The corporate deposition under Fed. R. Civ. P. 30(b)(6) has become a key component in modern litigation. It presents an unequaled opportunity for the party taking the deposition to gain admissions and information that might otherwise be unavailable. In most cases, there is little to be gained by the party defending the deposition, and it faces risks of inadvertent admissions, disclosures, and concessions. In general, federal courts have been vigilant in compelling parties to appear for their corporate depositions and requiring that they diligently prepare, even when deposition topics include old, stale issues about which few, if any, corporate employees have knowledge. But there are some cases where no corporate representative could provide the requested information—such as when an entity is placed into receivership by federal or state banking or insurance regulators. In such cases, some courts have been willing to enter protective orders preventing or severely restricting the 30(b)(6) deposition. In light of the recent bank failures and resulting suits against officers and directors, it is a good time to review this jurisprudence.
Rule 30(b)(6) sets forth the appropriate scope of an entity’s deposition, and provides, in part: “The persons so designated shall testify as to matters known or reasonably available to the organization.” Federal jurisprudence emphasizes the need for extensive preparation efforts for a corporate deponent to satisfy the obligations of a corporate deposition. The following statement is typical:
If the rule [30(b)(6)] is to promote effective discovery regarding corporations the spokesperson must be informed. This means that: “[The corporation] must make a conscientious good-faith endeavor to designate the persons having knowledge of the matters sought by [the interrogator] and to prepare those persons in order that they can answer fully, completely, unevasively, the questions posed by [the interrogator] as to the relevant subject matters.”
Protective Nat’l Ins. Co. of Omaha v. Commonwealth Ins. Co., 137 F.R.D. 267 (D. Neb. 1989) (quoting Mitsui & Co. v. Puerto Rico Water Resources Authority, 93 F.R.D. 62, 67 (D.P.R. 1981)). Even when no current employee has sufficient knowledge to provide all of the requested information, the corporation is obligated to “prepare [one or more witnesses] so that they may give complete, knowledgeable and binding answers on behalf of the corporation.” Dravo Corp. v. Liberty Mut. Ins. Co., 164 F.R.D. 70, 75 (D. Neb. 1995) (quoting Marker v. Union Fidelity Life Insurance Co., 125 F.R.D. 121, 126 (M.D. N.C. 1989)).
Federal courts generally have not been sympathetic to pleas based on lack of knowledge. For example, in United States v. Taylor, 166 F.R.D. 356, 361 (M.D.N.C. 1996), the court reasoned:
[I]t is not uncommon to have a situation, as in the instant case, where a corporation indicates that it no longer employs individuals who have a memory of a distant event or that such individuals are deceased. These problems do not relieve a corporation from preparing its Rule 30(b)(6) designee to the extent matters are reasonably available, whether from documents, past employees, or other sources.
Notwithstanding the foregoing, in some cases, courts have quashed or severely limited Rule 30(b)(6) deposition notices when the entity does not have, and never had, personal knowledge of the information requested. In FDIC v. Wachovia Ins. Servs., 2007 U.S. Dist. LEXIS 62538 (D. Conn. Aug. 27, 2007), for example, the court quashed a Rule 30(b)(6) deposition notice because no one at FDIC had personal knowledge of the bank’s pre-failure operation, and considerable discovery had already taken place, including depositions of witnesses with firsthand knowledge and the production of thousands of documents. In addition, other, better sources of discovery were available to the defendant.
Similarly, in RTC v. Bright, No. 3-92-CV-995-D, unpublished order (N.D. Tex. Mar. 31, 1993), the court acknowledged that the time and effort required to prepare a 30(b)(6) designee is directly proportional to the breadth of the deposition notice. Further, when a deposition notice is broad, the
party is placed at some risk that if its Rule 30(b)(6) representative cannot answer a question, either because the witness was not “fully educated” or due to faulty memory, the party may well be confronted with a motion to dismiss or for summary judgment as a result of the witness’s inability to answer.
RTC v. Bright, slip op. at 3. In Bright, the court quashed the Rule 30(b)(6) deposition of Resolution Trust Corp. (RTC), holding that the risk and burden to the RTC of having to “educate” a witness with no firsthand knowledge of the broad areas of inquiry outweighed the defendants’ interests in taking the deposition where alternative means of discovery were available. Id. at 3–4.
FDIC v. Conn. Bank of Commerce, 2007 U.S. Dist. LEXIS 62538 (D. Conn. Aug. 27, 2007) is also instructive. In that case, FDIC was prosecuting a contract-and-negligence action as receiver of a failed bank. The failed bank had been involved heavily with receivables financing and factoring. FDIC sued Wachovia, claiming it negligently failed to procure fraudulent invoice coverage that would have provided coverage in the event that a borrower’s invoices pledged as collateral turned out to be false or fraudulent.
Wachovia had issued a broad 30(b)(6) deposition notice to FDIC, and FDIC moved for a protective order. The court noted that the fact that FDIC had no personal knowledge of the underlying transactions did not relieve it of its obligation to designate a Rule 30(b)(6) deponent. This is consistent with the general rule that a corporation must prepare a designee for deposition despite the designee’s lack of personal knowledge of relevant events. The court concluded, however, that FDIC’s “lack of pre-failure involvement with [the failed bank] does bear upon the reasonableness of the scope of the discovery that has been requested by Wachovia.” The court concluded that the deposition notice was extremely broad, and thus the time and effort required to educate a designated representative would be extremely burdensome. The court also noted that the discovery could be obtained by less burdensome means, such as interrogatories, document requests, and interviewing persons with factual knowledge. The court noted that considerable discovery had already taken place, including depositions of fact witnesses and the production of thousands of documents. The court also found “substantial merit” to FDIC’s objection on work-product grounds. The deposition notice as drafted appeared “calculated to discover properly protected opinions, mental impressions, and strategy of plaintiff’s counsel.” For all of these reasons, the court ordered a protective order and ordered Wachovia to redraft its 30(b)(6) deposition notice. See also RTC v. Kazimour, No. C-92-0188, 1993 WL 13009325, *5 (N.D. Iowa Nov. 16, 1993) (unpublished) (quashing deposition notice because “[n]othing in Rule 30(b)(6) requires a party to ‘create’ a witness in response to a 30(b)(6) notice,” and that “[a] deposition of a person required by the court to be created by counsel . . . would violate Fed. R. Civ. P. 26(b)(3).”). See also Entergy La., Inc. v. Nat’l Union Fire Ins. Co., 98-219, 1999 U.S. Dist. Lexis 5989 (E.D. La. Apr. 21, 1999) (quashing the notice of corporate deposition after the corporation filed a Rule 11 affidavit stating that it could not present a witness with knowledge of the subject matter, but also ordering that the corporation shall not introduce evidence at trial regarding the subject matter in the notice).
There are cases that reach a contrary ruling. In FDIC v. Butcher, 116 F.R.D. 196 (E.D. Tenn. 1986), for example, the district court held that FDIC’s lack of personal knowledge as to activities of the bank pre-failure did not excuse it of its obligation to produce a 30(b)(6) deponent who had been well prepared. The court in that case noted that the 30(b)(6) deposition notice involved FDIC’s contentions in the case—“matters at the very heart of this lawsuit,” where FDIC sued the defendant directors and officers for $40 million in damages and identified 62 claimed losses. The defendants claimed that the deponents FDIC did produce were “woefully unprepared,” while FDIC claimed it spent 1,650 man-hours between mid-September and October preparing for the depositions, not including man-hours expended by its legal department. The court stated:
a corporation like the FDIC “must make a conscientious good-faith endeavor to designate the persons having knowledge of the matters sought by [the discovering party] and to prepare those persons in order that they can answer fully, completely, unevasively, the questions posed by [the discovering party] as to the relevant subject matters.”
Id. at199 (quoting Mitsui, 93 F.R.D. at 67). The court then reviewed deposition testimony and concluded that FDIC had not adequately prepared its witnesses.
The Butcher ruling notwithstanding, there are times when a corporate deposition simply does not make sense and does not benefit any party. For an individual or group of individuals to study historical documents that are available to both sides to appear as the corporate representative does not further a meaningful exchange of information. Instead, it wastes valuable resources and creates a “memory game” where the deponent is more likely to cloud and confuse the issues than to clarify them. In such circumstances, interrogatories, document requests, and third-party and expert discovery can be used by the opposing party to level the playing field as to knowledge of relevant facts. Once all parties have access to the same documents and information, the goals of Rule 26 have been satisfied, and there is no argument in favor of a corporate deposition.
Keywords: professional liability litigation, Rule 30(b)(6), corporate deposition, no personal knowledge