INTEGRA BANK CORPORATION et al v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND

Filing 292

ORDER overruling in part and sustaining in part 278 Appeal of Magistrate Judge Decision to District Court. SEE ENTRY FOR DETAILS. Signed by Judge Richard L. Young on 1/10/2014. (TMD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
EVANSVILLE DIVISION

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INTEGRA BANK CORPORATION,
INTEGRA BANK, N.A.,
FEDERAL DEPOSIT INSURANCE
CORPORATION as Receiver for Integra
Bank, N.A.,
Plaintiffs,
vs.
FIDELITY AND DEPOSIT COMPANY OF
MARYLAND,
Defendant.

No. 3:11-cv-00019-RLY-WGH

ENTRY ON F&D’S OBJECTION TO THE OCTOBER 18, 2013 RULING
GRANTING IN PART PLANTIFF’S MOTION FOR PROTECTIVE ORDER
Plaintiff, Federal Deposit Insurance Corporation, as receiver for Integra Bank,
N.A. (“FDIC”), seeks to recover on a financial institution bond issued to Integra by
Defendant, Fidelity and Deposit Company of Maryland (“F&D”). F&D served a Rule
30(b)(6) Deposition Notice on the FDIC, and in response, the FDIC sought a protective
order. (Docket # 236). The Magistrate Judge granted in part the protective order.
(Docket ## 270, 282). F&D filed a partial objection. (Docket # 278). For the reasons
set forth below, F&D’s objection is OVERRULED in part and SUSTAINED in part.
I.

Background

This case arises out of the Ponzi scheme committed by Louis Pearlman
(“Pearlman”). Throughout the scheme, Pearlman and his related entities obtained several
loans from Integra, which totaled approximately $29 million. (Supplemental Complaint ¶
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39). Pearlman allegedly collaborated with Stuart Harrington (“Harrington”), Executive
Vice President of Commercial Lending at Integra, to obtain these loans. Pearlman
submitted false financial reports and documentation during the loan process to
Harrington, who allegedly knew the documents were false but nevertheless secured the
loans for Pearlman. When Pearlman and his related entities defaulted on the loans, they
left Integra with losses of nearly $23 million. (Id. at ¶¶ 36, 41).
Integra purchased a financial institution bond from F&D with a coverage period
from July 1, 2007 to July 1, 2010. The policy covered those losses discovered during that
time period regardless of when the loss occurred. On June 29, 2010, Integra filed a proof
of loss. (Docket # 154-3 (“Supplemental Proof of Loss”)). F&D refused to provide
coverage to Integra under the bond. As a result, in February 2011, Integra filed suit
alleging breach of contract and seeking a declaratory judgment that it is entitled to
coverage under the policy. Near the end of July 2011, Integra failed and the FDIC
became receiver.
On July 31, 2013, F&D served an amended notice of deposition under Federal
Rule of Civil Procedure 30(b)(6). The notice contained 35 matters of examination with
30 additional subparts. The FDIC sought a protective order from the court arguing that it
would be an undue burden for it to comply with the notice and that the information
sought is duplicative. The Magistrate Judge entered a marginal order granting in part the
FDIC’s motion for a protective order (Docket # 270 (the “Marginal Entry”)); he then

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entered an entry supporting the marginal order (Docket # 282 (the “Supporting Entry”)).1
F&D filed its objection (Docket # 278) prior to the Magistrate Judge’s Supporting Entry,
and the FDIC filed its response (Docket # 283) on the same day as the Supporting Entry
was entered. Both parties indicated that they would supplement their filings to address
additional issues, and to date, neither party has done so. F&D only objects to the
Magistrate Judge’s ruling for Topic Numbers 17-18 and 21-23.
II.

Standard of Review

The district court’s review of a magistrate judge’s discovery ruling is governed by
Rule 72(a) of the Federal Rules of Civil Procedure, which provides: “The district judge to
whom the case is assigned shall consider such objections and shall modify or set aside
any portion of the magistrate judge’s order found to be clearly erroneous or contrary to
law.” FED. R. CIV. P. 72(a); see also 28 U.S.C. § 636(b)(1). Under the clear error
standard, “the district court can overturn the magistrate judge’s ruling only if the district
court is left with the definite and firm conviction that a mistake has been made.” Weeks
v. Samsung Heavy Indust. Co., Ltd., 126 F.3d 926, 943 (7th Cir. 1997). “A deferential
standard of review is particularly appropriate when the magistrate judge ‘has managed
the case from the outset and developed a thorough knowledge of the proceedings.’”
Vision Center Northwest, Inc. v. Vision Value, LLC, No. 3:07-CV-183RM, 2008 WL

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The Magistrate Judge’s two entries are inconsistent in one regard. In the Marginal Entry, the
Magistrate Judge denied the protective order for Topic 22(a); however, in the Supporting Entry,
he granted the protective order for Topic 22(a). Because the court finds that the FDIC must
supply a witness to testify to all of Topic 22, this discrepancy is immaterial.

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5191456, * 1 (N.D. Ind. Dec. 10, 2008) (citing Cooper Hosp. University Med. Ctr. v.
Sullivan, 183 F.R.D. 119, 127 (D.N.J. 1998).
III.

Discussion

F&D seeks to depose a representative from the FDIC. According to the Federal
Rules of Civil Procedure,
a party may name as the deponent a public or private corporation, . . . a
governmental agency, or other entity and must describe with reasonable
particularity the matters for examination. The named organization must
then designate one or more . . . persons who consent to testify on its behalf;
and it may set out the matters on which each person designated will testify.
. . . The persons designated must testify about information known or
reasonably available to the organization.
30(b)(6). Under Rule 30(b)(6) an entity has a duty to prepare its deponent to
“adequately testify not only on matters known by the deponent, but also on subjects that
the entity should reasonably know.” Smithkline Beecham Corp. v. Apotex Corp., No. 98
C 3952, 2000 WL 116082, * 8 (N. D. Ill. Jan. 24, 2000) (citing United States v. Taylor,
166 F.R.D. 356, 361 (M.D.N.C. 1996)). The deponent’s testimony reflects the
knowledge, opinions, and beliefs of the entity and not of the deponent. See id. at 9. This
includes the entity’s interpretation of events and documents. See id.
Like other discovery, a 30(b)(6) deposition is limited in scope by Rule 26. A court
is required to limit discovery if it 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; . . . or (iii) the burden or expense of the
proposed discovery outweighs its likely benefit, considering the needs of
the case, the amount in controversy, the parties’ resources, the importance
of the issues at stake in the action, and the importance of the discovery in
resolving the issues.
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Fed. R. Civ. P. 26(b)(2)(C). In addition, a party may move for a protective order, which
the court may grant “for good cause . . . to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense . . . .” Fed. R. Civ. P. 26(c).
The burden is on the party seeking the protective order to demonstrate that good cause
exists for the entry of the order by making a “particular and specific demonstration of
fact, as distinguished from stereotyped and conclusory statements.” Gulf Oil Co. v.
Bernard, 452 U.S. 89, 102 n. 16 (1981). In addition, “[b]efore restricting discovery, the
court should consider the totality of the circumstances, weighing the value of the material
sought against the burden of providing it and taking into account society’s interest in
furthering the truthseeking function.” Patterson v. Avery Denninson Corp., 281 F.3d
676, 681 (7th Cir. 2007) (internal quotation and citation omitted).
A. Topics 17 and 18
Topic 17 requests a deponent to testify to “answers to F&D’s interrogatories and
the factual basis for such answers.” Topic 18 similarly requests testimony on “answers to
F&D’s Request for Admission.” The Magistrate Judge found that these topics were
overbroad. (Supporting Entry 3). F&D does not address this reasoning and instead
argues that the topics are not duplicative of prior discovery because the FDIC’s responses
to the interrogatories did not include a factual basis, but mere conclusory statements. The
FDIC responds that requests such as those contained in Topics 17 and 18 have been
denied by the courts. See Catt v. Affirmative Ins. Co., No. 2-08-cv-243-JVB-PRC, 2009
WL 1228605, * 7 (N.D. Ind. 2009)(granting a protective order for a request for testimony

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on the answers to interrogatories because it did not satisfy the reasonable particularity
requirement of Rule 30(b)(6)).
For example, in Smithkline Beecham Corp., the court denied a motion to compel
where the defendant sought a 30(b)(6) witness to testify regarding the defendant’s
responses to interrogatories. 2000 WL 116082 at * 9. The court denied the motion
because the defendant was “not required to have its counsel muster all of its factual
evidence to prepare a witness to be able to testify.” Id. In addition, the court found that
the attorney client privilege would be implicated because the attorneys assist in the
preparation of the responses. Id.
Here, F&D served more than 24 interrogatories and 115 requests for admission.
The interrogatories cover a vast majority of the topics in the complaint. The FDIC has
supplemented its interrogatory responses and in several answers it points to bate numbers
where the factual basis for its assertions can be found. The court thus finds that the
Magistrate Judge’s decision to grant a protective order for Topics 17 and 18 as overbroad
is not clearly erroneous. F&D’s objection for these topics is OVERRULED.
B. Topic 21
Topic 21 consists of subparts ‘a’ through ‘v’ and requests “the factual basis for the
allegations in the Amended Supplemental Complaint, including, but not limited to, the
FDIC’s allegation . . .” in Paragraphs 31, 34, 36, 42, 43, 44, 68, 92, 93, 94, 121, 122, 124,
125, 127, 142, 143, 145, 148, 150, 155, and 172. The Magistrate Judge found that
responding to each of the subtopics would amount to a requirement that the FDIC present

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its case in chief. He also found that to prepare witnesses to this extent would be an undue
burden.
The court agrees with the Magistrate Judge that a response to Topic 21 would be
tantamount to the FDIC putting on its case in chief. The notice seeks testimony on nearly
all of the allegations in the amended supplemental complaint. In addition, the court finds
that the information sought in Topic 21 is largely duplicative of the responses to the
interrogatories provided by the FDIC. See F.D.I.C. v. Wachovia Insurance Services, Inc.,
No. 3:05 cv 929(CFD), 2007 WL 2460685 (D. Conn. Aug. 27, 2007); see also CSX
Transportation, Inc. v. Vela, No. 2:06-cv-112-RLY-WGH, 2007 WL 3334966 (S.D. Ind.
Nov. 8, 2007). For the FDIC to educate one of its employees who is starting with little to
no knowledge of the intricate facts of this case would require the FDIC to spend
numerous hours and dollars. The court gives deference to the Magistrate Judge’s finding
that the information upon which the employees would be basing their testimony is
equally available to the FDIC and F&D and that the FDIC has responded to Topic 21
through other discovery vehicles. Therefore, the court does not find that the Magistrate
Judge’s conclusion that this would be unduly burdensome is clearly erroneous. F&D’s
objection to Topic 21 is OVERRULED.
C. Topics 22-23
Topic 22 requests “[w]hen Integra first learned” and Topic 23 requests “the
identity of the person at Integra who first learned” the following: (a) of the forgery
alleged in [] paragraph 149 of the Amended Supplemental Complaint; (b) of Louis
Pearlman’s Ponzi scheme; (c) that Harry Milner was not associated with Trans
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Continental Airlines; that Cohen & Sigel was a fictitious entity; and (e) that Harrington
received a payment from Pearlman and/or Pearlman Companies.” The Magistrate Judge
again found that it would be an undue burden to require the FDIC to educate its
employees in the “extreme detail” for the noticed deposition as to topics 22-23. In
addition, he stated that these requests improperly sought testimony regarding prereceivership activities by Integra.
F&D argues that the Magistrate Judge’s ruling, contrary to law, immunizes the
FDIC from 30(b)(6) depositions, and that there is a duty on the FDIC to prepare a witness
for the deposition, despite the witness not having first hand knowledge, for the
deposition. The FDIC responds that the information sought is cumulative of prior
depositions and responses, and therefore, it would be an undue burden to educate its
employee(s) for the deposition. The court agrees that a duty to educate the deponent
exists; however, the question in this case is whether that duty is unduly burdensome
given the facts of this case. The Magistrate Judge found that it was, and the court
disagrees.
To find that Topics 22 and 23 require “extreme detail” in answering is clearly
erroneous. Each topic asks for a date and a name associated with the discovery of five
facts. Despite the FDIC’s assertion, these requests do not require the FDIC employee(s)
to become “bank historians” but rather to learn a few key dates and players from
information already in its possession. This is not an undue burden, but is the duty that
Rule 30(b)(6) places upon entities. See Chicago Reg'l Council of Carpenters Pension
Fund v. Woodlawn Cmty. Dev. Corp., 09-cv-3983, 2011 WL 6318605, * 4 (N.D. Ill. Dec.
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15, 2011) (finding that under Rule 30(b)(6), “a corporation is required to educate its
designee concerning all ‘reasonably available’ information, even if such information is
not within the knowledge of the corporation's current employees.”).
Furthermore, the court finds that the FDIC did not meet its burden to show these
requests were duplicative in order to obtain a protective order. The FDIC asserts that it
has already provided the information requested through depositions and interrogatories;
however, the cited depositions and interrogatories do not specifically respond to the
information sought in Topics 22 and 23. For example, the FDIC asserts that it answered
Topic 22 in its response to Interrogatory No. 3; however, that response does not contain a
date or event associated with the acquisition of such knowledge to indicate when Integra
learned of the forged stock certificates. As such, the court finds that they are not
duplicative requests and the issuance of a protective order on such grounds was error.
IV.

Conclusion

Rule 26 protects a party from suffering an undue burden in producing discovery.
The court agrees with the Magistrate Judge that Topics 17, 18, and 21 place an undue
burden on the FDIC. As such, the issuance of a protective order under Rule 26 is not
contrary to law or clearly erroneous, and the court OVERRULES the objection to those
topics. On the other hand, the court finds that the Magistrate Judge’s conclusion that

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Topics 22 and 23 would cause an undue burden is clearly erroneous. Therefore, the court
SUSTAINS the objection (Docket # 278) for Topics 22 and 23, and orders the FDIC to
produce a witness to testify to those topics. The FDIC need not prepare the witness for
more than is specifically noticed in Topics 22 and 23.
SO ORDERED this 10th day of January 2014.

__________________________________

_________________________________

RICHARD L. YOUNG, CHIEF JUDGE
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court
United States District
Southern District of Indiana Court

Southern District of Indiana

Distributed Electronically to Registered Counsel of Record.

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