THE GOOD, THE BAD, AND THE UGLY:

A trial court’s $850,000 sanction against a non-party corporation for not properly educating its corporate representative pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure was recently affirmed by the Eleventh Circuit Court of Appeals and serves as a cautionary tale to corporations that testify using designated representatives.

Imperial Premium Finance, LLC v. Lincoln Nat¹l Life Ins. Co, Case No. 13-12559 (decided February 26, 2015). Under Federal Rule of Civil Procedure 30(b)(6), a party that seeks to depose a corporation must describe with reasonable particularity the matters for examination. The corporation then has to identify a corporate representative who has knowledge of the requested information.

Before trial, a non-party finance company received a subpoena to testify about certain information in a civil case, but it was also under investigation for criminal actions that were connected to the litigation. Because of this, all of the corporation’s employees invoked their Fifth Amendment right to avoid testifying. The finance company then asked the court for either a continuance of the trial to allow the investigation to finish or for permission to prepare and use an outside witness for the deposition. The Court allowed the corporation to prepare and use an outside witness. The corporate representative however was virtually useless not only in a deposition but also at trial because the representative had almost zero knowledge of the requested information.

After trial, the trial court imposed an $850,000 sanction against the corporation for not properly preparing the outside witness. The trial court found that the company acted in bad faith in not properly educating the witness for trial and that such conduct was a ploy to avoid further scrutiny of the company. On appeal, the Eleventh Circuit affirmed the sanctions order and found that the company prepared the perfect witness for trial: “one who was knowledgeable about helpful facts and dumb about harmful ones.”

The Eleventh Circuit’s Opinion is a good read for any corporation required to designate and educate a corporate representative to give testimony.