificity and did not represent a broadening
of Subpoena 2. The District Court disagreed.
10
The EEOC sought reconsideration, which the District Court
partially granted, altering the text of its order but retaining
much of the language challenged by the EEOC. Specifically,
as modified by its reconsideration order of May 3, 2011, 4 the
District Court:
• Modified the request in ¶ 1 for “any and
all documents and data constituting or
related to validation studies or validation
evidence pertaining to Unicru and/or
Kronos assessment tests purchased by
The Kroger Company, including but not
limited to such studies or evidence as
they relate to the use of the tests as
personnel selection or screening
instruments” by adding that such studies
or evidence must be produced, “even if
created or performed for other
customer(s), if such studies or evidence
were relied upon in creating or
implementing the test for Kroger.” This
provision also stated that “[t]he
names/identity of any other customer(s)
should be deleted/redacted.” The court
further provided that “[s]aid document
production is limited to information
relating to disabilities, persons with
disabilities, or adverse impact upon
persons with disabilities.”
• Altered ¶ 3, which requires Kronos to
produce “any and all documents (if any)
related to the Kroger Company,
including but not limited to
correspondence, notes and data files,
relating to The Kroger Company; its use
of Assessment Tests; results, ratings, or
scores of individual test-takers; and any
validation efforts made thereto,” by
4
The language added following reconsideration of the
District Court’s original order enforcing the subpoena is
underlined.
11
adding the disability-related limitation in
¶ 1.
• Added ¶ 6, which forbids the EEOC
from disclosing documents or
information produced under the
Subpoena — all of which it termed
“Confidential Information” 5 — to anyone
else, including Sandy, and that any
EEOC person who saw the information
must agree in writing to the terms of the
Order. The District Court also limited
the use of the “Confidential Information”
to the Sandy Charge. Finally, the Court
placed the burden on the EEOC to file a
motion to challenge whether a document
should be marked confidential by adding
the following: “Once document
production occurs pursuant to this Order
of Court, should the EEOC believe that
good cause exists to lift the ‘Confidential
Information’ designation for any
particular document(s), the EEOC may
file a motion in that regard, and the
Court will conduct the proper inquiry.”
• Added ¶ 8, which states: “If any party or
third party seeks to obtain Confidential
Information from the EEOC under either
the [Freedom of Information Act
(“FOIA”)] or Section 83 of the EEOC
Compliance Manual while the EEOC’s
investigation of the Sandy Charge is
open, then the EEOC will notify Kronos
. . . as soon as is practicable and will
assert that the Confidential Information
is exempt from disclosure under FOIA,
based on the pending investigation,
pursuant to 29 C.F.R. § 1610.10 and/or
5
The court defined “confidential information” as “any
documents or information derived from documents produced
pursuant to” its order enforcing the subpoena.
12
the EEOC’s own rules or procedures. If
a FOIA request or any other request for
the contents of the file with respect to the
Sandy Charge or Confidential
Information is received after [the] EEOC
has closed the Sandy Charge, the EEOC
agrees to notify Kronos in the same
manner as described and as soon as is
practicable, but in no event more than
five (5) business days after the request is
received, and the EEOC agrees to give
Kronos an opportunity to object to
disclosure of the Confidential
Information to the requesting party.
Kronos shall have five (5) business days
after receiving such notice to object to
disclosure. If Kronos objects, [the]
EEOC agrees not to disclose the
Confidential Information to the
requesting party or parties. [The] EEOC
further agrees that, if a party sues [the]
EEOC under FOIA to obtain a copy of a
charge file which includes Confidential
Information, [the] EEOC will not object
to Kronos intervening to pursue its
objections and confidentiality concerns.”
• Added ¶ 9, which provides, “No use
shall be made of personal information
regarding any Kroger employee,
applicant, and/or test taker without prior
permission of this Court.”
See Appendix (“App.”) 43–49. 6
6
The District Court also added ¶ 7 to set forth a procedure for
disclosing Confidential Information to outside experts and ¶¶
10 and 11 to state that neither party waived its objections
regarding the confidentiality issues and that the court would
retain jurisdiction to enforce its order. The EEOC does not
object to these provisions.
13
In crafting these provisions, the District Court
performed the Pansy balancing analysis that we required in
Kronos I, finding that the privacy interests of job applicants,
the need to protect Kronos’s trade secrets, and the fact that
the information was not “critical to public health or safety” all
counseled in favor of granting the confidentiality order.
Kronos II, 2011 WL 1085677, at *15. On the other side of
the scale was the fact that the information was sought for a
legitimate purpose, information-sharing would promote
“efficiency and fairness,” and the public interest. Id. The
District Court ultimately found that these factors weighed in
favor of granting a limited confidentiality order (which,
unlike the previous order, allowed the entry of data into a
centralized database and did not require the destruction of
documents within ten days). Id. at *16.
The District Court also entered a cost-sharing order,
finding that it was proper to require the EEOC to reimburse a
subpoena recipient for the cost of production under our
decision in United States v. Friedman, 532 F.2d 928 (3d Cir.
1976). Kronos estimated that the cost of compliance with the
modified subpoena would be $75,000, although it seems to
have provided no evidence to support this figure. 7 App. 50.
Following briefing by both parties, the District Court decided
that requiring each party to pay 50% of the costs would
properly “strike a balance between the EEOC’s need for the
information, and the financial burden on Kronos.” Id. 53.
The EEOC contends this was an error both on the merits and
because Kronos waived this issue by not raising it to the
District Court in the first proceedings.
7
The only evidence in the record relating to costs was the
affidavit of Annette Kuhn, Kronos’s Director of Workforce
Science Services, and the exhibits appended thereto. Kuhn
reviewed the original, broader version of Subpoena 2, and
averred that Kronos had more than 11 million responsive
documents which would cost somewhere between $656,184
and $1,161,119 to produce. App. 87, 91. The Kuhn affidavit
does break down costs on an hourly basis and would have
been available to the District Court, but because the District
Court does not refer to these materials in its opinion, it is
unclear whether it considered them when adopting Kronos’s
$75,000 figure.
14
II.
The District Court had jurisdiction under 29 U.S.C. §
161(2) and 28 U.S.C. §§ 1331 and 1345. We have
jurisdiction pursuant to 28 U.S.C. § 1291. We review a
district court’s decision to grant or deny a subpoena
enforcement application for an abuse of discretion. Kronos I,
620 F.3d at 295. It is an abuse of discretion for a district
court to base its decision on “a clearly erroneous finding of
fact, an errant conclusion of law or an improper application of
law to fact.” Id. at 295–96 (quotation marks omitted). “We
also employ an abuse of discretion standard when reviewing
the grant of a confidentiality order.” Id. at 295.
III.
The EEOC first challenges the District Court’s
revisions of the subpoena on the basis that they conflict with
our mandate in Kronos I and that they are otherwise
inappropriate on the merits.
“It is axiomatic that on remand for further proceedings
after [a] decision by an appellate court, the trial court must
proceed in accordance with the mandate and the law of the
case as established on appeal.” Bankers Trust Co. v.
Bethlehem Steel Corp., 761 F.2d 943, 949 (3d Cir. 1985). “A
trial court must implement both the letter and spirit of the
mandate, taking into account the appellate court’s opinion and
the circumstances it embraces.” Id. When an appellate court
does not issue specific instructions on how to proceed, “the
question as to what further proceedings can be had consistent
with the opinion of the appellate court must be determined
from the nature of the case and the pertinent statutory
provisions.” Id. at 950. During the course of such
proceedings, the district court “may consider, as a matter of
first impression, those issues not expressly or implicitly
disposed of by the appellate decision.” Id.As we recently explained in United States v. Kennedy,
682 F.3d 244 (3d Cir. 2012), the requirement that a district
court comply in full with our mandate has several important
purposes:
15
It preserves the proper allocation of authority
within the tiered federal court structure set up
by Congress and the Constitution. It promotes
predictability and finality by notifying parties of
the matters that remain open on remand and
committing the rest to final resolution. And it
safeguards stability in the administration of
justice, for the orderly functioning of the
judiciary would no doubt crumble if trial judges
were free to disregard appellate rulings. See
Litman v. Mass. Mut. Life Ins. Co., 825 F.2d
1506, 1511-12 (11th Cir. 1987) (“Post mandate
maneuvering in the district courts would
undermine the authority of appellate courts and
create a great deal of uncertainty in the judicial
process.”); cf. Hutto v. Davis, 454 U.S. 370,
375 (1982) (“[U]nless we wish anarchy to
prevail within the federal judicial system, a
precedent of this Court must be followed by the
lower federal courts no matter how misguided
the judges of those courts may think it to be.”).
Id. at 253 (some citations omitted).
We must therefore “examine whether the District
Court adhered to the mandate in our first opinion or whether
it ventured beyond its authority.” Id.
A.
The EEOC argues that the District Court erred by
modifying its request for “any and all documents and data
constituting or related to validation studies or validation
evidence pertaining to Unicru and/or Kronos assessment tests
purchased by The Kroger Company, including but not limited
to such studies or evidence as they relate to the use of the
tests as personnel selection or screening instruments,” by
adding that such studies or evidence must be produced, even
if done for another company, only if they were “relied upon
in creating or implementing the test for Kroger.” App. 48.
As we noted in Kronos I, to enforce an administrative
subpoena, the EEOC must demonstrate: “(1) its investigation
16
has a legitimate purpose, (2) the inquiry is relevant to that
purpose, (3) the agency does not already possess the
information requested, (4) the agency has complied with
relevant administrative requirements, and (5) the demand is
not unreasonably broad or burdensome.” 620 F.3d at 296 n.4
(quotation marks omitted). Here, as before, it is the second
requirement that is at issue.
Because the concept of “relevance” in the context of
an administrative subpoena enforcement action was
thoroughly explained in Kronos I, a detailed discussion is
unnecessary. It suffices to reiterate that this requirement is
“broad” and not “particularly onerous” but must nonetheless
be “anchored to the charge of discrimination.” Kronos I, 620
F.3d at 296–97. It is also worth noting that the first decision
to remand this matter was based on our opinion that the
District Court “applied too restrictive a standard of relevance”
in creating its original geographic, temporal, and topical
limitations. Id. at 297. Specifically, we held that “[t]he
District Court’s decision denying the EEOC access to
particular materials unless they relate only to Kroger was an
improper use of its discretion” because documents unrelated
to Kroger could nonetheless “shed light on the charge of
discrimination.” Id. at 299 (emphasis added).
The District Court’s decision to restrict the scope of
the subpoena to validation studies or evidence that Kronos
“relied upon” in crafting the assessment used by Kroger
impermissibly contradicts our holding in Kronos I that such
documents must be produced by Kronos even if they are not
directly linked to Kroger. In Kronos I, we considered (and
rejected) the District Court’s decision to limit “production of
‘documents discussing, analyzing, or measuring potential
adverse impact on individuals with disabilities’ to those
‘relating specifically to and only to The Kroger Company.’”
Id. We explained that such documents are relevant even if
not directly connected to Kroger because they could reveal
that the assessment had an adverse impact on disabled
applicants or they could “assist the EEOC in evaluating
whether Kroger’s use of the test constituted an unlawful
employment action.” Id. The District Court nonetheless
introduced the “relied upon” language on remand, which is
17
only marginally broader than the “relating specifically to”
language we rejected. 8
To prove a violation of 42 U.S.C. § 12112(b)(6), the
EEOC is required to show that the employment test at issue
(1) “screen[s] out or tend[s] to screen out” disabled
applicants; (2) is unrelated to the position sought by the
applicant; and (3) is not “consistent with business necessity.”
These statutory requirements place the nature and efficacy of
the test (or tests) 9 at issue, at least insofar as the test was
purchased by Kroger — a proper limitation already included
in Subpoena 2. It was therefore unnecessary to include the
“relied upon” clause, since the question of whether these tests
were given in violation of the ADA forces courts to look
objectively at how the tests work.
Any limitation on the production of validity studies
that requires such studies to relate to Kroger in any way
impermissibly excludes relevant evidence and violates our
mandate in Kronos I. We will therefore remand with
instructions to the District Court to remove the “relied upon”
language from its order enforcing the subpoena.
B.
We now turn to the District Court’s alteration of ¶¶ 1
and 3 by adding language intended to limit the applicability
of the subpoena to disability-related issues. Paragraph 1
8
Arguably, this language is actually narrower because it
limits the way in which the information must relate to Kroger.
Conversely, the removal of “specifically” and the addition of
the proviso that studies done for other companies must be
produced if they were “relied upon” could be viewed as
making the newer language slightly more expansive.
Whether the District Court’s most recent modification is
slightly narrower or broader, however, is immaterial because
the language is not sufficiently different to satisfy the
requirements of our mandate.
9
It is unclear from the record whether Kroger purchased
multiple tests from Kronos, but if discovery reveals that it
did, then information surrounding each of the purchased tests
would be relevant.
18
sought validation studies and evidence regarding the Kronos
assessments, and ¶ 3 sought the production of “any and all
documents (if any) related to the Kroger Company, including
but not limited to correspondence, notes and data files,
relating to the Kroger Company; its use of Assessment Tests;
results, ratings, or scores of individual test-takers; and any
validation efforts made thereto.” App. 43–44. In both
instances, the District Court added the following language:
“[s]aid document production is limited to information relating
to disabilities, persons with disabilities, or adverse impact
upon persons with disabilities.” Id. at 44.
Regarding the validation studies sought in ¶ 1, it is
again worth looking at our statement in Kronos I that “the
District Court erred in limiting the EEOC’s access to user’s
manuals and instructions, validation information, and
materials pertaining to potential adverse impact on
individuals with disabilities.” 620 F.3d at 297. There are two
possible interpretations of this language: either the
“pertaining to . . . disabilities” clause modifies only
“materials,” or the clause also modifies “user’s manuals and
instructions” and “validation information.” We believe it is
relatively clear that we intended the former meaning, as it
would be illogical to require that the “user’s manuals and
instructions” pertain to disabilities. Thus, there is no basis in
our prior opinion for limiting “validation information” to that
which relates to disabilities; our opinion only limits such
information if it pertains to the wholly unrelated field of
racial discrimination.
Again, it is insufficient for the EEOC to show simply
that an employment test screens out disabled applicants. See
42 U.S.C. § 12112(b)(6). The EEOC must also prove that the
test does not relate to the position at issue and is not
“consistent with business necessity.” Id. It is thus a proper
inquiry for the EEOC to seek information about how these
tests work, including information about the types of
characteristics they screen out and how those characteristics
relate to the applicant’s ability to fulfill his or her duties for
the prospective position. The EEOC must also consider how
these tests work at screening out those unable to perform a
certain job and “screening in” those who can. The type of
information sought in ¶ 1 is relevant to this inquiry and
19
should be provided in order for the EEOC to effectively
pursue its investigation.
Kronos responds that the EEOC’s Uniform Guidelines
on Employee Selection Procedure, which sets forth standards
for test validation when an adverse impact on a protected
class has been shown, specifically does not apply to disabled
persons. See 29 C.F.R. § 1607.2(D). For this reason, Kronos
asserts, there is no requirement that a company administering
an employment test conduct validation studies related to an
adverse impact on disabled persons. We agree that no such
requirement exists, but this argument misses the point — the
question is not whether Kronos or Kroger was required to
conduct a validation study targeted towards a specific group,
but whether any validation studies (targeted or otherwise) that
Kronos has already conducted are relevant to Sandy’s charge
of discrimination. Moreover, it appears that the validity
studies in Kronos’s possession are of general applicability
and were not specifically targeted to race and gender. At oral
argument, counsel for Kronos conceded that “it varies, but
generally speaking validity studies to show whether or not a
test is job-related are not directed specifically at a race or a
gender or a national origin.” Oral Arg. at 24:41–24:59. We
then asked counsel whether these studies focused on the
people taking the test or the test itself, to which counsel
responded that validation studies “relate to whether or not the
test predicts performance on a particular job” and admitted
that “to the extent that [the EEOC] wish[es] to see if the test
predicts job performance generally, [the validation study] is
relevant.” Id. at 33:56–34:43.
We also disagree with the inclusion of the disability
limitation in ¶ 3. All of the information in ¶ 3 is already
sufficiently limited because it relates to The Kroger Company
and is, again, generally necessary to help the EEOC
understand whether Kroger’s use of the assessment was
permissible and to prove the elements of § 12112(b)(6).
There is no reason why communication between Kroger and
Kronos regarding the Assessment (or any other tests Kroger
purchased) should be excluded simply because it does not
directly relate to disabilities.
20
We note that there is the potential for some of the
information sought in both ¶¶ 1 and 3 to include documents
related to race. In our view, this is not inherently problematic
so long as the requests do not specifically target documents
related to race. 10 If the documents produced by Kronos in
response to the subpoena reveal that there was a racially
related impact on hiring, then, as we noted in Kronos I, the
EEOC need not ignore this new evidence. 620 F.3d at 301.
In such a case, the EEOC could file a commissioner’s charge
alleging racial discrimination pursuant to its power under 42
U.S.C. §§ 2000e-5(b) and 2000e-6.
For these reasons, on remand we instruct the District
Court to remove the language in ¶¶ 1 and 3 that limits the
evidence sought in those paragraphs to disability-related
issues.
IV.
We now consider the confidentiality order entered by
the District Court. As noted, in Kronos I we reversed the
District Court’s grant of this order based on the failure to
consider the “good cause balancing test” we established in
Pansy, which encompasses the following, non-exhaustive list
of factors:
1) whether disclosure will violate any privacy
interests;
2) whether the information is being sought for a
legitimate purpose or an improper purpose;
10
In recognition of the District Court’s valid concern that the
evidence sought in the subpoena could allow the EEOC to
venture impermissibly into the field of racial discrimination,
the EEOC stipulated that it had no objection to the District
Court’s allowing Kronos “to redact the information that
relates solely, and refers specifically and only to, race, and to
redact the names of Kronos’s other clients.” Oral Arg.
44:14–38. The District Court may wish to consider adding
the EEOC’s proposed limiting language to allow for the
redaction of client names and to preclude the production of
documents that relate solely to race.
21
3) whether disclosure of the information will
cause a party embarrassment;
4) whether confidentiality is being sought over
information important to public health and
safety;
5) whether the sharing of information among
litigants will promote fairness and efficiency;
6) whether a party benefitting from the order of
confidentiality is a public entity or official; and
7) whether the case involves issues important to
the public.
620 F.3d at 302.
On remand, the District Court properly set forth the
Pansy factors and explained how each factor should be
weighed in this case. The court found that the privacy
interests of job applicants, the need to protect Kronos’s trade
secrets, and the fact that the information was not “critical to
public health or safety” all counseled in favor of granting the
confidentiality order. Kronos II, 2011 WL 1085677, at *15.
The “most compelling factor” in the District Court’s view
was “that the privacy interests of Kronos would be protected
and their trade secrets and/or proprietary information would
be kept ‘confidential’” if an order was issued. Id. This was
important, the court said, because if Kronos’s assessment
materials were to be publicly disclosed, “the potential harm
and damage to the business of non-party Kronos would be
significant.” Id.The District Court then considered the factors that
weighed against granting a confidentiality order. On this side
of the scale was the fact that the information was sought for a
legitimate purpose, that information-sharing would promote
“efficiency and fairness,” and the public interest. Id. The
District Court ultimately found that these factors weighed in
favor of granting a limited confidentiality order, stating:
[A]fter further consideration, the Court has
22
revised the prior Confidentiality Order
hopefully consistent with the direction of the
Court of Appeals and has substantially limited
the terms of the Confidentiality Order to
address the concerns of the parties. Notably,
the Court has removed from its Order the
provisions that the confidential material not be
entered into a centralized database, and that the
notes or memoranda made by the EEOC shall
be destroyed within ten (10) days after a notice
of right to sue is issued by EEOC. The Court in
general has used the language suggested by the
EEOC with additional safeguards suggested by
Respondent in light of the trade secret
information of Respondent and personal data of
the test takers.
Id. at *16 (citation omitted).
The District Court effectuated its confidentiality order
by adding five new paragraphs to its general order of March
21, 2011, three of which are disputed here (¶¶ 6, 8, and 9).
Paragraph 6 contained the provision that the EEOC could not
disclose documents or information produced under the
Subpoena — all of which it termed “Confidential
Information” — to anyone else, including Sandy, 11 and that
any EEOC employee who saw the information must agree in
writing to the terms of the Order. This paragraph also limited
the use of the Confidential Information to the Sandy charge.
To the extent that the EEOC wished to challenge whether a
document should be designated confidential, the court
required it to file a motion.
Paragraph 8 reflected Kronos’s concerns about
whether its information would be disclosed via FOIA requests
to the EEOC. The provision states that the EEOC must assert
an exemption and notify Kronos if a FOIA request is received
during the pendency of the Sandy charge. If such a request is
11
The EEOC does not dispute that this information should be
withheld from Sandy and has stipulated that it will not “make
any disclosure to Sandy or her agents during the
investigation.” EEOC Br. 38.
23
received after the charge has been closed, the EEOC is
prohibited from disclosing the information should Kronos file
a timely objection. Further, ¶ 8 provides that the EEOC
cannot object to Kronos’s intervention in any suit in which a
party seeks to obtain Confidential Information from the
EEOC.
Paragraph 9 states, “No use shall be made of personal
information regarding any Kroger employee, applicant,
and/or test taker without prior permission of this Court.”
App. 45. This paragraph does not explain what constitutes
“personal information.”
A.
The EEOC first argues that no confidentiality order is
warranted because the information it seeks is protected from
disclosure by Title VII and the ADA, both of which prohibit
any EEOC employee from making charges public or
revealing any information acquired pursuant to an
investigation before a formal proceeding is instituted. 42
U.S.C. §§ 2000e-8(e), 12117(a). For example, § 2000e-8(e)
provides, “It shall be unlawful for any officer or employee of
the [EEOC] to make public in any manner whatever any
information obtained by the [EEOC] . . . prior to the
institution of any proceeding . . . involving such information.”
The EEOC also points out that the Trade Secrets Act, 18
U.S.C. § 1905, forbids the EEOC and its employees from
disclosing trade secrets or other confidential commercial
information. Additionally, the EEOC asserts that the Privacy
Act of 1974 protects EEOC files from disclosure both during
and after an investigation. See 5 U.S.C. §§ 552(b), 552a(b);
29 C.F.R. § 1610.19(a). Finally, although the EEOC may be
empowered to make certain disclosures to the parties to a
charge during the course of an investigation, it has stipulated
that it would not disclose any subpoenaed material to Sandy
or her agents during the course of its investigation. EEOC Br.
35–36.
Kronos responds by emphasizing the harm that any
disclosure — whether accidental or intentional — would
cause to its business. Any breach in confidentiality of this
material would render the tests useless for Kronos’s clients
24
and could advantage a competing test developer. Kronos
would then be forced to devote a considerable amount of time
and resources to developing new assessments, which could
harm its ability to operate a profitable business. Kronos also
expresses concern about the release of individual test takers’
private information and its contractual obligations to maintain
confidentiality in its customer communications.
In light of Kronos’s valid fear regarding the harm it
could suffer from disclosure of the subpoenaed information,
some form of a confidentiality order may indeed be warranted
in this case. Confidentiality orders have been approved in
other cases where district courts ordered the disclosure of
testing materials because the courts recognized the
importance of maintaining the confidentiality of such
documents. 12 See, e.g., EEOC v. Aon Consulting, Inc., 149
F. Supp. 2d 601, 609 (S.D. Ind. 2001) (holding a
confidentiality order was warranted because “the EEOC has
not shown that existing statutory and regulatory procedures
and protections offer sufficient protection to require
disclosure”); EEOC v. C&P Tel. Co., 813 F. Supp. 874, 876
(D.D.C. 1993) (finding that the “extremely strong interest in
protecting the subpoenaed information,” which related to
employment tests, justified the entry of a confidentiality
order). The EEOC argues that the lack of necessity due to the
existing statutory protections renders a confidentiality order
improper, but we see no abuse of discretion in the District
Court’s conclusion that additional protection was needed
12
The EEOC urges us to overturn the confidentiality order
based on University of Pennsylvania v. EEOC, 493 U.S. 182(1990), which held that a university does not enjoy a special
privilege “against disclosure of peer review materials” related
to discrimination charges. Id. at 184. As Kronos correctly
points out, this case and the other cases cited by EEOC are
not on point. Kronos Br. 45–46 & n.25. While the Court
mentioned the statutory non-disclosure provisions in the
EEOC laws and suggested that the privilege would impede
the effective administration of the statute, it did not in any
way suggest that a district court must refuse to grant
additional confidentiality protections where otherwise
warranted due to the non-disclosure laws governing the
EEOC.
25
because the business interests of Kronos — a third party to
this litigation — would be greatly harmed if its proprietary
data was disclosed. Moreover, since the EEOC has asserted
that various statutes otherwise protect this data from
disclosure, it is difficult to see how the EEOC’s interests, or
the public interest in disclosure, is affected by a
confidentiality order. While the burden falls on Kronos to
show the need for an order, the EEOC’s legitimate purpose
and interest in information-sharing cannot outweigh the
tremendous harm to Kronos that could result from the
disclosure of Kronos’s proprietary information. The District
Court thus did not abuse its discretion in entering a
confidentiality order.
B.
While some form of a confidentiality order may be
warranted, however, we must still consider whether the scope
of the confidentiality provisions issued by the District Court
were proper. We first examine the EEOC’s objection to ¶ 8.
This paragraph essentially requires the EEOC to
provide notice of any FOIA requests to Kronos, refuse to
disclose information in a FOIA request if Kronos objects, and
allow Kronos to intervene in any suit in which a party seeks
to obtain confidential information from the EEOC. The
EEOC argues that the requirements set forth in ¶ 8 conflict
with its FOIA policies in four material ways: (1) the EEOC
must notify Kronos of any FOIA request made during the
pendency of the Sandy charge, rather than remaining silent
and routinely denying all such requests pursuant to 29 C.F.R.
§ 1610.19(g); (2) the EEOC must notify Kronos of a FOIA
request made after closure of the Sandy charge within five
business days, rather than having no time constraint for
providing such notice; (3) the EEOC must not disclose the
Confidential Information if Kronos objects to such disclosure,
whereas its own policies require the EEOC to make an
independent determination of whether Kronos raised a valid
objection to disclosure pursuant to 29 C.F.R. § 1610.19(e)(1),
and any disagreement with the EEOC’s decision to disclose
would require the objector to seek an injunction to prevent
disclosure; and (4) the EEOC must not object to Kronos’s
26
intervention if sued by a party under FOIA, whereas the
EEOC would normally be able to object.
As the EEOC points out, entry of ¶ 8 appears to
reflect a presumption that all of the so-called “Confidential
Information” produced by Kronos constitutes trade secrets or
commercial information that is entitled to remain
confidential. It is important to note that the District Court
defined “Confidential Information” as “any documents or
information derived from documents produced pursuant to”
its order enforcing the subpoena. App. 48. This broad
definition raises the possibility that the confidentiality order
would encompass data in which neither Kronos, nor its
customers and their respective job applicants, have any
privacy interest — for example, data that Kronos has already
publicly disclosed. Given that neither we nor the District
Court are privy to the information Kronos will disclose under
the subpoena, we have no basis for concluding that all the
subpoenaed information is protected.
This is significant in light of our precedent regarding
the purposes of FOIA and how requests for information
should operate. Congress enacted FOIA in 1966 to promote
greater public disclosure of documents in the Government’s
possession. OSHA Data / CIH, Inc. v. U.S. Dep’t of Labor,
220 F.3d 153, 160 (3d Cir. 2000). Because Congress sought
to promulgate “a general philosophy of full agency disclosure
unless information is exempted under clearly delineated
statutory language,” an agency bears the burden of proving
that one of the nine statutory exceptions applies. Id.(quotation marks omitted). A document may not be
exempted from disclosure under FOIA simply because some
of its contents may be exempted; instead, “[w]e would have
to be convinced that every ‘reasonably segregable portion’ of
each document contains protected information.” AT&T v.
FCC, 582 F.3d 490, 499 n.8 (3d Cir. 2009) (quoting 5 U.S.C.
§ 552(b)), rev’d on other grounds, 131 S. Ct. 1177 (2011).
Allowing Kronos to assert unilaterally that any
information it discloses to the EEOC is automatically exempt
under FOIA precludes EEOC officials from performing the
analysis required by FOIA after a request for information is
made. It is likely that much of the data disclosed by Kronos
27
will indeed be exempt under 5 U.S.C. § 552(b)(4), which
allows nondisclosure of “trade secrets and commercial or
financial information obtained from a person and privileged
or confidential.” Nonetheless, the District Court erred by
impeding the EEOC’s ability to do its required analysis when
faced with a FOIA request.
On remand, we will instruct the District Court to
remove ¶ 8 of its March 21, 2011 order. However, we do not
wish to foreclose the possibility that the District Court may
exercise its discretion to redraft this provision to tailor it more
narrowly. If the District Court elects to do so, the court shall
specifically consider how the Pansy factors relate to these
specific limitations on disclosure. We also ask that the
District Court limit any such provision to information that
must remain confidential to protect Kronos’s business
interests, such as trade secrets, commercial information, and
financial data.
C.
The EEOC also argues the District Court erred by
limiting its use of the Kronos data to the Sandy charge (¶ 6)
and precluding the EEOC from using “personal information
regarding any Kroger employee, applicant, and/or test taker
without prior permission of [the] Court” (¶ 9). App. 45.
According to the EEOC, the court’s power to enforce a
subpoena and to enter an appropriate confidentiality order
“does not mean the court may require the [EEOC] to pre-clear
how it uses the subpoenaed information” during the course of
its investigation. EEOC Br. 48.
In support of its argument that it has authority to use
subpoenaed information for multiple charges involving
employers other than Kroger, the EEOC cites EEOC v.
Associated Dry Goods, 449 U.S. 590 (1981). There, the
Supreme Court held that the EEOC may place relevant
information in multiple charge files involving the same
employer. Although it recognizes this distinction, the EEOC
argues that we should extend this rule to situations where, as
here, the EEOC might potentially use Kronos’s information in
multiple charge files against multiple employers. Kronos
responds that the EEOC failed to explain how its
28
investigation would be affected by this restriction and that
there is no legal basis for the EEOC’s assertion that it should
have unlimited right to use the subpoenaed information in its
investigations of other charges.
Although Associated Dry Goods does not provide a
resolution to this dispute, our opinion in Kronos I
foreshadows why the District Court’s limitations regarding
the use of the data are problematic. We explained there that
“[o]nce the EEOC begins an investigation, it is not required to
ignore facts that support additional claims of discrimination if
it uncovers such evidence during the course of a reasonable
investigation of the charge.” 620 F.3d at 297. The District
Court’s order effectively impedes the EEOC’s ability to
pursue any such leads by denying the EEOC the ability to use
the data provided by Kronos. This language may have been
included due to the District Court’s concern that the EEOC
would use its subpoena as a “fishing expedition” into other
employers’ use of employment tests and into other forms of
discrimination by both Kroger and other employers in
violation of our opinion in Kronos I. Nonetheless, once we
have decided the documents sought are relevant to the charge
of discrimination, any other improper behavior discovered
during the course of the EEOC’s investigation may be
pursued. Accordingly, the District Court’s limitations on the
EEOC’s use of subpoenaed information is improper. We will
remand with instructions to the District Court to strike the
language contained in ¶¶ 6 and 9.
V.
The EEOC also asserts the District Court erred by
requiring it to reimburse Kronos for half of the cost of
producing the subpoenaed information.
A.
The EEOC first argues the District Court should not
have considered Kronos’s request for the EEOC to cover the
costs of compliance with the subpoena because Kronos
waived this argument by failing to raise the claim during the
first appeal. Specifically, the EEOC argues that the cost-
shifting issue “obviously overlap[s] considerably” with the
29
“undue burden” standard that is part of the fifth element in the
test to enforce an administrative subpoena. EEOC Br. 53.
Kronos did not raise an undue burden argument during the
initial proceedings before the District Court, which, according
to the EEOC, is tantamount to a failure to object to paying the
full cost of compliance with the subpoena. Conversely,
Kronos contends that its initial objection to the subpoena
raised the issue of cost by arguing that “‘[c]ompliance . . .
would require Kronos to expend very substantial resources,
time, and money.’” Kronos Br. 53 (quoting App. 178). It
then “suspended” the issue after the District Court
significantly narrowed the scope of the subpoena in its order
of June 1, 2009. Id. The issue did not resurface until after
our decision in Kronos I — which expanded the scope of
discoverable material and therefore increased the cost of
compliance with the subpoena — at which time Kronos
promptly raised it. Kronos also correctly states that, as the
appellees in Kronos I, “they were not required to raise all
possible alternative grounds for affirmance to avoid waiving
those grounds.” Eichorn v. AT&T Corp., 484 F.3d 644, 657–
58 (3d Cir. 2007).
“It is well established that arguments not raised before
the District Court are waived on appeal.” DIRECTV Inc. v.
Seijas, 508 F.3d 123, 125 n.1 (3d Cir. 2007). However, when
a case is remanded, a district court “may consider, as a matter
of first impression, those issues not expressly or implicitly
disposed of by the appellate decision.” Bankers Trust, 761
F.2d at 950. We have thus explained that a district court “is
thereby free to make any order or direction in further progress
of the case, not inconsistent with the decision of the appellate
court, as to any question not settled by the decision.” Id.Our opinion in Kronos I did not discuss who should
bear the costs of compliance with the EEOC’s subpoena,
leaving the District Court free to consider the issue.
Moreover, Kronos’s position on remand was significantly
altered by our opinion in Kronos I because our opinion
broadened the scope of the document production and thus
likely increased Kronos’s cost of production. Kronos was
entitled to renew its objection to the new, higher cost of
preparing discoverable materials. We therefore hold that
Kronos did not waive this issue.
30
B.
The EEOC also objects to the merits of the District
Court’s decision that the costs of compliance should be split
evenly between it and Kronos.
The District Court based its decision on United States
v. Friedman, 532 F.2d 928, 936 (3d Cir. 1976), which
involved the Government’s attempt to enforce summonses
against several third-party banks and an accountant in the
context of a tax liability investigation. We recognized that no
statutory authority exists to compel shifting the costs of
compliance with an administrative subpoena. Even so, we
held that courts have the power to award costs when deciding
to enforce a subpoena. Id. We went on to consider Federal
Rule of Civil Procedure 45, which in its current iteration may
require compensation for non-parties subject to civil
subpoenas. We noted that Rule 45 does not apply to
administrative subpoenas, but nonetheless found the text of
the rule, when coupled with Congress’s decision to entrust
courts with the enforcement of administrative subpoenas, to
be a useful indicator of “a broad congressional judgment with
respect to fairness in subpoena enforcement proceedings.”
Friedman, 532 F.2d at 937. We further required that courts
engage in an “individualized consideration rather than
generalization” in determining how to award costs, holding
that it was improper for the district court there to set a general
rule requiring reimbursement for all of the banks involved in
the case instead of considering each bank separately. Id.Such an analysis was necessary, we held, in order to decide
whether “the cost involved in complying with the summons in
question exceed[ed] that which the respondent may
reasonably be expected to bear as a cost of doing business.”
Id. at 938. 13
13
Friedman is the leading authority in this Circuit. Although
the EEOC cites EEOC v. Maryland Cup Corp., 785 F.2d 471(4th Cir. 1986), for the proposition that there is no statutory
right to reimbursement, that case involved a subpoena issued
to a party and, in any event, cannot supersede the law of this
Court.
31
Following briefing by both parties, the District Court
ordered that requiring each party to pay 50% of the costs
would properly “strike a balance between the EEOC’s need
for the information, and the financial burden on Kronos.”
App. 53. The court appeared to be particularly concerned
about imposing the full cost of such a large production on a
non-party. App. 52. It is unclear from the record exactly
what evidence was before the court to prove that the costs of
compliance would total $75,000, as the court mentioned only
the existence of a one-page joint status report. The sole piece
of evidence in the record related to costs is the Kuhn
affidavit, which was prepared in response to the more
expansive Subpoena 2, and thus estimated the cost of
compliance to fall between $656,184 and $1,161,119. 14 App.
87, 91.
We do not dispute that a cost-sharing order is within
the District Court’s discretion, and we recognize that the
estimate of $75,000 will likely increase when this case returns
to the District Court. Because the District Court will
therefore again be tasked with determining how to allocate
costs here, we note a few principles that should apply under
such circumstances.
As we stated in Friedman, the primary consideration in
fairly allocating the cost of compliance with an administrative
subpoena is whether the cost of compliance with the
subpoena “exceed[ed] that which the respondent may
reasonably be expected to bear as a cost of doing business.”
532 F.2d at 938. Such an inquiry requires at least some
evidence to support a party’s assertion about what the actual
costs of compliance will be. Id. at 937 (noting that a party
who seeks reimbursement should be “required to produce
evidence of the expense likely to be incurred in compliance
with the summons”). We also adopt the general proposition
that a non-party should not be expected to bear as great an
expense as a party when complying with a subpoena, a
principle which finds support in the fact that Rule 45
distinguishes between reimbursement for parties and non-
14
The reduction of Kronos’s estimate of compliance to
$75,000 was likely the result of the new limitations added by
the District Court on remand.
32
parties. See Fed. R. Civ. P. 45(c)(2)(B)(ii) (providing that a
district court “must protect a person who is neither a party nor
a party’s officer from significant expense resulting from
compliance” with a subpoena).
With these rules in mind, we will remand for the
District Court to reconsider how the costs of production
should be allocated in this matter.
VI.
For the foregoing reasons, we will reverse the
judgment of the District Court. We will remand for
additional proceedings consistent with this opinion.
33