If you throw your weight around, you might get taken down a peg.

E.I. du Pont de Nemours and Co. v. Kolon lndustries, Inc., Civil Action No. 3:09-cv-00058-REP (E.D.Va. May 25, 2010). E.I. du Pont de Nemours and Co. (“DuPont”) filed a Complaint against Kolon Industries, Inc. (“Kolon”), alleging that Kolon enticed certain DuPont employees and consultants to breach agreements and divulge trade secret and confidential information about DuPont’s manufacturing process and corporate strategy with respect to KEVLAR fiber. During discovery in the case, Kolon identified several employees in Korea who had knowledge relevant to the case. Over the course of several months, in what the Court described as procedural “fencing,” Kolon equivocated over whether or not it would accept service for these employees and produce them for depositions. Initially, Kolon rejected DuPont’s requests that it accept service of process to compel the employees’ attendance at depositions, after which DuPont started the complex process of compelling attendance under international law.

Several conferences followed, during which DuPont argued that the rules and decisional law supported its position that Kolon had to produce the employees because they were “managing agents,” a term of art used in the Federal Rules of Civil Procedure. Kolon appeared to relent, although it did not concede that the employees were managing agents, and said that it would instruct the employees to appear. However, when DuPont’s lawyers wrote to the American lawyers that Kolon had hired to represent the Korean employees, these lawyers again rejected DuPont’s request that they accept service on behalf of their clients.

Inevitably, the matter was presented to the court on DuPont’s motion to compel the depositions. The fundamental issue was whether the Kobol employees were “managing agents.” If they were, Kobol would have to produce them; if not, then DuPont would have to track them down in Korea and try, under international law, to compel them to testify in depositions. A secondary issue was whether, if the employees were managing agents, they would have to come to Virginia to be deposed. Kolon opposed the motion on both issues.

Under the applicable Federal rules, a party who wants to take the deposition of a corporation can proceed in either of two ways. The examining party can give the corporate entity a list of topics that are to be covered in the deposition, and the corporation can designate one of more “managing agents” to speak for it. Alternatively, the examining party can identify a “managing agent” of the corporation and order the corporation to produce that person. If, under the latter approach, the specified person is not an officer, director, or managing agent, the corporation is not obligated to produce him or her, and the examining party is responsible for compelling the witness’s attendance by subpoena.

What exactly make a person a “managing agent” is sketchy at best. Each case presents different facts and each case must be analyzed separately. The Court suggested, however, that four factors should be considered in making a case-specific determination of a person’s managing agent status:

  1. the discretionary authority vested in the person by the corporation;
  2. the employee’s dependability in following the employer’s directions;
  3. whether the individual is more likely to identify with the corporation or the adverse party in the litigation; and
  4. the degree of supervisory authority in areas pertinent to the litigation.

Of these factors, the third – the employee’s identity of interests with his employer as opposed to the opposing party is “paramount.” If the person’s “managing agent” status is debatable, Courts resolve doubts in favor of the party who wishes to take the deposition.

An additional sub-issue is when the person is a managing agent. A person’s status as managing agent is considered at the time of the deposition, not at the time of the events in questions. The general rule is that a former employee cannot be a managing agent for the purposes of a deposition. This rule, however, like most rules has an exception and the Court pointed it out as applicable in this case: A corporate party cannot fire or reassign an employee just to keep him or her from testifying.

In this case, the Court reviewed the circumstances of eight potential deponents and, for five of them, concluded that the deponent had managing agent status. With respect to those five deponents, the Court turned to the question of the location where the depositions would occur.

Ordinarily, a defendant’s deposition will take place where the defendant resides or has a principal place of business. This presumption, however, can be overcome upon consideration of the following factors:

  1. location of counsel for the parties in the forum district;
  2. the number of corporate representatives a party is seeking to depose;
  3. the likelihood of significant discovery disputes arising which would necessitate resolution by the forum court;
  4. whether the persons sought to be deposed often engage in travel for business purposes; and
  5. the equities with regard to the nature of the claim and the parties’ relationship.

The Court found that the third factor presented the most compelling reason for overriding the presumption that the depositions should take place in Korea. As the Court put it, “Discovery disputes have littered the litigation landscape in this case since the beginning, and they show no signs of abating – if anything, they are worsening.” The Court pointed to the half-dozen discovery motions already filed, hours of hearings and conference calls involving the Court and the parties, the parties’ accusations and counter-accusations of discovery misconduct, and one prior discovery expedition to Korea that was aborted essentially because of the parties’ inability to resolve disagreements. Because of this background, the Court found that there was a real risk that multiple rounds of depositions could be needed “if the Court does not closely monitor the conduct of both parties during the depositions.” To that end, the Court took the unusual step of directing that the depositions would take place in the Federal Courthouse in Richmond.

The Court also looked at the equities of the case (factor number five) and concluded that it was more fair to have the depositions take place in Virginia. In reaching that conclusion the Court noted wryly that the financial equities were not under consideration: “[G]iven the parties’ litigation strategy thus far, it does not appear that litigation cost is a major motivating factor for either party.” The primary equitable consideration came from Kolon’s conduct in needlessly delaying the discovery process. The Court reviewed Kolon’s objections to the depositions, then its apparent change in position to allow the depositions, then its switch back to opposing them again. The Court also noted that the independent counsel hired by Kolon to defend the employees had made aggressive and highly technical objections regarding the efficacy of service on the employees under international law. Moreover, the Court found that Kolon had taken personnel actions (terminations and reassignments) against the employees that Kolon then used as a basis to oppose the taking of the depositions. These factors, the Court held, weighed against Kolon in the balance of equities.

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