Chapter 7 The Apex Rule and Protecting Your Client's Management Team When Conducting Deposition Discovery

• Jurisdiction: United States

Chapter 7 The Apex Rule and Protecting Your Client's Management Team When Conducting Deposition Discovery
Nathan Davis Shane O'Connor Ciera Gonzalez Snell & Wilmer L.L.P. Denver, CO

NATHAN K. DAVIS is a partner in the Denver, Colorado office of Snell & Wilmer where he chairs the firm's Energy Litigation group. Nathan also is a member of Snell & Wilmer's Executive Committee and is an Administrative Partner in the Denver office. Nathan received his J.D. from the University of Denver, Sturm College of Law. He is actively involved in the Denver community and the Colorado oil & gas industry. For more than 20 years, Nathan Davis has represented businesses in commercial matters, focusing on oil & gas, royalty, contract, land and tort disputes. Nathan has assisted clients and businesses as an attorney, expert witness, arbitrator and advisor. He has tried numerous cases in multiple state and federal courts, as well as before the American Arbitration Association and similar organizations. Nathan also routinely advises clients on litigation avoidance and risk reduction strategies, as well as on regulatory issues. Nathan has dedicated his legal career to achievements in the energy field, receiving recognition for his commitment and litigation prowess from Colorado Super Lawyers^® , as well as an AV-Preeminent peer rating from Martindale-Hubbell®. Nathan has led litigation for E&P and midstream companies in Colorado, Oklahoma, New Mexico, Texas, Kansas, Utah, California and Arizona. His representative work includes: royalty disputes, purchase and sale agreement disputes, service contract disputes, lease disputes, environmental matters and regulatory compliance. Most recently, Nathan tried a high-profile declaratory judgment lawsuit raising significant questions about the proper way to calculate natural gas royalties under the Marketable Condition Rule. Nathan also has acted as lead counsel in numerous oil & gas class action lawsuits.

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I. Introduction

The Federal Rules of Civil Procedure liberally enable parties to seek relevant information in discovery that may be helpful in the preparation and trial of a case. While the liberal scope of discovery permitted by the federals rules is helpful to parties when developing a case for trial, it also creates the potential for abuse. As explained by the United States Supreme Court, "rules designed to facilitate expeditious resolution of civil disputes have too often proved tools for harassment and delay."¹ As a result of this potential for abuse, the federal rules empower courts to protect litigants against unreasonable discovery:

Liberal discovery is provided for the sole purpose of assisting in the preparation and trial, or the settlement, of litigated disputes. Because of the liberality of pretrial discovery permitted by Rule 26(b)(1), it is necessary for the trial court to have the authority to issue protective orders conferred by Rule 26(c). It is clear from experience that pretrial discovery by depositions and interrogatories has a significant potential for abuse.²

Discovery by way of depositions can be particularly burdensome, time-consuming and expensive. This paper discusses the scope of deposition discovery permitted by the Federal Rules of Civil Procedure, as well as the standards and procedures that govern motions for protective orders and motions to quash. This paper also discusses several specific discovery situations that often result in disputes or the need for court intervention, including depositions noticed and conducted under Rule 30(b)(6), apex depositions of high-level corporate executives, and depositions of corporate counsel. The ultimate goal of this paper is to offer practical tips and suggestions for protecting your client's management team from deposition discovery tactics that go beyond the reasonable limits prescribed by the Federal Rules of Civil Procedure.

II. Scope Of Deposition Discovery Permitted By Rule 26 Of The Federal Rules Of Civil Procedure.

Considerations of both relevance and proportionality expressly govern the scope of deposition discovery in civil lawsuits. Pursuant to Rule 26(b)(1), "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case. . . ."³ Relevance is "construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in

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the case."⁴ "Information within the scope of discovery need not be admissible in evidence to be discoverable."⁵ In evaluating proportionality, courts consider "the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit."⁶

Rule 26(b)(2)(C) requires courts to "limit the frequency or extent of discovery" if a court determines that "(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1)."⁷ This rule obligates courts "to consider the proportionality of all discovery and consider it in resolving discovery disputes."⁸

Rule 26(c)(1) details the standard governing motions seeking the entry of a protective order. Pursuant to this rule, courts "may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. . . ."⁹ "The 'good cause' standard of Rule 26(c) is highly flexible, having been designed to accommodate all relevant interests as they arise."¹⁰ "Rule 26(c) confers broad discretion on the trial court to decide when a protective order is appropriate and what degree of protection is required."¹¹ In this sense, the rule recognizes that the "trial court is in the best position to weigh fairly the competing needs and interests of parties affected by discovery."¹² When appropriate to do so, district courts "should not hesitate to exercise appropriate control over the discovery process."¹³

"[T]he burden is upon [the party seeking the protective order] to show the necessity of its issuance, which contemplates a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements."¹⁴ Thus, a party seeking a protective order must show both "good cause and a specific need for the protection."¹⁵ "The good cause standard of Fed. R. Civ. P. 26(c) is not met by the conclusory statements of the moving party."¹⁶ Instead, the party seeking a protective order must show that the requested discovery "will result in a clearly defined

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and serious injury to that moving party."¹⁷ "When the discovery sought appears relevant, the party resisting the discovery has the burden to establish the lack of relevance by demonstrating that the requested discovery (1) does not come within the scope of relevance as defined under Fed. R. Civ. P. 26(b)(1), or (2) is such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure."¹⁸ Courts tend to "lean towards resolving doubt over relevance in favor of discovery."¹⁹

Consistent with the obligation to consider the proportionality of all discovery when resolving discovery disputes, courts generally "compare the hardship to the party against whom discovery is sought against the probative value of the information to the other party."²⁰ "Even if relevant, discovery is not permitted where no need is shown, or compliance would be unduly burdensome, or where harm to the person from whom discovery is sought outweighs the need of the person seeking discovery of the information."²¹ While the party seeking protection bears the ultimate burden of persuasion, the party opposing a motion for protective order may "need to make its own showing of . . . the proportionality factors, including the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, and the importance of the discovery in resolving the issues. . . ."²²

Rule 26(c)(1) vests district courts with broad discretion when ruling upon motions for protective orders, including "forbidding the disclosure or discovery."²³ However, "[p]rotective orders prohibiting depositions are rarely granted."²⁴ "Where a protective order would quash a deposition in its entirety, the moving party must show extraordinary circumstances that present a particular and compelling need for such relief."²⁵ But even in the absence of such extraordinary circumstances, the text of Rule 26(c)(1) arms courts with several options to permit discovery but, at the same time, lessen its burden or expense, including "(B) specifying terms, including time and place or the allocation of expenses, for the disclosure or discovery; (C) prescribing a discovery method other than the one selected by the party seeking discovery; [and] (D) forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters. . . ."²⁶

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III. Scope Of Deposition Discovery Permitted By Rule 45 Of The Federal Rules Of Civil Procedure.

Rule 45 provides guidelines for subpoenaing a non-party to attend a deposition. Under this rule, a subpoena may be used to compel a person to attend a deposition within 100 miles of where the person resides, is employed, or regularly transacts business in person.²⁷ However, if the recipient of the subpoena is a party or party's officer, a subpoena may command that person to attend a deposition anywhere within the state where the person...