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Harris Management, Inc. v. Coulombe

Supreme Court of Maine

November 8, 2016


          Argued: May 4, 2016

          On the briefs:

          Paul McDonald, Esq., and Eben M. Albert, Esq., Bernstein Shur, Portland, for appellants Paul Coulombe, PGC1, LLC, and PGC2, LLC

          James D. Poliquin, Esq., Benjamin N. Donahue, Esq., Norman Hanson & DeTroy, LLC, Portland, for appellees Harris Management, Inc., and JJR Associates, LLC

         At oral argument:

          Eben M. Albert, Esq., for appellants Paul Coulombe, PGC1, LLC, and PGC2, LLC

          James D. Poliquin, Esq., for appellees Harris Management, Inc., and JJR Associates, LLC Business and Consumer Docket docket number CV-2014-60 For Clerk Reference Only


          SAUFLEY, C.J.

         [¶1] Paul Coulombe and two LLCs under his control-PGC1, LLC, and PGC2, LLC[1]-appeal from discovery orders entered in the Business and Consumer Docket (Murphy, J.) that required the disclosure of specific communications over the assertion that those communications were protected by the attorney-client privilege. Coulombe contends that the court erred in determining that (A) Coulombes communications with his attorney that included a third party were not privileged and (B) the crime-fraud exception to the attorney-client privilege applied to allow the disclosure of other communications between Coulombe and counsel. We affirm the judgment except with respect to one communication that we conclude the trial court must consider further on remand.

         I. BACKGROUND

         [¶2] In January 2014, Harris Management, Inc., and JJR Associates, LLC (collectively, "Harris"), filed a complaint against Coulombe, PGC1, and PGC2 in the Superior Court (Sagadahoc County). Although Coulombe and his LLCs removed the case to federal court based on diversity jurisdiction, the United States District Court for the District of Maine (Singal, J.) concluded that diversity was lacking and granted Harriss motion to remand the matter to the Superior Court. The parties then successfully applied to have the case transferred to the Business and Consumer Docket.

         [¶3] As amended effective March 11, 2015, Harriss complaint alleged seven causes of action arising primarily from allegations that, in January, February, and March 2013, Coulombe had misrepresented his commitment to hire Harris Management, owned and operated by Jeffrey Harris, to manage the golf course at the Boothbay Country Club, which Coulombe was preparing to purchase at auction. Harris alleged that Coulombe made these misrepresentations in an effort to obtain nearby property from JJR Associates[2] at a discount, to prevent Harris from purchasing the Club itself, and to have Harris assist in initially setting up the golf course. Harris alleged the following causes of action: (I) fraudulent inducement, (II) fraudulent misrepresentation, (III) negligent misrepresentation, (IV) breach of contract, (V) promissory estoppel, (VI) unjust enrichment, and (VII) quantum meruit.

         [¶4] Relevant here, Harris alleged that Coulombe, with assistance from his attorneys, Hawley Strait and John Carpenter, was secretly seeking a different golf course manager while Coulombe was simultaneously reassuring Harris that Harris was to manage the golf course. Harris alleged that it did not learn until March 2013-after ceasing independent efforts to purchase the Club, selling nearby JJR property to Coulombe at a discount, and beginning to manage Coulombes golf course after Coulombe purchased the Club-that someone else, Dan Hourihan, would be hired as the manager of the course.

         [¶5] In April 2015, the parties provided notices to the court of discovery disputes that required court resolution. The court (Murphy, J.) requested memoranda on the issue now on appeal-the applicability of the attorney-client privilege, see M.R. Evid. 502, to Coulombes communications with his attorneys, some of which also included Coulombes business associates. One such business associate was John Suczynski, a previous long-time employee of Coulombes former company who was later hired by PGC2 to be the general manager of the new Club. The parties filed memoranda with voluminous exhibits.

         [¶6] Harris argued that it was entitled to discover the communications because the crime-fraud exception to attorney-client privilege applied. See M.R. Evid. 502(d)(1). Harris further argued that Coulombes communications involving both counsel and Suczynski were not privileged because the inclusion of Suczynski, who was not a representative of Coulombe during the relevant time, destroyed the privilege.

         [¶7] Coulombe and his LLCs argued that the crime-fraud exception cannot apply because Harris failed to establish a necessary element of fraud- that Harris, led by an experienced businessperson who had the advice of counsel, justifiably relied on Coulombes representations. Coulombe and the LLCs further argued that the communications involving Suczynski were privileged because Suczynski was a representative of Coulombe or his businesses in speaking with counsel.

         [¶8] The parties exhibits included an affidavit from Coulombe explaining Suczynskis role in working with and for Coulombe; the parties privilege logs; and some communications among Coulombe, Harris, Suczynski, Hourihan, Carpenter, Strait, and Stephen Malcom, the president of the Knickerbocker Group-an architecture and construction firm alleged to have done business with Coulombe-from before and after Coulombe purchased the Club.

         [¶9] The court entered an order on July 1, 2015, providing, in relevant part, that Coulombe must permit Harris to discover the communications among Coulombe, his counsel, and Suczynski. The court found that, although Coulombe and Suczynski had worked together for many years, "Suczynski did not become involved with Coulombes golf course deal until March of 2013, " with his role becoming much more clear after the terms of his employment were negotiated on March 14, 2013. The court found that, because no terms of employment had been decided before that date, and because there was no other evidence that Suczynski had authority before March 14, 2013, to make decisions as a representative of Coulombe or his companies, the communications among Coulombe, Suczynski, and Coulombes attorneys before that date were not subject to the attorney-client privilege. The court ordered that other communications that were solely between Coulombe and his counsel, identified as privileged, would be reviewed in camera.

          [¶10] In early September 2015, the court ruled that specified items that it had reviewed in camera were discoverable because the crime-fraud exception to the attorney-client privilege applied. Exercising caution regarding the release of those documents pending the possibility of appeal, the court noted that it was "reluctant to make specific reference to the documents" that persuaded it of the exceptions applicability because of the possibility that Coulombe and his LLCs would appeal before disclosure. The court found that the crime-fraud exception applied because there was sufficient evidence that (a) Coulombe had intentionally kept his plans for management secret from Harris until he had completed transactions that benefitted Coulombe and were detrimental to Harris, and (b) the attorney-client communications at issue were intended to facilitate or conceal this activity.

         [¶11] Coulombe appeals from both of the courts decisions requiring the disclosure of communications.[3]

          II. DISCUSSION

          [¶12] The issues raised on appeal are: (A) whether Coulombe made the necessary showing that Suczynski was a "representative" of him or one of the LLCs such that the attorney-client privilege remained intact despite Suczynskis inclusion in communications, and (B) the extent to which proof of the elements of fraud is necessary for the fraud component of the crime-fraud exception to apply. These issues require us to review the courts factual findings as well as its interpretation of legal standards, see In re Motion to Quash Bar Counsel Subpoena, 2009 ME 104, ¶¶ 18-20, 982 A.2d 330, and to review the "courts determination of whether the crime-fraud exception applies to disputed documents for an abuse of discretion, " Bd. of Overseers of the Bar v. Warren, 2011 ME 124, ¶ 23, 34 A.3d 1103. We review the legal issues regarding the nature and scope of the privilege and the crime-fraud exception de novo and review the factual findings for clear error.[4] See In re Motion to Quash Bar Counsel Subpoena, 2009 ME 104, ¶ 20, 982 A.2d 330. "A finding of fact is clearly erroneous if there is no competent evidence in the record to support it; if the fact-finder clearly misapprehends the meaning of the evidence; or if the finding is so contrary to the credible evidence that it does not represent the truth and right of the case." Young v. Lagasse, 2016 ME 96, ¶ 8, 143 A.3d 131 (quotation marks omitted).

         [¶13] "[W]hen the party with the burden of proof is appealing . . . the appellant must show that the evidence compels a contrary finding." Id. Here, Coulombe and his LLCs bore the burden of establishing the applicability of the privilege by a preponderance of the evidence. See Pierce v. Grove Mfg. Co.,576 A.2d 196, 199 (Me. 1990); see also MapleWood Partners, L.P. v. Indian Harbor Ins. Co.,295 F.R.D. 550, 592 (S.D. Fla. 2013); PSE Consulting, Inc. v. Frank Mercede & Sons, Inc.,838 A.2d 135, 167 (Conn. 2004). Harris, in turn, bore the burden of establishing the applicability of the crime-fraud exception to the ...

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