Wednesday, July 10, 2013

In-House Privilege Upheld By Massachusetts Court

A significant decision today by the Massachusetts Supreme Judicial Court.

The issue and holding:

The issue presented on appeal is whether confidential communications between law firm attorneys and a law firm's in-house counsel concerning a malpractice claim asserted by a current client of the firm are protected from disclosure to the client by the attorney-client privilege.  We conclude that they are, provided that (1) the law firm has designated an attorney or attorneys within the firm to represent the firm as in-house 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 in-house counsel is not billed to a client, and (4) the communications are made in confidence and kept confidential.  Because these criteria were met in this case, we affirm the judge's order allowing the defendant law firm and its attorneys to invoke the attorney-client privilege to preserve the  confidentiality of these communications.

The law firm was retained by a commercial lender to investigate title and foreclose on property secured by what the lender thought was a first mortgage. A third party claimed a superior interest in the property.

A year later, the client (through outside counsel) sent the law firm a draft complaint alleging malpractice and breach of contract. 

The lawyers in the firm then consulted with the firm partner "designated to respond to ethical questions and risk management issues on behalf of [the firm]..."

The court underscored the importance of the ethics attorney function:

Where a law firm designates one or more attorneys to serve as its in-house counsel on ethical, regulatory, and risk management issues that are crucial to the firm's reputation and financial success, the attorney-client privilege serves the same purpose as it does for corporations or governmental entities: it guarantees the confidentiality necessary to ensure that the firm's partners, associates, and staff employees provide the information needed to obtain sound legal advice.  See Hertzog, Calamari & Gleason v. Prudential Ins. Co. of Am., 850 F.Supp. 255, 255 (S.D.N.Y.1994) ("No principled reason appears for denying ... attorney-client privilege to a law partnership which elects to use a partner or associate as counsel of record in a litigated matter").  "[B]road protection of communications with law firm in-house counsel, including communication about the representation of a current client of the firm, ... would encourage firm members to seek early advice about their duties to clients and to correct mistakes or lapses, if possible, to alleviate harm." Chambliss, supra at 1724.  As the United States District Court for the Southern District of Ohio recently noted: 

"[I]ndividual lawyers who come to the realization that they have made some error in pursuing their client's legal matters should be encouraged to seek advice promptly about how to correct the error, and to make full disclosure to the attorney from whom that advice is sought about what was done or not done, so that the advice may stand some chance of allowing the mistake to be rectified before the client is irreparably damaged.  If such lawyers believe that these communications will eventually be revealed to the client in the context of a legal malpractice case, they will be much less likely to seek prompt advice from members of the same firm."


The court rejected a differing result when the situation involves a current, rather than former, client:

In law, as in architecture, form should follow function, and we prefer a formulation of the attorney-client privilege that encourages attorneys faced with the threat of legal action by a client to seek the legal advice of in-house ethics counsel before deciding whether they must withdraw from the representation to one that would encourage attorneys to withdraw or disclose a poorly understood potential conflict before seeking such advice.  The "current client" exception is a flawed interpretation of the rules of professional conduct that yields a dysfunctional result.  See N.Y. St. Bar Ass'n Comm. on  Prof. Ethics, Op. 789 (2005) ("We do not believe that the conflicts rules ... were intended to prohibit ethics consultation when it is most helpful:  during the client representation").  As such, we decline to adopt it in Massachusetts.

Briefs were submitted by several amicus curiae, including the Association of Professional Responsibility Lawyers, the American Bar Association and the Attorneys' Liability Assurance Society, Inc.

The case is RFF Family Partnership, LP v. Burns & Levinson LLP. One should be able to access the decision through this link.

Law firm ethics counsel --every firm of sufficient size needs one. (Mike Frisch)

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