868 N.W.2d 399
S.D.2015Background
- Voorhees sold a feedlot to Dakota Feeding Co. (DFC) via a 2006 contract for deed that required DFC to complete lagoon design and permitting per DENR-approved specifications.
- DFC hired B & B Equipment (B&B) to perform excavation; lagoon remained incomplete and DENR later required depopulation; Voorhees foreclosed after DFC defaulted.
- DFC asserted fraud against Voorhees and third‑partied B&B for breach of contract; B&B counterclaimed impossibility of performance and breach of contract, seeking payment for excavation.
- Voorhees sought to depose DFC’s lawyer William Van Camp and subpoena his files; the circuit court denied Van Camp’s motions to quash and he was deposed and admitted communications and letters into evidence.
- DFC appealed the admission of attorney‑client communications as privileged; the Supreme Court held the communications were protected and the court erred in permitting the discovery and admission, but the error was harmless as to B&B’s claims and the judgment was affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether attorney‑client communications and counsel deposition were discoverable despite privilege | Voorhees argued Van Camp’s communications were relevant because DFC alleged fraud and counsel had investigated and advised on permit/plan issues | DFC argued communications were privileged, Van Camp acted as ordinary counsel, and deposition/subpoena improperly forced disclosure | Court: Communications met SDCL privilege elements; taking opposing counsel’s deposition required stricter showing and court erred in allowing it |
| Whether DFC waived privilege by putting its knowledge/advice at issue via fraud defense | Voorhees argued DFC placed counsel’s knowledge at issue so waiver or fraud exception applied | DFC argued it did not inject advice of counsel into the case and did not waive privilege | Court: No waiver—advice of counsel was not expressly or impliedly placed at issue; relevance alone is insufficient for waiver |
| Whether the DM&E (Acuity/claims‑adjuster) exception applied | Voorhees analogized Van Camp to a claims adjuster whose communications are not privileged | DFC argued Van Camp rendered legal advice, not business/claims decisions, so DM&E is distinguishable | Court: DM&E is distinguishable; Van Camp performed legal, transactional advice and privilege applies |
| Whether erroneous admission of privileged material requires a new trial (prejudice) | DFC argued admitted privileged materials prejudiced its defense and B&B’s claims so a new trial is required | Voorhees/B&B argued independent, nonprivileged evidence supported B&B’s claims and admissions didn’t determine B&B v. DFC issues | Court: Error in allowing discovery and admission was not harmless as to Voorhees’ foreclosure claim (not appealed) but was harmless regarding B&B’s breach/impossibility claims; no new trial required for parties on appeal |
Key Cases Cited
- Dakota, Minn. & E. R.R. Corp. v. Acuity, 771 N.W.2d 623 (S.D. 2009) (distinguishing when counsel functioned as claims adjuster and privilege did not apply)
- Bertelson v. Allstate Ins. Co., 796 N.W.2d 685 (S.D. 2011) (privilege waiver occurs when a client injects advice of counsel into the case)
- Rhone‑Poulenc Rorer Inc. v. Home Indem. Co., 32 F.3d 851 (3d Cir. 1994) (advice of counsel is not in issue merely because relevant; waiver requires disclosure of attorney‑client communications)
- Shelton v. American Motors Corp., 805 F.2d 1323 (8th Cir. 1986) (standards limiting depositions of opposing counsel: necessity, relevance/nonprivilege, and cruciality)
- Sedco International, S.A. v. Cory, 683 F.2d 1201 (8th Cir. 1982) (clients must disclose facts their attorneys conveyed from independent sources; privilege protects the communication, not underlying facts)