Cygnus Systems, Inc. v. Microsoft Corporation, et al

Filing 334

Cygnus Systems, Inc. v. Microsoft Corporation, et al

Doc. 334

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WEEKS & LAIRD PLLC

WEEKS & LAIRD PLLC 2223 E. Speedway Blvd. Tucson, AZ 85719 Telephone: [phone] Facsimile: [phone] Email: [e-mail] Brian A. Laird, SBN 020541 Attorneys for Defendants

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Ramada Worldwide, Inc., a Delaware corporation, Plaintiff, vs. Starbound Tucson Hotel, LLC, an Arizona limited liability company; Lee-Tzong Chen and Jane Doe, husband and wife; Palo Verde Property, LLC, a California limited liability company, Defendants. RESPONSE IN OPPOSITION TO MOTION TO COMPEL PRODUCTION OF 30(B)(6) WITNESS No. 06CV0045-TUC-JMR

HON. JOHN M. ROLL

In response to Defendants' Motion for Protective Order, Plaintiff filed a consolidated Response and a Motion to Compel. For 18 pages, Ramada

Worldwide, Inc. ("RWI") attempts to paint Starbound Tucson Hotel ("STH") as an obstructionist defendant who has struggled to prevent RWI from discovering information from a witness. Nothing could be further from the truth. RWI demands that STH, a bankrupt company with no assets or employees, fly a former manager from Florida to Tucson to appear and attend a 30(b)(6)

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deposition. I. RWI IS AFFIRMATIVELY MISLEADING DISPUTE.
AS TO THE

NATURE

OF THIS

This dispute revolves around whether a defunct defending company has any power to compel a non-resident former manager and minority owner to appear as a 30(b)(6) witness in Tucson. As can be seen from RWI's Motion, though they have called it a 30(b)(6) deposition, what they are actually seeking is a Tucson deposition of Wayne Mitchell, a Florida resident. Mitchell has not been involved with STH in any capacity since the company's bankruptcy terminated in 2003. The company has not conducted business since the bankruptcy. By improperly serving a 30(b)(6) notice, and arguing that the only person who can testify is Mitchell, RWI hopes to impose additional costs and burdens on a defunct company. RWI knows that former employees cannot be compelled to testify as 30(b)(6) witnesses. Rule 30(b)(6) provides in relevant part, "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 that person will testify." RWI will likely try to argue that even though STH has not been in business since 2003, Mitchell is a managing agent, because he was the manager and had a 5% interest in the company prior to the bankruptcy. Sugarhill Records Ltd. v.

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Motown Record Corp. 105 F.R.D. 166, 170 (DCNY 1985) sets forth factors to consider in determining whether Mitchell can be deemed a managing agent: Several factors have been enunciated which must be examined in determining whether a person is a "managing agent." Those are as follows: 1) whether the individual is invested with general powers allowing him to exercise judgment and discretion in corporate matters; 2) whether the individual can be relied upon to give testimony, at his employer's request, in response to the demand of the examining party; 3) whether any person or persons are employed by the corporate employer in positions of higher authority than the individual designated in the area regarding which information is sought by the examination; 4) the general responsibilities of the individual "respecting the matters involved in the litigation," Kolb v. A.H. Bull Steamship Co., 31 F.R.D. 252, 254 (E.D.N.Y.1962) (emphasis in original); and 5) whether the individual can be expected to identify with the interests of the corporation. See, e.g., Tomingas v. Douglas Aircraft Co., 45 F.R.D. 94, 96 (S.D.N.Y.1968). The burden of proving that she is a managing agent rests on Sugarhill. See, e.g., Proseus, 26 F.R.D. at 167. These factors militate against Mitchell being a current managing agent for STH. First, he has no power or authority over the defunct entity (which is currently facing judicial dissolution). Second, Mitchell has indicated that he does not want to be involved in flying to Tucson for a deposition. Third, he has no responsibilities to STH respecting any matter, related to the litigation or otherwise. Finally,

Mitchell does not identify with any STH interest, except insofar as it was a moneylosing venture that went bankrupt. Here, it is RWI's burden to prove that he is

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currently a managing agent subject to being compelled to testify in Tucson pursuant to a 30(b)(6) deposition notice. RWI cannot meet that burden. Mitchell is not an officer, director, or

managing agent for STH. He is a former manager who had a minority interest in the company but has no interest in these proceedings. Mitchell is not under STH's control as STH is a defunct company with no assets or employees.1 It is not common for parties to seek 30(b)(6) depositions of former employees or defunct companies. In Martin Engineering Co. v. Vibrators, Inc. 20 FR Serv. 2d 486 (ED Ark. 1975) the Court noted, "With regard to Mr. Fisher, the Court acknowledges that pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure a corporation may not be examined through one who is no longer in its employ at the time set for taking of the deposition."2 Likewise, in Colonial Capital Co. v. General Motors Corp. 29 F.R.D. 514, 515-516 (D. Conn. 1961), the Court, in denying a deposition of a former Vive President of General Motors noted, [I]t appears that William F. Hufstadter retired from General Motors on June 30, 1960 when he was a Vice President of the corporation. Since that time he has not
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It is believed that a strategic decision was made by Plaintiffs to name STH in hopes of obtaining a default and then claiming it was an alter ego of Dr. Chen. Under such circumstances, RWI could then try to make an argument for collateral estoppel on damages. The pro forma representation of STH is simply to protect against such tactics.

The Martin Engineering Court subsequently found that Mr. Fisher was still subject to control as he had moved his employ to a fully owned subsidiary. That is inapplicable here as Mitchell has no current connection to any entity still in business and party to this lawsuit.
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been an officer, employee, or agent of the defendant, nor is he presently a director of the corporation. Though the general rule appears to be that the deposition of a party may not be taken through one no longer employed by the party, Park & Tilford Distillers Corp. v. Distillers Co., 19 F.R.D. 169 (S.D.N.Y.1956), the plaintiff contends that the primary consideration in ruling on the question of who is a 'managing agent' for purposes of deposing a corporate party is whether the individual can be expected to identify himself with the interests of the corporation or with those of the adverse party. Viewed in this light, plaintiff argues, a former employee may be considered a 'managing agent' for purposes of F.R.Civ.P. Rule 26, 28 U.S.C.A.; and, since there has been no showing that Mr. Hufstadter is no longer loyal to the defendant or does not still identify himself with its interests, the deposition of the defendant may be taken through him. . . This court concludes that there is no authority for taking the deposition of General Motors through William F. Hufstadter on the basis of his relationship to the company as a past employee. The motion [to vacate the notice of deposition] as to him is therefore granted. Apparently to get around this long standing prohibition, RWI misleadingly presented on Page 9 of its Exhibit 6 a short exchange from Defendant Lee-Tzong Chen's deposition. The testimony was taken out of context, to give the impression that Mitchell is a currently active owner and manager of STH. In support of its attempted argument, RWI quotes the following brief passage of transcript testimony: Q. When was the last time Wayne Mitchell worked as a general manager for you for any of your hotels?

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A.

He was a general manager for my hotels in Tampa from '92 to about 2002.

Q. A. Q. A.

And what about Tucson? Tucson, he involved after the property bought the hotel. He's still the general manager now? He's the managing partner.

That is where RWI ends the quote. However, the testimony following the section belies RWI's false meaning: Q. A. Q. A. Q. A. Q. A. He is a manager now? Before. He had an ownership interest in it? Yes. Did he leave the hotel when Palo Verde took over? He's not involved in the hotel. Do you do any business with him at all now? No.

Chen Deposition 87:7-88:1. (Exhibit A) Dr. Chen speaks English as a second language. The deposition included several instances in which follow up questions clarified his positions. Here, the follow up questions show that the truncated exchange set forth in Plaintiff's Exhibit
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6, Page 9 was misleading. Chen did not testify, as set forth in RWI's motion, that Mitchell is currently the managing partner of the hotel property or STH. Instead, the follow up questions show the exact opposite, that Chen and Mitchell are not in business together at all now. Further, Chen testified that he had not seen Mitchell face-to-face since 2005, and that the last time he had spoken with Mitchell on the phone was several months before the deposition. (Chen Deposition 88:2-5; 89:12-14) II. DEFENDANTS DO NOT OPPOSE THE DEPOSITION OF WAYNE MITCHELL. RWI implies in its Motion that STH is obstructing RWI from obtaining vital testimony from Mitchell. That is patently false. STH agrees that Mitchell is a witness with relevant information, and STH disclosed him as such. The problem is he has not worked for the company since 2003, and does not reside in Arizona. A defunct company simply does not have any power to compel the appearance of a former employee. Mitchell has informed counsel that his wife has recently had a baby and he doesn't want to leave her alone at home to travel to Tucson. Defendants' Counsel has, at various times, agreed to a deposition in Florida3 (after drafting, but before serving the Rule 30(b)(6) Notice of Deposition) or a conference call.4 In the end, RWI decided to reject those options and try to compel "We will be happy to depose him in Florida but we need to get it scheduled now. Thank you, Janet Weinstein" Weinstein e-mail to Laird 2/22/07. (Exhibit B) 4 In response to a suggestion from Mr. Laird, Ms. Weinstein wrote, "Please provide
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a deposition of this former employee at its counsel's Tucson office location. (See Exhibit A to Motion for Protective Order). III.
OF CIVIL PROCEDURE REQUIRES THE RULES TO BE INTERPRETED TO SECURE THE JUST, SPEEDY, AND INEXPENSIVE DETERMINATION OF EVERY ACTION.

RULE 1, FEDERAL RULES

This case, as with every case in the federal district courts is governed by the Rules of Federal Procedure. Rule 1 provides, These rules govern the procedure in the United States district courts in all suits of a civil nature whether cognizable as cases at law or in eguity or in admirality, with the exceptions stated in Rule 81. They shall be construed and administered to secure the just, speedy, and inexpensive determination of every action. The dispute, at its heart, is over whether a defunct business entity, represented pro forma, can be compelled to produce a 30(b)(6) witness when it no longer has any employees. Here, RWI wants to compel a non-party, former

manager of a bankrupt company to fly to Tucson to attend a Rule 30(b)(6) deposition when other reasonable alternatives have been proposed. Defendants agree that Mitchell has relevant information, and do not object to his deposition. Defendants offered the following reasonable alternatives to imposing this burden on Mitchell and the defunct company:

his phone number." Weinstein email to Laird 2/26/07. Mr. Laird supplied the phone numbers requested, only asking to participate in the conversation, "I would like to be present telephonically during any substantive conversation." Laird e-mail to Weinstein 2/26/07. (Exhibit C).
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1. A deposition in Florida with STH's counsel appearing telephonically, or 2. A conference call between RWI's counsel and Mitchell with STH's counsel permitted to listen in on the call. RWI, at various times indicated that they would accept either option. Only when RWI subsequently noticed the Rule 30(b)(6) Deposition Notice in Tucson, was it necessary to seek a protective order. RWI has not provided any basis for an award of attorneys fees. Defendants have not objected to Mitchell's deposition. Defendants only asserted that STH, a defunct company in the process of judicial dissolution, is unable to compel Mitchell to appear for a 30(b)(6) deposition in Tucson. Accordingly, the Court should deny the request for attorneys fees. CONCLUSION For all of the foregoing reasons, the Court should deny RWI's Motion to Compel, grant defendants' Motion for Protective Order, Deny RWI's request for attorneys fees, and order that RWI is free to subpoena Mitchell for deposition in Florida. DATED April 10, 2007. WEEKS & LAIRD, PLLC /s/ Brian A. Laird ______________________ Brian A. Laird Attorneys for Defendant
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The foregoing was served by ECF Notice Delivery to: Janet Weinstein Amy Abdo 3003 N. Central Ave., Suite 2600 Phoenix, AZ 85012-2913 Attorneys for Plaintiff

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EXHIBIT A

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EXHIBIT B

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EXHIBIT C

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