United States District Court, S.D. California
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO COMPEL DISCOVERY
[DOC. NO. 86]
WILLIAM V. GALLO, Magistrate Judge.
On May 28, 2015, counsel for both parties informed the Court of several discovery disputes. Because the fact discovery deadline is July 2, 2015 (Doc. No. 58 at 3), the Court issued an expedited briefing schedule for the resolution of all pending discovery disputes, and set a Discovery Hearing for June 5, 2015, at 10:00 a.m. (Doc. No. 85.) On June 2, 2015, Defense counsel informed the Court that the parties had resolved Defendant's two discovery issues and therefore, Defendant would not be filing a Discovery Motion. Also on June 2, 2015, Plaintiff filed a Motion to Compel Discovery. (Doc. No. 86.) On June 4, 2015, Defendant filed a Response to Plaintiff's Motion to Compel. (Doc. No. 91.)
On June 5, 2015, at 10:00 a.m., the Court held a Discovery Hearing. Mr. Jason Forge and Ms. Rachel Jensen appeared on behalf of Plaintiff. Ms. Nancy Stagg and Mr. Benjamin Morris appeared on behalf of Defendant. During the Discovery Hearing, the Court issued tentative rulings and due to the compressed time period before the close of fact discovery, ordered the parties to proceed in accordance with its tentative rulings.
II. PLAINTIFF'S MOTION TO COMPEL DISCOVERY
A. PLAINTIFF'S ISSUE NO. 1-PAYMENT OF ATTORNEYS' FEES
1. PLAINTIFF'S ARGUMENT
During the depositions of Trump University's ("TU") former Controller, Mr. Steven Matejek, and TU's former President, Mr. Michael Sexton, Defendant did not allow questioning about who was responsible for paying the witnesses' attorneys' fees. Plaintiff believes this is an appropriate line of inquiry, as Defendant has directly or indirectly provided thousands, or tens of thousands, of dollars in benefits to witnesses in the form of paying for attorneys to represent them. (Doc. No. 86-1 at 8.) Defendant has now offered a stipulation that Defendant Trump and TU are paying Mr. Matejek's and Mr. Sexton's attorneys' fees. Plaintiff argues that the stipulation is not a replacement for asking questions about that subject during deposition. Because that line of questioning was foreclosed, Plaintiff seeks the opportunity to reopen both depositions and ask Mr. Matejek and Mr. Sexton about the payment of their attorneys' fees.
Plaintiff argues that the benefits the witnesses have received from Defendant in the form of attorneys' fees is relevant to show the witnesses' bias. (Doc. No. 86-1 at 9.) Plaintiff contends that, "the fact that a billionaire defendant may be providing thousands, or tens of thousands, of dollars in benefits to important witnesses is plainly the type of information that could induce bias, which makes it undeniably relevant." Id.
Further, Plaintiff argues that because Defense counsel's improper instructions not to answer questions during the depositions of Mr. Matejek and Mr. Sexton are the only reason that the depositions will be reopened and additional expenses will be incurred, Defendant should pay the price for its own discovery violations. (Doc. No. 86-1 at 21.) Plaintiff contends that Defendant should pay all reasonable costs for the next sessions of Mr. Matejek and Mr. Sexton's depositions. Id. Otherwise, he argues, it will be Plaintiff, not Defendant, who will be punished for Defense counsel's improper instructions not to answer. Id.
Further, although the fact discovery deadline is July 2, 2015, Plaintiff asks the Court to extend the deadline for the sole purpose of allowing the depositions of Mr. Matejek and Mr. Sexton to take place by July 16, 2015. (Doc. No. 86-1 at 22.)
2. DEFENDANT'S ARGUMENT
Before Plaintiff filed his Motion to Compel, Defendants offered to stipulate that Defendant Trump and TU are paying Mr. Matejek's and Mr. Sexton's attorneys' fees. Plaintiff rejected that stipulation. Defendant now cautions the Court that Plaintiff seeks to reopen the depositions of Mr. Matejek and Mr. Sexton for an unlimited purpose, and not simply to inquire about the payment of attorneys' fees or the fee arrangements. Defendant notes that Plaintiff argues in his Motion to Compel that, "[b]ecause the bias such benefits induces may extend to all subjects [of testimony], the Matejek and Sexton depositions should be reopened with no restrictions on the areas of inquiry..." (Doc. No. 91; quoting Doc. No. 86-1 at 11.) Defendant asserts that Plaintiff wants another bite at the apple as to topics already covered, or that could have been covered, in prior testimony. Id. Defendant argues that Plaintiff should not be allowed to reopen the depositions for an unlimited purpose under these circumstances. Id.
Defendant argues that it should not have to pay for additional depositions because his positions in these discovery disputes have been substantially justified, and Plaintiff has flatly rejected all of Defendant's compromise proposals. (Doc. No. 91 at 14.) Defendant also argues that the fact discovery cutoff should not be extended, even for limited purposes. Id. at 15.
3. APPLICABLE LAW
a. FEE ARRANGEMENTS GENERALLY NOT PROTECTED BY ATTORNEY-CLIENT PRIVILEGE
Generally the attorney-client privilege "does not safeguard against the disclosure of either the identity of the fee-payer or the fee arrangement." Ralls v. U.S., 52 F.3d 223, 225 (9th Cir. 1995) (citing In re Grand Jury Proceedings (Goodman), 33 F.3d 1060, 1063 (9th Cir. 1994); see also In re Osterhoudt, 722 F.2d 591, 593 (9th Cir. 1983) ("Fee arrangements usually fall outside the scope of the privilege simply because such information ordinarily reveals no confidential professional communication between attorney and client, and not because such information may not be incriminating."); In re Michaelson, 511 F.2d 882, 888 (9th Cir. 1975) ("Thus it has generally been held that information concerning the fee arrangement between an attorney and his client, or the existence of the attorney-client relationship is not privileged or protected by the attorney-client privilege."); U.S. v. Blackman, 72 F.3d 1418, 1424 (9th Cir. 1995) ("client identity and the nature of the fee arrangement between attorney and client are not protected from disclosure by the attorney-client privilege.").
b. PAYMENT OF EXPENSES
A court may impose an appropriate sanction, including reasonable expenses and attorneys' fees that are incurred by any party, on a person who impedes, delays, or frustrates the fair examination of the deponent. Fed.R.Civ.P. 30(d)(2). There are few situations where an instruction not to answer a deposition question is appropriate. Brincko v. Rio Props., Inc., 278 F.R.D. 576, 581 (D. Nev. 2011). A person may instruct a deponent not to answer only when necessary to preserve a privilege, to enforce a limitation ordered by the court, or to present a motion under Rule 30(d)(3). Fed R. Civ. P. 30(c)(2).
The court may order depositions to be taken a second time and order the cost be borne by the party whose counsel's conduct necessitated retaking the deposition. Brincko, 278 F.R.D. at 581; O'Brien v. Amtrak, 163 F.R.D. 232, 236 (E.D. Pa. 1995). Because there are many instances where a party taking a deposition may ask a question that a deponent or counsel considers improper but is unable to show it was asked in bad faith, or to annoy, embarrass or harass the witness, the court should evaluate on a case-by-case basis. Brincko, 278 F.R.D. at 584.
An award of expenses against an attorney advising a deponent not to answer is proper when the attorney's advice is not justified. Rockewell Intern., Inc. v. Pos-A-Traction Industries, Inc., 712 F.2d 1324 (9th Cir. 1983). An attorney can fail to meet the standard imposed by the Federal Rules of Civil Procedure to deal fairly and sincerely with the court and opposing counsel to conserve time and expense resulting in an "unreasonable and vexatious delay." City of New York v. Coastal Oil New York, Inc., No. 96 Civ. 8667 (RPP), 2000 WL 97247, at *2.
Even negligent failure to allow reasonable discovery may be punished. See Lew v. Kona Hosp., 754 F.2d. 1420, 1426 (9th Cir. 1985); see also Marquis v. Chrysler Corp., 577 F.2d 624, 642 (9th Cir.1978). "In view of the range of sanctions available, even negligent failures to allow reasonable discovery may be punished." Marquis, at 642.
Courts can order the payment of fees for any costs arising out of the discovery misconduct. See Raygoza v. City of Fresno, 297 F.R.D. 603, 607-10 (2014) (ordering payment of attorneys' fees, expert witness fees, court reporter fees, and costs the attorney incurred traveling to and from the deposition that did not take place); see F.C.C. v. Mizuho Medy Co. Ltd., 257 F.R.D. 679 (S.D. Cal. 2009)(because plaintiff caused the need to continue the deposition of corporate designee, plaintiff bears the costs of resuming the deposition and must reimburse defendant for roundtrip train fare and for attorney's travel time to the second deposition).
4. DISCUSSION AND RULING
a. DEFENDANT IMPROPERLY OBJECTED TO THIS LINE OF QUESTIONING
The Court agrees with Plaintiff that with respect to Mr. Matejek and Mr. Sexton, the identity of the fee-payer is not protected by the attorney-client privilege, and therefore, Defendant improperly foreclosed this line of questioning during both depositions. It is clear from Defendant's Opposition that Defendant agrees he should not have instructed the witnesses not to answer. As Defendant himself implicitly acknowledged in previous depositions of other witnesses, there was no objection to those questions, nor should there have been. The source of attorneys' fees is not privileged information. Although a stipulation may be appropriate in some circumstances to cure a party's mistake, this is not one of those times. The Court agrees that Plaintiff should not be forced to rely on a stipulation that Defendant and TU are paying the witnesses' attorneys' fees. Plaintiff is entitled to fully explore this area, and Defendant cannot foreclose this line of questioning by asserting improper objections.
Plaintiff seeks to reopen the depositions of Mr. Matejek and Mr. Sexton for an unlimited purpose because the bias induced by these benefits may extend to all subjects. The Court agrees with Plaintiff to some extent that the acknowledgment of bias through payment of fees could have permeated Mr. Matejek and Mr. Sexton's deposition testimony. The Court is persuaded by Plaintiff's argument that Plaintiff should not be prohibited from exploring these other areas.
Plaintiff's strongest argument, asserted during the Discovery Hearing, is that limiting Plaintiff's line of questioning strictly to the payment of attorneys' fees and fee arrangements will only facilitate more bickering between the parties over what questions specifically relate to the limited scope. Additionally, when asked by the Court during the Discovery Hearing whether Mr. Matejek or Mr. Sexton would voluntarily appear at trial, Defense counsel was understandably non-committal. If the witnesses do not appear to testify at trial, the deposition testimony is the only testimony that will be presented at trial. Plaintiff has the right to depose these witnesses about all subjects, and has a right to explore certain areas after asking about the payment of attorneys' fees. Plaintiff should not be prejudiced because of Defendant's improper instructions not to answer.
The Court hereby GRANTS Plaintiff's Motion to Compel as to this issue and ORDERS that the depositions of Mr. Matejek and Mr. Sexton be reopened to fully explore the questions foreclosed by Defendant's objection to the source of payment for the witnesses' attorneys' fees. The depositions of Mr. Matejek and Mr. Sexton shall be reopened for a maximum of two hours each to fully explore this line of questioning, as well as other areas that Plaintiff believes were affected by Defendant's improper instructions not to answer. There will be no restrictions or limitations on Plaintiff's ability to explore previously addressed or new areas during two designated hours of the re-opened depositions of Mr. Matejek and Mr. Sexton.
The depositions of Mr. Matejek and Mr. Sexton shall take place on or before July 9, 2015. No further extensions will be granted. The fact discovery deadline will be extended solely for purposes of re-opening the depositions of Mr. Matejek and Mr. Sexton in compliance with this Order.
b. DEFENDANT SHALL PAY EXPENSES
The sole reason for reopening the depositions of Mr. Matejek and Mr. Sexton is because of Defendant's improper instructions not to answer and Defendant's unjustified objections during the first depositions. The Court agrees with Plaintiff that it should be Defendant who bears the costs associated with reopening these two depositions. Therefore, the Court GRANTS Plaintiff's Motion to Compel as to this issue. Defendant shall pay the full cost of the court reporter and the videographer, if any, as well as any other miscellaneous costs associated with the continued depositions of Mr. Matejek and Mr. Sexton.
Despite Plaintiff's request, the Court will not order Mr. Matejek or Mr. Sexton to travel to Plaintiff's counsel's offices in San Francisco or San Diego for the continued depositions. These are third party witnesses who have already been deposed and neither the Court, nor Plaintiff, has the authority to compel these witnesses to travel across the country for trial, let alone for their re-opened depositions. The parties have conducted depositions in New York, and the Court is aware of at least one more deposition scheduled to take place in New York. Therefore, the re-opened depositions of Mr. Matejek and Mr. Sexton shall be held in New York, New York. Defendant will not be responsible for payment of Plaintiff's counsel's airfare or lodging, unless these depositions require additional travel, change to existing travel, or an extended stay by Plaintiff. If so, Defendant shall pay for Plaintiff's counsel's airfare, any additional costs to changed travel plans, and extended lodging stay in New York, New York.
B. PLAINTIFF'S ISSUE NO. 2 - TRUMP UNIVERSITY'S FINANCES
1. PLAINTIFF'S ARGUMENT
During the deposition of Mr. Matejek, Defendant did not allow Plaintiff to ask questions about the business operations, performance, or finances of TU. Plaintiff argues that Defendant did not allow any questions "with a percentage or dollar sign." Plaintiff argues that this Court has already found such questions to be properly subject to discovery. (Doc. No. 86-1 at 11; citing Makaeff v. Trump University, LLC, et al., Case No. 10-CV-0940-GPC (WVG), Doc. No. 93 at 13 ("Defendant Trump University's financial information is discoverable information and is not public information or readily available.").) Plaintiff asserts that Defendant has "essentially conceded" the impropriety of the instruction not to answer, and has agreed to make Mr. Matejek available for three additional hours of deposition testimony. Id.
2. DEFENDANT'S ARGUMENT
Defendant may be willing to make Mr. Matechek available for a second deposition in New York to discuss certain issues if key witnesses are not able to answer those questions. Defendant contends that the deposition would be limited in time and scope to address these issues in dispute. Defendant notes that some of the questions in dispute are related to the financial issue recently ruled on by the Court and Plaintiff's objection to that ruling is now pending before the District Judge. Defendant notes that there are other questions related to TU financials which are not currently before the Court, and will also be addressed during the deposition.
Defendant argues that although Plaintiff's discussion of this issue focuses on Mr. Matejek's testimony, Plaintiff "slyly" requests relief in the form of another deposition of both Mr. Matejek and Mr. Sexton. (Doc. No. 91 at 6.) Defendant notes that Plaintiff does not explain why his complaints regarding Mr. Matejek's testimony equate to a continued deposition of Mr. Sexton, and during meet and confer efforts, the parties only discussed Mr. Matejek's testimony and Plaintiff's alleged need for further deposition testimony from him. Id. Thus, Defendant argues, Plaintiff's requested relief as to Mr. Sexton regarding TU finances is improper because it was not part of meet and confer discussions. Id.
3. DISCUSSION AND RULING
Plaintiff is correct that this Court has already ruled in the Makaeff action that "Defendant Trump University's financial information is discoverable information and is not public information or readily available. Defendant Trump University shall respond to this RFP." (Makaeff, Doc. No. 93 at 13.) These questions were appropriate and therefore Defendant should not have instructed Mr. Matejek not to answer. Plaintiff's Motion to Compel Defendant to reopen Mr. Matejek's deposition for the purpose of inquiring about TU's business operations, performance, or finances, is hereby GRANTED. As noted above, Mr. Matejek's deposition shall be reopened for a maximum of four hours total, to allow Plaintiff an opportunity to seek information related to payment of his attorneys' fees (two hours) and the business operations, performance, and finances of TU (two hours).
Although the Court has granted Plaintiff's request to reopen the deposition of Mr. Sexton for the purpose of inquiring about the payment of his attorneys' fees and his fee arrangements, the Court will not permit Plaintiff to reopen Mr. Sexton's deposition to ask questions related to TU's business operations, performance, or finances. As noted in Defendant's Opposition, Plaintiff's argument regarding questions about TU finances was limited to Mr. Matejek's deposition. Plaintiff has not made any substantive argument as to why he should be allowed to reopen Mr. Sexton's deposition to inquire about the business operations, performance, or finances of TU.
In line with the guidance set forth above, Mr. Matejek's deposition will take place in New York, New York, on or before July 9, 2015. Defendant shall pay for the expenses related to the reopening of Mr. Matejek's deposition, subject to the same ...