CEOs May Be at the “Apex” of Their Companies, But They Can Still Be Deposed

Order Re: Discovery Dispute, Finisar Corp. v. Nistica, Inc., Case No. 13-cv-03345-BLF (Magistrate Judge Jacqueline Scott Corley)

One of the more contentious issues in civil litigation involves the question of under what circumstances can the highest ranking officer in a corporation find himself or herself answering questions at a deposition related to the business activities of the company.  In a recent order in a patent infringement suit, Magistrate Judge Corley examined this “apex” deposition doctrine and compelled the deposition of the CEO of the plaintiff Finisar Corp., subject to several limitations on how the deposition was to be conducted.

Turning first to the requested deposition of Finisar’s CEO, Magistrate Judge Corley recognized that while courts generally prohibit depositions only in extraordinary circumstances, the “apex” deposition doctrine has been used to prohibit or limit the depositions of high-ranking corporate officers under the theory that such depositions create a tremendous potential for abuse or harassment.  Under this doctrine, courts consider: (1) whether the deponent may have unique, non-repetitive knowledge of the facts at issue; and (2) whether the party seeking the deposition has exhausted other less intrusive discovery methods.  Magistrate Judge Corley held, however, that even when the apex doctrine is implicated, the burden remains on the party opposing the deposition to show extraordinary circumstances justify its prohibition.  Additionally, she held that the party seeking the apex deposition has to show only that the deponent may have unique information, and that the full exhaustion of every possible discovery means is not an absolute requirement.

Turning to Magistrate Judge Corley’s specific findings, she held that: (1) Finisar failed to meet its burden of showing extraordinary circumstances warranted the preclusion of the deposition; (2) the defendant, Nistica Inc., proffered a sufficient argument to conclude that Finisar’s CEO (“Mr. Gertel”) might have unique, non-repetitive knowledge of facts at issue; and (3) the large number of previous depositions that failed to yield information about those facts constituted a sufficient exhaustion of other discovery methods.

Turning to the claimed unique knowledge, Nistica first contended Mr. Gertel had firsthand knowledge of Finisar’s valuation of the patents in suit because at the time Finisar acquired the patents through a merger with another company, Optium, Mr. Gertel was Optium’s CEO.  Finisar argued that the deposition of Mr. Gertel was not necessary in light of previous depositions of several of its high-level executives who were asked about the valuation of the patents.  Magistrate Judge Corley reviewed the deposition testimony and found, however, that none of the other executives were able to give a substantive answer on this topic.  Thus, she found that Mr. Gertel may have unique, non-repetitive information about how Finisar valuated the patents.

Nistica next contended Mr. Gertel’s deposition was required so he could testify to conversations he had with Nistica employees when Optium considered acquiring Nistica, during which the employees may have disclosed confidential information regarding the accused products.  Magistrate Judge Corley found that no employee deposed to date had been able to testify to the contents of these conversations, and that even though Nistica did not argue such information was actually disclosed during these conversations, the possibility that Mr. Gertal had such knowledge was sufficient to allow the apex deposition on this topic.

Third, Nistica broadly argued that Mr. Gertel had unique knowledge about the various affirmative defenses raised by Nistica, including estoppel, laches, unclean hands, and equitable estoppel.  Magistrate Judge Corley found that Nistica failed to assert what unique facts Mr. Gertel may have known related to these defenses, and so did not allow the deposition on this topic.

Finally, Nistica contended Mr. Gertel’s deposition was required so he could testify to a possible personal motivation he might have had to file suit.  Nistica based its argument on an email that was neither sent nor received by Mr. Gertel, but that Magistrate Judge Corley found to be relevant to the question of whether Mr. Gertel had a motivation to sue Nistica independent from a desire to remain competitive in the industry.  She found that while other witnesses testified to Finisar’s decision to bring suit, Nistica was entitled to inquire into whether Mr. Gertel had such a particular personal motivation.

Thus, Nistica was able to make a plausible showing that Mr. Gertel had unique, non-repetitive knowledge of facts in issue.  Finisar, however, still argued that the deposition was not warranted because Nistica failed to exhaust other discovery options, for example, by failing to propound interrogatories on the above topics.  Magistrate Judge Corley found there is no strict requirement to exhaust every type of discovery request before seeking an apex deposition and Nistica’s questions on these topics during numerous other depositions were sufficient.  Consequently, she granted Nistica’s request for an order compelling the deposition of Mr. Gertel, but limited the deposition to two hours, and to only the distinct issues about which Mr. Gertel may have unique knowledge.

The ruling illustrates that CEOs are not immune from the discovery obligations attendant to any civil litigation.  However, the Order also underscores that the Courts are sensitive not to allow the litigation process to become a means to harass or abuse the officers in charge of business decision-making.