Protecting Your Client's President From Having To Be Deposed: NC Business Court

You have probably been in this situation.  Your client is a successful corporate entity, maybe publicly held.  You are defending the entity in a lawsuit and you receive a Notice of Deposition for the CEO of your client.  The CEO is annoyed, says that she knows nothing about the substance of the lawsuit, and that she's too important (and too darn busy) to sit down for a deposition.  She expects you to get her out of it.

It's a difficult objective.  The NC Business Court has looked at this set of facts a couple of times, Once, a couple of years ago, in an unpublished Order in the case of Gay v. People's Bank (which I wrote about in this post), it granted a Motion for a Protective Order. And last week, in Next Advisor Continued, Inc. v. Lendingtree, Inc, 2016 NCBC 70, the Court denied a similar Motion.

Both decisions came from Judge Bledsoe.  Each time he discussed something called the "apex doctrine," but he decided not to formally adopt it.

The Apex Doctrine

What is the apex doctrine?  It is a federally recognized principle that helps top officers of a corporate client avoid having to be deposed.  In a decision from the Western District of North Carolina, it was described as follows:

The 'apex doctrine,' rooted in Federal Rule of Civil Procedure 26, was developed as an aid in ensuring that the liberal rules of procedure for depositions are used only for their intended purpose and not as a litigation tactic to create undue leverage by harassing the opposition or inflating its discovery costs.

Op. ¶14 (quoting Performance Sales & Mktg. LLC v. Lowe's Cos., 2012 U.S. Dist. LEXIS 131394, at *16 (W.D.N.C. 2012)).

The apex doctrine doesn't presumptively exclude the litigant's top officer from being deposed.  It puts the burden on the party asking for the deposition to show that “(1) the executive has unique or special knowledge of the facts at issue and (2) other less burdensome avenues for obtaining the information sought have been exhausted."  Id.

If you are in federal court and are thinking of filing a Motion for a Protective Order to keep your client's President from having to endure the pain of a deposition, Judge Bledsoe's Opinion in the Next Advisor decision contains a comprehensive discussion of the federally recognized apex doctrine (in ¶¶13-14).

North Carolina Standards In Lieu Of The Apex Doctrine

Judge Bledsoe said that North Carolina's courts had not adopted the apex doctrine, and that he found it unnecessary to do so.  He said that our Courts "are permitted to limit discovery where 'justice requires it' to protect a party or person, including a corporate executive, 'from unreasonable annoyance, embarrassment, oppression, or undue burden or expense.'" Op. ¶15.  Discovery can also be limited if it is “unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive,” or is “unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties’ resources, and the importance of the issues at stake in the litigation.” N.C. R. Civ. P. 26(b)(1a)."  Order ¶15.

So, Judge Bledsoe followed those general principles in ruling that Plaintiff's CEO would have to be deposed.  He said that the CEO had "unique, personal knowledge relevant to the issues in dispute in this litigation" relating to Defendant's attempted acquisition of the Plaintiff."  Op. ¶17.

A CEO Being "Too Busy" Isn't Enough To Warrant A Protective Order

He rejected Plaintiff's argument that the CEO "carri[ed] heavy responsibilities as the CEO of a publicly traded company with over 300 employees" and that he should be protected from having to be deposed for that reason.  He held that:

Although [the CEO] undoubtedly maintains a very busy schedule and carries heavy responsibilities in his role as Lending Tree’s CEO, courts have consistently held that if a prospective deponent has relevant knowledge, the mere fact that the prospective deponent is a CEO or is busy does not constitute a showing of good cause for a protective order.

Op. ¶18.

Given that the CEO had direct knowledge of some of the issues in the case, Judge Bledsoe found that the Defendant's right to obtain relevant information from him "outweighed any burden or inconvenience imposed [the CEO] by requiring him to prepare for and submit to a deposition."  Op. ¶19.

There was no evidence of "annoyance," "harassment," or "undue burden" to the CEO.

If you are wondering why a similar Motion for a Protective Order in the People's Bank case was granted, it was a different set of facts.  The Defendant in that case, a "relatively small bank," had already provided four of its executives for their depositions and argued that further depositions of its top officers would be repetitive of those already taken and disruptive to its operations.  Judge Bledsoe said that he was "persuaded that Defendant faces a sufficient risk of disruption and undue burden in these circumstances to afford Defendant limited relief."  Order ¶21.  He permitted the deposition of the bank's Chief Operating Officer, but prohibited the depositions of its Chief Financial Officer and its Chief Administrative Offer.  That Order was without prejudice to the Plaintiff being allowed to re-notice the depositions of the CFO or the CAO.

 

 

 

 

 

 

 

 

 

 

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It Takes More Than Just $5 Million To Get A Case Into The NC Business Court

This week, I published a post on this blog in which I suggested that a case involving $5 million in controversy could be designated to the Business Court without the Court having to analyze the nature of the claims before it to see if they met any of the bases for mandatory jurisdiction contained in G.S. §7A-45.4.

That was wrong, and it provoked a torrent of controversy directed to me.  Well, probably not a torrent to you, but a torrent to me: an email and a phone call from Business Court Chief Judge Gale and an email from an eminent attorney friend in Raleigh.  I'm glad that Judge Gale looks at my blog (I think that Judge Bledsoe, Judge McGuire, and Judge Robinson look at it too), but I'm unhappy that I might have said anything on this blog that generated a phone call from Judge Gale and which could have steered anyone in the wrong direction.

Let me start by saying that you shouldn't rely on my blog for legal advice or its accuracy.  There is a disclaimer buried somewhere in this blog which says exactly that.

Notwithstanding that disclaimer, I'm pretty serious about getting it right with this blog.  So let's look at the part of the statute governing designations to the Business Court which I didn't describe correctly on Monday: G.S. §7A-45.4(b)(2).  It says:

An action described in subdivision (1), (2), (3), (4), (5), or (8) of subsection (a) of this section in which the amount in controversy computed in accordance with G.S. 7A-243 is at least five million dollars ($5,000,000) shall be designated as a mandatory complex business case by the party whose pleading caused the amount in controversy to equal or exceed five million dollars ($5,000,000).

So the statute is pretty clear that an amount in controversy of more than $5 million, standing alone, isn't enough to make a case mandatory for designation to the Business Court.

The case still has to fall within the grounds set forth in G.S. Section 7A-45.4(a)(1), (2), (3), (4), (5), or (8).  So when I suggested in my last post that Judge Gale didn't have to analyze whether the Complaint in Southeastern Automotive, Inc. v. Genuine Parts Co. 2016 NCBC 61 qualified as an intellectual property case because more than $5 million was in controversy, I was not right.