Boyd v. Comdata Network, Inc.

• Citation: 88 S.W.3d 203
• Parties: Dudley G. BOYD, et al. v. COMDATA NETWORK, INC., et al.
• Decision Date: 30 April 2002
• Court: Tennessee Court of Appeals

88 S.W.3d 203

Dudley G. BOYD, et al. v. COMDATA NETWORK, INC., et al.

Court of Appeals of Tennessee, at Nashville.

April 30, 2002.

Published Pursuant to Tenn. Ct. App. R. 11.

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William R. O'Bryan, Jr., Kenneth M. Bryant, and E. Todd Presnell, Nashville,

Tennessee, for the appellant, Comdata Network, Inc.

Scott Justin Crosby and Susan M. Clark, Memphis, Tennessee, and George H. Nolan and Julie C. Murphy, Nashville, Tennessee, for the appellees, Dudley G. Boyd and Jan E. Boyd.

OPINION

WILLIAM C. KOCH, JR., J., delivered the opinion of the court, in which WILLIAM B. CAIN and PATRICIA J. COTTRELL, JJ., joined.

This appeal involves a discovery dispute implicating the common interest privilege and the work product doctrine. After filing suit in the Chancery Court for Williamson County to rescind their guaranties, the individual guarantors of a corporate debt served interrogatories and requests for production of documents on the creditor seeking copies of all written communications between the creditor and the corporation from which the creditor had purchased the corporate debt. The creditor objected to the production of documents involving its negotiation of a joint defense agreement with the original creditor and the drafts of an agreement to repurchase the corporate debt. The trial court directed the creditor to produce both categories of documents but permitted the creditor to pursue an interlocutory appeal. We granted the interlocutory appeal to address the application of the common interest privilege and the work product doctrine. We have determined that the common interest privilege shields the documents relating to the joint defense agreement from discovery and that the work product doctrine likewise protects the drafts of the repurchase agreement. Accordingly, we reverse the trial court's order compelling the production of these documents.

I.

The Fidelity Group, Inc. ("Fidelity Group") is a Tennessee corporation engaged in the business of receivable financing for small transportation companies. Its president and majority stockholder is Dudley G. Boyd who lives in Memphis, Tennessee. In connection with its business, Fidelity Group obtained an unsecured line of credit from NTS, Inc. ("NTS"), a Delaware corporation located in Fort Worth, Texas. NTS provides financial and related services to trucking companies, truck stops, and other members of the transportation industry.

By September 1997, Fidelity Group had drawn down $834,750.66 on its NTS line of credit and was unable to repay it. Mr. Boyd, Fidelity Group, and another Tennessee corporation Mr. Boyd controlled entered into three agreements with NTS on January 15, 1998, to restructure Fidelity Group's debt. First, NTS and Sovryn, Inc. ("Sovryn")¹ entered into a Marketing Services Agreement, anticipating that Sovryn's commissions would be used to pay down Fidelity Group's debt to NTS. Second, both Fidelity Group and Sovryn executed a Promissory Note and Debt Reduction Agreement in which they agreed to be jointly and severally liable for Fidelity Group's debt and to repay the debt in scheduled installments by 2001. Third, Mr. Boyd and the Boyd Revocable Inter-Vivos Trust ("Boyd Trust")² executed a Guaranty Agreement guarantying the payment of the Promissory Note and Debt Reduction Agreement executed by Fidelity Group and Sovryn.

During the negotiations over the restructuring of Fidelity Group's debt, NTS disclosed to Mr. Boyd that it was negotiating the sale of substantially all of its assets to Comdata Network, Inc. ("Comdata"), including the Marketing Services Agreement, the Promissory Note and Debt Reduction Agreement, and the Guaranty Agreement. Following consultations with Comdata, Mr. Boyd, on behalf of himself and his corporations, assented to this transaction. On January 17, 1998, NTS entered into an Exchange Agreement with Comdata conveying to Comdata all its right, title, and interest in the Marketing Services Agreement, the Promissory Note and Debt Reduction Agreement, and the Guaranty Agreement. The Exchange Agreement contained a repurchase provision enabling Comdata to require NTS to repurchase any of the assets covered by the Exchange Agreement. Thereafter, NTS changed its name to IPS Card Solutions, Inc. ("IPS").

Time passed without much progress in reducing the $834,750.66 debt. In the summer of 1998, Comdata declared the Promissory Note and Debt Reduction Agreement in default and terminated the Marketing Services Agreement. In February 1999, facing the prospect that Comdata would call upon him and the Boyd Trust to honor their Guaranty Agreement, Mr. Boyd and the Boyd Trust ("the Boyd parties") filed suit in Memphis seeking rescission of their guaranties and damages for Comdata's alleged breach of the Marketing Services Agreement. On July 30, 1999, after their Memphis suit was dismissed for improper venue, the Boyd parties filed the same complaint in the Chancery Court for Williamson County.

The Boyd parties' suit prompted Comdata to invoke its rights under the Exchange Agreement to require IPS, as NTS's successor, to repurchase the NTS assets. During the discussions that followed, Comdata and IPS negotiated not only the terms of a Purchase Agreement for the note but also the terms of a Joint Defense Agreement with regard to the litigation pending in the trial court.³ On August 17, 1999, while the negotiations between Comdata and IPS were taking place, the Boyd parties filed interrogatories and requests for production of documents seeking documents and other communications between Comdata and NTS regarding the Boyd parties, Fidelity Group, or Sovryn.⁴

Two significant developments occurred on November 15, 1999. First, Comdata and IPS executed a Purchase Agreement in which Comdata assigned the promissory note and debt reduction agreement to IPS. Second, Comdata filed its response to the Boyd parties' interrogatories and request for production of documents. Citing the attorney-client privilege and the work product doctrine, Comdata objected to producing (1) the drafts of the Purchase Agreement covering the note, (2) the correspondence between Comdata's and IPS's lawyers regarding the Purchase Agreement (3) the proposed Joint Defense Agreement, and (4) the correspondence between the lawyers for Comdata and IPS regarding the proposed Joint Defense Agreement.

On February 3, 2000, IPS launched what it intended to be a preemptive strike by filing suit in the United States District Court for the Southern District of New York to enforce the Boyd parties' guaranties. The Boyd parties responded on February 14, 2000, by moving to amend their complaint in this proceeding to add IPS as a defendant. Three days later, they moved to compel Comdata to respond to their interrogatories and request for production of documents. On February 29, 2000, the trial court filed an order permitting the Boyd parties to amend their complaint to add IPS as a defendant. The amended complaint was filed on March 3, 2000. On April 17, 2000, the trial court granted the motion to compel but also authorized Comdata to pursue an interlocutory appeal to this court. Ten days later, Comdata applied to this court for an interlocutory appeal. We granted Comdata's application on May 11, 2000.⁵

II. THE STANDARD OF REVIEW

We turn first to the standard of review. Comdata's appeal challenges the trial court's decisions regarding the scope of pre-trial discovery and its invocation of the attorney-client privilege and the work product doctrine. Decisions regarding discovery issues address themselves to a trial court's discretion, Benton v. Snyder, 825 S.W.2d 409, 416 (Tenn.1992); Payne v. Ramsey, 591 S.W.2d 434, 436 (Tenn.1979); Harrison v. Greeneville Ready-Mix, Inc., 220 Tenn. 293, 302-03, 417 S.W.2d 48, 52 (1967), as do decisions regarding the application of the attorney-client privilege and the work product doctrine. In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir.2000); Frontier Refining, Inc. v. Gorman-Rupp Co., 136 F.3d 695, 699 (10th Cir.1998). Accordingly, the appellate courts must review these decisions using the "abuse of discretion" standard of review.

While the "abuse of discretion" standard limits the scope of our review of discretionary decisions, it does not immunize these decisions completely from appellate review. Duncan v. Duncan, 789 S.W.2d 557, 561 (Tenn.Ct.App.1990). Even though it prevents us from second-guessing the trial court, White v. Vanderbilt Univ., 21 S.W.3d 215, 223 (Tenn.Ct. App.1999), or from substituting our discretion for the trial court's discretion, Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn.1998); State ex rel. Vaughn v. Kaatrude, 21 S.W.3d 244, 248 (Tenn.Ct.App. 2000), it does not prevent us from examining the trial court's decision to determine whether it has taken the applicable law and the relevant facts into account. Ballard v. Herzke, 924 S.W.2d 652, 661 (Tenn. 1996). We will not hesitate to conclude that a trial court "abused its discretion" when the court has applied an incorrect legal standard, has reached a decision that is illogical, has based its decision on a clearly erroneous assessment of the evidence, or has employed reasoning that causes an injustice to the complaining party. Clinard v. Blackwood, 46 S.W.3d 177, 182 (Tenn.2001); Buckner v. Hassell 44 S.W.3d 78, 83 (Tenn.Ct.App.2000); In re Paul's Bonding Co., 62 S.W.3d 187, 194 (Tenn.Crim.App.2001); Overstreet v. Shoney's, Inc., 4 S.W.3d 694, 709 (Tenn.Ct. App.1999).

When called upon to review a discretionary decision, we will review the trial court's underlying factual findings using the preponderance of the evidence standard in Tenn. R.App. P. 13(d). However, we will review the trial court's purely legal determinations de novo without a presumption of correctness. Brown v. Birman Managed Care, Inc., 42 S.W.3d 62, 66 (Tenn.2001); Burlew v. Burlew...