Opinion
97 Civ. 6124 (JGK)(THK), 98 Civ. 3099 (JGK)(THK).
January 17, 2000.
MEMORANDUM OPINION AND ORDER
Presently before the Court is an application by the plaintiff-sureties to compel the defendants Bank of Tokyo-Mitsubishi, Ltd. ("BTM") and Long Term Credit Bank of Japan, Ltd. ("LTCB") (collectively, "the Banks") to produce Hiroki Horita, an employee of the Marubeni Corporation ("Marubeni"), as a Rule 30(b)(6) witness. See Letter of Ian A.L. Strogatz, Esq., dated September 20, 2000 ("Strogatz Sept. 20 Ltr."). The sureties served their notice of deposition, pursuant to Federal Rule of Civil Procedure 30(b)(6), on September 15, 2000, naming Marubeni, and specifically its employee Horita, as the Banks' managing agent. See Notice of Deposition, attached as Exhibit W to Declaration of Ian A.L. Strogatz in Support of Co-Sureties' Application ("Strogatz Decl.") The primary information sought from the deponent relates to actions taken and knowledge obtained by Marubeni regarding the P-19 Project, allegedly in its capacity as the Banks' managing agent.
The Banks contend that neither Marubeni nor its employee Horita are managing agents of the Banks, and that the Banks are therefore not obligated to produce Horita as a 30(b)(6) witness. See Letter of Steven R. Schindler, Esq., dated September 26, 2000 ("Schindler Sept. 26 Ltr."), at 2. The Banks have asked the Court to enter a protective order, pursuant to Fed.R.Civ.P. 26(c), quashing the sureties' Rule 30(b)(6) deposition notice. See id., at 1. For the reasons that follow, the sureties' application is denied, and the Banks' request for a protective order is granted.
BACKGROUND
Marubeni is one of Japan's largest trading companies, and is also a client of both of the Banks. See Schindler Sept. 26 Ltr., at 4. According to the Banks, Marubeni entered into arrangements with Petrobras/Brasoil to finance a number of oil production and storage projects in Brazil, one of which was the P-19 Project at issue in this action. See id. In December of 1994, having already negotiated the structure, terms, and financing arrangements with Petrobras/Brasoil, Marubeni approached the Banks to request that they provide financing on the P-19 Project. See id. The Banks were agreeable to providing the funds on the condition that Marubeni furnish a 100% guarantee, thereby placing the ultimate risk of a loan default on Marubeni. Relying heavily on this guarantee, see Declaration of Akihiko Tomaru ("Tomaru Decl."), at ¶ 2, attached as Exhibit A to Letter of Steven R. Schindler, Esq., dated October 17, 2000 ("Schindler Oct. 17 Ltr."); Declaration of Yasushi Kubota ("Kubota Decl."), at ¶ 5, attached as Exhibit B to Schindler Oct. 17 Ltr., the Banks issued a Performance Bond in favor of Petrobras/Brasoil in the amount of US$110,532,660. See Strogatz Decl., at ¶ 4.
Apparently, Marubeni, as a trading company, was prohibited by Japanese law from engaging in banking activities, and thus could not itself issue a loan to petrobras/Brasoil. See Letter of Ian A.L. Strogatz, dated Sept. 6, 2000 ("Strogatz Sept. 6 Ltr.), at 1.
The sureties argue that the Banks were only "nominal lenders" on the P-19 Performance Bond ("P-19 Bond"), and that the Banks delegated the "actual authority" to negotiate and administer the loan to Marubeni and its "point-person on the P-19 loan, Horita." See Strogatz Sept. 6 Ltr., at 1-2. The Banks respond that they have never considered Marubeni to be their agent, and that they never authorized Marubeni to exercise judgment and discretion on their behalf. See Tomaru Decl., at ¶ 4; Kubota Decl., at ¶ 5.
DISCUSSION
I. Governing Legal Standards
Under Rule 30(b)(6) of the Federal Rules of Civil Procedure, a corporate party to litigation, through one or more of its officers, directors or managing agents, may be compelled to give testimony pursuant to a notice of deposition. The party seeking the deposition may identify a specific officer, director, or managing agent to be deposed. Alternatively, if no such identification is made, the corporate party being deposed must designate one or more officers, directors, or managing agents to testify on its behalf. See Fed.R.Civ.P. 30(b)(6). Because the testimony of such a person is binding on the corporate party, a corporate employee or agent who does not qualify as an officer, director, or managing agent is not subject to deposition by notice. See, e.g., United States v. Afram Lines (USA), Ltd., 159 F.R.D. 408, 413 (S.D.N.Y. 1994); Sugarhill Records Ltd. v. Motown Record Corp., 105 F.R.D. 166, 169 (S.D.N.Y. 1985); DeNoto v. Pennsylvania R.R. Co., 16 F.R.D. 567, 567 (S.D.N.Y. 1954). Such an employee is treated as any other non-party witness, and must be subpoenaed pursuant to Rule 45 of the Federal Rules of Civil Procedure; or, if the witness is overseas, the procedures of the Hague Convention or other applicable treaty must be utilized. See Afram Lines, 159 F.R.D. at 413; see also In re Honda American Motor Co., Inc., 168 F.R.D. 535, 540 (D.Md. 1996) (citing Afram Lines).
"The test for a managing agent is not formulaic." Boss Mfg. Co. v. Hugo Boss AG, No. 97 Civ. 8495 (SHS) (MHD), 1999 WL 20828, at *3 (S.D.N Y Jan. 13, 1999). Rather, the question of whether a person is a managing agent, and therefore subject to a notice of deposition, is answered pragmatically and on a fact-specific basis. See 8A Charles Alan Wright, Arthur R. Miller Richard L. Marcus, Federal Practice and Procedure § 2103, at 39 (2d ed. 1994); see also Afram Lines, 159 F.R.D. at 413 ("Because of the vast variety of factual circumstances to which the concept must be applied, the standard . . . remains a functional one to be determined largely on a case-by-case basis.") (quoting Founding Church of Scientology of Washington, D.C., Inc. v. Webster, 802 F.2d 1448, 1452 (D.C. Cir. 1986) (citation omitted)). "Whether a proposed deponent falls into a particular category of employees or agents is therefore less relevant than the individual's specific functions and authority. Afram Lines, 159 F.R.D. at 413.
Courts in this district have generally considered five factors in determining whether an individual is a managing agent:
1) whether the individual is invested with general powers allowing him to exercise judgment and discretion in corporate matters; 2) whether the individual can be relied upon to give testimony, at his employer's request, in response to the demands of the examining party; 3) whether any person or persons are employed by the corporate employer in positions of higher authority than the individual designated in the area regarding which the information is sought by the examination; 4) the general responsibilities of the individual respecting the matters involved in the litigation; and 5) whether the individual can be expected to identify with the interests of the corporation.Sugarhill Records, 105 F.R.D. at 170 (internal quotations and citations omitted); accord Afram Lines, 159 F.R.D. at 413; Zurich Ins. Co. v. Essex Crane Rental Corp., No. 90 Civ. 2263 (SWK) (JCF), 1991 WL 12133, at *1 (S.D.N.Y. Jan. 29, 1991); see also Boss Mfg., 1999 WL 20828, at *3 (recognizing that although the number of factors generally considered by courts ranges from three to five, courts in this district have considered the five factors listed above).
The examining party bears the burden of establishing the status of the witness. See Sugarhill Records, 105 F.R.D. at 170. Although the exact nature of this burden is not entirely clear, see Boss Mfg., 1999 WL 20828, at *4 ("[I]t is not entirely clear whether the burden [of establishing the deponent's status] is one of production or persuasion or both"); Afram Lines (suggesting that the burden may vary depending on whether the examining party has had complete discovery on the issue or whether the deponent is an employee of the opposing party), the examining party must at minimum provide "enough evidence to show that there is at least a close question whether the proposed deponent is the managing agent." Afram Lines, 159 F.R.D. at 413; accord Boss Mfg., 1999 WL 20828, at *4 (citing Afram Lines).
II. Marubeni and Horika Horita
The sureties' application presents an unusual scenario for analysis under Rule 30(b)(6). "Nearly all the published cases relating to the issue [of who can be deemed a managing agent] . . . concern whether an employee of a corporation should be designated a managing agent."Founding Church of Scientology, 802 F.2d at 1452. And, although the analysis is equally applicable to corporate entities, of the few cases, dealing with corporate entities as alleged managing agents, most address situations in which the corporate entity is in an explicit agency relationship with the noticed corporate party. See, e.g., Afram Lines, 159 F.R.D. at 413 (port agents and surveyors acting as independent contractors for noticed corporate party); see also Founding Church of Scientology, 802 F.2d at 1452 ("Only rarely have courts even had occasion to examine whether a de facto relationship with a corporation, rather than a de lure one, furnishes a basis in law for designating a managing agent.") In these more typical scenarios, the existence of an agency relationship, whether as an employee or independent contractor, is clear, and the focus of the analysis is accordingly on the scope of the agent's authority, and the nature of his role in the matters at stake in the litigation. Indeed, the five-factor test essentially assumes the existence of some form of an agency relationship, and proceeds from that point.
Based on the evidence before the Court, the Court finds that the sureties have failed to establish that there was even an agency relationship between the Banks and Marubeni, rendering the question of whether Marubeni was acting as the Banks' managing agent, as opposed to a mere subordinate agent, largely moot. The sureties have not provided direct evidence that the Banks delegated authority of any kind to Marubeni, or that Marubeni was acting on the Banks' behalf. Indeed, the sureties do not contest that Marubeni commenced financing discussions with Petrobras before the Banks were even involved with the P-19 Project.
The sureties have provided no evidence, for example, that Marubeni entered into any contractual agency relationship with the Banks, or that Marubeni was otherwise employed by or acting explicitly on behalf of the Banks. Rather, the sureties' argument rests on the disparity between the Banks' hands-off approach to the P-19 Project, and Marubeni's very active participation. The sureties stress that because the Banks relied so heavily on Marubeni's guarantee, the Banks did not directly negotiate the terms of the loan with Petrobras/Brasoil, nor did they conduct their own monitoring of the P-19 Project. See Strogatz Sept. 6 Ltr., at 1-2; Strogatz Decl., at ¶ 8. The sureties claim that Petrobras/Brasoil dealt exclusively with Marubeni, and that Marubeni was the only entity that exercised the discretion to negotiate the terms of the loan, and to monitor the progress of the P-19 Project. See Strogatz Sept. 6 Ltr., at 2. For example, the sureties have provided documentation indicating that on at least one occasion, when Petrobras/Brasoil sought to negotiate changes in the terms of the loans, it approached Marubeni and not the Banks, and that Marubeni exercised the authority to alter certain loan terms. See Letter from Director Galvano of Petrobras/Brasoil to Marubeni, dated May 16, 1997, attached as Exhibit P to Strogatz Decl. (asking that Marubeni and "the Lender" waive certain conditions of the loan and continue scheduled disbursements despite violations of the loan agreement); Letter from Tadao Manabe of Marubeni to Director Galvano of Petrobras/Brasoil, dated August 18, 1997, attached as Exhibit Q to Strogatz Decl. (informing Petrobras/Brasoil that in consideration of Galvano's letter, the loan disbursements would continue). The sureties also assert that on another occasion, a Marubeni employee attended a meeting in which the P-19 Project was discussed, and indicated that he was representing the Banks. See Affidavit of Gary A. Wilson ("Wilson Aff."), at ¶ 16, attached as Exhibit M to Strogatz Decl.
The Court notes that the sureties had measures available to them in this litigation to obtain additional facts to support their application. For example, they have had the opportunity to obtain documentary discovery from the Banks, and could have deposed officials of the Banks on issues that would have a direct bearing on the relationship between the Banks and Marubeni.
Even the request cited by the sureties sought permission of Marubeni as well as of the Banks, and the record is silent on whether Marubeni required the Banks' approval to waive certain loan conditions.
There is no question that Marubeni participated aggressively in negotiating and subsequently monitoring the P-19 Bond, and it is also uncontested that the Banks did little beyond providing the financing for the Bond. It does not follow, however, that Marubeni's actions were taken on behalf of the Banks, and can therefore be attributed to the Banks. What the sureties seem to ignore is that Marubeni, as an entity separate from the Banks, had its own, unique interest in the P-19 Project, and had a role that was independent from that of the Banks. This is illustrated quite clearly in the Master Agreement ("Agreement"), dated May 22, 1995, governing the P-19 Bond. See Master Agreement, attached as Exhibit G to Schindler Sept. 26 Ltr. Listed along with the other parties to the Agreement are BTM and LTCB, identified as the lenders, and Marubeni, identified separately as the guarantor. There is absolutely no indication in the Agreement that Marubeni was participating in the Agreement through or on behalf of the Banks. Rather, what the Agreement indicates is that there are certain rights and responsibilities held by the guarantor alone, and other rights and responsibilities that are to be shared by the guarantor and the lenders. For example, Article 5 of the Agreement requires Petrobras, as the charterer, to provide quarterly and year-end financial statements to Marubeni, the guarantor. See Agreement § 5.01. Article 5 further entitles the guarantor to request certain documents on its own initiative, see Agreement § 5.01(c), and to inspect the P-19 Project site, or "vessel," at its request. See Agreement § 5.02(b). The Agreement also vests the guarantor with authority to make discretionary decisions in certain areas. For example, no terms, covenants, or conditions of any "Operative Document" may be amended, or any attendant rights waived, without the approval of the guarantor. See Agreement § 7.07; see also, e.g., Agreement §§ 1.01 (purchase and conversion contracts for acquisition and conversion of the "vessel"); 6.08 (order of distribution of excess insurance proceeds in the event of loss) By contrast, in other areas, the approval of both the guarantor and lenders are needed. See, e.g., Agreement §§ 4.06 (merger or consolidation); 6.01 (termination of the "Charter Agreement"); 7.17 (assignment of rights). The guarantor and lenders are also treated as separate entities for other purposes, such as in the scheme created for reimbursement of expenses and indemnification. See Agreement § 7.02.
It is entirely consistent with the evidence before the Court to conclude that Marubeni was monitoring and exercising discretion with regard to the loan on its own behalf, and not on behalf of the Banks. Only the statement of the sureties' Gary Wilson suggests otherwise. Wilson states that a Marubeni employee identified himself as representing the Banks at a single meeting at which the P-19 and P-31 Projects were discussed. See Wilson Aff., at ¶ 16. The sureties have not indicated, however, what aspects of the P-19 Project were discussed, whether these kinds of representations were commonly made by Marubeni employees, or whether the Marubeni employee's participation in the meeting indicated that he had any actual authority to exercise discretion on behalf of the Banks. In short, the sureties have not provided the Court with evidence sufficient to cast doubt on the Banks' assertion that they have never considered Marubeni to be their agent, and that they never authorized Marubeni to exercise judgment and discretion on their behalf. See Tomaru Decl., at ¶ 4; Kubota Decl., at ¶ 5.
In the absence of evidence of any agency relationship between Marubeni and the Banks, it is clear that the sureties have failed to satisfy the five-factor test for determining managing agency status. Regarding the first factor, the sureties have not established that any powers or discretion Marubeni might have exercised, whatever the scope, came from the Banks, rather than from Marubeni's own status as the loan's guarantor.
As for the second factor, since Marubeni is a completely separate entity from the Banks, without any contractual obligation to act on the Banks' behalf, there is no reason to assume that the Banks can assure Marubeni's participation in a deposition for an action to which Marubeni is not a party. Indeed, both BTM and LTCB have submitted declarations asserting that they do not have the authority or ability to compel any Marubeni employee to testify in this action, whether in Japan or New York. See Tomaru Decl. at ¶ 5; Kubota Decl. at ¶ 6.
The lack of evidence establishing an agency relationship between Marubeni and the Banks also makes the third factor, whether there is anyone in a higher position at the Banks who can testify about the information sought, largely irrelevant. For example, the sureties seek information about Marubeni's activities, in its capacity as the Banks' managing agent, relating to the P-19 Project. Since there is no evidence that Marubeni was acting as the Banks' managing agent, there is no reason to believe that anyone at the Banks has such knowledge. Moreover, since there is no reason to conclude that Marubeni and Horita have the authority to speak for the Banks, any bona fide employee or agent of the Banks would be better able to testify on the Banks' behalf. It is the Banks' contention that while they have little knowledge of the activities that took place in Brazil, they are fully capable of testifying about their own involvement in the making and administration of the loan. See Schindler Sept. 26 Ltr., at 7-8.
The Banks additionally argue that where the Banks lack knowledge of the matters set forth in the sureties' deposition notice, it is because they extend beyond the Banks' involvement in this litigation, and are related instead to the relationship between Petrobras/Brasoil and Marubeni. The Court agrees. Many of the subject areas enumerated in the sureties' notice of deposition inquire into the relationship between Marubeni and Petrobras. For example, Item #1 inquires into communications between Marubeni, in its role as the Banks' managing agent, and Petrobras, regarding the P-19 Project; Item #3 inquires into all actions taken by Marubeni, in its role as the Bank's managing agent, regarding the administration of the P-19 loan; and Item #4 inquires into "all knowledge of Marubeni," in its role as the Banks' managing agent, regarding progress of and work on the P-19 Project. Given the lack of evidence that Marubeni was acting as any kind of agent of the Banks, much less a managing agent, these types of questions are clearly beyond the scope of what the Banks can and should be required to address.
The fourth and fifth factors for determining managing agent status are simply irrelevant unless an agency relationship is first established. There is no dispute that Marubeni played an important role in the P-19 Project, as required by the fourth factor. While this might certainly lead the sureties to conclude that Marubeni and Horita should be deposed in their own right, Rule 30(b)(6) requires first that these actions have been taken on the Banks' behalf if Marubeni and Horita are to be deposed through, and as managing agents of, the Banks.
Regarding the fifth factor, the sureties state that "Mr. Horita can obviously be expected to identify with the interest of the Japanese Banks, rather than with those of the sureties or of any other party, since Marubeni is the 100% guarantor of the Banks' loan." See Strogatz Oct. 12 Ltr., at 4. There is no doubt that the interests of Marubeni and the Banks were aligned in one obvious sense — as the guarantor and lender, respectively, they both were invested in the financial success of the P-19 Project. See Schindler Sept. 26 Ltr., at 8 ("Marubeni's interests with respect to the P-19 credit are aligned with the Banks' interests.") However, their interests did not coincide because Marubeni was acting on behalf of the Banks. Rather, it is clear that from the beginning, Marubeni was pursuing its own interests. Marubeni was intimately involved with the P-19 Project before the Banks were even aware of the Project. It was Marubeni that approached the Banks and solicited their assistance in furthering Marubeni's goal of acquiring financing for the Project. And, once the bond had been issued, Marubeni actively protected its interests as guarantor by monitoring the loan. Moreover, the Banks have asserted that Marubeni's relationship to Petrobras is far broader than the Banks' involvement in the P-19 loan,see Schindler Sept. 26 Ltr., at 4, 8, and the sureties have not argued otherwise. Thus, to classify Marubeni categorically as the Banks' managing agent would result in imputing actions and knowledge to the Banks that would extend far beyond the scope of the Banks' actual involvement with Petrobras.
CONCLUSION
In sum, the sureties have failed to establish that Marubeni acted as an agent, much less a managing agent, for the Banks on the P-19 loan. Although close questions in this area are indeed resolved in favor of the examining party, see Afram Lines, 159 F.R.D. at 413; Sugarhill Records, 105 F.R.D. at 171, the Court does not find this to be such a case. Moreover, the rationale behind this general rule is weakened in a case such as the one currently before the Court, where the proposed witness is not an employee of the noticed parties, and where the noticed parties could therefore be exposed to sanctions for failing to produce a witness who is beyond their control. See Afram Lines, 159 F.R.D. at 414 ("[T]he consequence of requiring depositions pursuant to notice [where the deponent is not an employee of the noticed party] is not merely the waiver of formal subpoena procedures; rather, [the noticed party] could be sanctioned for failing to produce witnesses who are in fact beyond its control.")
For the reasons stated above, the Court denies the sureties' application to compel the production of Hiroki Horita of Marubeni as a Rule 30(b)(6) witness, and grants the Banks' application for a protective order with respect to the noticed deposition, under Fed.R.Civ.P. 26(c).
SO ORDERED.