This is Part 2 of an examination of the 100+ “Orders of Significance” dropped by the NC Business Court late last year. Part 1 of this series (on designating cases to the Court) is here. If you haven’t heard anything about the Orders of Significance, look here.
There are a couple of Orders of Significance dealing with attorney-client privilege that are significant enough to be written about on this blog. The first is Judge Conrad’s Order on a Motion to Compel in Kelley v. Charlotte Radiology, P.A. 2019 NCBC Order 13.
Waiver By Disclosure To A Non-Client
The “general rule” is that the attorney-client privilege is waived “when an attorney and client communicate in the presence of a third party.” Order ¶12.
Waiver doesn’t apply if the third party is “an agent of the client or the attorney.” Id. It also doesn’t apply “when the third parties are co-clients who are each represented by the same attorney.” Id.
So who was the third party in the Kelley case who received the otherwise privileged communications? There were actually two of them: the son of the Plaintiff, and the Plaintiff’s wife.
Judge Conrad concluded that the Plaintiff’s son was not acting as his agent. There was nothing in the record showing that the son had the authority to act on the Plaintiff’s behalf, “an essential element of agency.” Order ¶23. As for the wife, the Court ruled that the wife had received the same communications as the son, so there was no need for a separate analysis as to her.
Waiver Of Privilege By Use Of Defendant-Employer’s Email System
The Plaintiff had used his employer’s email system to communicate with his attorneys. A bad idea if you are wanting to protect privilege since the question of waiver turns on whether the employee “had a reasonable expectation of privacy and confidentiality in his email communications with his personal attorney.” Order ¶38.
Judge Conrad said “[i]t is debatable whether an employee ever has an
expectation of privacy when using his employer’s e-mail system to communicate about a legal dispute against the employer.” Order ¶38.
Moreover, the Plaintiff had received the Defendant’s Employee Handbook, which stated that the Defendant had the right to monitor employee emails. That eliminated the possibility of any “reasonable expectation of privacy” in his emails.
Adequacy Of Privilege Logs
Privilege logs identifying documents withheld on the basis of privilege are required by Rule 26(b)(7)(ii) of the North Carolina Rules of Civil Procedure and Business Court Rule 10.5.
The Defendant challenged the adequacy of the privilege log provided by the Plaintiff, arguing that the descriptions of the withheld documents were “obtuse and uninformative.” Judge Conrad disagreed, stating:
Kelley’s privilege log provides the date of each communication, the sender and recipients, a short description of the subject matter, and the type of privilege asserted. (See Kelley Privilege Log.) This is all the Case Management Order requires, (ECF No. 21), and it is the type of information courts usually find adequate for this purpose.
Plus, Judge Conrad added, even if the privilege log had been inadequate, the appropriate remedy would not have been to strike the entire log, but instead for the Court to conduct an in camera review. Order ¶19.
It’s important to identify all the grounds for withholding documents in the privilege log. The Defendant said that the Plaintiff had waived the claim that some of the documents listed in the log were entitled to work-product immunity by not originally referencing that immunity in the privilege log.
Judge Conrad rejected this argument of waiver, saying:
It is true that a belated assertion of immunity can result in its forfeiture. This usually occurs when a party asserts one ground for withholding documents, waits to see the other side’s motion to compel (or to see how the court decides the motion), and then asserts a different ground in an effort to get a second bite at the apple. That type of gamesmanship is obviously prejudicial.
Order ¶20. Since the Plaintiff had revised its original privilege log to include the work-product assertion before the Defendant filed its Motion to Compel, there was no “gamesmanship” or any prejudice to the Defendant, and no waiver of the work-product privilege.
Miscellaneous Privileged Items
Draft pleadings are subject to work-product protection. Order ¶3.
Engagement letters cannot be withheld from production. Though there is “little North Carolina law” on this point, Judge Conrad held that:
federal courts generally find that agreements outlining the general nature of the representation rather than the specific work that the attorney will perform are not protected by the attorney-client privilege or the work-product doctrine.
The remainder of the Kelley Order is an email by email review of whether those particular emails are privileged.
Appealing An Order Ruling on a Privilege Issue
You can appeal an Order affecting a privilege immediately, and you don’t need to wait for a final judgment in the case.
That was the situation before Judge McGuire in Global Textile Alliance, Inc. v. TDI Worldwide, LLC, 2019 NCBC Order 6. Judge McGuire had entered an Order prevbiously in the case ruling that the Plaintiff had waived attorney-client privilege by permitting a third party to participate in conversations with its counsel.
Plaintiff appealed. The Defendant sought to move forward with dispositive motions in the case. Plaintiff argued that all proceedings in the case should be stayed pending the appeal.
Judge McGuire said that “[c]laims of privilege . . . are substantial rights that would be lost if orders affecting them were not immediately reviewed.” ¶6. Given that the immediate appeal was legitimate. Judge McGuire ruled that the Court was divested of jurisdiction to proceed in the case.
If the Order ruling that privilege had been waived had not been immediately appealable, the Court could have retained jurisdiction and proceeded with the case.