Welcome to our Newsletter edition for the First Quarter of 2008. This forum provides an opportunity to highlight topics of interest to you. Please send requests to newsletter@bcclegal.com for topics you wish included in our next edition. The Newsletter also enables us to share with you the accomplishments of our attorneys and staff. Thank you for the opportunity to be of service. For further information on our attorneys and areas of practice, visit our website at http://www.bcclegal.com/.
The Attorneys & Staff
Burke Costanza & Cuppy LLP
________________________________________________________
Waiver of Attorney/Client Privilege By Inadvertent Disclosure
Oops! Can be a problem!
The source of the attorney-client privilege is found in the Indiana statutes at IC § 34-46-3-1:
[T]he following persons shall not be required to testify regarding the following communications:
(1) Attorneys, as to confidential communications made to
them in the course of their professional business, and as
to advice given in such cases.
What is "Privileged?"
The person asserting the privilege has the burden to show:
(1) the existence of an attorney-client relationship;
(2) that a confidential communication was involved.
Note: The privilege belongs to the client and can only
be waived by conduct attributable to the client.
The person asserting the privilege has the burden to show:
(1) the existence of an attorney-client relationship;
(2) that a confidential communication was involved.
Voluntary Disclosure or Consent.
Indiana's Rules of Evidence [Ind. R. Evid. 501] provide that:
(b) Waiver of Privilege by Voluntary Disclosure
A person with a privilege against disclosure waives the privilege if the person or person's predecessor while holder of the privilege voluntarily discloses or consents to disclosure of any significant part of the privileged matter. This rule does not apply if the disclosure itself is privileged.
So, what does this mean?
Illustrations by example best explain what client conduct or actions may constitute a waiver by the client of the privilege.
Example No. 1: You didn't look in the box, did you?
An owner of a power plant (the Plaintiff) sued a contractor (the Defendant) who started a fire during the course of construction, resulting in property damage.
During the discovery phase of litigation, the Defendant produced 2 ½ boxes of documents for Plaintiff's inspection at Defendant's offices. Shortly after Plaintiff's counsel began inspecting the documents, Defendant's counsel attempted to pull back some documents which had already been reviewed by Plaintiff's counsel because they had been "inadvertently" included in the pile of documents produced by the Defendant, and claimed those particular documents were attorney-client privileged. A disagreement ensued between Plaintiff's and Defendant's counsel and the question was put before the Court.
The Court adopted the "balancing test" as the preferred approach among the three (3) alternatives in use in various jurisdictions, and concluded that the privilege had not been waived.
Example No. 2: We gave you what?
In a medical malpractice case against a Defendant physician, the Defendant asked the physician who shared office space with him to serve as the Defendant's expert witness. The Defendant physician gave his expert witness files to review. Included in the documents given by the Defendant to his expert witness for review were communications to the Defendant from his attorney. After the expert witness completed his review of the files, Plaintiff's counsel deposed the Defendant's expert witness, and at the outset of the deposition, Plaintiff's counsel had already examined the same files produced by the Defendant that were examined by Defendant's expert witness and relied upon by the expert witness for his opinion and testimony.
At the deposition, the Defendant's attorney attempted to then "remove" from the files already reviewed by the expert witness those documents that were communications between the Defendant's attorney and the Defendant physician. Plaintiff's counsel objected to the defense attorney's attempt to withdraw the questioned documents. The Court, applying "balancing test," held that the Defendant physician's attorney-client privilege had been waived.
Example No. 3: Thought you took that stuff out of the file? Think again!
In a "bad faith" action against an insurer for failure to pay medical benefits under a medical insurance policy after the insurer denied coverage, the Claims Committee sought an opinion of its attorney on the coverage issue. The insurer's attorney provided an opinion, in communicated the opinion to the Claims Committee without declaring that such opinion was an "advice of counsel" statement. The Claims Committee completed its review and also denied coverage to the insured. Litigation on coverage ensued and discovery was conducted between the insurer and the insured.
The insurer's attorney's opinion letter was redacted from the file produced by the insurer in response to discovery, but the Claims Committee's determination, which, included its findings that it "concurs with the attorney's opinion of no coverage," was left in the insurer's file.
A dispute arose between the parties in the case as to whether the insurer's attorney's opinion letter must be produced. The Court held in this instance that the attorney-client privilege had been waived by "opening the door" when the insurer provided the basis for the Claims Committee's decision, i.e., that the Claims Committee "concurred with the attorney's opinion of no coverage," and, thereafter, reached a similar conclusion of "no coverage."
How does the Court decide when the attorney-client privilege is waived?
Some states use the "objective" test: Inadvertent disclosure forfeits the protection of the privilege without regard to the circumstances. Others use the "subjective" test: Continues the protection of the privilege if the disclosure was not intentional.
Most states use the "balancing" test: The Court examines several factors in determining whether to continue the protection of the privilege depending upon the circumstances of the case.
Factors Emphasized in Court Cases.
The factors to be taken into account by the Court are:
(1) Was the privileged information a small part of a large disclosure?
(2) What precautions were taken to protect against disclosure?
(3) Was there prompt discovery and attempted correction of the disclosure?
(4) How widespread was the inadvertent disclosure?
(5) Is it possible to effectively grant relief to the disclosing party (to "unring" the bell)?
(6) Is there the prospect of serious harm to the interests of the opponent or justice
if waiver is not found?
(7) How excusable or inexcusable is the neglect that resulted in the disclosure?
What Clients Need to Know!
If something (a document, a note, a paper, etc.) is privileged, make sure it says that. And if it's not privileged, don't say it is. Mark documents "attorney-client privileged" that are privileged.
Documents should be shared, distributed, only on a "Need to Know" basis. Never share privileged documents outside of the "control group." Not sure how is in the control group? Ask your attorney. Segregate privileged materials from non-privileged. Not sure what materials are privileged? Ask your attorney.
How do you know what is privileged and what is not? Before disseminating any documents, first seek the advice of your attorney. Get your attorney involved at the earliest stage, on the front-end. Requests from insurers, from patients, from your clients and contractors, all raise the potential risk of you producing attorney-client privileged information. Even some compulsory disclosures (e.g., to state, federal, or professional regulators) can be deemed to constitute a waiver.
When in doubt, consult your attorney first. Mistakes will be costly. Instruct those working for you on the policies of your firm, company or practice of releasing documents. Your attorney can draft and provide you with a "policy" to be used by your staff and employees concerning dissemination of information and production of documents. For further information on this topic, please contact one of our attorneys at [210] 769-1313, or email your request to newsletter@bcclegal.com. One of our attorneys will contact you to answer your questions and develop strategies to assist you with protecting your attorney-client privilege.
Robert F. Parker, Partner
parker@bcclegal.com
________________________________________________________
THE REAL ESTATE ATTORNEY
Buyers and sellers of residential real estate often retain the services of a lawyer. Consulting a lawyer early in the purchase and sale process is important. A lawyer can do very little to change the contractual relationship of a buyer and seller after a Purchase Agreement has been signed. A lawyer experienced in real estate transactions will advise on issues raised in the contracting process, and will also raise issues that neither buyer nor seller had considered. The legal issues to consider in the purchase transaction are dependant on the type of house (condominium or single family residence), the municipality where the house is located, and whether the house is located in a newly developed subdivision, an established subdivision, or in rural setting. A lawyer will assist a seller or purchaser to determine whether these issues adversely affect the transfer or use of the home.
If a real estate agent is involved in the transaction, the agent may supply "form contracts." Although the forms may be standardized, each transaction is different. The lawyer can assist in determining the appropriate additions or subtractions to these forms necessary to clearly reflect the intentions of the buyer and seller. With a full knowledge of contract and real estate law, the lawyer is most suitable for revising these contracts and finalizing their execution by the parties.
Once the contract has been executed, the lawyer will, to the extent necessary, assist the client in reviewing the liens that exist on the property, issues concerning surveys, and preparing and reviewing closing documents. At closing, buyers may find themselves executing 30 or 40 legal documents. The seller will execute significantly fewer documents, but each document has legal ramifications. The buyer and seller should have access to an attorney to explain these documents and their effect on the transaction. Use of an attorney experienced in real estate transactions will give the buyer or seller confidence in their decisions and will go a long way to fulfilling their expectations.
The optimum time for consulting an attorney for purchase or residential real estate is prior to entering into a purchase agreement for the real estate.
Todd A. Etzler, Partner
etzler@bcclegal.com
________________________________________________________
________________________________________________________
CASE NOTES
Recent Court Decisions
1. Residential Real Estate. Landowners filed a petition for certiorari to challenge a decision of the county board of zoning appeals who held that a guesthouse building on the landowner's property violated a county zoning ordinance. The trial court reversed, and the board appealed.
The appellate court affirmed, holding that the ordinance did not prohibit landowners from using their accessory building as a guesthouse for occasional visitors. Hamilton County Planning Commission v. Nieten, 876 N.E.2d 355 (Ind. Ct. App. 2007).
2. Environmental Law - Manufacturing. An automobile parts manufacturer brought a breach of contract action against the Indiana Department of Environmental Management (IDEM), after IDEM recanted its approval of the manufacturer's PCB spill cleanup proposal. The trial court granted summary judgment in favor of the manufacturer, and IDEM appealed.
The appellate court reversed, holding that the contract was unenforceable as being contrary to public policy. Indiana Dept. of Environmental Management v. Raybestos Products Co., 876 N.E.2d 759 (Ind. Ct. App. 2007).
3. Business - Stock Transactions. Purchasers of common stock in first corporation, in transaction involving exchange of their stock in second corporation, brought an action under the Indiana Securities Act against the first corporation and its directors, alleging that the first corporation sold unregistered securities and failed to make material disclosures. The trial court granted partial summary judgment to the purchasers, as to claims against an outside director. The outside director appealed. The Court of Appeals affirmed and transfer was granted.
The Indiana Supreme Court affirmed, holding that the outside director did not establish an affirmative defense to liability under the Indiana Securities Act. Lean v. Reed, 876 N.E.2d 1104 (Ind. 2007).
4. Negligence Action. A lake visitor, who dove off a dock and struck his head on a dredge pipe located on the channel floor, brought a negligence action against the nonprofit corporation that owned lake. The corporation asserted affirmative defenses, including named non-parties. Following a jury trial, the trial court entered judgment against the corporation in the amount of $1,019,400.00, and the corporation appealed.
The Indiana appellate court affirmed, holding that: (1) the lake was held open to the public, and, thus, the visitor was an invitee, rather than a licensee; (2) the trial court did not abuse its discretion by denying the corporation's motion to bifurcate issues of liability and damages; (3) the trial court did not abuse its discretion by permitting a vocational economic analyst to testify regarding the impaired earning capacity of the visitor; and (4) the trial court did not abuse its discretion by denying corporation's motion to withdraw its nonparty defense at the conclusion of trial. Shafer & Freeman Lakes Environmental Conservation Corp. v. Stichnoth, 877 N.E.2d 475 (Ind. Ct. App. 2007).
5. Products Liability - Protection of Manufacturer's Formula. An automobile accident victim's estate brought a products liability claim against a tire company. The tire company moved for a protective order to prevent disclosure of the rubber formula for steel-belted radial tires. The trial court entered an order for the tire company to produce the formula with restrictions on dissemination. The tire company petitioned for interlocutory appeal and transfer was granted.
The Indiana Supreme Court reversed and remanded, holding that: (1) as a matter of first impression, a three-part balancing test is the proper analysis for whether good cause has been shown and that a protective order should be issued for trade secret production during discovery; (2) the manufacturer adequately demonstrated that the steel belt skim stock formula was a trade secret; and (3) disclosure of the formula was not necessary. Bridgestone Americas Holding, Inc. v. Mayberry, 878 N.E.2d 189 (Ind. 2007).
6. Construction Law. Prospective purchasers of a home brought an action in the Superior Court, Marion County, against a construction contractor, seeking damages and specific performance. The action was dismissed, apparently for failure to prosecute. The prospective purchasers filed an action in the Circuit Court, Marion County, against the construction contractor, seeking damages and specific performance. The Superior Court action was reinstated, the subsequent purchaser was added as defendant, and the subsequent purchaser brought a cross-claim against the construction contractor. The actions were consolidated. The Superior Court granted summary judgment to the subsequent purchaser as to prospective purchasers' claims, and the order was certified as final and appealable. The prospective purchasers appealed.
The Indiana appellate court reversed and remanded, holding that the valid lis pendens notice in Circuit Court action provided the subsequent purchaser with constructive notice of the specific performance claim asserted in the reinstated Superior Court action. Clarkson v. Neff, 878 N.E.2d 240 (Ind. Ct. App. 2007).
7. Real Estate - Quiet Title Action. The eastern landowners brought an action against the western landowners claiming trespass and damage to the disputed tract of land. The western landowners filed a counterclaim to quiet title and for damages. The eastern landowners filed a motion for summary judgment, seeking to quiet title by adverse possession. The trial court denied the motion, and following a bench trial, quieted title in favor of the western landowners. The eastern landowners appealed.
The appellate court reversed, holding that: (1) the eastern landowners failed to request summary judgment on the specific issue of whether they initially acquired title by adverse possession and, thus, could not complain on appeal that the trial court failed to enter summary judgment on that specific issue; (2) Court of Appeals could treat as "surplusage" the trial court's purported "findings of fact" which merely restated the testimony of witnesses; (3) the eastern landowners established control of the disputed tract; (4) the eastern landowners established an intent to claim ownership of the disputed tract; and (5) the western landowners had constructive notice of the eastern landowners' intent and control of the disputed tract. Garriott v. Peters, 878 N.E.2d 431 (Ind. Ct. App. 2007).
8. Insurance Coverage for Defense Against Environmental Claims. Insured brought an action against a commercial general liability (CGL) insurer to recover costs to defend against an environmental claim for three and one-half years before the insured gave the insurer notice of the claim. The trial court entered summary judgment in favor of the insurer and the insured appealed.
The Indiana appellate court affirmed in part, reversed in part and remanded, holding that: (1) the insured's delay was unreasonable but, (2) factual issues precluded summary judgment on the question of whether the insured rebutted the presumption of prejudice against the insurer. Dreaded, Inc. v. St. Paul Guardian Ins. Co., 878 N.E.2d 467 (Ind. Ct. App. 2007).
Chad Melchi, Associate
melchi@bcclegal.com
Paula E. Neff, Partner -- Editor
neff@bcclegal.com
________________________________________________________
BCC ATTORNEYS
IN THE COURTS AND THE COMMUNITY
George W. Carberry ----- will present a program on Estate Planning during the "Retirement Planning Today" conferences sponsored by Valparaiso University, to convene at the University on March 27 and April 3 and again on March 29 and April 5.
Todd A. Etzler ----- was recently recognized with five other volunteers as a Valparaiso 2007 YMCA Volunteer of the year. Todd was graciously nominated by the YMCA's Chief Financial Officer, Deborah Winter. Todd works with the YMCA as its attorney and recently assisted the YMCA in closing a $14.4 Million Economic Development Revenue Bond for its new facility in Valparaiso.
Tory Prasco, Jon Schmaltz and Troy Barron ----- attended a legal seminar titled "The New Indiana Uniform Securities Act" in order to better advise clients regarding the new Securities Act becomes effective on July 1, 2008.
________________________________________________________
BCC Welcomes Business, Accounting and Tax Attorney to the Firm
Jason Smith joined the Firm in January of 2008. He is a member of the Indiana Bar Association and the American Bar Association. Jason concentrates his practice in Estate Planning, General Business Matters, and Taxation.
Jason was raised in Seymour, Indiana. He and his fiancé, Carrie Pollert, live in Valparaiso, Indiana. He received his undergraduate degree from the Kelley School of Business at Indiana University in Business Accounting, and his J. D. from Valparaiso University School of Law. Jason is currently pursuing his LLM in Taxation from the Chicago -Kent College of Law.
© Burke Costanza & Cuppy LLP
Disclaimer: This Newsletter is not intended as legal advice. To obtain legal advice, please contact one of our attorneys.
