Safe Acquisition, LLC v. GF Protection Inc.
| Decision Date | 05 November 2018 |
| Docket Number | 77309-7-I |
| Citation | 6 Wn.App.2d 1004 |
| Court | Washington Court of Appeals |
| Parties | SAFE ACQUISITION, LLC, a Washington corporation, LUCIDY, LLC, a Washington corporation, and SCOTT FONTAINE, an individual, Appellant, v. GF PROTECTION INC., d/b/a Guardian Fall Protection, a Washington corporation, Respondent. |
UNPUBLISHED OPINION
A party asserting an attorney-client privilege bears the burden of proving the existence of an attorney-client relationship. The absence of findings of fact that an attorney-client relationship existed is deemed an adverse finding to the party asserting the privilege. Here, the trial court concluded that appellant SAFE Acquisition, LLC did not meet its burden of establishing the attorney-client privilege applied to e-mails between its litigation counsel and the two individuals who acted on behalf of both SAFE and respondent GF Protection Inc. (GFP). In the absence of any findings that an attorney-client relationship existed between the litigation counsel for SAFE and two individuals, there is no reversible error.
A party asserting the work product rule bears the burden of establishing the documents or items in question were prepared in anticipation of litigation. SAFE failed to offer anything more than the conclusory statement that all communications between litigation counsel and the two individuals were "for the purpose of advising and representing" SAFE.[1] But the substance of the disputed e-mails is unknown. And it is conceivable that some portion of the e-mails might reveal litigation strategy or other information that constitutes an attorney's work product. Accordingly we remand to the trial court to conduct in camera review or otherwise resolve whether any or all of the disputed e-mails are protected work product.
Scott Fontaine founded SAFE to develop and market his patented safety inventions, including a safety device for roofers called the HitchClip. Starting in 2009, Fontaine asked his friend Mike Vasquez for help promoting the HitchClip. In August 2013, SAFE contracted with GFP to manufacture, sell and distribute its patented inventions in exchange for a share of the proceeds. In March or April of 2014, Brock Bullard, another friend of Fontaine's, began working with SAFE. The venture between SAFE and GFP did not go well however, and by April 10, 2015, SAFE'S then-counsel threatened to sue GFP. Soon after, SAFE retained its present counsel and filed suit against GFP for breach of contract misappropriation of trade secrets, and conversion.
On August 23, 2016, GFP served SAFE with requests for production of all communications with Mike Vasquez and Brock Bullard "from December 2011 to present... including but not limited to, COMMUNICATIONS regarding the present lawsuit."[2] SAFE refused the requests as to communications with litigation counsel because they "ask[ed] for attorney-client communications and/or work product."[3]
Almost one year later, GFP filed a motion to compel. The court granted the motion and denied SAFE'S motion for reconsideration. On September 15, 2017, the court granted GFP's motion for monetary sanctions after SAFE continued to resist production of the disputed materials.
On September 19, 2017, a commissioner of this court granted a temporary stay of the trial court's order levying sanctions pending a ruling on SAFE'S motion for discretionary review. On October 25, 2017, the commissioner denied review and lifted the stay. A panel of this court granted SAFE'S motion to modify the commissioner's ruling denying interlocutory appeal and ordered the temporary stay on sanctions continue pending appeal.
We review discovery orders for an abuse of discretion.[4]
Civil Rule (CR) 26 governs discovery. The scope of discovery is broad.[5]But privileged matters are generally not subject to discovery.[6]
Attorney-client privilege is "'narrow'" and [7] When a corporation or limited liability company is a client, the general rule is that the privilege may extend beyond the "control group" of upper management to include some non-managerial employees and other agents.[8]
Whether an attorney-client relationship exists is a question of fact.[9] The party invoking the privilege bears the burden of establishing an entitlement to it.[10]
Here the court considered both parties' detailed arguments regarding attorney-client privilege and concluded that SAFE failed to carry its burden in invoking the privilege. The court did not enter any findings of fact resolving the conflicting facts regarding Bullard and Vasquez's relationships with SAFE and GFP.
SAFE relies on Fontaine's two identical "letters of intent"[11] to Bullard and Vasquez from July 21, 2014, to argue that Fontaine's friends are co-owners of SAFE. The 2014 letters vaguely discuss an ownership percentage in Fontaine's various companies:
Neither letter states when either friend took, or will take, his 10 percent stake in Fontaine's companies.[13]
Deposition testimony from Fontaine, Bullard, and Vasquez confuses rather than clarifies. Vasquez testified he never was an owner, employee, or independent contractor for SAFE. But he understood his ownership interest in SAFE to be a future interest contingent on the company becoming profitable. Similarly, Bullard testified his agreement with SAFE involved "what ownership I would have in SAFE."[14] Fontaine testified that Lucidy, LLC, has no owners or investors other than himself.
SAFE offers alternative theories of agency and independent contractor relationships. But it appears Vasquez and Bullard were working as paid consultants or independent contractors for GFP while arguably prospective co-owners, ostensible co-owners, or agents of SAFE. Vasquez testified that GFP paid him $5, 000 per month as a product consultant beginning October 1, 2013 to train and support the sales staff. Fontaine, however, described Vasquez's role in SAFE, beginning around July or August of 2013, as a "product consultant and sales representative]."[15] SAFE never paid royalties or a salary to Vasquez. Bullard received over $1, 000 in reimbursements from GFP in December 2014. And despite Fontaine's description of Bullard as SAFE'S general manager, SAFE never paid royalties or a salary to Bullard.
The court concluded that SAFE "failed to carry [its] burden in justifying their assertion that documents to which [Bullard and Vasquez] are party may be withheld on a claim of attorney-client privilege."[16] The court did not make any findings about Vasquez or Bullard's legal relationships with SAFE.
The general rule is "absence of a finding of fact on an issue is 'presumptively a negative finding against the person with the burden of proof.'"[17]An exception to the negative finding rule applies where "there is ample evidence to support the missing finding, and the findings entered by the court, viewed as a whole, demonstrate that the absence of the specific finding was not intentional."[18]
In this case, it is appropriate to infer a negative finding against SAFE regarding attorney-client privilege. The record contains conflicting and confused evidence whether Vasquez and Bullard are co-owners, prospective co-owners, or agents of SAFE. In addition, the order's silence does not seem an inadvertent oversight to enter findings in support of an attorney-client relationship because the court expressly concluded that SAFE failed to carry its burden.
SAFE contends that the absence of findings of fact and the presence of documentary evidence means we should engage in de novo review of whether there was an attorney-client relationship. But the cases relied upon by SAFE apply only where there is undisputed evidence or the material evidence is all contained in documents in the record.[19] Because the evidence about Bullard and Vasquez is disputed, includes deposition testimony, and the e-mails' contents are unknown, de novo review is not warranted or practical.
Because SAFE failed to satisfy its burden of establishing the existence of an attorney-client relationship that extends to Vasquez and Bullard, the trial court did not abuse its discretion.
The court also concluded that the work product rule did not prevent discovery of Vasquez and Bullard's communications with SAFE'S litigation counsel. Civil Rule 26(b)(4) excludes from discovery materials "prepared in anticipation of litigation or for trial."[20] Strong public policy also favors shielding genuine work product from discovery.[21] In Heidebrink v. Moriwaki, our Supreme Court defined the scope and purpose of the rule concluding "[it] should provide protection when such protection comports with the underlying rationale of the rule to allow broad discovery, while maintaining certain restraints on bad faith, irrelevant and privileged inquiries in order to ensure just and fair resolutions of disputes."[22]
Whether material should be shielded as work product by CR 26(b)(4) is a two-step mixed question of law and fact.[23] First, the court must consider whether the party opposing discovery established that the materials were prepared in anticipation of litigation and qualify as work product.[24] A court must "'examin[e] the specific parties and their...
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