Zhu v. Li

• Court: District Court, N.D. California
• Decided: September 1, 2021
• Docket: 4:19-cv-02534
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 JIAJIE ZHU, Case No. 19-cv-02534-JSW (TSH)

8 Plaintiff, DISCOVERY ORDER 9 v. Re: Dkt. Nos. 79, 80 10 JING LI, et al., 11 Defendants.

12 13 Plaintiff Jiajie Zhu seeks to depose Yi Yao, one of Defendants’ counsel of record. In this 14 lawsuit, Plaintiff alleges that he was a majority member of a California LLC called Teetex. He 15 was not, however, actively involved in the management of the company. Rather, Defendant Jing 16 Li was the managing member, and her husband, Defendant Dong Chen, was its CEO. When 17 Plaintiff graduated from business school and attempted to become a manager, a dispute arose with 18 Li and Chen, who did not want to give up control. To resolve the dispute, the parties entered into 19 a purchase and sale agreement (“PSA”) based on a multiple of Teetex’s reported profits. Several 20 years later Plaintiff learned that Teetex’s profits were actually much higher than as represented, 21 and he filed this lawsuit, claiming he had been defrauded into selling the company for too little. 22 Defendants have taken the position that Zhu and Li (the parties to the PSA) were not, in 23 fact, the real members of Teetex, and that the real members were Dong Chen, Alvin Li (Zhu’s 24 father in law), and Joanne Hu. Based on this, Defendants argue that Zhu has no standing. ECF 25 No. 17. Judge White rejected this argument in ruling on Defendants’ motion to dismiss, ECF No. 26 28, but they renewed this defense in their answer. ECF No. 29. Zhu now seeks to depose Yao 27 concerning who the true members of Teetex were. 1 negotiated and drafted the PSA, guarantees and related documents as counsel for Jing Li and 2 Chen, opposite Christopher Lee, who was counsel for Plaintiff. 3 The leading case concerning taking the deposition of an opposing counsel appears to be 4 Shelton v. American Motors Corp., 805 F.2d 1323 (8th Cir. 1986). In that case, the Eighth Circuit 5 observed that “[i]n recent years, the boundaries of discovery have steadily expanded, and it 6 appears that the practice of taking the deposition of opposing counsel has become an increasingly 7 popular vehicle of discovery.” Id. at 1327. “To be sure, the Federal Rules of Civil Procedure do 8 not specifically prohibit the taking of opposing counsel’s deposition.” Id. “We view the 9 increasing practice of taking opposing counsel’s deposition as a negative development in the area 10 of litigation, and one that should be employed only in limited circumstances.” Id. 11 “Undoubtedly, counsel’s task in preparing for trial would be much easier if he could 12 dispense with interrogatories, document requests, and depositions of lay persons, and simply 13 depose opposing counsel in an attempt to identify the information that opposing counsel has 14 decided is relevant and important to his legal theories and strategy.” Id. “The practice of forcing 15 trial counsel to testify as a witness, however, has long been discouraged, and recognized as 16 disrupting the adversarial nature of our judicial system.” Id. (citation omitted). “Taking the 17 deposition of opposing counsel not only disrupts the adversarial system and lowers the standards 18 of the profession, but it also adds to the already burdensome time and costs of litigation. It is not 19 hard to imagine additional pretrial delays to resolve work-product and attorney-client objections, 20 as well as delays to resolve collateral issues raised by the attorney’s testimony.” Id. “Finally, the 21 practice of deposing opposing counsel detracts from the quality of client representation. Counsel 22 should be free to devote his or her time and efforts to preparing the client’s case without fear of 23 being interrogated by his or her opponent. Moreover, the ‘chilling effect’ that such practice will 24 have on the truthful communications from the client to the attorney is obvious.” Id. “We do not hold that opposing trial counsel is absolutely immune from being deposed. 25 We recognize that circumstances may arise in which the court should order the taking of opposing 26 counsel's deposition.” Id. “But those circumstances should be limited to where the party seeking 27 1 depose opposing counsel; (2) the information sought is relevant and nonprivileged; and (3) the 2 information is crucial to the preparation of the case.” Id. (citation omitted). 3 “Although the Ninth Circuit has not set forth a standard for analyzing whether to permit 4 the deposition of counsel in a pending litigation, district courts within the Ninth Circuit have 5 routinely utilized the three-part test set forth in the Eight Circuit’s decision in” Shelton. Torrey 6 Pines Logic, Inc. v. Gunwerks, LLC, 2020 U.S. Dist. LEXIS 201948, *4 (S.D. Cal. Oct. 29, 2020). 7 “But district courts have clarified that the Shelton analysis applies only where the discovery 8 sought concerns matters relating to counsel’s representation of a litigant in the current litigation. It 9 does not apply to discovery of facts known to counsel as a percipient witness relating to matters 10 that preceded the litigation.” Id. (simplified). And, indeed, the Eighth Circuit has adopted that 11 limitation as well. See Pamida, Inc. v. E.S. Originals, Inc., 281 F.3d 726, 730 (8th Cir. 2002) 12 (“Shelton was not intended to provide heightened protection to attorneys who represented a client 13 in a completed case and then also happened to represent that same client in a pending case where 14 the information known only by the attorneys regarding the prior concluded case was crucial.”). 15 But this limitation itself has a limitation: “Pamida permits deposing an opposing counsel 16 if a party ‘seeks relevant information uniquely known by [the] attorneys about prior terminated 17 litigation, the substance of which is central to the pending case.’” Smith-Bunge v. Wis. Cent., Ltd., 18 946 F.3d 420, 423 (8th Cir. 2019) (quoting Pamida, 281 F.3d at 731) (emphasis added); see also 19 id. (“Neither piece of information is peculiarly within counsel’s knowledge . . . . Pamida does not 20 apply here. [¶] Instead, Shelton applies.”); see also Golden v. Stein, 2020 WL 1487306, *8 (S.D. 21 Iowa Mar. 4, 2020) (“Pamida does not apply unless the information sought is peculiarly within 22 counsel’s knowledge . . .”). 23 Plaintiff is clear in his letter brief and was even clearer during oral argument that the sole 24 piece of information he wants to depose Yao about is who the true owners of Teetex were. However, Plaintiff has made no showing that Yao has peculiar or unique knowledge about that 25 issue. Specifically, Plaintiff has not shown why Jing Li, Dong Chen and Alvin Li lack this 26 information. Plaintiff has not shown that Yao’s knowledge on that subject is anything other than 27 1 Pamida’s requirement that he seek information that is uniquely known by opposing counsel. On 2 the current record, this motion to compel must therefore be denied. 3 Even though fact discovery closes in two weeks, at the hearing the Court learned to its 4 || great surprise that Plaintiff has not yet deposed either Defendant. Thus, depending on what those 5 witnesses say, it might be possible for Plaintiff to develop a factual record concerning knowledge 6 || uniquely known by Yao that he has not yet developed. The Court therefore denies this motion to 7 || compel without prejudice. The Court reminds the parties that any further motions to compel are 8 due seven days after the close of fact discovery. Civil Local Rule 37-3. 9 IT IS SO ORDERED. 10 11 Dated: September 1, 2021 2 TAA. | □ THOMAS S. HIXSON 13 United States Magistrate Judge

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