The Franchise Memorandum

A federal court in Kansas recently granted Defendant Sandvik Mining and Construction’s motion to quash a deposition subpoena of its in-house counsel. Roadbuilders Machinery and Supply Co., Inc. v. Sandvik Mining and Construction USA, LLC, 2023 WL 3790691 (D. Kan. June 2, 2023). Plaintiff Roadbuilders Machinery and Supply Company commenced the suit alleging that Sandvik wrongfully terminated the parties’ franchise dealer agreement. Roadbuilders sought to depose Sandvik’s in-house counsel, Taylor Siegel, to obtain additional information about the termination. Sandvik moved to quash the deposition, claiming that any information from Siegel would be irrelevant and privileged. Roadbuilders, however, argued that by asserting the affirmative defenses of failure to mitigate and good faith, Sandvik had placed at issue communications with Siegel that were integral to those defenses.

The court sided with Sandvik and quashed the deposition. The court first established that a heightened standard for deposing opposing counsel applied to Siegel. Under this standard, parties seeking a deposition must show, “that (1) no other means existed to obtain the information; (2) the information sought is relevant and non-privileged; and (3) the information is crucial to the preparation of Plaintiff’s case.” In order to determine whether these standards apply to in-house counsel, the court looked at (1) counsel’s duties and involvement in the litigation, (2) whether they were listed as a potential witness, and (3) whether the accepted rationale for the heightened standards (avoiding abuse and delay) was applicable. The court applied the heightened standard because Siegel’s privileged advice to Sandvik on collateral matters could lead to potential abuse. Applying the heightened standard, the court found that Roadbuilders failed to show that Siegel was the exclusive source of relevant information about the ongoing franchise agreement dispute. Because Sandvik did not assert that it relied on Siegel’s advice for the failure to mitigate defense, the court determined that Roadbuilders also failed to show that Sandvik placed protected communications with Siegel at issue. Finally, the court held that asserting a good faith defense does not automatically waive attorney-client privilege.

*Emily Ditzler is a Summer Associate for Lathrop GPM who contributed to the writing of this post.