ADT Holdings, Inc. v. Harris ( 2017 )


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  •                                              EFiled: Aug 24 2017 08:00AM EDT
    Transaction ID 61026000
    Case No. 2017-0328-JTL
    IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
    ADT HOLDINGS, INC., in its individual            )
    capacity and as attorney-in-fact for ZONOFF,     )
    INC., and ADT LLC,                               )
    )
    Plaintiffs,                    )
    v.                                    ) C.A. No. 2017-0328-JTL
    )
    MICHAEL HARRIS and BOT HOME                      )
    AUTOMATION, INC., d/b/a RING.COM,                )
    )
    Defendants.                     )
    MEMORANDUM OPINION
    Date Submitted: August 22, 2017
    Date Decided: August 24, 2017
    Steven L. Caponi, K&L GATES LLP, Wilmington, Delaware; Attorney for Plaintiffs.
    Megan Ward Cascio, Lauren Neal Bennett, MORRIS, NICHOLS, ARSHT & TUNNELL
    LLP, Wilmington, Delaware; Mark C. Scarsi, Ashlee N. Lin, Katherine R. Pierucci, J.
    Samuel Payne, MILBANK, TWEED, HADLEY & McCLOY LLP, Los Angeles,
    California; Attorneys for Defendants.
    LASTER, V.C.
    Plaintiffs ADT Holdings, Inc. and ADT LLC (together, “ADT”) noticed a
    deposition of defendant Bot Home Automation, Inc. (“Ring”) pursuant to Court of
    Chancery Rule 30(b)(6). Ring designated Dr. Michael Balog as its witness for all of the
    topics, including Topic 37: “Ring confidential and trade secret information provided to
    Zonoff that you contend was received, accessed, or reviewed by [ADT].” Balog appeared
    for deposition, agreed that he was Ring’s Rule 30(b)(6) witness for purposes of Topic 37,
    and answered questions on that topic.
    ADT has not contended that Balog lacked knowledge, was unprepared, or was
    inadequate in any way. Nor has Ring suggested that Balog lacked knowledge, was
    unprepared, or was inadequate in any way. Despite the de facto agreement on the
    sufficiency of Balog’s knowledge, Ring purported to file an amended response to ADT’s
    Rule 30(b)(6) notice that designated Peter Gerstberger as an additional witness on Topic
    37. The new response stated: “Subject to its General Objections, Defendant designates
    Peter Gerstberger to testify regarding Ring’s confidential and trade secret information
    provided to Zonoff, and Defendant designates Michael Balog to testify regarding ADT’s
    receipt, access, and/or review of such information.”
    ADT moved to strike Ring’s supplemental designation of Gerstberger as a Rule
    30(b)(6) witness. The rule states:
    A party may in the party’s notice name as the deponent a public or private
    corporation or a partnership or association or governmental agency and
    designate with reasonable particularity the matters on which the
    examination is requested. The organization so named shall designate 1 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
    1
    matters on which the person will testify. The person so designated shall
    testify as to matters known or reasonably available to the organization.
    Ch. Ct. R. 30(b)(6).
    When a party notices the deposition of an organization pursuant to Rule 30(b)(6),
    the organization has an obligation to ensure, through the testimony of one
    witness or multiple witnesses, that the party taking the deposition receives
    complete responses, based on the organization’s full knowledge and any
    relevant information readily available to it, to questions related to all the
    matters set forth with particularity for examination in the [notice], unless
    this Court enters an Order limiting the scope of the deposition’s subject
    matter or the parties agree otherwise.
    Fitzgerald v. Cantor, 
    1999 WL 252748
    , at *2 (Del. Ch. Apr. 5, 1999). “[T]he deposition
    testimony should be based on the organization’s full knowledge and the information
    readily available to it and not limited to the witnesses’ personal first-hand knowledge of
    the matters at issue.” 
    Id. “The organization
    is the deponent . . . , not the witness or
    witnesses the organization designates to testify on its behalf.” 
    Id. The obligation
    to designate one or more witnesses in response to a Rule 30(b)(6)
    notice belongs to the organization. “The most logical approach is [for the organization] to
    produce as a witness the person or persons within the organization that are the most
    knowledgeable.” 
    Id. “[I]f different
    persons within the organization have the most
    knowledge of different matters . . . , the organization may produce each person as a
    witness and limit the matters on which they will testify to those matters on which they are
    the most knowledgeable.” 
    Id. “Even these
    persons who are considered the most
    knowledgeable about a particular matter, however, must ensure, before testifying, that his
    or her knowledge . . . encompasses what the organization knows or can reasonably
    2
    determine through relevant information readily available to the organization.” 
    Id. The organization
    alternatively can designate a witness “who may not be the most
    knowledgeable” and then “prepare the witness or witnesses to testify on the
    [organization’s] behalf in response to questions on each matter.” 
    Id. at *3.
    An
    organization falls short and fails to comply with its obligations if “at the time of the
    deposition, the person or persons it designates as witnesses are unaware of the
    organization’s full knowledge of a matter set forth [in the notice] and, therefore, are
    unable to provide full and complete answers on behalf of the organization.” 
    Id. See generally
    8A Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal
    Practice and Procedure § 2103 (3d ed. 2010) (explaining that Rule 30(b)(6) imposes “an
    implicit obligation to prepare the witness” in order to ensure he can testify
    comprehensively as to the entire organization’s knowledge).
    These principles make clear that in response to a Rule 30(b)(6) notice, the
    organization bears the responsibility to designate a person or persons to testify on the
    organization’s behalf. The organization has to do this upfront, before the deposition takes
    place. It cannot make a provisional designation, wait and see how the deposition goes,
    and then make supplemental designations. Just as a biological person could not ask for a
    supplemental deposition if dissatisfied with his testimony, an artificial person cannot
    either. If an organization could designate supplemental witnesses at will, after the
    designated witnesses have testified, then the organization easily could employ a strategy
    of attrition in which follow-on witnesses could fix adverse testimony given by the
    original witness. This in turn would enable organizations to undercut the effective use of
    3
    deposition testimony for impeachment in a way that a biological person never could. See
    Ch. Ct. R. 32(a)(1) (“Any deposition may be used by any party for the purpose of
    contradicting or impeaching the testimony of deponent as a witness.”).
    This case differs from a situation in which the party that noticed the Rule 30(b)(6)
    deposition contends that the witness was inadequate. In that scenario, the party noticing
    the deposition has options. The party can demand that the organization produce an
    adequate witness, either by educating the previously proffered witness or by naming a
    supplemental witness.1 In that scenario, the organization can accede to the demand and
    provide an adequate witness. Applied to these facts, if ADT asserted that Balog was an
    inadequate witness and insisted on a further deposition, then Ring could have designated
    Gerstberger as a supplemental witness.
    A party that takes a Rule 30(b)(6) deposition and believes the witness was
    inadequate is not required to ask for an adequate witness. The party may prefer to force
    the organization to live with the testimony of its inadequate witness and use the
    deposition transcript for impeachment. If a party wishes to follow that route, then a court
    1
    See, e.g., Calzaturficio S.C.A.R.P.A. s.p.a. v. Fabiano Shoe Co., Inc., 
    201 F.R.D. 33
    , 41 (D. Mass. 2001) (holding that insufficiently prepared Rule 30(b)(6) designees
    warranted requiring corporation to re-designate witnesses, prepare them, and submit them
    for further depositions); Prokosch v. Catalina Lighting, Inc., 
    193 F.R.D. 633
    , 639 (D.
    Mass. 2000) (ordering further deposition of “unprepared and unresponsive” Rule 30(b)(6)
    witness).
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    will respect that decision.2 Of course, by doing so, the party takes the risk that the trier of
    fact will not find the impeachment persuasive.
    The choice to seek an adequate Rule 30(b)(6) witness thus lies with the party
    noticing the deposition, not with the organization. Put differently, a court will not reward
    the organization’s failure to comply with its obligations under Rule 30(b)(6) by
    permitting the organization to designate a supplemental witness unilaterally and thereby
    gain a second bite at the apple.
    If Ring believed that both Gerstberger and Balog were necessary witnesses to
    convey Ring’s knowledge regarding Topic 37, then Ring had a duty to designate both
    witnesses at the outset, before Balog’s deposition. Ring could not wait until that
    deposition was over, evaluate Balog’s testimony, then amend its designation to add
    Gerstberger as an additional designee. The motion to strike is therefore granted.
    2
    See Gutierrez v. AT&T Broadband, LLC, 
    382 F.3d 725
    , 733 (7th Cir. 2004)
    (deferring to a party’s “tactical decision not to insist that the defendants produce better
    witnesses.”). A party also may seek any of the other discovery sanctions contemplated by
    Rule 37. See, e.g., Resolution Tr. Corp. v. S. Union Co., Inc., 
    985 F.2d 196
    (5th Cir.
    1993) (affirming sanction of costs and fees where 30(b)(6) witnesses “possessed no
    knowledge relevant to the subject matters identified” in the notice); Inmuno Vital, Inc. v.
    Telemundo Gp., Inc., 
    203 F.R.D. 561
    (S.D. Fla. 2001) (striking defendant’s Rule 30(b)(6)
    witness as sanction for untimely production).
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Document Info

Docket Number: CA 2017-0328-JTL

Judges: Laster, V.C.

Filed Date: 8/24/2017

Precedential Status: Precedential

Modified Date: 8/24/2017