United States District Court, E.D. Louisiana
DANIEL E. KNOWLES, III, Magistrate Judge.
Before the Court are the Motion to Compel [Doc. #117], the Motion to Compel [Doc. #123], and Defendants' Motion to Compel [Doc. #140]. The Court heard oral argument on all three motions. Having reviewed the motions, the oppositions, the numerous replies, and the case law, the Court rules as follows.
The complaint alleges as follows. This is a diversity action for breach of contract, breaches of fiduciary duties owed between partners, fraud, conversion, civil conspiracy, deceptive or unfair trade practices, and unjust enrichment that arises out of defendants' operation and management of, and relationship to, the New Orleans Inter-Continental Hotel located in downtown New Orleans.
Pan American Life Insurance Company ("PALIC") and Louisiana Acquisitions Corp. ("LAC") formed a Louisiana partnership called PANACON on June 4, 1981, for the purpose of designing, building, and operating a luxury hotel in New Orleans. PALIC owned a two-thirds interest in PANACON, and LAC owned the other one-third. The hotel opened in 1983 under the Inter-Continental brand name. LAC is a wholly-owned subsidiary of Inter-Continental Hotels Corp. ("IHC"), and the two entities operate as commonly-controlled business entities.
The PANACON partnership entered into an Operating and Management Agreement ("the Management Agreement") with IHC to manage the hotel. On September 15, 1983, LAC became manager of the hotel pursuant to an assignment from IHC. PALIC claims that over the years, LAC and IHC used the Management Agreement as a lucrative vehicle to double-charge or over-charge PANACON for services to the detriment of the partnership and PALIC, while garnering significant profits for defendants. PALIC contends that defendants failed to perform certain obligations owed under the Management Agreement, which inured to defendants' financial gain but impeded the hotel's ability to compete as a luxury hotel. PALIC also alleges that defendants surreptitiously competed against PANACON by operating other hotels in the local market. Thus, according to PALIC, LAC and IHC maximized their profits not through their one-third ownership of PANACON but rather by abusing the hotel Management Agreement - a scheme that produced profits regardless of whether the hotel itself was profitable. PALIC complains that defendants' strategy resulted in PALIC receiving no profits on its investment for years at a time.
In 2005, PALIC began to take steps to sell the underperforming hotel. PALIC alleges a plethora of acts that defendants are accused of committing in order to thwart the sale of the hotel, which again was allegedly losing money for PALIC but proving quite profitable to defendants.
Before the January 2013 sale of the hotel, PALIC became aware of some of the very conduct by defendants about which it complains in this action. According to PALIC, defendants demanded that PANACON and PALIC execute two documents, a Side-Letter Agreement and a Voluntary Termination Agreement - documents that PALIC describes as including "a purported release" of PALIC's claims for breaches of the Management Agreement and fraud - as a condition for their agreement to the pending sale of the hotel. These documents were executed in December 2012. PALIC contends that defendants insisted on the releases because defendants knew that they had been discovered in their fraudulent scheme and that PALIC was forced to agree to the releases because of economic duress in light of its eagerness to finally sell the unprofitable hotel.
PALIC then initiated this action, individually and as a partner in PANACON, against LAC and IHC in July 2013. In its 149-paragraph complaint, PALIC alleges causes of action for breach of contract (Count 1), breach of partnership and fiduciary duties and good faith obligations (Count 2), fraud (Count 3), civil conspiracy (Count 4), conversion (Count 5), unfair trade practices (Count 6), and alternatively, unjust enrichment (Count 7).
II. The Motion to Compel [Doc. #117]
A. The Parties' Contentions
1. The Motion to Compel
PALIC asks the Court to compel the deposition or Richard Solomons, the CEO of InterContinental Hotels Group, PLC ("IHG") within 60 days. Defendants refuse to produce Solomons on the ground that he is the CEO, and that PALIC seeks his deposition only to harass him. PALIC notes that Solomons was the CFO and Head of Commercial development of IHG at the time of the sale here, and the evidence reveals that he was intimately involved in the sale. PALIC also asks the Court to order the production of Solomons' ESI, which defendants have unilaterally withheld. Defendants now maintain that PALIC has waived its right to Solomons' ESI because it failed to object to defendants' arbitrary two-day deadline, imposed unilaterally when they propounded on PALIC their e-discovery protocol.
PALIC argues that high-level executives are subject to depositions when they have personal knowledge of the facts relevant to the lawsuit. Again noting that Solomons was CFO at the time of the sale here, PALIC maintains that he participated directly in the operation and management of the hotel. PALIC attaches an e-mail to its motion to demonstrate that Solomons was directly involved in the sale. PALIC contends that the Apex doctrine is inapplicable here because this is a commercial dispute in which the executives of both parties have personal knowledge. PALIC notes that defendants have noticed the depositions of its CEO and Chairman of the Board, Jose Suquet, and other high-ranking executives. And while defendants have now stated that they may produce Solomons after they depose PALIC's executives, PALIC argues that this is nothing more than a delay tactic. Citing case law and the federal rules, PALIC contends that parties are not allowed to unilaterally schedule the timing of discovery. PALIC notes that defendants must move for a protective order if they dispute the timing of discovery, and defendants have not done so here.
PALIC listed Solomons as an e-custodian in its discovery protocol, but defendants unilaterally struck him after PALIC failed to formally object. PALIC maintains that the production of Solomons' ESI will not delay discovery or trial, and there is no financial burden on defendants. PALIC asks the Court to order defendants to search Solomons' ESI in the same way that defendants asked it to search its ESI and to produce the material within 30 days.
2. The Opposition
Defendants note that they are both distant subsidiaries of IHG (of which Solomons is CEO), which is not a party to the lawsuit. They note that Solomons is not a party to the lawsuit, nor employed by a defendant; he lives in the United Kingdom; and PALIC did not serve a subpoena on him, nor did it follow Hague Convention protocol. And PALIC can not force him to come to New Orleans because he lives more than 100 miles from the Court. Defendants argue that even had PALIC served Solomons with a subpoena, this Court can not enforce it because enforcement will be directed to the court of issuance.
Citing the Apex doctrine, defendants contend that courts do not allow the deposition of highranking employees unless said employee has first-hand, non-repetitive knowledge of the facts, and the party seeking the deposition has exhausted other, less intrusive means. Solomons is not a highranking officer, however, within either defendant but of the global parent.
Defendants have agreed to secure Solomons' deposition if, at the end of all of the other depositions, it appears that he has some unique, relevant knowledge that was not attainable from others. With regard to the deposition of Suquet, defendants note that he is the CEO of a party to this lawsuit, is a main character in PALIC's complaint, and produced 656 documents of which he was the custodian and 2, 665 documents in which his name appeared. This is very different from Solomons' position with regard to the sale. Defendants note that they are producing six other highranking executives for depositions even though the executives may no longer work for them.
Defendants maintain that Solomons has limited knowledge of the facts here and authored only one e-mail. They also contend that any knowledge that he possessed can be addressed through less intrusive means, such as interrogatories or the ...