Tips for law firms to protect communications with in-house counsel

In the event that a relationship with a client goes south, lawyers are well-advised to seek counsel of their own. Some law firms have dedicated in-house counsel or a risk management team that can represent the firm's legal interests and provide advice to the firm's attorneys. For other firms, they may work with outside counsel to address such issues. But it begs the question: How can attorneys seek counsel in a way that preserves the law firm's privilege?

There have been several high-profile decisions in various states that examined the extent to which law firms enjoy the protections of in-house attorney-client privilege. One complicated issue these courts have grappled with is the appearance of a conflict with a client. If an attorney is seeking legal advice internally while a client representation is ongoing, is it possible that the attorney is prioritizing their own interests or addressing their own potential exposure at the expense of the client's? Does that potential conflict of interest override the typical attorney-client protections afforded to communications with in-house counsel?

Most jurisdictions - including California - have generally resolved this issue in favor of law firms, finding that the attorney-client privilege still protects communications with their in-house counsel so long as there is a genuine attorney-client relationship between in-house counsel and the law firm's attorneys or the firm itself.

Here are some tips for attorneys and firms to help preserve the privilege protecting communications with in-house counsel.

Seek guidance from the firm's in-house counsel

Ensuring that communications with a firm's in-house counsel remain protected have an important key first step - a lawyer facing or anticipating a potential dispute with a client should get the firm's in-house counsel involved. Ignoring the issue won't make it go away. Disclosing to in-house counsel can help ensure the protection of certain privileges between the attorney and the law firm. It can also typically be done in such a way that allows the attorney to see that the client's needs are continuing to be met.

In-house advisors and law firm risk managers have seen it all before. What may seem like an unmanageable crisis to an attorney could have a simple solution in the eyes of a seasoned general counsel or risk manager. The firm's general counsel can be a valuable resource because they may, for example, provide advice on the proper course of conduct or steps to take in order to ensure compliance with the applicable ethical duties. On the other hand, if an attorney withholds information from the in-house counsel or risk manager, it could potentially create risk for the firm in applying for or renewing insurance, which typically requires attesting to information related to potential claims.

Moreover, if an attorney is concerned about a specific risk with regard to a client matter but fails to apprise in-house counsel or seek their guidance in navigating the issue, such failure could create risk for the firm. This may be particularly important when an attorney first becomes aware of a potential claim and has concerns about what to do next. If the attorney does not discuss the issue with the firm's general counsel and, instead, talks to other attorneys within the firm about that risk, it could potentially mean that the attorney's communications with others in the firm are not protected by privilege.

Communicate formally with in-house counsel

Once an attorney determines that a particular issue should be brought to the attention of in-house counsel or the firm's risk manager, it is important to treat in-house counsel or the risk manager as counsel to the firm, both in form and in substance. Even for firms that do not have a formally-designated general counsel, it can nevertheless be helpful to have some designated person who handles risk management issues to help maintain the protections of privilege. If a firm has various members handling the typical responsibilities of a general counsel on an ad hoc basis, then it could raise the question of whether the firm is truly treating their in-house attorney as counsel for the firm.

Law firms can also take steps to ensure that in-house counsel can operate effectively by, for example, assigning specific responsibilities to the in-house counsel, such as generally advising firm attorneys on risk management as well as investigating and analyzing matters that might create risks for the firm. The role of in-house counsel may also include other duties like identifying and resolving conflicts of interests, ensuring the firm has adequate legal malpractice insurance, reporting potential or actual claims to firm leadership or the firm's malpractice carrier, providing counsel to firm attorneys on the applicable ethical obligations, and updating the firm's partnership agreement or corporate structure. Most firms will also ensure that if a specific client matter is being reviewed, the representative of the firm's in-house counsel will not be an attorney who worked extensively on that matter (or whose work is subject to a potential claim).

In-House counsel treats the firm as a client

Many in-house counsel at law firms will act in the same manner as the firm's attorneys do for outside clients in an effort to ensure the legitimacy of the position. Consistent with this approach, many firms will utilize separate billing numbers for in-house counsel matters, will require in-house counsel to record time for work performed on a matter, or will implement other administrative procedures that confirm the in-house counsel truly serves as counsel for the firm and represents the firm's interests.

Although some firms and general counsel may be well-equipped to address and resolve a whole host of issues, in-house counsel may nevertheless choose to retain outside counsel to advise the firm or represent it in certain circumstances. Not only could outside counsel be better situated to navigate complex ethical or legal issues, such an arrangement may also help ensure the protection of the in-house privilege.