Hunter v. Waterfront, s. A12A0716

• Decision Date: 13 July 2012
• Docket Number: A12A0717.,Nos. A12A0716,s. A12A0716
• Citation: 730 S.E.2d 608,12 FCDR 2491
• Court: Georgia Court of Appeals
• Parties: HUNTER, MACLEAN, EXLEY & DUNN v. ST. SIMONS WATERFRONT, LLC. St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn.

730 S.E.2d 608

12 FCDR 2491

HUNTER, MACLEAN, EXLEY & DUNN

v.ST. SIMONS WATERFRONT, LLC.

St. Simons Waterfront, LLC

v.Hunter, Maclean, Exley & Dunn.

Nos. A12A0716, A12A0717.

Court of Appeals of Georgia.

July 13, 2012.

Susan Warren Cox, Benjamin Joseph Colson, Statesboro, for Appellant.

John Gilbert Nelson, Jenny Elizabeth Jensen, Atlanta, for Appellee.

DILLARD, Judge.

This consolidated appeal follows the trial court's judgment granting and denying various aspects of a motion to compel filed by St. Simons Waterfront, LLC (“SSW”). In case number A12A0716, Hunter, Maclean, Exley & Dunn (“Hunter Maclean”) appeals the trial court's grant of the motion in favor of SSW, arguing that the trial court abused its discretion by (1) granting relief in excess of that sought in SSW's motion to compel; (2) ruling that the attorney-client privilege does not apply to communications with law firm in-house counsel after a client asserts a claim against the firm; (3) ruling that information developed by a law firm in anticipation of a potential claim asserted against it by a client is subject to discovery; and (4) ruling that documents created as part of an internal investigation conducted by a law firm regarding its potential liability are subject to discovery if that investigation occurs while the law firm continues to represent the client. In case number A12A0717, SSW appeals the trial court's denial of its motion to compel as it concerns outside counsel consulted by Hunter Maclean and argues that (1) a memorandum created by outside counsel should be subject to discovery because it was created during the time in which Hunter Maclean continued to represent SSW; (2) no attorney-client relationship existed between Hunter Maclean and the outside counsel; (3) there was no indication that Hunter Maclean intended to keep communications with outside counsel secret; (4) Hunter Maclean has waived any privilege; (5) the crime-fraud exception precludes Hunter Maclean from invoking the attorney-client privilege; and (6) if the privilege applies, SSW is entitled to information not protected by the privilege. Because the trial court employed an erroneous legal theory in reaching its decision, we vacate and remand with direction.

I. Summary of the Relevant Facts.

a. Hunter Maclean's Representation of SSW Prior to February 18, 2008. The record reflects that Hunter Maclean was retained by SSW in 2006 to represent the company through the development and sale of high-end condominiums on St. Simons Island,Georgia. But the relationship between the parties deteriorated after buyers, alleging a variety of reasons, began rescinding the purchase contracts in late 2007–early 2008.

During Hunter Maclean's initial representation of SSW, the primary attorneys working for the client were Triece Ziblut, Jennifer Mafera, and Elizabeth Thompson. Ziblut and Mafera advised the client on transactional matters and Thompson joined the representation as a closing attorney.

When buyers began to rescind in late 2007–early 2008, SSW inquired about the possibility of enforcing the specific-performance provision in the sales contract drafted by Hunter Maclean. But a member of the firm's litigation team advised that he believed it was unlikely a court would grant specific performance due to the large amount of earnest money buyers paid on the high-dollar condominiums (15 percent).¹ And as attempted rescissions continued, Ziblut and Mafera asked Kirby Mason, another member of the firm's litigation team, to review the buyers' claims on behalf of SSW. In this regard, Mason reviewed and revised response letters to the rescinding buyers.

On February 18, 2008, Ziblut, Mafera, and Mason were all involved in a conference call with the SSW representatives the firm had dealt with throughout the course of the firm's representation, Anna Maria Hatfield and Janet Safran.

b. The February 18, 2008 Conference Call. The parties have two differing versions and recollections of this seminal moment in the history of the case.

1. Hunter Maclean's Version. According to Mason and Ziblut, the purpose of the call was to advise SSW as to the procedure Mason would use to negotiate with the rescinding buyers concerning the return of earnest money and settlement of claims. Thus, Mason started the conference call by explaining the process and the sufficiency of the buyers' individual claims to Hatfield and Safran when suddenly a male voice came “booming” unexpectedly over the loudspeaker. That voice belonged to Robert Mundy, the president of SSW.

Mason, Mafera, and Ziblut all testified that Mundy was angry with Hunter Maclean and clearly intended to hold the firm responsible for the buyers' rescissions. Both Mafera and Mason took a statement by Mundy to the effect of “live by the sword, die by the sword” ² to mean that SSW would hold Hunter Maclean responsible for any losses. Ziblut testified that Mundy wanted to know why settlement was being discussed and said that Hunter Maclean had been hired to protect SSW's interests. Thus, at the conclusion of the call, the three Hunter Maclean attorneys all believed it was probable that SSW would eventually file a claim against the firm.³

2. SSW's Version. According to Safran and Mundy, Mundy spoke up during the February 18 conference call because he was not interested in settling with the rescinding buyers and instead wanted to pursue specific performance. Mundy said that he did not understand Hunter Maclean's hesitation to pursue specific performance. Safran did not recall Mundy threatening Hunter Maclean, and Mundy testified that he was not looking to bring a claim against Hunter Maclean because there were closings left to finalize. Instead, his intention was to stress SSW's desire to pursue specific performance, not to settle with the buyers. Both Safran and Mundy testified that the decision to sue Hunter Maclean was made only after SSW obtained new counsel.

c. Hunter Maclean's Actions after the February 18 Conference Call. The actions of Hunter Maclean after the February 18 call, as reflected by the record and described below, form the crux of the discovery dispute at issue between the parties—including Hunter Maclean's continued representation of SSW, the undertaking of an internal investigation, Hunter Maclean's consultation with an outside expert, and Hunter Maclean's internal decision regarding a letter that Mafera was drafting for SSW.

1. Continued Representation of SSW. Mafera testified that after the February 18 call, there was an immediate decision that the firm should seek outside counsel to handle the buyers' claims for SSW. Thus, Hunter Maclean began efforts to locate a new attorney for SSW on February 19. While SSW sought counsel in Atlanta, Hunter Maclean sought to find local counsel for SSW in the Brunswick area. But as late as early March 2008, the efforts to obtain new counsel remained unsuccessful due to the specialized nature of the buyers' claims, and because the attorneys and firms consulted up to that point all had conflicts of interest.

Meanwhile, Hunter Maclean continued to complete closings and deal with the buyers' claims after February 18. As to the closings, Thompson testified that the last one she conducted on behalf of SSW occurred in April 2008. And Hunter Maclean continued to conduct closings on behalf of SSW even after SSW obtained new counsel. As to the buyers' claims, Mafera testified that Hunter Maclean helped stall, respond to, and negotiate those claims; Ziblut testified that the firm continued to write initial response letters to claims as of February 25 and conducted settlement negotiations at SSW's request; and Mason testified that Hunter Maclean did the best that it could to avoid harm to SSW until new counsel could be obtained, including trying to prevent adverse actions. Indeed, Mason testified that she personally conducted calls with some attorneys for rescinding buyers after February 18. Additionally, Brooks Stillwell—another member of the Hunter Maclean litigation team—counseled SSW after February 18 with regard to rescission letters that required immediate response, advising SSW to “get as many of them closed as quickly as you can and with the least publicity possible” and to initiate “discussions” with buyers.

Nevertheless, Mason opined that the attorney-client relationship between Hunter Maclean and SSW ended after February 18 and that the firm's involvement with SSW after that point merely entailed limited representation during a transitional period of maintaining the status quo.

2. Hunter Maclean's Internal Investigation of Potential Claims and Defenses. It is undisputed that after the February 18 conference call, and while continuing to counsel SSW, Hunter Maclean also started looking into its exposure regarding potential claims it thought SSW might assert against the firm. In fact, immediately after the call, Mason went to the office of Arnold Young, in-house general counsel for Hunter Maclean, to report that the firm had been threatened by a client and to inform him of the plan to find new counsel for SSW.

Like Mason, Ziblut also approached Young after the February 18 call and began participating in some of the firm's defense efforts, including meeting with Young, Mafera, Thompson, Mason, and Stillwell, all while continuing to assist SSW. Additionally, Ziblut and Mafera approached Stillwell on February 19 to discuss both how to help SSW with the buyers' claims and the firm's exposure to any potential malpractice that had occurred as part of the SSW representation.

Finally, while she continued to represent SSW in negotiations with the rescinding buyers and actively sought new counsel for SSW, Mason also participated in the internal investigation/defense efforts, acting as in-house counsel with Young on the matter.⁴

3. Hunter Maclean's Consultation with Darla McKenzie. In addition to beginning its internal investigation, Hunter Maclean also contacted Darla McKenzie, an attorney with an...