Let's start with a hypothetical… - foxrothschild.com
Where the Privilege Ends Thursday, June 23, 2016 2 3 p.m. Speakers: Aaron Mills Scott Fox Rothschild LLP Peter Stiteler Fox Rothschild LLP Patricia Devoy Minnesota Lawyers Mutual 2016 Fox Rothschild
Lets start with a hypothetical Junior attorney is concerned that he has possibly made a serious mistake Approaches senior attorney who has the client relationship, but only a small role on the case He asks the question, Was this malpractice? Is that communication privileged? Your presenters Aaron Mills Scott Fox Rothschild LLP Peter Stiteler Fox Rothschild LLP
Fox merged with Oppenheimer Wolff & Donnelly effective January 2016 Your presenters Patricia Devoy Claim Attorney, Minnesota Lawyers Mutual Insurance Company Goals for today Identify where the intrafirm privilege ends what is inside the boundaries of privilege and what cannot be protected Overview of developing case law and relevant
ethical rules Guidance on practices to reduce risk What if things go wrong? Admissions by attorneys to errors how unhelpful? Many attorneys are quick to disclose perceived errors to clients Attorneys want to demonstrate honesty to minimize damage to relationship and avoid a malpractice suit What if the attorney did not actually make an error?
Some attorneys disclose perceived errors either before completing the analysis, or after completing an incorrect analysis What if things go wrong? What if those admissions are in communications that the attorney thought were privileged? Think back to our hypothetical The ethical obligation to care While attorneys are naturally interested in protecting communications as privileged, the intrafirm privilege
ultimately benefits clients Consider the Rules of Professional Conduct, such as Rule 1.1 (Competence) and 1.3 (Diligence) Rule 1.4(a)(3) keep the client reasonably informed about the status of a matter Rule 1.4(b) explain the matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation The ethical obligation to care Rule 1.6(b)(7) a lawyer may reveal information relating to the representation of a client if . . . The lawyer reasonably
believes the disclosure is necessary to secure legal advice about the lawyers compliance with these rules. The intrafirm privilege encourages: Seeking early advice Correction of mistakes if possible Internal investigation Firm in-house counsel role, promoting compliance
Elizabeth Chambliss, The Scope of In-Firm Privilege, 80 Notre Dame L. Rev. 1721, 1724 (2005) The traditional approach to intrafirm privilege Purpose of Attorney-Client Privilege: encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. Upjohn Co. v. United States, 449 U.S. 383, 393 (1981) Traditional View: no attorney-client privilege protection for attorney
communications with in-house counsel regarding potential malpractice claims where conflicting interests existed between the client and law firm during communication Exceptions: Fiduciary Current client The traditional approach to intrafirm privilege Fiduciary Exception Originated in the trust law context Based on the principle that the beneficiary of a trust
had the right to production of legal advice rendered to the trustee related to the administration of the trust Does not apply where the fiduciary obtains legal advice for personal benefit, which the fiduciary pays for on their own. U.S. v. Jicarilla Apache Nation, 131 S. Ct, 2313, 2321 (2011) Many courts have rejected this exception The traditional approach to intrafirm privilege Current Client Exception Where a law firm seeks legal advice from its in-house
counsel in response to an adverse claim brought by a current outside client, the communications are not protected by the attorney-client privilege. In re Sunrise Securities Litigation, 130 F.R.D. 560 (E.D. Pa. 1989) The privilege does not attach to communications or legal advice in which a firms representation of itself violates Rule 1.7. Id. Widely adopted exception The traditional approach to intrafirm privilege
Current Client Exception (Cont.) Bank Brussels Lambert v. Credit Lyonnaise (Suisse), S.A., 220 F. Supp. 2d 283 (S.D.N.Y. 2002) Roger & Wells (RW) represented Credit Lyonnaise (CL) in certain oil transactions and related litigation During representation, CL told RW that if CL was found liable in the litigation it would sue RW RW Ethics Committee head then conducted an internal review of the firms representation of CL CL eventually sued RW and sought documents related to the internal review
The traditional approach to intrafirm privilege Current Client Exception (Cont.) Bank Brussels Lambert v. Credit Lyonnaise (Suisse), S.A., 220 F. Supp. 2d 283 (S.D.N.Y. 2002) RW objected to production based on attorney-client privilege Court overruled the objection: a law firm cannot invoke the attorney-client privilege against a current client when performing a conflict check in furtherance of representing that client.
The traditional approach to intrafirm privilege Current Client Exception (Cont.) Koen Book Distributors v. Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C., 212 F.R.D. 283 (E.D. Pa. 2002) Koen hired the Powell law firm for advice related to a security interest from one of Koens customers, who later filed for bankruptcy Powell represented Koen in the bankruptcy proceeding Koen became dissatisfied with Powell and stated it was considering filing a malpractice action
Powell then consulted other firm members about the potential malpractice claim The traditional approach to intrafirm privilege Current Client Exception (Cont.) Koen Book Distributors v. Powell, Trachtman, Logan, Carrle, Bowman & Lombardo, P.C., 212 F.R.D. 283 (E.D. Pa. 2002) Koen later fired Powell, sued it for malpractice, and sought production of internal firm documents related to the discussions of malpractice
Powell objected based on the attorney-client privilege Court overruled the objection: The firm was engaged in a conflict of interest when it was receiving information from and/or providing legal advice to several of its lawyers while at the same time continuing to represent [Koen]. Shifting course to protect privilege While the traditional approach was widely accepted for several years, some courts rejected the exceptions long ago and others are just getting started.
United States v. Rowe, 96 F.3d 1294 (9th Cir. 1996) (holding attorney-client privilege existed where associates undertook an investigation on behalf of the firm in anticipation of litigation) Garvy v. Seyfarth Shaw LLP, 966 N.E.2d 523 (Ill. App. Ct. 2012) (holding fiduciary exception does not apply to advice about personal liability of or in anticipation of litigation against the fiduciary) Tattletale Alarm Systems, Inc. v. Calfee, Halter & Griswold, LLP, 2011 WL 382627 (S.D. Ohio Feb. 3, 2011) (rejecting the notion that a plaintiff will be functionally unable to prove negligence without access to intrafirm loss prevention communications)
The modern approach to intrafirm privilege The general trend is moving away from the Federal rule that no privilege attaches. Daniel Hirotsu Woofter, The "Attorney-Law Firm" Privilege: Protecting IntraFirm Communications Regarding A Current Client's Potential Malpractice Claim, 27 Geo. J. Legal Ethics 987, 996 (2014) Two general tests have arisen from state courts: RFF Partnership, LP v. Burns & Levinson, LLP.,991 N.E.2d 1066 (Mass. 2013); and St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn, P.C., 746 S.E.2d 98 (Ga. 2013).
RFF Partnership, LP v. Burns & Levinson (Facts) RFF hired B&L to assist in $1.4 million commercial loan secured by first mortgage on piece of property and later foreclosing on the property Dispute arose over whether RFFs mortgage was actually first mortgage While still representing RFF, B&L was threatened with litigation relating to the commercial loan by another law firm representing RFF. Attorneys involved in the initial commercial loan consulted with B&Ls in-house attorney
When litigation eventually commenced, RFF sought communications arguing that court should follow federal rule RFF Partnership, LP v. Burns & Levinson (Holding) Court rejected federal rule because it was a flawed interpretation of the rules that encouraged attorneys to withdraw or disclose a poorly understood potential conflict before seeking any advice Concluded that privilege existed when: (1) the law firm has designated an attorney or attorneys within the
firm to represent the firm as in-house or ethics counsel; (2) the in-house counsel has not performed any work on the client matter at issue or a substantially related matter; (3) the time spent by the attorneys in these communications with the in-house counsel is not billed to a client; and (4) the communications are made in confidence and kept confidential. St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn, P.C. (Facts) SSW hired Hunter to draft purchase contract for condo development. Several purchasers later rescinded on
contract due to defects in the purchase contract SSW informed Hunter it thought Hunters work was responsible, but Hunter continued to represent SSW while finding replacement counsel Hunters in-house counsel interviewed attorneys on the matter SSW sued and sought depositions of attorneys and internal communications St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn, P.C. (Holding) Privilege exists when:
(1) there is a genuine attorney-client relationship between the firm's lawyers and in-house counsel; The more formal the position held by in-house counsel, the better (2) the communications in question were intended to advance the firm's interests in limiting exposure to liability rather than the client's interests in obtaining sound legal representation; (3) the communications were conducted and maintained in confidence; and (4) no exception to the privilege applies.
Approaches by other courts Several courts have concluded that because statute governs whether attorney-client privilege attaches, privilege exists so long as the statutory requirements are met Palmer v. Superior Court, 180 Cal. Rptr. 3d 620, 634 (Cal. App. 2014) (in the absence of a statutory exception, the Firm's ethical duties to its client do not trump assertion of the privilege here) Crimson Trace Corp. v. Davis Wright Tremaine LLP, 326 P.3d 1181, 1189 (Or. 2014) (concluding attorney-client
privilege applied to intrafirm communications when statutory conditions were met) The modern trend in Minnesota State and federal district courts in Minnesota have issued decisions adopting the four-part test adopted in RFF Coloplast A/S & Coloplast Corp. v. Spell Pless Sauro, P.C., Civ. No. 27-CV-12-1261 (Minn. Dist. Ct. Nov. 22, 2013) JJ Holand, Ltd. v. Fredrikson & Byron, P.A., No.
12-3064 ADM/TML (D. Minn. July 17, 2014), affd JJ Holand, Ltd. v. Fredrikson & Byron, P.A., 2014 WL 5307606 (D. Minn. Oct. 16, 2014) A variation on our hypothetical Junior attorney is concerned that he has possibly made a serious mistake Attends a team meeting with three other attorneys working on the case and asks, Was this malpractice? Is that communication privileged?
Another hypothetical Junior attorney is concerned that she has possibly made a serious mistake Approaches the firms ethics counsel, who has another attorney in her office Ethics counsel invites the junior attorney in and all three discuss the situation Is that communication privileged? Last hypothetical Junior attorney is concerned that she has
possibly made a serious mistake The supervising attorney is not available Junior attorney walks down the hall to discuss with a different attorney who is not on the case Is that communication privileged? Takeaways Intrafirm communications are important for attorneys to meet their own ethical obligations The modern trend is to permit protection of intrafirm communications under the attorneyclient privilege, but often only when meeting certain criteria
Without certainty in case law in Minnesota, a series of practices make sense to reduce risk: Seek advice from the right person Formalizing the role of firm in-house or ethics counsel Designating primary and backup attorneys, and notifying the firm through writing Consulting with an attorney not working on the case.
Avoid substantive discussions about the case that are unrelated to potential malpractice Remember our hypotheticals Make it truly confidential An intrafirm communication must be confidential to be privileged take appropriate steps to ensure it has the hallmarks of a privileged communication Do not bill for the conversation
Billing client for conversation about whether malpractice has occurred removes privilege under RFF Practically speaking, optics are terrible Consult with outside counsel For attorneys in solo or small firm practice, these issues remain important Consider establishing an ongoing relationship with an attorney to provide counsel on ethics issues and problematic matters
Contact your malpractice carrier If you are concerned or uncertain about whether you have committed malpractice, call your carrier to discuss the situation Claim Attorneys can provide an objective perspective and recommend next steps If the situation is serious or otherwise complex, your carrier can hire outside counsel to thoroughly analyze the situation and advise on how to proceed Contact the Office of Lawyers
Professional Responsibility Same-day advice is available by phone on prospective ethics issues call before you take the potentially problematic action Questions? We welcome you to submit questions for discussion Thank you for attending Please feel free to contact us regarding this
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