A Bank's Recovery of Costs to Comply with Subpoena

Banks in New Jersey which are not a party to a lawsuit can recover, in advance, the costs of complying with a subpoena for financial records. N.J.S.A. 17:16S-1 (effective March 7, 1997) authorizes banks who are not parties to a lawsuit to require payment for expenses incurred or to be incurred in producing customers’ financial records.

N.J.S.A. 17:16S-1(b) provides that:

[a] person, other than a governmental unit, who is a party to an action and is seeking discovery or production of evidence as permitted by and pursuant to [applicable New Jersey law] or the Federal Rules of Civil Procedure requiring or requesting access to financial records pertaining to a customer of the financial institution shall pay to the financial institution that assembles or provides the financial records a fee for reimbursement of the reasonably necessary costs, directly incurred,

These costs are described below.

The first category for which a bank can be reimbursed by a litigant seeking discovery is "search and processing costs," defined as:

the total amount of personnel direct time incurred in locating and retrieving, producing, packaging and preparing financial records for shipment, costs for analysis of material, or for managerial or legal advise, expertise, research, or time spent for any of these activities.

A bank can therefore require reimbursement of its “direct” costs for the salaries paid to its employees who participated in compiling information that has been subpoenaed, and for attorneys’ fees and expenses for legal advice sought by the bank if it chooses to use the services of outside counsel to assist in responding to a particular subpoena. The ability of a bank to recover costs for legal and personnel services is a departure from general civil procedure, which permits a non-party who responds to a subpoena to recover only “out-of-pocket expenses” incurred.

A second category that may now be recovered by a bank responding to a subpoena is transportation costs, including:

transport of personnel to locate and retrieve the information or material required or requested and including all other reasonably necessary costs to convey the information or material to the place of examination.

If documents are stored at various bank offices or at an off-site storage facility, the costs incurred by a bank for retrieving those documents are to be paid by the litigant who requested the production of those documents.

The third category of reimbursable expenses are reproduction costs. The Act specifically authorizes a bank to require payment of copying and similar charges, such as the cost of “copies produced by reader-printer reproduction processes”. The per-copy charge is established by the Act as “the institution’s usual rate charged to its customers for reproducing copies”.

Another feature of the Act is the provision that a bank may require an advance payment, based on the bank’s good faith estimate of the charges permitted by the Act. Neither New Jersey’s court rules nor federal court procedure requires the payment of applicable out-of-pocket expenses in advance. The Act clearly establishes that banks in New Jersey can now shift the cost burden of producing the subpoenaed evidence to the propounder of the subpoena.

We recommend that in the bank’s list of scheduled fees to its customers that it include a provision for file research and document recovery at an hourly rate and a photocopy charge to establish a standard charge for these searches. Charges for personnel, transportation cost or outside counsel can be determined on a case by case basis.