00001 1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS 2 MARSHALL DIVISION ) 3 SMITH, SAM, ) ) 4 Plaintiff. ) ) CIVIL ACTION 5 VS. ) NO.: 9-03DV-7654 ) 6 ACME Container Company, ) JURY ) 7 Defendant. ) 8 9 ****************************************************** ORAL AND VIDEOTAPED DEPOSITION OF 10 SALLY NEALEY APRIL 13, 2005 11 ****************************************************** 12 13 ORAL AND VIDEOTAPED DEPOSITION of SALLY NEALEY, produced as a witness at the instance of the 14 Defendants, and duly sworn, was taken in the above-styled and numbered cause on APRIL 13, 2005, 15 from 3:05 p.m. to 3:45 p.m., before Mary Ann Smith, CSR, in and for the State of Texas, recorded by 16 machine shorthand at the offices of Rabinowitz, Rabinowitz, Rabinowitz & Chan, LLP, 600 Travis, Suite 17 3400, Houston, Texas, pursuant to the Federal Rules of Civil Procedure and the provisions stated on the 18 record or attached hereto; that the deposition shall be read and signed before any notary public. 19 20 21 22 23 24 25 00002 1 A P P E A R A N C E S FOR THE PLAINTIFF: 2 SHIRK, WORK & FISH, LLC BY: MR. TYE KNOTTS 3 101 Creek Street 10th Floor 4 Grand River, CA 90017 (218)867 - 5309 5 FOR THE DEFENDANT: Rabinowitz, Rabinowitz, 6 Rabinowitz & Chan BY: MR. THOMAS 7 600 Travis Suite 3400 8 Houston, TX (619)867 - 5309 9 THE VIDEOGRAPHER: Mr. Tim Carson 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00003 1 I N D E X Appearances 2 Sally Nealey Examiniation by Mr. Thomas 3 Witness Corrections Witness Signature 4 Reporter's Certificate E X H I B I T S 5 NUMBER DESCRIPTION PAGE 6 1 Acme Employee Handbook 6 (rev. 10/2/1998) 7 2 Note from Smith to Nealey 7 8 4/1/2003 9 3 Note from Smith to Nealey 9 6/4/2003 10 4 Smith's June Expense Report 10 11 5 Smith's July Expense Report 10 12 6 Smith's August Expense Report 10 13 14 15 16 17 18 19 20 21 22 23 24 25 00004 1 THE VIDEOGRAPHER: We are on the record. Today is 2 April 13, 2005, at approximately 3:05 P.M. This is 3 the video taped deposition of Sally Nealey in the 4 case of Sam Smith vs ACME Container Company. 5 SALLY NEALEY, the witness hereinbefore named, 6 having been first duly cautioned and sworn to testify the 7 truth, the whole truth and nothing but the truth, testified 8 on her oath as follows: 9 EXAMINATION 10 BY MR. THOMAS: 11 Q. Good afternoon Ms. Nealey. 12 A. Good afternoon. 13 Q. Ms Nealey when were you hired by ACME Container? 14 A. I was hired in May of 1999. 15 Q. And what was your job description? 16 A. Originally I was hired as a records clerk for the 17 HR and accounting departments. However, after about a year 18 I was moved to the sales department where I began working as 19 a sales assistant for several of the salespeople. 20 Q. Okay. Ms Nealey, what was your working 21 relationship with Mr. Smith? 22 BY MR. KNOTTS: Objection. Vague, vague as to 23 time. 24 Q. Let me clarify. At anytime during your employment 25 with ACME, did you report to or have an ongoing working 00005 1 relationship with Mr. Smith? 2 A. Yes. I worked with Mr. Smith from the very 3 beginning of his employment with ACME. 4 Q. And in what capacity did you work with Mr. Smith? 5 A. My title was Sales Assistant, but basically I was 6 a secretary for Sam and two other sales people. 7 Q. Okay. What sorts of things would you do in your 8 capacity as a Sales Assistant for Mr. Smith? 9 A. In general I helped with all the sales people with 10 things like scheduling, letter writing, expense reports, 11 sales reports, and phone messages. Mr. Fillmore said it was 12 my job to keep the salesmen busy selling and not tied up 13 with things like administrative chores. 14 Q. Who is Mr. Fillmore? 15 A. Jack Fillmore is the Senior Vice President of 16 sales and marketing for ACME. 17 Q. Do you and the other sales people report to Mr. 18 Fillmore? 19 A. That use to be the case, but Mr. Fillmore passed 20 away due to a heart attack shortly after the Toy Company 21 account was lost. 22 Q. Okay. Do you know who was involved with the 23 decision to hire Mr. Smith? 24 A. I believe that Mr. Fillmore was the one who hired 25 him. I don't know if any of the other salesmen took part in 00006 1 the hiring process. (Exhibit was marked for identification) 2 Q. Ms. Nealey, at this time I am going to show you a 3 seven page document previously marked as Exhibit 1 which 4 states at the top, ACME Container, Incorporated, Employee 5 Handbook. Would you please take a minute to look at that 6 document and tell me if you've ever seen that before? 7 A. I have. 8 Q. And is that the Employee Handbook for ACME 9 Container, Incorporated? 10 A. Yes, it is. 11 Q. Do you know if Mr. Smith kept a copy of that in 12 his office? 13 A. He did. 14 Q. How do you know that? 15 A. Because I filed it there. 16 Q. Did you handle all of Mr. Smith's filing for him? 17 A. Yes, I did. 18 Q. Do you recall if Mr. Smith ever signed an 19 employment or confidentiality agreement? 20 A. I believe that he would have executed an 21 employment agreement, yes. Um, with a confidentiality 22 clause. Mr. Fillmore insisted that all salesmen have formal 23 agreements. 24 Q. Did you have an employment agreement? 25 BY MR. KNOTTS: Objection, relevance. 00007 1 A. Yes, I do. 2 Q. In your experience, if changes were ever made to 3 an employment agreement, would that change be made in 4 writing? 5 A. Absolutely. In fact, when we changed over from an 6 HMO to a PPO we all received a written notice of the change 7 and had to sign that we agreed to it. 8 Q. When you say 'we', did that include Mr. Smith and 9 the other salesmen? 10 A. Certainly. (Exhibit was marked for identification) 11 Q. The next document I'm going to show you will be 12 marked as Exhibit 2. It's a memo dated April 1, 2003, 13 addressed to Sally, and apparently signed by Sam. Can you 14 tell me if you've ever seen that document before? 15 A. I have seen this document. 16 Q. Do you recognize the handwriting on the document? 17 A. Yes, That is Sam's -- Mr. Smith's. 18 Q. And did he often write handwritten notes to you? 19 A. He did. 20 Q. And so you are quite certain that this is his 21 handwriting? 22 A. Yes, certainly. 23 Q. And if you could, I want to have you focus your 24 attention on some of the writing in this particular note. 25 Starting at line 3, where it states, "I must tell you -- to 00008 1 you care me". Have you ever asked Mr. Smith what he meant 2 by this? 3 A. Yes, I am sure I did on that day. 4 Q. Do you recall on this particular instance what it 5 was he meant? 6 A. No, I don't, I don't, I am sure I just talked to 7 him and he explained it. 8 Q. During the months that you worked for Mr. Smith, 9 was it a common experience that you would get a note such as 10 this, that didn't quite make sense when you read it? 11 A. Yes, it was. 12 Q. Alright. If you look at the last sentence of this 13 memo, it says, "I'll be at the Odyssey at 2:00 p.m., see you 14 then." Can you tell me if it was Mr. Smith's practice to go 15 to the Odyssey on a regular basis? 16 BY MR. KNOTTS: Objection. Vague, calls for 17 speculation. 18 Q. You can answer. 19 A. He went there -- a couple times a week probably. 20 Q. What is the Odyssey? 21 A. It's a bar and grill. 22 Q. How often did Mr. Smith have lunch at the Odyssey? 23 A. He would probably go there two or three times a 24 week but it wasn't always just a lunch. 25 Q. Did you ever observe Mr. Smith to be under the 00009 1 influence of alcohol while he was at work? 2 BY MR. KNOTTS: Objection. Calls for speculation. 3 A. On occasion, yes. 4 Q. And has that been the case for the past year? 5 A. Yes. 6 Q. And what are some of the symptoms you observed 7 that led you to believe that he was intoxicated? 8 A. Oh, probably slurring of his words, not making 9 sense when he would write me notes, incoherent -- pretty 10 much incoherent. (Exhibit was marked for identification) 11 Q. Alright. The next document I'm going to show you 12 has been marked as Exhibit 3. It's a memo dated June 4, 13 2003, once again apparently addressed to Sally, signed Sam. 14 Can you tell me if you've ever seen that document before? 15 A. Yes, I have. 16 Q. Is that also Mr. Smith's handwriting? 17 A. It is. 18 Q. If you would please read the sentence that starts 19 with "Maybe". 20 A. It says "Maybe we can meet at the Odyssey at 6:00 21 p.m., the cocktails I had at lunch are starting to wear off 22 - ha". 23 Q. Was it common for Mr. Smith to make casual 24 references to drinking in memos or verbally throughout the 25 course of the day? 00010 1 A. He did so from time to time, yes drinking was 2 definitely a common theme with Sam. (Exhibits 4,5,6 were 3 marked for identification) 4 Q. Okay, I'd now like to give you three exhibits that 5 have been marked in order as Exhibits 4, 5, and 6. Can you 6 please identify these documents? 7 A. These are copies of Mr. Smith's expense reports. 8 Q. Looking at Exhibit 4, do you see any entries there 9 that the Odyssey? 10 A. I see, I see three on this report. 11 Q. Do you also see multiple entries for meals at the 12 Odyssey on Exhibits 5 and 6? 13 A. Yes. 14 Q. Do you know if ACME has a policy regarding 15 expensing alcoholic beverages? 16 A. It was prohibited. I think that the employee 17 handbook addresses this issue. 18 Q. If we go back to Exhibit 1, can you show me where 19 it states that? 20 A. Sure. It's here on page three. It says "under no 21 circumstances should the cost of alcoholic beverages be 22 included in meal expenses. 23 Q. Thank you. I want to change topics now and ask you 24 if you recall the 2002 Christmas Party. 25 A. Oh yes, I remember it quite well. 00011 1 Q. Why is that? 2 A. Sam showed up hammered. Greg Able, one of the 3 other salesmen, almost had a fist fight with Sam when Greg 4 insisted on Sam giving up his keys and taking a taxi home. 5 In fact, Sam also asked me if I'd take him home and tuck him 6 into bed. Everyone thought he was just being a funny drunk, 7 but I didn't appreciate the humor. 8 Q. Did anyone in management take notice of Mr. 9 Smith's behavior? 10 A. I think so. The next day Sam was called into Mr. 11 Fillmore's office. I don't know what went on inside, but 12 when Sam returned he was swearing up a storm. 13 Q. Next I want to discuss the Toy Company account. 14 Do you recall that this account was Mr. Smith's 15 responsibility? 16 A. Yes. Sam was the one who got that account, but he 17 ended up causing us to lose it. Several employees lost their 18 jobs due to the cutbacks that were necessary after the Toy 19 Company account was lost. If you ask me, the stress of the 20 whole Toy Company incident caused Mr. Fillmore's heart 21 attack. 22 BY MR. KNOTTS: Objection, non-responsive. Ms. 23 Nealey, please listen and only answer the questions that you 24 are asked. 25 Q. What happened that caused Toy Company to cancel 00012 1 its contract with ACME? 2 A. A few weeks after the contract was signed, Phil 3 Richardson over at Toy Company called Sam and told Sam that 4 the warning label had to be changed on the packaging. Phil 5 also sent Sam an email to this effect. However, at this same 6 time Sam called me and left me a message around AM one night 7 and told me that he was going on vacation for five days to 8 Mexico and asked me to cover for him. He never told me or 9 anyone else about the need to change the label. So when 10 Phil received the first 50,000 boxes, he was furious. 11 Q. Is this when you lost the account? 12 A. No. That came about a week later when Sam showed 13 up drunk to a meeting with Mr. Fillmore and Mr. Richardson 14 at Toy Company. 15 BY MR. KNOTTS: Objection hearsay. 16 Q. How do you know Mr. Smith was drunk at that 17 meeting? 18 A. When Sam and Mr. Fillmore got back to the office, 19 I overheard Mr. Fillmore yelling at Sam telling him that he 20 was sick and tired of dealing with an old drunk that his 21 irresponsibility had cost us hundreds of thousands of 22 dollars and that he should pack his things and get out. 23 Q. Was this when Mr. Smith was fired? 24 A. Yes. 25 Q. No further questions. (Deposition adjounred) 00013 1 WITNESS CORRECTIONS AND SIGNATURE 2 Please indicate changes on this sheet of paper, giving the 3 change, page number, line number and reason for the change. 4 Please sign each page of changes. 5 PAGE/LINE CORRECTION REASON FOR CHANGE 6 ______________________________________________________ 7 ______________________________________________________ 8 ______________________________________________________ 9 ______________________________________________________ 10 ______________________________________________________ 11 ______________________________________________________ 12 ______________________________________________________ 13 ______________________________________________________ 14 ______________________________________________________ 15 ______________________________________________________ 16 ______________________________________________________ 17 ______________________________________________________ 18 ______________________________________________________ 19 _________________________________________ 20 21 I, SALLY NEALEY, have read the foregoing deposition and 22 hereby affix my signature that same is true and correct, 23 except as noted above. 24 ________________________________________ 25 SALLY NEALEY