Delaware Supreme Court Theater Ruling Addresses Party's Deposition Demeanor

It's a fight that pits Carole Shorenstein Hays, the owner of San Francisco's Curran Theatre, against San Francisco theater owner Robert Nederlander. He claims that Hays improperly competed to put on the musical Dear Evan Hansen and the play Harry Potter and the Cursed Child, in violation of an LLC agreement governing another theater company in San Francisco, Shorenstein Hays-Nederlander Theatres LLC (SHN), that the parties jointly own.

CSH Theatres L.L.C. and Nederlander of San Francisco Associates each own 50% of SHN. A dispute arose between the parties after CSH Curran LLC, an entity that Hays co-operates, bought the Curran Theatre. In 2014, CSH Theatres sued the Nederlander company in Delaware Chancery Court seeking a declaratory judgment that CSH Theatres wasn't obligated to renew SHN's lease with the Curran.

In a recent complex ruling, the Delaware Supreme Court in part reversed the trial court's findings by deciding that, under the terms of the SHN LLC agreement, Hays and her husband Jeffrey “cannot stage competitive productions (not falling within Section 7.02(b)'s [narrow] exceptions) at the Curran that violate its contractual duty [under §7.02(a)] to maximize SHN's economic success.” The supreme court went on to note: “Because Nederlander has not challenged the court's rulings in the Declaratory Judgment Action as to damages and other forms of relief, we decline to remand that action. Further, in view of our reversal of the trial court's interpretation of Section 7.02(a) in the Declaratory Judgment Action, we order remand of [Nederlander's related lawsuit] for further proceedings consistent with this Opinion.” In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 596 (2019).

In addition, the trial court awarded attorney fees and costs to Nederlander for Hays's bad-faith litigation tactics during her deposition — an award that was not disputed.

There are difficult depositions. Unproductive depositions. Ones where people cry or are rude or angry. And then, as the Delaware Supreme Court noted, there's Hays. The 70-year-old Tony award-winning theater producer's behavior during her deposition prompted the Delaware Supreme Court to issue a 20-page addendum blasting her — and her counsel from Sullivan & Cromwell — for failing to keep her in line.

“The deposition appears to have been a colossal waste of time and resources due to her behavior, which made a mockery of the entire deposition proceeding,” wrote Justice Karen Valihura for the court. “An attorney representing a client who engages in such behavior during the course of a deposition cannot simply be a spectator and do nothing. Here, Hays's counsel made no apparent effort to curb her misconduct.”

Hays was defended at the deposition by Sullivan & Cromwell partner Brian Frawley, who could not immediately be reached for comment.

Hays's deposition began at 9:38 a.m. and concluded at 7:13 p.m. — and may have been sheer hell for Dechert partner Michael Doluisio, who led the questioning. The court published pages upon pages of transcripts.

Here's a sampling:

“Q. You told me you met with your counsel to prepare for the deposition.

Sure.

How many times?

Well, see, I think of time as a continuum. So I think I met with them from the beginning to the end. And the beginning was the start, and then there was the rehearsal, and then there was the preview, and now it's what I think of as the performance. So, in my mind, I'm answering what you're asking. If you could be more specific. Do you want hours?

Yes.

Oh, I don't wear a watch. So I know the sun coming up in the morning and the moon coming up at night.”

When Hays wasn't giving short, nonresponsive answers, she gave long, non-responsive answers, plus a dollop of theatrical pretentiousness.

When asked by Doluisio if there were “other Broadway-style shows that you have had conversations with people about bringing them to the Curran” her response was all over the map.

An excerpt:

“Suddenly you have the right, the glee, the kaboom to ask me to go is that your personal email — yes, we're going to emotionally water board you, we're going to keep you down as far as you can go, as though that's like what we do under the name of the law that's what you went to law school for and that you will go home and tell your wife you had a great day — that's what we're doing?

… I'm happy to stay until the lights come up and the lights go down. Don't bother me at all. Because I've been doing this 30 years. And you know what, I'm like Judy Garland, I can keep, keep, keep, — I got another song in me, and I know when I walk throughout the community, they're thrilled of what I'm doing.”

In its decision, the Delaware Supreme Court admonished: “An attorney representing a client who engages in such behavior during the course of a deposition cannot simply be a spectator and do nothing,” the state supreme said. “Here, Hays's counsel made no apparent effort to curb her misconduct.”

In a footnote, the justices did recognize that Frawley may have felt constrained to intervene, noting that Delaware rules stipulate that “conferences between the attorney and deponent during the deposition should not occur except to 'assert a privilege against testifying or on how to comply with a court order.'”

Nonetheless, the state high court stressed that there's a point where lawyers must do something to control their clients. “Perhaps this episode can be used positively as a lesson to those training new lawyers on deposition skills,” the justices suggested.

“Lawyers have an obligation to ensure that their clients do not undermine the integrity of the deposition proceedings by engaging in bad faith litigation tactics; they cannot simply sit and passively observe as their client persists in such conduct.”

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Jenna Greene is Editor of The Litigation Daily, an ALM sibling publication of Entertainment Law & Finance, and author of the “Daily Dicta” column. She is based in the San Francisco Bay Area and can be reached at [email protected].