Matt Stokes – Page 9 – Robson and Robson

What Is Discovery?

July 22, 2015

After the initial stages of filing a lawsuit, the pleading stage, is complete, the parties will have an opportunity to obtain information to each other regarding factual and legal basis for their respective claims and defenses. This is known as the discovery phase of litigation.

What is the discovery phase?

During the discovery phase, each party has an opportunity to use the various discovery “tools” to obtain information regarding the other party’s claims or defenses. The most common discovery tools are:

“Rule 26” Disclosures

In federal court, the parties are required to exchange “Rule 26” disclosures with one another. These disclosures require that each party provide basic information on what discoverable information it possesses. For example, “Rule 26” disclosures require that a party identify individuals that may have knowledge regarding the facts of a case and requires parties to identify relevant documents in their possession. The purpose of the “Rule 26” disclosures is to streamline the discovery process for all parties involved.

There is no state court equivalent for “Rule 26” disclosures. Instead, parties typically utilize other discovery tools to obtain the same information.

Requests for Production of Documents and Things

A request for production of documents and things is precisely what the name implies. Such a request is made in writing to an opposing party which must respond in the time period provided under the rules. Requests for production now typically include request for electronic records, such as e-mails, text messages and information from social media.

Interrogatories

Interrogatories are written questions which are directed from one party to another. The receiving party is required to respond with written answers within the period of time provided under the rules. Typically, counsel is heavily involved in providing the responses to interrogatories and rarely yields “smoking gun” information.

Depositions

Depositions are the center piece of the discovery process and involve a real time interchange between individuals and counsel. During a deposition, counsel asks a series of questions and the deponent provides a series of answers.

Depositions typically takes place in a law firm conference room but are sometimes held at a court house or other location. The interchange between counsel and deponent is recorded verbatim by a stenographer who produces a written transcript that can be used at trial or in the context of a motion.

Because of the preparation time required to conduct a deposition or defend a client who is being deposed, a deposition is typically the most expensive discovery tool available. Moreover, stenographers charge by the page and their rates range from four to ten dollars per page depending on the speed in which the transcript is needed.

Notwithstanding the costs, a deposition is often the most effective discovery tool as it requires the deponent to provide information without the softening effect of counsel. The deposition also allows a preview of how a witness may behave at trial.

Subpoenas

A subpoena is a device used to compel information from individuals or entities that are not parties to litigation. A subpoena is used in combination with some other discovery tool. For example, you may send a subpoena to a third party in order to compel them to produce documents or appear for a deposition.

How long does the discovery phase last?

The length of the discovery phase depends primarily on the jurisdiction and venue where the case is being litigated. The discovery phase in federal court is typically much shorter than in state court. The discovery phase in federal court is typically less than one year.

The discovery phase in state court can be extremely long as judges in state court do not set deadlines for propounding discovery. Many parties use delays in discovery as a tactic to exhaust the opposing party.

Although state courts typically have long discovery phases, the Court of common pleas in Philadelphia has a sophisticated case management system that significantly reduces that time. The discovery phase of the majority of cases in Philadelphia is completed in less than eighteen months.

What will I need to disclose in discovery?

Although the specific documents and information that you will need to produce depend heavily on the particular circumstances of your case, the scope of discovery is generally quite broad. A party may obtain discovery regarding any matter, that it not privileged, which is relevant to the subject matter in the pending litigation. Moreover, even irrelevant information is subject to disclosure if the information appears reasonably calculated to lead to the discovery of “appears reasonably calculated to lead to the discovery of [admissible] evidence.”

Owner Exclusion from ADA and Title VII

June 3, 2013

A recent case from the Third Circuit, the federal appellate court covering Pennsylvania, clarifies the limitations of employment laws for owners of closely-held corporations.

Mariotti v. Mariotti Building Products, Inc., No. 11-3148, 2013 WL 1789440 (3d Cir. April 29, 2013).

Plaintiff, Robert Mariotti, was an officer, shareholder, and director of Mariotti Building Products, Inc. (MBP) which was a closely held family business started by Plaintiff’s father, Louis Mariotti. The Plaintiff served as both vice-president and secretary to the company. Plaintiff and his brothers were employed in the business pursuant to an agreement which provided for termination “only for cause.” In 1995, Plaintiff had a “spiritual awakening” which he claimed resulted in “systematic antagonism” from the company’s officers, directors, and some employees.

In early 2009, after the death of Plaintiff’s father, Eugene Mariotti, Plaintiff’s brother, derided Plaintiff and his faith. At the funeral, Plaintiff gave a eulogy, which included comments about his faith, which upset some family members. Two days later, the shareholders of MBP convened without the Plaintiff and voted unanimously to terminate his employment. On January 10, 2009, the Plaintiff received notice of his termination in a letter that explained that certain benefits would cease, including health insurance and access to company credit cards. The letter further indicated that Plaintiff would continue to receive a draw from the corporation.

After his termination, Plaintiff remained a member of MBP’s board of directors until August 2009 when the shareholders did not reelect him as a director. The Plaintiff then filed a charge of religious discrimination and hostile work environment in violation of Title VII of the Civil Rights Act of 1964 against MBP. MBP moved to dismiss the claim, arguing that the Plaintiff was not an employee under Title VII and therefore could not invoke its protections. The District Court granted the motion and Plaintiff appealed.

The Third Circuit upheld the District Court’s dismissal, holding that the Supreme Court’s test in Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003) applies to business entities that are not professional corporations. The Third Circuit, applying Clackamas, looked to the following six factors from the Equal Employment Opportunity Commission (EEOC) to determine whether Plaintiff was an employee for purposes of Title VII:

[1] Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work

[2] Whether and, if so, to what extent the organization supervises the individual’s work

[3] Whether the individual reports to someone higher in the organization

[4] Whether and, if so, to what extent the individual is able to influence the organization

[5] Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts

[6] Whether the individual shares in the profits, losses, and liabilities of the organization.

The Third Circuit concluded that the Plaintiff was not an employee for purposes of Title VII. The court noted that the analysis focused on the amount of control and the source of the individual’s authority. After reviewing the Plaintiff’s complaint, the Third Circuit found that his status as a shareholder, director, and corporate officer gave him significant control and authority at MBP. As a director and corporate officer, Plaintiff had the ability to participate in fundamental decisions of the business. In addition, the Plaintiff continued to serve on the board of directors after his termination until August 2009. The court further noted that the termination letter did not cease Plaintiff’s salary. The Third Circuit therefore concluded that the Plaintiff was not an employee for purposes of Title VII.

Take Away

Business owners do not receive all of the legal protection of employees. The Clackamas / Mariotti line makes clear that business owners do not receive the protections of the Americans with Disabilities Act (“ADA”) or Title VII. Similarly, a business owner is not entitled to collect unemployment compensation upon termination. Whether a person is a “business owner” for these purposes depends on the level of control they can exert over the business and ownership alone is not dispositive.

The business owner need not be at the mercy of a group of fellow shareholders however. There are contractual ways for an owner to protect him or herself. Shareholder agreements that require other shareholders to purchase the shares of a terminated shareholder is one such alternative. Employment agreements that incorporate the ADA and Title VII by reference may also create a breach of contract claim that is co-extensive with the statutory rights that the business owner would otherwise be ineligible.