Background
Education Creditor Trust (ECT), successor to lenders that backed a letter of credit for Education Management Corporation, sued the Department of Education over its use of proceeds from a 2018 draw on that letter of credit. ECT alleges that the government spent about $39.6 million outside the letter’s permitted purposes and after applicable deadlines. The government disputes both the asserted contractual relationship and the merits.
During discovery, the government subpoenaed ECT’s counsel of record, Morrison & Foerster partner James A. Newton, for a deposition. Newton represented lender Candlewood Investment Group during 2018–19 negotiations with the Department concerning the Dream Center schools and the release of $14.5 million in letter-of-credit proceeds. ECT moved to quash the subpoena.
The Court’s Holding
Senior Judge Eric G. Bruggink granted ECT’s motion and quashed the subpoena. Applying the three-part test from Shelton v. American Motors Corp., the court held that a party seeking to depose opposing counsel must show that no other means exist to obtain the information, that the information is relevant and nonprivileged, and that it is crucial to preparing the case.
The government failed the first requirement. It had deposed only one lender witness, Michael Lau, despite having a loan register identifying all lenders and contact information for additional lender witnesses. It also had access to Department witnesses and multiparty communications concerning the negotiations. The government’s dissatisfaction with Lau’s testimony did not establish that Newton was the exclusive source of the requested information. Because the government had not exhausted ordinary discovery avenues, the court did not decide whether Newton’s testimony would be nonprivileged or crucial.
Key Takeaways
- Depositions of opposing counsel are strongly disfavored in the Court of Federal Claims.
- The party seeking such a deposition must satisfy all three Shelton requirements.
- A lawyer’s participation in negotiations does not make the lawyer a necessary fact witness when the information can be obtained from clients, other participants, or documents.
Why It Matters
The ruling reinforces that litigants cannot depose opposing counsel simply because counsel participated in the underlying transactions or may possess useful factual knowledge. They must first pursue reasonably available non-attorney witnesses and other discovery sources, and must show genuine necessity rather than convenience.
For government-contract and other complex commercial litigation, the decision underscores the need to develop a specific record showing why alternative discovery is unavailable before seeking testimony from an adversary’s lawyer.