247 N.C. App. 641
N.C. Ct. App.2016Background
- Mid-Atlantic (tenant) and Holding (guarantor) were sued by Friday Investments for unpaid rent under a 2000 lease; Blast purchased the club assets from Mid-Atlantic in 2012 under an Asset Purchase Agreement that included an indemnity/defense obligation in Blast’s favor.
- Blast agreed post-suit to defend and indemnify Defendants as promised in the Blast Agreement.
- Plaintiff sought production of post-suit communications between Defendants and Blast; Defendants refused, asserting attorney-client privilege and claiming a tripartite attorney-client relationship (common interest doctrine).
- The trial court conducted in camera review, denied Defendants’ Motion for Protective Order, and ordered production; Defendants appealed and sought to add the in camera documents to the appellate record (motion denied by the Court of Appeals).
- The Court of Appeals affirmed, holding the communications were not protected by a tripartite attorney-client privilege because Defendants and Blast shared a common business interest, not the requisite common legal interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Is the interlocutory discovery order appealable or waived? | Defendants waived privilege by not asserting it in initial responses. | Privilege was properly asserted when specific requests and deposition questions targeted communications with Blast. | Appeal permitted; privilege assertion not waived. |
| 2. Should documents reviewed in camera be added to the appellate record/sealed? | N/A | Defendants sought appellate in camera review (submit documents under seal). | Denied as untimely and prejudicial; defendants failed to follow trial-court sealing procedures. |
| 3. Does a tripartite attorney-client relationship/common-interest privilege protect communications with Blast? | Plaintiff: communications are discoverable; no tripartite privilege applies. | Defendants: indemnity/defense agreement created a common legal interest and thus privileged tripartite relationship. | No tripartite privilege; trial court did not abuse discretion. |
| 4. Is an indemnification clause in an asset purchase agreement alone sufficient to create a common legal interest? | Plaintiff: indemnity alone is insufficient. | Defendants: indemnity obligation establishes shared legal interest like insurer–insured. | Indemnity in an asset purchase agreement, without more (e.g., control over defense/settlement or shared, specific litigation purpose), is insufficient. |
Key Cases Cited
- Veazey v. City of Durham, 231 N.C. 357 (discusses interlocutory orders)
- In re Miller, 357 N.C. 316 (attorney-client privilege determination affects substantial right; immediate appeal)
- K-2 Asia Ventures v. Trota, 215 N.C. App. 443 (need particularized privilege objections in discovery responses)
- Evans v. U.S. Auto. Ass’n, 142 N.C. App. 18 (appeal of privilege ruling affects substantial right)
- Raymond v. N.C. Police Benevolent Ass’n, 365 N.C. 94 (tripartite/association-based representation and common legal interest analysis)
- Nationwide Mut. Fire Ins. Co. v. Bourlon, 172 N.C. App. 595 (insured–insurer–counsel tripartite relationship where insurer controls defense/settlement)
- Dobias v. White, 240 N.C. 680 (joint employment of counsel in business transactions and limits on inter sese privilege)
- State v. Murvin, 304 N.C. 523 (in camera review and privilege issues)