Friday Invs., LLC v. Bally Total Fitness of the Mid-Atlantic, Inc.
Friday Invs., LLC v. Bally Total Fitness of the Mid-Atlantic, Inc.
Opinion
**236 In this case we consider whether an attorney-client relationship exists between defendants and a non-party that contractually agreed to indemnify defendants. Recognizing its tripartite nature, we conclude that the contractual duty to defend and indemnify gives rise to an attorney-client relationship. Nonetheless, because defendants failed to request that the trial court provide written findings of fact and did not present in a timely manner the documents at issue for appellate review, we must presume the trial court found facts sufficient to support its conclusion. Given the bare record before us, we cannot conclude that the trial court erroneously determined that the attorney-client privilege did not extend to the communications at issue. Accordingly, we modify and affirm the decision of the Court of Appeals.
In February 2000, the predecessor in interest to defendant Bally Total Fitness of the Mid-Atlantic, Inc. (Bally Mid-Atlantic) entered into a lease agreement with the predecessor in interest to Friday Investments, LLC (plaintiff) for a large commercial space in Charlotte, North Carolina, in which to place a health club. 1 Codefendant Bally Total Fitness Holding Corporation (Bally Holding), the parent company of both Bally Mid-Atlantic and the original tenant, guaranteed the lease. Bally Mid-Atlantic later sold some of its health clubs, including the Charlotte club, to Blast Fitness Group, LLC (Blast). The Asset Purchase Agreement between Bally Mid-Atlantic and Blast transferred any obligations arising under the real property leases of the clubs sold. The Agreement also included an indemnification clause, wherein Blast agreed to "defend, indemnify, and hold [defendants] ... harmless of, from and against any Losses incurred ... on account of or relating to ... any Assumed Liabilities, including those arising from or under the Real Property Leases after the Closing."
On 9 May 2014, plaintiff sued defendants for payment of back rent and other charges due under the lease stemming from Blast's failure to pay rent on the space defendants had assigned to Blast. Defendants notified Blast of the lawsuit, and Blast promptly *667 agreed to indemnify and defend defendants in accord with their Agreement. During discovery, counsel for plaintiff requested copies of "post-suit correspondence and documents exchanged between [defendants] and Blast." After **237 defendants refused to comply, plaintiff moved to compel production of the requested documents. Defendants objected and moved for a protective order, asserting the attorney-client privilege. The trial court orally ordered defendants to produce the documents and a privilege log for in camera review.
On 2 April 2015, after completing its in camera review, the trial court notified counsel via e-mail that it had denied defendants' motion for a protective order and granted plaintiff's motion to compel. On 13 April 2015, the trial court entered its written order summarily denying defendants' motion for a protective order and granting plaintiff's motion to compel. At no point did either party request that the trial court make written findings of fact and conclusions of law. Defendants appealed the trial court's interlocutory order, successfully contending that the subject of the appeal affects a "substantial right." After settling the record on appeal, and after the briefing deadline had passed, defendants moved to submit the documents at issue under seal for in camera review by the Court of Appeals.
The Court of Appeals affirmed the trial court's grant of plaintiff's motion to compel.
Friday Invs., LLC v. Bally Total Fitness of the Mid-Atl., Inc.
, --- N.C. App. ----,
"The primary purpose of the discovery rules is to facilitate the disclosure prior to trial of any
unprivileged
information that is relevant and material to the lawsuit so as to permit the narrowing and sharpening of
**238
the basic issues and facts that will require trial."
Bumgarner v. Reneau
,
"The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law."
Upjohn Co. v. United States
,
Historically, an attorney-client relationship arises between an attorney and a single client the attorney represents.
See
id.
at 335,
In
Raymond
a former police officer and member of the Southern States Police Benevolent Association (SSPBA) contacted the SSPBA and spoke with an SSPBA attorney in confidence, seeking legal advice regarding his recent demotion.
Id. at 95-96,
Our decision in
Raymond
analogized the relationship between the officer, the SSPBA and an attorney for the association, and outside defense counsel to those relationships common in the insurance context.
See
id. at 98,
"[A] contractual duty to defend and indemnify creates a common interest and tripartite relationship between the insurer, the insured, and the defense attorney."
Id. at 98-99,
**240 In all significant ways, the question of the formation of an attorney-client relationship here is indistinguishable from that resolved by our decision in Raymond . Blast *669 contractually agreed to indemnify and defend defendants against any losses incurred relating to their real property lease. After this litigation commenced, defendants notified Blast of the litigation, and Blast engaged counsel to defend the case under the indemnification agreement. Like the common interest found in the insurance context, Blast's interest in defendants' legal well-being as indemnitees creates the common interest in this litigation: The indemnification provision subjects Blast to any damages that result from an adverse judgment against defendants. Accordingly, a tripartite attorney-client relationship exists between defendants, Blast, and their defense counsel.
The mere fact that an attorney-client relationship exists, however, does not automatically trigger the attorney-client privilege.
See
Dobias
,
(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.
Murvin
,
"Findings of fact and conclusions of law are necessary on decisions of any motion ... only when requested by a party...." N.C.G.S. § 1A-1, Rule 52(a)(2) (2015). The purpose of requiring findings of fact
**241
and conclusions of law by the trial court "is to allow meaningful review by the appellate courts."
O'Neill v. S. Nat'l Bank of N.C.
,
A trial court's discovery ruling is reviewed for abuse of discretion,
see
Firemen's Mut. Ins. Co. v. High Point Sprinkler Co.
,
Though a tripartite attorney-client relationship exists, we cannot conclude, given the bare record before us, that the trial court abused its discretion or misapplied the law in compelling disclosure of the communications at issue. The underlying trial court order compelling discovery contains neither findings of fact nor conclusions of law, as neither party requested them. Therefore, we must presume that the trial court found facts sufficient to support its determination that the communications at issue were not privileged. Moreover, defendants did not properly present the allegedly privileged documents for appellate review.
See
State v. Alston
,
In sum, we hold that Blast's contractual duty to defend and indemnify defendants created a tripartite attorney-client relationship. Nonetheless, the record before us fails to indicate that the trial court abused its discretion in determining that the post-litigation communications between defendants and Blast were not privileged. Accordingly, **242 we modify and affirm the decision of the Court of Appeals. We remand this case to the Court of Appeals for further remand to the trial court for additional proceedings not inconsistent with this opinion.
MODIFIED AND AFFIRMED; REMANDED.
Around 14 February 2000, Tower Place Joint Venture (Original Lessor), as landlord, and Bally Total Fitness Corporation (Original Lessee), as tenant, entered into a lease agreement for the property at issue. Friday Investments, LLC (plaintiff) is the current owner of the property at issue and successor in interest to Tisano Realty Inc., the successor in interest to the Original Lessor. Defendant Bally Mid-Atlantic is the successor in interest to the Original Lessee.
Reference
- Full Case Name
- FRIDAY INVESTMENTS, LLC v. BALLY TOTAL FITNESS OF THE MID-ATLANTIC, INC. F/K/A Bally Total Fitness of the Southeast, Inc. F/K/A Holiday Health Clubs of the Southeast, Inc. as Successor-In-Interest to Bally Total Fitness Corporation; And Bally Total Fitness Holding Corporation
- Cited By
- 18 cases
- Status
- Published
- Syllabus
- Whether attorney-client relationship existed among several parties arising from indemnity agreement, and if so, whether certain communications were protected by attorney-client privilege.