Litigation Privilege Applies to Claims of Inducement to Breach
By Unarco Material Handling, Inc. and Kerry Steel, Inc. had been involved in litigation that settled between the two parties. After settlement, the president of Kerry Steel began to suspect that Unarco had misled Kerry Steel in inducing it to settle. Through its attorney, Kerry Steel approached a former officer of Unarco and requested information regarding Unarco. This officer had signed a confidentiality agreement with Unarco. Kerry Steel’s attorney negotiated an indemnification agreement with the officer in which Kerry Steel agreed to indemnify the officer from any loss resulting from his giving a statement to Kerry Steel regarding actions of Unarco. The attorney also helped procure a statement from the former Unarco officer.
When Unarco learned of this activity, it sued the former officer for breach of his confidentiality agreement. Unarco also sued Kerry Steel, its president, as well as Kerry Steel’s attorney for inducing the officer to breach his confidentiality agreement with Unarco. The attorney for Kerry Steel contended he was immune from the claims of Unarco under the litigation privilege because he was acting in the capacity as attorney for Kerry Steel.
In a case of first impression, the Tennessee Court of Appeals upheld summary judgment in favor of Kerry Steel’s attorney and applied the litigation privilege to inducement to breach actions. The Court found that the litigation privilege in Tennessee applies to an attorney’s conduct prior to the commencement of litigation if (1) the attorney was acting in the capacity of counsel for a client or identifiable prospective client when the conduct occurred, (2) the attorney was acting in good faith for the benefit of and on behalf of the client or prospective client, not for the attorney’s self interest, (3) the conduct was related to the subject matter of proposed litigation that was under serious consideration by the attorney, and (4) there was a real nexus between the attorney’s conduct and litigation under consideration. Conduct would not be privileged if the attorney employed wrongful means (e.g., fraud, trespass, threats, violence or other criminal conduct). Unarco Material Handling, Inc. v. Liberato et al., 2010 WL 744394 (Tenn. Ct. App. Mar. 2, 2010).
The Court, apparently troubled that the attorney may have solicited and/or assisted a former agent of Unarco in the breach of a duty of confidentiality in violation of Tennessee Rule of Professional Conduct 4.2, emphasized that an attorney’s immunity from civil liability does not preclude other consequences, such as sanctions from the Board of Professional Responsibility.
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