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March 27, 2018

Corporate Depositions: The Wrong Time to Answer in the Form of a Question

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By:  Patricia McHugh Lambert, Esq.

Introduction

            Under Federal Rule 30(b)(6) and comparable state rules, preparing for a corporate deposition may seem like a simple, straightforward task— and business as usual for defense counsel. However, the scope of this mechanism far exceeds the rule. Rather, strategic norms employed by litigators and decisions by various courts have shaped corporate depositions into a significant undertaking. It is important to understand the interaction of these forces as you embark on choosing the right corporate designee and preparing that individual to speak for the company.

Choosing the Right Individual

            Although a corporation is a “person” in the eyes of the law, there must be a human individual to speak for it during litigation, generally beginning with depositions. As with many things in the legal world, the corporate deposition process will begin with notice. Under the federal rule, when a party names a corporation in its notice, it must “describe with reasonable particularity the matters for examination.”[1] From there, the corporation must then “designate one or more officers, directors, or managing agents…to testify on its behalf.”[2] The corporate designee must “testify about information known or reasonable available to the organization.”[3]

            Thus, the corporation’s search for the ideal corporate designee begins. At first glance, it may seem efficient to simply designate someone at the company with the most knowledge, in order to avoid the risk of deposing someone with too little knowledge or wasting time and resources deposing multiple people. However, there are a number of complications with this strategy. First, representatives with a wide array of knowledge can often reveal more information than the deposing party initially asks. This knowledge may then expose them to further questions outside the scope of the original topics listed in the notice. (See Part III.A). Rather, it is frequently more effective to designate a person with only limited knowledge who can prepare adequately and give appropriate testimony. After all, the company’s only obligation is to produce a representative with knowledge about those topics listed in the notice.[4] The designee need not have any personal knowledge at all—only the ability to familiarize themselves with the information.[5]

Moreover, sometimes the person who has the most knowledge does not make the best witness. Of course, calm, patient, and professional individuals are ideal representatives to give testimony. In combining the two objectives, some companies will even go as far as to hire articulate outsiders to be designated deponents for the company—thereby also limiting the knowledge the deponent will have. More commonly, however, corporations will choose a current employee as its designee and thoroughly prepare them within the scope of the notice. This, of course, presents additional challenges for which every corporation should anticipate.

Preparing for Deposition

            Many attorneys will employ the “limited knowledge” strategy described above, but some have taken it one step further—producing witnesses who simply “cannot recall” any of the information asked of them. Courts have been emphatic in ruling that this tactic is strictly prohibited by the rule and often comes with consequences. (See Part IV). Rather, thorough preparation is the best way control the flow of information and comply with the rule.

            Because the deponent need not have personal knowledge, preparation is not only wise, it is required by the court. In United States v. Taylor, the court held that even when a corporation no longer employs any individuals who can recall a distant event, the duty to prepare a deponent with available resources is not discharged. Rather any materials that are reasonably available, such as documents or former employees, must be used to inform the deponent of the condition of the corporation.[6] This can seem like a momentous task—especially for companies that are large or have a long history. However, this duty exists only within the scope of information listed within the notice, which must be described with “reasonable particularity.” Although these topics will limit the amount of information that the deponent must be prepared to discuss, it will not limit the scope of questions asked and will not insulate the deponent from being re-deposed in his individual capacity.

Scope of Questioning

            The scope of the deposition is written in black and white on the notice, so the risk of disclosing too much is minimal, right? Not quite. As with any deposition, there is always a risk of the deponent answering far more than the question asks, but with regard to corporate depositions in particular, the topics identified on the notice are not always the “safety net” they may appear to be.

            Federal courts have consistently held that the scope of questioning in corporate depositions is not confined by the notice.[7] This standard begs the question—if the topics listed in the notice cannot limit the scope of deposition questioning, why are they included at all? In King v. Pratt & Whitney, the court clarified the misconception, noting that the notice requirement language of “reasonable particularity” is not superfluous but rather simply defines the corporation’s obligations to produce a qualified designee.[8]

            Although “The deponent’s answers to questions outside the scope of the notice will not bind the organization,” the testimony can be admitted as the statement of the deponent in an individual capacity.[9] Because of this, it is often favorable that the deponent only have knowledge about the noticed topics, in order to mitigate the spread of information. As the court in King, frankly noted, “if the deponent does not know the answer to questions outside the scope of the matters described in the notice, then that is the examining party’s problem.”[10]

Nonetheless, when questions spread beyond the scope of the notice, counsel should object to the questioning under the rule 30(b)(6) duty to prepare the witness only for the topics on the  notice. However, counsel should be hesitant to instruct the witness not to answer questions because sanctions may be imposed for employing this tactic unreasonably. As the court noted in E.E.O.C. v. Freeman, “Any instruction not to answer a deposition question in violation of Rule 30(c)(2) presumptively warrants sanctions, and the instances in which a court may choose not to levy them are ‘few and far between.’”[11]

Deposing the Corporate Designee in an Individual Capacity

            That an individual is designated to represent the company in a corporate deposition does not insulate him from being deposed in an individual capacity. In fact, statements made in a corporate deposition may nonetheless be attributed to the individual in the circumstances noted above. Depositions of corporate officers as individuals are rather governed by Federal Rule 26, which allows for the deposition of anyone regarding “any nonprivileged matter that is relevant to any party’s claim or defense.”[12] Many parties will argue that the individual’s own personal statements are simply not relevant, and thus not permitted discovery. However, as the rule notes, “For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action.” Thus, if the party seeking the deposition can show good cause for its relevance, the court will order it despite the objection. In the interest of efficiency, however, courts are hesitant to order needlessly cumulative discovery be conducted.

Consequences

            Choosing the wrong designee or inadequately preparing that individual can be disastrous for your case. Most evidently, this poses a huge risk of exposing detrimental information or more information than required. However, lacking proper care in navigating this process can also result in significant court intervention. Most commonly, courts will compel the deposition of an appropriate corporate designee or impose sanctions for noncompliance.

Sanctions

Designating a representative who has no knowledge about the company may seem like an easy loophole, but as discussed above, it will not pass muster of the Federal Rule. The Rule 30 notice serves as an outline of the deponent’s obligation to make himself familiar with the requested topics. Therefore, a deponent who is unable to answer questions within the scope has not complied with the rule. In fact, presenting a corporate designee unprepared to answer questions on those topics is tantamount to a failure to appear for the deposition.[13]  When this occurs, there is a significant risk that a court will impose sanctions. [14]

 However, every imperfect corporate deposition will not automatically warrant sanctions. For example, in Booker v. Massachusetts Dept. of Public Health, the Court refused to impose sanctions when the individual designated has sufficient knowledge but was merely not the deposing party’s preferred deponent.[15] Additionally in Vopak USA, Inc. v. Hallett Dock Co., the Court held that sanctions were not appropriate when counsel terminated the deposition due to confusion about its scope.[16] Courts leave room for varying circumstances and generally reserve sanctions for noncompliance that is particularly egregious.

Compelling a Different Corporate Designee

            In addition to sanctions, the court may also have the power to compel a different corporate representative from the one designated. If the designated representative has inadequate knowledge, the deposing party may move to compel testimony from a qualified representative.[17] 

            The deposing party may not, however, move to compel testimony from another corporate designee simply because the first was not preferable.[18] In McPherson v. Wells Fargo Bank, the court held that the corporation has the sole authority to determine who will speak for it, so long as that person is adequately prepared.[19] In holding that the plaintiff could not compel the testimony if its preferred designee, the court emphasized “Certainly the Court will not interfere at this stage in the [corporation’s] right to make that determination for itself.”[20]

Conclusion

            Choosing and preparing a corporate designee can be a significant undertaking. The first step is to contact a qualified law firm or attorney to assist you. The best resource to connect you with experienced attorneys is the Harmonie Group’s online directory, which you can access at harmonie.org/directory

Patricia McHugh Lambert has over 35 years of experience in handling complex commercial litigation and insurance matters. Ms. Lambert has worked on national class actions, significant litigation and regulatory matters for Fortune 500 companies. She has also assisted small and mid-sized companies and business executives with contract, real estate and commercial disputes that needed to be resolved quickly and efficiently. Ms. Lambert is best known as an attorney who knows the field of insurance. She has represented insurers, policyholders, and insurance producers in disputes both in court and before the Maryland Insurance Administration. Ms. Lambert can be contacted at 410-339-6759 and plambert@pklaw.com.

 

[1] See Fed. R. Civ. P. Rule 30(b)(6).

 

[2] Id.

 

[3] Id.

 

[4]  Great Am. Ins. Co. of N.Y. v. Vegas Constr. Co., 251 F.R.D. 534 (D. Nev. 2008) (noting that a corporation has an obligation to make conscientious, good faith effort to produce thoroughly educated witness about noticed deposition topics).

 

[5] Reed v. Bennett, 193 F.R.D. 689 (D. Kan. 2000) (holding that the defendant corporation was not required to designate someone with “personal knowledge” to appear on its behalf).

 

[6] See U.S. v. Taylor, 166 F.R.D. 356 (M.D.N.C. 1996).

 

[7] See Crawford v. Franklin Credit Management Corp., 261 F.R.D. 34. (S.D.N.Y.2009) (noting that the deposition’s scope is rather limited by the civil procedure rule governing the scope of discovery). Some state courts apply different standards when interpreting the applicable state rule. See Hoechst Celanese Corp. v. Nat’l Union Fire Ins. Co., 623 A.2d 1099 (Del. Super. Ct. 1991) (striking answers from the deposition transcript that were outside the scope of the notice).

 

[8] King v. Pratt & Whitney, a Div. of United Technologies Corp., 161 F.R.D. 475 (S.D.Fla.1995).

 

[9] E.E.O.C. v. Freeman, 288 F.R.D. 92 (D. Md. 2012); see also Falchenberg v. New York State Dep’t of Educ., 642 F.Supp.2d 156, 164 (S.D.N.Y.2008) (“Questions and answers exceeding the scope of the … notice will not bind the corporation, but are merely treated as the answers of the individual deponent.”).

 

[10] Id. at 476.

 

[11] E.E.O.C. v. Freeman, 288 F.R.D. 92, 103 (D. Md. 2012) (citing Boyd v. Univ. of Maryland Med. Sys., 173 F.R.D. 143, 147 (D.Md.1997)).

 

[12] See Fed. R. Civ. P. Rule 26.

 

[13] United States v. Taylor, 166 F.R.D. 356, 363 (M.D.N.C. 1996).

 

[14] See QBE Ins. Corp. v. Jorda Entrprises, Inc., 277 F.R.D. 676 (S.D. Fla. 2012) (imposing sanctions on an insurer which failed to designate an adequate 30(b)(6) representative).

 

[15] Booker v. Massachusetts Dept. of Public Health, 246 F.R.D. 387 (D.Mass.2007).

 

[16] Vopak USA, Inc. v. Hallett Dock Co., 210 F.R.D. 660 (D.Minn.2002).

 

[17] State Farm Mutual Auto. Ins. Co. v. New Horizont, Inc., 254 F.R.D. 227 (E.D.Pa.2008).

 

[18] McPherson v. Wells Fargo Bank, N.A., 292 F.R.D. 695 (S.D.Fla.2013).

 

[19] Id.

 

[20] Id. at 698.