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The Apex Doctrine: An Update

May 1, 2017 Professional Services Industry Legal Blog

Reading Time: 4 minutes

This author recently addressed the issue of deposing high level corporate officers, also known as apex employees.  That blog post pointed out that, while the federal courts and some state courts have specifically adopted what is known as the “apex doctrine”, Florida’s courts have not specifically done so; our courts mostly follow the tenets of the doctrine, but it has not specifically been adopted, and some courts decline to follow that principle.

However, a recent decision out of New Jersey (which has also not specifically adopted the apex doctrine) provides further support that the doctrine should be used by Florida’s courts when examining the issue of apex employee depositions.   The decision, HD Supply WaterWorks Group, Inc. v. Director, Division of Taxation, from New Jerseys tax court, involved plaintiff companies challenging the state’s denial of their claims for a refund of their corporate business tax.  The companies argued that they were Delaware corporations that were limited partners in Florida limited partnerships and thus were not subject to New Jersey’s taxation.

In the course of the litigation, New Jersey’s Division of Taxation sought to depose plaintiff’s president, who was also the CEO of HD Supply Holdings which ultimately owned the corporations that were the plaintiffs in the case.  The basis for the CEO’s deposition, the Division of Taxation claimed, was that he was the only remaining officer of HD who had held positions with the plaintiffs and the Florida limited partnerships during the relevant tax years.  In response, the plaintiffs moved for a protective order, submitting an affidavit from the CEO stating: that, for administrative ease, he and other members of HD senior leadership relied on a team of subordinate officers, managers, and specialists to establish the structure of various entities, to oversee their day-to-day operations and activities, and to supervise their employees; that he lacked personal knowledge of the details, structure or activities of every entity within the HD corporate structure; he did not have personal knowledge of specific facts relevant to the questions at issue; and that as Chairman, CEO and President of HD, he was responsible for the entire business enterprise, and his time was in high demand, thus making it difficult for him to set aside the time necessary to prepare for and attend a deposition.

In response, the Division of Taxation noted that New Jersey (like Florida) had not adopted any definitive rule protecting high-ranking executives from deposition, and that the right to depose such executives had to be weighed against the deponent’s right to be protected from annoyance, embarrassment, oppression, or undue burden or expense.  In rendering its ruling, the Tax Court looked to the federal decisions, and the considerations made in those cases, namely: 1) whether the deponent has unique, first-hand, non-repetitive knowledge of the facts at issue in the case; and 2) whether the party seeking the deposition has exhausted other less intrusive discovery methods.  In applying those standards to the case, the Tax Court observed that the CEO’s affidavit stated that he had no personal knowledge of the facts at issue and that other officers could testify to the same facts.  Resultantly, the Tax Court issued a protective order for the CEO.

This case demonstrates that, though Florida has not officially adopted the apex doctrine, litigants in Florida courts wishing to protect their high-ranking officials from deposition should demonstrate the same facts as those in HD Supply and the federal cases dealing with this issue.  Namely, the litigants should show: the executive’s lack of personal knowledge as to the facts at issue; that other employees or officers can testify as to the same facts and issues; and, the hardship that would be created by being subjected to deposition.

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