In unfair business practices cases, as with most civil cases involving companies, partnerships or other organizations, a party frequently wants to take a deposition of someone designated by the organization to speak for it as to certain issues. Unfortunately, it is not unusual for counsel to depose one or more designated individuals only to find that they have not been adequately prepared to testify and possess little useful knowledge. Two recent opinions from the Eastern District of Virginia and the District of Maryland suggest that such gamesmanship violates the requirements of the Rule and is sanctionable.
In the federal system these depositions are authorized by Rule 30(b)(6) of the Federal Rules of Civil Procedure. Under that Rule a party may serve notice on an organization that it will depose a corporate designee and provide a list of topics to be covered in the deposition. The organization is obligated to produce an officer, director, managing agent or some other representative who consents to testify on its behalf regarding the enumerated topics. The term "organization" includes corporations, partnerships, LLCs, associations and governmental agencies or other entities.
In Humanscale Corp. v. Compx International, Inc., 2009 U.S. Dist. LEXIS 120197 (E.D.Va. December 24, 2009), click here, the district court examined the clear requirements of the Rule. "The corporation must make a good-faith effort to designate people with knowledge of the matter sought by the opposing party and to adequately prepare its representatives so that they may give complete, knowledgable, and nonevasive answers in deposition." Given that the individual speaks for the corporation, the duty to prepare goes beyond the actual knowledge of the individual to the knowledge of the company. Therefore, the Rule requires the company to prepare the designee to testify as to all matters known by or reasonably available to the company. That this may be burdensome and time consuming to the company does not excuse its failure to adequately prepare its designee. As the court noted, "... sanctions may be properly imposed against a corporation when its 30(b)(6) designee is unknowledgable of relevant facts and it fails to designate an available, knowledgable, and readily identifiable witness because such an 'appearance is, for all practical purposes, no appearance at all,'" quoting Resolution Trust Co. v. Southern Union Co. , 985 F.2d 196, 197 (5th Cir. 1993).
In Humanscale Corp., the court ordered the defandant to designate properly prepared witnesses to testify as to both financial and non-financial topics. It also directed the plaintiff to submit statements of attorneys' fees and costs incurred so that sanctions could be awarded.
Just last week, the District of Maryland in Weintraub v. Mental Health Authority of St. Mary's, Inc., 2010 U.S. Dist. LEXIS 5131 (D. Md. January 22, 2010), addressed the Rule in the context of a defunct corporation. There the plaintiff had served a Rule 30(b)(6) notice on the defendant who sought a protective order given that the company was no longer in business and had no employees or authorized representatives. Counsel for the defendant conceded that he might be able to find a former director who could be deposed, but noted it was likely the individual would have no information related to the designated topics of interest. Nevertheless, the court ordered that the defendant designate an individual who could testify and cautioned that the company could not "throw up its hands" and designate an individual who was inadequately prepared.
Unfortunately for the defendant, counsel did not produce a fully informed deponent. In fairness, however, in his letter designating the individual, counsel informed opposing counsel that he was designating her "having been left essentially no alternative by the court," but acknowledged that he could not compel her to come to Maryland to be deposed. At her deposition, the designee could not testify meaningfully as to at least ten topics and repeatedly testified that no efforts to obtain such information had been undertaken.
The plaintiff filed a motion for sanctions which the court granted. Finding that the defendant had violated its prior order to produce a knowledgable deponent, the court held that the defendant's actions constituted bad faith. The court refused to give credence to the defendant's lack of control over the witness, finding that under the circumstances "Ms. Zoss was a poor choice to serve as the Rule 30(b)(6) designee." Fortunately for the defendant, the plaintiff also deposed the President of defendant's Board of Directors who was more knowledgable and defense counsel asked to treat his testimony as that of a corporate representative. Thus, the plaintiff was able to obtain much of the desired testimony. Because two depositions were required to obtain the information that should have been forthcoming in one, however, the court imposed modest sanctions. Given the tenor of the opinion, had the Board member not testified, it is proabable that the sanctions would have been more severe.
These cases should be cautionary tales to a litigant. The courts have been clear that an organization must produce knowledgable individuals to testify in response to a Rule 30(b)(6) notice even if the designee has no personal, first-hand knowledge. The law requires that they be well prepared to testify as to all topics for which they have been designated. Difficulties arising out of the organization's status or availability of knowledgable employees according to these cases will not excuse that obligation.
Thursday, January 28, 2010
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