David A. Marsh has won a victory in his attempt to prevent a law firm representing Marsh Supermarkets Inc. from deposing him in its lawsuit against his father, Don Marsh.

Marsh Supermarkets' lawsuit alleges that its former CEO, Don Marsh, misused funds by treating the business “like his personal checkbook” to bankroll extravagant trips, maintain vacation homes and hide relationships with female employees.

The grocery chain is represented by Indianapolis-based Baker & Daniels LLP, which once did estate-planning work for David Marsh.

U.S. Magistrate Tim A. Baker on Friday sided with David Marsh in his argument that Baker & Daniels’ previous work it did for him presented a conflict of interest.

In his decision, Baker also cited documents from the Internal Revenue Service’s Civil Investigation Division relating to potential civil and criminal tax liabilities David Marsh may be facing.  

Court filings in April raised the possibility for the first time that the IRS inquiry into the expenses David Marsh submitted for reimbursement may lead to federal charges.

“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,” Baker wrote.

Like his father, David Marsh also has battled the grocery store chain’s new owner, Florida-based private-equity firm Sun Capital Partners, over expenses the firm deemed improper.

David Marsh served as president of Marsh Supermarkets until February 2006. Don Marsh was CEO until September that year, when Sun completed its acquisition of the company. David Marsh now is president of the Crystal Flash convenience store chain.

Baker & Daniels LLP represented Marsh Supermarkets in David Marsh’s suit filed in 2006 charging that Sun Capital Partners shorted him about $102,000 on a $2.1 million severance package. Both sides agreed to a confidential settlement in 2007.

Baker & Daniels helped David Marsh complete estate-planning documents before he sued his former employer in 2006. That legal work presents enough of a conflict that should prevent the firm from deposing him, he argued in court documents.

In a previous court filing, Marsh Supermarkets’ lawyer, David Herzog of Baker & Daniels, said that even if there were a conflict, David Marsh waived that argument years ago when Baker & Daniels opposed him in his own lawsuit against the company.

Magistrate Baker acknowledged that Herzog is correct that David Marsh could have moved to disqualify the law firm from representing Marsh Supermarkets during his suit against the company in 2006.

But that was before the IRS entered the picture, Magistrate Baker said, making his interest in identifying a conflict much greater than it was in 2006 and providing a reasonable explanation for his delay in moving to disqualify.

Marsh Supermarkets is weighing its options, spokesman Ed West said.

“In his order, Judge Baker said this was a close call,” West said. “And we are reviewing the matter in order to decide whether we will be taking any additional steps.”

Linda Cooley, an attorney for David Marsh, said in an e-mail that the “court’s ruling reflects our position on an interpretation of relevant authority in this matter.”

Don Marsh got the ax just after Sun Capital bought the then-publicly owned grocery chain for $88 million in cash, plus the assumption of $237 million in debt.

The issue of what is considered reimbursable expenses is at the crux of Don Marsh’s defense as well.

The IRS on May 17 reached a settlement with Marsh Supermarkets regarding nearly $5.3 million in personal travel and entertainment expenses reimbursed by the company to former CEO Don Marsh.

The settlement came to light in a court document filed Thursday by the grocery chain in its ongoing legal dispute with Don Marsh.