North Carolina Department of Justice
North Carolina Department of Justice
North Carolina Department of Justice
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REPLY TO: Grayson G. Kelley
Special Litigation
(919) 716-6900
FAX: (919) 716-6763

February 9, 1999

Mr. E. Stephen Stroud Chairman, Centennial Authority 1520 Blue Ridge Road Suite 201 Raleigh, North Carolina 27607

Re: Advisory Opinion: Meetings of Public Bodies; Closed Sessions to Preserve Attorney-Client Relationship; G.S. § 143-318.11

Dear Mr. Stroud:

You request our opinion as to the circumstances under which a public body may lawfully hold a closed meeting to consult with an attorney under the exception to North Carolina’s open meetings requirement found in G.S. § 143-318.11(a)(3). You reference a specific meeting which the Design and Construction Committee of the Centennial Authority held in closed session to discuss with legal counsel “. . . potential claims by the Centennial Authority against our contractors for late delivery of the arena and potential claims against the Authority filed by the contractors.”

G.S. § 143-318.9 declares it to be the public policy of this state that hearings, deliberations and actions of public bodies be conducted openly. G.S. § 143-318.10 requires that, with certain exceptions, “. . . each official meeting of a public body shall be open to the public, and any person is entitled to attend such a meeting.” One exception to this requirement is G.S. § 143-318.11(a)(3), which allows a meeting to be closed when required:

To consult with an attorney employed or retained by the public body in order to preserve the attorney-client privilege between the attorney and the public body, which privilege is hereby acknowledged. General policy matters may not be discussed in closed session and nothing herein shall be construed to permit a public body to close a meeting that otherwise would be open merely because an attorney employed or retained by the public body is a participant. The public body may consider and give instructions to an attorney concerning the handling or settlement of a claim, judicial action, mediation, arbitration, or administrative procedure. If the public body has approved or considered a settlement, other than a malpractice settlement by or on Mr. E. Stephen Stroud February 9, 1999 Page 2

behalf of a hospital, in closed session, the terms of that settlement shall be reported to the public body and entered into its minutes as soon as possible within a reasonable time after the settlement is concluded.

The exception therefore authorizes closure of a meeting only as required to discuss the handling of a claim, judicial action, mediation, arbitration or administrative procedure, or in order to preserve the attorney-client privilege between the attorney and the public body. The statute specifically acknowledges that the attorney-client privilege may be invoked by public bodies.

Your letter indicates that the meeting in question was closed in order to discuss “potential claims” by the Authority against contractors and potential claims filed by contractors against the Authority. It is unclear whether the Authority has actually been notified or served with claims by one or more contractors. If, in fact, the Authority has been served with claims by its contractors, the plain language of G.S. § 143-318.11(3) authorizes closure of a meeting to discuss with attorneys the handling or settlement of such claims. If claims have not been served, closure of the meeting is allowed only if the discussion of potential claims by or against contractors necessitated the protections of the attorney-client privilege.

Confidential discussions between a public body and its attorneys concerning potential litigation may frequently be as critical to protection of the public body’s legal position as discussions occurring after litigation has been initiated. Strategy sessions focused on claims avoidance or settlement of disputes which may evolve into litigation cannot, as a practical matter, be held in the presence of opposing parties. As the Minnesota Supreme Court has noted:

A basic understanding of the adversary system indicates that certain phases of litigation strategy may be impaired if every discussion [by a public body with its attorney] is available for the benefit of opposing parties who may have as a purpose a private gain in contravention to the public need as construed by the agency.

Minneapolis Star & Tribune v. H.R.A., 310 Minn. 313, 323 (1976). “Settlement and avoidance of litigation are particularly sensitive activities, whose conduct would be grossly confounded, often made impossible, by undiscriminating insistence on open lawyer-client conferences.” Sacramento Newspaper Guild v. Sacramento County Bd. of Suprs., 263 Cal. App. 2d 41, 56 (1968). The necessity for such confidential conferences appears to have been recognized by our General Assembly through the specific, statutory acknowledgment of the attorney-client privilege exception to the open meetings law.

Mr. E. Stephen Stroud February 9, 1999 Page 3

It is the law of this jurisdiction that the attorney-client privilege exists even where actual litigation may not be contemplated. State v. Murvin, 304 N.C. 523 (1981); State v. Davenport, 227

N.C. 475 (1947). We are not, however, aware of a North Carolina case addressing the application of the attorney-client privilege to discussions of potential claims by or against public bodies. Courts in at least three other states have concluded that threatened, noticed or contemplated litigation by or against a public body justified confidential consultation with attorneys. In Port of Seattle v. Rio, 16 Wash. App. 718 (1977), the Court of Appeals of Washington considered whether, in a land condemnation action, a settlement offer to the property owner was required by Washington’s Open Public Meetings Act to be discussed and approved in a public meeting. The court concluded that when a communication with legal counsel concerns contemplated or pending litigation or settlement offers, the necessity for the attorney-client privilege exists between a public agency and its lawyers to the same extent as between other clients and their counsel. In a similar case the Circuit Court of the City of Richmond, Virginia rejected an attempt by a highway contractor to obtain privileged documents through Virginia’s Freedom of Information Act, finding that notices of intent to file a claim submitted by the contractor constituted threatened litigation which justified the attorney-client exception to disclosure under the Act. Parvin v. Virginia Department of Transportation, 15 Va. Cir. 349 (1989).

The Nebraska Court of Appeals concluded, in a challenge to a closed meeting held by the University of Nebraska’s Board of Regents that “. . . strategic meetings a public body does have with its attorney, in which it may give direction to its attorney, when it is threatened with or engaged in litigation, are protected by the attorney-client privilege. Becker v. Allen, 1996 Neb. App. (unpublished). Courts in cases involving private litigants have also held that communications with attorneys related to potential litigation are protected by the attorney-client privilege. See Soltani-Rastegar v. Superior Court, 208 Cal. App. 3d 424 (1989); Holm v. Superior Court, 42 Cal. 2d 500 (1954). In our view, the principles discussed in these cases provide a sound basis for concluding that the protections of the attorney-client privilege may be invoked where a public body has a reasonable basis for believing there is a need to discuss potential claims or potential litigation with its legal counsel.

It is noted that G.S. § 143-318.11(c) mandates certain procedural requirements for calling a closed session of a public body. Included is a requirement that a motion based on the necessity to consult with an attorney under the exception in (a)(3) “ . . . shall identify the parties in each existing lawsuit concerning which the public body expects to receive advice during the closed session.” Although the reference to “existing lawsuit” may arguably be viewed as a further restriction on the purposes for which a meeting may be closed, we do not believe this procedural requirement was intended to supersede the substantive provisions authorizing closure when required to consult with Mr. E. Stephen Stroud February 9, 1999 Page 4

an attorney regarding a claim, judicial action, mediation, arbitration, administrative procedure or to otherwise preserve the attorney-client privilege.1

It is therefore our opinion that the attorney-client privilege exception to the open meetings requirement may be invoked where the purpose of the meeting is to conduct confidential discussions with attorneys regarding an actual claim, judicial action, mediation, arbitration or administrative procedure. Where the purpose of closing a meeting is to discuss potential claims or litigation, the public body should have a reasonable basis to believe a confidential discussion with its legal counsel is necessary. Assuming, as suggested in your letter, that the Design and Construction Committee had a reasonable basis to believe that potential legal claims by and against the Authority necessitated a confidential discussion with its attorneys, we believe that closure of the meeting was a lawful application of the statutory exception in G.S. § 143-318.11(a)(3).

Sincerely,

Grayson G. Kelley Senior Deputy Attorney General

GGK/sp

Though not specifically required by statute, a public body meeting with its attorney in closed session to discuss potential litigation should state, through a duly adopted motion, that the purpose of the closed session is to discuss potential litigation and identify the parties to the potential litigation to the extent it can do so consistent with the privilege.