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Keith Anderson is a litigation and labor & employment partner and concentrates his practice on representing financial institutions in the financial services industry, as well as representing employers in employment matters. He has handled multiple litigated matters under the FLSA, ADA, ADEA, FMLA and claims of discrimination and retaliation, as well as counseling employers on compliance and effective employment policies. View articles by Keith

You Don’t Get a Bite at the Big Dog: Texas Court Rules that Injured Worker CannotWhat if your employee plaintiff sues you and then demands to take the deposition of your company CEO or some other high-level corporate executive who has no personal knowledge about the facts of the case? No one would be excited about that prospect. Fortunately, a Texas appellate court recently ruled that high-level executives can be put off-limits for deposition unless they have particular, personal knowledge of the events in question. The decision, In re Newport Classic Homes, is an important one for companies (even if they are not in Texas) to remember if they are ever faced with a request for an “apex deposition.”

What is an Apex Deposition?

We all know that depositions are a discovery tool used to get a witness’s testimony under oath. Sometimes a plaintiff seeks a deposition of a company’s CEO or high-ranking executives who have no personal knowledge of the events in question – commonly referred to as “apex depositions.” A company’s CEO may know a lot about the company, but have zero personal knowledge of the events in the lawsuit. Plaintiffs nonetheless sometimes pursue the deposition of a high-ranking individual for a variety of reasons – some legitimate (garnering testimony that could be useful) and others maybe not as legitimate (as harassment or a veiled pressure tactic to compel a settlement). The apex doctrine is intended to direct discovery to those at lower levels with particular, personal knowledge of a dispute, as well as protect high-level executives from harassing and time-consuming depositions.

Background

Newport Classic Homes was a general contractor on a project, and Marcus Hiles was its CEO. The injured plaintiff worked for a subcontractor on the project and suffered a workplace injury. He sued Newport, alleging that it had contractual and actual control of the worksite. The plaintiff sought to depose Hiles, which triggered Newport’s motion to prevent the deposition and the plaintiff’s motion to compel. Hiles stated that he did not have any unique or superior knowledge of any facts or evidence surrounding the construction project or the incident. In fact, Hiles said the only information he would have was what others at Newport told him. The trial court, however, granted the request to depose Hiles, leading Newport to seek an immediate review of that order.

Court of Appeals Says No

The Texas State Court of Appeals reversed the trial court and found that Hiles did not have the particular personal knowledge necessary to warrant a deposition. The court stated that the plaintiff’s justification was “nothing more than the simple, obvious recognition that the highest-ranking corporate officer of any corporation has the ultimate responsibility for all corporate decisions.” Examining a previous Texas Supreme Court ruling about the issue of when to permit the deposition of a corporate president or high-level corporate official, the court concluded that the “unique or superior knowledge” threshold requires a showing “beyond mere relevance … that a high-level executive is the only person with personal knowledge of the information sought” or possesses such knowledge in greater quality or quantity than anyone else. To be sure, “some knowledge” is not enough as it would make the apex discovery indistinguishable from the scope of general discovery. Nor is knowledge of company policies sufficient. The court examined the deposition of another Newport employee that described what Hiles would know and concluded that the CEO simply did not have “unique or superior personal knowledge” to justify his deposition and that the plaintiff could obtain all necessary discovery through less intrusive means.

Takeaways

The opinion serves as a strong arrow in the quiver for a defendant to avoid having their high-level executives deposed. Each jurisdiction (and each individual judge) varies on the interpretation of the apex deposition principle, but most jurisdictions have developed law requiring some type of unique and special knowledge similar to the Texas court. Apex deposition requests could be encountered in litigation involving a discrimination claim or a workplace injury claim, and a defending company should carefully evaluate whether the requested deponent has the unique and superior personal knowledge to really warrant being deposed. Unless a plaintiff can show that type of particular knowledge, the deposition should be seen as nothing more than improper harassment.

Combining Classrooms and Class Actions: Trump Proposes Combining Labor and Education DepartmentsCould the Department of Labor (DOL) and Department of Education (DOE) possibly merge in the near future? President Trump thinks so and recently announced his desire to combine the two departments into a single federal agency to be called the Department of Education and the Workforce. According to a White House Statement, the new agency would be “charged with meeting the needs of American students and workers from education and skill development to workplace protection to retirement security.” The proposed restructuring would provide for four sub-agencies: K-12, Higher Education/Workforce Development, Enforcement, and Research/Evaluation.

Current Status

DOE is the smallest cabinet agency with just under 4,000 employees and a $68 billion budget, and oversees federal student loans, distributes K-12 education funding, and enforces civil rights laws at colleges. DOL, by contrast, has about 15,000 employees and a $13 billion budget to support its broad agenda of training programs, enforcement of wage and safety laws, and the Bureau of Labor Statistics.

The proposal is part of a larger plan by the administration to reorganize and reduce the size of federal government agencies. Other combinations of sections of federal agencies have been discussed by the OMB, which itself may have a shrinking role.

Reactions to the Proposal

Not surprisingly, reaction to the proposed combination has been mixed. Current administration members support it. Secretary of Education Betsy DeVos promoted the idea to help break down “artificial barriers” between education and career development. Mick Mulvaney, director of the federal OMB, spoke in favor of the plan to reduce the size of the federal government which he described as “bloated, opaque, bureaucratic, and inefficient.”

Opponents say it would be a bad idea. Chris Lu, a former Deputy Secretary of Labor under President Obama, pointed out that only parts of the two agencies deal with worker training because most of DOL consists of enforcement agencies such as OSHA, MSHA, Wage & Hour, and OFCCP that were created to protect workers. The National Employment Law Project (a union-backed think tank) denounced the proposal as a “half-baked idea” that would only betray the workers for whom President Trump pledged to advocate.

Members of the business community may welcome entities such as OSHA and MSHA falling under the DOE, which has a more educational (and less enforcement-oriented) focus.

Likely to Happen?

Odds of the combination actually coming to fruition seem unlikely. Congress has to approve a major reorganization of cabinet departments, which means 60 votes in the Senate. POLITICO (a Washington, D.C. political news outlet) surmised that the plan “would pose a heavy political and legislative lift” as previous attempts to eliminate the DOE have failed in Congress. President Obama had his own reorganization plan in 2012 that never went anywhere. Seth Harris, Deputy Secretary of Labor under President Obama, predicted that the merger will not happen.

From a high level, some of the mandates of these two agencies overlap. One pursues education to enter the labor force while the other focuses on the workforce (with some training programs). The proposed merger faces many obstacles before the finer details are even discussed, such as what (and who) gets cut. If nothing else, the announced plan has attracted attention, and it is worth keeping an eye on. Having DOL sections combined and altered with a focus on education (rather than just on enforcement) would certainly be a game changer for many employers.

Cooperate or Pay: Recovering Attorneys’ Fees to Get to ArbitrationDoes your arbitration agreement allow you to recover attorneys’ fees if the employee rebels against arbitration and you have to compel it? Maybe it should. In Aralar v. Scott McRea Automotive Group, a court in Florida recently affirmed an arbitrator’s award of nearly $20,000 in attorney’s fees for the defendant’s hassle of moving for arbitration. Employers with arbitration agreements should be encouraged that the fees incurred for moving for arbitration (when it should be clear cut) may be recoverable with the contract clause.

The Facts and the Arbitration Clause

Aralar worked in the McRea auto service center and filed a lawsuit in court under the FLSA for unpaid overtime and back wages. Pursuant to an arbitration agreement Aralar signed as a condition of employment, McRea notified Aralar’s counsel multiple times that he could not pursue the matter in court — it had to go to arbitration.

The arbitration clause provided that if one of the parties filed an action in court that was subject to arbitration, the other party would provide notice of the arbitration requirement and request to have the case dismissed. If the party who filed the court action did not dismiss the case within 10 days and the case ultimately ended up in arbitration following a motion, the moving party could recover reasonable attorneys’ fees incurred “because of the filing of the complaint.”

Aralar did not respond, and McRae filed a motion to dismiss the case and compel arbitration. Yet again Aralar failed to respond, although he eventually agreed to the arbitration forum about six weeks after it was filed. The court then compelled the matter to arbitration and stayed the case pending the results. Aralar did not end up filing his request for arbitration for another six months after the court’s ruling.

About a year later, the arbitrator granted McRae’s motion for judgment on the pleadings, finding that Aralar’s job as a service advisor was exempt from FLSA requirements. A few months later, the arbitrator awarded McRae the fees and costs incurred up through the time the case was stayed by the court, a sum totaling $19,291.58. The fees and costs awarded were about half of the amount requested.

After no further response was received from Aralar, McRae filed a motion with the court to confirm the arbitration award. Aralar finally woke up and filed to vacate the attorneys’ fee award.

The Court’s Decision

In his ruling, the judge conveyed that any party seeking to vacate an arbitrator’s findings must clear a high hurdle because federal courts defer to an arbitrator’s decisions whenever possible. Then the judge said the same standard applies for award of attorneys’ fees. Aralar contended that (1) fees should only be awarded as a sanction, and (2) that because his FLSA claim was not frivolous, the awarding of fees was inappropriate based on rulings in civil rights cases. The judge rejected those contentions and found that because the parties contractually agreed to the arbitration agreement’s fee shifting provision and Aralar did not withdraw his lawsuit within 10 days of notice, McRae was entitled to enforce the contract terms and recover the fees incurred to get the matter into arbitration.

Takeaways

The decision makes sense and these fee shifting clauses could be a useful tool to avoid fights about arbitration. Where the employer has to have its attorneys compel a matter into arbitration when the employee should have agreed to it, that unnecessary expense should come out of the plaintiff’s pocket. Employers should find some small encouragement that fee recovery provisions will be enforced. At the very least, the Aralar decision provides leverage towards peaceful agreements into arbitration rather than a fight. No plaintiff wants to pay a former employer—especially when they filed a lawsuit to try and get money.