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Dialysis Clinic, Inc. v. Medley

Supreme Court of Tennessee, At Nashville

October 3, 2018, Session; January 25, 2019, Filed

No. M2017-01352-SC-R11-CV

Opinion

 [*316]  In this interlocutory appeal, we address whether the attorney-client privilege protects communications between a corporation's legal counsel and a third-party nonemployee of the corporation. After acquiring four commercial properties, a corporation filed unlawful detainer actions against the properties' tenants. The tenants subpoenaed documents from a property management company hired by the corporation to manage [**2]  its properties. The corporation and the property management company objected to producing documents containing communications between the corporation's legal counsel and the property management company, arguing that the attorney-client privilege protected the documents. The trial court held that the documents were protected because the attorney-client privilege extended to the property management company as an agent of the corporation. We hold that ] the attorney-client privilege applies to communications between an entity's legal counsel and a third-party nonemployee of the entity if the nonemployee is the functional equivalent of the entity's employee and when the communications relate to the subject matter of legal counsel's representation of the entity and the communications were made with the intention that they would be kept confidential. Applying this framework, we hold that the property management company was the functional equivalent of an employee of the corporation, that the communications related to the subject matter of counsel's representation of the corporation, and that the communications were made with the intention that they would be kept confidential. We affirm the [**3]  ruling of the trial court and remand to the trial court for further proceedings.

OPINION

Dialysis Clinic, Inc. (Dialysis Clinic) owned and operated dialysis centers. In addition, Dialysis Clinic owned and leased various commercial properties to third parties. Dialysis Clinic did not have in-house knowledge about or experience in the management of commercial rental properties. For that reason, Dialysis Clinic had a property management agreement with XMi Commercial Real Estate (XMi) to manage several of Dialysis Clinic's commercial properties. Under the property management agreement, XMi acted as Dialysis Clinic's agent on an exclusive basis to manage and operate properties. XMi's scope of work under the agreement included negotiating lease renewals and amendments; collecting rents and dues; canceling or terminating leases upon Dialysis Clinic's direction; and instituting, prosecuting, and defending actions involving the leases and properties.

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567 S.W.3d 314 *; 2019 Tenn. LEXIS 17 **; 2019 WL 324646

DIALYSIS CLINIC, INC. v. KEVIN MEDLEY ET AL.

Prior History: Tenn. R. App. P. 11 Appeal by Permission from Denial of Rule 9 [**1]  Application; Ruling of the Trial Court Affirmed; Case Remanded to the Trial Court. Appeal by Permission from the Court of Appeals, Circuit Court for Davidson County. No. 14C4843. Joseph P. Binkley, Jr., Judge.

Dialysis Clinic, Inc. v. Medley, 2017 Tenn. App. LEXIS 204 (Tenn. Ct. App., Mar. 27, 2017)

Disposition: Ruling of the Trial Court Affirmed; Case Remanded to the Trial Court.

CORE TERMS

communications, Dialysis, Clinic, functional equivalent, attorney-client, properties, nonemployee, entity, confidential, trial court, in-house, matters, legal advice, documents, partnership's, consultant, landowner, lease, independent contractor, outside counsel, employees, subject matter, negotiating, day-to-day, tenants, relations, manage, email, hired, property management company

Evidence, Privileges, Attorney-Client Privilege, Scope, Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Attorney-Client Privilege, Clearly Erroneous Review, De Novo Review

Evidence, Privileges, Attorney-Client Privilege, Scope, Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Attorney-Client Privilege, Clearly Erroneous Review, De Novo Review