In Re Paul W. Abbott Co., Inc.
2009 WL 1687487, 767 N.W.2d 14, 2009 Minn. LEXIS 336 (2009)
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Rule of Law:
The party asserting the attorney-client privilege bears the burden of proving that an attorney-client relationship existed, which is a question of fact determined by the communications, conduct, and circumstances of the parties involved.
Facts:
- Paul W. Abbott Company, Inc. (PWA) was an insulation company incorporated in 1954.
- In 1993, PWA's President, John Abbott, initiated but never completed a voluntary dissolution, and the company ceased doing business.
- On August 1, 1997, the Minnesota Secretary of State involuntarily dissolved PWA for failure to file annual registrations, which left PWA vulnerable to ongoing asbestos claims.
- John Abbott died in November 2006.
- In 2007, a new law was set to take effect on July 1 that would prevent dissolved corporations from barring personal injury claims.
- In June 2007, PWA's insurer, TIG Insurance Company (TIG), sought to have PWA reinstated and voluntarily dissolved before the July 1 deadline to bar pending asbestos claims.
- TIG retained attorney Leif Rasmussen to facilitate the process and contacted John Abbott's widow, Karen Abbott, to secure her assistance. TIG agreed to pay all fees and advised her to consult her own counsel.
- On June 27, 2007, Rasmussen presented documents to Karen Abbott for her signature, including one naming her as PWA's CEO, which she signed. She later testified that she had never been an officer, had nothing to do with the company, and did not believe Rasmussen was her or PWA's attorney.
Procedural Posture:
- Plaintiffs in an asbestos litigation case (Respondents) sought to depose Leif Rasmussen, an attorney.
- Paul W. Abbott Company, Inc. (PWA), the defendant in the litigation, filed a motion for a protective order in Ramsey County District Court (trial court) to prevent the deposition, claiming attorney-client privilege.
- The district court denied PWA's motion, finding no attorney-client relationship had been established.
- PWA, as petitioner, petitioned the Minnesota Court of Appeals (intermediate appellate court) for a writ of prohibition and for discretionary review.
- The court of appeals denied both petitions.
- PWA, as appellant, petitioned the Minnesota Supreme Court (highest court) for further review of the court of appeals' denial of the writ of prohibition.
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Issue:
Does the attorney-client privilege protect communications between an attorney, retained by an insurer to dissolve a corporation, and the widow of the corporation's former president when the widow testifies that she did not believe the attorney represented her or the corporation?
Opinions:
Majority - Page, J.
No. The attorney-client privilege does not protect the communications because the party asserting the privilege, PWA, failed to meet its burden of proving that an attorney-client relationship existed. The existence of an attorney-client relationship is a question of fact, and the party claiming the privilege must establish its existence. The district court found that no relationship was formed between Rasmussen and Karen Abbott, either in her individual capacity or as a corporate representative. This finding is supported by the record, particularly Karen Abbott's own deposition testimony where she stated she did not believe she was a corporate officer and that she did not believe Rasmussen was her or the company's attorney. Because PWA failed to establish the foundational element of an attorney-client relationship, the communications are not privileged and are discoverable.
Concurring - Magnuson, C.J.
No. The holding is correct and should be interpreted narrowly. While an insurer has the right to retain counsel to defend an insured, an attorney-client relationship must still be properly established according to the Rules of Professional Conduct. A lawyer has a professional responsibility to clearly communicate the formation and scope of representation. That responsibility was not met in this case, which is the basis for the decision. This opinion should not be read to generally endorse the deposition of opposing counsel, but rather as a consequence of the specific failure to establish a clear attorney-client relationship.
Analysis:
This decision reaffirms that the attorney-client privilege is not absolute and its application depends on a factual showing of an established attorney-client relationship. It highlights the significant burden on the party asserting the privilege to prove its existence, emphasizing the client's perspective and understanding. The case serves as a critical reminder to corporate and insurance counsel to be explicit and formal in establishing representation, particularly when engaging with individuals who are not sophisticated legal or corporate actors. It suggests that courts will not infer a privileged relationship merely from the involvement of an attorney, especially when a third party, like an insurer, is directing the legal action.
