OUTPOST SOLAR, LLC, ET AL.
HENRY, HENRY & UNDERWOOD, P. C., ET AL.
Session November 1, 2016
from the Circuit Court for Giles County No. CC11515 James G.
Martin, III, Judge.
interlocutory appeal arises out of an action in which two
companies brought suit against their former attorney for
legal malpractice. The attorney moved for summary judgment as
to one client's claim, contending that the claim was
barred by the statute of limitations; the client responded
that it learned of its cause of action within one year of the
assertion of the claim. The attorney then sought through
discovery to have the former client produce communications
from the client's new counsel; the client declined to
produce the communications, taking the position that they
were protected by the attorney-client privilege. The attorney
moved the trial court to compel the client to produce the
communications, and the court granted the motion, holding
that the client impliedly waived attorney-client privilege in
asserting that the client discovered the cause of action
within the year preceding the assertion of the claim.
Discerning no error, we affirm the trial court's holding.
R. App. P. 3 Appeal as of Right; Judgment of the Circuit
Bowen and Will Parsons, Nashville, Tennessee, for the
appellant, BNL Technical Services, LLC.
Winston S. Evans, Nashville, Tennessee, for the appellees;
Henry, Henry & Underwood, P.C., and Robert Henry.
Richard H. Dinkins, J., delivered the opinion of the court,
in which Andy D. Bennett and W. Neal McBrayer, JJ., joined.
RICHARD H. DINKINS, JUDGE.
an interlocutory appeal in an action for legal malpractice
brought by Outpost Solar, LLC ("Outpost") and BNL
Technical Services, LLC ("BNL") against Robert C.
Henry ("Mr. Henry") and Henry, Henry, and
Underwood, P.C., his law firm. BNL appeals an order granting
Mr. Henry's motion to compel BNL to produce copies of
correspondence between BNL and its counsel that BNL claims is
protected by the attorney-client privilege. Mr. Henry sought
production of the correspondence in connection with his
defense that BNL's claim was barred by the one year
statute of limitations applicable to legal malpractice claims
at Tennessee Code Annotated section 28-3-104. The trial court
ordered the production of the documents after holding that
BNL impliedly waived the privilege when it asserted, in
response to Mr. Henry's statute of limitations defense,
that it discovered the cause of action within the limitations
period. BNL contends that the court erred because BNL did not
use the information to support its legal malpractice claim.
Pertinent Facts and Procedural History
a contract engineering support and renewable energy services
firm that does business in Tennessee; Wilson P. Stevenson,
III ("Mr. Stevenson"), is the majority owner and
president. BNL and a company known as Richland, LLC
("Richland") formed Outpost, a joint venture, to
design and manufacture solar energy systems. Mr. Henry
prepared the articles of organization, operating agreement,
and other documents for Outpost, and the articles were filed
on January 14, 2009, with Mr. Henry serving as Outpost's
registered agent until September 13, 2011. In August 2011,
Mr. Henry prepared the Bill of Sale when BNL purchased
Richland's 50 percent interest in Outpost; the bill of
sale included a provision that Mr. Henry, as Richland's
attorney, had drafted the document "at both parties'
request, " and that they "have been advised a
conflict may exist between them and have requested that this
instrument be prepared jointly for the Company's attorney
and consent thereto and waive any conflict of interest."
to BNL's purchase of Richland's interest, Outpost and
Mr. Stevenson had engaged in discussions with the Industrial
Development Board of the City of Pulaski and Giles County,
Tennessee ("the Board") about leasing space in the
industrial park. In due course, Mr. Stevenson and Mr. Speer,
the Executive Director of the Board, negotiated the terms of
a lease of property in the park for a total term of twenty
years. When Mr. Stevenson and Mr. Dan Speer
reached the agreement, Mr. Henry, who also represented the
Board, prepared the lease agreement, which Outpost and the
Board executed on September 6, 2011.
December 2011, a dispute arose between Outpost and Richland
with respect to some equipment manufactured by Richland, and
on January 23, 2012, Mr. Henry wrote Mr. Stevenson, advising
him that Mr. Henry's firm "no longer represent
[Outpost] and our attorney-client relationship has
terminated." In February 2012 the Board began
discussions with Magneti Marelli, another tenant of the
industrial park whose facility adjoined the property upon
which Outpost held an option to lease, regarding
Marelli's proposed expansion; as a result of these
discussions, the Board requested Outpost on several occasions
to release its option. The Board and Outpost were not able to
agree on the terms of a release.
October 11, 2012, Mr. Henry sent Mr. Stevenson a letter on
behalf of the Board, inter alia, advising him that
Outpost was in default of the lease in several respects and
that, if the items "[were] not addressed during the cure
period, the Board 'may' exercise its option to
terminate the Lease." On November 9, Outpost, through
its new counsel, gave the Board notice that Outpost was
exercising its option to lease the additional acreage, and on
November 12, the Board executed a temporary easement in favor
of Magneti Marelli. In May 2013, Outpost vacated the
specific reference to the claims of BNL, which give rise to
the instant appeal, the Amended Complaint also alleged that
throughout 2010 and 2011, PV Training & Research, LLC
("PVTRC"), a company owned by Mr. Stevenson's
mother which was planning to open a solar farm in Pulaski,
entered into agreements with the Board to purchase three
parcels of land which it planned to assign to Silicon Ranch,
LLC ("Silicon Ranch") to develop the solar farm;
that, in exchange, Silicon Ranch was going to reimburse $225,
000 in site preparation costs incurred by BNL and award BNL
contracts related to work on the Pulaski solar farm and other
Silicon Ranch solar farms; and that the Board sold the
property directly to Silicon Ranch in breach of the agreement
to sell to PVTRC; that Mr. Henry, in violation of his duties
as counsel to BNL, "facilitated [the Board's] breach
of the agreements to sell real estate to PVTRC" and
failed to inform BNL of the Board's action; and that BNL
"did not discover Henry's integral role in this
transaction and his violation of duties to BNL until late
2013 and/or early 2014 when these facts were revealed in the
discovery process in a separate lawsuit."
October 11, 2013, Outpost and Mr. Stevenson filed the instant
suit against Mr. Henry and his law firm, alleging that Mr.
Henry had a conflict of interest and committed legal
malpractice in representing Outpost and Mr. Stevenson while
also representing the Board. On December 17, 2013, Mr. Henry
served a subpoena duces tecum on Scott Williams
("Mr. Williams"), the attorney who had begun
representing Outpost and BNL, seeking all correspondence,
e-mails, and other written communications between Mr.
Williams, Mr. Stevenson, Outpost, and BNL. Outpost filed a
motion to quash the subpoena on January 13, 2014, arguing
that the documents were protected by attorney-client
privilege and/or the work product doctrine; on July 18, the
court entered an order, inter alia, requiring
Outpost to provide a log within 60 days of the documents not
provided to Mr. Henry for which a claim of privilege was
24, 2014, Outpost amended the complaint, dropping Mr.
Stevenson as a plaintiff, adding BNL as a plaintiff, and
asserting additional causes of action for breach of fiduciary
duty, aiding and abetting constructive eviction, and
fraudulent concealment. BNL's legal malpractice claim,
which arises from Mr. Henry's role in the Board's
sale of the solar farm property directly to Silicon Ranch,
asserts that Mr. Henry "committed legal malpractice
through his representation of [the Board] that was directly
adverse to his client, BNL." Mr. Henry answered on
November 19, denying the gravamen of the complaint and
asserting, inter alia, that BNL's claim was
barred by the one-year statute of limitations at Tennessee
Code Annotated section 28-3-104(a)(2).
December 3, 2014, Mr. Henry moved for summary judgment,
contending that Mr. Stevenson had actual or constructive
knowledge of the facts giving rise to BNL's cause of
action more than a year before BNL joined in the instant
suit, therefore barring BNL's malpractice claim. In a
portion of his response to the motion for summary judgment,
Mr. Stevenson reasserted statements he made in a September
2014 declaration. On December 10, Mr. Henry filed a motion
asking the court to compel BNL to produce documents that had
been subpoenaed from Mr. Williams, which BNL had withheld on
the ground that the documents were protected from production
by the attorney-client privilege.
March 27, 2015, the court appointed senior judge Ben Cantrell
as Special Master, with instructions to determine whether any
of the 151 documents which BNL had withheld from production
as privileged were relevant to Mr. Henry's statute of
limitations defense and to advise the court in that regard.
On May 19, 2015, BNL submitted a total of 172 documents to
the Special Master, and on August 10 Judge Cantrell reported
that eight of the documents contained information relevant to
the defense. The court thereafter ordered BNL to
produce the eight privileged documents, holding that that
"[the] plaintiffs put their privileged information at
issue by pleading the discovery rule."
moved for permission to file an interlocutory appeal pursuant
to Tennessee Rule of Appellate Procedure 9, which the trial
court granted; this court, likewise granted permission to
appeal. The question presented for our review is whether the
trial court erred in holding that BNL impliedly waived the
attorney-client privilege when it invoked the discovery rule
in response to Mr. Henry's assertion of the statute of
limitations defense and ordering production of the documents.
regarding pre-trial discovery are inherently discretionary;
therefore, the standard of review for such decisions is abuse
of discretion. See Lee Medical, Inc. v. Beecher, 312
S.W.3d 515, 524 (Tenn. 2010) (citations omitted). An abuse of
discretion occurs if a trial court causes an injustice to a
party by "(1) applying an incorrect legal standard, (2)
reaching an illogical or unreasonable decision, or (3) basing
its decision on a clearly erroneous assessment of the
evidence." Id. (citations omitted) "While
the abuse of discretion standard limits the scope of our
review of discretionary decisions, it does not immunize these
decisions completely from appellate review." Boyd v.
Comdata Network, Inc., 88 S.W.3d 203, 211 (Tenn. Ct.
App. 2002) (citing Duncan v. Duncan, 789 S.W.2d 557,
561 (Tenn. Ct. App. 1990)). "When called upon to review
a discretionary decision, we will review the trial
court's underlying factual findings using the
preponderance of the evidence standard in Tenn. R. App. P.
13(d). However, we will review the trial court's purely
legal determinations de novo without a presumption
of correctness." Boyd, 88 S.W.3d at 212 (citing
Brown v. Birman Managed Care, Inc., 42 S.W.3d 62, 66
(Tenn. 2001); Burlew v. Burlew, 40 S.W.3d 465, 470
(Tenn. 2001); Grand Jury Proceedings v. United
States, 156 F.3d 1038, 1042 n.1 (10th Cir. 1998)). The
threshold inquiry in this case is whether the court utilized
the proper test to determine whether the privilege was waived
and, if so, whether BNL's actions met the test.
Tennessee, a plaintiff must file a legal malpractice claim
within one year of the day on which the injury giving rise to
the claim occurred. See Tenn. Code. Ann. §
28-3-104(c). In Kohl v. Dearborn & Ewing our
Supreme Court discussed a two-prong test, denominated the
"discovery rule, " for determining when the statute
of limitations period for legal malpractice claims begins to
run, 977 S.W.2d 528, 532 (Tenn. 1998). Under the discovery
rule, a plaintiff must (1) suffer a legally cognizable or
actual injury and (2) know, or in the exercise of reasonable
diligence should have known, that the injury was caused by
the defendant's negligent or wrongful conduct.
Id. Evidence of the plaintiff's actual or
constructive knowledge of the injury can establish the second
element. Kohl, 977 S.W.2d at 532 (citing Carvell
v. Bottoms, 900 S.W.2d 23, 29 (Tenn. 1995)). A plaintiff
has constructive knowledge of an injury when he or she is
"aware of facts sufficient to put a reasonable person on
notice that he [or she] has suffered an injury as a result of
wrongful conduct." Carvell, 900 S.W.2d at 29
(quoting Roe v. Jefferson, 875 S.W.2d 653, 657
(Tenn. 1994)). The limitations period begins to run when the
plaintiff has actual or constructive knowledge of the injury.
See Kohl 977 S.W.2d at 532 (Tenn. 1998).
case at bar, after analyzing a range of Tennessee cases
discussing the limits of the attorney-client privilege, the
trial court addressed the circumstances under which the
privilege can be impliedly waived and concluded that
Plaintiffs put the privilege at issue when they asserted the
discovery rule in responding to Mr. ...