Inter-Fluve v. Montana Eighteenth Judicial District Court

2005 MT 103, 112 P.3d 258, 327 Mont. 14, 22 I.E.R. Cas. (BNA) 1397, 2005 Mont. LEXIS 179
CourtMontana Supreme Court
DecidedApril 26, 2005
Docket04-699
StatusPublished
Cited by21 cases

This text of 2005 MT 103 (Inter-Fluve v. Montana Eighteenth Judicial District Court) is published on Counsel Stack Legal Research, covering Montana Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Inter-Fluve v. Montana Eighteenth Judicial District Court, 2005 MT 103, 112 P.3d 258, 327 Mont. 14, 22 I.E.R. Cas. (BNA) 1397, 2005 Mont. LEXIS 179 (Mo. 2005).

Opinions

OPINION AND ORDER

¶ 1 Inter-Fluve, Inc. (Inter-Fluve), seeks a writ of supervisory control, arguing that the District Court of the Eighteenth Judicial District, Gallatin County, is proceeding based on a mistake of law in controlling discovery proceedings with respect to the attorney-client privilege. ‘Discovery of potentially-privileged material presents unique issues which we have, under certain circumstances, found sufficient to invoke original jurisdiction.” Winslow v. Mont. Rail Link, Inc., 2001 MT 269, ¶ 2, 307 Mont. 269, ¶ 2, 38 P.3d 148, ¶ 2. Here, however, we decline to exercise supervisory control. Our resolution of Inter-Fluve’s petition is patterned after that of Hegwood v. Mont. Fourth Judicial Dist. Ct., 2003 MT 200, 317 Mont. 30, 75 P.3d 308, another petition that arose from discovery proceedings, in that we set forth a legal analysis supporting our refusal to exercise supervisory control.

¶2 We address the following issues:

¶3 (1) Is this an appropriate case for the exercise of supervisory control?

¶4 (2) Is the confidentiality of the attorney-client privilege violated when a former director of a closely-held corporation, who has brought claims against the corporation, is allowed to discover communications between corporate counsel and other directors which occurred during his tenure as a director?

FACTUAL AND PROCEDURAL BACKGROUND

¶5 Inter-Fluve is a closely-held Montana corporation with its principal office in Hood River, Oregon. At the time of the conflict which spawned the lawsuit underlying this petition, Gregory Koonce (Koonce), Lon Mikkelsen (Mikkelsen) and Dale Miller (Miller) were the [16]*16directors of the corporation, each holding a one-third interest therein as shareholders. Miller was employed as the manager of Inter-Fluve’s Bozeman office, while Mikkelsen managed the Hood River office where he worked with Koonce. Ever since the incorporation of the business, Miller was a shareholder and a member of the Board of Directors. Additionally, Miller had previously served as Inter-Fluve’s president.

¶6 On March 11, 2002, Mikkelsen and Koonce terminated Miller’s employment with Inter-Fluve. Thereafter, Miller resigned his directorship and initiated the underlying litigation. In doing so, Miller brought a claim of wrongful discharge against Inter-Fluve and a claim of corporate oppression against Mikkelsen and Koonce. Subsequently, Inter-Fluve brought counterclaims against Miller, alleging conversion and violation of the Uniform Trade Secrets Act.

¶7 During discovery, Miller sought to depose Calvin Braaksma (Braaksma), who had served as corporate counsel for Inter-Fluve in Bozeman with the firm Landoe, Brown, Planalp, Braaksma & Reida. As part of the deposition, Miller wanted to inquire about the substance of certain communications between Braaksma and Inter-Fluve which occurred during Miller’s tenure as a director.

¶8 Inter-Fluve filed a motion for a protective order pursuant to Rule 26(c), M.R.Civ.P., asking the District Court to prevent Miller from questioning Braaksma about the substance of attorney-client communications, including conversations related to the termination of Miller’s employment with Inter-Fluve. In support of this request, Inter-Fluve asserted that the attorney-client privilege extends to corporations, and the privilege covers conversations which Mikkelsen and Koonce had with Braaksma because they had engaged Braaksma on behalf of Inter-Fluve. Hence, Inter-Fluve argued that Miller was not entitled to discover these conversations, regardless of his status as a director at that time the communications occurred, because the privilege belongs to the corporation, not the directors.

¶9 In response to Inter-Fluve’s request for a protective order, Miller raised several arguments to support his contention that he was entitled to depose Braaksma regarding these communications. Miller argued that Mikkelsen and Koonce had conducted these communications in their respective capacities as directors of Inter-Fluve, that these communications occurred without his knowledge and that his status as a former director entitled him to access these communications which occurred during his tenure as a director. Additionally, Miller claimed that corporate funds were used to pay the fee for these communications. Consequently, Miller asserted [17]*17that he, as a thirty-three percent shareholder, had effectively paid thirty-three percent of the bill for these communications. Finally, Miller claimed that Mikkelsen and Koonce had engaged Braaksma for the purpose of affecting Miller’s relationship with Inter-Fluve, and that Braaksma’s advice was used to the detriment of Miller. Inter-Fluve responded by arguing that a former director does not have the authority to waive the attorney-client privilege of a corporation.

¶10 Another point of contention arose when Miller’s counsel deposed Mikkelsen and Koonce, asking them about the substance of communications with Inter-Fluve’s corporate counsel prior to Miller’s termination. Mikkelsen and Koonce declined to answer these questions, assertingthe attorney-client privilege. Consequently, Miller filed a motion to compel, asking the District Court to order Mikkelsen and Koonce to respond to these questions. In doing so, Miller asserted that Koonce and Mikkelsen had secretly consulted with corporate counsel in both Bozeman and Oregon to secure advice in furtherance of a conspiracy to terminate Miller’s employment. Further, Miller asserted that these consultations were paid for with corporate funds. In response, Inter-Fluve restated the arguments made in its motion for a protective order.

¶11 Finally, Inter-Fluve filed a motion in limine, asking the District Court to limit the scope of Miller’s questioning with respect to any legal advice sought by Mikkelsen and Koonce, either individually or on behalf of Inter-Fluve, regarding the termination of Miller’s employment. Inter-Fluve requested this relief in limine so as to avoid any prejudice that might accompany the rightful invocation of the attorney-client privilege in front of the jury.

¶12 The District Court dealt with these motions in its Decision and Order of October 4, 2004 (Order). With respect to Inter-Fluve’s motion for a protective order, the District Court determined that the defendants were not entitled to assert the attorney-client privilege against Miller as to communications between Inter-Fluve and Braaksma which occurred during Miller’s tenure as director. In reaching this conclusion, the District Court stated that in order for Koonce and Mikkelsen to obtain legal advice regarding corporate matters and keep such advice from Miller, they would have had to retain separate counsel and pay for such with non-Inter-Fluve funds. As such, the District Court denied Inter-Fluve’s motion for a protective order.

¶13 With regard to Miller’s motion to compel, the District Court considered whether alleged communications between Inter-Fluve and [18]*18corporate counsel other than Braaksma were privileged as against Miller. The District Court concluded that Miller was entitled to discover communications between Inter-Fluve and all other attorneys acting as counsel for Inter-Fluve, but specified that Miller was not entitled to access any such communications which occurred after his resignation as a director. Additionally, the District Court specified that Miller was not entitled to discover attorney-client communications made by or to Mikkelsen and/or Koonce when the client was not InterFluve.

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Inter-Fluve v. Montana Eighteenth Judicial District Court
2005 MT 103 (Montana Supreme Court, 2005)

Cite This Page — Counsel Stack

Bluebook (online)
2005 MT 103, 112 P.3d 258, 327 Mont. 14, 22 I.E.R. Cas. (BNA) 1397, 2005 Mont. LEXIS 179, Counsel Stack Legal Research, https://law.counselstack.com/opinion/inter-fluve-v-montana-eighteenth-judicial-district-court-mont-2005.