RLI Insurance Company v. Nexus Services, Inc.
Filing
473
MEMORANDUM OPINION & ORDER granting 434 MOTION for Protective Order to Preclude the Deposition of Craig W. Kliethermes filed by RLI Insurance Company. Signed by Magistrate Judge Joel C. Hoppe on 5/8/20. (kld)
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
Harrisonburg Division
RLI Insurance Company,
Plaintiff,
v.
Nexus Services, Inc. et al,
Defendants.
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Civil Action No. 5:18-cv-00066
MEMORANDUM OPINION & ORDER
By:
Joel C. Hoppe
United States Magistrate Judge
This matter is before the Court on Plaintiff RLI Insurance Company’s (“RLI”) Motion for
a Protective Order to Preclude the Deposition of Craig W. Kliethermes. ECF No. 434 (“Pl.’s
Mot. for Protective Order”). Defendants Nexus Services, Inc., Libre by Nexus, and Homes by
Nexus (collectively “Nexus” or “the Defendants”) seek to depose Mr. Kliethermes, RLI’s
President and Chief Operating Officer, about the company’s decision to stop issuing immigration
bonds for the Defendants. Pl.’s Mot. for Protective Order 2. For the reasons set forth below,
RLI’s motion will be granted.
I. Procedural History
The parties are familiar with this case’s long and contentious history. On November 12,
2019, I granted the parties’ motion to amend the scheduling order, which extended their deadline
to complete fact discovery through March 20, 2020. ECF No. 311. During a discovery hearing
on February 11, 2020, the Defendants’ counsel indicated that Mr. Kliethermes may be able to
“shed important light” on issues in the case, but that Defendants were “not pushing” RLI on
deposing him at that time. Tr. of Feb. 11, 2020 Disc. Hr’g 25, ECF No. 413. On February 13, I
issued an order directing that any remaining depositions of RLI’s witnesses would take place at
Defendants’ counsel’s office in Northern Virginia. ECF No. 397. The Defendants deposed
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several RLI witnesses in late February and early March 2020. See Pl.’s Mot. for Protective Order
3–4; Defs.’ Am. Br. in Opp’n 2–3, ECF No. 451.
On March 11, 2020, the Defendants purported to notice Mr. Kliethermes for an in-person
deposition to begin at 10:00 a.m. on March 18, 2020 in McLean, Virginia. See Pl.’s Mot. for
Protective Order Ex. J, ECF No. 434-10. RLI filed its motion for protective order on March 17,
followed shortly thereafter by written objections to the Defendants’ Notice, filed on the evening
of March 20, purporting to “suspend” four depositions (including Mr. Kliethermes’s) in light of
the COVID-19 crisis. See ECF No. 442. Plaintiff’s motion has been fully briefed, see ECF Nos.
447, 451, 469, and can be resolved without oral argument, see Fed. R. Civ. P. 78(b); W.D. Va.
Gen. R. 4(c)(2).
II. RLI’s Motion for a Protective Order
RLI requests a protective order to prohibit Nexus from taking Mr. Kliethermes’s
deposition. See generally Pl.’s Mot. for Protective Order 1–16. RLI argues that as a high-level
executive Mr. Kliethermes is protected by the “apex doctrine,” id. at 2–3, 8–14, and that the
Defendants failed to properly and timely notice his deposition, see id. at 2, 8, 14 (citing Fed. R.
Civ. P. 30(b)(1)). The Defendants counter that the apex doctrine does not apply because, while
Mr. Kliethermes is a high-ranking executive at RLI, he “has unique personal knowledge of facts
relevant to this case,” Defs.’ Am. Br. in Opp’n 1, specifically the reasons why RLI decided to
terminate Nexus’s immigration bond program, see id. at 2–3. According to the Defendants,
David Sandoz, “a former Vice President of Surety at RLI[] who was the primary point of contact
between RLI and Nexus, testified in his deposition on March 5, 2020, that Kliethermes told him
directly to terminate the Nexus program because a principal of the company ha[d] a criminal
record.” Id. at 2 (citing id. Ex. 1, at 3–4, ECF No. 451-1). Contra Defs.’ Am. Br. in Opp’n Ex. 1,
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at 3–4 (Mr. Sandoz testifying that, although he was “not sure [he] got the full explanation” why
RLI decided to terminate the bond program, he recalled having a “pretty brief conversation” over
the phone with Mr. Kliethermes, “who indicated that they [were] not interested in the program
going forward,” and that Mr. Sandoz “believe[d]” Mr. Kliethermes “didn’t like the [criminal]
background on the owner,” Mr. Donovan).1 Defendants also argue that giving Mr. Kliethermes
seven days’ notice of his deposition “was adequate, and as a practical matter irrelevant at this
juncture,” because the COVID-19 pandemic has indefinitely postponed the deposition. Defs.’
Am. Br. in Opp’n 3.
A.
The Legal Framework
A civil litigant generally is entitled to “obtain discovery regarding 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)(1) does not precisely define relevancy,” In re: Am. Med.
Sys., Inc., MDL No. 2325, 2016 WL 3077904, at *4 (S.D. W. Va. May 31, 2016), other than to
instruct that “[i]nformation within this scope of discovery need not be admissible in evidence to
be discoverable,” Fed. R. Civ. P. 26(b)(1). Consistent with this instruction, federal courts have
long understood that “[r]elevancy for discovery purposes is defined more broadly than relevancy
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The Defendants also argue that the March 6, 2020 deposition of Ira Sussman supports their position that
Mr. Kliethermes has unique personal knowledge of RLI’s decision to cease issuing immigration bonds.
Defs.’ Am. Br. in Opp’n 2 (citing id. Ex. 2, ECF No. 451-2). Mr. Sussman testified that he learned about
Mr. Donovan’s criminal history after “Googl[ing]” him, as was his normal practice whenever a claim
came in, and that he shared this information with three or four RLI coworkers. Id. Ex. 2, at 3. He recalled
telling Burt Davis, Greg Chilson, and “probably Dave Sandoz at some time or another.” Id. Asked
whether he discussed Mr. Donovan’s criminal history with Mr. Kliethermes, Mr. Sussman responded,
“It’s possible, but I don’t remember.” Id. at 4. Defendants assert that Mr. Sussman’s “testimony about
Kliethermes’[s] personal knowledge conflicted [to] some degree with Sandoz’[s] testimony,” Defs.’ Am.
Br. in Opp’n 3, which “begs the question of when and how did Kliethermes learn about the criminal
history, and what decisions were made based on this knowledge,” id. at 2, “Accordingly, [they] noticed
Kliethermes on March 11 for a deposition on March 18.” Id. at 3; see id. at 4 (“There is a solid basis to
believe that Kliethermes may have relevant information to which Nexus is entitled under the Federal
Rules of Civil Procedure.”).
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for evidentiary purposes.” Kidwiler v. Progressive Paloverde Ins. Co., 192 F.R.D. 193, 199
(N.D. W. Va. 2000); see, e.g., Flora v. Hamilton, 81 F.R.D. 576, 578 (M.D.N.C. 1978) (“It is
clear that what is relevant in discovery is different from what is relevant at trial, in that the
concept at the discovery stage is much broader.”). Amendments to Rule 26(b)(1) gradually have
narrowed the scope of permissible discovery from nonprivileged matters relevant to “the subject
matter involved in the action” to nonprivileged matters relevant to a “party’s claim or defense.”
See Cole’s Wexford Hotel, Inc. v. Highmark, Inc., 209 F. Supp. 3d 810, 816–24 (W.D. Pa. 2016)
(discussing the 2000 and 2015 amendments to Rule 26(b)(1)’s relevancy standard). Nevertheless,
“it remains true that relevancy in discovery is broader than relevancy for purposes of
admissibility at trial,” In re: Am. Med. Sys., 2016 WL 3077904, at *4 (internal quotation marks
omitted), and that the district court has broad discretion to determine if proposed discovery is
relevant under this standard, Downs v. Va. Health Sys., No. 5:13cv83, 2014 WL 12776888, at *2
(W.D. Va. June 2, 2014). “Moreover, notwithstanding Rule 26(b)(1)’s recent amendment placing
an emphasis on the proportionality of discovery, the discovery rules, including Rule 26, are still
‘to be accorded broad and liberal construction.’” In re: Am. Med. Sys., 2016 WL 3077904, at *4
(quoting Eramo v. Rolling Stone LLC, 314 F.R.D. 205, 209 (W.D. Va. 2016)).
“At the same time, ‘discovery, like all matters of procedure, has ultimate and necessary
boundaries.’” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (quoting Hickman
v. Taylor, 329 U.S. 495, 507 (1947)). Under Rule 26(b), for example, “the court must limit the
frequency or extent of discovery . . . if it determines” the proposed discovery, even if relevant, is
not proportional to the needs of the case. Fed. R. Civ. P. 26(b)(2)(C). Rule 26(c) provides that a
Court may issue a protective order, for good cause shown, to “protect a person from annoyance,
embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c)(1). Ordinarily,
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the movant bears the burden of establishing “good cause” by showing that “specific prejudice or
harm will result if no protective order is granted.” United States ex rel. Davis v. Prince, 753 F.
Supp. 2d 561, 565 (E.D. Va. 2010) (quoting Phillips v. Gen. Motors Corp., 307 F.3d 1206,
1210–11 (9th Cir. 2002)). For the following reasons, I find that RLI has shown good cause for a
protective order precluding the deposition of Mr. Kliethermes.
B.
Discussion
RLI moves for a protective order primarily on grounds that the “apex doctrine” shields
Mr. Kliethermes from having to sit for a deposition by the Defendants’ attorneys because Mr.
Kliethermes is a high-ranking, or “apex,” corporate executive at RLI who does not have any
“unique, personal knowledge” about RLI’s decision to terminate the immigration bond program.
Pl.’s Mot. for Protective Order 2 (emphasis omitted); see Performance Sales & Mktg. LLC v.
Lowe’s Co., Inc., No. 5:07cv140, 2012 WL 4061680, at *3 (W.D.N.C. Sept. 14, 2012) (“[A]
broad rule allowing liberal discovery does not necessarily bestow upon a party the right to have
his or her attorney depose a highly ranked corporate executive.”). Rooted in Rule 26, the apex
doctrine “was developed as an aid” to ensure that the liberal rules for obtaining discovery by
deposition “are used only for their intended purpose and not as a litigation tactic to create undue
leverage by harassing the opposition or inflating its discovery costs.” Performance Sales &
Mktg., 2012 WL 4061680, at *3; see also Wal-Mart Stores, Inc. v. Vidalakis, No. 5:07mc39,
2007 WL 4591569, at *1 (W.D. Ark. Dec. 28, 2007) (“This doctrine is normally aimed at high
level decision makers who have no particular direct knowledge of the facts pertaining to the
particular lawsuit.”); Baine v. Gen. Motors Corp., 141 F.R.D. 332, 334 (M.D. Ala. 1991)
(discussing cases where district courts required a party seeking to “depose high-level
decisionmakers who are removed from the daily subjects of the litigation . . . [to] first
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demonstrate that the would-be deponent has ‘unique personal knowledge’ of the matter in
issue”). The doctrine instructs that a party cannot depose its opponent’s high-level (or “apex”)
executive officer unless the party first “show[s] that ‘(1) the executive has unique or special
knowledge of the facts at issue and (2) other less burdensome avenues for obtaining the
information sought have been exhausted.’”2 Performance Sales & Mktg., 2012 WL 4061680, at
*3 (quoting Wal-Mart Stores, 2007 WL 4591569, at *1)). Put differently, it creates a “rebuttable
presumption” that requiring an opponent’s high-ranking corporate executive to sit for a
deposition “either violates Rule 26(b)(2)(C)’s proportionality standard or, on a party’s motion for
a protective order, constitutes ‘good cause’ for such an order as an ‘annoyance’ or ‘undue
burden’ within the meaning of Rule 26(c)(1).” Id. at *4 (quoting Fed. R. Civ. P. 26(c)(1)).
“Should the deposing party fail to overcome this presumption, the court must then limit or even
prohibit the deposition.” Id.
I find that the Defendants have failed to show that Mr. Kliethermes has unique or special
knowledge of the issues in this case. See Smithfield Bus. Park, 2014 WL 547078, at *2. The
Defendants rely on Mr. Sandoz’s uncorroborated recollection that Mr. Kliethermes told him to
stop issuing immigration bonds. See Defs.’ Am. Br. in Opp’n 2. Even assuming that is a fair
representation of Mr. Sandoz’s deposition testimony, see Pl.’s Reply in Supp. of Mot. for
2
Although the Fourth Circuit has yet to consider the apex doctrine, district courts in the Fourth Circuit
have applied the doctrine in cases, like this one, where a party seeks to depose its opponent’s highranking corporate officials. See, e.g., Cross by & through Steele v. XPO Express, Inc., Civ. Nos. 4:152480, 4:15-2481, 4:15-2773, 4:16-1253, 4:16-1254, 2017 WL 10544637, at *2 (D.S.C. May 15, 2017)
(finding that the party seeking to depose its opponent’s apex executive failed to demonstrate he had
special or unique knowledge that could not be obtained through other less burdensome means); Smithfield
Bus. Park LLC v. SLR Int’l Corp., No. 5:12cv282, 2014 WL 547078, at *2 (E.D.N.C. Feb. 10, 2014)
(same); Intelligent Verification Sys., LLC v. Microsoft Corp., No. 2:12cv525, 2014 WL 12544827, at *1,
*3 (E.D. Va. Jan. 9, 2014) (finding that the defendant’s apex executive had personal knowledge of the
issues in the litigation and the defendant had failed to make any lower-level personnel with that
information available for deposition).
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Protective Order 4–5 (quoting Defs.’ Am. Br. in Opp’n Ex. 1, at 3–4), RLI has certified that Mr.
Kliethermes does not have unique personal knowledge about the immigration bond program, see
Pl.’s Mot. for Protective Order Ex. L, at 5 (“Mr. Kliethermes has a general awareness of RLI’s
immigration bond program and of RLI’s decision to terminate the immigration bond program.
Upon further investigation, RLI has confirmed that Mr. Kliethermes has no personal knowledge
regarding either of these topics beyond what is known by Messrs. Sussman, Davis and
Chilson.”), ECF No. 434-12. RLI is a large company with various lines of business, and the
surety bond program accounts for less than one percent of its gross annual premiums. Pl.’s Mot.
for Protective Order 8. The Defendants have failed to point to any piece of discovery, aside from
Mr. Sandoz’s vague recollection, that Mr. Kliethermes has unique personal knowledge of the
issues in this case. In fact, Mr. Sussman’s deposition testimony indicates that others at RLI,
namely Bart Davis and Greg Chilson, had knowledge of Mr. Donovan’s criminal background
and RLI’s decision to terminate the bond program, see Pl.’s Reply in Supp. 6; id. Ex. B at 3,
therefore making any knowledge that Mr. Kliethermes might possess not “unique.” Cf. Reese v.
United States, No. 1:12cr337, 2017 WL 3016822, at *7 (M.D.N.C. July 14, 2017) (“An attorney
could reasonably conclude that the Fourth Circuit [in United States v. Simmons, 649 F.3d 237
(4th Cir. 2011) (en banc),] chose the adjective ‘unique’ carefully, with full appreciation of its
then-established definition: ‘Of which there is only one; one and no other; single, sole, solitary . .
. . the only one of a kind; having no like or equal; standing alone in comparison with others . . .
.’” (quoting Unique, Oxford English Dictionary (2d ed 1989) (cleaned up))). Nexus may not like
RLI’s assertion but, absent any evidence of bad faith, I will take RLI at its word that Mr.
Kliethermes does not have unique personal knowledge of the issues in this case.
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I also find that the Defendants have failed to show that they have exhausted other less
burdensome means to obtain the information they seek. See Smithfield Bus. Park, 2014 WL
547078, at *2. On January 24, 2020, RLI’s amended interrogatory answer indicated that Mr.
Davis and Mr. Chilson, both vice presidents of surety at RLI, had personal information about
RLI’s decision to cease issuing immigration bonds. Pl.’s Mot. for Protective Order Ex. L, at 5.
RLI has also submitted declarations from Mr. Davis and Mr. Chilson stating the same. ECF Nos.
434-14, 434-15. Nexus deposed both Mr. Davis and Mr. Chilson on February 25, 2020. Pl.’s
Mot. for Protective Order 9. Nexus’s counsel did not ask Mr. Chilson about this topic, and he
only briefly explored the topic with Mr. Davis before counsel said he thought his “record [was]
sufficient.” Pl.’s Mot. for Protective Order Ex. M, at 4, ECF No. 434-13. Nexus had one month
between the time RLI amended its interrogatory answer and Nexus’s depositions of Mr. Davis
and Mr. Chilson to prepare to question them about RLI’s decision to cease issuing immigration
bonds. Its failure to do so shows that it did not exhaust its discovery options to obtain the
information it now asserts can only be obtained from Mr. Kliethermes.
Furthermore, I find that the Defendants’ notice to depose Mr. Kliethermes was improper
under Rule 30. “A party who wants to depose a person by oral questions must give reasonable
written notice to every other party.” Fed. R. Civ. P. 30(b)(1). The Court has discretion to
determine what is “reasonable notice” on a case-by-case basis. See Kolon Indus. Inc. v. E.I.
DuPont de Nemours & Co., 748 F.3d 160, 173 (4th Cir. 2014) (“Although Kolon maintains that
the five-days’ notice was reasonable under the circumstances, the district court acted within its
discretion in concluding otherwise.”); see also Parks v. Louisiana-Pacific Corp., No. 5:18cv12,
2019 WL 166559, at *2 (W.D.N.C. Jan. 10, 2019) (holding that six days’ notice was not
reasonable); Ike-Ezunagu v. Deco, Inc., No. 09cv526, 2010 WL 4822511, at *2 (D. Md. Nov. 22,
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2010) (holding that notice given eleven days before the discovery deadline, and after almost
thirteen months of discovery, was not reasonable).
Defendants assert that giving Mr. Kliethermes fewer than seven days’ notice of his
deposition was “adequate, and as a practical matter irrelevant at this juncture,” because the
COVID-19 pandemic has indefinitely postponed the deposition. Defs.’ Am. Br. in Opp’n 3. I
disagree. First, the Defendants do not satisfactorily explain why they waited almost until the
close of fact discovery to notice Mr. Kliethermes’s deposition. They note that “[s]everal
depositions were being telescoped in the weeks of March 9 and 16 due to the summary judgment
briefing schedule,” Defs.’ Am. Br. in Opp’n 3, but there is no indication the Defendants believe
Mr. Kliethermes would testify to otherwise-unavailable “facts essential to justify [their]
opposition,” Fed. R. Civ. P. 56(d), to RLI’s motion for summary judgment. See generally Defs.’
Am. Br. in Opp’n 2–4. Second, the Defendants could have issued a deposition notice for Mr.
Kliethermes on February 13, 2020, when they issued notices for Mr. Michael, Ms. Klobnak, and
Mr. Kennedy. Instead, they told the Court and RLI’s counsel that they were “not pushing” RLI to
let them depose Mr. Kliethermes. The Defendants’ lacked diligence in pursuing a deposition of
Mr. Kliethermes, and they failed to give proper timely notice of the deposition.
It appears that RLI has made available those employees with knowledge of the reasons
for RLI’s decision to cease issuing immigration bonds. Nexus’s failure to diligently pursue its
discovery on this issue was its own choice. Nexus should not be able to take advantage of the
COVID-19 pandemic to rewrite the procedural history and argue that it should be granted more
time to depose Mr. Kliethermes.
III. Conclusion
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10312
For the reasons set forth above, RLI’s Motion for a Protective Order, ECF No. 434, is
hereby GRANTED.
It is so ORDERED.
The Clerk shall deliver a copy of this Order to the parties.
ENTER: May 8, 2020
Joel C. Hoppe
United States Magistrate Judge
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