Diamond Post
 Professional Negligence Newsletter
Luanne Runge, team leader, along with fellow shareholders, Howard Boyd and Stuart Mauney, routinely represent professionals in litigation and other matters relating to the rendition of professional services, with the assistance of associates Paul Greene and Matt Whitehead. The team has expertise in defending malpractice actions on behalf of accountants, attorneys, dentists, hospice, hospitals, nurses, physicians, insurance and real estate professionals. Additionally, they have substantial experience advising and representing long term care providers, including nursing homes, assisted living facilities, and continuing care retirement communities in matters related to minimizing liability and avoiding professional malpractice actions. Further, they advise and counsel professionals on matters outside of litigation, including alternative dispute resolution, and administrative and regulatory matters.
We hope you find the information in this newsletter helpful. If you have any questions or would like additional information, please contact any of our Team members.
Assignability of Professional Negligence Claims
The South Carolina Court of Appeals recently issued a significant decision regarding the assignability of professional negligence claims. Fowler v. Hunter, 380 S.C. 121, 668 S.E.2d 803 (Ct. App. 2008). Following a growing trend permitting assignments of certain professional liability claims, the Court held that assignments of such claims should be permitted to promote reasonable settlements, so long as there is no collusion between the settling parties.
 In Fowler, the plaintiffs were involved in an automobile accident with the defendant driver. One of the insurance policies potentially providing coverage was a commercial umbrella policy procured through Insurance Associates, Inc. It was later discovered that due to an inadvertent computer error by Insurance Associates, however, the umbrella policy did not provide automobile liability coverage. As part of a settlement, the defendants assigned their professional negligence claim against Insurance Associates to the plaintiffs. The plaintiffs signed a covenant not to execute against the defendants, and they agreed in return to cooperate in the prosecution of the professional negligence claim. Under the terms of the agreement, any recovery on the professional negligence claim was to be split equally between the plaintiffs and the defendants' insurer.
The circuit court granted Insurance Associates summary judgment on the ground that no damages resulting from its negligence could be proven by the plaintiffs, standing in the shoes of the defendants, because the defendants were insulated from execution of any judgment. On appeal, the South Carolina Court of Appeals reversed the trial court, despite acknowledging that the trial court's analysis was "technically correct." The Court was swayed by the rationale of the majority of courts that permit such assignments of professional negligence claims and held that this assignment was permissible in an effort to promote reasonable settlements and help injured parties. In holding such assignments permissible, the Court emphasized that there was no evidence of collusion between the settling parties. "In light of our State's willingness to place the interests of the injured party above such a technical application of the law, we believe it was inappropriate for the claim to be dismissed at the summary judgment stage."
Now that the door of assignability is open in South Carolina, attempts to assign professional negligence claims will likely grow. Despite growing trends permitting assignability, it is important to keep a sharp eye out for collusion as the courts will not likely uphold assignability under such circumstances.
Fair Housing Act Claims Continue against LTC Providers
 Consistent with the national trend, South Carolina long-term care facilities are being sued for violations of the Fair Housing Act. In Estate of Blanche Bell v. Episcopal Church Home d/b/a Bishop Gadsden Retirement Community No: 2:05-1953 (D.S.C.), Bell's estate brought a disability discrimination action under the Fair Housing Act and Americans with Disabilities Act against a Continuing Care Retirement Community. While residing in the CCRC's independent living unit, the resident's condition declined and she began using a motorized cart. She also began needing assistance transferring to and from the cart. The complaint alleged that the CCRC refused to reasonably accommodate the resident's needs by: 1) requiring her to transfer to its skilled nursing facility or leave the CCRC; and 2) having policies which barred the use of personal assistants. Following the CCRC's denial of these allegations, the parties entered into a consent order pursuant to which the CCRC agreed to enact a policy governing transfer between levels of care, rules regarding the use of motorized devices and allowing the use of personal attendants under certain conditions.
Combatting the Apex Deposition
Plaintiff's counsel are requesting to depose a corporate defendant's highest-ranking officer (or "apex" officer) with increasing frequency. These deposition notices are often seen in the health care context where hospitals and long-term care facilities are defendants. Plaintiffs typically have three goals in mind when noticing an apex deposition: 1) establish lack of familiarity of the apex officer with day to day operations; 2) elicit testimony showing primary concern with the financial success of the corporation to support plaintiff's theory of "profits over people in cases involving personal injury or death; and 3) increase pressure on the corporation to settle the case. It is also used in efforts to "pierce the corporate veil" and establish liability of parent companies for acts of subsidiaries.
 As we know, modern discovery rules are liberal, and Rule 30(a)(1) allows the deposition of "any" person. High-level executives are not immune from discovery, including Sam Walton who was deposed in a slip-and-fall case against Wal-mart. See Wal-mart Stores, Inc. v. Street, 754 S.W.2d 153 (Tex. 1988). Further, the fact that the witness has a busy schedule is not a basis for foreclosing appropriate discovery. See General Star Indemnity Co. v. Platinum Indemnity Co., 210 F.R.D. 80 (S.D.N.Y. 2002). However, courts have recognized that it may be appropriate to establish limits on apex depositions to ensure that the goal of the deposition complies with the Rule 26 mandate of uncovering information reasonably calculated to lead to the discovery of relevant evidence. Rule 26 motions to limit or exclude this discovery are often successful.
Courts can limit discovery that is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome or expensive. Courts can also limit discovery where the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving those issues. Fed. R. Civ. P. 26(b)(2)(C)(i) & (iii). In addition, courts can limit discovery to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, and the likelihood of harassment and business disruption are factors to consider in deciding whether to allow discovery of corporate executives. See Six West Retail Acquisition, Inc. v. Sony Theatre Mgmt. Corp., 203 F.R.D. 98, 102 (S.D.N.Y. 2001). Courts acknowledge both explicitly and implicitly that an apex deposition is different than a non-executive deposition and can be oppressive, inconvenient and burdensome to the defendant, and that courts have the discretion to restrict depositions of high-ranking corporate executives. See Baine v. General Motors Corp., 141 F.R.D. 332, 334-35 (M.D. Ala. 1991); Salter v. Upjohn Corp. 593 F.2d 649 (5th Cir. 1979). In a case involving an alleged defect in Chrysler minivans, the court forbade the immediate deposition of Lee Iacocca because "he is a singularly unique and important individual who can be easily subjected to unwarranted harassment and abuse. He has a right to be protected, and the courts have a duty to recognize his vulnerability." Mulvey v. Chrysler Corp., 106 F.R.D. 364, 366 (D.R.I. 1985).
Before a defendant is required to produce its apex officer for deposition, a plaintiff must make "some showing beyond mere relevance." In re Alcatel USA, Inc., 11 S.W.3d 173, 179 (Tex. 2000); see also Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992). Specifically, courts have held that a plaintiff must show the would-be deponent has some "unique or superior knowledge" which is not otherwise available through another witness or other less intrusive discovery. See Crown Central Petroleum Corp. v. Garcia, 904 S.W.2d 125, 128 (Tex. 1995); Liberty Mut. Ins. Co. v. Superior Court, 13 Cal. Rptr.2d 363 (Ct. App. 1992); General Star Indemnity Co. v. Platinum Idemnity Co., 210 F.R.D. 80, 83 (S.D.N.Y. 2002) ("A court will often deny a request to depose a high ranking corporate official when lower ranking executives have access to the same information.") It is not enough to show the officer has "some knowledge of discoverable information." In re Alcatel USA, Inc., 11 S.W.3d 173, 179 (Tex. 2000).
The "unique or superior knowledge" test creates an opportunity for the defendant to argue that deposing the apex officer is not necessary since the information sought is obtainable from a more convenient, less burdensome and less expensive source. While courts have discussed shifting the burden to the plaintiff-requiring the plaintiff to demonstrate the apex officer has unique or superior knowledge-the defendant should not wait for the court to adopt this approach but rather, be proactive. One accepted method is to present affidavits from apex officials stating they have no unique or superior knowledge. See General Star Indemnity Co. v. Platinum Idemnity Co., 210 F.R.D. 80, 83 (S.D.N.Y. 2002).
Additionally, the defendant will likely have to offer a witness or witnesses with the knowledge the plaintiff ostensibly seeks from the apex officer. By doing so, defense counsel can force the plaintiff to jump through the appropriate hoops before heading straight to the apex officer. Further, instead of an apex deposition pursuant to Rule 30(a)(1), courts have acknowledged that "[t]he preferred approach for deposing a corporation is the use of Rule 30(b)(6) which requires the corporation to obtain the information." Folwell v. Hernandez, 210 F.R.D. 169, 173 (M.D.N.C. 2002). Significantly, producing witnesses pursuant to a Rule 30(b)(6) notice gives the defendant more control over the deposition, given its requirement that areas of examination must be specified in the notice. While Rule 30(b)(6) specifically does not preclude other depositions, Rule 30(b)(6) is a useful tool in fighting apex depositions since it can be proposed as an alternative and widely-accepted discovery method - which is also less intrusive and less prone to abuse and harassment than the apex deposition.
Given the desirability of keeping high-ranking executives out of the discovery process, and of foreclosing any opportunity plaintiffs might have to increase the value of a case for reasons unrelated to its merits, devoting time and resources to resisting apex depositions is certainly worth the effort. |
