Ethics in Brief

Ethics in Brief is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.

California Appellate Court Embraces In-House Attorney Client Communication Privilege

In May of this year, Ethics in Brief reported on multiple out-of-state court rulings on whether communications between an attorney and the firm’s in-house counsel could be shielded under the attorney client privilege from the firm’s existing or former client. The Second District Court of Appeal recently recognized this privilege where “a genuine attorney-client relationship existed” between the attorney and the firm’s in-house counsel.  (Edwards Wildman Palmer v. Superior Court, No. B255182, 11/25/14, LEXIS 1081 at *18).

“Mireskandari retained the Firm to represent him in an invasion of privacy lawsuit against the Daily Mail, a newspaper based in the United Kingdom. Shelton was the Firm partner in charge of handling the case."   (Id. at *2.) The relationship was “short lived, and for the most part, contentious.”  (Id.)    Mireskandari ultimately retained new counsel and sued the firm for malpractice. 

“Swope, a partner in the Boston office, was the Firm's general counsel; Christman, a partner in the Chicago office, was the Firm's ‘Claims Counsel.’ Swope and Christman shared responsibility ‘on claims handling and loss prevention issues.’”  (Id. at * 7.)  Prior to the malpractice lawsuit, Shelton consulted Swope and Christman who then “‘deputized’ Durbin ‘to advise Ms. Shelton regarding her responses to Mr. Mireskandari's complaints and on the management of the Mireskandari client relationship.’” (Id. at *8.) 

In determining if the former client was entitled to compel the internal communications between the four, the appellate court reviewed the Supreme Court decisions in Massachusetts, Georgia, and Oregon which all rejected application of the “fiduciary” or “current client” exceptions to the attorney client privilege. (RFF Family Partnership, LP v. Burns & Levinson, LLP (Mass. 2013) 465 Mass. 702 (“RFF”); Crimson Trace Corporation v. Davis Wright Tremaine LLP (Ore. 2014) 355 Ore. 476; St. Simons Waterfront, LLC v. Hunter, MacLean, Exley & Dunn, P.C. (Ga. 2013) 293 Ga. 419.) 

Ultimately, the appellate court found the privilege applied to communications between Shelton, Swope and Christman, but found as “a matter of law, [the firm] failed to establish preliminary facts showing an attorney-client relationship existed between Durbin and Shelton” noting of significance that “Durbin actually worked on the Daily Mail case, supervising the preparation of pleadings.”  (Id. at *36.) 

In applying the privilege to the communications with Swope and Christman, the court found the factors set forth in the Massachusetts RFF decision “provide a helpful template for a court in determining whether a genuine attorney-client relationship existed between in-house counsel and a law firm's attorneys or the firm itself.”  (Id. at *34.)  The RFF court recognized the following as “prerequisites” to establishing the attorney client relationship “(1) the law firm must have designated, either formally or informally, an attorney or attorneys within the firm to represent the firm as in-house or ethics counsel, so that there is an attorney-client relationship between in-house counsel and the firm when the consultation occurs; (2) where a current outside client has threatened litigation against the law firm, the in-house counsel must not have performed any work on the particular client matter or a substantially related matter; (3) the time spent on the in-house communications may not have been billed to the client; and (4) the communications must have been made in confidence and kept confidential.” (Id. at **33-34.) 

Like all attorney client relationships, the decision should promote full disclosure to the in-house attorney to not only protect the firm, but minimize harm to the existing client’s case.   The decision stresses the importance of ensuring in-house counsel does not divide his or her loyalty between the firm and the client in stating that if “the in-house attorney has billed the outside client in the underlying matter for his or her time, a court might readily infer that the attorney was acting as counsel to the outside client, rather than to the firm or the firm's lawyer[.]”  (Id. at **34-35.) 

Thus, an attorney at a firm cannot simply “trade hats” and become the firm’s attorney after working for outside client.   To this end, the decision should not be read to dilute the attorneys’ “fiduciary obligation to disclose material facts to their clients, an obligation that includes disclosure of acts of malpractice.” (Beal Bank, SSB v. Arter & Hadden, LLP (2007) 42 Cal.4th 503, 514.) 

-- Andrew Servais

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**