The NC Business Court Deals With The Apex Doctrine (Again)

Brooks Pierce
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Brooks Pierce

I know that you haven’t heard from me in a while. I’m sorry, and I feel guilty. ......I’m not ready to abdicate my position as the original NC Business Court blogger, so I’m back at it again.

My reentry point is the Business Court’s decision this month in Duke Energy Carolinas, LLC v. AG Insurance SA/NV, 2019 NCBC 73. The case concerns Duke Energy’s efforts to obtain insurance coverage for its liabilities connected to “coal combustion residuals,” more commonly known as “coal ash.”....

For readers not living in North Carolina, Duke Energy’s problems in handling its coal ash (a byproduct from the operation of coal-fired power plants) have been a huge issue here.

Thirty nine tons of coal ash from a pond maintained by Duke Energy were spilled into North Carolina’s Dan River in 2014. That resulted in the North Carolina Legislature ordering Duke Energy to close 32 ponds maintained by it containing coal ash by 2029. It also led to millions of dollars of fines for Duke Energy from the Environmental Protection Agency.

The issue in the AG Insurance case was whether the insurance companies litigating the case — and there are at least fifteen of them — were entitled to take the depositions of Duke Energy’s CEO and CFO.

C Suite officers never want to be deposed, and Duke objected to the depositions, forcing a Motion to Compel. Duke argued, per the “Apex doctrine,” that the insurers had to show that the officers had “unique or special knowledge of the facts at issue and that “other less burdensome avenues for obtaining the information sought have been exhausted.” Op. ¶21.

The Business Court has dealt with the Apex doctrine on at least three prior occasions. In each, the Business Court discussed the doctrine, but refused to adopt it. Those cases are Gay v. People’s Bank (unpublished), Next Advisor Continued, Inc. v. Lendingtree, Inc, 2016 NCBC 70, and Bradshaw v. Maiden, 2017 NCBC 30. These decisions were all delivered by Chief Judge Bledsoe.

Chief Judge Bledsoe’s basis for rejecting the Apex doctrine in AG Insurance was that Rule 26 of the Rules of Civil Procedure is sufficient guidance for resolving the dispute over the CEO and CFO depositions.

Rule 26 says that discovery can be limited and it incorporates most of the protection that the Apex doctrine provides to chief executives. It says in part that a Court may limit discovery if:

i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties’ resources, and the importance of the issues at stake in the litigation.
N.C.

N.C. R. Civ. Pro. 26(b)(1a)(emphasis added).

Chief Judge Bledsoe then assessed the involvement of the CEO and CFO in the coal ash matters at issue in the case. He wrote that: “each had significant involvement in analyzing, directing, and/or implementing Duke’s strategy and decision-making concerning coal plant closures and coal ash remediation both before and after the Dan River Spill.” Op. ¶25.

It didn’t make any difference to his analysis that lower level executives had already testified on these same subjects. He held that the views of higher level executives “may be of far greater probative value on the issue of intent and motive than the views of the lower-level executives.” Op. ¶25 (quoting Travelers Rental Co. v. Ford Motor Co., 116 F.R.D. 140, 146 (D. Mass. 1987)).

Judge Bledsoe did provide some limited protection to the high level Duke Energy deponents. The deponents will be deposed in their individual capacities, not as corporate representatives per N.C. R. Civ. Pro. 30(b)(6). The depositions were also limited to four hours, instead of the presumptive seven hours allowed under Business Court Rule 10.7(a).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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