While attorneys provide legal advice to their clients, they are sometimes the recipients of such advice from their own counsel, including in-house firm counsel. Agreeing with recent decisions by the highest courts of Georgia and Massachusetts, a panel of the First Department Appellate Division this June handed down a decision declaring such advice protected by the attorney-client privilege. See Stock v. Schnader Harrison Segal & Lewis LLP.
The case involved a legal malpractice claim brought by a former client against the attorneys who represented him in negotiating his severance from his employment and in an unsuccessful arbitration related to that severance.
The plaintiff had sought to compel the production of emails between his attorneys, including one whom who had been subpoenaed to testify in the arbitration, and their law firm’s in-house counsel relating to legal questions related to their representation.
The trial court had ordered the production of the emails based on the so-called “fiduciary exception” and the “current client” exception to attorney-client privilege, but the appellate court rejected those exceptions and vacated the order to produce the emails, holding that the “real clients” of the firm counsel’s legal advice were the firm’s attorneys, not the former client.
In coming to this conclusion, the court explicitly rejected the “current client” exception to attorney-client privilege, which some courts have recognized as allowing a former client to access any communications within a law firm relating to the representation of that client that took place while he was a current client. It also rejected the application of the “fiduciary exception,” which often arises in the trust context and allows trust beneficiaries to obtain communications between a trustee and trustee’s counsel related to trust administration. The exception did not apply, the appellate court held, because the legal advice from firm in-house counsel was not sought for the benefit of the client, but was for the benefit of the attorneys in order to apprise them of their legal and ethical obligations.
The case has garnered significant attention and evoked an amicus curiae brief by a number of large law firms and the Association of Corporate Counsel (the “ACC”). The ACC brief argued that a more client-oriented resolution of the privilege issues was warranted.
Much of the court’s reasoning, particularly in its rejection of the “current client” exception, followed cases from the Massachusetts Supreme Court, RFF Family Partnership, LP v. Burns & Levinson, LLP, and to a lesser extent the Georgia Supreme Court, St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn, P.C., 293. We likely have not heard the last of these issues, particularly given the ACC’s energetic engagement and investment in them.