United States: First Department Shifts Burden To Attorney Resisting A Deposition But Requires That Information Be Otherwise Unavailable

In an opinion in Liberty Petroleum Realty, LLC v. Gulf Oil, L.P., dated August 2, 2018, the Appellate Division, First Department reversed the Supreme Court's protective order prohibiting the deposition of an attorney in a commercial case.¹

The case arose out of an ongoing dispute between Liberty Petroleum, which is a distributor of wholesale motor fuel, and Cumberland Farms and Gulf Oil, L.P. (together "Gulf"), who are competing sellers of wholesale motor fuel.  Liberty Petroleum sued Gulf in Supreme Court, Bronx County, alleging tortious interference with the contract when Gulf allegedly encouraged nonparty gas stations to rebrand from "Mobil" to "Gulf" and to purchase fuel from Gulf instead.²

In the course of the litigation, Liberty Petroleum served a subpoena on Gulf's attorney "seeking documents and deposition testimony about his communication with Gulf  . . . in connection with their inducement of the breach of contract."³  When Gulf's attorney ignored the subpoena, Liberty moved to strike Gulf's answer.  Gulf opposed the motion to strike, and cross-moved for a protective order to quash the subpoena.

The Supreme Court quashed the subpoena for documents and for a deposition of Gulf's lawyer.  The First Department reversed in part and affirmed in part, ruling that the court below had properly quashed the subpoena for documents but should not have granted the protective order prohibiting the attorney's deposition.

The First Department disagreed with the standard that the lower court adopted from the Federal Court of Appeals for the Eighth Circuit in issuing the protective order and prohibiting the deposition of the attorney.  The Shelton v. American Motors Corp. standard, which prevails in the Eighth Circuit, provides that depositions of opposing counsel are limited to circumstances where the party seeking the deposition shows that: "(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."⁴

The First Department concluded that Shelton was inconsistent with New York law,  which places the burden on the party opposing discovery, not the party seeking discovery, to justify a protective order:  According to the court, "the individual or entity seeking a protective order bears the initial burden to show that the information sought is irrelevant or that the process will not lead to legitimate discovery, and only then does the burden shift to the subpoenaing party to demonstrate that the information sought is material and necessary."⁵

The First Department adopted the approach used in the Second Department, which applies once the party opposing discovery has carried its initial burden in seeking a protective order:  the party seeking to depose opposing counsel must show that the information "sought is material and necessary" and must "demonstrate a good faith basis."⁶  The subpoenaing party "must demonstrate good cause, in order to rule out the possibility that the deposition is sought as a tactic intended solely to disqualify counsel or for some other illegitimate purpose." ⁷ The First Department also articulated another requirement: that the party seeking the deposition must show that the information is not available from another source.⁸

Gulf's attorney had argued that the information sought by Liberty was aimed at disqualifying him as counsel for the defendants, and that questions about rebranding the fuel to Gulf would implicate privileged communications.

The First Department ordered the lower court, on remand, to consider whether Liberty was seeking information that was sufficiently worthwhile given the possible risk of disqualifying Gulf's attorneys.  The Court, however, also noted that an attorney's attempts to resist a deposition could be jeopardized if the attorney had previously represented the client prior to the litigation in a business capacity.  The Court also made clear that the mere likelihood of questions eliciting privileged information was also not a sufficient ground to quash a subpoena.⁹

Supreme Court will next need to decide, on remand, whether Liberty can show that the information sought is material and necessary, whether there is a good faith basis for seeking it, and that the information is not available from another source.

Justice Singh concurred separately in the result, agreeing with the general proposition that the burden is on the party resisting discovery, but also disagreeing with the additional element that the party seeking discovery establish that the information sought is not available from another source.  He also appeared relatively unconvinced that Gulf's counsel could actually assert privilege over conversations relating to rebranding fuel from Mobil to Gulf, reasoning that "privilege does not apply when an attorney acts as a negotiator or agent."¹⁰

Although the Court's decision clarifies that the initial burden of resisting discovery resides with the attorney opposing a deposition, the Court's decision also makes clear that depositions of opposing counsel should be quite rare and should be used sparingly, not as part of hardball litigation strategy.

Footnotes

1 Liberty Petroleum Realty, LLC v. Gulf Oil, LP, No. 6450N, 2018 BL 275291 (App. Div. 1st Dept. Aug. 2, 2018).

2 Id. at *2.  Although the lower court decision did not emanate from the Commercial Division, it involved a commercial case that could have ramifications on litigating in the Division.

3 Id.

4 Shelton v. Am. Motors Corp., 805 F.2d 1323, 1327 (8th Cir. 1986).

5 Liberty Petroleum, 2018 BL 275291, at *3.

6 Id. at *4.

7 Id.

8 Id. at *5.

9 Id.

10 Id.  at *7.

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