Sessions v. Sloane ( 2016 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA 15-1095
Filed: 19 July 2016
Forsyth County, No. 14 CVS 7674
JOHN H. SESSIONS, Plaintiff,
v.
MICHAEL SLOANE, TRACEY KELLY,
SUSAN EDWARDS & PHILLIP SLOANE,
as individuals, and CRUISE CONNECTIONS
CHARTER MANAGEMENT 1, LP, a North
Carolina Limited Partnership, and CRUISE
CONNECTIONS CHARTER MANAGEMENT
GP, INC., Defendants.
Appeal by Defendants from order entered 2 June 2015 by Judge L. Todd Burke
in Forsyth County Superior Court. Heard in the Court of Appeals 30 March 2016.
Hendrick Bryant Nerhood Sanders & Otis, LLP, by Matthew H. Bryant and
Wyche, P.A., by Henry L. Parr, Jr. (admitted pro hac vice) and Sarah Sloan
Batson, for plaintiff-appellee.
Wilson, Helms & Cartledge, LLP, by G. Gray Wilson and Lorin J. Lapidus and
Strauch Green & Mistretta, P.C., by Jack M. Strauch and Stanley B. Green, for
defendant-appellant.
HUNTER, JR., Robert N., Judge.
Defendants appeal from an order compelling discovery. The trial court ordered
Defendants to produce documents withheld by the Defendants based on their
assertions that the documents were prepared in anticipation of litigation and were
therefore subject to confidentiality based on application of the attorney-client
SESSIONS V. SLOANE
Opinion of the Court
privilege, the work product doctrine or the joint defense privilege. After careful
examination of the record and the procedures which the Defendants used to assert
these privileges, we hold the trial court did not abuse its discretion in compelling the
production of the withheld communications.
I. Factual and Procedural Background
Defendants Cruise Connections Charter Management GP, Inc. (“Cruise
Corporation”) and Cruise Connections Charter Management 1 LP (“Cruise Limited
Partnership”) planned to bid $50,575,000 on a government contract with the Royal
Canadian Mounted Police (the “Mounties”) to supply three cruise ships to house
security police forces during the 2010 Winter Olympic Games. In order to show
financial strength to perform this task, bidders to the government contract had to
provide a letter of credit for ten percent (10%) of their total bid amount with their
proposal. Proposals were due on 23 May 2008. If they won, Defendants Cruise
Corporation and Cruise Limited Partnership expected to make a net profit of at least
$14,000,000.
As of 17 May 2008, Defendants had not secured a letter of credit for ten percent
(10%) of their overall bid. Defendants asked Plaintiff Sessions to provide a letter of
credit for their bid in the amount of $5,057,500 in order to meet this bid requirement.
On 22 May 2008, Sessions agreed to provide Defendants a letter of credit in
consideration for $5,057,500 from contract proceeds should Defendants be awarded
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the contract. Defendants signed a letter of intent agreeing to Sessions’ terms. The
letter of intent reads in part:
In exchange for providing an unredeemable, nonpayable
Letter of Credit in the amount of $5,057,500, Mr. Sessions
shall be granted assignable rights to receive Warrants at
no cost to him for special limited partnership interest in
the Partnership which he or his assignee solely at their
election may either cause the Partnership to redeem or
convert to special limited partnership interests.
If the Partnership is the successful bidder and enters into
a contract providing services for the Royal Canadian
Mounted Police (the “RCMP Contract”), and if Sessions or
his assignee elects to exercise his right to receive a special
limited partnership interest in the Partnership or demand
that the Partnership redeem the Warrants, Sessions or his
assignee shall receive allocations and distributions from
the Partnership in an amount equal to the sum of (i)
$5,057,500.00 plus (ii) two (2) times the amount of
additional capital advanced, loaned, or provided by Mr.
Sessions or his nominee together with the principal
amount so advanced, loaned, or provided with his
assistance. For example, if Sessions or his assignee
provides $275,000 for working capital, then the original
$275,000 is paid back plus an additional $275,000, prior to
any distributions to the other partners of the Partnership
or payments of any kind to the other parties to this
agreement or to any entity in which they are associated.
If the Partnership is the successful bidder and enters into
the contract contemplated herein, the Partnership shall
pay Sessions’ choice of either the redemption for special
limited partnership interest or if the Warrants are
exercised allocations and distributions of the amounts
described above within 10 days after the Partnership
receives its initial payment from the Royal Canadian
Mounted Police or Government of Canada or the
contracting authority whomever that should be (currently
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Opinion of the Court
expected to be 75% of the total project fee) (the “Initial Fee
Installment”).
Sessions, through his company Carolina Shores Leasing LLC,1 obtained a
letter of credit from Southern Community Bank & Trust on 22 May 2008. The letter
of credit dated 22 May 2008 in the amount of $5,057,500 lists Cruise Connections
Charter as the applicant with Carolina Shores Leasing as the co-applicant, and Her
Majesty the Queen in Right of Canada as the beneficiary. Sessions transferred
$5,057,500 to the bank as security for the letter of credit and paid a fee of $25,000 to
obtain the letter of credit.
The same day, Sloane, a partner and chief financial officer of Cruise
Connections Charter Management, hand delivered the letter of credit from Winston-
Salem, North Carolina to Seattle, Washington. Sloane gave the letter to Kelly, who
then delivered the letter of credit to Edwards in Canada. Defendant Cruise Limited
Partnership was awarded the contract on or about 30 May 2008. Subsequently,
Defendants attempted to renegotiate the agreement with Sessions, but the
agreement was not amended.
On 26 November 2008, Cruise Limited Partnership and Cruise Corporation
filed suit against the Attorney General of Canada, representing the Mounties in
United States District Court for the District of Columbia for breach of contract
1 Although Carolina Shores Leasing was named as the co-applicant on the letter of credit, they
are not a party to this action.
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Opinion of the Court
(hereinafter the “Canadian lawsuit”). On 9 September 2013, the Court granted
summary judgment in favor of Cruise Limited Partnership and Cruise Corporation.
On 21 July 2014, the Court entered an order for monetary damages against the
Canadian government in the amount of $19,001,077. Defendants then entered into
a settlement agreement with Canada on 12 December 2014 for the payment of
$16,900,000 by 12 January 2015.
In the Canadian lawsuit, Defendants alleged they have no obligation to pay
Sessions. Sessions was not a party to the Canadian lawsuit. After filing the
Canadian lawsuit, all of the parties in this case entered into a forbearance and escrow
agreement. The agreement recognizes a dispute between Sessions and Cruise
Connections, but states the parties to the agreement are “willing to forbear from
enforcing or taking other action on the Claims until the Canada Lawsuit is resolved
. . . .” The parties also agreed to deposit all proceeds arising out of the Canadian
lawsuit into the trust account of Strauch Fitzgerald & Green. Thereafter, Strauch
Fitzgerald & Green would pay itself litigations costs and attorneys fees, and then
deposit thirteen percent (13%) of the net proceeds up to a maximum of $5,000,000
into an escrow account. Since the settlement agreement, Defendants have not paid
or agreed to pay Sessions.
On 31 December 2014, Sessions filed a verified complaint and writ of
attachment seeking damages for breach of contract and injunctive relief preventing
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Opinion of the Court
the parties or their agents from disbursing the escrow funds pende lite. This
complaint named the following as parties: Michael Sloane, Tracy Kelly, Susan
Edwards, and Phillip Sloane in their individual capacities as well as Cruise
Connections Charter Management 1, LP and Cruise Corporation as Defendants. The
complaint also named as parties Strauch Green & Mistretta, a North Carolina law
firm, as the settlement and escrow agent. Kelly, Sloane, and Edwards are partners
in Cruise Limited Partnership, and Sloane is Cruise Limited Partnership’s chief
financial officer. In his complaint, Sessions claims the Defendants anticipatorily
repudiated the contract and sought damages in excess of $25,000.
Sessions sought a writ of attachment alleging some Defendants are out of state
residents and would likely remove the escrow money from North Carolina upon
payment by the Canadian government. Sessions sought the writ to prohibit Strauch,
Green, & Mistretta, Defendants’ counsel, from disbursing the funds in an amount
that would leave less than $5,457,500 in its trust account. Attached to the complaint,
Sessions provided a copy of P. Sloane’s affidavit dated 15 January 2013 from the
Canadian lawsuit. The affidavit stated the following:
5. When Cruise Connections approached Mr. Sessions,
another individual who was supposed to provide a letter of
credit for the bid had just backed out, and the deadline for
submitting the bid was fast approaching. Mr. Sessions
knew that Cruise Connections was in a bad bargaining
position, since Cruise Connections had no other viable
alternatives for getting a letter of credit before its bid was
due. Mr. Sessions took advantage of the situation,
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Opinion of the Court
repeatedly raising the price for providing the letter of
credit until he eventually demanded a price equal to the
amount of the letter of credit ($5,057,500). Since we were
out of time and out of options, Cruise Connections acceded
to Mr. Sessions’ demand. Given the fact that Mr. Sessions
used his vastly superior bargaining position to force these
unfair terms upon Cruise Connections, I have serious
doubts as to the enforceability of the Letter of Intent.
6. Even if it is ultimately enforceable, the Letter of Intent
does not create a debt obligation on the part of Cruise
Connections. Instead, if Cruise Connections’ bid was
successful, Mr. Sessions was to be granted an option to
receive a limited partnership interest, pursuant to which
he would be able to receive funds in the form of partnership
distributions. Cruise Connections did not intend to make
distributions to partners until such time as it had
confirmed that there was sufficient cash available to cover
any current or future costs or other financial obligations
related to the Vancouver Olympic project, so any
partnership distributions would have only been
distributions of profits. If Cruise Connections’ bid was not
accepted, or Cruise Connections ultimately did not realize
a profit, then Mr. Sessions would have recovered nothing.
7. Aside from providing the letter of credit that Cruise
Connections submitted to the RCMP in conjunction with
its bid, John Sessions provided no other capital or other
financing to Cruise Connections, including working
capital, so Cruise Connections owed Mr. Sessions no debt
whatsoever.
On 27 January 2015, Sessions filed a Rule 41 voluntary dismissal with
prejudice as to all claims against Strauch Green & Mistretta. On 13 March 2015,
Defendants M. Sloane, Cruise Limited Partnership, and Cruise Corporation filed an
unverified answer generally denying Sessions is entitled to any relief. Additionally,
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Defendants raised fifteen affirmative defenses including failure of consideration,
indefiniteness, unconscionability, mutual mistake, duress, and estoppel.
On 19 March 2015, Sessions served identical sets of written discovery requests
on each defendant. As an example, Sessions requested all “documents sent to,
received from, or concerning John Sessions.” Defendants objected, stating:
Defendant objects to this request to the extent it calls for
documents containing information protected from
disclosure pursuant to the work product doctrine or the
attorney opinion work product doctrine. Defendant further
objects to this request to the extent it calls for documents
containing information protected from disclosure pursuant
to the attorney-client privilege or joint defense privilege.
Without waiving any of its objections, Defendant will
produce non-privileged documents responsive to this
request.
Defendants responded with similar objections to Sessions’ other discovery requests.
On 30 March 2015, Defendants M. Sloane, Cruise Limited Partnership, and
Cruise Corporation filed an amended answer and motion to dismiss alleging three
additional defenses: Sessions’ claims are barred by the doctrine of accord and
satisfaction, novation, and the statute of limitations. On 1 April 2015, Defendants
Kelly, Edwards, and P. Sloane filed an unverified answer generally denying they owe
Sessions money.
Cathy Holleman, a paralegal at Strauch Green & Mistretta, mailed a privilege
log to Sessions’ counsel on 16 April 2015. The privilege log listed documents
requested in discovery and the associated privilege Defendants invoked in response
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Opinion of the Court
to the request to produce that document. Below is a representative sample of the
privilege log.
Document Document Author Recipient Description Privilege
Number Date
CCPRIV000016 6-09-08 Tracey Defendants Email Work
Kelly created in Product
anticipation Doctrine;
of litigation Joint
and legal Defense
advice Privilege
CCPRIV000019 6-09-08 Tracey Defendants Email Work
Kelly created in Product
anticipation Doctrine;
of litigation Joint
and legal Defense
advice Privilege
CCPRIV000020 5-15-08 Phillip Defendants Email Attorney-
Sloane and Jack seeking or Client
Strauch containing Privilege
legal advice
CCPRIV000021 5-18-08 Phillip Jack Email Attorney-
Sloane Strauch seeking or Client
containing Privilege
legal advice
On 15 May 2015, Sessions filed a motion to compel Defendants to provide full
and complete responses to Sessions’ discovery requests pursuant to Rules 34 and 37
of the North Carolina Rules of Civil Procedure. In his motion, Sessions requested the
trial court to order Defendants to produce the following:
(1) To produce all the documents or portions thereof
withheld from production solely based on a claim of “work
product/joint defense privilege” where the items are
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Opinion of the Court
communications solely among the defendants themselves
without the participation of counsel.
(2) In the alternative to item one, to provide the Court for
in camera review [of] the documents, or portions thereof,
that Defendants have withheld based on a claim of
privilege under the “work product doctrine,” even though
(a) no attorney was involved in creating the information
withheld and (b) the documents were created long before
there was any hint of litigation between Plaintiff Sessions
and the defendants. The in camera review would allow the
Court to determine whether these documents or portions
thereof may properly be withheld from plaintiff . . . .
(3) Produce to plaintiff the “To, From, CC, BCC, and
Subject” lines of the documents or portions thereof that
Defendants have withheld based on attorney client
privilege, so that the Plaintiff may make his own
independent assessment as to the validity of the claim of
privilege . . . .
(4) Pay plaintiff his reasonable expenses incurred in
obtaining these orders, including attorney’s fees, as
provided in Rule 37(a)(4) of the North Carolina Rules of
Civil Procedure.
Attached to the motion to compel, Sessions attached eight emails or email chains
partially withheld under the work product doctrine as examples of illegitimate use of
the work product doctrine. For example, in an email from Edwards to Kelly dated 16
July 2008, the email provided to Sessions read:
Subject: Tried Calling
HI
Back from the Tribunal and have tried calling, no luck.
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1. So I would not send the email I just sent – but it needs
to be said. We need support on this team and to not
question performance.
2. How was the Bank mtg. Very keen to hear.
[Redacted]
Cheers, Sue
Another email to Edwards from Kelly dated 22 September 2008 read:
Subject: Throwing it out there….
Hi Tracey/Mike:
I suspect that we can prioritize the #’s so that the Partners
and all Subcontractor needs can be met.
Priorities:
[Redacted]
493,125 RBC
Partner Lump Sum
[Redacted]
1,200. Cardinal Law
6,450. Insurance
8,000. Port Agent
30,000 Partner draw per month
574,025 as opposed to: 670,575
[Redacted] At that time, all other Sub-Contractors can be
deposited with.
Therefore, I see the opportunity to allow the Partners a
lump sum draw immediately.
Amount??
Sue
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In response to Sessions’ motion to compel, Defendants provided an affidavit of
Kelly dated 27 May 2015. In his affidavit, Kelly stated he and his partners exchanged
“several” drafts of a potential agreement with Sessions. Kelly and his partners “hired
Will Joyner and Jack Strauch of Womble Carlyle Sandridge & Rice, PLLC to
represent [them] with regard to, among other things, potential litigation related to
the third party who had reneged on the financing deal as well as the negotiations
with Mr. Sessions.” The parties exchanged emails with red-lined changes to the
document until, at approximately 1:35 p.m. on 21 May 2008, Sessions emailed Kelly
and his partners a version of the document with no added red-lined changes. Sessions
indicated the agreement needed to be signed “immediately” in order to obtain a letter
of credit the same day. Kelly signed the agreement. Upon review of the document,
Kelly found “wholesale changes to the material terms of the proposed agreement from
the version that had been circulated earlier.” As a result, Kelly believed litigation
over the document was possible. Kelly and his partners “began to focus on the
Sessions’ dispute as well as legal strategy regarding the dispute in or around June 9,
2008.”
The trial court held a hearing on the motion 1 June 2015. Because there was
no court reporter present at the hearing, a transcript is not included in the record.
Instead, the parties provide a summary of the hearing in the record on appeal. On 2
June 2015, the trial court granted in part and denied in part Sessions’ motion to
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compel. The court ordered Defendants produce the following on or before 9 June
2015:
(1) Produce to plaintiff all the documents or portions
thereof withheld from production based on a claim of “work
product doctrine, joint defense privilege” where the items
are communications involving the defendants themselves
without the participation of counsel.
(2) Produce to plaintiff the “To, From, CC, BCC, and
Subject” lines of the documents or portions thereof that
Defendants have withheld based on attorney client
privilege, so that the Plaintiff may make his own
independent assessment as to the validity of the claim of
privilege.
On 11 June 2015, Sessions’ counsel emailed Cecilia Gordon, the trial court
administrator, asking for a meeting with Judge Burke and asking about a motion for
reconsideration filed by Defendants. In response, Gordon wrote: “Pursuant to
conversation with Judge Burke, will not hear Mr. Greene’s motion for reconsideration
and advise that he comply with the court’s ruling. Should Mr. Greene not comply he
may be subject to the contempt power of the court. Judge Burke is not available to
meet with parties.”
Defendants timely filed a Notice of Appeal from the order granting in part and
denying in part Sessions’ motion to compel. Pursuant to Rule 62 of the North
Carolina Rules of Civil Procedure, Defendants filed a motion to stay the enforcement
of the order granting in part and denying in part the motion to compel. On 29 June
2015, the trial court granted the stay pending disposition of the appeal of that order.
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On 15 July 2015, Defendants filed a motion for a protective order with the trial
court pursuant to Rule 26 of the North Carolina Rules of Civil Procedure and N.C.
Gen. Stat. § 1-294, requesting the court enter a protective order staying the noticed
depositions of Defendants. Defendants argued the subject matter of the depositions
would be tangled with matters involved in the order on appeal to this Court. The
trial court allowed Defendant’s motion for a protective order, staying depositions
pending disposition of the appeal. The court ordered Defendants to pay any
cancellation fees, including air fare, related to the stay of the depositions.
In this Court, on 21 December 2015, Sessions filed a motion to dismiss the
appeal for lack of jurisdiction alleging the order appealed is interlocutory and does
not affect a substantial right. Defendants filed a response to the motion to which
Sessions filed a reply brief on the motion. Defendants filed a motion to strike
Sessions’ reply brief. Both the motion to dismiss and the motion to strike were
referred to this panel.
II. Jurisdiction
An interlocutory order is an order made “during the pendency of an action”
which does not dispose of the entire case, but instead requires further action by the
trial court. Duquesne Energy, Inc. v. Shiloh Indus. Contractors, 149 N.C. App. 227,
229, 560 S.E.2d 388, 389 (2002). Generally, interlocutory orders are not immediately
appealable. Id. The purpose behind preventing interlocutory appeals is to prevent
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undue delay in the administration of justice by allowing fragmented and premature
appeals. Sharpe v. Worland, 351 N.C. 159, 161, 522 S.E.2d 577, 578–579 (1999)
(citing Bailey v. Gooding, 301 N.C. 205, 209, 270 S.E.2d 431, 434 (1980)).
However, an interlocutory order is immediately appealable “(1) if the trial
court has certified the case for appeal under Rule 54(b) of the Rules of Civil Procedure;
and (2) when the challenged order affects a substantial right of the appellant that
would be lost without immediate review.” Campbell v. Campbell, __ N.C. App. __, __,
764 S.E.2d 630, 632 (2014) (citations and quotations omitted). An order compelling
discovery is interlocutory in nature and is usually not immediately appealable
because such orders generally do not affect a substantial right. Sharpe, 351 N.C. at
163, 522 S.E.2d at 579 (citing Mack v. Moore, 91 N.C. App. 478, 480, 372 S.E.2d 314,
316 (1988)). When “a party asserts a statutory privilege which directly relates to the
matter to be disclosed under an interlocutory discovery order, and the assertion of
such privilege is not otherwise frivolous or insubstantial, the challenged order affects
a substantial right.” Id. at 162, 522 S.E.2d at 579. This Court has applied the
reasoning of Sharpe to include attorney-client privilege, the work product doctrine,
and the common interest or joint defense doctrine. See K2 Asia Ventures v. Trota,
215 N.C. App. 443, 446, 717 S.E.2d 1, 4 (2011); Cf. Nationwide Mut. Fire Ins. Co. v.
Bourlon, 172 N.C. App. 595, 601, 617 S.E.2d 40, 44 (2005) (denying defendant’s
motion to dismiss as interlocutory and reviewing order compelling discovery
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involving claims of attorney-client privilege and a tripartite attorney-client
relationship).
Here, Defendants asserted attorney-client privilege, the work product doctrine,
and the joint defense privilege at the hearing in response to the motion to compel
discovery. If the assertion of privilege is not “frivolous or insubstantial” then a
substantial right is affected and the order compelling discovery is immediately
appealable. A blanket, general objection is considered to be frivolous or insubstantial,
but objections “made and established on a document-by-document basis” are
sufficient to assert a privilege. See K2 Asia Ventures, 215 N.C. App. at 447–448, 717
S.E.2d at 4–5. Defendants provided a document privilege log describing the privilege
relating to each withheld document. As a result, their assertion of privilege is not
frivolous or insubstantial and a substantial right is affected. We therefore hold this
interlocutory order is immediately appealable. We deny Sessions’ motion to dismiss
the appeal based on its interlocutory nature.
Sessions submitted to this Court a reply brief in support of his motion to
dismiss Defendants’ appeal, and Defendants thereafter filed a motion to strike
Sessions’ reply brief. Defendants contend, pursuant to Rule 37(b) of the North
Carolina Rules of Appellate Procedure, a motion may “be acted upon at any time,
despite the absence of notice to all parties.” However, the Rule refers to this Court’s
ability to act upon a motion at any time, not the ability of a party to do so. Although
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Rule 28(h) of the North Carolina Rules of Appellate Procedure permits a party to file
reply briefs in certain circumstances, Rule 37, which governs motions, does not
expressly allow reply briefs. Sessions provides no additional authority to support his
ability to file a reply brief to a motion and therefore we decline to consider his reply
brief to the motion to dismiss.
III. Standard of Review
“Whether or not the party’s motion to compel discovery should be granted or
denied is within the trial court’s sound discretion and will not be reversed absent an
abuse of discretion.” Patrick v. Wake Cnty. Dep’t of Human Servs., 188 N.C. App. 592,
595, 655 S.E.2d 920, 923 (2008). We also review the trial courts’ application of the
work product doctrine and of attorney-client privilege under an abuse of discretion
standard. Hammond v Saini, 229 N.C. App. 359, 370, 748 S.E.2d 585, 592 (2013);
Evans v. United Services. Auto. Ass’n, 142 N.C. App 18, 27, 541 S.E.2d 782, 788
(2001). Under an abuse of discretion standard, this Court may only disturb a trial
court’s ruling if it was “manifestly unsupported by reason or so arbitrary that it could
not have been the result of a reasoned decision.” Hammond, 229 N.C. App. at 370,
748 S.E.2d at 592 (quoting K2 Asia Ventures, 215 N.C. App. at 453, 717 S.E.2d at 8).
IV. Analysis
Generally, parties may obtain discovery “regarding any matter, not privileged,
which is relevant to the subject matter involved in the pending action.” N.C. Gen.
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Stat. § 1A-1, Rule 26(b)(1) (2015). If a party claims a document is privileged, the
burden lies with that party to “(i) expressly make the claim and (ii) describe the
nature of the documents, communications, or tangible things not produced or
disclosed, and do so in a manner that, without revealing information itself privileged
or protected will enable other parties to assess the claim.” See N.C. Gen. Stat. § 1A-
1, Rule 26(b)(5)(a) (2015).
A. Determination of Validity
When this motion came on for hearing, Judge Burke had Defendants’ privilege
log and the Kelly affidavit before him. According to Defendants, at the hearing on
the motion, Defendants orally requested an in camera review but did not tender to
Judge Burke the documents to be examined. Lacking the documents, the only
evidence before Judge Burke was the privilege log which on its face lacked sufficient
evidence for the trial court to assess their claim of privilege. In their brief,
Defendants argue the trial court failed to make necessary determinations as required
by Hall v. Cumberland County Hospital System, Inc. 121 N.C. App. 425, 466 S.E.2d
317 (1996). They contend a finding of validity of their Rule 26 claim is mandatory
and should have been included in the order for the order to be legally enforceable.
Appellants read Hall to say the motion, affidavit, and privilege log alone are sufficient
to support a finding of validity of their Rule 26 claim. Defendants contend an in
camera review should occur following a determination of validity. We disagree.
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The Rules of Civil Procedure are not so clear. The better practice in privilege
controversies would be to submit a motion, affidavit, privilege log, request for findings
of fact and an in camera review together with a sealed record of the documents to be
reviewed. Defendants concede they made no formal request for in camera review.
Using the method followed by Defendants, if the trial court has questions regarding
the factual basis of the alleged privileged documents, the court would not have a basis
to resolve its questions. Lacking the documents, there is no evidence to determine if
the claims of privilege are bona fide. Moreover, if the documents are not provided
under seal to this Court for our review, appellants run the risk of providing
insufficient evidence for this Court to make the necessary inquiry. It is therefore
problematic for the Defendants to meet their burden of proof at trial or on appeal.
B. Joint Defense Privilege and Work Product Doctrine
Defendants argue the trial court did not make a finding whether the
documents withheld under the work product doctrine or joint defense privilege were
prepared in anticipation of litigation. Instead, the trial court summarily ordered the
production of all documents where the communications involve the Defendants
themselves without participation of counsel. Citing Evans v. United Servs. Auto
Ass’n, 142 N.C. App. 18, 541 S.E.2d 782 (2011), Defendants contend the work product
doctrine does not require “direct involvement of an attorney” to apply.
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The joint defense privilege, also known as the common interest doctrine, takes
the attorney-client privilege and extends it to other parties that “(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.”
Friday Investments, LLC v. Bally Total Fitness of the Mid-Adlantice, Inc., __ N.C.
App. __, __, __ S.E.2d __, __ (2016). Thus, the joint defense privilege is not actually a
separate privilege, but is instead an exception to the general rule that the attorney-
client privilege is waived when the client discloses privileged information to a third
party. Id. It is generally recognized when parties communicate to form a joint legal
strategy. Id.
The work product doctrine protects materials prepared in anticipation of
litigation from discovery. In re Ernst & Young, 191 N.C. App. 668, 678, 663 S.E.2d
921, 928 (2008). Materials prepared in the regular course of business are, however,
not protected. Cook v. Wake Cnty. Hosp. Sys., Inc., 125 N.C. App. 618, 623, 482 S.E.2d
546, 550 (1997). The test for whether a document was prepared in anticipation of
litigation or in the regular course of business is:
whether, in light of the nature of the document and the
factual situation in the particular case, the document can
fairly be said to have been prepared or obtained because of
the prospect of litigation. But the converse of this is that
even though litigation is already in prospect, there is no
work product immunity for documents prepared in the
regular course of business rather than for purposes of the
litigation.
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Id. at 624, 482 S.E.2d at 551 (emphasis removed).
Pursuant to Rule 52 of the North Carolina Rules of Civil Procedure “[f]indings
of fact and conclusions of law are necessary on decisions of any motion or order ex
mero motu only when requested by a party and as provided by Rule 41(b).” N.C. Gen.
Stat. § 1A-1, Rule 52 (a)(2) (2015). Rule 41, governing dismissal of claims, does not
apply to this case. See N.C. Gen. Stat. § 1A-1, Rule 41 (2015). If the trial court is not
required to make findings of fact and conclusions of law and does not do so, then we
presume the trial court found facts sufficient to support its judgment. Estrada v.
Burnham, 316 N.C. 318, 324, 341 S.E.2d 538, 542 (1986) (citations omitted).
Although findings of fact and conclusions of law are helpful for meaningful review by
our appellate courts, if a party did not request the court to make findings of fact, then
it is within the discretion of the trial court whether to make findings. Evans, 142
N.C. App. at 26–27, 541 S.E.2d at 788; Watkins v. Hellings, 321 N.C. 78, 82, 361
S.E.2d 568, 571 (1987).
The burden at trial rests on the party claiming privilege under the work
product doctrine to show the emails were prepared in anticipation of litigation instead
of in the regular course of business. Evans, 142 N.C. App. at 28–29, 541 S.E.2d at
789–790. And, “[b]ecause work product protection by its nature may hinder an
investigation into the true facts, it should be narrowly construed consistent with its
purpose.” Id. at 29, 541 S.E.2d at 789.
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The record on appeal lacks a transcript from the hearing on the motion to
compel. The parties included a summary of the hearing, but the summary does not
mention a request for factual findings. Additionally, the record contains no response
to the motion to compel other than Kelly’s affidavit. As a result, there is no evidence
in the record that indicates Defendants requested the trial court make findings of
fact. Accordingly, the trial court was not required to make findings of fact, and we
presume the trial court found facts sufficient to support its judgment. The trial court
did not abuse its discretion by failing to make findings of fact regarding whether the
documents at issue were prepared in anticipation of litigation.
While we agree with Defendants that the work product doctrine does not
require the direct involvement of an attorney to apply, the work product doctrine does
require documents be prepared in anticipation of litigation instead of in the regular
course of business. The burden rested on Defendants in the trial court to demonstrate
the documents in question fell within the shield of the work product or joint defense
doctrines. To meet their burden, Defendants needed to show the documents were
prepared in anticipation of litigation. In opposition to the motion to compel,
Defendants produced only Kelly’s affidavit. The affidavit established Defendants’
anticipated litigation as of the dates of the emails at issue. However, Defendants did
not meet their burden to show the specific emails at issue were actually prepared or
obtained because of the prospect of litigation. Defendants did not demonstrate the
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Opinion of the Court
emails were exchanged for the purpose of pending litigation instead of during the
regular course of business. Although Defendants provided evidence to show litigation
was anticipated at the time of the email exchanges, any business-related
communication during that time is not protected. Defendants did not meet their
burden to show the communications “can fairly be said to have been prepared or
obtained because of the prospect of litigation.” See Cook, 125 N.C. at 624, 482 S.E.3d
at 551.
Defendants could have met their burden by showing the documents were
prepared in anticipation of litigation. Defendants should have given the trial court
more information about the nature of the withheld documents and the factual
situation surrounding them instead of a broad claim of privilege. The best practice
would have been for Defendants to turn over the documents to the trial court for an
in camera review. On the facts before us, we hold the trial court did not abuse its
discretion by ordering Defendants to produce the emails at issue under the work
product and joint defense doctrines.
C. Attorney-Client Privilege
Attorney-client privilege is based upon the reasoning that “full and frank”
communications between a client and his attorney allow the attorney to best
represent his client. In re Miller, 357 N.C. 316, 329, 584 S.E.2d 772, 782 (2003)
(quoting Upjohn Co. v. United States, 449 U.S. 383, 389, 66 L. Ed. 2d 584, 591 (1981)).
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The privilege is rooted in the English common law, with its earliest recorded instance
in 1577. See generally Berd v. Lovelace, 21 Eng. Rep. 33 (1577). Today, the attorney-
client privilege protects “all confidential communications made by the client to his
attorney.” Dickson v. Rucho, 366 N.C. 332, 737 S.E.2d 362 (2013) (citations omitted).
“When the relationship of attorney and client exists, all confidential communications
made by the client to his attorney on the faith of such relationship are privileged and
may not be disclosed.” In re Miller, 357 N.C. at 328, 584 S.E.2d 782 (citations
omitted). The burden lies with the party claiming attorney-client privilege to
establish each essential element of the privilege. Id. at 336, 584 S.E.2d at 787. The
Supreme Court of North Carolina recognizes a five-part test to determine whether
the privilege applies to a certain communication:
(1) the relation of attorney and client existed at the time
the communication was made, (2) the communication was
made in confidence, (3) the communication relates to a
matter about which the attorney is being professionally
consulted, (4) the communication was made in the course
of giving or seeking legal advice for a proper purpose
although litigation need not be contemplated and (5) the
client has not waived the privilege.
Id. at 335, 584 S.E.2d at 786.
Defendants challenge the trial court’s order as it relates to 80 emails between
Defendants and their attorneys. The trial court ordered Defendants to produce the
“To, From, CC, BCC, and Subject lines” of the emails withheld by Defendants on the
basis of attorney-client privilege. Defendants contend revealing the subject lines of
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the emails will reveal protected information. Quoting a case from Illinois, Defendants
state: “Header information may contain information subject to the attorney-client
privilege or the work product doctrine.” Shuler v. Invensys Bldg. Sys. Inc., 2009 U.S.
Dist. LEXIS 13067 (N.D. Ill. 2009).
After reviewing the relevant case law, we believe the question of whether
subject lines of emails must be protected from discovery under attorney-client
privilege is a question of first impression in North Carolina. However, just because
the form of the document or communication is new or different does not mean we
must look outside our jurisdiction for authority. We hold the same five-part test
applies for the subject line of an email as it does for any communication allegedly
protected under attorney-client privilege.
Defendants bear the burden of establishing each essential element of the
privilege pursuant to the five-part test recognized by our Supreme Court. To support
their claim of privilege, Defendants produced a privilege log containing the document
dates, authors, recipients, a description, and the privilege asserted. Descriptions of
the withheld emails include the following: “email created in anticipation of litigation”
and “email seeking or containing legal advice.” The record provides no evidence
Defendants met their burden at trial to show the subject lines of the emails contained
privileged information by meeting the test. The record only reflects Defendants
claimed the emails, including their subject lines, are protected by attorney-client
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privilege. Accordingly, the trial court did not abuse its discretion by requiring
Defendants to produce the subject lines of the emails.
D. In Camera Review
Finally, Defendants contend the trial court should have conducted an in
camera review prior to issuing its order compelling discovery. However, the decision
whether to conduct an in camera review to determine whether documents are
shielded from discovery by the assertion of a privilege is within the sound discretion
of the trial court. See Midgett v. Crystal Dawn Corp., 58 N.C. App. 734, 736, 294
S.E.2d 386, 387 (1982).
Based on the record before us, we see no evidence Defendants made a request
for an in camera inspection of the documents at trial or submitted the documents for
inspection. We note that Plaintiff Sessions did make a request for an in camera
inspection but this was only requested in the alternative in the event that the court
did not rule that the documents were privileged. The decision to conduct an in camera
inspection, without a request for such inspection, lies within the discretion of the trial
court, and we have no record evidence Defendants requested an in camera inspection.
Unless the court is given the documents to inspect, Defendants will have difficulty
meeting their burden to show any specific emails were prepared or obtained because
of the prospect of litigation. Defendants took a strategic risk in not submitting the
documents to be sealed for in camera review.
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V. Conclusion
For the foregoing reasons, we hold the trial court did not abuse its discretion
by ordering Defendants to produce documents or portions thereof. We therefore
affirm the trial court’s order.
AFFIRMED.
Judges ELMORE and DAVIS concur.
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