North Carolina Supreme Court Privilege Decision Rests on Understandable Karma

November 25, 2020

Corporate clients and their lawyers must look ahead to assess the privilege implications of their litigation positions.

In Global Textile Alliance, Inc. v. TDI Worldwide, LLC, 847 S.E.2d 30, 33 (N.C. 2020), defendants asked plaintiff GTA to identify as a pertinent document custodian GTA’s sole shareholder’s “longtime friend, financial advisor, and advisor to some of [the sole shareholder’s] businesses.” GTA successfully resisted that custodian designation — “testify[ing] that Haspeslagh [the individual] has no role with GTA and that Haspeslagh has not advised GTA about this lawsuit.” Id. During later discovery, plaintiff GTA claimed privilege protection for communications to and from Haspeslagh. Noting “[e]ven a corporation owned by a ‘single individual’ is a distinct entity from its shareholder,” the court rejected GTA’s privilege claim – concluding that “at best, Haspeslagh is [GTA’s sole shareholder] Luc-Tack’s agent as to some of Tack’s personal affairs, but Haspeslagh is not GTA’s agent.” Id. at 35. Rubbing it in, the court noted that “[t]he corporation could have made Haspeslagh its agent, but it did not do so” – reminding GTA that it “had specifically argued to the trial court that Haspeslagh had no role with respect to GTA.” Id.

Lawyers who do not look far enough down the road might win a battle, but lose the war.