Court Permits In-House Lawyer Deposition—But With Instructions to Preserve the Privilege 1

Lawyers are increasingly seeking depositions of companies’ in-house lawyers, and this phenomenon likely corresponds with in-house counsel increasingly assuming business-related roles or tasks within the company.  In Sand Storage, LLC v. Trican Well Serv., L.P., 2015 WL 1527608 (S.D. Tex. Apr. 2, 2015), the Depositioncourt ordered an in-house lawyer’s deposition—albeit with privilege protections—and provided a good overview of the law on this subject.  You may read the decision here.

Background

Sand Storage and Trican entered into a sand-storage contract.  Trican later sent Sand Storage formal notice of its failure to perform its contractual obligations.  Trican’s in-house lawyer signed the letter, a copy of which you may read here.

Sand Storage sought the in-house lawyer’s deposition, arguing that it is entitled to discover the bases for the alleged failed performance from the person who authored the letter identifying the performance issues, regardless whether he is a lawyer.

Lawyer’s Affidavit

Trican’s in-house lawyer filed an affidavit, available here, stating that he did not make the decision to terminate the contract.  Although he consulted with a Trican businessperson “for the purpose of facilitating the rendition of professional legal services” regarding the Sand Storage agreement, he did not expressly identify the decision-maker.

And after this consultation, he determined that Trican needed to notify Sand Storage of the deficiencies and then drafted the notice letter.  He disavowed any personal knowledge of the statements in the notice letter.

Deposition Ordered

The court noted that depositions of opposing counsel are “disfavored” and that it should permit these depositions in “limited circumstances.”  Relying upon Nguyen v. Excel Corp., 197 F3d 200 (CTA5 1999) and Shelton v. American Motors Corp., 805 F2d 1323 (CTA8 1986), the court required Sand Storage to prove these three factors in order to depose Trican’s in-house lawyer:

  1. No other means exist to obtain the information than to depose opposing counsel;
  2. The information sought is relevant and non-privileged; and
  3. The information is crucial to the preparation of the case.

Based on the facts before it, the court found that the source of the notice letter’s statements regarding Sand Storage’s alleged non-performance was crucial and relevant to the case, and that Sand Storage had no other means to determine Trican’s decision-maker without deposing the in-house lawyer.  The court therefore allowed the in-house lawyer’s deposition.

Privilege Protections

The court, however, implemented privilege-protection measures.  Although ruling that the source of information contained in the notice letter and Trican’s decision-maker were facts and not privileged, it also ruled that Sand Storage’s counsel could not inquire into communications between Trican’s in-house lawyer and Trican employees, which are privileged.

The court therefore limited the deposition’s scope to factual matters underlying the notice letter and instructed Sand Storage’s counsel to “not intentionally solicit information that is privileged.”  And the court ruled that the in-house lawyer’s deposition did not constitute waiver of the privilege on any other matter.

PoP Analysis

One wonders whether this issue ever arises if Trican’s in-house lawyer had not authored the letter and simply provided legal advice to Trican businesspersons regarding the contractual issues.  If a Trican businessperson signed and sent the letter, then the in-house lawyer’s deposition likely never becomes an issue.

Even so, Trican successfully limited the deposition’s scope and preserved its privilege, a navigation that provides guidance for other in-house lawyers faced with this issue.  And for a detailed review of the legal issues surrounding in-house lawyers’ depositions, see my article titled Protecting the Attorney-Client Privilege–Depositions of In-House Counsel, available here.  You may also find my post, Tips for Preventing or Limiting In-House Counsel Depositions, helpful.

Selection and Preparation of Corporate Representatives for 30(b)(6) Depositions

In-house and outside counsel should never underestimate the importance of selecting and preparing the appropriate representative(s) for a Federal Rule 30(b)(6) (or state-law equivalent) deposition.  The requirements placedselection on the chosen representative–as well as in-house and outside counsel–invoke rigorous preparation, which includes a thorough understanding the corporate attorney-client privilege.

In my article, Selection and Preparation of Corporate Representatives for 30(b)(6) Depositions, published by InsideCounsel, I breakdown Rule 30(b)(6)’s requirements.  I also outline the duties and responsibilities that the rule imposes on corporate parties (and, thus, their lawyers), and expose some of the myths developed over time.  The article, accessible here, also discusses qualities and characteristics that counsel should consider when selecting corporate representatives.

The article also emphasizes the importance of thorough preparation, and how that preparation must include educating the representative as to the corporate attorney-client privilege.  My thanks to InsideCounsel for publishing the article and permitting its reprint in this post.

Tips for Preventing or Limiting In-House Counsel Depositions 2

Deposing in-house lawyers was once considered taboo, but has now become a litigation trend.  And these depositions are not limited to an in-house corporate lawyer in business litigation over a deal gone bad; trial lawyers increasingly seek to depose in-house litigation managers as well.  When these deposition requests arise, lawyers should appropriately consider the significant attorney-client privilege issues that will inevitably become center stage.

Several questions arise in this situation.Business man pledging  Is there anything in-house and outside counsel can do to prevent the deposition from occurring?  How should counsel handle the privilege-related issues if the deposition goes forward? How can in-house counsel avoid becoming a deposition target in the first place?

Federal and state courts provide divergent views on the subject.  Some follow the so-called Shelton rule, originating in Shelton v. American Motors Co., 805 F.2d 1323 (8th Cir. 1986), which permits a protective order preventing in-house counsel depositions unless the party seeking the deposition shows (1) that no other means exist to obtain the information; (2) the information sought is relevant and non-privileged; and (3)  the information is crucial to the party’s case preparation.

Many courts, notably the Second Circuit, decline to follow Shelton and prefer to review all relevant facts and circumstances before deciding whether to permit a deposition, such as the deposition need, the lawyer’s role in the matter on which discovery is sought, and the risk of encountering privilege and work-product issues. In re Subpoena Issued to Dennis Friedman, 350 F.3d 65 (2d Cir. 2003).

In my recent article, Preventing or Limiting In-House Depositions, published by Inside Counsel, I explore the still-developing law on this important issue.  I also provide tips on how in-house counsel can lessen their chances of becoming a deposition target, how to address the privilege-related issues, and whether the in-house lawyer needs separate counsel.

You may access the article at this link.   My thanks to Inside Counsel for publishing the article and allowing access through this post.