The Washington State Supreme Court has agreed to hear a case that could give high-level executives an easier path than other citizens to avoid answering questions in court. Oregon-based Umpqua Bank requested that Washington's highest court take up the issue after a Spokane Valley couple's attorney asked to question the bank's CEO, its head of human resources and the home loan department manager under oath.
Umpqua's legal team argued those three individuals are too high up in the company to be dragged into the lawsuit.
In fact, the lawyers argued in court filings, requiring Umpqua CEO Cort O'Haver to testify would be something like subjecting Amazon founder Jeff Bezos to "time-consuming depositions every time an Amazon truck is in a fender-bender, because he might know something about a safety policy."
On the flip side, Spokane attorney Kevin Roberts, representing Heather Stratford and her husband, Bill Geibel, in their civil case, argues that Umpqua's request to apply what's known as the "apex doctrine" would create an unfair, class-based system with different standards for everyday people and those at the top of the corporate food chain.
"They're asking Washington to create an aristocracy, a class of people that gets treated differently simply because of the amount of money or power they have," Roberts tells the Inlander. "The irony is this bank claims to have a priority on people and community at the same time they're acting like an 800-pound gorilla in terms of turning lawyers loose on customers that dared to question them."
While many states do apply the apex doctrine when deciding whether an executive truly needs to be dragged into a deposition, Washington doesn't use this standard, Roberts says.
Now that the question is before the Supreme Court, citizens could learn this year whether Washington will stick with its current system or give special status allowing certain people to avoid depositions.
THE CASE
The case stems from a home loan that small-business owners Stratford and Geibel sought in late 2016 to build their Spokane Valley home. They came to Umpqua with a builder in mind, but then-loan officer Bryan Jarrett told them that they should instead use a builder he knew to get a better deal, Stratford says.
Stratford asked how many projects that builder was doing with the bank, and she says Jarrett told her he had eight to 10 projects, and they were all on time and on budget.
"Every question we asked, he had the perfect answer, and they were all lies," Stratford says.
Things went horribly wrong with their build. Stratford says all their doors and windows were framed wrong, and they say they later learned the builder had pocketed the first draw of money from the loan rather than putting it toward their construction project. Left with a house "that should be torn down," Stratford says, they fired the builder, sued him and ultimately won a judgment.
"We had to say, 'Are we going to declare bankruptcy ... or are we going to fight through this?'" Stratford says. "We made the decision to fight."
But they're unlikely to collect that judgment, she says, because the builder had issues with other projects, too.
During that lawsuit, the couple learned more about their loan officer, Jarrett, including that state investigators had determined he'd forged insurance applications before he worked at Umpqua. The Washington state Office of the Insurance Commissioner investigated Jarrett in 2012, and by 2014 he admitted to forging several applications for which he received commissions from Farmers Insurance Group (the commissions were later reversed). Jarrett was hired by Umpqua in 2015.
As the couple hired another contractor and picked up their own tools to finish their home over the next few years, they reached out to Umpqua and modified their loan multiple times as the project stretched on. Later, they wanted to know, why had the bank hired someone with a history of fraud? And would the bank agree to mediation to make them whole?
"All we wanted for Umpqua to do is help us stay in our house that we had to finish ourselves. The cost doubled from what we originally had taken," Stratford says. "Why don't you just own the fact you hired wrong, clean up your mess, put new policies in place and be a good bank? That's what we're asking for, which I think is reasonable."
Umpqua did not respond to the mediation request. The couple sued in May 2021 and then offered to settle multiple times, but without a response, the lawsuit moved forward in Spokane County Superior Court. (Jarrett started working at Numerica Credit Union in 2017, according to a Spokesman-Review article. Jarrett's license to originate mortgage loans was revoked in Washington on June 4, 2021, according to a filing from the state Department of Financial Institutions.)
During discovery, Roberts requested Zoom depositions with Umpqua CEO O'Haver, Chief People Officer (human resources head) Sheri Burns, and Kevin Skinner, the head of home lending. But Umpqua sought a protective order to prevent those legal interviews, claiming none of the three high-level executives had any direct knowledge of the situation, and therefore shouldn't have to face the burden of being interviewed virtually.
"When our lawsuit is over human resources, how in the world can we not be able to ask the human resources director about it?" Roberts asks. "How can we not ask the home mortgage guy about what qualifies someone? That really makes little sense."
The judge sided with Roberts, saying the three could be deposed. Umpqua then directly asked the state Supreme Court to take up the case and recognize the "apex doctrine."
APEX VERSUS AVERAGE JOE
In Washington, people who are ordered to sit for a deposition can ask for a protective order from the court. They have to show why they shouldn't be interviewed, whether that's because they don't have direct knowledge of the situation or it would cause them undue burden. High-level executives can make the same request.
But after the court denied their request, Umpqua's lawyers argued that the apex doctrine, regularly used in federal courts, should be applied here.
Roberts says the doctrine originally prevented high-level government officials from harassing lawsuits that could force them to spend all their time in court. Instead, lower level employees should be deposed first or instead.
Rather than the CEO showing why they shouldn't be interviewed, the plaintiff must make an argument why they should be, which at times means showing their hand by sharing questions that a specific executive would be able to answer, Roberts says. The burden is flipped from what a single mom or small-business owner would have to do to prevent a deposition, and gives the executives a preview of what they'll be asked, while others don't get that, he says.
In their request for the state Supreme Court to hear the case, Umpqua's lawyers argued the court "should take this opportunity to bring Washington law into alignment with other jurisdictions, while also harmonizing it internally, by explicitly adopting the Apex Doctrine — which balances parties' need for discovery against the unique vulnerability of high-level executive officers."
Roberts, meanwhile, argues it's a great chance for the court to maintain the system that treats all people the same.
"It's really an opportunity I think for the Supreme Court to send a message that, in Washington, our courts don't have different standards for citizens and corporations," Roberts says.
Georgia's Supreme Court ruled in June that courts could not apply the apex doctrine, which puts a "thumb on the scale" for executives from companies such as GM, Coca-Cola, Delta Airlines and the United Parcel Service, Reuters reports.
When the apex doctrine is applied, judges consider "the corporate official's rank and responsibilities; her personal knowledge of facts relevant to the litigation; the extent to which those facts can be obtained in discovery; and the possibility of obtaining the information from a different source," Reuters reports, noting several other states have also refused to adopt the doctrine, including Colorado, New York, Connecticut and North Carolina.
In response to requests for comment, Umpqua stated, "We do not comment on cases in active litigation."
Stratford, meanwhile, says she and her husband are appalled that the bank may have spent more on legal fees than the couple even asked for in settlement pitches. It feels like a David and Goliath situation, she says.
"I have about seven employees, and my husband has a company of 20. He's as busy as a CEO of a major bank. I'll tell ya, he's probably even more busy," Stratford says. "Why are your people exempt? Because they have money? It's a double standard." ♦
