TRENTON RENEWABLE POWER, LLC v. DENALI WATER SOLUTIONS, LLC (C-000049-20, MERCER COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3060-20
TRENTON RENEWABLE
POWER, LLC,
Plaintiff,1 APPROVED FOR PUBLICATION
January 24, 2022
v.
APPELLATE DIVISION
DENALI WATER
SOLUTIONS, LLC,
Defendant-Respondent.
__________________________
SYMBIONT SCIENCE,
ENGINEERING AND
CONSTRUCTION, INC.,
Appellant.
__________________________
Argued November 29, 2021 – Decided January 24, 2022
Before Judges Messano, Accurso, and Enright.
On appeal from an interlocutory order of the Superior
Court of New Jersey, Chancery Division, Mercer
County, Docket No. C-000049-20.
1
Trenton Renewable Power, LLC is not a party to the appeal.
Daniel J. Cohen argued the cause for appellant
(Newman, Simpson & Cohen, LLP, attorneys; Daniel
J. Cohen and Daniel C. Stark, on the briefs).
Jeffrey M. Pollock argued the cause for respondent
(Fox Rothschild, LLP, attorneys; Jeffrey M. Pollock
and Steven J. Link, of counsel and on the brief;
Dominique J. Carroll, on the brief).
The opinion of the court was delivered by
MESSANO, P.J.A.D.
Plaintiff Trenton Renewable Power, LLC owns and operates an
anaerobic biodigester facility in Trenton (the Trenton Facility). Plaintiff or its
predecessors contracted with non-party appellant, Symbiont Science,
Engineering and Construction, LLC (Symbiont), an engineering, design and
construction firm in Milwaukee, Wisconsin, to design and build out the
facility. Defendant Denali Water Solutions, LLC (Denali) contracted with
plaintiff to supply organic waste for processing at the Trenton Facility.
Disagreements arose between plaintiff and Denali, and, in March 2020,
Denali cited the contract's force majeure provision, claiming the Covid-19
pandemic made it impossible for it to perform as required by the agreement.
Denali also alleged the Trenton Facility could not process all categories and
quantities of waste Denali was required to deliver under the contract because
of fundamental design flaws and inadequate equipment and technology at the
plant. Unable to resolve the dispute, plaintiff filed suit.
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The judge denied plaintiff a temporary restraining order, and, before the
date set for a hearing on a preliminary injunction, plaintiff eliminated its
request for injunctive relief in its July 2020 amended complaint. Denali
answered and served plaintiff, Symbiont and other non-parties, Renew Energy
A/S LLC (Renew), DSM Environmental Services, Inc. (DSM), and Leidos
Engineering & Sciences, Inc. (Leidos), with subpoenas ad testificandum and
duces tecum. When plaintiff and most of the non-parties failed to comply,
Denali filed a motion to compel.2
Plaintiff, Symbiont, and other non-parties filed cross-motions to quash
the subpoena or, alternatively, for a protective order limiting the scope of the
request.3 Symbiont asserted compliance would be unduly burdensome, and it
also sought to shift the costs of compliance to Denali. The judge entered an
order on February 1, 2021, granting Denali's motion to compel and denying the
cross-motions to quash. Symbiont moved for reconsideration, which the judge
denied, and he subsequently denied Symbiont's motion for a stay pending
appeal.
2
In a footnote in its brief, Denali states that DSM did not file opposition to
Denali's motion to compel and produced the requested discovery.
3
Symbiont's counsel represented all the non-parties before the motion judge,
but only Symbiont moved for leave to appeal. As appropriate, we limit our
discussion to Symbiont's arguments.
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We granted Symbiont's motion for leave to appeal and temporarily
stayed the discovery order for forty-five days to permit the parties to
participate in a conference through the Civil Appeals Settlement Program; the
conference was unsuccessful. In the interim, pursuant to Rule 4:41-1, the
judge appointed a special discovery master because of the extraordinary
volume of discovery-related issues that arose. The order limited the master's
authority to resolving discovery disputes between the parties. On September
7, 2021, we entered an order staying further discovery as to Symbiont and
accelerated its appeal from the motion judge's February 1 and April 22, 2021
orders.
I.
The record further reveals the judge entered a case management order on
September 3, 2020. As expected, the order set forth deadlines for various
discovery, with all "fact discovery" to be completed by April 30, 2021. The
order did not explicitly mention discovery from non-parties, and it prohibited
the filing of any "discovery-related motions" unless first discussed with the
court. One week later, on September 10, Denali served its subpoena on
Symbiont.
The subpoena demanded Symbiont provide for deposition a corporate
designee with knowledge of seventeen "topics," including: the terms of
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Symbiont's agreement with plaintiff, "including the drafting, revision, and
execution of the agreement"; "[t]he calculation of Symbiont's guaranteed
maximum price to complete the construction to retrofit the Trenton Facility";
and "[a]ll communications with [plaintiff c]oncerning the construction and
design" of the facility, "including but not limited to, the construction cost,
construction schedule, and design modifications." Attached to the subpoena
was a document demand, encompassing thirteen categories, including: all
communications between Symbiont and plaintiff regarding Symbiont's efforts
to be selected for the project, including "all proposals submitted, all interviews
given, all pitches made, and the basis for calculating the guaranteed maximum
price"; construction documents for the facility, including any modifications;
and documentation of disputes between plaintiff and Symbiont; documents and
communications between Symbiont and plaintiff's lenders, and between
Symbiont and Renew, DSM and Leidos.
Emails in the record document the dialogue between Symbiont's counsel
and Denali's counsel after service of the subpoena. In a November 25, 2020
email, Symbiont's counsel provided a list of fifty-five "custodians who worked
on the [p]roject," and designated eleven who were "key personnel." He
suggested the parties confer to "identify the custodians whose records [Denali]
would like [Symbiont] to initially search," and to otherwise agree on a
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reduction in the scope of the demand. Counsel suggested Denali would bear
the costs of compliance if the scope of the discovery demand was not reduced.
Denali's counsel responded five days later, stating it was "not prepared to limit
[its] requests to certain custodians or search terms." As threatened in the
email, Denali filed its motion to compel on December 18.
In its cross-motion to quash the subpoena or for a protective order,
Symbiont's counsel, and its in-house general counsel, certified that Symbiont
had preliminarily identified four "computer drives" in its electronic filing
system that included some information on the Trenton project; those cont ained
40,000 files and approximately 136 gigabytes of data. This did not include the
emails of Symbiont's 100 workers, most of whom "had some involvement
with" the Trenton project, because the emails were stored elsewhere in the
system. Symbiont searched only the emails of the key personnel it had earlier
identified and found 30,999 potentially responsive emails. Counsel certified
that an outside vendor estimated the cost of processing the data would be
$10,000, plus an additional $5330 per month in storage fees. Counsel
requested the court quash the subpoena or otherwise limit its scope.
The judge considered oral argument on the motion and entered an order
on February 1, 2021, granting Denali's motion and denying all cross-motions.
In a written statement of reasons that accompanied the order, the judge first
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rejected plaintiff's contentions that the records demanded by Denali were only
"marginally relevant," noting "[t]he breadth of the complaint and the damages
asserted against [d]efendant involve a broad array of technical, operational,
and financial aspects of the facility's operation." He concluded Denali
"established a substantial showing that the records are relevant and material to
its defenses," and the "expansive protective order in place adequately
addresses [plaintiff's] concerns about confidentiality."
The judge did not find that Denali's demands of Symbiont were
"overbroad or unduly burdensome . . . [as] the requests [we]re tailored to those
aspects of [Symbiont's] involvement with [p]laintiff or the Trenton Facility
most relevant to the dispute between [the parties]." The judge noted "[t]he
comprehensive and permissive clawback provision minimize[d] many of
[Symbiont's] concerns" regarding the burdensome nature of the discovery
demand.4 Based on Symbiont's certifications, the judge found it "already
[made] significant efforts to identify custodians and responsive documents . . .
4
See Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, 290 (S.D.N.Y. 2003)
("[M]any parties to document-intensive litigation enter into so-called 'claw-
back' agreements that allow the parties to forego privilege review altogether in
favor of an agreement to return inadvertently produced privileged
documents.").
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and suggest[s] that [Symbiont has] already incurred the most significant costs
associated with their production."
Symbiont and plaintiff moved for reconsideration. Symbiont's counsel's
certification included email messages demonstrating the clawback provision
was not fully negotiated at the time of the court's order. Symbiont's corporate
counsel certified the clawback provision would "not minimize the 'vast
majority of . . . extraordinary costs and burdens that w[ould] accompany
compliance'" because Symbiont had not yet reviewed the 5.6 million pages of
documents and emails to consider assertions of privilege or confidentiality.
The judge denied the reconsideration motions. In a written statement of
reasons supporting the order, he first addressed and rejected plaintiff's
arguments. The judge then said he already considered Symbiont's arguments
regarding the burdensome nature of the demand, and "concluded . . . those
burdens were not undue given the relevance and materiality of the records
sought, Symbiont's steps already undertaken to identify records custodians,
and the acknowledgement . . . that [counsel] were discussing a clawback
provision, which" the court had since entered.
II.
Before us, Symbiont renews the arguments it raised before the motion
judge, contending it will incur unreasonable burdens and costs in providing the
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electronically stored information (ESI) demanded by Denali, and the same
information is accessible from other sources, including plaintiff. Symbiont
notes the clawback provision fails to address the costs Symbiont will incur in
providing the ESI, and, alternatively, Symbiont argues Denali should bear the
costs of production. Having considered these arguments in light of the record
and applicable legal principles, we reverse.
"Generally, we accord substantial deference to a trial court's disposition
of a discovery dispute." Brugaletta v. Garcia, 234 N.J. 225, 240 (2018) (citing
Capital Health Sys., Inc. v. Horizon Healthcare Servs., Inc., 230 N.J. 73, 79–
80 (2017)). "[A]ppellate courts are not to intervene but instead will defer to a
trial judge's discovery rulings absent an abuse of discretion or a judge's
misunderstanding or misapplication of the law." Capital Health, 230 N.J. at
79–80 (citing Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 371
(2011)).5
We "start from the premise that discovery rules 'are to be construed
liberally in favor of broad pretrial discovery.'" Id. at 80 (quoting Payton v.
5
We apply a similarly deferential standard of review to the denial of a motion
for reconsideration. See, e.g., Cypress Point Condo. Ass'n v. Adria Towers,
LLC, 441 N.J. Super. 369, 372 (App. Div. 2015) (citing Cummings v. Bahr,
295 N.J. Super. 374, 389 (App. Div. 1996)). Because the timeliness of
Symbiont's appeal from the original order is unchallenged, we need not
address the second order denying its motion for reconsideration.
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N.J. Tpk. Auth., 148 N.J. 524, 535 (1997)). Rule 4:10-2(a) reflects this
principle:
Parties may obtain discovery regarding any matter, not
privileged, which is relevant to the subject matter
involved in the pending action . . . . It is not ground
for objection that the information sought will be
inadmissible at the trial if the information sought
appears reasonably calculated to lead to the discovery
of admissible evidence.
"Consequently, to overcome the presumption in favor of discoverability, a
party must show 'good cause' for withholding relevant discovery by
demonstrating, for example, that the information sought is a trade secret or is
otherwise confidential or proprietary." Capital Health, 230 N.J. at 80.
Yet, "the parties' discovery rights are not unlimited," Piniero v. N.J. Div.
of State Police, 404 N.J. Super. 194, 204 (App. Div. 2008), and claims of
privilege or confidentially are not the only reasons supporting good cause
justifying non-production. Our rules recognize that "a party or . . . the person
from whom discovery is sought" may "for good cause shown" seek "any order
that justice requires to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense." R. 4:10-3 (emphasis
added); see also Horizon Blue Cross Blue Shield of N.J. v. State, 425 N.J.
Super. 1, 29 (App. Div. 2012) (noting otherwise permitted discovery "may be
limited by the court if it determines that the discovery sought is unreasonably
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cumulative or duplicative, or the burden or expense of the proposed discovery
outweighs its likely benefit" (citing R. 4:10-2(g))). A court may grant the
person from whom discovery is sought various forms of relief, including:
"[t]hat the discovery not be had," "the discovery . . . be had only on specified
terms and conditions," or "the scope of the discovery be limited to certain
matters." R. 4:10-3(a), (b), and (d). Rule 4:10-2(f)(2), cited by the motion
judge, provides:
A party need not provide discovery of electronically
stored information from sources that the party
identifies as not reasonably accessible because of
undue burden or cost. On a motion to compel
discovery or for a protective order, the party from
whom discovery is sought shall demonstrate that the
information is not reasonably accessible because of
undue burden or cost. If that showing is made, the
court nevertheless may order discovery from such
sources if the requesting party establishes good cause
. . . . The court may specify conditions for the
discovery.
[(Emphasis added).]
Few reported cases in New Jersey have considered whether the general
policies recognized by our Court Rules that support broad discovery between
parties to the litigation necessarily apply with equal voice to discovery
demanded from non-parties. In Berrie v. Berrie, the Chancery court
considered whether in the context of a contested divorce case, the plaintiff
could compel the deposition of his estranged brother, a non-party, to establish
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the worth of plaintiff's similar, privately held toy business. 188 N.J. Super.
274, 276–77 (Ch. Div. 1983). After recognizing the liberality of our discovery
rules, the court noted, "broad as modern discovery may be, it is not unbridled
and not unlimited." Id. at 282.
The court observed that all discovery "impose[s] some burdens on the
persons from whom information is sought," and when "the burdens outweigh
the benefits[,] the tools of discovery become, intentionally or unintentionally,
weapons of oppression." Ibid. When "the interests of a nonparty" are
involved, the court said the issue "deserves close scrutiny." Id. at 282–83. In
quashing the deposition subpoena, the court concluded that requiring the
estranged non-party brother to provide personal financial data was
"unreasonable and oppressive, impose[d] an undue burden upon him and [wa]s
an unwarranted intrusion and invasion of his rights." Id. at 287.
The Berrie court cited two trial court decisions that dealt with discovery
sought from non-parties using "an equitable bill of discovery." Id. at 283; see
R. 4:18-1(d) (noting the rule regarding a demand for production of documents
"does not preclude an independent action against a person not a party"). 6 In
6
It is now accepted that a party may seek discovery from a non-party "by a
proceeding in the cause," and a separate action is unnecessary. Pressler &
Verniero, Current N.J. Court Rules, cmt. 4 on R. 4:18-1 (2022); see also
Cavallaro v. Jamco Prop. Mgmt., 334 N.J. Super. 557, 566 (App. Div. 2000)
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Arcell v. Ashland Chemical Co., the Law Division held the defendant was
entitled to discovery from a non-party, the employer of one of the plaintiffs.
152 N.J. Super. 471, 507–08 (Law Div. 1977). Citing cases from other
jurisdictions, the court stated that such relief was allowed "where the party
from whom discovery was sought had a pecuniary interest in the outcome of
the action at law or was in possession of information vital to the prosecution or
defense of the legal action which information could not be obtained from any
other source." Id. at 507 (emphasis added).
In Beckwith v. Bethlehem Steel Corp., the plaintiffs, in eight separate
lawsuits, sought discovery from a non-party, nonprofit corporation in Virginia
that "gather[ed] and disseminate[d] information to the asbestos industry,
government regulatory agencies, the news media, and the general public about
asbestos and its [e]ffect on human health." 182 N.J. Super. 376, 379 (Law
Div. 1981). Two of the nonprofit's members were defendants in the lawsuit.
Id. at 380. Unlike the non-party in Arcell, the non-party in Beckwith had no
pecuniary interest in the outcome of the litigation. Judge Keefe examined
other case law from New Jersey and elsewhere, and concluded:
whether an action for discovery should lie against a
party who has no pecuniary interest in the outcome of
(noting one primary purpose of Rule 4:14-7(c) is "to provide litigants the
opportunity of full discovery from non-parties").
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the litigation requires a balancing of certain
considerations. They are: (1) the "necessity a party
may be under" in seeking the discovery, or the
importance of the information sought in relation to the
main case; as against (2) the relative simplicity in
which the information may be supplied by defendant,
and the availability of less burdensome means to
obtain the same information.
[Id. at 382 (emphasis added) (citations omitted).] 7
The Federal Rules of Civil Procedure and federal courts have explicitly
recognized similar considerations regarding discovery demanded of nonparties
to the litigation. Rule 26(c) is the source of our Rule 4:10-3, Pressler &
Verniero, cmt. 1 on R. 4:10-3, and provides the same bases for granting a
protective order to "any person from whom discovery is sought." Fed. R. Civ.
P. 26(c)(1). Additionally, pursuant to Federal Rule of Civil Procedure
45(c)(3), a district court shall "quash or modify a subpoena" if it "subjects a
person to an undue burden." Fed. R. Civ. P. 45(c)(3)(A)(iv).
In consideration of whether a subpoena places
an undue burden on the party subpoenaed, it has been
stated that "such factors as relevance, the need of the
7
The court in Beckwith ultimately concluded that it lacked jurisdiction over
the nonprofit Virginia corporation and dismissed the plaintiff's discovery
complaint. 182 N.J. Super. at 385. Symbiont did not raise any jurisdictional
argument in this case. See Catalina Marketing Corp. v. Hudyman, 459 N.J.
Super. 613, 618–19 (App. Div. 2019) (discussing a New Jersey court's lack of
jurisdiction to enforce a subpoena served on a foreign corporation or consider
the foreign corporation's motion to quash). Denali's subpoena was served on
Symbiont, "c/o Cogency Global Inc., SOP Agent," in Dayton, New Jersey.
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party for the documents, the breadth of the document
request, the time period covered by it, the particularity
with which the documents are described and the
burden imposed" should be considered.
[Alexander v. FBI, 186 F.R.D. 21, 34 (D.D.C. 1998)
(quoting United States v. Int'l Bus. Machs. Corp., 83
F.R.D. 97, 104 (S.D.N.Y. 1979)).]
"In addition, the status of a witness as a non-party to the underlying
litigation 'entitles [the witness] to consideration regarding expense and
inconvenience.'" Concord Boat Corp. v. Brunswick Corp., 169 F.R.D. 44, 49
(S.D.N.Y. 1996) (alteration in original) (quoting Fed. R. Civ. P. 45(c)(2)(B)
(1996)); see also In re Novo Nordisk Sec. Litig., 530 F. Supp. 3d 495, 504
(D.N.J. 2021) (noting while "non-parties are entitled to broader discovery
protections, there must be some showing that the burden imposed will be
undue," and finding the non-party failed to demonstrate undue burden); In re
Auto. Refinishing Paint Antitrust Litig., 229 F.R.D. 482, 495 (E.D.Pa. 2005)
("The witness's status as a nonparty to the litigation should also be
considered." (citations omitted)).
Indeed, Federal Rule of Civil Procedure 45(d)(2)(B)(ii) specifically
requires a court, in responding to a nonparty's objection that a document
demand or production of ESI is unduly burdensome, to enter an order that
"must protect a person who is neither a party nor a party's officer from
significant expense resulting from compliance." See 9 Moore's Federal
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Practice § 45.41 (Matthew Bender 3d Ed. 2022) (noting pursuant to the Rule,
"the court is under a mandate to protect a nonparty from 'significant expense'
in complying with a subpoena," and that "[s]ome courts have held that [it]
requires a district court to shift the cost of compliance . . . if those costs are
significant").
Here, the judge was faced with motions to quash subpoenas filed by both
plaintiff and non-parties to the litigation, including Symbiont. He applied a
traditional analysis regarding claims of undue burden and expense to both in
much the same manner. In doing so, he failed to consider the distinction
between the burden plaintiff carried in opposing Denali's broad discove ry
demand, and the qualitatively different burden imposed on Symbiont. After
all, plaintiff commenced the litigation, and Denali was entitled to the full force
of our liberal discovery rules in obtaining information from its adversary; not
so with respect to Symbiont.
We think the "considerations" Judge Keefe outlined in Beckwith are
necessary for a court to assess when facing a discovery dispute involving a
non-party to the litigation, and these considerations are firmly tethered to our
existing Rules. Rule 4:10-2(g), for example, permits a court to "act . . . on its
own initiative" and limit discovery that:
(1) . . . is obtainable from some other source that is
more convenient, less burdensome, or less expensive;
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(2) the party seeking discovery has had ample
opportunity by discovery in the action to obtain the
information sought; or (3) the burden or expense of
the proposed discovery outweighs its likely benefit,
taking into account the needs of the case, the amount
in controversy, the parties' resources, the importance
of the issues at stake in the litigation, and the
importance of the proposed discovery in resolving the
issues.
These are particularly relevant concerns when discovery is sought from a non -
party. 8
Denali argued that the discovery from Symbiont was necessary to
support its claim that the Trenton Facility's imperfections made it impossible
for plaintiff to process the organic waste products Denali was contractually
obligated to deliver under the agreement. While we certainly pass no
judgment on the merits of that defense, we note that Denali asserted the force
majeure provisions in its contract with plaintiff before the suit was filed,
8
When considering a challenge to the appropriate "scope of discovery,"
Federal Rule of Civil Procedure 26(b)(1) requires the court to consider issues
similar to those contained in Rule 4:10-2(g). In Nicholas v. Wyndham, Int'l,
Inc., the appeals court affirmed the district court's grant of a protective order
denying the defendant's requested discovery from a nonparty. 373 F.3d 537,
542–43 (4th Cir. 2004). The court cited a prior iteration of Rule 26 and found
the defendant was not entitled to discovery because the nonparty "could have
no more information about the facts of liability and damages than [the
p]laintiffs themselves had," and the plaintiffs had already produced significant
discovery. Id. at 543.
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claiming the Covid-19 pandemic made it impossible for Denali to deliver the
products as required.
We acknowledge our Court Rules generally permit the parties to use the
"methods of discovery . . . in any sequence." R. 4:10-4. Nonetheless, the
court has discretion to order the sequencing of discovery "in the interests of
justice." Ibid. When a party seeks discovery from a non-party, particularly
when the ESI is voluminous, time-consuming and costly to prepare for
production, and may implicate issues of privilege and confidentiality, the court
must consider "the relative simplicity in which the information may be
supplied by [a party], and the availability of less burdensome means to obtain
the same information." Beckwith, 182 N.J. Super. at 382 (citations omitted).
Here, some of the information Denali sought from Symbiont, for
example, its contract with plaintiff and any prior drafts, would undoubtedly be
in plaintiff's possession, as would communications between plaintiff and
Symbiont regarding the Trenton Facility's design and operation. Yet, rather
than await the responses to the discovery requests it served on plaintiff roughly
contemporaneously with Symbiont, Denali chose to compel production from
both at the same time. Denali acknowledged at oral argument before us that
this was essentially a strategic decision on its part and certainly not compelled
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by any "necessity." Ibid. And, as already noted, the judge applied similar
standards to the distinctly different aspects of Denali's motion.
Moreover, the judge's reliance on the clawback provision did not lessen
the burden on Symbiont, which would have had to produce all the ESI, subject
only to assertions of privilege or confidentiality. Although it had preliminarily
evaluated how much ESI would be responsive to Denali's demand, the judge
mistook Symbiont's preliminary assessment as indicative of Symbiont having
done most of the necessary work, but that clearly is not the case.
We reverse and vacate the two orders under review. 9 In doing so, we
hasten to add we express no opinion on Denali's ability to compel production
of the ESI from Symbiont in the future if the parties cannot otherwise agree to
the appropriate scope of production. We have no doubt that the court will be
able to exercise its discretion in resolving any additional disputes.
Reversed.
9
We will forward our opinion to the Civil Practice Committee for
consideration of whether our Rules, like the Federal Rules, should provide for
explicit recognition of discovery demands served on nonparties.
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