MARSH SUPERMARKETS, INC. v. MARSH

Filing 112

ORDER ON NONPARTY DAVID A. MARSH'S MOTION FOR PROTECTIVE ORDER: Nonparty David A. Marsh's motion for protective order 88 and motion to correct 104 are granted, and therefore Baker & Daniels may not depose David on behalf of Marsh Supermarkets, Inc. - See Order for Details. Signed by Magistrate Judge Tim A. Baker on 5/20/2011. (SWM)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
MARSH SUPERMARKETS, INC.,
Plaintiff,
vs.
DON E. MARSH,
Defendant.

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1:09-cv-458-SEB-TAB

ORDER ON NONPARTY DAVID A. MARSH’S
MOTION FOR PROTECTIVE ORDER
I.

Introduction
Indiana Rule of Professional Conduct 1.9 precludes attorneys and firms from switching

sides. Nonparty David A. Marsh asserts that Baker & Daniels’s plan to depose him in this case
on behalf of Plaintiff Marsh Supermarkets, Inc. would violate Rule 1.9 because Baker & Daniels
previously provided him with estate planning advice. Because David’s estate planning work is
substantially related to his deposition in this case, and because David did not unreasonably delay
in seeking disqualification, Baker & Daniels may not depose him in this case.
II.

Background
Marsh Supermarkets, Inc. (“the Company”) sued Don E. Marsh alleging that he misused

its funds while serving as its CEO. The Company believes these alleged misdeeds include
authorizing payment of personal expenses for Don’s son (and former Company president),
David. One disputed expense was for David’s personal estate planning with Baker & Daniels
over five years ago, and the Company wishes to depose David about why it paid for his personal
legal work. The Company plans for David’s deposition to be taken by its long-time counsel,
Baker & Daniels.

David and the Company have their own litigation history, including David’s 2006 lawsuit
against the Company. David A. Marsh v. Marsh Supermarkets, Inc., No. 1:06-cv-1395-JDTTAB. David’s lawsuit also involved the Company’s payment of his personal expenses, including
the estate planning fees. Baker & Daniels defended the Company against David’s action, and at
no time did David seek to disqualify the firm. The lawsuit ultimately settled in October 2007.
At some point, the IRS got involved. On March 20, 2009, the Company notified David
that “certain expenditures of funds of Marsh Supermarkets, Inc. by you or on your behalf that
were treated as reimbursable expenses constitute income to you. We reached this determination
after extensive discussions with the IRS Agent who is auditing our returns.”1 [Docket No. 88,
Ex. 1.] David believes that the IRS Civil Investigation Division has authored a document
“wherein certain implications were made regarding David relating to his potential civil and/or
criminal tax liabilities.”2 [Docket No. 88 at ¶ 3.] David asserts that his awareness of these
liabilities spurred his objection to Baker & Daniels deposing him in this lawsuit. [Docket No.
102 at 2–3.] His counsel raised this objection with Baker & Daniels on August 6, 2010, and the
Company advised that it was postponing David’s deposition indefinitely. [Id. at 1–2.]
On February 8, 2011, the Company noticed David’s deposition for March 17, 2011.
[Docket No. 88, Ex. 2.] David renewed his objection, and his counsel met and conferred with
Baker & Daniels and counsel for Don Marsh without reaching agreement. [Docket No. 88 at 3.]

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Despite the letter’s perhaps unwelcome message, David may have taken some comfort in
the motto at the bottom of the Company letterhead: “we value you.” [Docket No. 88, Ex. 1.]
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David’s motion for protective order mistakenly identified the “IRS Criminal
Investigation Division.” He subsequently moved to correct this error. [Docket No. 104.] The
Court grants his motion to correct.
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David’s motion for protective order [Docket No. 88] followed.
III.

Discussion
David argues that disqualification is proper because permitting Baker & Daniels to

depose him would create a conflict of interest. The Company responds that Baker & Daniels has
no conflict because its prior representation of David is not substantially related to his deposition
in this matter. Alternatively, the Company argues that even if Baker & Daniels has a conflict,
David waived any objection by not seeking disqualification sooner.
A.

Disqualification for conflict of interest

The standards governing disqualification of counsel derive from Indiana’s Rules of
Professional Conduct—adopted as this Court’s standards of conduct—and federal common law.
Leathermon v. Grandview Mem’l Gardens, Inc., No. 4:07-cv-137-SEB-WGH, 2010 WL
1381893, at *8 (S.D. Ind. Mar. 31, 2010). David alleges that permitting Baker & Daniels to
depose him in this matter would violate these rules. David focuses his argument on Rule 1.9(a),
which provides:
A lawyer who has formerly represented a client in a matter shall not thereafter
represent another person in the same or a substantially related matter in which
that person’s interests are materially adverse to the interests of the former client
unless the former client gives informed consent, confirmed in writing.
The federal common law provides a similar standard: disqualification is required if the prior
representation has a “substantial relationship” to the current matter such that “it could reasonably
be said that during the former representation the attorney might have acquired information
related to the subject matter of the subsequent representation.” Leathermon, 2010 WL 1381893,
at *8 (quoting LaSalle Nat’l Bank v. Lake County, 703 F.2d 252, 255 (7th Cir. 1983)).
The Company argues that Baker and Daniels’s previous estate planning work is not
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substantially related to the planned deposition because the deposition will not cover any estate
planning details—only why the Company footed the bill. The Company also makes much of
David’s failure to specify the type of confidential information given to Baker & Daniels.
Comment 3 to Rule 1.9 addresses these arguments:
Matters are “substantially related” for purposes of this Rule if they involve the
same transaction or legal dispute or if there otherwise is a substantial risk that
confidential factual information as would normally have been obtained in the
prior representation would materially advance the client’s position in the
subsequent matter. . . . A former client is not required to reveal the confidential
information learned by the lawyer in order to establish a substantial risk that the
lawyer has confidential information to use in the subsequent matter. A conclusion
about the possession of such information may be based on the nature of services
the lawyer provided the former client and information that would in ordinary
practice be learned by a lawyer providing such services.
The nature of estate planning requires a client to provide sensitive financial information,
particularly concerning the client’s tax position. David has not specified what he disclosed to
Baker & Daniels, but comment 3 permits the inference that it included tax information. Even if
this specific information is not anticipated to come up in deposition, knowledge of David’s
financial position could shed some light on why the Company paid his legal fees and
characterized them as reimbursable—a position the Company no longer holds, and a position the
IRS is apparently scrutinizing. Under these circumstances, Rule 1.9 precludes Baker & Daniels
from deposing David.

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B.

Waiver

The Company argues that even if Baker & Daniels has a conflict of interest, David
waived any objection by failing to seek disqualification sooner. In the Seventh Circuit, “[a]
motion to disqualify should be made with reasonable promptness after a party discovers the facts
which lead to the motion.” Leathermon, 2010 WL 1381893, at *12 (quoting Kafka v. Truck Ins.
Exch., 19 F.3d 383, 386 (7th Cir. 1994)). Deciding whether a party’s delay waives its right to
seek disqualification requires the Court to “balance the policy of preserving former client
confidences with that of allowing parties their freedom to choose their legal counsel.”
KnowledgeAZ, Inc. v. Jim Walter Res., Inc., No. 1:05-cv-1019-RLY-WTL, 2007 WL 2258731, at
*5 (S.D. Ind. Aug. 3, 2007).
The Company is correct that David could have, and perhaps should have, moved for
Baker & Daniels’s disqualification during the 2006 litigation. But that was before the IRS
entered the picture. David’s interest in identifying a conflict is now much greater than in 2006,
providing a reasonable explanation for his delay in moving to disqualify. Upon learning of the
Company’s plans to depose him, David communicated his concerns. And, although he did so
only three days before his scheduled deposition, David asserted his interest by timely moving for
a protective order.3
The Company is also correct that it will suffer some prejudice if Baker & Daniels cannot
depose David. Baker & Daniels is highly familiar with the history of the Marsh litigation and

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At some point, the parties also met and conferred. But because David’s statement under
Local Rule 37.1 omits the date, time, and place of their conference as required by the rule, the
Court is unable to determine whether the meet and confer provided the Company with earlier
notice of David’s intentions.
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has already prepared to depose David. But the Company has been aware of David’s objections
to Baker & Daniels since August 2010 and bears some responsibility for undertaking deposition
preparation before David’s reasonably anticipated motion for protective order.
This is a close case. David could have sought disqualification sooner, but he seeks
disqualification only for a single deposition, and the Company has long been aware of his
objections. Moreover, as discussed above, his objections are significant. Estate planning
requires disclosure of sensitive financial information, and even if the deposition is not
anticipated to cover that information, David—now under IRS scrutiny—has a valid concern that
his sensitive information would be in the minds of attorneys from whose firm he previously
sought advice. Judge Barker recently weighed these types of competing interests in another
case. She concluded that disqualification was required, reasoning that:
given the extent of the conflict here, we cannot withhold the remedy of
disqualification where the confidence of the public and the integrity of the legal
system is at stake. As the Seventh Circuit observed in Analytica: “For a law firm
to represent one client today, and the client’s adversary tomorrow in a closely
related matter, creates an unsavory appearance of conflict of interest that is
difficult to dispel in the eyes of the lay public—or for that matter the bench and
bar—by the filing of affidavits, difficult to verify objectively, denying that
improper communication has taken place or will take place between the lawyers
in the firm handling the two sides.” 708 F.2d at 1269. Any such appearance is
particularly difficult to dispel where, as here, the public has been so intimately
involved in the progression of this case. Clients have a right to expect
representation that is untainted by conflict and clients will not repose confidences
in attorneys or firms who switch from one side to another, whatever the reason.
Leathermon, 2010 WL 1381893, at *12. Although the conflict in Leathermon was more
pronounced, the same principles apply here. Recognizing these concerns and the nature of the
conflict David has identified, the Court concludes that the remedy David seeks is appropriately
narrow, and the most appropriate and prudent course of action is for the Company to retain

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separate counsel for David’s deposition.
IV.

Conclusion
Nonparty David A. Marsh’s motion for protective order [Docket No. 88] and motion to

correct [Docket No. 104] are granted, and therefore Baker & Daniels may not depose David on
behalf of Marsh Supermarkets, Inc.
Dated:

05/20/2011
_______________________________
Tim A. Baker
United States Magistrate Judge
Southern District of Indiana

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Copies to:
Linda Joy Cooley
KRIEG DEVAULT, LLP
[e-mail]
Winthrop James Hamilton
BOSE MCKINNEY & EVANS, LLP
[e-mail]
David K. Herzog
BAKER & DANIELS - Indianapolis
[e-mail]
Ryan Michael Hurley
BAKER & DANIELS - Indianapolis
[e-mail]
Andrew M. McNeil
BOSE MCKINNEY & EVANS, LLP
[e-mail]
C. Joseph Russell
KRIEG DEVAULT LLP
[e-mail]
Munjot Sahu
BAKER & DANIELS - Indianapolis
[e-mail]
Emily L. Yates
BOSE MCKINNEY & EVANS, LLP
[e-mail]

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