128 F.R.D. 128 | M.D. Ga. | 1989
.ORDER
Before the court is plaintiffs motion to compel the production of certain documents from Southern Clays, Inc. (Southern), the Rhode Island Charities Trust (the “Trust”); Engelhard Corporation (“Engelhard”), and George Grant, Southern’s former counsel. Although plaintiffs’ motion seeks to compel numerous documents from Engelhard, Southern, and the Trust, the court here addresses only those documents in the possession of Engelhard and Southern which relate to the acquisition of the Gibson and Cheeves properties by Southern. A hearing on plaintiffs’ motion to compel was held in chambers on September 27, 1989. The court heard oral arguments from the parties regarding Engelhard and Southern’s claim that the particular documents sought by plaintiffs are protected by the attorney-client privilege and the work product doctrine. At that time the court instructed counsel for Englehard and Southern to sub-mitt the requested documents to the court for in-camera inspection. Having reviewed the documents submitted, the briefs of the parties and the relevant case law, the court now issues the following order.
DISCUSSION
Southern and Engelhard produced documents .to plaintiffs along with schedules identifying certain documents which were
As an initial matter the court notes that the attorney-client privilege is not a favored evidentiary concept in the law since it serves to obscure the truth, and should be construed as narrowly as is consistent with its purpose. Teachers Insurance & Annuity Ass’n of America v. Shamrock Broadcasting Co. Inc., 521 F.Supp. 638, 641 (S.D.N.Y.1981). The purpose of the attorney-client privilege is to promote freedom of consultation between client and lawyer by eliminating the fear of subsequent compelled legal disclosure of confidential communications. International Tel. & Tel. Corp. v. United Tel. Co. of Florida, 60 F.R.D. 177 (M.D.Fla.1973), aff’d, 550 F.2d 287 (5th Cir.1977).
Defendants assert that in 1963 Southern was sold to Freeport as a “going concern”. Defendants state that all of Southern’s assets were sold to Freeport with the exception of kaolin lands in Washington County which were leased to Free-port under a 99-year indenture. Defendants further state that following the sale, all of Southern’s employees became Free-port’s employees and Southern ceased conducting any business. Finally, defendants contend that Southern’s records, including those in dispute here, became Freeport’s records in connection with the sale. Therefore, Freeport and Engelhard are Southern’s successors in interest and there has been no waiver of the attorney-client privilege by Southern in disclosing the documents relating to the acquisition of the Cheeves and Gibson properties to Freeport and Engelhard.
On the other hand, plaintiffs argue that Southern, Freeport and Engelhard do not share the identical legal interest necessary to bar waiver of Southern’s attorney-client and work product privileges by its surrender of privileged documents to Freeport and Engelhard. Plaintiffs contend that Southern’s disclosure of the documents in question occurred in the context of a solely commercial adverse business relationship and did not serve any legal interest as co-defendants, joint clients or communications among commonly controlled or related corporate entities. Plaintiffs assert that after Southern’s partial asset sale the interests of Southern and the Rhode Island Charities Trust as to Freeport were not legal or identical, but rather strictly adverse and commercial in nature.
In Hodges, Grant & Kaufmann v. United States, 768 F.2d 719 (5th Cir.1985), the Fifth Circuit Court of Appeals held that the attorney-client privilege is not waived if a privileged communication is shared with a third person who has a common legal interest with respect to the subject matter of
The fact that there might be an overlap of a commercial and a legal interest for a third party does not negate the effect of the legal interest in establishing a community of interest. Id.
Duplan involved corporately related co-defendants involved in the joint defense of patent and antitrust litigation. The district court found no waiver of the attorney-client privilege as to communications among the corporately related co-defendants. However, as to privileged communications shared with an unrelated non-defendant licensee of the co-defendants the court found that there had been a waiver of the attorney-client privilege because the licensee shared only a commercial and not a legal interest with the co-defendants. Id. at 1175.
All parties agree that there was technically no merger between Southern and Freeport in 1963 when Freeport purchased the assets of Southern. However, Southern and Engelhard argue that the situation in the instant case is analogous to a de facto merger for the purpose of a privilege analysis, because Freeport and Engelhard are Southern’s successors in interest. The court is not persuaded that the situation in the instant case is analogous to a de facto merger.
In Howard v. APAC-Georgia Inc., 192 Ga.App. 49, 383 S.E.2d 617 (1989), the Court of Appeals of Georgia held that a de facto merger occurs when one corporation is absorbed into another. Id. at 50, 383 S.E.2d 617. See, OCGA § 14-2-210; Kemos, Inc. v. Bader, 545 F.2d 913 (5th Cir.1977)(applying Georgia law). The court held:
In order to find a defacto merger, four elements must be present: (1) There is continuation of the enterprise of the seller corporation, so that there is a continuity of management, personal, physical location, assets, and general business operations; (2) There is a continuity of shareholders which results from the purchasing corporation paying for the acquired assets with shares of its own stock, this stock ultimately coming to be held by the shareholders of the seller corporation so that they become a constituent part of the purchasing corporation; (3) The seller corporation ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practically possible; and (4) The purchasing corporation assumes those liabilities and obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller corporation.
Id. 192 Ga.App. at 50-51, 383 S.E.2d 617; Bud Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451 (11th Cir.1985). If the corporation sells to another corporation its entire business operation and all its assets, in exchange for some consideration other than stock, the two corporate entities remain distinct and intact. Howard, 192 Ga.App. at 51, 383 S.E.2d 617. In the case sub judice, Freeport purchased Southern’s assets for consideration other than stock. In a letter to this court dated July 18, 1985, sent by George Grant who represented Freeport in similar litigation involving the same plaintiffs, states that the consideration for the transaction exceeded 13 million dollars. Mr. Grant also states that Free-port did not purchase all or substantially all of Southern’s assets and that there never was any identity of ownership between Southern and Freeport. Therefore, the two corporations remained distinct entities. However, as stated supra, it is not necessary that the corporations be related or that both entities be parties to the litigation.
Courts have found a community of interest where one party owes a duty to defend another, or where both consult the same attorney.
In the case sub judice, neither Freeport or Engelhard were joint clients with Southern at the time the communications in question were made; nor is either a co-defendant in the instant litigation. Furthermore, the disclosure made by Southern to Freeport during Freeport’s purchase of Southern’s assets was made voluntarily as part of an arms length commercial transaction between parties with adverse interest. Where there is no legal interest (duty or direct transaction between the two clients of the attorney), the mere interest of a non-party client in legal transactions between the prime client and an outsider is not sufficient to prevent a waiver of the attorney-client privilege. Id. Thus, the fact that Engelhard has a commercial interest in the transactions in which Southern became the owner of the Cheeves and Gibson properties is not sufficient to prevent a waiver of the attorney-client privilege in the instant case. Moreover, the court finds that the documents in question are not protected by the work product doctrine. The work product doctrine protects those documents which are prepared by an attorney or at his direction in anticipation of litigation. Clarkson Industries, Inc. v. Price, 135 Ga.App. 787, 218 S.E.2d 921 (1975) (When the objection goes to the work product exception to general discovery, the party served must show that the material sought was prepared by or for the party in anticipation of litigtion or trial.); Lowe’s of Georgia, Inc. v. Webb, 180 Ga.App. 755, 350 S.E.2d 292 (1986). The documents which plaintiffs seek to discover were prepared over twenty five years ago and not in anticipation of litigation. Thus they are not protected from disclosure by the work product doctrine.
For the reasons set forth above, the court hereby directs defendants Southern Clays and the Rhode Island Charities Trust, Engelhard Corporation and George Grant, Southern Clays former counsel, to produce those documents requested by plaintiffs which relate to the acquisition of the Cheeves and Gibson properties. As to those documents, plaintiff’s motion to compel is GRANTED; as to the other requested documents, the parties should proceed as directed by this court on September 27, 1989.
SO ORDERED.
. This case was decided prior to the close of business on September 30, 1981, and is binding precedent under Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981).
