Nov. 12 — The buyer in a failed sale of a car dealership may depose a trade association's lawyer—but not the dealership's lawyer—about a telephone conversation between the two attorneys discussing legal issues that were blocking the transaction, the Texas Court of Appeals, First District, decided Nov. 7.
The court held that the work product doctrine, but not the attorney-client privilege, protects the dealership's lawyer from being compelled to testify about the conversation. However, neither protection applies to the trade association's lawyer due to the lack of an attorney-client relationship with the dealership, the court ruled in an opinion by Justice Jane Bland.
The privilege dispute arose in a suit for damages that the prospective buyer of Baytown Nissan Inc. brought against the dealership and its owners after the deal cratered.
The buyer wanted to depose the dealership's lawyer, J. Cary Gray, and the general counsel of the Texas Automobile Dealer Association, Brenda K. Phillips, about a conversation they had before the deal fell through. Baytown Nissan was a member of the association, and Gray telephoned Phillips when Nissan North America Inc. asserted a right of first refusal on the sale of the dealership.
“We … decline to adopt a blanket rule of privilege between a trade association's members and the association's counsel.”Justice Jane Bland
In this special proceeding to block the depositions, the court of appeals held that the attorney-client privilege in Texas Rule of Evidence 503 did not apply to the lawyers' conversation because no attorney-client relationship existed between Baytown Nissan and the association's lawyer.
The court rejected the idea that the privilege applied merely because of Phillips's status as an attorney. “It is the relationship with the client that confers the privilege,” the court declared.
Moreover, no implied attorney-client relationship automatically exists between a trade association's attorney and the association's members, the court said. Citing a 2003 federal district court case, Bland stated: “We similarly decline to adopt a blanket rule of privilege between a trade association's members and the association's counsel.”
Nor did the evidence support an implied attorney-client relationship in this matter, the court found. It noted that Gray didn't ask Phillips to represent him or the dealership, didn't send Phillips an engagement or confidentiality agreement, didn't tell Phillips he believed she was acting as counsel for him or his clients, and didn't ask for assurance that the conversation was privileged.
In addition, Phillips did not tell Gray she needed to do a conflicts check, the court pointed out. Phillips said that she only provided Gray with general legal information and that she receives numerous calls and e-mails from association members every day, the court added.
Even if Gray subjectively believed the conversation was privileged and would be kept confidential, “such unstated subjective beliefs do not give rise to an attorney-client relationship by implication,” the court declared.
In ruling that the work product doctrine did not block Phillips from testifying about her conversation with Gray, the court reasoned that Phillips was not acting as Baytown Nissan's representative or attorney in the discussion, and she was not asked to serve as an expert in any matter.
As for Gray, however, the court concluded that the work product doctrine prevents him from being deposed about his talk with the dealership's lawyer. He spoke with Phillips in his capacity as Baytown Nissan's lawyer, and the conversation was conducted in anticipation of litigation over the failed dealership sale, Bland said.
The court noted that some of the deposition questions posed to Gray requested disclosure of his thoughts and mental impressions about this case. That material is core work product and absolutely protected, it said.
As for other deposition questions that requested factual details about the conversation, the court said the buyer did not demonstrate substantial need for Gray's testimony. The information the buyer wants Gray to disclose is available through Phillips, who had already disclosed it to third parties and is available to testify, the court said.
Chief Justice Sherry Radack and Justice Rebeca A. Huddle concurred in Bland's opinion.
Gray Reed & McGraw represented Baytown Nissan and Gray. Jackson Walker LLP represented the plaintiff.
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