United States District Court, D. South Dakota, Western Division
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO COMPEL ATTENDANCE AND PRODUCTION OF DOCUMENTS [DOCKET NO. 131]
VERONICA L. DUFFY, Magistrate Judge.
This matter is before the court on plaintiff Atmosphere Hospitality Management, LLC's complaint, filed pursuant to the court's diversity jurisdiction, 28 U.S.C. § 1332. See Docket No. 1. Now pending is a motion to compel, Docket No. 131, also filed by Atmosphere. The district court, the Honorable Karen E. Schreier, referred this motion to this magistrate judge for decision. See Docket No. 165.
The general background of the facts of this litigation and the identity of the parties is set forth in this court's recent opinion filed at the court's Docket No. 168. That statement of facts is incorporated by reference herein. The hybrid version is that plaintiff and defendants Karim Merali and Shiba Investments, Inc. entered into two agreements, a licensing agreement and an operating agreement. Under the former, plaintiff granted defendants the right to use plaintiff's "Adoba" brand for defendants' hotel in Rapid City, South Dakota. Under the latter, plaintiff undertook to operate defendants' hotel under the "Adoba" brand. Litigation ensued after defendants unilaterally terminated both agreements in April, 2013. Zeljka Curtullo is a defendant who was added to the lawsuit later.
The motion which is the subject of this opinion involves depositions of Sacha Merali, Batool Merali, and a deposition and service of Zeljka Curtullo. Only Curtullo is a party to these proceedings, having been named as a defendant in plaintiff's amended complaint. See Docket No. 37. The following are the pertinent facts as to plaintiff's attempt to depose and serve these three persons.
A. Sacha Merali
Sacha Merali is the son of defendant Karim Merali and Batool Merali, Karim's wife. He also owns 22 percent of defendant Shiba Investments, Inc. See Docket No. 100-2 at p. 2. Shiba is a closely-held company in which only five members of the Merali family own all interests. Id.
Sacha was involved in the contacts between defendants and plaintiff and third-party defendant Henderson prior to executing the contracts at issue herein. Id. at p. 3. Sacha was copied on emails between plaintiff and defendant Merali, he was to receive 25 percent of the operating company after the parties signed the agreements (in essence becoming plaintiff's business partner), and he was present when Henderson and Karim signed the agreements and actively participated in the discussion. See Docket No. 69 at pp. 13-14, 19, 23-25.
Sacha was in charge of the renovation of defendants' hotel to meet the plaintiff's Adoba standards after the contracts were executed. See Docket Nos. 133-11; 133-31 at p. 6. As such, Sacha was given a confidentiality agreement by plaintiff at the inception of their business dealings which plaintiff expected him to sign (he never did). See Docket No. 69 at pp. 46-47. In turn, when Sacha would hire vendors to work on the Adoba conversion, he required the vendors to sign the same type of confidentiality agreement. Id. at p. 49. Plaintiff shared with Sacha detailed specifications and plans for the renovation of defendants' hotel. Id. at pp. 68-69.
When defendant Karim contacted Certified Public Accountant James Postma to be defendants' accountant and to examine defendants' financial records, Sacha was present with Karim and Mr. Postma and actively participated in the financial examination. See Docket No. 86 at p. 47, 52-53. Sacha wrote checks on the operating account of defendants' hotel. See Docket No. 133-32.
Previously, the plaintiff in this litigation brought suit against Sacha Merali in South Dakota state court. See Docket No. 133-36. In that state court action, defendants' current counsel, Mr. Courtney Clayborne, represented Sacha, and plaintiff's current counsel represented plaintiff. Id. at p. 11-12. Apparently that state court action is no longer pending, but the parties do not explain when that litigation ceased. The document filed by plaintiff in this matter is dated June 7, 2013, so the court finds that Mr. Clayborne represented Sacha in the state court litigation at least through that date.
This federal court action was begun by plaintiff on May 20, 2013, approximately one month before the documents referenced above from the state court litigation. Compare Docket No. 1 with Docket No. 133-36. Defendants served plaintiff with their initial disclosures in this litigation on December 30, 2013, seven months later. See Docket No. 133-14. As of that date, Mr. Clayborne represented that Sacha was one of only two individuals likely to have discoverable information regarding the negotiation of the agreements between the parties and the Adoba "brand." Id . Mr. Clayborne listed Sacha's address as the business address of defendant's hotel. Id . Further, Mr. Clayborne stated that Sacha should be contacted "through Counsel only." Id.
On March 14, 2014, plaintiff's counsel sent Mr. Clayborne a letter asking for deposition dates for, among others, Sacha Merali. See Docket No. 133-1. On May 2, 2014, plaintiff's counsel sent a follow-up letter, asking again for a deposition date for Sacha. See Docket No. 133-3.
A deposition of Daniel Schipman was taken by plaintiff's counsel on May 6 and 7, 2014. See Docket No. 133-11. Mr. Schipman testified that Sacha was initially a front desk employee of defendants' hotel who was paid hourly, and who later continued as an employee of defendants' hotel on a salary basis. Id.
On May 16, 2014, plaintiff's counsel again requested Mr. Clayborne to supply her with dates on which Sacha could be deposed. See Docket No. 133-4. That request was repeated on June 24, 2014. See Docket No. 133-5. Receiving no response from Mr. Clayborne, plaintiff's counsel issued a notice of deposition for Sacha on June 27, 2014, setting the date of July 10, 2014, for Sacha's deposition. See Docket No. 133-15. Plaintiff's counsel also issued a subpoena for Sacha for the same date. See Docket No. 133-16. The process server served Sacha's subpoena on defendant Karim Merali at Karim's Rapid City home. Id.
On July 8, 2014, a staff person in Mr. Clayborne's office sent an email to a staff person in plaintiff's counsel's office advising that Sacha is living in Chicago. See Docket No. 133-17. Mr. Clayborne's staff person sent a copy of the email to Mr. Clayborne as well as to plaintiff's counsel's office. Id . Mr. Clayborne's agent then advised that Sacha would return to Rapid City for his deposition if plaintiff paid his travel expenses. Id . Otherwise, Mr. Clayborne's agent informed plaintiff that Sacha's deposition would have to be taken in Chicago. Id.
In response, plaintiff's counsel noted that Mr. Clayborne had never moved to quash the deposition notice. See Docket No. 133-8. Plaintiff's counsel offered to amend Sacha's notice of deposition if Mr. Clayborne would supply plaintiff with dates that Sacha would be in Rapid City. Id.
On July 14, 2014, plaintiff's counsel re-noticed Sacha's deposition for August 15, 2014, in Rapid City. See Docket No. 133-19. On July 18, 2014, plaintiff's counsel asked Mr. Clayborne to update defendants' initial disclosures to reflect Sacha's current address, since Mr. Clayborne had represented that Sacha was now living in Chicago, Illinois. See Docket No. 133-12.
In addition to the deposition notice, plaintiff's counsel also issued a subpoena for Sacha for his deposition, also for August 15, 2014. See Docket No. 133-23. Plaintiff's counsel sent the subpoena to Mr. Clayborne and asked him to admit service of the subpoena on behalf of Sacha. Id.
On August 6, 2014, Mr. Clayborne sent plaintiff's counsel an email stating that he was "not in a position to accept" an admission of service for Sacha's subpoena because Mr. Clayborne could not "get a hold of Sacha." See Docket No. 133-7. Significantly, Mr. Clayborne did not state that he was unable to accept service of Sacha's subpoena because he no longer represented Sacha. Id . Despite stating that he could not contact Sacha, Mr. Clayborne went on to state that Mr. Clayborne had informed Sacha of the August 15 date for his deposition and that Sacha had responded that "he would try and keep it open." Id . Plaintiff's counsel also had Sacha's subpoena served on defendant Karim Merali at Karim's home in Rapid City and also served Sacha's subpoena on the front desk manager at defendants' hotel. See Docket No. 133-20.
Sacha's mother and defendant Karim's wife, Batool Merali, was deposed on August 14, 2014. See Docket No. 133-31. Although she testified that she had spoken to Sacha less than a week before her deposition, and that she and Sacha continued to work together on renovations at defendants' hotel, she claimed that she did not know Sacha's phone number, email address, his residence address, where he was working, whether he was staying at a hotel or with friends. Id . Batool testified that Sacha's permanent home address was the same home address as hers and Karim's. Id.
On August 15, plaintiff's counsel inquired via email of Mr. Clayborne at 6:47 a.m. whether Sacha was going to show up for his deposition later that same day. See Docket No. 133-28. Mr. Clayborne responded "no." Id . Then, for the first time in any written document before the court, Mr. Clayborne advised plaintiff's counsel that he did not represent Sacha "in any manner concerning this litigation." Id . Mr. Clayborne also stated that he had "not spoken with [Sacha] in any manner about his deposition." Id . This is, of course, in direct contradiction to Mr. Clayborne's earlier assurance given nine days earlier to plaintiff's counsel that he had spoken to Sacha about his August 15 deposition that that Sacha would "try to keep [the date] open." Compare Docket No. 133-7 (Courtney Clayborne's August 6, 2014, email), with Docket No. 133-28 (Courtney Clayborne's August 15, 2014, email).
Sacha did not show up for his August 15, 2014, deposition. See Docket No. 133-26. Plaintiff's counsel then issued a second subpoena for Sacha's deposition for a new date of August 28, 2014. See Docket No. 133-27. Because defendants had never updated their initial disclosures to indicate Sacha's current address, plaintiff's counsel sent the subpoena to Mr. Clayborne. See Docket No. 133-27. Sacha did not show up for his August 28 deposition either. See Docket No. 133-29. At the deposition, Mr. Clayborne indicated he believed that Sacha's relationship to defendant Shiba did not obligate Mr. Clayborne to attempt to contact Sacha or facilitate his deposition. Id.
On August 21, 2014, defendant Zeljka Curtullo, also by this point represented by Mr. Clayborne, filed her initial disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1). See Docket No. 110. Mr. Clayborne listed Sacha as a person with knowledge of the renovation of defendants' hotel and the Adoba brand in Curtullo's initial disclosures. Id. at p. 2. Mr. Clayborne listed Sacha's address as 500 Michigan Avenue in Chicago. Id . 500 Michigan Avenue is a large, commercial office building in which 53 separate businesses have offices, none of which bear the name of Sacha or his business. See Docket No. 133-22. Plaintiff also hired a private investigator who spent 24.75 hours trying to locate Sacha, to no avail. See Docket No. 133-25.
On September 11, 2014, Mr. Clayborne sent plaintiff's counsel a letter indicating that the parties might attempt to depose Sacha in Chicago if they traveled to Chicago for Zeljka Curtullo's deposition. See Docket No. 133-13. In addition to the above-described attempts to take Sacha's deposition, plaintiff's counsel also hired a private investigator whom was unable to locate Sacha or find an address for him. See Docket No. 133-22.
B. Zeljka Curtullo
Zeljka Curtullo, now a party defendant, was not named as a party when plaintiff initiated this lawsuit. See Docket No. 1. Before the parties had a Rule 26(f) planning meeting or made their initial disclosures under Rule 26, plaintiff moved to amend its complaint to add Curtullo. See Docket No. 25. That motion was granted on October 4, 2013, with no objection by the original defendants. See Docket No. 36. Plaintiff's amended complaint was filed on October 9, 2013, and alleged that Curtullo began as an employee of plaintiff, but later became Sacha's girlfriend and an employee of defendant Shiba, to which she wrongfully disclosed proprietary information belonging to plaintiff. See Docket No. 37.
On October 16, 2013, plaintiff's counsel inquired of Mr. Clayborne whether he would be representing Curtullo. See Docket No. 133-9. Mr. Clayborne orally informed plaintiff's counsel on October 24, 2013, that he did not represent Curtullo. See Docket No. 77, ¶ 5. A process server for Cook County, Illinois, returned the complaint and summons for Curtullo unserved on December 4, 2013, indicating that Curtullo had moved from the address listed on the summons and could not be located. See Docket No. 133-10.
Daniel Schipman testified on May 6-7, 2014, that Curtullo continued to be an employee of defendant Shiba as of that date, and that she worked on the renovation of the hotel and was in Rapid City at the hotel sporadically. See Docket No. 133-11. On May 23, 2014, plaintiff moved for an extension of the time allowed to serve Curtullo with the summons and amended complaint as plaintiff had not been able to find Curtullo to serve her. See Docket No. 79. The court granted the extension, giving plaintiff until September 2, 2014, to serve Curtullo. See Docket No. 88. As of June 24, 2014, Curtullo was still not served. See Docket No. 133-5.
On July 14, 2014, Curtullo was served with the summons and the amended complaint at defendants' hotel. See Docket No. 104. Mr. Clayborne informed plaintiff's counsel that Curtullo came in to see him on the morning of July 16, 2014, to hire Mr. Clayborne to represent her. See Docket No. 133-12. Mr. Clayborne informed plaintiff's counsel that he was not representing Curtullo. Id . Plaintiff's counsel asked Mr. Clayborne to advise her if he did at some point undertake representation of Curtullo. Id . Plaintiff's counsel requested that Mr. Clayborne update his initial disclosures to indicate Curtullo's current address. Id . Mr. Clayborne indicated he would provide Curtullo's current address. Id.
On August 1, 2014, Mr. Clayborne filed an answer to plaintiff's amended complaint on behalf of Curtullo. See Docket No. 102. On August 6, 2014, he sent an email to plaintiff's counsel stating now that he represented Curtullo, he wanted to request that the parties exchange their initial disclosures prior to Curtullo's deposition being taken. See Docket No. 133-7. Mr. Clayborne explained that he wanted more details about the claim against Curtullo as the amended complaint was very general. Id.
In view of the looming discovery deadline of September 2, 2014, plaintiff's counsel served Curtullo with a notice of deposition for August 8, 2014. See discussion on p. 2 of Docket No. 133-8. Curtullo did not show up for her deposition; Mr. Clayborne explained that he was not even sure she knew about the plan to take her deposition because of the short notice. Id.
On August 21, 2014, Mr. Clayborne filed initial disclosures on behalf of Curtullo, as discussed above. See Docket No. 110. In those initial disclosures, Mr. Clayborne listed Curtullo's address as the address for Clayborne's law firm. Id.
On September 11, 2014, Mr. Clayborne sent plaintiff's counsel a letter indicating that Curtullo was available to have her deposition taken in Chicago during the second or third week of October. See Docket No. 133-13. Plaintiff filed the instant motion on September 22, 2014. See Docket No. 131.
C. Batool Merali
On March 14, 2014, plaintiff's counsel wrote Mr. Clayborne asking for dates on which Batool Merali, defendant Karim's wife, could be deposed. See Docket No. 133-1. Another letter was sent on June 24, 2014, again asking for a date on which Batool could be deposed. See Docket No. 133-5.
On July 8, 2014, a staff person at Mr. Clayborne's office informed a staff person at plaintiff's counsel's office that Batool was out of the state until sometime in August, and would not be available for a deposition in July. See Docket No. 133-17. Plaintiff states that Batool's deposition was noticed for July 15, 2014; however, the only notice of deposition and subpoena supplied in the record by plaintiff is for August 14, 2014. See Docket No. 133-31. In any case, plaintiff's counsel offered to reschedule Batool's deposition if Mr. Clayborne would give an alternate date by 5:00 p.m. on July 9. See Docket No. 133-18. Batool did not show up for her deposition on July 15.
Plaintiff's counsel filed a document indicating that a private investigator confirmed Batool was physically present at her Rapid City home on July 14, 2014. See Docket No. 133-33. The private investigator also observed Batool at her Rapid City home on August 4, 2014. Id . On August 5, 2014, the investigator served Batool with a subpoena for a deposition on August 14, 2014. Id.
Batool's deposition was taken on August 14, 2014. See Docket No. 133-31. She testified that she never knew a deposition had been scheduled for her on July 15. Id . She testified that she did not know plaintiff wanted to take her deposition until Karim told her approximately one week prior to August 14. Id . Batool testified that she could not remember a particular date when Mr. Clayborne began representing her, but that she has "always considered him my attorney." Id.
During Batool's deposition, she testified that she had been in contact with Courtney Clayborne directly to set up her deposition dates. Id. at p. 2 (depo. p. 10, lines 14-16). When plaintiff's counsel asked Batool whether she had worked with Mr. Clayborne in connection with her July deposition date or only the August deposition date (a conversation which necessarily would have predated the August 14, 2014, deposition), Mr. Clayborne objected on the basis of attorney-client privilege and instructed Batool not to answer. Id . (depo. p. 10 at lines 17-22). In response to this, plaintiff's counsel asked Mr. Clayborne: "Is Batool Merali your client?" and Mr. Clayborne answered "yes." Id . (depo. p. 10 at lines 23-24).
Regarding the month of July, 2014, Batool testified that she was not supposed to be in Rapid City and was, in fact, gone from July 1 through July 13. Id . However, on July 13 her flight was canceled and she came home unexpectedly until she left Rapid City on July 18. Id . She was then gone again from July 18 through July 31. Id.
After the deposition, Mr. Clayborne sent an email to plaintiff's counsel stating that he represented Batool only for her deposition. See Docket No. 133-28. He claimed that his representation began upon the service of the subpoena on Batool [August 4, 2014], and that his representation would end upon Batool's review and signing of the transcript. Id.
D. Plaintiff's Motion
Plaintiff moves for an order from the court ...