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Dec. 1 — The attorney-client privilege shields a lawyer's confidential communications with her law firm's in-house attorney about a dispute with a current client provided that a genuine attorney-client relationship exists between them, the California Court of Appeal, Second District, decided Nov. 25 (Edwards Wildman Palmer v. Superior Court (Mireskandari), 2014 BL 331662, Cal. Ct. App. 2d Dist., No. B255182, 11/25/14).
The court disagreed with federal cases that have refused to apply the privilege in this situation. “Adoption of the so-called ‘fiduciary' and ‘current client' exceptions to the attorney-client privilege is contrary to California law because California courts are not at liberty to create implied exceptions to the attorney-client privilege,” Justice Richard D. Aldrich wrote.
The ruling is the first published California appellate decision directly recognizing the attorney-client privilege for legal discussions within law firms about problems with a current client's representation.
The decision adds to a growing list of state-court rulings that allow law firms to assert the attorney-client privilege for lawyers' consultations with in-house attorneys about ongoing representation of an outside client.
The issue arose in a former client's malpractice action against the Edwards Wildman Palmer law firm. The court held that the attorney-client privilege may shield legal discussions that took place between then-partner Dominique R. Shelton, who was representing an unhappy litigation client, and two other partners in the firm—the firm's general counsel and its “claims counsel.”
The court acknowledged that some federal courts, applying a “fiduciary” or “current client” exception to the privilege, have found that the privilege does not cover internal legal talks about problems with a current client's representation. As examples, it cited In re SonicBlue Inc., 2008 BL 15488, No. 03-51775 (Bankr. N.D. Cal. Jan. 18, 2008), and Thelen Reid & Priest LLP v. Marland, No. C 06-2071 VRW (N.D. Cal. Feb. 21, 2007).
The premise underlying both exceptions, Aldrich said, is that a law firm cannot assert the privilege against a current client when self-representation creates a conflict of interest with that client, or otherwise breaches the firm's duties to the client.
Aldrich pointed out that these exceptions have been rejected in three recent state supreme court decisions: St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn, P.C., 2013 BL 185295, 746 S.E.2d 98 (Ga. 2013); RFF Family P'ship, LP v. Burns & Levinson, LLP, 2013 BL 184885, 991 N.E.2d 1066 (Mass. 2013); and Crimson Trace Corp. v. Davis Wright Tremaine LLP,2014 BL 151211, 326 P.3d 1181 (Or. 2014).
The court found it unnecessary to decide which approach is more persuasive, “because we are not at liberty to adopt the fiduciary or current client exceptions to the attorney-client privilege.” The privilege is a legislative creation in California, and courts have no power to limit it by recognizing implied exceptions, Aldrich said.
The court conceded that a law firm's representation of itself or a partner in a dispute with a current client may raise thorny issues of professional responsibility. “However, it does not follow that the looming specter of ethical issues mandates the extinguishment of the attorney-client privilege,” Aldrich said.
Recognizing the privilege in these circumstances “does not undercut a firm's duty to keep a client apprised of developments in the case or alert the client to an incident of malpractice,” the court added.
The court made clear that “the privilege will attach only when a genuine attorney-client relationship exists.” Drawing on RFF, the court suggested relevant factors bearing on that issue:
• whether the firm designated particular lawyers to represent it as in-house or ethics counsel;
• whether the in-house counsel performed any work on the outside client's matter;
• whether the outside client was billed for time spent on the in-house consultations; and
• whether the in-house communications were made in confidence and kept confidential.
The court concluded that in this case the privilege does not cover Shelton's communications with one of the three partners she consulted, because evidence was lacking that an attorney-client relationship existed between that lawyer and Shelton.
The lawyer in question was purportedly “deputized” to deal with the dissatisfied client after the dispute arose, and the lawyer actually worked on the complaining client's case, Aldrich said.
Justices Joan Dempsey Klein and Patti S. Kitching concurred in Aldrich's opinion.
Valle Makoff LLP represented Edwards Wildman Palmer. Parker Shumaker Mills LLP represented the former client, Shahrokh Mireskandari.
Copyright 2014, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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