In a matter of first impression, a North Carolina appellate court ruled that an Asset Purchase Agreement’s indemnification provision did not create a “tripartite attorney–client relationship” among the contracting parties and counsel sufficient to invoke the common-interest doctrine and protect attorney communications from disclosure. Friday Investments, LLC v. Bally Total Fitness of the Mid-Atlantic, Inc., 2016 WL 3156239 (N.C. Ct. App. June 7, 2016). You may read the decision here.
Bally leased space for its health club operations, but later sold the health club and assigned the lease to Blast Fitness Group. The Asset Purchase Agreement between Bally and Blast contained an indemnification provision.
The lessor later sued Bally (but not Blast) for unpaid rent, and Blast agreed to defend Bally pursuant to the Asset Purchase Agreement. When the lessor requested post-suit correspondence between Bally and Blast, Bally sought a protective order claiming that the attorney–client privilege protected the correspondence from disclosure.
Bally claimed that the privilege covered the communications because Bally, Blast, and its lawyers held a “tripartite attorney–client relationship” sufficient to invoke the attorney–client privilege under the common–interest doctrine. A tripartite relationship most commonly exists when an insurance company retains counsel to represent an insured.