Zhu v. Li

Background

Jiajie Zhu sought to depose Yi Yao, one of the defendants’ lawyers. Zhu alleged that he was a majority member of Teetex, a California limited liability company, but was not actively involved in its management. The opinion states that Jing Li was the managing member and Dong Chen was the chief executive officer. After Zhu tried to become a manager, the parties entered into a purchase and sale agreement based on Teetex’s reported profits. Zhu later learned that the profits were allegedly higher than represented and sued, claiming he had been defrauded into selling the company for too little.

The defendants argued that Zhu and Jing Li were not the company’s real members and that the real members were Dong Chen, Alvin Li, and Joanne Hu. They argued that Zhu therefore lacked standing, meaning he was not legally entitled to bring the case. Judge White had rejected that argument when ruling on the defendants’ motion to dismiss, but the defendants renewed it in their answer. Zhu wanted to question Yao about who the true members of Teetex were. Yao had negotiated and drafted the purchase and sale agreement, guarantees, and related documents as counsel for Jing Li and Dong Chen.

Legal standard

The court discussed the three-part test commonly used by district courts in the Ninth Circuit for deposing opposing counsel. Under that test, the party seeking the deposition must show that the information sought is relevant and not protected by attorney-client privilege or work-product protection, and that the information is crucial to preparing the case. The court also explained that this test generally concerns information about the lawyer’s representation of a client in the current litigation. It does not automatically apply when the lawyer is a fact witness with knowledge of events that occurred before the litigation.

The court further discussed an exception for information uniquely known by an opposing lawyer about an earlier, ended proceeding when that information is central to the current case. The opinion states that this exception requires the information to be peculiarly or uniquely within the lawyer’s knowledge.

Ruling

The court found that Zhu had not shown that Yao had unique knowledge about Teetex’s ownership. Zhu had not explained why Jing Li, Dong Chen, and Alvin Li lacked the same information, and he had not shown that Yao’s knowledge was anything more than ordinary knowledge available from other witnesses. The court therefore denied the motion to compel.

The court then denied the motion to compel without prejudice. At the hearing, the court learned that Zhu had not yet deposed either defendant, even though fact discovery was scheduled to close in two weeks. The court stated that testimony from those witnesses might allow Zhu to develop a record showing information uniquely known by Yao. It reminded the parties that any further motions to compel were due seven days after fact discovery closed. The order was signed by Thomas S. Hixson, United States Magistrate Judge.