Wednesday, June 8, 2016

Common Business Interest Does Not Establish Tripartite Privilege

The North Carolina Court of Appeals has held that the attorney-client privilege was inapplicable when a successor in interest purchases assets

This appeal requires us to consider the common interest doctrine, which extends the attorney-client privilege to communications between and among multiple parties sharing a common legal interest. We hold that an indemnification provision in an asset purchase agreement, standing alone, is insufficient to create a common legal interest between a civil litigant indemnitee and a third-party indemnitor.

The case involves a rent dispute

The record reflects that when faced with a specific request for their communications with Blast, Defendants promptly asserted the attorney-client privilege. During the 11 February 2015 deposition, counsel for Plaintiff asked the deponent, Mid-Atlantic’s General Counsel Earl Acquaviva, to describe “all of the conversations that you have had personally with Blast or any representatives of Blast about this lawsuit.” Defendants’ counsel immediately objected on the basis of attorney-client privilege and advised the deponent not to answer. Plaintiff’s further attempts to probe the issue were all met with similar objections by Defendants’ counsel, and the deponent refused to answer such questions...

we hold that Defendants properly asserted the attorney-client privilege in a manner that is neither frivolous nor insubstantial and that this interlocutory appeal affects a “substantial right” of Defendants. We therefore deny Plaintiff’s motion to dismiss.

The tripartite privilege

The linchpin in any analysis of a tripartite attorney-client relationship is the finding of a common legal interest between the attorney, client, and third party. See Raymond, 365 N.C. at 100, 721 S.E.2d at 927 (tripartite attorney-client relationship existed between attorney, client, and benevolence organization due to the common interest of “protecting and promoting the livelihood” of the client). “[T]he parties must first share a common interest about a legal matter.” United States v. Aramony, 88 F.3d 1369, 1392 (4th Cir. 1996)

...To extend the attorney-client privilege between or among them, parties must (1) share a common interest; (2) agree to exchange information for the purpose of facilitating legal representation of the parties; and (3) the information must otherwise be confidential. Schwimmer, 892 F.2d at 243–244. Although prudent counsel would always put a representation agreement in writing, there is no requirement that the agreement be in writing.

...The indemnification provision in the asset purchase agreement requires Blast to defend and indemnify Defendants from “[l]osses incurred or sustained . . . on account of or relating to . . . the use of the [a]ssets by [p]urchaser and the operation of the . . . [h]ealth [c]lubs . . . .” This language, and the nature of the asset purchase agreement, are most similar to the purchase agreement which was held to be insufficient in SCR-Tech to create a tripartite privileged relationship.

...We hold that Defendants and Blast shared a common business interest as opposed to the common legal interest necessary to support a tripartite attorney-client relationship. Consequently, we hold that the trial court did not abuse its discretion in compelling Defendants to produce the documents.

(Mike Frisch)

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