Protecting internal communications from disclosure

As soon as something goes wrong in a representation, the first instinct for many attorneys may be to turn to colleagues for advice, reassurance or just to vent. It could be an unexpected adverse development, a threatened claim from a client, or sometimes the attorney just realized that she or he made a mistake. Any of these circumstances could eventually involve an actual legal malpractice claim.

In the immediate aftermath of a problematic situation with a client, attorneys can often be emotional and self-critical, even where the situation may not be entirely the attorney's fault. As a result, attorneys may send emails lamenting their case strategy or second-guessing decisions made during the representation. Such communications can then serve as Exhibit A for the plaintiff in the subsequent legal malpractice lawsuit.

Apart from the potential admission of liability, the optics of such communications can be damaging where the representation is continuing, as it may make it seem that the attorney is more concerned with her or his own liability than the best interests of the client. In addition, as if a potential malpractice claim is not bad enough, many attorneys fail to appreciate the insurance implications when they become aware of circumstances that they fear may lead to a claim. Knowledge that a client may assert a claim can constitute circumstances that should be reported to the law firm's insurer.

In light of these and other issues that attorneys face when things turn sour, attorneys often seek counsel from their firm's general or in-house counsel. Whether such communications are protected by the attorney-client privilege has been the subject of many high-profile decisions, including in California. See Palmer v. Superior Court, 231 Cal. App. 4th 1214, 1234 (2014) (declining to adopt the "fiduciary duty" and the "current client" exceptions to the attorney-client privilege and upholding the in-house counsel privilege for communications concerning a dispute with a current client); see also RFF Family P'ship v. Burns & Levinson, SJC-11371 (Mass. July 10, 2013); St. Simons Waterfront v. Hunter, Maclean, Exley & Dunn, S12G1924 (Ga. July 11, 2013); Crimson Trace Corp. v. Davis Wright Tremaine LLP, 355 Or. 476 (2014).

The good news is that the holding in Palmer and the trend in recent cases from other jurisdictions appears to favor upholding the attorney-client privilege for communications between attorneys and their in-house counsel. However, regardless of the law in the applicable jurisdiction, there are some lessons for attorneys in these circumstances to avoid any uncertainty regarding whether internal communications will be protected from disclosure.

1. Consider Opening New Matters for Internal Issues

As a general rule, the more in-house counsel treats the firm like a client, the clearer it will be that communications are privileged. Accordingly, when an attorney raises a potential issue relating to a client representation, it is helpful to treat that inquiry, no matter how informal or minor, as a separate matter with its own file.

Without a separate file, the risk is that the communication may be treated as part of the client file that must be produced to the client. A distinct file help avoids any ambiguity as to the purpose of the communication.

2. Clearly Identify In-House Counsel

Similarly, there can be ambiguity regarding whether an attorney at the firm was in fact acting in her or his capacity as the firm's in-house counsel with respect to a matter. This is especially an issue for firms that designate in-house counsel on an "ad hoc" basis, as opposed to formally designating an attorney (or even a team of attorneys) as the firm's in-house counsel.

Many firms already have attorneys who perform many or all of the typical responsibilities of in-house counsel, such as purchasing legal malpractice insurance, identifying and resolving conflicts of interests, reporting potential and actual claims, and updating and providing the status of the firm's partnership agreement or corporate structure.

Larger firms may have full-time in-house counsel to address those issues as well as loss prevention efforts. However, firms of any size can benefit from the formal designation of in-house counsel, although there may be additional considerations where in-house counsel represents the firm's clients in addition to the firm. In such situations, it can be helpful to: (1) ensure that the attorney serving as in-house counsel does so on a formal, ongoing basis; (2) ensure that the attorney clearly establishes the firm as the client prior to any communications occurring while in that role; and (3) ensure that either the in-house counsel has no involvement in the client representation that is being internally reviewed, or the in-house counsel obtains informed consent from both the firm and the outside client.

Firms that instead simply delegate law firm matters to different attorneys within the firm as they arise can face increased risk that the court will not recognize an attorney-client relationship between the attorney seeking the advice and the attorney acting as in-house counsel. Of course, where there is no such relationship, communications may not be protected from disclosure by the attorney-client privilege.

3. Maintain Formality

Among colleagues within a law firm, communications tend to be much more informal than would typically be sent between attorneys and their clients. However, although this may not be a significant issue in all contexts, the lack of formality in supposedly privileged communications can lend itself to a finding that the communications were not in fact legal advice rendered by an attorney acting as in-house counsel.

Thus, where appropriate, firms can take steps to respect the dividing line that exists between the in-house counsel and all other attorneys. In situations where an attorney needs advice regarding how to handle a client matter, it is helpful to remember that in-house counsel is effectively operating as if the firm retained outside counsel, and thus it is not simply venting to a friend at the firm. In order to maintain the privilege, both form and substance can matter.