Affiniti Colorado, LLC v. Kissinger & Fellman, P.C.

          City and County of Denver District Court No. 18CV32340 Honorable Michael A. Martinez, Judge

          Ogborn Mihm, LLP, Michael T. Mihm, Susan H. Jacks, James E. Fogg, Thomas D. Neville, Denver, Colorado, for Plaintiff-Appellee

          Montgomery Little & Soran, P.C., Christopher B. Little, Michael R. McCormick, Esther H. Lee, Greenwood Village, Colorado, for Defendants-Appellants

          OPINION

          FREYRE, JUDGE

         ¶ 1 In this C.A.R. 4.2 interlocutory appeal, we are asked to decide an attorney-client privilege issue not previously addressed by Colorado courts. No one disputes that the attorney-client privilege exists "without regard to the non-corporate or corporate character of the client," A v. Dist. Court, 191 Colo. 10, 20, 550 P.2d 315, 323 (1976) (citation omitted), or that a corporation may only assert or waive the privilege through "individuals empowered to act" on its behalf, Genova v. Longs Peak Emergency Physicians, P.C., 72 P.3d 454, 462 (Colo.App. 1993). As well, our supreme court and other courts presume that the attorney-client privilege ordinarily survives the death of the client. Wesp v. Everson, 33 P.3d 191, 200 (Colo. 2001) (citing Swidler & Berlin v. United States, 524 U.S. 399 (1998)). But what happens when the client is a dissolved corporation and has no one to act on its behalf? Does the attorney-client privilege survive the corporation's dissolution? Relying on the majority view of courts in other jurisdictions that have considered this issue, the district court answered that question "no." We agree with the district court and conclude that the policy reasons supporting the "posthumous" privilege for an individual client do not support the posthumous privilege for a corporate client. We hold that when (1) a corporation dissolves; (2) there are no ongoing post-dissolution proceedings; and (3) no one with the authority to invoke or waive the corporation's attorney-client privilege remains, the privilege ceases to exist. Therefore, we affirm the district court's order.

         ¶ 2 Defendants, Kenneth S. Fellman and the law firm Kissinger & Fellman, P.C. (collectively, Fellman), appeal the district court's order denying their motion for a protective order. Fellman filed the motion in a negligent misrepresentation suit brought by plaintiff, Affiniti Colorado, LLC, alleging that Fellman had made misrepresentations in an "Opinion Letter" that was written to induce it to contract with Fellman's now-dissolved corporate client, EAGLE-Net Alliance (EAGLE-Net), a purported intergovernmental entity.^[1] Fellman raised immunity under the Colorado Governmental Immunity Act (CGIA), so the district court set the matter for a hearing under Trinity Broadcasting of Denver, Inc. v. City of Westminster, 848 P.2d 916 (Colo. 1993), and ordered limited discovery related to the immunity issue. After Affiniti requested communications between Fellman and EAGLE-Net, Fellman sought a protective order based on the attorney-client privilege. The district court denied the motion and granted C.A.R. 4.2 certification. We granted Fellman's petition for review.

         I. Background

         ¶ 3 EAGLE-Net was formed to deploy and operate a broadband internet network, funded by a federal grant, to provide rural schoolchildren with internet access. Affiniti is a limited liability company that provides broadband technology to rural communities. It negotiated and executed a management agreement with EAGLE-Net in 2013, based on an Opinion Letter provided by Fellman, acting as EAGLE-Net's general counsel. Under the agreement's terms, Affiniti agreed to manage EAGLE-Net's network and provide capital funding for the project in exchange, in part, for EAGLE-Net's agreement to grant Affiniti a security interest in its assets.

         ¶ 4 In 2015, Affiniti sued EAGLE-Net for breach of the agreement and obtained a judgment. The litigation eventually depleted EAGLE-Net's assets, and on May 27, 2017, the board of directors adopted a resolution to dissolve EAGLE-Net and divest it of its assets. On June 5, 2017, the dissolution process ended, EAGLE-Net ceased to exist, and Fellman no longer represented EAGLE-Net.

         ¶ 5 During the litigation, federal government officials notified Affiniti that EAGLE-Net had failed to obtain the necessary approval to grant Affiniti a security interest in its assets, contrary to representations allegedly made in the Opinion Letter. Because of the resulting difficulties in collecting on the judgment, Affiniti then brought this negligent misrepresentation action premised on those alleged misrepresentations.

         ¶ 6 As relevant here, Fellman filed a motion to dismiss, asserting that (1) EAGLE-Net was an intergovernmental agency; (2) Fellman was general counsel for this public entity; and (3) Fellman was, therefore, entitled to immunity under the CGIA. When the court ordered limited discovery and Affiniti requested communications between Fellman and EAGLE-Net, Fellman filed the motion at issue here. The court denied the motion and ordered Fellman to comply with Affiniti's discovery requests.

         ¶ 7 Fellman then moved for reconsideration and raised several new issues. It argued that (1) because EAGLE-Net was a public entity, special policies, not considered by the court, applied; (2) the work product and deliberative process privileges, not considered by the court, applied; and (3) the public official privilege protected its communications with EAGLE-Net. In denying reconsideration, the district court found that the motion was premised on the same legal theory and that nothing in the motion altered the analysis or the outcome.

         II. Jurisdiction

         ¶ 8 Before discussing the merits, we address whether interlocutory review under C.A.R. 4.2 is a proper channel to review the district court's order finding that the attorney-client privilege does not survive the dissolution of a corporation. As recognized by the division in Adams v. Corrections Corp. of America, 264 P.3d 640, 644 (Colo.App. 2011), interlocutory review of discovery orders that address "only whether the trial court . . . abused its discretion in a discovery matter" is generally not allowed. Id.; see also In re W.R. Grace & Co.-Conn., 984 F.2d 587, 589 (2d Cir. 1993) ("Pretrial discovery orders are generally not appealable . . . ."). We fully agree with this general proposition, and our decision to review the privilege issue presented here should not be viewed as a departure from it.^[2] Indeed, we note that the general rule in Adams is in accord with numerous federal decisions considering the propriety of reviewing discovery orders under the comparable federal interlocutory review statute, 28 U.S.C. § 1292(b) (2018). These decisions have consistently found such orders improper for interlocutory review. See Quantum Corp. v. Tandon Corp., 940 F.2d 642 (Fed. Cir. 1991) (denying review of court's order denying the request for bifurcation of proceedings to avoid disclosure of patent infringement opinions); Oasis Research, LLC v. EMC Corp., Nos. 4:10-CV-435, 4:12-CV-526, 2015 WL 5318119, *4 (E.D. Tex. Sept. 11, 2015) (unpublished opinion) (denying review because order compelling disclosure under the crime fraud exception did not present a pure issue of law); Fed. Trade Comm'n v. Stefanchik, No. C04-1852RSM, 2006 WL 3474204, *1-2 (W.D. Wash. Nov. 30, 2006) (unpublished order) (denying interlocutory review because the question whether the client's knowledge of his attorney's knowledge waived the privilege did not involve a controlling question of law); Isaacson v. Keck, Mahin & Cate, 875 F.Supp. 478, 481 (N.D. Ill. 1994) (denying review of court's order issued after reviewing materials because the issue did not involve an unresolved question of law); McCann v. Commc'ns Design Corp., 775 F.Supp. 1506, 1533-34 (D. Conn. 1991) (discovery orders generally never present controlling questions of law).

         ¶ 9 Having first articulated the general rule, the division in Adams also recognized that when a discovery order "presents a question of law, such as the availability of a corporation's attorney-client privilege . . ., interlocutory review is occasionally granted." 264 P.3d at 644. Because we are the first division to accept interlocutory review of a discovery order, we explain why, in our view, this is one of those exceptionally rare cases, as contemplated by Adams, that meets the exacting criteria for our review under C.A.R. 4.2 and section 13-4-102.1, C.R.S. 2018.

         A. Applicable Law

         ¶ 10 Section 13-4-102.1(1) provides:

The court of appeals, under rules promulgated by the Colorado supreme court, may permit an interlocutory appeal of a certified question of law in a civil matter from a district court or the probate court of the city and county of Denver if:

(a) The trial court certifies that immediate review may promote a more orderly disposition or establish a final disposition of the litigation; and

(b) The order involves a controlling and unresolved question of law.

         ¶ 11 Similarly, C.A.R. 4.2 provides, in relevant part, as follows:

(a) Discretionary Interlocutory Appeals. Upon certification by the trial court, or stipulation of all parties, the court of appeals may, in its discretion, allow an interlocutory appeal of an order in a civil action. . . .

(b) Grounds for Granting Interlocutory Appeal. Grounds for certifying and allowing an interlocutory appeal are:

(1) Where immediate review may promote a more orderly disposition or establish a final disposition of the litigation; and

(2) The order involves a controlling and unresolved question of law. For purposes of this rule, an "unresolved question of law" is a question that has not been resolved by the Colorado Supreme Court or determined in a published decision of the Colorado Court of Appeals, or a question of federal ...