Opinion
97 Civ. 6124 (JGK) (THK), 98 Civ. 3099 (JGK) (THK)
September 9, 2000
MEMORANDUM OPINION AND ORDER
These consolidated actions were referred to me for general pretrial supervision by the Honorable John G. Koeltl, United States District Judge. Two applications for protective orders, pursuant to Federal Rule of Civil Procedure 26(c), are presently before this Court. Defendants Braspetro Oil Services Co. and Petroleo Brasileiro S.A. (referred to collectively as "Petrobras") seek to preclude plaintiffs United States Fidelity Guaranty Company and American Home Assurance ("the sureties") from deposing attorneys Peter Hornbostel, Esq. and Frederick Simpich, Esq. Third-party defendant Marubeni America Corporation ("MAC") seeks to preclude the sureties from deposing attorney Barton Ford, Esq. For the reasons set forth below, these applications for protective orders are denied.
BACKGROUND
In these actions, plaintiffs seek, inter alia, a declaration of their obligations and liabilities under two performance guarantee bonds, as well as damages for tortious interference with contract and for breach of obligations allegedly owing the sureties under various payment bonds and indemnity agreements. As the basis of their claim of tortious interference with contract, the sureties allege that Petrobras, through its Washington, D.C. counsel — Messrs. Hornbostel and Simpich — tortiously interfered with the attempt of third-party defendant IVI to tender payment and equipment to MAC, thus leading to the payment bond claim against the sureties by MAC. See Letter from Jacob Cohn, Esq., dated July 14, 2000 ("Cohn 7/14/00 Ltr."), at 3.
A summary of the complex factual background of these actions is provided in the following Orders and Opinions: U.S. Fidelity and Guar. Co. v. Braspetro Oil Services Co., Nos. 97 Civ. 6124 and 98 Civ. 3099 (JGK) (THK), 2000 WL 744369, at *1 (S.D.N.Y. June 8, 2000); U.S. Fidelity and Guar. Co. v. Braspetro Oil Services Co., 199 F.3d 94 (2d Cir. 1999);U.S. Fidelity and Guar. Co. v. Braspetro Oil Services Co., No. 97 Civ. 6124 (JGK), 1997 WL 307666 (S.D.N.Y. May 17, 1999); U.S. Fidelity and Guar. Co. v. Petroleo Brasilero S.A., No. 98 Civ. 3099 (JGK), 1999 WL 307642 (S.D.N.Y. May 17, 1999).
In his decision addressing the Court's jurisdiction over the action, Judge Koeltl noted that "the plaintiffs have alleged acts by Petrobras . . . that, if proven, would be sufficient to form the basis for Petrobras' liability. For example, Petrobras, through its Washington, D.C. counsel, allegedly interfered with IVI's attempt to tender payment and equipment to MAC." U.S. Fidelity and Guar. Co. v. Petroleo Brasilero S.A., 1999 WL 307642, at *8.
The sureties seek to depose Frederick Simpich and Peter Hornbostel, partners at Cameron Hornbostel, the law firm representing Petrobras in these actions, as well as Barton Ford, a partner at Winthrop, Stimson, Putnam Roberts, the law firm representing MAC in these actions. The sureties contend that these depositions will provide relevant information about communications between Hornbostel, Simpich, and Ford, who were "directly involved in the events leading up to the payment bond claim against the co-sureties by Marubeni America Corporation ("MAC"). This claim lies at the heart of the co-sureties' tortious interference claims against Petrobras." (Cohn 7/14/00 Ltr., at 3.) Specifically, the sureties assert that, between April and August 1997, Hornbostel and Simpich met and communicated with Ford (both alone and with MAC representatives) regarding the payment bond. (Cohn 7/14/00 Ltr., at 3.) The sureties contend that the attorneys were "playing a business-actor role" in these communications, and that, in some instances, the attorneys were the only individuals present at the meetings. See Letter from Jacob Cohn, Esq., dated July 24, 2000 ("Cohn 7/24/00 Ltr."), at 3.
DISCUSSION
As a general matter, attorney depositions are disfavored. In a leading decision on this issue, Shelton v. American Motors Corp., 805 F.2d 1323 (8th Cir. 1986), which is widely followed in this Circuit, the court held that depositions of opposing counsel should be permitted only if: (1) the information in question is crucial to the discovering party's trial preparation; (2) the information at issue is both relevant and not privileged; and (3) no other means exists to obtain the sought-after information. See Shelton, 805 F.2d at 1327; see also Maher v. Monahan, No. 98 Civ. 2319 (JGK) (MED), 2000 WL 777877, at *4 (S.D.N.Y. June 15, 2000); Roznitsky v. Schwartz Cobb Scheinert, No. 98 Civ. 6643 (CSH) (MHD), 1999 WL 187074, at *2 (S.D.N.Y. Apr. 6, 1999); Pereira v. United Jersey Bank, Nos. 94 Civ. 1565 (LAP) and 94 Civ. 1844 (LAP), 1997 WL 773716, at *7 (S.D.N.Y. Dec. 11, 1997); Robles v. Deutsch Advertising, Inc., No. 96 Civ. 3480 (JFK), 1997 WL 86386, at *1 (S.D.N.Y. Feb. 28, 1997).
The rationale for limiting depositions of attorneys, which has been favorably cited by the Second Circuit, see United States v. Yonkers Board of Education, 946 F.2d 180, 185 (2d Cir. 1991), is that depositions of counsel, even if limited to relevant and non-privileged information, are likely to have a disruptive effect on the attorney-client relationship and on the litigation of the case. See Roznitsky, 1999 WL 187074, at *2. Although there is some authority for the proposition that the principles set forth in the Shelton decision apply even where an attorney is not trial counsel, most courts addressing Shelton issues have done so in the context of proposed depositions of trial counsel, where concerns with invading attorney work product and disruption of litigation are most pronounced. See, e.g., Roznitsky, 1999 WL 187074, at **2-3 (presumption against deposition of trial counsel); Niagara Mohawk Power Corp. v. Stone Webster Engineering Corp., 125 F.R.D. 578, 591-92 (N.D.N.Y. 1989).
In the instant case, these concerns are not seriously threatened. As an initial matter, none of the attorneys whom the sureties seek to depose are trial counsel in this action. These attorneys are transactional lawyers who represented their clients with respect to the legal issues which arose prior to the commencement of these actions. For instance, Ford specializes in "insolvency, workout and project finance situations." Ford Declaration, at ¶ 1. Ford provided legal representation to MAC at the time that Petrobras threatened and then actually declared a default by IVI, the construction consortium on the P-19 Project. (See Letter from John Davis, Esq., dated July 17, 2000 ("Davis Ltr."), at 1.) He advised MAC regarding a potential workout situation with IVI in connection with its default in the P-19 Project. Ford Decl., Par; 1-3. He drafted various agreements with Petrobras that gave rise to the payment bond claim and, in 1997, much of the communications between Petrobras and MAC was funneled through Ford and Petrobras' attorneys — Hornbostel and Simpich. See Declaration of Jacob Cohn in Connection with Co-Sureties Memorandum of Law in Opposition to Petrobras's Rule 12(c) Motion, ¶ 93. The exact nature of the representation provided by Hornbostel and Simpich to Petrobras prior to the litigation is unclear, because neither Hornbostel nor Simpich submitted an affidavit in connection with Petrobras' application for a protective order. Nevertheless, there appears to be no dispute that they were involved in discussions with MAC and its attorneys with respect to the threatened default and payment bond claim, including IVI's attempt to discharge its payment obligation to MAC.
Although these attorneys are partners at law firms which are serving as trial counsel in these actions, and they appear to be providing some assistance to trial counsel, they are not themselves trial counsel.
The Court further notes that it appears that trial counsel for MAC previously agreed to make Ford available for deposition regarding these matters in the parallel MAC-Sureties litigation that is proceeding in state court. See Cohn 7/24/00 Ltr.
Accordingly, taking the depositions of these attorneys will not be disruptive of the litigation, or raise significant privilege issues, as would be more likely if they were they acting as trial counsel. See Chase Manhattan Bank. N.A. v. T N PLC, 156 F.R.D. 82, 84 (S.D.N.Y. 1994) (authorizing deposition of corporate counsel, rather than trial counsel, who may have exercised business as well as legal authority): Johnston Development Group, Inc. v. Carpenters Local Union No. 1578, 130 F.R.D. 348, 356 (D.N.J. 1990) (less potential harm to adversary process where corporate counsel, as opposed to trial counsel, is deposed).
Moreover, considering the individual factors articulated in Shelton, the depositions of these attorneys have been justified. The sureties have demonstrated that these attorneys are likely to possess information which is relevant, indeed, crucial, to plaintiff's tortious interference claims. The sureties allege, and neither Petrobras nor MAC argues to the contrary, that Hornbostel, Simpich, and Ford participated in many meetings regarding payment for the P-19 equipment. In fact, MAC's privilege log contains entries which refer to Ford's notes about meetings with Hornbostel and Simpich, and letters from Ford to his client regarding such meetings. (MAC Privilege Log, attached as Ex. A to Cohn 7/14/00 Ltr.) Not only are those payments in issue, but the conduct of defendant Petrobras, acting through its counsel — Hornbostel and Simpich — is the basis for plaintiff's tortious interference claim in these actions. Thus, the testimony of these attorneys, regarding their participation in the meetings and communications between Petrobras and MAC, is highly relevant to plaintiffs' claim of tortious interference.Cf. Pray v. The New York City Ballet, No. 96 Civ. 5723 (RLC) (HBP), 1997 WL 266980, at *1 (S.D.N.Y. may 19, 1997) (permitting depositions of opposing counsel regarding a pre-litigation investigation where the investigation itself was directly in issue in the litigation), aff'd in part and rev'd in part, No. 96 Civ. 5723 (RLC), 1998 WL 558796, at *1 (S.D.N.Y. Feb. 13, 1998); Bogan v. Northwestern Mutual Life Ins. Co., 152 F.R.D. 9, 14 (S.D.N.Y. 1993) (permitting deposition of opposing counsel who "concededly participated in disputed pre-litigation events which at least may relate to issues raised in this litigation"); Johnston Development Group, 130 F.R.D. at 352 (permitting deposition of opposing counsel about pre-litigation meetings in which counsel participated because "the meetings at issue are highly relevant to plaintiffs' claims in the case").
MAC contends that New York Supreme Court Justice Cozier, in a related state court action, has determined that the sureties' claim that MAC conspired with Petrobras fails as a matter of fact and law, and this moots the sureties' claims of tortious interference in these actions.See Davis Ltr., at 4. The issue of the effect of this state court ruling on these actions is presently one of the subjects of motions that are sub judice before Judge Koeltl. See Cohn 7/24/00 Ltr., at 3. For now, the sureties' claim of tortious interference is a viable claims in these actions. Cf. Maher v. Monahan, 2000 WL 777877, at *4 ("[D]iscovery cannot be blocked by the assertion that the claim is meritless, since it is adequately pled, has not been dismissed, and is not self-evidently pressed in bad faith.")
The sureties have also demonstrated that, in addition to being relevant, the information sought is non-privileged. To the extent that Hornbostel, Simpich, or Ford participated in and made statements during meetings conducted between representatives of Petrobras and those of MAC, those communications would not be privileged. They clearly were not made in confidence to their clients or parties with whom they shared a common interest. Cf. Johnston Development Group, 130 F.R.D. at 352 (permitting deposition of opposing counsel about pre-litigation meetings, and noting that "plaintiffs' concerns of privilege or confidentiality are unwarranted because third parties were present at each conversation for which deposition testimony is sought, and the presence of adverse third parties destroys the confidentiality otherwise attaching to lawyer-client conversations"). Moreover, the attorneys are alleged to have been "actors" in these business meetings, and in essence they are being questioned as fact witnesses. Accordingly, any possibility of infringing on privileged communications is greatly diminished. Petrobras' concern that "any potential testimony would be laced with privilege issues," (Sanoff Ltr., at 3), is unsupported and belied by the context of the attorneys' role in the transactions in issue. Similarly, MAC's argument that, in the past, the sureties have challenged virtually every assertion of privilege made by MAC and/or Petrobras, and thus, the sureties will abuse these depositions by infringing into privileged areas and by refusing to respect assertions of privilege (Davis Ltr., at 3), is based on speculation. Nothing in this Order is intended to preclude the proper assertion and protection of legitimately privileged communications.
The Court assumes that the sureties will only challenge an assertion of privilege if there is a good-faith basis to do so, and if the parties are unable to resolve any privilege issues that may arise, the Court will be available to do so.
Finally, the sureties have demonstrated that the information sought through the attorney depositions at issue cannot, as a practical matter, be obtained through other sources. The sureties allege that Hornbostel and Simpich were often the only Petrobras participants involved in the communications regarding MAC's payment for the P-19 equipment. (Cohn 7/14/00 Ltr., at 5.) Counsel for Petrobras does not deny this. Similarly, the sureties allege that Ford was often the only representative of MAC involved in these communications, and this is not denied by counsel for MAC. (Cohn 7/24/00 Ltr., at 3.) Rather, counsel for Petrobras contends that the information can be obtained from Ford, MAC's attorney, as well as MAC employees who participated in the meetings (Letter from Jonathan Sanoff, Esq., dated July 7, 2000 ("Sanoff Ltr."), at 2), and counsel for MAC argues that the information can be obtained from Petrobras's attorneys, Hornbostel and Simpich. (Davis Ltr., at 2.) These arguments have a "pass the buck" quality, and implicitly concede that the sureties should be permitted to depose the attorneys — albeit another party's attorneys.
Petrobras further contends that "[a]ny crucial information arising from communications between Messrs. Hornbostel, Simpich, and Ford," was relayed to Petrobras and MAC employees and can be discovered through questioning these employees, rather than the attorneys. (Sanoff Ltr., at 3.) This ignores the fact that certain Marubeni employees who were participants in the communications are either unavailable for deposition or, as was the case with one witness, have no recollection or knowledge of the conversations which the sureties wish to explore. See Cohn July 24 Ltr., at 4, and Exhibit B thereto. In any event, the sureties are entitled to question the direct participants in these meetings and conversations, rather than being forced to attempt to glean information from second-hand sources.
Counsel for MAC has taken the position that the participants from Marubeni (the parent company of MAC) are not MAC employees, and are therefore not within its control to produce for deposition. See Letter from Ed Flanders, Esq. to Jacob Cohn, Esq., dated January 5, 2000, attached as Ex. D to Cohn 7/14/00 Ltr. The sureties would thus be required to go through the burdensome task of attempting to compel depositions of witnesses in Japan, assuming these individuals were even present during, or had knowledge of, the relevant meetings and communications.
Having determined that questioning of these attorneys is appropriate, there remains the issue of whether, in the first instance, depositions should be taken or, as suggested by Petrobras and MAC, it would be less intrusive and more appropriate to proceed by interrogatories or written questions to the witnesses. In this case, the Court is of the view that written questions and interrogatories would be an extremely cumbersome and ineffective discovery technique. First, it has been determined that the subjects on which questioning will occur do not, for the most part, implicate privileged communications. Thus, oral depositions will not present a significant threat to privileged communications. Further, the information being sought is neither discrete nor purely factual in nature. Because the attorneys are fact witnesses to conversations and meetings involving other participants, credibility issues and inconsistencies in the witnesses' testimony are likely to arise, for which follow-up questioning and more flexible oral examination techniques are most useful. Accordingly, the sureties may take oral depositions of these attorneys, provided that the questioning is limited in scope to the subject of communications and meetings between Petrobras and MAC, in which the attorneys were participants, in connection with payment for the P-19 Project equipment and events leading up to the payment bond claim against the sureties.
CONCLUSION
For the reasons set forth above, Petrobras' and MAC's applications for protective orders precluding the depositions of Messrs. Hornbostel, Simpich and Ford are denied.
SO ORDERED.