Stewart et al v. Atherio Inc et al

Filing 148

Memorandum Opinion and Order Granting 108 MOTION For Leave to Re-Open Depositions. Plaintiffs shall notice and take the depositions of Greg Furst and Jason Cory no later than four (4) weeks from the date of this order. The Court DENIES Pla intiffs motion with respect to reopening the deposition of Thomas Farb. However, the Court will GRANT Plaintiffs leave to serve Farb with no more than five (5) written discovery requests related to the Release. (Ordered by Judge Jane J. Boyle on 10/16/2018) (svc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
TAMMY O’CONNOR and MICHAEL
STEWART,
Plaintiffs,
v.
JASON CORY, THOMAS FARB, and
GREG FURST,

Defendants.

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CIVIL ACTION NO. 3:16-CV-1731-B

MEMORANDUM OPINION AND ORDER
Plaintiffs ask this Court for leave to reopen Defendants’ depositions to question them on
Defendant Jason Cory’s recently added affirmative defense. The Court allowed Cory to amend his
answer on May 2, 2018. Cory’s amended answer asserts that Plaintiffs’ claims are barred because
Plaintiffs released any claims against Cory in a release agreement. Plaintiffs want the opportunity to
question Defendants about the release and the facts surrounding it. Because Plaintiffs meet their
burden of showing good cause exists to re-depose Defendants, the Court GRANTS Plaintiffs’
Motion for Leave to Reopen Depositions (Doc. 108).
I.
BACKGROUND
This is a securities-fraud case where Plaintiffs allege Defendants misrepresented and omitted
material information in connection with the sale of Plaintiffs’ company. Some time after the sale,
Defendant Jason Cory and Atherio, Inc. entered into an Omnibus Compromise and Release
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Agreement (the “Release”) under which Cory’s employment with Atherio would end. Doc. 116, Def.
Cory’s Resp., 2. The Release states: “Atherio, any Affiliate of Atherio, and any Atherio Party hereby
release, remise, and forever discharge Cory and the Cory parties from any and all rights, claims,
demands, Actions, causes of action . . .” Atherio or its affiliates have or may have against Cory. Doc.
67, Def. Cory’s Mot. for Leave to Am. Pleadings, 5. Cory argues that Plaintiffs are bound by this
Release and thus their claims are barred. Doc. 103, Def. Cory’s Am. Answer, ¶ 531.
Plaintiffs deposed Defendants Greg Furst, Thomas Farb, and Jason Cory from February 6 to
February 8, 2018. Doc. 108, Pls.’ Mot. for Leave, 1. During those dates, Defendants did not assert
a defense related to the Release in their pleadings. Id.; see also Doc. 46, Def. Cory’s Am. Answer;
Doc. 47, Defs. Farb & Furst’s Am. Answer. Shortly after the depositions, on February 28, 2018, Cory
requested leave of Court to amend his answer to include a new affirmative defense based on the
Release. Doc. 67, Def. Cory’s Mot. to Amend. This Court granted Cory leave to amend on May 2,
2018, Doc. 102, Order, and he filed his amended answer that same day. Doc. 103, Cory’s Am.
Answer.
One month later, Plaintiffs requested leave to reopen the depositions of Defendants taken
back in February. Doc. 108, Mot. to Reopen. Plaintiffs argue they did not know about Cory’s new
defense—or its factual and legal bases—before the depositions. Id. at 2. Defendants filed separate
responses. Docs. 116 & 117. Cory argues that Plaintiffs have not shown “good cause” for why his
deposition should be reopened because Plaintiffs knew about the Release and knew about Cory’s
intent to use it as a defense before they deposed him. Doc. 116, Cory’s Resp., 3. In other words, Cory
argues Plaintiffs’ lack of diligence in questioning Defendants about the potential defense in the first
round of depositions bars them from retaking his deposition. Id. at 6. Defendants Farb and Furst
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argue that reopening of oral depositions would be unduly burdensome and that written discovery
requests would suffice. Doc. 117, Defs. Farb & Furst’s Resp., 5–6.
It does seem that Plaintiffs had some notice of the Release’s existence before the Defendants’
depositions. First, Cory’s original answer in this case asserted the Release as an affirmative defense.
Doc. 9, Def. Cory’s Answer, ¶ 112. But after a letter from Plaintiffs’ counsel claiming Plaintiffs were
not bound by the Release because they had no knowledge of it, Cory removed the defense from his
first amended answer. See Doc. 13, Cory’s First Am. Answer; Doc. 121, Pls.’ Reply, 4. Later, around
the time Plaintiffs took the depositions of Farb and Furst, Cory discovered evidence that Plaintiffs
may have knew about the Release when it was entered into. Doc. 116, Cory’s Resp., 3. After Furst’s
deposition on February 6, 2018, Cory’s counsel told Plaintiffs’ counsel that Cory was contemplating
reasserting the Release as a defense. Id. Two days later, Plaintiffs deposed Cory. Id. Plaintiffs’ counsel
referenced the Release a few times during that deposition; but none of the questions dealt with the
Release as it would be used as a defense. See Doc. 116-1, Def. App., 8–9 (Deposition of Jason Cory).
Defendants assert this shows a lack of diligence on the Plaintiffs’ part because they had sufficient
notice of the Release’s existence at this time and could have questioned Cory about it, but chose not
to. In response, Plaintiffs argue that even though Cory’s counsel may have stated her intent to
reassert the defense, Cory’s answer had not yet been amended and, more importantly, Plaintiffs had
no notice of the underlying legal or factual theories of the defense. Doc. 121, Pls.’ Reply, 5.
II.
ANALYSIS
Unless both parties stipulate otherwise, a party seeking to reopen the deposition of a witness
that has already been deposed in the case must obtain leave of court. Fed. R. Civ. P. 30(a)(2)(A)(ii).
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A court must grant leave to the extent it is consistent with Rules 26(b)(1) and (b)(2). Id. Rule
26(b)(1) provides that the scope of discovery should be limited to, among other things, “any
nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs
of the case . . . .” Fed. R. Civ. P. 26(b)(1). Rule 26 (b)(2) requires a court to limit the frequency and
extent of discovery if it finds that “(1) 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; (2) the party seeking discovery has had ample opportunity to obtain the
information by discovery in the action; or (3) the proposed discovery is outside the scope permitted
by Rule 26(b)(1).” Fed. R. Civ. P. 26(b)(1)(C). Thus, some courts have denied leave to take a
second depositions where a party lacked diligence in obtaining information before the initial
deposition. Kleppinger v. Tex. Dep’t of Transp., 283 F.R.D. 330, 333 (S.D. Tex. 2012) (citing Fresenius
Med. Care Holdings, Inc. v. Roxane, 2007 WL 754302, at *2 (S.D. Ohio March 9, 2007)).
Relatedly, Rule 30(d)(1) provides that “[u]nless otherwise stipulated or ordered by the court,
a deposition is limited to one day of 7 hours.” Fed. R. Civ. P. 30(d)(1). Before extending the duration
of depositions, a court must be satisfied that the moving party has shown “good cause.” Kleppinger,
283 F.R.D. at 333; see also Fed. R. Civ. P. 30(d)(1) advisory committee’s notes, 2000 Amendments.
Similar to Rule 30(a)(2), Rule 30(d)(1) states that a court “must allow additional time consistent
with Rule 26(b)(1) and (2) if needed to fairly examine the deponent . . . .” Fed. R. Civ. P. 30(d)(1).
Courts have allowed parties to reopen depositions when “new information comes to light”
that creates the need for further questioning. Kleppinger, 283 F.R.D. at 333. “New information” can
include the addition of new parties to the case, the addition of new allegations to the pleadings, and
the production of new documents. Id. at 333 n.3 (collecting cases). If a deposition is reopened
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because of newly discovered information, the court should limit the deposition to questions related
to this information. Id. (citing Ganci v. U.S. Limousine Serv., Ltd., 2011 WL 4407461, at *2 (E.D.N.Y.
Sept. 21, 2011)).
Here, the Court will grant Plaintiffs leave to reopen Defendants’ depositions. Defendant
Cory’s amended answer asserts a new affirmative defense under the Release that could work as an
absolute bar to Plaintiffs’ claims. Doc. 103, Def. Cory’s Am. Answer, ¶ 351; see also Kress v. Price
Waterhouse Coopers, 2011 WL 5241852, at *1 (E.D. Cal. Nov. 1, 2011) (“‘Good cause’ for an order
[allowing reopening of depositions] exists where new claims or defenses have been added.”). This
defense was not asserted at the time Plaintiffs took Defendants’ depositions. Doc. 108, Pls.’ Mot. to
Reopen, 2. While, as noted above, Plaintiffs may have been aware that the Release existed and that
Defendants’ counsel was considering adding it to Cory’s answer, Plaintiffs were not aware of the
factual allegations related to the defense or the legal theory under which the defense was brought. Id.
To further elaborate, Cory asserts in his amended answer that Plaintiffs are bound by the
Release entered into by Cory and Atherio, Inc. because Atherio had “actual and apparent authority”
to bind its shareholders, including Plaintiffs, to such an agreement. Doc. 103, Cory’s Am. Answer,
¶ 351. Cory relies on a few pieces of documentary and testimonial evidence to support his claim that
Plaintiffs were aware of the Release and thus agreed to be bound by it. See id. There is no indication
that Plaintiffs were aware of this evidence or of the allegations related to agency law Cory uses to
support his Release defense. Indeed, when Cory originally asserted the Release as a defense, he did
not support it with any evidence (aside from the Release itself) and did not argue in terms of agency
principles. Doc. 9, Def. Cory’s Answer, ¶ 112.
The Court thus finds that, consistent with Rule 26(b)(1) and (b)(2), Plaintiffs have shown
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good cause to warrant reopening the depositions of Defendants. Additional depositions would not
be cumulative or duplicative as Plaintiffs have agreed to limit the scope of these depositions to Cory’s
Release defense. Doc. 121, Pls.’ Reply, 2. Moreover, Plaintiffs did not have the opportunity to
question Defendants on the Release; it was not plead when Plaintiffs took Defendants’ depositions
and Plaintiffs were unaware of the factual and legal support for the defense. Finally, as noted, the
discovery sought is within the scope of Rule 26(b)(1) because it pertains to a nonprivileged matter
that is relevant to Cory’s defense.
Because the burden and expense of additional depositions is not small, the Court will grant
leave to reopen depositions with limitations. First, the scope of questioning is restricted to Cory’s
Release defense, and the factual and legal underpinnings of the defense. Second, Plaintiffs are
permitted no more than two additional hours of deposition time per Defendant. Third, the Court
grants Plaintiffs leave to depose Defendants Cory and Furst, but not Defendant Farb. Farb has
asserted—and Plaintiffs have not disputed—that he was not an employee when the Release
Agreement was entered into. Doc. 117, Defs. Farb & Furst’s Resp., 5–6. The Court finds that
deposing Farb is not proportional to the needs of this case and that the burden of redeposing him
outweighs the potential benefit. However, the Court will grant Plaintiffs leave to serve Farb with a
limited number of written discovery requests related to Cory’s Release defense. Finally, the Court will
require Plaintiffs to travel to a location that is both convenient for Defendants and within reason for
all parties to take their depositions. The parties will bear their own costs associated with taking these
depositions.

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III.
CONCLUSION
After considering Plaintiffs’ Motion for Leave to Re-Open Depositions (Doc. 108), Defendant
Cory’s Response (Doc. 116) and Defendants Farb and Furst’s Response (Doc. 117), and Plaintiffs’
Reply (Doc. 121), the Court GRANTS Plaintiffs’ motion (Doc. 108). Plaintiffs shall notice and take
the depositions of Greg Furst and Jason Cory no later than four (4) weeks from the date of this order
or November 16, 2018. The scope, duration, and location of these depositions shall be limited as
the Court has specified above. The Court DENIES Plaintiffs’ motion with respect to reopening the
deposition of Thomas Farb. However, the Court will GRANT Plaintiffs leave to serve Farb with no
more than five (5) written discovery requests related to the Release.

SO ORDERED.
SIGNED: October 16, 2018.

______________________________
JANE J. BOYLE
UNITED STATES DISTRICT JUDGE

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