Citigroup Inc. v. Holtsberg

915 So. 2d 1265, 2005 Fla. App. LEXIS 19973, 2005 WL 3479328
District Court of Appeal of Florida·Decided December 21, 2005·No. No. 4D05-1389·Published·Cited by 5 cases

Opinion

ON MOTION FOR REHEARING

PER CURIAM.

We grant petitioners’ motion for rehearing, withdraw our dismissal of their certio-rari petition challenging the trial court’s order denying their motion for a protective order, and issue the following written opinion.

Jack Holtsberg and Elaine Holtsberg (Plaintiffs) sued the petitioners (Defendants) over the second-hand reports of [1267] Smith Barney stock analyst Jack Grubman (Grubman) regarding the future prospects and prices of the stock of MCI WorldCom. They asserted that they lost the value of their investments in WorldCom when it went bankrupt in 2002. They contended that Grubman’s favorable statements were misleading, that he had conflicts of interest, and that his statements benefited himself as well as Defendants.

In the course of discovery, Plaintiffs have subpoenaed for deposition Sanford I. Weill (Weill), Citigroup’s former chief executive officer (CEO) and present chairman of its board, and Charles 0. Prince (Prince), Citigroup’s current CEO. Defendants moved for a protective order to prevent their depositions, arguing this was a blatant attempt to harass Defendants because, inter alia, neither individual had firsthand knowledge of the facts of the case. They argued that before Plaintiffs can depose Citigroup’s high level executives, they must show that those persons have unique or special knowledge of the facts at issue and that Plaintiffs have already exhausted less burdensome avenues of obtaining the information sought. In other words, they must satisfy the “apex” doctrine. According to Defendants, the “apex” doctrine was recognized in Florida by Department of Agriculture and Consumer Services v. Broward County, 810 So.2d 1056, 1057 (Fla. 1st DCA 2002). In that case, the first district did not use the term “apex,” but held that the department was entitled to a protective order after the challengers of a proposed rule noticed the department commissioner for deposition and the department offered the deputy commissioner as substitute. The court found that, “[i]n circumstances such as these, the agency head should not be subject to deposition, over objection, unless and until the opposing parties have exhausted other discovery and can demonstrate that the agency head is uniquely able to provide relevant information which cannot be obtained from other sources.” Id. at 1058. No affidavits from the two men sought to be deposed were attached to the motion.

In opposing the motion for a protective order in this case, Plaintiffs pointed out that the apex rule has not been expressly adopted in Florida, and that in Texas, where it was adopted, the party seeking a protective order must file the affidavit of the officials sought to be deposed, denying knowledge of the relevant facts. They also cited a Florida Bar Journal article1 for the proposition that such an affidavit must be attached to the motion for protective order in Florida. They further argued that a rigid rule like the apex doctrine contravenes Florida Rule of Civil Procedure 1.310(a) (allowing deposition of any person, including a party) and Plantation-Simon Inc. v. Bahloul, 596 So.2d 1159 (Fla. 4th DCA 1992) (holding that a tenant could notice deposition of the president of the landlord’s corporate general partner and was not limited to procedure in which landlord partnership decides which officer would testify for it).

Plaintiffs also noted that Citigroup contended it was only a holding company that did not employ Grubman and was not responsible for his actions. In order to prove Citigroup’s liability, it was necessary for Plaintiffs to show that Prince and Weill, its upper 'management, were intimately involved in Grubman’s conduct in making the alleged misleading statements and that they were the only ones who could speak of Citigroup’s intent and mo[1268] tive. Thus, the conduct and knowledge of the highest level executives were relevant in this case.

Plaintiffs further argued that it was not necessary for them to show that Prince and Weill had relevant personal knowledge; it was Defendants’ responsibility to prove, on the record, that they did not. Prior to becoming Citigroup’s CEO, Prince was the administrative officer, the chief operating officer, and then CEO of the global corporate and investment banking group. This case concerns the relationship between the investment banking group and the analysis arm of Smith Barney, headed by John Hoffmann (Hoff-mann). Plaintiffs related the allegations of an SEC complaint that Grubman sought Weill’s help in getting his children into a selective preschool run by the 92nd Street Y, which allegedly was accomplished by Grubman’s upgrading his analysis of AT & T stock from “neutral” to “buy,” which in turn resulted in significant investment banking fees accruing to Salomon Smith Barney, and Citigroup’s pledging $1 million over five years to the 92nd Street Y, a pledge which was approved by Prince and Weill. Prince was also on the compensation committee that paid Grubman $20 million at a time when Hoffmann, Grubman’s supervisor two levels removed, was being paid only $1 million.

Plaintiffs also argued that the apex doctrine was not accepted in Florida because it was arbitrary; to avoid being deposed, Weill and Prince had to show undue burden or harassment and they had shown neither. The trial court denied the motion for protective order and Defendants filed this petition for writ of certiorari.

In this court, Defendants rely on Department of Agriculture and Consumer Services and a more recent case, Horne v. School Board of Miami-Dade County, 901 So.2d 238 (Fla. 1st DCA 2005). However, both cases arose in a governmental, rather than corporate, context.

In Department of Agriculture, the first district granted certiorari relief, holding that the department was entitled to a protective order after challengers of a proposed rule noticed the commissioner of the department for deposition and the department offered instead the deputy commissioner, to whom authority for the program to which the rule pertained had been delegated. The court explained:

We agree with the department that the ALJ abused his discretion in denying the motion for protective order. In circumstances such as these, the agency head should not be subject to deposition, over objection, unless and until the opposing parties have exhausted other discovery and can demonstrate that the agency head is uniquely able to provide relevant information which cannot be obtained from other sources. To hold otherwise would, as argued by the department, subject agency heads to being deposed in virtually every rule challenge proceeding, to the detriment of the efficient operation of the agency in particular and state government as a whole.

810 So.2d at 1058.

In Home, the petitioners sought review of an order denying their motion for a protective order to prevent the respondent school board from deposing Mr. Horne, the former commissioner of education, regarding school funding decisions made when he was commissioner. The trial court denied the motion because Horne was the former commissioner. The first district held, however, that its earlier decision in Department of Agriculture applied to former as well as current government officials; to rule otherwise would discourage people from accepting positions as public servants. 901 So.2d at 240-41.

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Citigroup Inc. v. Holtsberg, 915 So. 2d 1265, 2005 Fla. App. LEXIS 19973, 2005 WL 3479328 (Fla. Ct. App. 2005).

915 So. 2d 1265 (Citigroup Inc. v. Holtsberg) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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