News Corp and NDS counsel must have known it was going to get ugly, after NDS chief Abe Peled flew out of the country the night before he was due to testify. But did they really have any idea just how upset Judge David Carter was going to get?
On Thursday night May 1 2008, Abe Peled finished being deposed by EchoStar counsel Chad Hogan at about 9pm, ahead of his appearance as an NDS witness the next morning. But some time during his deposition he had decided he would not be testifying before the jury. From the courthouse that night he went straight to the airport and took a Red Eye flight to London. He was out of the country, beyond the reach of a subpoena, before EchoStar counsel knew he would not be appearing the next day.
It appears to have been a tactical decision—in the course of EchoStar’s cross-examination of NDS Operational Security chief Reuven Hasak on the Thursday, Judge Carter had agreed to substantially increasing the scope of questions which Echostar could ask. Judge David Carter had been pushing for weeks for Rupert Murdoch and NDS chief Abe Peled to testify in the 2008 EchoStar case. In the end he had been prepared to accept that only Peled would be called by the NDS defence. But now Peled was a no-show.
What unfolded next reads like a nightmare example of what happens when you get a judge offside—and how impossible it is to control the process from there, as Judge Carter returned to the issue again and again and again through the Friday, as it looked worse and worse for NDS.
Eventually by 6pm, as the court wound up for the week, Judge Carter was ready to lay down the law: Peled would be at the courthouse in Los Angeles on the following Tuesday, or he would subpoena him. In fact he would send EchoStar counsel to do it. “That means you’re probably going to London,” he told Hagan. “You’re probably going to serve him if it requires service in London.”
It was a face-off that Carter won, though NDS lawyers argued for restrictions on what Peled could be asked when he returned to the court the following week.
It’s a long transcript because Carter gnawed at the problem all day, culminating in his demands at 6pm. It’s hard not to feel sympathy for NDS counsel Darren Snyder–some of the exchanges must have been excruciating. The sequence on the Friday May 2 began moments after the court resumed. It begins with a description of what he had been asked during the deposition:
THE COURT: Counsel, can we take a recess for just a minute? Ladies and gentlemen, I am going to have you step back in the jury room. I promise you this has nothing to do with you, Mr. Kahn.
(Jury not present.)
THE COURT: Counsel, I want to discuss this issue that came up with Dr. Peled. I was told informally when I came into court that Dr. Peled had returned to England. I would like to hear what’s occurring concerning Dr. Peled between the two of you because he was supposed to be a witness today. It was clear that if I have the opportunity for a live witness for cross-examination that was the Court’s preference. I have been working very hard to ensure that this jury had live testimony.
So is Dr. Peled going to testify for NDS or not?
MR. SNYDER: No, Your Honor.
THE COURT: I certainly can’t force Dr. Peled or Henri Kudelski or anybody else to come to court. I understand it’s not in my jurisdiction.
Who was originally going to call Dr. Peled?
MR. SNYDER: We were, Your Honor.
THE COURT: There was a statement made to the Court by EchoStar — and I want to make certain this is memorialized. You seemed concerned this morning that Dr. Peled wasn’t here, and you said you were going to play a portion of his deposition, and you want an adverse inference — have you ever subpoenaed Dr. Peled?
MR. WELCH: No.
THE COURT: Have you ever made an effort to subpoena Dr. Peled?
MR. WELCH: No.
THE COURT: What do you believe you need from Dr. Peled’s testimony? What depositional testimony are you depending upon that’s of value to you?
MR. WELCH: Your Honor, he discusses various topics. First, he describes the hierarchy related to his corporation and the relationship between HarperCollins, NDS Group, and NDS Americas.
THE COURT: News Corp., HarperCollins, but he is the president of NDS.
MR. WELCH: He is also on the News Corp. Executive Management Committee, and during his deposition he discussed that he reported to Greg Clark of News Corporation. He was the chief technical officer. He reported to Mr. Clark between ’95 and ’98. From that point forward, he reported to a gentleman by the name of Chase Carey from ’98 until the end of 2001. Mr. Carey was in charge of satellite operations for News Corporation. Mr. Murdoch was also on the News Corp. Executive Committee, as well as Anthea Disney.
THE COURT: Do you have this in depositional form?
MR. WELCH: Yes, sir, we do, and I assume they have no reason to object to us reading in the deposition or portions of it.
THE COURT: Was this the deposition taken during the evening hours?
MR. WELCH: Yes, sir. It was the deposition Wednesday evening that we sat here between 5:30 and possibly 9:00.
MR. SNYDER: We would be willing to stipulate to those facts. There is no controversy as to that.
MR. WELCH: I didn’t complete all the facts in the deposition.
THE COURT: My preference is always going to be if I can get witnesses to court in front of the jury — to maintain a very consistent pattern.
MR. WELCH: Would Your Honor like me to proceed with the additional areas?
THE COURT: Please.
MR. WELCH: He also would testify about conversations he had — he could put more flesh on the bones than Mr. Hassak did as it relates to the conversations he had with Oliver Koemmerling. He had three conversations that he testified about. One was in July 2001.
THE COURT: Dr. Peled had conversations with —
MR. WELCH: Oliver Koemmerling.
THE COURT: What did he say concerning Oliver Koemmerling? I want specificity.
MR. WELCH: Oliver Koemmerling was retained by NDS to design and assist in the development of the Haifa lab.
That was done in ’96. Mr. Koemmerling was a consultant or employee of NDS for the period ’96 through 2000 at which point NDS entered into a joint venture with Mr. Koemmerling called ADSR. Mr. Koemmerling was retained by NDS because of his knowledge related to attacking Smart Cards.
THE COURT: Did Dr. Peled state in the deposition that he had knowledge of why Koemmerling was retained?
MR. WELCH: Yes, sir.
THE COURT: And that Koemmerling was in fact retained by NDS?
MR. WELCH: Yes, sir.
THE COURT: And that he had knowledge from Hassak or from whom?
MR. WELCH: He was — I don’t know the exact — if he got the knowledge from Hassak or if he had it independently, the deposition would flush that out. As I understand the testimony, he knew that Mr. Koemmerling had been arrested or he was investigated by NDS, and the reason that they retained him is he was one of the foremost experts as it relates to attacking Smart Cards.
At that point, he was instrumental in assisting them in developing the Haifa lab, and that includes the engineers that they were hiring.
THE COURT: So in other words, the end result of this — I don’t mean to cut you off. You can go on in just a moment. My concern about different corporate entities segmenting themselves or choosing to call lower-level managerial people or engineers who don’t know where directions came from — from either EchoStar or NDS — are somewhat negating when we get people of Mr. Ergen’s stature, Mr. Kudelski’s stature, and Dr. Peled’s stature, or Rupert Murdoch’s stature. How high this extends or doesn’t extend to the corporate entities makes a tremendous difference in terms of potential damages.
MR. WELCH: What Mr. Peled testified about was that he basically set up this lab and that he essentially turned a blind eye to it. They only had six to seven employees. The only names he can remember were Mordinson and Skhedy. He claims that he never saw Exhibit 98 until after the litigation — the motion to intervene was filed in September 2002, and he never wanted to see the results of it. But when I showed him Exhibit 98 in the deposition and Section 4 that talks about a DISH Network hack in practice that he would have liked to have known what those contents were.
Then going back to the Oliver Koemmerling issue, Your Honor, in July 2001, Oliver Koemmerling reported to Dr. Peled —
THE COURT: Reported personally?
MR. WELCH: Yes. They were at a dinner. This was while they were in the joint venture with ADSR —
THE COURT: Koemmerling reported to Dr. Peled.
That sounds like they have a weekly meeting, and then you say no, they were at a dinner.
MR. WELCH: They were at a dinner discussing the ADSR business. One of things that ADSR was involved in was reverse engineering chips. ADSR was the lab that was basically run by Mr. Koemmerling. During this dinner meeting when they were discussing business, Mr. Koemmerling told Dr. Peled that Chris Tarnovsky admitted that he was involved in piracy of the Canal+ system, as well as posting of the Canal+ codes on the Internet.
In addition, he testified about an August 2001 telephone conference —
THE COURT: Just a minute. I don’t know what I am going to do in relation to this motion. There is no need to make a statement on behalf of NDS. If Mr. Peled hasn’t left the ground yet, you might make a call and just ask him —
MR. SNYDER: Mr. Peled has left, Your Honor.
MR. WELCH: In August 2001, Mr. Ray Adams contacted Dr. Peled and told him that it was urgent that Dr. Peled have a telephone conversation with Mr. Oliver Koemmerling. This conversation lasted approximately five minutes. Dr. Peled contacted Mr. Koemmerling where Mr. Koemmerling again reiterated that Chris Tarnovsky admitted the posting and the hacking relating to —
THE COURT: Christopher Tarnovsky — I am going to say that again, so I am sure I understand this because I am not privy to the deposition. Ray Adams contacts Dr. Peled and urges him to contact —
MR. WELCH: Oliver Koemmerling.
THE COURT: And Koemmerling tells Dr. Peled that Christopher Tarnovsky —
MR. WELCH: Christopher Tarnovsky was involved in the piracy and hacking of the Canal+ system, and that Christopher Tarnovsky also told Mr. Koemmerling that he had posted the Canal+ codes on the Internet.
THE COURT: Therefore, from your perspective, this wrongdoing should have led to termination, and certainly there is an inference that at the highest levels of NDS —
MR. WELCH: They turned a blind eye.
I have one other. In September 2001 at another dinner at Trader Vic’s in London —
THE COURT: This is a dinner.
MR. WELCH: This is yet another conversation.
THE COURT: Dinner reporting.
MR. WELCH: While they were still in the relationship with ADSR — NDS in a relationship with ADSR —
Mr. Koemmerling informed Dr. Peled that Christopher Tarnovsky had admitted that he was involved in EchoStar piracy and had posted the EchoStar codes on the Internet.
THE COURT: So Tarnovsky also admits to Koemmerling who tells Peled —
MR. WELCH: Yes, sir.
THE COURT: — that Tarnovsky has posted —
MR. WELCH: EchoStar codes, and this was in September 2001.
THE COURT: And, of course, at that time, from your perspective, Tarnovsky is not fired. He is not fired until just before the lawsuit.
MR. WELCH: Yes, sir.
THE COURT: From your perceptive, it’s given to top management.
MR. WELCH: Top management knows. They don’t do anything about it.
THE COURT: Let me turn to NDS. That’s the basic outline. I certainly recognize that I can’t force either one of you to bring a witness to court beyond an 150-mile radius, but everybody’s expectation was Dr. Peled was going to testify. He was deposed, and I think I was introduced to him on Wednesday at 10:30.
MR. SNYDER: Yes.
THE COURT: He seemed like a very nice gentleman.
I said hello. I think everyone was here.
MR. SNYDER: Let me make a couple of points, Your Honor. As I informed the Court last night, the defense would like very much to rest today and get this case to the jury. We made some decisions about the witnesses we were going to call and not call.
THE COURT: I wasn’t aware of this last night, though.
MR. SNYDER: We did not — we had not made the decision which witnesses we were going to drop.
THE COURT: When did Dr. Peled leave?
MR. SNYDER: I believe on the last flight last night. I believe it was after 9:00.
THE COURT: What time were we here last night?
MR. SNYDER: We were here relatively late. I don’t remember exactly what time we left.
THE COURT: I got home at 11:00. You were here I know until after 10:00, and I am pretty certain unless I was awfully kind to both of you that you were here until at least 9:30.
MR. SNYDER: I believe that’s right.
THE COURT: Mr. Eberhart was here.
MR. EBERHART: No.
MR. SNYDER: I was here, Your Honor.
THE COURT: Mr. Stone?
MR. STONE: I was here.
THE COURT: Mr. Klein?
MR. KLEIN: I was here.
THE COURT: I think I had all the other attorneys.
What this means is that — I am going to speak outloud.
What this means is that I certainly wasn’t informed that Dr. Peled was leaving. The decision had to have been made to have Dr. Peled leave to catch the 10:00 flight — and I am going to get verification of when that flight was — to go back to London which excludes the Court now from jurisdiction and the very live testimony it’s seeking, and the dependency again upon depositional testimony, which I don’t think is appropriate from my standpoint.
MR. SNYDER: Your Honor, may I?
THE COURT: I want to make sure I have the time frame down. So to catch that 10:00 flight, the decision had to have been made at a substantial time earlier. When was the reservation made? It’s a direct question. I want a direct answer.
MR. SNYDER: Sometime before 7:00. I don’t think I can narrow it down.
THE COURT: You are to bring me that documentation. I want to see it.
MR. SNYDER: Which documentation?
THE COURT: His reservation. I want to know what time his reservation was made.
MR. SNYDER: Plaintiffs never requested that Mr. Peled appear as a witness. The defendants were going to call Mr. Peled. The Court I believe had always made it clear that it would like to see senior managers, senior executives, appear at trial, but that was a choice left to the parties.
THE COURT: No, I think I was more direct. I wanted to see Mr. Kudelski, Mr. Ergen, Mr. Murdoch, and Mr. Peled. I thought the responsibility lay at the highest levels. I thought I was very clear that as the corporations segmented themselves there were really four key players.
MR. SNYDER: You were very specific with those names. I understood it was the parties’ decision whether they were going to bring those people, and we intended until yesterday to have Dr. Peled testify, but we wanted to end our case and to make a decision.
Our defense is not one of the corporation not being responsible for the acts of its employees. Our defense is we did not do what we are accused of doing. We thought that evidence was the evidence we needed to get in front of the jury, and that’s the evidence that we have put and intend to put in front of the jury before we rest.
The topics that plaintiffs have identified that they want Dr. Peled to testify about are either issues that are already in the record, or it’s an excuse to get in damaging hearsay. All the other aspects of that have already been discussed at some length in Mr. Hassak’s testimony and cross-examined at some length.
THE COURT: From EchoStar’s position, you can understand that that act is rather low level compared to Dr. Peled, but that’s your tactical choice. My decision is whether I draw an adverse inference from that.
I think that’s enough discussion for right now. I think that — I hate to hold up Mr. Kahn’s testimony, but if Dr. Peled hadn’t left, and if I was going to draw an adverse inference, I wanted you to have the option to hold him. I know he is not.
I don’t know why I want to be inconsistent with my literal demand that people testify in person if there is some nexus to the corporate entity. I don’t know what I am going to do. You both can establish your record. I would be concerned in resting my case not knowing what the Court is going to do. I think I need to tell you what I am going to do before you rest your case.
MR. SNYDER: Thank you, Your Honor. I would just like to make — at the risk of repeating myself, plaintiffs never requested Mr. Peled. He was designated a defendants’ witness, and I believe we have the option to identify who our witnesses are. He was never requested — aside from being subpoenaed, he just wasn’t requested. The testimony they are describing is not proper rebuttal testimony.
Therefore, I don’t think that it would be appropriate to draw an adverse inference from Dr. Peled’s failure to appear.
THE COURT: Perhaps, I won’t. Maybe I’ll just explain the facts —
MR. WELCH: We have two things. Mr. Hagan will address the issue of Dr. Peled being requested. Had we known they were going to send him home, then we would have requested the Court to allow us to subpoena him before he left, but the issues that he would also testify about were directly against their claims on the documents. Dr. Peled discussed —
THE COURT: That’s potentially a declaration against penal interest. There are a lot of arguments whether these statements are hearsay or not, but the Court hasn’t even had an opportunity to be aware of this until this morning with the expectation that Dr. Peled was here to testify. I can’t force NDS to bring Dr. Peled or Dr. Murdoch or to force you to bring Kudelski.
Frankly, this is peculiar. Dr. Peled was here.
He knew on such and such a date he was deposed until quite late on Wednesday and has now chosen to take a flight which now calls for depositional testimony.
MR. WELCH: Do I need to continue with the areas he discussed?
THE COURT: You can, but he has already —
MR. WELCH: Mr. Hagan will address the issue of our request for him to testify.
MR. HAGAN: Two quick points, Your Honor. First, I believe that it’s disingenuous for Mr. Snyder to say we never requested Dr. Peled’s testimony. That is absolutely not the case. During the discovery process — early on in discovery both parties requested the depositions of the CEO.
They wanted Charlie Ergen’s deposition. I wanted Mr.
Peled’s depo. We reached an agreement at that stage that we would hold off unless one side was going to offer them at trial at which point the other side got to depose them. We put Mr. Ergen up and they deposed him.
The critical issue of why we need Peled is because Mordinson and Skhedy, the engineers that did this — they had no idea who ordered the hack. Now, Mr. Hassak testified he has no idea.
THE COURT: That was my point before. When we start with these lower-level people, they never know where the orders come from.
Counsel, I think everybody has been forewarned. I once again repeat I don’t have jurisdiction.
(Proceedings were adjourned.)
SANTA ANA, CALIFORNIA, FRIDAY, MAY 2, 2008
Day 15, Volume II
(Outside the presence of the jury.)
THE COURT: All right. We’re on the record.
All counsel are present.
The American adversarial system that all of us are proud of as practitioners and the judge is based upon adversarial proceedings, the right to examine and cross-examination witnesses.
This Court has been absolutely consistent from the beginning of this case in terms of trying to apply pressure to both sides to bring witnesses to court. And while it recognizes that there is the opportunity for depositions, and it is appropriate, and the Court’s limited jurisdiction, and while the Court will not, of course, step outside its limited powers, the Court wants to afford every courtesy to both counsel and give the opportunity for NDS to rethink its position.
This Court’s subpoena power to compel witnesses in civil cases is limited to a 150-mile radius from this courthouse. That means that this Court can only force a witness to testify in person if that witness resides within 150 miles.
Many of the witnesses that have appeared in this case reside out of this 150-mile radius. Those that testified live in person here in court have appeared voluntarily at the Court’s request and, I think, the able efforts of counsel for both parties.
This Court once again consistently felt that live testimony was important when we were really dealing with a case that spanned not only state jurisdiction but international borders. This Court has always felt that live testimony was important so that the jury could judge not only their testimony but their demeanor.
For the most part, once again, let me repeatedly state that the counsel for both sides, both plaintiffs and defendants, have made rather extraordinary efforts to obtain testimony from witnesses outside this jurisdiction.
Dr. Peled is the CEO and president of NDS. He was not subpoenaed by EchoStar but was expected to be called as a witness and was informed by all parties some place through a portion of the defense case. Both parties then relied upon the representation that he would appear.
Dr. Peled arrived in the United States earlier this week and had his deposition taken outside the jury’s presence on Wednesday evening from approximately 5:30 to 10:00 p.m. In fact, the Court was introduced informally to Dr. Peled with Mr. Snyder and —
MR. WELCH: I was here, Your Honor, as well as Jeannie Gavenchak from News Corporation and Jeff Blum from EchoStar.
THE COURT: At about 10:00 or 10:30, which was rather brief and basically just “Good evening.”
At 10:00 p.m. on Thursday evening, Dr. Peled made the personal decision — because I don’t believe counsel can make the decision for a witness of his stature — to leave the jurisdiction of this Court and return to the United Kingdom without notice to the Court or plaintiffs. By departing, he negated the opportunity to hear his testimony and judge his demeanor.
This could be construed to be an example of the very corporate irresponsibility of failing to explain the corporate entity’s conduct, and it is very troubling to this Court. After all, these are publicly traded companies dealing with American consumers and potentially subject to Congressional oversight. And the top of these corporate pyramids, Bergen’s, Kudelski’s, Peled’s, Murdoch’s failure to appear is unacceptable.
I’m most troubled by the ability of both plaintiff corporation and defendant corporation and the structure to segment. And perhaps it would be appropriate in many of the cases before this Court, but in a case of these kinds of allegations, satellite piracy allegations, that, if true, are monumental, and the stealing of documents, if true, which are monumental, is of great concern.
The Court will allow the parties to play the deposition testimony, but the jury’s going to be allowed to draw whatever inference they choose from Dr. Peled’s unavailability.
The admonition is consistent with the repeated admonition to all parties that they would be required to produce witnesses within their control or suffer adverse inferences. At the beginning of this trial, I was initially and highly concerned that witnesses would dictate — the pirates would dictate — whether or not they would even appear, and testimony would be presented that they chose to give at their depositions and what topics they would choose to testify, and I was extremely concerned and have expressed that repeatedly and consistently how the trial could be conducted.
I will not ask the jury to draw an adverse inference, but I will place the parties in the position of exactly what occurred.
The following will be read to the jury, and then I’ll ask NDS what they want to do and afford them every opportunity.
If Dr. Peled reappears, there will be no questioning concerning why he left or why he returned.
MR. WELCH: Yes, sir.
THE COURT: All right. Because I think it’s that important if this information is at the top of either structure.
I’m giving NDS the opportunity to bring Dr. Peled back to this jurisdiction, and I’m going to require that you rest your case on Tuesday. You will not be resting today.
So whatever tactical advantage you believe you have is going to be negated.
I’ll probably be sending the jury home at some convenient part in today’s examination, and we’ll have the hearing at that time outside the presence of the jury concerning Mr. Emerson.
Therefore, there should be no expectation on NDS’s part that they’re resting today.
Once again, if Dr. Peled chooses to return, there will be no inquiry into his leaving. EchoStar will be allowed to play the deposition in your rebuttal of Dr. Peled if he does not return, and the Court will inform the jury of the following: I will inform the jury that the Court’s subpoena power to compel witnesses in civil cases is limited to 150-mile radius. I will inform them that Dr. Peled is the CEO and president of NDS, that he was subpoenaed by EchoStar, but he was expected to be called as a witness by NDS — strike that. That he was not subpoenaed — my apologies — by EchoStar, but he was expected to be called as a witness by NDS.
That both parties apparently had entered into an agreement that neither CEO was to be deposed unless they testified; therefore, Charlie Ergen was testified a short time before his — deposed, I’m sorry — a short time before his testimony, Dr. Peled a short time before his testimony, by agreement of counsel, and that was appropriate.
But after the deposition of Wednesday evening, Dr. Peled made the personal decision — so I leave counsel out of this equation — that’s an aside — made the personal decision to leave this jurisdiction and return to the United Kingdom without notice to the Court or plaintiff, thereby negating the opportunity for a subpoena. By this departure he has negated the opportunity of the jury to hear his testimony and judge his demeanor, from somebody in a coequal position of Mr. Ergen.
I will not go further and explain what I’ve explained to you concerning my person concerns about corporate irresponsibility, nor publicly traded companies, nor will I comment upon Congressional oversight, nor the position I think that the American consumer is in after listening to this lawsuit.
Now, that admission may be, in fact, stronger. It will not be weaker.
You can make your record.
MR. SNYDER: Thank you.
THE COURT: And you can make your choice.
MR. SNYDER: Thank you, Your Honor.
NDS objects to the proposed instruction and admonition that the Court plans to give to the jury. It’s NDS’s position — and I believe correct under the law —
that the defendants have the right to determine which witnesses they present in their case.
THE COURT: You do. I’m allowing you to do that.
MR. SNYDER: And I believe that within the context of that right, it would be inappropriate for the Court to comment on the travel arrangements or whereabouts of any particular witness, including Dr. Peled.
There have certainly been other instances of witnesses that were added or dropped from witness lists during the course of this case, and it was the defendants’ decision not to call Dr. Peled so that we could rest our case today. We thus object to the Court’s decision to do that.
We had made every effort, and we had informed, I believe, the Court and the other parties that we intended to rest today for some time. Scheduling difficulties and the timing of events complicated that and forced defendants to make decisions, one of which was not to call Dr. Peled because we do not believe that he was instrumental to our defense, that the defendants are not responsible for those postings, are not responsible for EchoStar’s piracy, and are not responsible for the swap of their cards.
And we thus think that giving the defense’s right to determine what evidence is presented and by which witnesses, it would be inappropriate to give this instruction.
THE COURT: Okay. Thank you very much.
Now, why don’t we call Mr. Kahn back to the witness stand.
And the Court reiterates that I’ve been consistent, and the Court will not backtrack from its initial decision, Mr. Snyder or Mr. Hagan. I’ve made it very clear. And once I’ve applied that kind of pressure to get what I call the pirates and the underlings of these corporations to court, there is no reason, with information that’s shared at Mr. Ergen’s level or Mr. Peled’s level, the jury cannot view demeanor — should not be entitled to do so.
If there’s a disagreement, at least the Circuit understands, I hope, the extraordinary efforts that this Court takes. If it disagrees, then we’ll be trying the case over again. But that will be the admonition given to the jury.
Inform me if you’re going to place a phone call.
I would advise you to do so because the corporate responsibility lies with Dr. Peled — unless I get you involved, Mr. Snyder. I choose not to. I think that’s a corporate decision. I don’t think attorneys dictate to Mr. Ergen or Mr. Kudelski or Mr. Peled or Mr. Murdoch.
So if you would be kind enough to get Mr. Kahn again and get the jury, please.
(In the presence of the jury.)
THE COURT: The jury’s back.
I want to inform the jury that at some convenient point you’ll be going home. Right before 12:00, I believe.
Counsel will not be resting their respective cases probably until Tuesday or Wednesday of next week.
Counsel, if you’d like to continue your direct examination.
(Outside the presence of the jury.)
THE COURT: All right. The jury’s no longer present.
I’ve been thinking about some of the Court’s comments, and I’m going to retract one of them; and that is, Mr. Snyder, you’re welcome to conclude your case anytime you choose to.
So if you would like to rest today, if we get to the information and that hearing and the Court’s resolution and we still have the jury, you’re not precluded from resting today.
And, therefore, if you conclude, then I’ll expect the rebuttal to start on Tuesday.
And I want to think this out, though, and make absolutely certain that this is well thought out on both sides.
I think, Mr. Snyder, Mr.– Dr. Peled —
Sir, if you would remain outside. You’re a witness, and I don’t chose to have you present.
(Witness Kahn leaves the courtroom.)
THE COURT: I want the full ramifications of this absolutely clear. Dr. Peled’s taken his position; I’ve taken mine. The Court has wide discretion to comment upon evidence in a civil matter. In a criminal matter we do not.
This is the minimal admonition I will be reading to the jury.
So, therefore, whether Dr. Peled returns or not is not my concern. I’ll leave that to your wisdom in terms of whether you chose to contact. My guess is it may be difficult, after Dr. Peled made that choice to return to the United Kingdom, for him to return. He may choose not to.
Maybe the train is already too far down the track, and I understand that. It may be an embarrassing phone call for you to make. I understand that.
But I would hope that the full recognition of what could occur would dawn on Dr. Peled.
I want to assume that in some way a verdict came back, in whatever amount, against NDS. And I want to assume that — the circuit believed that the Court had even been too intrusive in this regard, although I believe I’ve set a very clear record from day one and that this should catch neither party by any surprise. In fact, I think I was most harsh with EchoStar in that regard.
You’re a publicly traded company. The fact of a verdict has tremendous repercussions on the NASDAQ exchange.
And if this Court was overturned in two or three years from now on this verdict, it affects your shareholders. You are not a private company as I deal with.
Now, Dr. Peled is not a United States citizen. I don’t know his linkage. He’s in the British system, which is a partial jury system. But I would hope he reflects upon this decision, and I hope he has time to reflect upon that.
And if he decides not to return, you will not be forced in any way, but I will make the admonition that I’ve told you about.
I want to give you all that time, or no time.
That’s up to you. So, therefore, I’ll take my guidance from now on.
If you wish to place a phone call or if you wish to stand your ground with your present position, you’re free to rest your case today. But having made that statement to you, you know the repercussions of that, and you know exactly what this Court’s going to do.
All right. Now, in terms of the hearing, there was an informal request by Mr. Stone last evening to take Mr. Emerson.
MR. STONE: Mr. Barr.
THE COURT: I’m sorry, Mr. Barr. My apologies.
Mr. Barr will not testify until I’ve had a full and complete hearing outside the presence of the jury, just as I indicated last evening. And Mr. Barr will follow along after this gentleman and/or the tape, and then if we have time, I will go back and try to thoughtfully make a decision. And if the jury’s still here, you may conclude with Mr. Barr today. And, in fact, you may rest your case today.
But I don’t want to be discourteous and have you caught later complaining that you didn’t know what action the Court was going to take or, minimally, you hadn’t contacted Dr. Peled and informed him of this Court’s position. I think that would place counsel in an unfair position because, after all, it’s Dr. Peled’s decision, I assume.
All right. Counsel, we’ll see you at 1:00 o’clock. Thank you.
SANTA ANA, CALIFORNIA, FRIDAY, MAY 2, 2008
DAY 15 – VOLUME III
(The following proceedings is taken outside the presence of the jury.)
THE COURT: All right. We are back on the record.
All counsel are present.
Thank you for your courtesy, Counsel.
And Counsel, we are going to recall Mr. Kahn?
MR. EBERHART: Yes, your Honor.
THE COURT: Okay.
MR. SNYDER: Your Honor, before we get the jury, can I tell you NDS’s —
THE COURT: Certainly. Have a seat.
MR. SNYDER: Thank you.
We’d like to finish with Mr. Kahn, and then play the video of Mr. Osborne, and then NDS will rest.
THE COURT: Okay. Now, let me make certain that I consistently —
I’m sorry, Mr. Kahn, pardon my discourtesy. If you’d wait outside for just a moment.
I think your position is in stone, and I hear that; I respect it. I take it that you have not called Dr. Peled.
MR. SNYDER: Actually, your Honor, I did speak briefly to Dr. Peled.
THE COURT: Okay. And is your position still the same, that he will not appear?
MR. SNYDER: Yes, sir.
THE COURT: Okay. Then this has tremendous ramifications, potentially, for NDS, not in terms of judicial proceedings, but I hope that you and Dr. Peled have discussed his position representing NDS, just as Mr. Ergen or Kudelski represent their respective companies. For a significant period of time, not only have I placed all parties on notice concerning the gravity of the allegations, but also tried to make a record that people were put on the stand who had limited information, regardless of your designating them corporate representatives. Mr. Lenoir, Mr. Rubin, very nice gentlemen, but limited information, from my perspective, and I think the jury’s.
Not only is the conflict between the two of you —
have taken on some of the aspects of a duopoly, but in reflecting on my prior comments, I not only believe it affects the American subscriber, but it affects the respective shareholders of your corporations. And whether it’s Mr. Peled or Mr. Ergen, if you’re publicly traded, you place yourself in a far different position than you do as a privately held company.
So if a verdict returns that’s unfavorable to either of the parties, and those who have what appears to be the most information and are available to that company —
Mr. Eberhart, why don’t you have a seat.
Then, unrelated to this case, I can imagine that the shareholder suits that might grow out of — out of that failure or unwillingness for the very echelon or top people to appear. Now, that has nothing to do with this lawsuit, but it has a lot to do with presidents and CEOs taking those responsible positions and realizing that they not only represent shareholders explicitly, but also the effect of this lawsuit does affect the subscribing public, generally.
It’s almost unimaginable to me that the heads of corporations, although I haven’t said that to the jury and I will not, and all my comments have rather been insulated from the jury, except for the somewhat facetious tongue-in-cheek statement that all parties were warmly invited to attend. Beyond that, none of my comments have come in front of the jury thus far.
The question becomes whether this Court would view this as an adverse inference, and I will probably decline to call for the jury making an adverse inference, but Mr. Peled, on behalf of NDS, the company he ably represents, puts himself in the position when the jury is informed of his ability to appear and actually having had him here, and a videotape is then played of not having the following benefit. And I just want to say this to you, abide by your decision. Sometimes that what seems harmful is mollified by virtue of taking the witness stand and being able to comment upon what the meaning of — of a statement is. It’s never quite as bad, in other words, as it seems, and it’s never quite as good as it seems, and that’s supposed to be the American adversarial system.
Well, Dr. Peled, literally, is here and apparently makes the choice, and maybe with the advice of counsel, I’m not going to subscribe to that, leaves this jurisdiction.
This Court’s already taken its position, and from the beginning of this case to the end, I’ve been consistent in that, and I will not back away from it.
Now, how I word that I hope will be informational, and I’ll let the jury draw their own inference from the instructions, because there’s an instruction concerning consciousness of guilt or the unwillingness or ability not to produce a party. And by that party having been here and taken the conscious choice so close in time to a deposition that may or may not be favorable, which literally, NDS now controls in terms of how they play this deposition — I’m sorry, EchoStar now controls in how they play this deposition. It places Dr. Peled, potentially, in the worse position of having all the bad things played that might have occurred, and of course, your designations following, but he can’t explain. He can’t mollify. He can’t say the intent that was on his mind or the goodness he had for the company.
So I think it’s actually with great sadness, not with any joy in my heart, that I’m going to need to take that position with the jury. But in consistently forewarning both of you, I set the stage early on, so this should come as no surprise to EchoStar, whose been leaned on very hard by the Court, and it should come to no surprise as to NDS.
I think you’re right, Mr. Snyder, you have the way — you have the right to control the tactics of your case. You can make those decisions. I’m sure you’ve expressed or talked about the potentiality of any shareholder suits that grow out of this if there is an adverse verdict and Dr. Peledson (sic) not taking the stand to explain NDS’s position personally. But I think the greatest concern is that if there is material information that he possesses, of all the people in the corporate structure, Charlie Ergen and Dr. Peledson (sic) appear to be the two primary people that really represent the corporations and set the tone of responsibility. And it’s a little difficult to watch EchoStar and NDS put on a case where well-intentioned and semi-knowledgeable people take the stand, but there is always an insulation that they weren’t at a particular meeting, didn’t have that responsibility or segmented out in some way.
So I know you thoughtfully considered it. It’s, frankly, with great sadness and great concern on my part that the Court’s in this position. I will follow through, though, on my admonishment.
All right. If you’d be kind enough to have Mr. Kahn take the stand, and we’ll say, instead of admonishment, information to the jury.
Oh, and by the way, on that subject, the Court’s found numerous cases in which the Court can draw an adverse inference, which I will not be drawing, that it be left for argument and instructions. And the Court believes that this will be the middle position in terms of sharing this information with the jury.
(The following proceedings is taken in the presence of the jury.)
THE COURT: All right.
Now, let me discuss two other things with you.
Your resting is the same as I perceive EchoStar’s resting, and that is, you need to go over each item of evidence.
Make certain each item that you believe has been received into evidence is, in fact, received, and I’ve reserved that for both of the parties.
I don’t expect items to be brought in front of the Court that were not moved into evidence and simply neglected, but I do expect that your records would comport with those items you believe are in evidence. And let me state to you that if an item is amiss as far as the jury is concerned, I will not grant a new trial. At the end of our discussion today or this evening, you’ll sign an evidence tag that Kristee prepares, and that means that each of you have gone over each piece of evidence, that you believe that the record is in order. And that way, in case a piece of evidence is missing, I view that as counsel’s entire responsibility. Motion with new trial will be met with a denial.
Third, I still don’t know if we’re going to the jury on Tuesday or Wednesday, but I’m hopeful that we do.
So, Counsel, who do you propose to call in rebuttal so I know when to bring the jury back?
MR. HAGAN: Our rebuttal case, your Honor, will consist of the following: We will call Mr. Andre Kudelski. If we are not able to reach a stipulation with the defendants on two particular pieces of evidence from EchoStar’s CSG database, we will call NagraStar’s CEO, Pascal Lenoir, to authenticate a couple of documents. And then we will conclude with reading certain portions of Dr. Peled’s testimony into the record. And I just want to make clear to the Court we —
that deposition was taken at the courthouse, and it was not able to be videotaped.
THE COURT: No, and in fact, it was my order that it not be videotaped, because the expectation was Dr. Peled would testify, and therefore, the jury would be further precluded from seeing his demeanor because of the expectation that he would, in fact, testify.
Each of you are aware of why Pascal Lenoir would be testifying. Are you able to reach an agreement, or is he going to take the stand? In other words, what I’m trying to sort out is, is the case really going to the jury on Tuesday or Wednesday. I assumed that the transcripts of Dr. Peled and the cross-designations may not be that long, but I just don’t know. I haven’t gotten a time estimate yet. I don’t know how long Pascal Lenoir testifies, and I have no idea what the expectation is concerning Andre Kudelski.
MR. HAGAN: If — I think that Darin and I will be able to reach a stipulation, and we can work on that.
THE COURT: I’ll — I’ll wait.
MR. HAGAN: This afternoon.
THE COURT: Why don’t you go over and talk to him.
In other words, let’s find out right now, and if you can’t, that’s fine, and if you can, that’s fine. Then I’m going to have that stipulation, if you do reach it, put on the record now. If you can’t reach it, so be it.
(Attorney discussion held off the record.)
THE COURT: All right. Now, while the jury is out of our presence, I want to discuss how the Court is going to handle the information conveyed to the jury concerning Dr. Peled. I want to keep this as neutral as possible, convey the information, and then let each of you argue whatever you’d like to. So I think the most appropriate thing is the following: Dr. Peled is the CEO, president of NDS. He was not subpoenaed by EchoStar, and voluntarily flew to the United States and was placed on the witness list by NDS as a witness in this trial and was to testify. He arrived earlier this week and had his deposition taken outside of your presence on Wednesday evening, April 30th.
Dr. Peled flew back to the United Kingdom on Thursday evening, May 1st, 2008. In the absence of Dr. Peled, the Court will allow EchoStar to read into the record portions of his testimony, and NDS to cross-designate and read into — and read into the record portions of Dr. Peled’s testimony.
Now, that simply informs when he was present, when he left, and you can argue all the inferences which are left to the jury. I’m a little concerned if I go any further than that factual misstatement and it turns into an adverse inference, and it causes the Court concern. By the same token, I think it gives NDS the right to argue and EchoStar, certainly, the right to argue that Peled was here, available, and you have an instruction right on point in your instruction packet, if you look at it, about witnesses able to testify.
Now, the question is, of course, NDS is going to object to any instruction to the jury, and of course you want a stronger inference given to the jury. I think that’s a well-balanced statement by the Court and doesn’t carry the Court’s frustration over to the — to the jury, so it gives EchoStar the leeway to argue that he wouldn’t subject himself to an appearance in court. And by the same token, it isn’t the Court making that statement, which is harmful.
But let me hear from EchoStar concerning that.
MR. HAGAN: Two points, your Honor. First, I think it is within the Court’s discretion to issue an adverse inference for Mr. Peled’s failure to attend trial and failure to allow us to cross-examine him in front of the jury.
THE COURT: And by the way, over the weekend, we are going to look at that further, if I read this or another admonition or adverse inference, however you want to do that, or information. I want to see what the outer parameters are. In other words, courts oftentimes can give an adverse inference, but it’s an extreme measure. This doesn’t pass, though, without, you know, factual comment about what occurred. But yes, I can give an adverse inference.
MR. HAGAN: And in the event that the Court is not inclined to do that, which — to preserve our record, we would object to, especially given the history of the Court’s guidance and instructions for all other witnesses who have attended live at trial, then we would ask if the Court, subject to our objections, if the Court is going to give a factual statement about the circumstances surrounding Mr. Peled’s leaving the United States and going back to the United Kingdom, we would ask that that statement be a complete factual record of what happened, and that is, that Mr. Peled left without us having the opportunity to subpoena him, because he left without notifying the Court or notifying plaintiffs’ counsel before getting on a plane and leaving the jurisdiction.
THE COURT: Okay. In other words, it’s not fair to say that — from your perspective, that he was not subpoenaed by EchoStar, but by the same token, it’s not fair to recognize that NDS had him voluntarily appear. So that’s the beginning point, that’s the truth. But once he was here, your concern is that you didn’t subpoena him, relying upon your expectation that he would, in fact, testify.
MR. HAGAN: Our expectations and the representations of the defense counsel.
THE COURT: And those representations were made to the Court, also, that he would testify, and the frustrating part to the Court is it reminds me of the deposition that everybody walked out on in the middle of the evening and didn’t notify the Court. Here is another example of the Court not being notified, and the gentleman is already on the airplane while we are sitting here in court on Thursday evening.
Well, whatever I do in this regard, it will occur Tuesday, because it’s the appropriate place for that admonition or that information or that adverse inference to take place. It’s not this evening on the resting of NDS’s case. It also gives NDS every opportunity over the weekend to rethink their position, which I assume they’re not, but I want to be as cautious as possible, give NDS all the time to contemplate the ramifications of this.
All right. While I’ll not settled on it, let me turn to Mr. Snyder so he can make his record, and of course, that will be that nothing should be said.
MR. SNYDER: Thank you, your Honor. I am not going to repeat my previous objection.
THE COURT: I — I want you to. I want you to protect your client. I want it on the record.
MR. SNYDER: I believe I previously put on the record, and I — I will repeat that I do not believe that it was appropriate for the Court to comment on Dr. Peled’s absence, essentially, for two reasons.
First, Dr. Peled was never requested by the plaintiffs. He was never asked to appear, never appeared on their witness list.
Second, as I’ve indicated to the Court previously, it is the defendants’ position that our defense in this case is based on not having participated, not having committed the alleged conduct and that we have — we have obviously made the decision on behalf of the defense that for a variety of reasons regarding the quality of that defense and presenting it to the jury, that it is in the company’s best interest not to present Dr. Peled’s testimony.
THE COURT: You do understand, though, that although I agree that you have the option of producing Dr. Peled, and if he had not been produced in any way, shape or form, it simply would have been an inference that I’m allowing both counsel to argue or the parties to argue about who’s not appearing, whether it’s Kudelski, who I believed would not appear up until recently. I’m still not sure if he’ll really be here, or Murdoch or Peled.
But what I’ve deprived EchoStar of, based on my belief and your representation, I mean, you collectively, not personally, but NDS’s — I want to take the attorneys out of this — was that a video deposition wasn’t necessary, and therefore, what EchoStar doesn’t have is the benefit of a deposition that is videotaped, because everybody’s expectation was that Peled would testify, and I’d supplied the same opportunity concerning Charles Ergen. So now, the jury has an even more difficult task, because with that expectation and non-notice to the Court and simply Dr. Peled leaving for the United Kingdom, this jury doesn’t even have the equal ability to have a video deposition, as some of the witnesses who testified. I’m a little concerned that at least the Court didn’t have notice until he was already in England.
MR. SNYDER: Your Honor, may we make one other point for the record?
THE COURT: Uh-huh.
MR. SNYDER: As I indicated previously, NDS does not believe that Mr. Peled’s proper — proffered testimony on the topics identified by plaintiffs are proper rebuttal, and likewise, notes that plaintiffs rested their case before there was any indication that Mr. Peled would appear, which would negate any suggestion that plaintiffs believed that Mr. Peled’s testimony was necessary for their case.
THE COURT: And in response to this not being appropriate rebuttal?
MR. WELCH: Your Honor, that’s where we had cut off earlier in the — in the day when I was listing the things that — that’s where we got cut off earlier in the day when I was listing the things that Dr. Peled testified about, your Honor. He was also going to testify about his knowledge or the lack of knowledge about the cash payments, his lack of knowledge about NDS paying for the mailboxes, and that he would have liked to know this type of information. It would have been important to him. This also gives a great deal of testimony about how satellite operators make their business decisions, and that satellite operators do not run out and automatically perform card swaps. They try to perform these ECMs or patches as long as you can. That directly refutes their argument that EchoStar should have gone out and made changes in an immediate fashion.
In addition, he talks about the types of harm that falls upon satellite operators when you have piracy. In addition to that, he discusses the effects that the Canal+ post would have on Sogecable, which is still pending. That came down from the Ninth Circuit, so Sogecable still has a claim. That’s presumably one of the reasons why they do not want his testimony to be heard by the jury, because it shows the widespread pervasiveness and the harm that they did on the entire industry.
Another point that he will talk about in his deposition is the state of the knowledge that NDS had at the time the lab was built, who the major competitors were, and that what they did with this lab was, rather than make their product better, they went and they attacked the various other systems that were their major competitors.
He also discusses the fact that DirecTV was potentially looking to switch. There is a variety of reasons that they did not bring him, and he covers most of the topics, but are the subject of their counterclaim. He talks about the documents and how flippant the claim is that Ray Adams allegedly said that these were stolen, and that he — that’s where we are really harmed by not having a video, because he just is like — the fact that his wife’s car got broken into, the less expensive car, spoke volumes, and it’s those type of things that were prejudiced by not having a video.
In addition, your Honor, as the Court’s well aware, we didn’t take a full deposition, because there are some things that we would like to save for trial. At the end of the deposition, I made the comment to Mr. Snyder that, “I guess we’re going to see Mr. Peled at trial,” and Darin cut me off and said, “Tomorrow.” Based on that, and the fact —
THE COURT: Is that on the video?
MR. WELCH: It is. It’s in the — it’s in the record, your Honor, at page 170.
THE COURT: Read it to me.
MR. WELCH: Starting at line 8.
THE COURT: Read it to me.
MR. WELCH: “We’ve concluded our questioning for the day of Dr. Peled, and I guess we’re going to see him at trial.” Mr. Snyder cuts me off and says, “Tomorrow,” and I said, “Tomorrow.” And in addition, I said, “And we’ve made a couple of document requests of you, and I guess you are going to take those, you’re going to think about that tonight, and you’ll let us know in the morning.” Now, one of the things that Dr. Peled had was a time line of various events that occurred. I asked Mr. O’Donnell, who’s their paralegal, as well as Mr. Snyder yesterday, by e-mail on various occasions. And I also told him to let Chad know and provide the document to Chad. They failed to respond at all. Even as of late last night, they failed to respond. It was not until 6:00 a.m. this morning that first they say, “Here is our lineup.” And I said, “So I assume you’re not going to be calling Dr. Peled, or are you?” And then Mr. Snyder responded, “You can infer that I’m not going to call him.” Now, I don’t know if he was on a direct flight to the UK from here, or if he flew from here to New York, and then he took the first flight out of New York, and they waited until such time as he was in the air from New York before they gave us their tactical decision. I don’t know why they delayed, but we asked numerous times for the time line, and there is information in the time line that we’re not going to be able to ask Mr. Peled about.
In addition to that, your Honor, there are certain documents that we would have liked to question Dr. Peled about. We’re not going to get to do that, because he is not on the stand. For instance, your Honor, there is a January 30th, 2001 press release issued by NDS that we were going to mark as an exhibit. And in that document, it clearly shows that not only they get the DirecTV conditional access revenues, but they’ve built an entire business off of keeping the DirecTV business, because it was their first digital platform.
THE COURT: But you had no power to get Dr. Peled here other than his voluntary appearance. In other words, I hear that you’re chagrined once he was here and how frustrating that is. By the same token, in an abundance of caution, you could have subpoenaed him. You relied upon the representation of other counsel, which you feel you’ve been misled by. But Dr. Peled had the choice of never appearing, and you would have never had that opportunity.
MR. WELCH: Had they told us, had they not mentioned that they were going to be here on Thursday, because we were going to — they were going to call him at noon, and we were late Wednesday night speaking with your Honor. They again made that representation that we would see him, because they — he wanted to catch a flight to go home.
THE COURT: On what day?
MR. WELCH: That he was going to catch a flight after Thursday’s testimony.
THE COURT: Now, the expectation on Thursday, according to my notes, was that we were hopeful of finishing Christopher Dalla, David Kumar and Jim Emerson. And we had also stated — I’m sorry.
MR. WELCH: That was Wednesday.
THE COURT: That was on Wednesday, my apologies.
And on Thursday, we believed that we were going to have started Reuven Hasak either late Wednesday or early Thursday, and there was a request to have Dr. Peled testify, and I believe that Dr. Peled would testify on Thursday.
Dr. Peled could have been called anytime on Thursday, but instead, after Reuven Hasak finished, we went on to —
MR. WELCH: Maldonado.
THE COURT: Maldonado?
MR. WELCH: Yes, sir, your Honor.
THE COURT: So there can’t be any confusion in this record that NDS did have the ability and had requested that he testify on Thursday, but it was no fault of any of the parties, nor the Court, because we could have gotten to him in some portion, if not totally, on Thursday.
MR. SNYDER: May I make two points, your Honor?
THE COURT: Please.
MR. SNYDER: First, as I believe the Court has pointed out, whatever concerns plaintiffs’ counsel may have about Dr. Peled, they are unquestionably in a better position now than if Dr. Peled had never appeared and had not been deposed. It was always the defendants’ choice whether to bring him. He was not subpoenaed; he was not requested. He did not appear on a plaintiffs’ witness list, and the plaintiffs rested without any indication that Dr. Peled would appear.
Second, although plaintiffs have identified a number of topics on which they will either present Dr. Peled’s testimony or would present Dr. Peled’s testimony, I don’t believe that any of those are properly rebuttal topics. They are all topics that go to plaintiffs’ case in chief, which they were voluntarily willing to rest without the presence of Dr. Peled.
THE COURT: Just a moment. Just a minute.
(Interruption in the proceedings.)
THE COURT: Now, Counsel, there are a lot of other options. One, trying to balance the fact that Dr. Peled did not appear or did not have to appear originally, I can simply stop the proceedings, bring the jury back in a week and give you the option, and Dr. Peled, of conducting a deposition by video if you believe you’re severely harmed in London.
Mr. Hagan is shaking his head.
Number two, I can state in front of the jury without giving the present admonition that the Court’s requesting Dr. Peled return to the United States, giving NDS another week to produce him. And then if I read an admonition, I’ll have a much stronger record. And that means the record goes — I bring the jury back in a week.
Now, think about that for a moment. I am not proposing either of them. I am tossing out all the possible options here.
(Attorney discussion held off the record.)
THE COURT: Because you see, Counsel, I think I’m on safe ground, quite frankly, with the initial research I’ve done, but I want the weekend. I could give an adverse inference. I may choose not to place myself in that position and have you argue that adverse inference, in other words, just simply give the jury the facts of what occurred.
But I am not certain that the facts I’m giving are balanced, because you’re right, there are some things that occurred that should be added to this transcript. By the same token, no matter what I add, you’re deprived, once he was here, of a video deposition, because everybody expected that he would testify, just like Charles Ergen. But in a sense, I am also calling you on your statement and forcing you to respond, that if you believe that that video deposition is, you know, so important. The Court’s not on a fast-track concerning this case. They can return in a week. They would probably welcome it.
(Attorney discussion held off the record.)
MR. WELCH: Your Honor, after consulting with our client, what we’d like to do is read the deposition to keep the process moving quickly and accept whatever admonition the Court would like to give to the jury.
THE COURT: You see, that puts me in a position of quashing down the admonition. When I start giving you options and you decline them, it moves the Court away from, quite frankly, the strength that I feel that is called for in this situation. So I want to be very certain that you’re turning down a video deposition in London. Now, I don’t know if he’ll comply.
Number two, requesting that NDS produce Dr. Peled under these circumstances, and then having Dr. Peled not return, places this Court in a better position concerning the admonition or the information, and it may strengthen your position concerning his unwillingness to be here.
Now, all that negates, though. All that causes a delay, and you have to decide, you know, with the tactics that both EchoStar and NDS are employing, you know, how old your case is getting to the jury. But by the same token, if this goes over a week, that’s my discretionary call, the case gets old for NDS, also. Frankly, right now NDS is pushing to get this to the jury, because, in my opinion, the evidence is freshest in the minds of the jurors with the presentation of the defense case.
I’d continue this case a week or two weeks and find out when the jury is available. This case is now old for everybody, though, and you’ve accomplished much of your case on behalf of EchoStar through NDS, just as NDS accomplished much of their case through EchoStar’s presentation, so it’s kind of balanced. Each of you have to, really, weigh how much you gained when supposedly it was your case in chief, but each of you made, you know, tremendous strides in terms of your own presentation.
In what is supposed to be the plaintiffs’ case, NDS had some good points. And what was supposed to be NDS’s case, EchoStar had some good points. So if it’s harmful to both of you, then that last option is off the table, but I want to discuss all of those. If I was sitting on the circuit, I’d want to make certain that, you know, all of the options were heard by the trial court and all the options were considered by counsel.
Now, why don’t you have another discussion. NDS ought to talk about this for a moment.
(Attorney discussion held off the record.)
THE COURT: And Counsel, I will understand if you decline to go to London. It will take NDS off the hook, because the claim would be, of course, Dr. Peled could have testified and you didn’t want to go, so be careful.
(Attorney discussion held off the record.)
THE COURT: All right. Counsel on behalf of EchoStar.
MR. HAGAN: Your Honor, our preference would be and our request would be that the Court compel the defendants to produce Dr. Peled live for testimony on Tuesday morning.
THE COURT: And — and how can I do that?
MR. HAGAN: He’s a — he’s the CEO of a party, and this is a particular issue that we briefed prior to the trial when we made a motion to compel the trial attendance of the Israeli engineers, David Mordinson and Zvi Shkedy, and I will rest on the legal arguments that are in those briefs. If the Court is not inclined to compel —
THE COURT: Well, if I — if I had the power, Counsel. If I had the power in a criminal matter, certainly under these circumstances, that person would appear. The question is if I have that power.
MR. HAGAN: I think that the Court does have that power, and I think that the legal authority from the Ninth Circuit supporting that is in our brief, which we filed prior to trial, moving to compel the attendance of Mr. Mordinson and Mr. Shkedy, one of which was a 30(b)(6)
representative for the defendants. If the —
THE COURT: Now, let’s assume that NDS finds, tactically, that his depositional testimony was so harmful and declines the order. What would the order — what would the Court do then, find NDS in contempt?
MR. HAGAN: No.
THE COURT: In other words, I shouldn’t make a frivolous order that I am not willing to back up.
MR. HAGAN: I think that the — that the impact of a decision, a tactical decision by the defendants to fail to comply with that order should be a fairly harsh adverse inference, which the Court has on numerous occasions through the course of this trial indicated that it was willing to give —
THE COURT: Uh-huh.
MR. HAGAN: — and if that — if the Court’s concern — and first of all, we think that you do have the — the authority and the discretion to give that type of an adverse inference, but if the Court is concerned about what the circuit may or could do, and the Court wants to take the conservative approach, which is the middle ground, then we would request that that instruction be factually accurate and include a provision that said Dr. Peled — it was represented to us that Dr. Peled would appear live. He left the country without notifying the Court or plaintiffs’ counsel and affording them an opportunity to issue a subpoena.
THE COURT: Okay. I’ll need a copy of that transcript, because I don’t have it.
All right. Mr. Snyder.
MR. SNYDER: Your Honor, as I’ve indicated previously, plaintiffs never put Dr. Peled on any iteration of their witness list.
THE COURT: Just a moment. How could they? They allegedly didn’t have the authority to subpoena him, but now they are telling me that they do have the authority or I have the authority to order him into court.
MR. SNYDER: They requested the presence at trial of several NDS employees, including employees from Israel, and NDS complied with that request at — at the Court’s urging, but in cooperation with the Court and plaintiffs’ counsel and the administration of this trial. They never requested that Dr. Peled appear as a trial witness.
Defendants indicated that they would call Dr. Peled and made the decision not to call Dr. Peled.
If the Court is inclined to give an instruction, I agree that it need be factually accurate, although I do not agree to the addition of the material that plaintiffs have suggested, which, for example, omits the accurate fact that plaintiffs never requested Dr. Peled’s appearance at the trial. They rested their case without requesting Dr. Peled or even any indication that Dr. Peled would appear, so they did not believe that his testimony was critical or even important to their presentation of the evidence.
THE COURT: Okay. Well, it gives me the weekend to resolve this, and I think the better part of caution right now is simply to send the jury home, that I make no further statement to them, certainly, without trying to think this out over the weekend, or any state to them — any statement to them at this time. And if the Court’s going to make any type of statement, the most appropriate time would obviously be on Tuesday morning just before the playing of this deposition.
Now, knowing who those parties are that are going to be called in rebuttal, is there surrebuttal?
(Attorney discussion held off the record.)
MR. SNYDER: Your Honor, at the moment, we don’t contemplate a surrebuttal, but I do not yet know what the scope of Mr. Kudelski’s testimony is going to be.
THE COURT: All right. Then, is there anything further as far as the jury is concerned other than you resting in their presence and sending them home, and then we can continue on this evening with other matters?
MR. SNYDER: I don’t believe so, no, your Honor.
THE COURT: Okay. Kristee, would you be kind enough to get the jury.
(Proceedings resumed at 5:41 p.m.)
(Outside the presence of the jury.)
THE COURT: We’re on the record. All counsel are present.
Counsel, thank you for your courtesy this evening.
It’s almost 6:00 o’clock. And the Court holds as follows and rules as follows: Rule 45 requires the Court to quash a subpoena if it requires a person who is neither a party nor a party’s officer to travel more than 100 miles from where that person resides, is employed, or regularly transacts business.
Some Courts have thus implied, even in foreign corporations, that officers living in foreign countries can be compelled to give testimony in the United States. The Court cites Younis, Y-O-U-N-I-S, v. American University of Cairo, 30 F.Supp. 2d 390, Southern District of New York 1998. Also, In Re Teknek LLC, 206 WL 2136046, which is a bankruptcy court in the Northern District of Illinois, 2006, which this Court was the District Court in, and Judge Cox was the bankruptcy court. Also, Application to Enforce Administrative Subpoena’s Duces Tecum of SEC v. Knowles, 87 F.3d 413, Tenth Circuit 1996.
Likewise, it has been held that, quote, “a foreign corporation doing business in a district is subject to all processes, including subpoenas in that district,” citing Less v. Taber Instrument Corporation, 53 FRD 645, 646, Western District of New York, 1971. Moreover, the Court has discretion to require the corporation to produce the individual director named in the subpoena; see also, Elder Beerman, B-E-E-R-M-A-N, Stores Corporation v. Federated Department Stores, Inc., 45 FRD 515, Southern District of New York, 1968.
This Court sees no reason why such a conclusion would not equally apply to a CEO of a party company. The trial court’s discretion extends to issuing sanctions if a party fails to produce a corporate officer or director in compliance with such an order. The Court once again cites Federal Rule of Civil Procedure, Comments 45 and 16.
Now, there isn’t a lot of discussion in the Northern District, California case that we saw. They just simply cited rule 45. They didn’t cite the bankruptcy court. We’ve also found some other case law that we believe supports our position. Therefore, I’m going to order Dr. Peled to return to this Court and appear in this court.
Now, having made that order, I’m going to turn to NDS and let them have a conference for a moment. That can be done in two ways: He’ll either be here, ready to testify at 8:00 o’clock in the morning, as a courtesy. And I will preclude EchoStar from going into the area about his leaving and returning, et cetera. The prejudicial effect outweighs the probative value, as far as the Court’s concerned.
If there is some concern, I’m going to order NDS, if — unless there’s a representation to this Court by Mr. Snyder on behalf of NDS, then I will simply delay the proceedings. I’ll order EchoStar to subpoena him, so that I keep building my jurisdiction in London, and we’ll simply wait. But he will be returning.
So, Mr. Snyder, why don’t you have a consultation with your co-counsel and make your decision.
(Pause in the proceedings at 5:44 p.m.)
(Proceedings resumed at 5:53 p.m.)
THE COURT: We’re back on the record. All counsel are present.
Mr. Snyder, what’s your position?
MR. SNYDER: Your Honor, we’ve heard the Court’s order. And I understand that it requires us to produce Dr. Peled.
I have not been able to speak to Dr. Peled, nor have I been able to talk to my client, so it’s difficult for me to give the Court any answer other than I have heard the Court’s order.
THE COURT: Okay.
MR. SNYDER: And I — and if there is some time —
if the Court can give us some time to get ahold of them and give the Court and the parties an answer about whether Dr. Peled will appear, I would appreciate that.
THE COURT: I’ll absolutely pay you that courtesy.
My thought is this: I want to do this as humanly as possible. And if you want, I’ll put this out in a minute order; but, because of the press coverage, I’d recommend against it. I think the easiest way to resolve this is by transcript, and by you relaying that to your client first.
If there’s any difficulty, then I will simply require — to make sure I’ve dotted all my “I’s” and crossed the “T’s,” I will simply stop the proceedings on Tuesday.
(To plaintiff’s counsel:) And require you to serve the gentleman, also.
I believe I absolutely have this power because it’s a corporation, multinational, but focused here in the United States, doing business here, receiving money here.
Focusing on the corporate entity, there’s no question in my mind that it’s an appropriate order.
MR. SNYDER: Your Honor, may I make one additional —
THE COURT: No. Let me finish, and then you’ve got the rest of the day.
(To plaintiff’s counsel:) That means you’re probably going to London. You’re probably going to serve him if it requires service in London, and I may just stop.
And the problem with that is Andre Kudelski. So I don’t know that Andre Kudelski should suffer, nor should you suffer bringing the gentleman here, so I’m going to give you the option.
But no matter what, it will not go forward until I’m certain that every effort’s been made on my part. And I may take that one extra step of subpoenaing. I don’t think I have to. I just want to be cautious.
Oh, I said the “Northern District of New York,” I meant the Southern District of New York simply refers to Rule 45. There is not much of an analysis there. But I have a much stronger fact situation here than even the Court in the Southern District of New York has.
Now, Mr. Snyder, please.
MR. SNYDER: Your Honor, I wanted to inquire, if I could, about the scope of the testimony that plaintiff’s will be allowed to elicit from Dr. Peled. And my concerns fall into two categories: First, matters that are not — that have not been at issue in this trial. The Court has, over our objection, allowed query into the Canal+ and DirecTV litigations. And I certainly understand that order and would anticipate that Dr. Peled would be asked questions about that. But there are other matters involving NDS affairs of various vintages that, based on plaintiff’s counsel’s comments and some of the questions at deposition, I anticipate they intend to question Dr. Peled about while he’s in front of the jury.
And it puts — that puts us in the difficult position of either allowing that testimony or objecting and thus making an issue out of it in front of the jury.
Second, Your Honor, there is a — I’m frankly concerned about the intentions of plaintiff’s counsel to question Dr. Peled repeatedly about matters over which he admits he has no knowledge. And while I understand that the plaintiffs have a right to show Dr. Peled documents, to find out whether he has information, to ask him questions whether he has information, I think that it is unfairly prejudicial for the Chief Executive to essentially sit in the witness stand and — for what is essentially argument in the form of questions.
THE COURT: If I knew with more particularly what those concerns were, I could respond to them. But I will not bargain with Dr. Peled nor hand down a ruling that gives him the choice of either coming or not coming based upon my ruling. He’s here first, and then we discuss the issues.
And I’ll take the time to do that with you.
And I share your concern. He shouldn’t be embarrassed. But by the same token, he should be able to be asked relevant information. And if he’s here, maybe I can find out what that is.
So the first question is, do I have this power.
And I believe I do pursuant to the case law that we’ve been researching. And frankly, I’ve been hesitant to use that in the past, but I’ve always believed that I have the power to order in some of these persons who were or were not going to appear.
Quite frankly, I thought an equitable balance had been reached; that there was no reason to really pursue Kudelski anymore; that was his choice — or Murdoch; that was his choice — and that the balance-out, if you will, just equitably between Ergan and whomever, which turned out to be Dr. Peled, was the end of the discussion.
But I’m quite convinced that I have the power.
MR. SNYDER: I’m not trying to bargain with the Court, Your Honor. I have heard your order.
THE COURT: Okay.
MR. SNYDER: I wanted to raise my concerns so that the Court would understand them.
THE COURT: And if you get the information to me — Mr. Snyder, if you get the information to me, I can look at it. I can see what those categories are. So maybe over the weekend you can set forth what the concerns are.
Nobody’s trying to embarrass him. And I don’t want that to happen either with any of the CEO’s.
I mean, Ergan had a pretty strenuous direct and cross-examination, so I’m not going to protect him; but by the same token, he shouldn’t be asked repeated questions.
But if it pertains to Koemmerling, for instance, or Tarnovsky, certainly that appears to be appropriate.
You can raise the double hearsay objection. One seems to be “exception against penal interest” and the other is an “adverse party.” But at least I can deal with those.
Right now, I’m just dealing with whether I had the power to bring him back. And I’d assumed I had before, but I was being, I thought, somewhat of a gentleman with both sides and encouraging you to do that, and then letting you argue if you chose not to. But in Peled’s position, it’s moved far beyond that.
As far as Kudelski, that’s his choice, though.
And it’s Murdoch’s choice. I’m not going to employ this kind of power.
Peled presents a unique problem to me now. So I think the guidelines for each of you is simply this: If Peled is here, as I’m ordering, at 8:00 o’clock in the morning on Tuesday, we’re not going to act surprised.
You’re simply going to move to reopen. The Court’s going to say it was aware of that earlier on, so there’s no insinuation that anything has happened, because all this has been outside the presence of the jury.
And I’m limiting NDS so that there’s no discussion about this. I think the prejudicial effect outweighs the probative value with whatever occurred concerning why he left.
If he’s not present, then I’ve got two options.
One is a series of sanctions, and the Court doesn’t want to employ those. They range all the way up to default, which is rather ridiculous and not the option this Court would chose, frankly. But it does potentially call for other sanctions. I would be remiss to employ any of those sanctions, frankly, until I took the next step; and that is, I would cause a subpoena, although I think he’s a corporate officer, obviously, and I have — under my ruling power, I would take that extra cautious step.
I probably would look to EchoStar at that time to determine, you know, whether or not Peled, who’s eventually going to be here, would have a tactical advantage through NDS of having him called afterwards, or if you want to wait until he arrives. And, unfortunately, we’ve got to send Mr. Kudelski home. But Mr. Kudelski should be here on Tuesday. And that deposition should take place, also, I think, on Monday. Monday?
MR. HAGAN: Monday afternoon.
THE COURT: Monday afternoon.
MR. SNYDER: Is it your intention, Your Honor, that Dr. Peled would be called by the defendants —
THE COURT: Absolutely.
MR. SNYDER: — as opposed to the plaintiff’s rebuttal case?
THE COURT: Yeah, if you chose to. I’m giving you the first option all the way along the line. The only option I’m not giving you is having Dr. Peled not return.
If you want to fit him into your case and reopen, so be it.
If you want him called by the plaintiffs, so be it.
(To plaintiff’s counsel:) But if I’m bringing him back and NDS decides not to call him, I want to hear your true representation that you are going to call him, ’cause I’m not bringing him back across the world to inconvenience the gentleman. I’m bringing him back ’cause he’s a material witness, quite frankly.
MR. HAGAN: Yes, Your Honor, we will call him.
THE COURT: You’ll call him in your rebuttal case?
MR. HAGAN: If he appears.
THE COURT: Well, he —
MR. SNYDER: Would —
THE COURT: You mean, if he voluntarily appears.
He’ll appear. It’s just how long it takes, that’s all.
MR. SNYDER: And I’ve heard the Court’s order, Your Honor. If he is called in plaintiff’s case as a rebuttal witness, would he be treated as a rebuttal witness?
THE COURT: Yes. But the rebuttal is so broad, that’s the problem. You’ve got general denials running through this case on both sides. And I need to have you narrow that for me on paper and express what your concerns are if he’s called. Because it’s not fair for me to make a general ruling and then feel — you know, you or the EchoStar feel that I’ve said one thing and done something else. So I need to know what those concerns are.
Certainly, as to Koemmerling and Tarnovsky, that’s certainly relevant — amongst other things that I’ve heard.
But a repeated badgering of him is not. Documents should be shown in good faith. Those documents that a corporate representative of his stature would be expected to see can certainly be shown.
The question becomes — I don’t know what’s out there. I wasn’t at the deposition. I don’t know if there’s an e-mail, for instance, from Hasak to somebody else and, you know, they’re parading that in front of the CSO, who might not ever see that document but, by the same token, should. I mean, I’ve got to see those documents. I don’t know enough, I think, to make a ruling right now — a sweeping ruling.
So I think the best we can expect is this: He’ll either be here pursuant to this order, or I’ll deal with it at that time on Tuesday morning.
And Kudelski should be deposed if he’s coming, and he should be prepared to testify on Tuesday. If — I don’t want to look ahead. The order’s the order. It says what it says. And the only question I’ve got is, if you need this further explained to Dr. Peled, I’m happy to issue this other than the oral ruling that’s contained in the transcript, which takes time to prepare and probably won’t be out until Monday or Tuesday. Or I can simply issue this in a memo form, which then becomes widespread and, quite frankly, everybody knows about it quickly.
MR. SNYDER: Transcript’s sufficient, Your Honor.
THE COURT: Okay. At least for this time, that’s a courtesy I can pay you, and that takes Dr. Peled, hopefully, off the hook; and hopefully, he hears this order loud and clear.
I think I’d appreciate Monday evening an informal phone call to Kristee. I’m going to be out of the jurisdiction for some period of time on Monday, and then back in. And so I won’t know on Monday — although you can reach me tomorrow, and you can reach me Sunday. There’s part of Monday I’m just not available.
And I’d appreciate it if the two of you would talk to each other on EchoStar and NDS’s respective sides, because we don’t want to inconvenience, if we can help it, Dr. Peled and Andre Kudelski. I’d like to get them into court and out of court as a courtesy.
Okay. So in short, with all the things we have left to do, I hope we’re going to the jury on Tuesday afternoon and Wednesday. But I’m not confident of that right now. And a lot of that depends upon Dr. Peled.
Now, is there anything further this evening?
Otherwise, I’m going to let Debbie go home to her family —
who’s my court reporter, for the record, and it’s 6:10 on Friday.
Counsel on behalf of EchoStar?
MR. HAGAN: Nothing, Your Honor.
THE COURT: Okay. And on behalf of NDS?
MR. SNYDER: Nothing further, Your Honor.
THE COURT: Okay. Do you want this in written form so you can do some research? That is the order.
MR. SNYDER: You mean an informal writing, Your Honor?
THE COURT: Sure.
MR. SNYDER: Yes, that would be helpful.
THE COURT: Sure, sure.
(At 6:09 p.m., proceedings were adjourned.)