After a recent decision of the Virginia Supreme Court, litigators facing the choice of whether to file in state or federal court must now consider the availability of third-party discovery. The Virginia high court has significantly reduced the effective ability for a state court to enforce a subpoena on a party with a Virginia registered agent but headquartered outside of the Commonwealth. Thus, practitioners who foresee the need for extensive third-party discovery on out-of-state parties will likely need to go to federal court. In past EDVa Updates, we have discussed amendments to FRCP Rule 45 (FRCP Rule 45 Amendment Take Effect on December 1, 2013), and have contrasted federal court third-party discovery with Virginia state court procedures (3rd Party Discovery Under FRCP Rule 45. v. Virginia Rule 4:9A: A Trap for the Unwary Means that Valid Objections Could be Waived). In its April 2015 decision in YELP, Inc. v. Hadeed Carpet Cleaning, Inc., 770 S.E.2d 44 (Va. 2015), the Supreme Court of Virginia restricted a significant Rule 4:9A discovery avenue. The Court held that Virginia state courts do not have subpoena power over third-parties that do not reside in Virginia, even if they have Virginia registered agents. On third-party discovery, it seems that the Virginia state courts are moving away from streamlined discovery, while federal courts, with the 2013 Fed. R. Civ. P. 45 amendments, are improving the discovery process. For certain types of cases, the YELP decision’s limitations on Virginia state courts’ subpoena authority tilts the court-selection decision towards the federal courts. The Hadeed Claims and the Court’s Holding In the case, Alexandria-based Hadeed Carpet asserted defamation claims against three John Doe defendants. The claims focused on anonymous negative reviews posted on YELP. To identify the defendants, Hadeed served a Rule 4:9A subpoena on YELP’s Virginia registered agent. (For a discussion of similarities and differences between Virginia Supreme Court Rule 4:9A and Fed. R. Civ. P. 45 practice, see here.) Virginia has a specific statutory procedure at Va. Code § 8.01-407.1 for seeking otherwise anonymous internet information. Hadeed complied with the statute, yet YELP balked, refusing to turn over any information. The trial court issued an order enforcing the subpoenas, and still YELP refused. Civil contempt followed. On appeal, the Virginia Court of Appeals affirmed the trial court’s ruling. YELP, Inc. v. Hadeed Carpet Cleaning, Inc., 62 Va. App. 678, 752 S.E.2d 554 (2014). The Supreme Court of Virginia reversed. First, the Court held there is no statutory authority for such subpoenas (“the General Assembly has not expressly authorized the exercise of subpoena power over non-parties who do not reside in Virginia”). The Court then nixed any notion that the Virginia Rules permit the discovery (“our Rules do not recognize the existence of subpoena power over nonresident non-parties”). In sum, the Court held that the trial court had no authority to enforce the third-party subpoena to YELP. (In a concurring opinion, Justices Mims and Millette concluded that Virginia’s statutes do authorize the exercise of subpoena power over non-resident, non-parties, but they arrived at the same result because they see this extension of subpoena power as a 14th Amendment Due Process violation.) Virginia State Court Practice v. EDVa Practice The case is significant in day-to-day practice because it limits an avenue to discover data maintained by companies such as Google, Facebook, Twitter, and Pinterest (who together filed as amici curiae in the YELP case). These companies are out-of-state operations who have Virginia registered agents. If they can be reached with Rule 4:9A subpoenas as non-parties in Virginia state court litigation, then there exists a fairly inexpensive discovery avenue for certain types of information. But if this route is cut off, as the Yelp case holds, then a litigant will instead have to navigate the Uniform Interstate Depositions and Discovery Act (“UIDDA”). The UIDDA provisions were enacted in Virginia in 2009, and they require that a litigant obtain out-of-state discovery subpoenas from the courts of the other states. For example, in Virginia state court litigation, a subpoena to a third-party Maryland entity would first have to be issued by the Virginia court, and then based on the Virginia subpoena the Maryland court would issue its own subpoena. Any contest over the subpoenas would likely unfold in the Maryland courts. The UIDDA is an improvement over the scattered procedures from before, but it still can be a maze to navigate. Contrast the YELP development for Virginia state courts with the 2013 amendments to Fed. R. Civ. P. 45. Under Rule 45, an attorney may issue a third-party subpoena from the Eastern District of Virginia. While enforcement of that subpoena likely begins in a foreign court, the Rule now includes procedures that potentially will send enforcement back to the issuing court. Thus, a Rule 45 subpoena to a Florida company issued in EDVa litigation likely might be enforced by an EDVa magistrate judge. The differences in these third-party discovery procedures matter when the court-selection decision is made. If a case will require significant third-party discovery from national players (who may have Virginia registered agents but are not Virginia residents), then the YELP decision scores in favor of federal court selection and against choosing Virginia state courts. Possibility of Legislative Repair The Court’s 5-2 majority opinion leaves open the door to legislative repair. If the General Assembly returns with a statutory amendment making clear that Virginia intends that its courts have subpoena power over nonresident non-parties, then for parties such as Plaintiff Hadeed Carptet in the YELP case, the state court avenue would become available. The Mims/Millette position, however, in their concurring opinion would bar such a statutory amendment if the position prevails. Under their analysis where they refer to the “state court’s coercive judicial power,” a Virginia court’s subpoena power is limited by the Due Process Clause of the Fourteenth Amendment, and extending subpoena power over nonresident third-parties would be a Due Process violation. For the foreseeable future, therefore, federal courts will provide Virginia litigators more useful third-party discovery of out-of-state parties.