Controlling the Scope of Deposition Discovery in Bad Faith and Punitive Damages Cases[dagger]
Nelson, Michael R
Recent decisions involving broad-based discovery of evidence, within the nexus of allegedly egregious defense conduct and loosened privilege in bad faith suits, highlight the need to actively defend depositions directed at those persons involved in the claims process. Usually identified under the rubric, “persons most knowledgeable,” defense counsel must become well-versed in the pitfalls connected with depositions of such persons and vigorously defend against misuse of this process so as to avoid unintentionally expanding the scope of discovery.
THE “PERSON MOST KNOWLEDGEABLE” DEPOSITION
Depositions of “persons most knowledgeable,” taken pursuant to Federal Rule of Civil Procedure 30(b)(6),1 pose specific challenges to defense counsel. Prior to the enactment of Rule 30(b)(6), the Federal Rules distinguished between depositions of organizational officers, directors and managing agents, and those of other employees or representatives of an organization. Only the first category of persons could be said to embody “knowledge of the organization,” such that their depositions were admissible for any purpose. Under that classification, parties sometimes faced difficulties determining whether a particular deponent was included within the category.2 FED. R. CIV. P. 30(b)(6) eliminated that difficulty, substituting instead a mechanism by which one party could request the deposition of a representative of another party who was “most knowledgeable” about a specified area of inquiry.3
Although Rule 30(b)(6) was enacted to address problems inherent in the earlier procedure, this rule carries unique problems of its own. For example, when the organizational party responds by designating a representative, that designee’s testimony becomes binding upon the organization as to the extent of the requested testimony.4 This limitation can be particularly problematic if the designee is not knowledgeable about the requested areas of testimony or responds to questions outside the scope of the notice. Other concerns affecting Rule 30(b)(6) are the scope of the notice itself, requirements regarding witness designation and preparation, and questions outside the scope of the notice.
Given these potential pitfalls, defense counsel must be particularly vigilant when defending the 30(b)(6) deposition, taking care to guard against misuse of the process while simultaneously utilizing defense strategies that are common to all depositions. Although the 30(b)(6) deposition brings with it special considerations, the ordinary strategies and techniques applicable to defending all depositions apply equally well. Counsel must attend to all applicable rules, both formal and informal, in order to minimize the possibility that the court will ignore objections directed to the conduct of opposing counsel. Similarly, counsel should adhere carefully to the judicial prescriptions and rules articulated at the Rule 16 conference – especially those regarding the court’s preferences for deposition disputes.
THE NEXUS REQUIREMENT AND WORK-PRODUCT PRIVILEGE
In State Farm Mutual Automobile Insurance Co. v. Campbell,5 the Supreme Court held that evidence of a defendant’s lawful out-of-state conduct may be probative in determining the amount of punitive damages, so long as the conduct had “a nexus to the specific harm suffered by the plaintiff.”6 A Pennsylvania district court later applied the nexus requirement to a request for broad-based discovery in Saldi v. Paul Revere Life Insurance Co.7 The federal court there determined that the nexus requirement was satisfied where the plaintiff presented evidence, in the form of bad faith litigation from other states, that the insurer had a practice or pattern of allegedly egregious conduct that was applied to the plaintiff. This prima facie showing of a pattern and practice of bad faith opened the door for additional discovery into the insurer’s internal practices and policies. The court noted that it might have considered objections or assertions of privilege, even in the face of this prima facie showing, but that it did not do so because the objections raised involved general, rather than specific, assertions.
Likewise, when applying similar discovery provisions, the Florida Supreme Court in Allstate Indemnity Co. v Ruiz,8 held that all documents pertaining to the underlying claim were discoverable, including those that would otherwise be protected by the work-product doctrine. However, the court also noted that litigants who chose to bring coverage and bad faith claims simultaneously must expect to be restricted from discovering work-product until the resolution of their coverage dispute.
These cases are instructive because they highlight the potential for broad-based discovery and the concomitant need to assert specific objections and privileges.
MARKING THE BOUNDARIES
Delineating the boundaries of discovery is particularly important when dealing with issues of bad faith and punitive damages, as illustrated by the risks identified in Campbell and Saldi. That being said, the “broad-based” discovery permitted in Saldi is not without limitations. In Saldi, the plaintiff had strong evidence of a pattern or practice of bad faith in the form of documents produced in other actions, including a successful claim in another jurisdiction. Beyond that, the Saldi opinion provides no indication of what evidence would meet the standard permitting such broad-based discovery. Consequently, defense counsel should determine the extent of the evidence already in the plaintiffs’ possession and challenge discovery based on its sufficiency to meet the Saldi standard. Furthermore, while Ruiz raises the specter of discovering evidence normally covered by the work-product and attorney-client privileges, defense counsel must be aware that such discovery is not appropriate when bad faith and coverage actions are combined. Some courts, for example, hold that such discovery is not permissible unless the defendant also puts the advice of counsel at issue.9
The first opportunity to aggressively defend a deposition occurs even before the first notice is received. The Rule 16 conference, in combination with the court’s broad power to limit discovery as provided in FED. R. CIV. P. 26, gives defense counsel the opportunity to ascertain the court’s preferred approach to resolving deposition disputes. It also serves to clarify the relevant areas of discovery.10
During the deposition itself, all objections and assertions of privilege must be specific and should be placed on the record to preserve them for future review. Although speaking objections are improper, it may be possible to ask the deponent to leave the room prior to placing the objection on the record in full, outside the presence of the deponent, in order to avoid the appearance of a speaking objection.11
REQUIRING SPECIFICITY IN THE 30(b)(6) NOTICE
In order to avoid permitting discovery beyond the nexus of conduct alleged by the plaintiff, counsel must be cognizant of the requirement that a 30(b)(6) notice be “particularly” drawn. The rule requires that the notice set forth, with particularity, the areas on which examination is requested. Generic notices or notices encompassing all issues in the case do not meet the requirement that areas of inquiry be stated with particularity.12
One common problem is the use of the phrase, “including but not limited to,” in the 30(b)(6) notice. This phrase essentially states that, although the request will certainly cover the enumerated topics, inquiry may extend beyond those topics and into unknown and unspecified areas. Such notice places an impermissible burden on the organization to produce a deponent with knowledge of anything and everything that might possibly be relevant. The courts have struck such language for making the notice excessively broad.13 Finally, while a party is not precluded from noticing a 30(b)(6) deposition to question areas already covered in other discovery, at least one court has limited such inquiries when it found that these requests were overly duplicative and burdensome.14
Failure to respond properly and immediately to an overbroad or irrelevant 30(b)(6) notice can result in waiving potential objections or privileges. Counsel must raise specific objections to the notice, including those areas beyond the nexus. Furthermore, if the scope of the notice exceeds relevant matters or is otherwise objectionable, defense counsel must immediately seek a protective order.15 Even if the areas of questioning are potentially relevant, if they are vague, confusing or excessively broad, defense counsel must obtain clarification or risk harmful answers, unanticipated questioning, or sanctions for supplying an unprepared witness.16
Counsel also must be specific when objecting to the scope of a notice. In Saldi, defendants repeatedly failed to provide specific reasons why each of the items noticed should be protected. For example, deposition of defense counsel in the underlying claim was permitted after defendants simply invoked “privilege” without providing a specific privilege log or other reasons supporting the privilege. The Saldi court clearly indicated that it might have considered the burden of production or other objections if it had been provided with specific and explicit information supporting burdensome production or the existence of privilege. Thus, discovery requests, including 30(b)(6) notices, must be met with specific objections to overcome the broad scope of allowable discovery in the wake of Saldi.
DESIGNATING AND PREPARING THE 30(b)(6) WITNESS
Once the party requesting discovery has served a 30(b)(6) notice that meets the requirements of the rule, the burden shifts to the producing party to designate a knowledgeable person.17 Production of an unqualified witness – one who is unable to address the areas specified in the deposition notice – may result in sanctions.18 Issues surrounding the adequacy of the witness focus on the preparedness of the witness to respond to the questions posed.19 Furthermore, the failure to produce a qualified witness, or the production of an unqualified witness, is interpreted by some courts as a failure to produce the deponent at all, thus supporting the potential imposition of additional sanctions.20
Counsel must remain aware that the 30(b)(6) designee represents the knowledge and opinions of the organization and that the designee’s testimony will be binding on the organization. Given the potential, raised in Saldi, that details of litigation in other jurisdictions may be admitted into evidence, counsel also must be cognizant of the need for consistency in testimony regarding the organization, as provided by its designee. If another individual has testified on the same subject in this or other litigation, counsel should consider using the same individual. If the decision is made to designate some other individual, counsel must be prepared to address the discrepancy posed by the change in individuals – if the new designee is the most knowledgeable in this proceeding, he or she should have been most knowledgeable in the other proceeding as well.
Furthermore, while the 30(b)(6) deposition is not a “memory contest,”21 courts have repeatedly emphasized the importance of preparing witnesses who are designated to testify on behalf of the organization. Defense counsel must be certain to make the witness aware of the subjects contained in the notice, assure that the witness has knowledge of those subjects, and review with the witness all documents and other sources of information, including past employees, to be certain that the witness is well-informed.22
QUESTIONS OUTSIDE THE SCOPE
The courts are sharply divided over whether a 30(b)(6) deponent may be asked questions outside the scope of the 30(b)(6) notice; they are divided as well over the proper procedure to employ when such questions are asked. Counsel must be aware of the rule that applies in the particular jurisdiction. For example, Massachusetts courts have determined that it is improper to ask questions of a 30(b)(6) deponent beyond the scope of the notice, suggesting that the proper procedure when questioning exceeds the scope is to adjourn the deposition and seek protection from the court.23 In contrast, Florida courts hold that questions outside the scope of the notice are permissible and that 30(b)(6) deponents should not be given special protection.24
If the designee is permitted to respond to questions outside the scope of the notice, counsel should raise applicable objections and allow the deponent to respond to the best of his or her ability. Counsel also should note on the record that such answers are not intended to be binding on the organization.25
Counsel must be familiar with the rules relating to 30(b)(6) depositions, including the jurisdictional particularities of those rules. Attention to those rules must begin at the outset of the case and extend through the deposition itself in order to minimize the risk of unintentionally expanding the scope of discovery.[dagger] Submitted by the authors on behalf of the FDCC Extra-Contractual Liability Section.
1 FED. R. CIV. P. 30(b)(6) provides:
A party may in the party’s notice and in a subpoena name as the deponent a public or private corporation or a partnership or association or governmental agency and describe with reasonable particularity the matters on which examination is requested. In that event, the organization so named shall designate one or more officers, directors, or managing agents, or other persons who consent to testify on its behalf, and may set forth, for each person designated, the matters on which the person will testify. A subpoena shall advise a non-party organization of its duty to make such a designation. The persons so designated shall testify as to matters known or reasonably available to the organization. This subdivision (b)(6) does not preclude taking a deposition by any other procedure authorized in these rules.
2 FED. R. CIV. P. 30 advisory committee’s notes, 1970 amendments.
3 FED. R. CIV. P. 30(b)(6) was also designed to eliminate “bandying,” by which organizational officers disclaimed knowledge of facts clearly known to the organization. It was intended as well to assist organizations which found that unnecessarily large numbers of its officers were being deposed. See FED. R. CIV. P. 30 advisory committee’s notes, 1970 amendments.
4 See, e.g., Hyde v. Stanley Tools, 107 F. Supp. 2d 992 (E.D. La. 2000) (holding that the testimony of a 30(b)(6) witness could not be contradicted by the affidavit of an expert witness when there was no evidence that the 30(b)(6) witness was confused or made an honest mistake, and the expert’s affidavit was not based on newly discovered facts); Nevada Power Co. v. Monsanto Co., 891 F. Supp. 1406 (D. Nev. 1995) (In upholding summary judgment for a defendant, the court found no question of material fact on issues to which a 30(b)(6) deponent testified because such testimony was binding upon the organization and could not be refuted by raw assertions of contrary facts.).
5 538 U.S. 408 (2003).
6 Id. at 422.
7 224 F.R.D. 169 (E.D. Pa. 2004).
8 899 So.2d 1121 (Fl. 2005).
9 See, e.g., McCrink v. Peoples Benefit Life Ins. Co., No. Civ. A. 2:04CV01068LDD, 2004 WL 2743420 (E.D. Pa. Nov. 29, 2004).
10 Sandra F. Gavin, Playing by the Rules: Strategies for Defending Depositions, 1999 L. REV. MICH. ST. U-DET. C.L. 645.
12 See Alexander v. Federal Bureau of Investigation, 188 F.R.D. 111, 114, 121 (D.D.C. 1998) (rejecting notice to depose on “any matters relevant to this case” as not meeting the “reasonable particularity” requirement); see also Prokosch v. Catalina Lighting, Inc., 193 F.R.D. 633, 638 (D. Minn. 2000) (“[T]he requesting party must take care to designate, with painstaking specificity, the particular subject areas that are intended to be questioned, and that are relevant to the issues in dispute.”).
13 See, e.g., Tri-State Hospital Supply Corp. v. United States, 226 F.R.D. 118, 125 (D.D.C. 2005); Reed v. Bennett, 193 F.R.D. 689 (D. Kan. 2000).
14 Banks v. Office of Senate Sergeant-at-Arms, 222 F.R.D. 7, 19 (D.D.C. 2004) (ordering the parties to find topics that will “insure that the 30(b)(6) depositions are meaningful exercises in ascertaining information that has not been previously discovered” and ordering the party seeking discovery “not |to] ask questions that duplicate questions previously asked of other witness [sic] or seek information that he already has by virtue of responses to other discovery devices”); see also Tri-State, 226 F.R.D. at 126 (stating that, while the plaintiff was permitted to question in duplicative areas, the court would entertain claims for abusively duplicative questioning following the deposition).
15 See, e.g., Westchester Fire Ins. Co. v. Household Intern., Inc., No. Civ.A. 02-1328JJF, 2005 WL 23351 (D. Del. Jan. 5, 2005).
16 See, e.g., Arctic Cat, Inc. v. Injection Research Specialists, Inc., 210 F.R.D. 680 (D. Minn. 2002) (corporation’s designation of plainly unqualified deponent for scheduled deposition warranted sanction of defense costs payment, notwithstanding plaintiff’s contention that its faulty designation was caused by vagueness of defendants’ deposition notice, where plaintiff voiced no uncertainty to defendants about the intended scope of inquiry and failed to seek the court’s assistance in bringing further clarity to scope of questioning).
17 See Foster-Miller, Inc. v. Babcock & Wilcox Canada. 210 F.3d 1 (1st Cir. 2000) (by asking the requesting party whom it wished to testify on behalf of the producing party for Rule 30(b)(6) purposes, the producing party impermissibly attempted to shift the burden of identifying who best spoke for the producing party on the matters in question).
18 See, e.g., Cielo Creations, Inc. v. Gao Da Trading Co., No. Civ.A. 04 Civ. 1952. 2004 WL 1460372 (S.D.N. Y. June 28, 2004) (imposing substantial monetary sanctions for complete failure to prepare a 30(b)(6) deponent).
19 See Bank of New York v. Meridien BIAO Bank Tanzania Ltd., 171 F.R.D. 135 (S.D.N.Y. 1997).
20 See, e.g., id. at 151 (the complete inability of a designated witness to respond to one area of inquiry amounted to non-appearance, which might warrant the imposition of sanctions).
21 Id. at 150 (citing EEOC v. American International Group, Inc., No. 93 Civ. 6390, 1994 WL 376052, at *3 (S.D.N.Y. July 18, 1994)).
22 See Concerned Citizens of Belle Haven v. Belle Haven Club, 223 F.R.D. 39 (D. Conn. 2004) (a deponent has an obligation to prepare its designee to respond fully to the noticed inquiry even if the relevant documents are voluminous and review of the documents would be burdensome); Bank of New York, 171 F.R.D. at 151 (the deponent organization must prepare its designee to the extent matters are reasonably available).
23 See Parparelli v. Prudential Ins. Co. of Am., 108 F.R.D. 727 (D. Mass. 1985).
24 King v. Pratt & Whitney, 161 F.R.D. 475, 476 (S.D. Fla. 1995).
25 See id.; see also Cabot Corp. v. Yamulla Enterprises, Inc., 194 F.R.D. 499 (M.D. Pa. 2000); Detoy v. San Francisco, 196 F.R.D. 362 (N.D. Cal. 2000); Overseas Private Inv. Corp. v. Mandelbaum, 185 F.R.D. 67 (D.D.C. 1999).
Michael R. Nelson is a member of the Bluebell, Pennsylvania firm of Nelson, Levine, de Luca & Horst, L.L.C. He earned his law degree from Temple University School of Law. Mr. Nelson’s area of expertise involves insurance class actions and bad faith/extra-contractual claims; he currently represents insurance companies in matters of complex litigation in various jurisdictions throughout the country. Mr. Nelson is admitted to the Bars of Pennsylvania. New Jersey and New York, as well as various federal courts in those jurisdictions. He is active in many organizations including the Federation of Defense & Corporate Counsel, Defense Research Institute, Lawyers for Civil Justice, and the Pennsylvania Defense Institute, where he regularly lends his expertise making presentations relevant to various issues. Mr. Nelson is also actively involved in lobbying and regulatory issues on behalf of the insurance industry. He is a founding partner of the firm and the firm’s Chairman.
C. Theresa Barone is an associate in the Nelson, Levine, de Luca & Horst complex litigation department. She received her B.A. from Richard Stockton College of New Jersey and her law degree from Temple University School of Law, where she received the Barrister Award for outstanding trial advocacy. After law school, Ms. Barone entered private practice with a concentration in civil litigation. She is a member of the Pennsylvania Bar Association and admitted to the Bars of Pennsylvania, New Jersey, the Court of Appeals for the Third Circuit, and the U.S. District Courts for the Eastern and Middle Districts of Pennsylvania.
Copyright Federation of Defense & Corporate Counsel, Inc. Spring 2006
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