Tenn. SC rules property management company communications protected by attorney-client privilege

By Takesha Thomas | Feb 8, 2019

NASHVILLE, Tenn. (Legal Newsline) – The Supreme Court of Tennessee has affirmed a trial court's ruling that granted an interlocutory appeal to a property owner in an unlawful detainer case.

On Jan. 25, the Supreme Court of Tennessee found that the attorney-client privilege was indeed protected in the matter involving defendants Kevin Medley and Dialysis Clinic Inc. It affirmed the ruling of the trial court and remanded the case back to that court for further proceedings.

The matter involves a subpoena that was issued to XMi Commercial Real Estate by the defendants for documents relating to the purchase of commercial properties. XMi is the property management company for Dialysis Clinic. 

Justice Sharon G. Lee affirmed the Davidson County Circuit Court's decision to grant the appeal to Dialysis.

"We hold that the property management company was the functional equivalent of an employee of the corporation, that the communications related to the subject matter of counsel’s representation of the corporation, and that the communications were made with the intention that they would be kept confidential," Lee wrote.

According to the ruling, Dialysis owned and leased various commercial properties to third parties. The company hired property manager XMi Commercial Real Estate to manage several of Dialysis' commercial properties. XMi was to handle all day-to-day operations and tenant relations.

In July 2012, Dialysis acquired four commercial properties in Nashville, the ruling states. The properties were occupied by Canvas Lounge, 3 Entertainment Group LLC and OutCentral Inc.

In October 2014, Dialysis filed unlawful detainer actions against Medley and the companies. The defendants subpoenaed XMi for documents related to the leased properties after the cases were removed to the trial court, the ruling states.

However, Dialysis and XMi objected to the production of such documents arguing that, "the attorney-client privilege protected the documents." The trial court agreed. 

Lee also found that "XMi operated as the 'property management department' of Dialysis Clinic and as such was the functional equivalent of an employee of Dialysis Clinic. In addition, communications between XMi and legal counsel for Dialysis Clinic related to the subject matter of counsel’s representation of Dialysis Clinic and were made with the intention that the communications would be kept confidential."

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