Internal emails and attorney-client privilege

By Diane Karpman

For about a decade, this column has discussed the intra-firm privilege because of the troubling cases that are decided in this area. Intra-firm privilege continues to come up whenever a law firm is threatened with litigation. Mistakes happen. Clarence Darrow is reputed to have said, “Hell, that’s why they make erasers.” (Shrager & Frost (1986) The Quotable Lawyer, page 99.) Obviously, when a mistake is made, if possible, fix it.

“Repair” is a magic period in the life of a case when a mistake has occurred, but we are able to correct it, so the client does not sustain damages. In a law firm or practice group, lawyers will generate emails asking for advice and suggesting solutions on how to take care of the problem. We want to encourage this conduct, because it results in greater consumer protection and the satisfaction of client expectations. If it doesn’t involve client claims, then a law firm’s internal investigation into a member’s conduct is privileged. (U.S. v. Rowe, 96 F. 3d 1294 ― Court of Appeals, 9th Circuit 1996)

Yet, a number of cases from all over the country have repeatedly held that if it’s a current client to whom loyalty is owed, then those explosive emails are discoverable in subsequent litigation with the law firm. Even if the firm had an appointed general counsel handling risk management issues, those confidential emails can be discovered and often produce smoking AK 47s. Internal law firm communications are not privileged when privilege is being asserted against a current client. The firm’s claim of privilege is trumped by the “fiduciary exception” to attorney-client privilege.

Most courts that have addressed this “current client” intra-firm privilege have held that it is inapplicable, because of an inherent conflict of interest in that scenario. The conflict arises because of the simultaneous representation of “clients” having adverse interests. You have the firm’s self-interest and the client’s interests. The interests of the human/corporate client trump the claim of privilege by the firm. The justification for a denial of privilege is that all members of the firm drink from the same fiduciary well, and therefore, they owe all clients the same duties.

However, some recent cases seem to be modifying this counter-intuitive result, or rejecting the conflict concept and asserting that both the firm and the client share the mutual goal of the client obtaining good results. Thus, a consultation with internal firm colleagues on how to achieve those results is not a conflict with the client.

This is much more practical than having clandestine meetings in hallways with lawyers instructed not to take notes. In one case where the court recognized that law firms/lawyers should be encouraged to seek advice, the court did not want to “dissuade attorneys from referring ethical problems to other lawyers, thereby undermining conformity with ethical obligations. Such a rule would also make conformity costly by forcing the firm to either retain outside ethics counsel or terminate the existing attorney-client relationship to ensure confidentiality of all communications relating to that client.” Thelen Reid & Priest LLP v. Marland, No. C 06‑2071 VRW, 2007 WL 578989 (N.D. Cal. Feb. 21, 2007). Outside counsel retained in this type of circumstance is known as “privilege counsel.”

In a rare but clear case, TattleTale Alarm Systems Inc. v. Calfee, Halter & Griswold LLP, 2011 WL 382627 (S.D. Ohio 2011) began what we hope is a national trend. The court observed, “there are societal values to be served by allowing members of a law firm to converse openly and freely about potential missteps in their representation of a client without worrying about whether the client will eventually be able to use those communications to the lawyer’s disadvantage.” This is only common sense. Often the firm has a tremendous interest in doing a great job and preventing any damages to the client, so that the mistake does not metastasize into a malpractice claim.

What are the lessons to be learned from these cases? First, designate someone as internal general counsel, so that at least a claim of privilege could be asserted by general counsel. Second, revisit the fee agreement. At the inception of the relationship (before any conflicts or faux conflicts exist) obtain client consent to the confidentiality of intra-firm communications. There hasn’t been a case on that type of waiver/consent, but an advanced consent in this circumstance may be viable. Finally, only in the “law” could an important privilege case be called “tattletale.”

• Legal ethics expert Diane Karpman can be reached at 310-887-3900 or at karpethics@aol.com