Owens v. Best Beers of Bloomington, Inc., 53A05-9404-CV-132

• Decision Date: 03 April 1995
• Docket Number: No. 53A05-9404-CV-132,53A05-9404-CV-132
• Citation: 648 N.E.2d 699
• Parties: Steven G. OWENS, Appellant-Plaintiff, v. BEST BEERS OF BLOOMINGTON, INC. and the Estate of Robert Haak, Deceased, Appellees-Defendants.
• Court: Indiana Appellate Court

Page 699

648 N.E.2d 699

Steven G. OWENS, Appellant-Plaintiff, v. BEST BEERS OF BLOOMINGTON, INC. and the Estate of Robert Haak, Deceased, Appellees-Defendants.

No. 53A05-9404-CV-132.

Court of Appeals of Indiana Fifth District.

April 3, 1995.

Geoffrey M. Grodner, Suzannah Bex Wilson, Mallor Clendening, Grodner & Bohrer, Bloomington, for appellant.

Charles F. Cremer, Jr., John A. Cremer, Cremer & Miller, Indianapolis, Marguerite R. Shreve, Bloomington, for appellees.

OPINION

SHARPNACK, Chief Judge.

In this interlocutory appeal, Steven G. Owens appeals the trial court's denial of his motion to compel answers to certain deposition questions. Best Beers of Bloomington, Inc. ("Best Beers") objected to the questions based on the attorney-client privilege. We reverse and remand.

Owens raises four issues on appeal, which we consolidate and restate as whether the trial court abused its discretion in determining that the certified deposition questions at issue sought information protected by the attorney-client privilege.

The facts show that Owens was employed by Best Beers from August 31, 1976, until Best Beers terminated his employment on January 21, 1991. During the time relevant to this action, Owens was acting as vice president and general manager of Best Beers. Robert Haak was president as well as a director and the majority, if not sole, owner of Best Beers. Haak is now deceased.

Best Beers had a distributorship agreement with Miller Brewing Company ("Miller"). In 1984, Best Beers' relationship with Miller began to deteriorate. On October 7, 1986, Best Beers received from Miller a notice of intention to terminate the distributorship agreement. Haak instructed Owens to prepare a plan of action to address the deficiencies alleged by Miller. Despite the efforts of Haak and Owens, Miller terminated Best Beers' franchise on February 9, 1987.

After receiving notice of the termination, Haak and Owens met with attorney James R. Cotner to discuss filing a lawsuit against Miller. According to Owens, Haak asked Owens to assume responsibility for preparing the potential litigation against Miller, for coordinating the litigation activities with Best Beers' attorneys, and for assisting in preparing the case for trial. As compensation for his services, Owens alleges that Haak agreed to pay him fifty percent of any monies collected from Miller as a result of the litigation.

In July 1989, Haak, Owens, and Cotner again discussed the litigation against Miller. Cotner stated that his fees were going to be very high and offered to work on a one-third contingency. According to Owens, Haak and Owens then modified their prior agreement so that Owens would receive one-third of any monies recovered in the litigation against Miller.

Owens assisted Cotner in preparing the case against Miller for trial. According to Owens, he invested hundreds of hours in litigation-related activities at Haak's request in addition to performing his regular duties as an employee of Best Beers. On March 20, 1990, Best Beers recovered a money judgment against Miller for compensatory and punitive damages.

On February 11, 1993, the litigation against Miller was finally concluded when the Indiana Supreme Court affirmed the trial court's award of compensatory damages and vacated the award of punitive damages that Miller had been ordered to pay Best Beers. Miller Brewing Company v. Best Beers of Bloomington, Inc. (1993), Ind., 608 N.E.2d 975, 985. Best Beers and Haak refused to pay Owens the one-third percentage of the judgment Owens alleges he was owed. Best Beers now denies that such an agreement was entered into by Haak and Owens. Owens contends that Cotner was present during several conversations between Haak and Owens in which the compensation agreement was discussed. ¹ Following the Miller litigation, Owens was terminated by Haak several months after the Miller trial ended. Thereafter, Owens filed suit to recover on the alleged compensation agreement.

On December 15, 1993, Owens deposed Cotner. During the deposition, Owens asked Cotner questions about the alleged agreement between Best Beers and Owens. Counsel for Best Beers objected to these questions based upon the attorney-client privilege.

Owens moved to compel Cotner to answer the deposition questions. Following a hearing, the trial court upheld Best Beers' objections to Owens' motion to compel, finding that "[a]ll of the unanswered sixty-seven (67) certified questions seek information relating to Mr. Cotner's representation of Best Beers of Bloomington, Inc. in conflict with an attorney's obligation not to reveal such information." Record, p. 308. On Owens' motion, the trial court certified its order for interlocutory appeal and this court accepted Owens' petition pursuant to App.R. 4(B)(6).

A trial court exercises judicial discretion in ruling on discovery issues, and we will reverse only for an abuse of that discretion. Bishop v. Goins (1992), Ind.App., 586 N.E.2d 905, 907. In determining whether the trial court abused its discretion, we look to the provisions of Ind. Trial Rule 26(B). Id. Trial Rule 26(B), in pertinent part, states:

"Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject-matter involved in the pending action ... It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence...."

T.R. 26(B)(1). In ruling on a discovery dispute, the trial court must determine whether the information sought meets two criteria: (1) the information must be relevant to the subject matter being tried; and (2) the information must not be exempted from discovery by privilege or immunity. Bishop, 586 N.E.2d at 907, fn. 2.

The attorney-client privilege is one such privilege by which the discovery of relevant information may be exempted.

"The attorney-client privilege applies in proceedings in which an attorney '... may be called as a witness or otherwise required to produce evidence concerning a client.' Ind. Professional Conduct Rule 1.6. In addition, IND.CODE § 34-1-14-5 states that '[t]he following persons shall not be competent witnesses: [ ...] Third. Attorneys, as to confidential communication made to them in the course of their professional business, and to advice given in such cases.' The attorney-client privilege establishes a provision for a person to give complete and confidential information to an attorney, so the attorney may be fully advised in his services to this client. Colman v. Heidenreich (1978), 269 Ind. 419, 422, 381 N.E.2d 866, 868. At the same time it assures the client that the confidences will not be revealed. Id. However, it has been cautioned that since the privilege prevents the disclosure of relevant information and impedes the quest for the truth, the privilege should be narrowly construed. In re Shargel (2d Cir.1984), 742 F.2d 61, 62; In re Special, September 1983, Grand Jury (Klein) (S.D.Ind.1985), 608 F.Supp. 538, 542, aff'd, 776 F.2d 628; accord Fisher v. United States (1976), 425 U.S. 391, 403, 96 S.Ct. 1569, 1577, 48 L.Ed.2d 39, 51.

The privilege provides ' "that when an attorney is consulted on business within the scope of his profession, the communications on the subject between him and his client should be treated as confidential." ' Colman, 269 Ind. at 423, 381 N.E.2d at 869, (quoting Jenkinson v. State (1840), 5 Blackf. 465, 466). The privilege applies to all communications to an attorney for the purpose of obtaining professional legal advice or aid regarding the client's rights and liabilities. Id."

Hueck v. State (1992), Ind.App., 590 N.E.2d 581, 583-84, reh'g denied, trans. denied. If a client makes particular communications during the course of a conversation with his or her attorney which do not concern the subject matter of the attorney-client relationship, the communications are not considered privileged. Colman, supra, 381 N.E.2d at 872. The burden to prove the applicability of the privilege is on the one who asserts it. Id. at 869. The applicability of the privilege must be established as to each question asked or document sought. Walsh v. United States, (7th Cir.1980), 623 F.2d 489, 493.

Best Beers argues that it can invoke the privilege to protect communications about any arrangement for compensation of Owens even though it denies that there were any such communications. We do not agree. If there were no such communications, as Best Beers contends, there are no confidential communications between attorney and client that would be compromised by requiring Cotner to simply respond that there were no such communications. At the least, Best Beers must show that there was an attorney-client relationship between it and Cotner in which Best Beers was seeking advice or other professional services with respect to the special compensation for Owens. Colman, supra, 381 N.E.2d at 869; Walsh, supra, 623 F.2d at 495. A court cannot make a determination in ignorance of the facts on which the privilege must depend. Id. at 493. If necessary, a court may conduct an in camera inquiry to inform itself sufficiently to act. Id. at 494, fn. 5.

In the instant case, we view Best Beers' invocation of the privilege in order to protect communications that it asserts never occurred to be an unjustifiable impediment of Owens' search for the truth. Thus, we hold that, upon remand, Owens may discover the fact of the existence or nonexistence of communications concerning the compensation agreement by compelling Cotner to answer the certified question or questions that the trial court determines are intended to seek that fact. For example: "Certified Question No. 17: During that conversation were you aware of the existence of any agreement between Mr. Haak and Mr. Owens?" Record, p. 225.

For our purposes, we will assume that all communications that occurred when Haak, Owens, and Cotner...