370 N.C. 235
N.C.2017Background
- Bally Mid-Atlantic (defendant) leased commercial space to a tenant and later assigned certain clubs, including the Charlotte club, to Blast Fitness Group (Blast) pursuant to an Asset Purchase Agreement that included indemnity and duty-to-defend obligations by Blast.
- Friday Investments (plaintiff), the landlord and successor in interest, sued defendants for unpaid rent after Blast failed to pay.
- Defendants notified Blast, which agreed to defend and indemnify under the asset purchase agreement and engaged counsel for the defense.
- Plaintiff sought production of post-suit communications between defendants and Blast; defendants claimed attorney–client privilege and moved for a protective order.
- The trial court reviewed documents in camera, denied the protective order, and ordered production; defendants appealed.
- The Supreme Court considered whether Blast’s contractual duty to defend/indemnify created a tripartite attorney–client relationship and whether the communications were privileged, but affirmed because the record lacked findings and defendants failed to timely submit disputed documents on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Blast’s duty to defend/indemnify created an attorney–client relationship with defendants and defense counsel | No tripartite attorney–client relationship exists from an indemnity provision alone; communications are not privileged | The indemnity and duty-to-defend create a common legal interest akin to insurer/insured, forming a tripartite attorney–client relationship | Court: Yes — the indemnity/duty-to-defend created a tripartite attorney–client relationship (aligning with Raymond) |
| Whether the communications at issue were protected by the attorney–client privilege | Communications are not privileged because no tripartite relationship existed and privilege elements are unmet | Communications are privileged under Murvin five-factor test because Blast and defendants shared a common legal interest and counsel represented both | Court: Did not reach a definitive privilege ruling on the merits; affirmed trial court’s production order because the record was inadequate to show abuse of discretion and trial court’s implicit factual findings are presumed |
| Whether the trial court erred procedurally by not making written findings of fact/conclusions | Plaintiff: trial court’s order compelling discovery was proper and findings not required absent request | Defendants: lack of written findings prevents meaningful appellate review of privilege determinations | Court: Findings are required only if requested; none were requested, so appellate court must presume trial court made supporting factual findings |
| Whether appellate courts could review the privileged documents in camera after briefing deadlines | Plaintiff: Too late; defendants failed to timely submit documents for appellate in camera review | Defendants: should be allowed to submit documents under seal for appellate review to vindicate privilege claims | Court: Court of Appeals properly denied untimely submission; defendants failed to preserve a complete record for review |
Key Cases Cited
- Raymond v. North Carolina Police Benevolent Ass'n, 365 N.C. 94 (2011) (recognizes tripartite attorney–client relationship where organizations pay for and direct legal representation)
- State v. Murvin, 304 N.C. 523 (1981) (articulates five-factor test for attorney–client privilege)
- In re Investigation of Miller, 357 N.C. 316 (2003) (privilege requires attorney–client relationship at time of communication)
- Dobias v. White, 240 N.C. 680 (1954) (multiparty attorney–client relationships recognized where multiple persons employ same attorney for a transaction)
- Nationwide Mut. Fire Ins. Co. v. Bourlon, 172 N.C. App. 595 (2005) (insurance-context authority finding insurer and insured may share counsel and privilege)