Tuesday, June 20, 2023

When An Unlikely Event Occurs

The North Carolina Supreme Court found a waiver of attorney-client privilege in a joint representation

During a joint conference call with counsel, one of the defendants, Nicholas Hurysh, secretly recorded the conversation. After a falling out among the codefendants, Hurysh sought to waive the attorney–client privilege and disclose the contents of the call.

IOMAXIS moved for a protective order, arguing that the call was to discuss corporate matters. IOMAXIS further argued that counsel on the call (who also was IOMAXIS’s counsel for general corporate matters) was providing advice to the individual defendants solely in their roles as agents of the company.

The trial court rejected this argument and ruled that Hurysh held the privilege individually and could waive it. As explained below, we affirm. The trial court made a fact finding that counsel was not acting as corporate counsel but instead as joint defense counsel for all the defendants, including Hurysh, under a written joint defense agreement. That finding is supported by at least some competent evidence in the record and thus is binding on appeal.

Based on that finding, the trial court properly determined that Hurysh jointly held the attorney–client privilege with respect to the secretly recorded call and “therefore may opt to waive the privilege if he so desires.”

Facts

This case concerns a corporate entity known as IOMAXIS, LLC. In 2017, the founder and majority owner of IOMAXIS passed away. A dispute later arose between the trust formed by his estate, whose trustees are the plaintiffs in this action, and the remaining members of IOMAXIS, who are defendants in this action.

During this time period, the law firm Holland & Knight, LLP represented IOMAXIS in connection with “general corporate matters” under a standard corporate engagement letter. This engagement letter was solely between Holland & Knight and IOMAXIS and did not involve representation of the individual members of IOMAXIS.

After plaintiff filed suit in North Carolina

In July 2018, Holland & Knight executed a second engagement letter, this one covering the “dispute” with plaintiffs and the lawsuit “in state court in North Carolina.” This second engagement letter stated that Holland & Knight would jointly represent IOMAXIS and its individual corporate members, all of whom were named defendants in this litigation. The letter emphasized that “there will be no way in this joint representation for you to pursue your individual interests through your common attorney.” A different Holland & Knight attorney, Phillip Evans, signed this second engagement letter.

There is nothing in the second engagement letter, or anywhere else in the record, indicating that Holland & Knight created any separation within the firm between attorneys handling the corporate matters and attorneys handling the litigation matters.

The second engagement letter also addressed potential implications of the joint representation. The letter stated that “as a necessary consequence of this joint representation, all information you share with [Holland & Knight] in this joint representation will be shared among each other.” It continued, “[I]n the unlikely event of a disagreement among you, the attorney–client privilege will not protect the information you share with us."

Thereafter a zoom call was recorded

the trial court found that Hurysh was represented by Holland & Knight in this litigation under the terms of an express engagement letter. That engagement letter stated that Holland & Knight jointly represented Hurysh, his fellow corporate members, and IOMAXIS and that “there will be no way in this jointrepresentation for you to pursue your individual interests through your common attorney.” The engagement letter further stated that “in the unlikely event of a disagreement among you, the attorney–client privilege will not protect the information you share with us.”

Words to the wise

Most obviously, counsel can choose not to jointly represent both the corporation and the individual directors, officers, or employees as counsel did in this case through the litigation engagement letter. But even when counsel chooses to do so, there are ways to avoid the factual confusion that arose here. For example, an engagement letter can identify the particular attorneys within the firm who are handling a joint litigation defense and separately identify the corporate attorneys who are handling the general legal affairs of the company. The letter can then inform the jointly represented parties that any legal advice from the corporate attorneys is solely for the company, not the individuals.

Similarly, a corporate attorney speaking to officers or employees of the company can offer a clear disclaimer of representation, emphasizing that counsel represents the corporation for purposes of the discussion; that the communications are covered by an attorney–client privilege held solely by the company; and that the participants must consult their own counsel if they seek personal legal advice about the subject matter.

None of this took place here, thus creating a factual dispute about the scope of Holland & Knight’s representation on the July 22 call. The trial court resolved that factual dispute by making findings in favor of Hurysh. Those findings are supported by competent evidence, and the trial court’s resulting determination that Hurysh held the attorney–client privilege was well within the trial court’s sound discretion. We therefore affirm the trial court’s order.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2023/06/the-north-carolina-supreme-court-found-a-waiver-of-attorney-client-privilege-during-a-joint-conference-call-with-counsel-on.html

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