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July 12, 2013

Legal Update
William L. Boesch

Supreme Judicial Court: In-firm communications are privileged

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Entering what it acknowledged were “uncharted jurisprudential waters,” the Massachusetts Supreme Judicial Court on July 10 became the first last-resort appellate court anywhere in the United States to address whether the attorney-client privilege applies to communications between lawyers in the same law firm about a current client who has threatened a malpractice claim. The court answered that yes, the privilege does apply, so long as the lawyers and firm observe certain formalities.

The case before the court, RFF Family Partnership, LP v. Burns & Levinson, arose from the law firm’s handling of a real estate loan foreclosure that produced a dispute over lienholder priority. (We discussed the case several months ago in a Boston Bar Journal article previewing the SJC’s decision.) The client retained a second lawyer, who sent a malpractice claim letter and draft complaint to the law firm, and demanded indemnification against any loss the client might suffer due to the firm’s failure to detect, report and address the competing liens. The letter prompted an internal meeting at the firm between the lawyers involved in the matter and the firm’s managing partner.

In the ensuing malpractice case, the firm took the position in discovery that the internal meeting was subject to the attorney-client privilege. A superior court judge agreed, and the former client filed an interlocutory appeal, which the SJC, recognizing the importance of the issue, took for its own review.

The court held that in-firm communications such as those in the case before it are privileged against discovery provided that, first, the law firm has designated, formally or informally, one or more of its attorneys to act as in-house or ethics counsel. Second, the designated lawyer must be someone who has not worked on the client matter that is the subject of the discussion, or on a substantially related matter. Third, the time spent on the in-firm discussions may not be billed or charged to a client; the firm must bear the expense. Fourth, the in-firm communications must be made and kept in confidence.

The court held that Burns & Levinson had met these criteria, and that the lower court properly ruled that the in-firm communications in that case were privileged.

The SJC’s decision recognized the general importance for law firms, as for other businesses and professional entities, of being able to seek legal advice about potential claims and the “elaborate web of professional regulation” within which they operate. Permitting law firms and individual lawyers to seek confidential advice, the court observed, serves the same salutary purposes as justifies the existence of the attorney-client privilege in general. And the court rejected the notion that shielding such internal communications from the client’s gaze is necessarily against the client’s interests or inconsistent with the firm’s duty of loyalty to the client.

The SJC found unpersuasive each of the two analytical devices that some courts and commentators have used to allow clients to avoid or overcome the privilege in malpractice cases. The so-called “fiduciary exception” to the privilege, the court held, would not apply in the circumstances of the RFF Family Partnership case even if the court were to adopt the exception generally, because it applies only where a trustee or other fiduciary seeks legal advice on behalf of his beneficiaries, and uses trust funds to pay for the advice. The “current client” exception, which focuses on the supposed conflict of interests that arises when a firm represents itself while continuing to represent the complaining client, was also unavailing. The SJC declined to read the ethical rules on imputation of conflicts as “meant to prohibit an in-house counsel from providing legal advice to his own law firm in response to a threatened claim by an outside client.” Further, the court said, even if in-house counsel’s role were deemed to create a conflict, this would not deprive the firm, as his client, of its right to the privilege.

This Alert was prepared for the clients and friends of Sugarman, Rogers, Barshak & Cohen, P.C. It is provided for educational and informational purposes only and is not a substitute for professional advice on your specific legal situation.