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Court Puts In-House Counsel in Deposition Hot Seat

By Renee Choy Ohlendorf, Litigation News Associate Editor – July 30, 2015


An in-house attorney who authored a breach of contract notice must submit to a deposition to identify the persons with knowledge of the alleged breach, subject to limitations to preserve privileges. Sand Storage, LLC v. Trican Well Services, L.P. The ruling by the U.S.  District Court for the Southern District of Texas emphasizes the critical distinction between an in-house counsel's role as a business adviser and a legal adviser in maintaining attorney-client privilege.

Court Orders Limited Deposition of Attorney
Sand Storage sought to depose two Trican in-house attorneys regarding contentions in a breach of contract notice, including the identity of the notice's author and his supervisor. The opinion did not state whether the attorneys were individually named in deposition notices or whether the depositions were noticed pursuant to Rule 30(b)(6), which requires production of the most knowledgeable person. Trican objected, asserting attorney-client privilege.

The parties disputed whether the author of the notice acted as a decision maker authorizing the termination, obviating the privilege, or as an attorney rendering legal advice, preserving the privilege. Trican produced the supervising attorney, but she was unable to verify the source of information in the notice letter or who authorized the contract termination. Sand Storage then moved to compel the author's deposition.

Noting that depositions of opposing counsel are generally disfavored, the district court applied a three-part test to determine the appropriateness of a deposition: “(1) no other means exist to obtain the information than to depose the opposing counsel; (2) the information sought is relevant and non-privileged; and (3) the information is crucial to the preparation of the case.”

The court held the author was the only person with knowledge of the source of information contained in the notice and the identity of the decision maker, and thus, Sand Storage had no other means to obtain that information. The court further concluded the contents of the notice were disputed and critical to the claims asserted, and neither the source of the facts underlying the letter nor the identity of the decision maker were privileged.

Accordingly, the court permitted the attorney to be deposed, but limited the scope of the deposition to identifying the source of the facts in the letter and the decision maker who terminated the contract. The court also ruled that Trican did not waive privileges by submitting to the deposition, and that inadvertent disclosure of privileged information did not waive Trican’s rights to assert those privileges at trial.

Was a Deposition Necessary?
Whether deposing the attorney was necessary to determine the source of the information in his notice or the decision maker is debatable. “I am troubled that the opinion fails to identify what steps were taken before the deposition was ordered,” says Nathaniel Cade Jr., Milwaukee, WI, cochair of the ABA Section of Litigation’s Ethics & Professionalism Committee. “The most crucial element is whether Sand Storage did everything at its disposal short of deposing the lawyer. The court does not address whether Sand Storage issued a Rule 30(b)(6) deposition notice, and if so, whether Trican was able to designate anyone else with knowledge besides the lawyer,” explains Cade. Cade further notes the information could have been obtained through other methods, such as a written deposition.

Other Section of Litigation leaders believe the opinion was narrowly tailored to balance both parties’ interests. “The facts of this case are unique. There seems to be some suggestion that Trican was less than forthright in identifying who had knowledge of the alleged breaches of contract,” observes Kenneth R. Berman, Boston, MA, cochair of the Section of Litigation’s Corporate Counsel Committee. “Sand Storage made a sufficient showing that the information was relevant and could not be obtained from any other source. The court fashioned an order designed to protect the attorney-client privileged communications, and allow Sand Storage to get the information it needed without intruding upon the privilege,” he states.

Protecting the Privilege
“The way to avoid your own attorney being deposed is to make sure there are means to obtain the information other than by deposing the attorney,” says Berman. “The analysis is really no different from a Rule 30(b)(6) analysis. It requires an honest assessment of whether the information sought by the opponent is relevant to the case, and if it is known by the attorney, the company should try to identify who else knows the information and could testify to it,” he adds.

In the event a lawyer is deposed, practitioners should limit the topics of deposition, assert objections, and enter into a clawback agreement to ensure the attorney-client privilege is not waived, according to Cade. He also recommends that in-house counsel clearly define their role to protect the privilege. “Just because you are a lawyer does not make conversations in and of themselves privileged. Only those conversations where you have been specifically engaged to provide legal advice are privileged,” Cade cautions.

“It is sometimes ambiguous whether the inside counsel is wearing a business hat or a lawyer hat,” agrees Berman. “It is a highly fact-dependent analysis and differs from case to case. When people in a company want to speak to their in-house counsel, they should make clear that they are looking for legal advice. If that is not clear, the attorney should ask the employee, ‘Are you consulting me for legal advice?’ If there are internal communications between an employee and an attorney, the communications should make clear that legal advice is being sought or given,” advises Berman.

Keywords: attorney-client privilege, deposition, contract, F.R.C.P. 30, clawback


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