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Posts Tagged ‘attorney-client privilege’

California Court Clarifies Grounds for Law Firm Disqualification

Posted on: January 30th, 2019

By: Brett Safford

In O’Gara Coach Company, LLC v. Joseph Ra, 2019 Cal.App. Lexis 12, the California Court of Appeal clarified the grounds on which a law firm can be disqualified. The Court reversed the decision of the trial court and disqualified Richie Litigation PC from representing Joseph Ra, a former executive of O’Gara Coach Company, LLC, in litigation involving Ra and O’Gara Coach. The Court held that disqualification is warranted because Darren Richie, the founder of Richie Litigation, formerly served as O’Gara Coach’s president and chief operating officer, and in those roles, he served a primary point of contact for the company’s outside counsel and possessed “confidential information, protected by O’Gara Coach’s attorney-client privilege, concerning Ra’s allegedly fraudulent activities at issue in this litigation.” The Court disqualified Richie Litigation even though Richie was not a licensed attorney when serving as O’Gara Coach’s president and chief operating officer and never had an attorney-client relationship with the company. The Court further held that vicarious disqualification of the entire firm, not only Richie, is warranted under the doctrine of imputed knowledge.

The litigation between O’Gara Coach and Ra arose from a lawsuit filed by Marcelo Caraveo, a former customer of O’Gara Coach, alleging wrongful conduct by O’Gara Coach, Ra, and others relating to Caraveo’s acquisition of luxury vehicles from O’Gara Coach. Ra filed a cross-complaint against O’Gara Coach for indemnity, and O’Gara Coach filed a cross-complaint against Ra, Caraveo, and others alleging that Ra and Caraveo “were the primary architects” of a fraudulent scheme involving the sale, leasing, and financing of vehicles.

Richie’s employment with O’Gara Coach terminated in 2016. In May 2017, Richie filed articles of incorporation for Richie Litigation which named Robert Lu as the sole officer and director.  In June 2017, Lu substituted as counsel of record for Ra. In August 2017, Richie was admitted to the California State Bar.

In October 2017, O’Gara Coach moved to disqualify Richie Litigation based on two reasons. First, O’Gara Coach argued that although Richie was not a licensed attorney when employed by the company, “the court should apply the rule requiring disqualification of attorneys representing adverse parties in successive representations when, as here, the matters are substantially related, as well as the rule that, when a former client’s confidential information is known to any attorney at a law firm, the entire firm must be disqualified.” Second, O’Gara Coach argued disqualification of Richie Litigation is warranted because Richie was privy to O’Gara Coach’s privileged information, and “Richie Litigation is not entitled to exploit that information in litigation adverse to the company.” The Court of Appeal rejected the first argument, but agreed with the second, holding that the trial court “erred in failing to consider O’Gara Coach’s alternate argument that disqualification of Richie and his law firm was required as a prophylactic measure because the firm was in possession of confidential information, protected by O’Gara Coach’s attorney-client privilege, concerning Ra’s allegedly fraudulent activities at issue in this litigation.”

The Court of Appeal explained that O’Gara Coach presented undisputed evidence that Richie participated in meetings and communications with outside counsel who were investigating Ra’s activities and “developing theories material to O’Gara Coach’s defense and forming the basis for its cross-claims in this litigation and that are protected by lawyer-client privilege.”  As the privilege belongs to O’Gara Coach, Richie cannot disclose privileged information without O’Gara Coach’s consent.  The Court further concluded, “[N]ow that Richie is a member of the California State Bar, O’Gara Coach is entitled to insist that he honor his ethical duty to maintain the integrity of the judicial process by refraining from representing former O’Gara Coach employees in this litigation against O’Gara Coach that involve matters as to which he possesses confidential information.”

The Court of Appeal further held that Richie Litigation is variously disqualified because “once a showing has been made that someone at the adverse party’s law firm possesses confidential attorney-client information materially related to the proceedings before the court, a rebuttable presumption arises that the information has been used or disclosed in the current employment,” and Ra did not present evidence that Richie had been screened from Lu or other lawyers at the firm working on the pending litigation. As such, the Court held that “the doctrine of imputed knowledge requires the vicarious disqualification of the entire Richie Litigation firm.”

O’Gara Coach emphasizes the paramount importance of protecting client confidences and the attorney-client privilege to ensure the “integrity of the judicial process.” An attorney must not only be mindful of his or her own prior relationships with an opposing party, but also of the prior relationships between other attorneys in his or her firm and an opposing party. Without thorough conflict checks, firms may subject themselves to disqualification and other costly repercussions from their clients.

If you have any questions or would like more information, please contact Brett Safford at [email protected].

Protecting In-House Correspondence from Disclosure: The Troublesome “CC”

Posted on: November 28th, 2018

By: Jake Carroll

Commercial disputes present complex issues of causation—what caused the accident, who is responsible, what is impacting company revenue. But before the dispute even arises, in-house attorneys are frequently copied on correspondence with team members and employees evaluating and offering opinions on causation, performance, and potential costs. Then, when the dispute or accident ends up in litigation, the materials prepared by the employees are sought in discovery.

For example, what if an engineering firm learns that one of its employees improperly installed a part of the anti-corrosion system for a pipeline. The employee’s supervisor prepares an email detailing all instances of improperly installed systems in the last four (4) years by the employee and decides to cc in-house counsel. Is this email protected from disclosure if a lawsuit arises from the improperly installed pipe system?

Claims of privilege and work product are often asserted when an in-house attorney is included as a secondary recipient—or CC—on an email, raising the question of what exactly is covered by the attorney-client privilege and work-product doctrine. Resolving these issues can be costly in their own right, and have the potential to derail an otherwise straightforward dispute.

While there are some exceptions, the general rule is that the communications where in-house attorneys are only CC’d are not protected from disclosure under either the attorney-client privilege or the work-product doctrine.[1]

The attorney-client privilege protects confidential communications that are sent for the purpose of securing legal advice.[2] However, when an email is neither addressed to the in-house attorney, nor sent directly to the attorney, it is unlikely that the privilege applies.[3] Similarly, the work-product doctrine protects correspondence or reports prepared in anticipation of litigation.[4] When an in-house attorney is only CC’d on correspondence, the emails are neither work performed by the in-house attorney, nor work prepared at the direction of the in-house attorney.[5] Additionally, many of these emails are typically sent prior to litigation and are not protected.

Businesses would do well to remember that simply copying your in-house attorney on an email will not shield its disclosure during discovery. The impact of this fact is far-reaching. In the example above, not only would the other side have an admission regarding the mislaid pipe from the supervisor, the email has also identified other projects where the business may be vulnerable to suit to a plaintiffs’ attorney.

If a company wishes for correspondence to be protected from disclosure, the following tips, though not exhaustive, are helpful:

  1. The sender of the email should direct correspondence to in-house counsel in a separate email—not by CC—and for the express purpose of seeking legal advice on a potential issue. For example, starting the email with “legal advice needed” or “request for legal advice” will go a long way to preserving the privilege and are more effective than “I have a question” or “see below.” Such requests should also be addressed specifically to the in-house attorney or an attorney on the legal team, rather than being directed to other employees with just a cc to the lawyer.
  2. To protect the privilege when using emails, avoid communications with both business and legal purposes as much as possible.
  3. Limit long email chains. Besides being good business practice, in-house counsel should not let privileged discussions continue in a long email chain. Inevitably, as the discussion continues, the topic may stray away from the original question and new people may be added to the email string—risking the privilege protection.

Protecting the attorney–client privilege and work-product privilege requires sound policies and procedures, a properly trained workforce and constant vigilance from the in-house attorney. But business that put procedures in place on the front end will find it well worth their time if and when a dispute arises.

If you need help with this issue, or any other commercial law questions, Jake Carroll practices construction and commercial law, is licensed to practice in Georgia and Florida, and is a member of Freeman Mathis & Gary’s Construction Law and Tort & Catastrophic Loss practice groups. He represents corporations and manufacturers in a wide range of litigation and corporate matters involving breach of contract, business torts, and products liability claims. He can be reached at [email protected].

 

 

[1] Minebea Co. v. Papst, 228 F.R.D. 13, 21 (D.D.C. 2005) (“A corporation cannot be permitted to insulate its files from discovery simply by sending a ‘cc’ to in-house counsel.”) (quoting USPS v. Phelps Dodge Refining Corp., 852 F.Supp. 156, 163-64 (E.D.N.Y.1994)).
[2] See e.g. Upjohn Co. v. U. S., 449 U.S. 383, 394-95 (1981).
[3] Id. at 394; In re Seroquel Prods. Liability Litig., 2008 U.S. Dist. LEXIS 39467, 2008 WL 1995058, at *4 (May 7, 2008) (explaining that “[t]here is general agreement that the protection of the privilege applies only if the primary or predominate purpose of the attorney-client consultation is to seek legal advice or assistance”) (quoting Paul R. Rice, Attorney-Client Privilege in the United States § 7:5).
[4] The work-product privilege is derived from the United States Supreme Court’s ruling in Hickman v. Taylor, 29 U.S. 495, 510-11, 67 S. Ct. 385, 393 (1947), and is codified in Fed. R. Civ. P. 26(b)(3).
[5] See Cox v. Adm’r U.S. Steel & Carnegie, 17 F.3d 1386, 1421-22 (11th Cir. 1994), opinion modified on reh’g, 30 F.3d 1347 (11th Cir. 1994) (recognizing that the work-product privilege protects from discovery “materials that reflect an attorney’s mental impressions, conclusions, opinions, or legal theories” that were prepared in anticipation of litigation and intended to remain confidential); cf. Hickman, 329 U.S. at 511, 67 S.Ct. at 393; Upjohn, 449 U.S. at 399, 101 S.Ct. at 687.

Court Rules No Coverage For Pa. Law Firm’s Malpractice Suit

Posted on: November 26th, 2018

By: Barry Brownstein

An insurer does not have to cover a Pennsylvania law firm in a professional malpractice suit that a client filed after the firm allegedly used privileged information to benefit its attorneys’ side business in a real estate development.

The United States District Court for the Western District of Pennsylvania granted Westport Insurance Corp.’s motion for summary judgment in its case against Hippo Fleming & Pertile Law Offices (“HFP”) and attorney Charles Wayne Hippo Jr., agreeing with the insurer that the dispute over a shopping center development was exempted from coverage by the outside businesses exclusion in the firm’s professional liability policy.

Gregory Morris and Morris Development, one of HFP’s longtime clients, alleged that HFP had used information disclosed to the firm under attorney-client privilege to benefit a project by its side businesses, Templar Development and Templar Elmerton. Westport’s insurance policy contained a clear and unambiguous exclusion for lawsuits stemming from any of the policyholders’ outside businesses, and Hippo had not disclosed his involvement in the Templar companies when applying for the policy.

HFP argued that since the underlying lawsuit’s first two allegations of legal malpractice and breach of contract stemmed from the firm’s attorney-client relationship to Morris, Westport had a duty to defend them under the professional liability policy. The court, however, said it was Hippo’s dual role that gave rise to the claims against him.

The court emphasized that the plain language of the complaint in the underlying suit entirely discredits defendants’ argument that counts I and II are based solely on HFP’s role as Morris’s attorney. Counts I and II of the complaint allege that Hippo committed legal malpractice and breach of contract by simultaneously acting as Morris’s attorney and a competing real-estate developer. Therefore, the court held that Westport has no duty to defend because each claim in the underlying suit falls unambiguously within the policy’s outside business exclusion.

If you have any questions or would like more information, please contact Barry Brownstein at [email protected].

How Can The Trump-Cohen Tape Be Public?

Posted on: July 31st, 2018

By: Greg Fayard

A lawyer and client talk. The lawyer records the conversation. The recording is made public. How can this be?

That’s what happened to then candidate Donald Trump and his New York lawyer Michael Cohen. The conversation occurred in September 2016. Trump was not aware Cohen recorded the discussion. The recording is a few minutes long and encompasses several topics, including reference to a possible payment to a Playboy model with whom Trump allegedly had an affair in 2006, although this is never expressly discussed. At one point a cash or check payment is referenced. The two speak in a verbal shorthand.

The FBI, as part of an investigation by the U.S. Attorney’s Office for the Southern District of New York, confiscated the recording in April 2018 (see earlier blog discussing this here) while investigating attorney Cohen. The recording was made public in July 2018, but it is unclear by whom.

The conversation between Cohen and Trump is ordinarily protected by the attorney-client privilege, although it is clear other people were around Trump and Cohen, calling into question whether Trump waived the privilege by speaking openly to his lawyer in front of others. Nevertheless, a special master, working under United States District Judge Kimba Wood in New York determined the tape to be privileged. Trump, as Cohen’s client, “owns” the privilege.

However, the President’s legal team “waived” the attorney-client privilege, permitting the tape’s disclosure. The question is why? Four possible reasons come to mind:

  1. The tape had already been leaked, leaving the President no other viable option but to waive the privilege;
  2. Waiving the privilege permits the President’s advisors to discuss the tape openly;
  3. Discussing the tape without officially waiving the privilege might open the door to a broader waiver of communications between Cohen and Trump; and/or
  4. If Trump’s team asserted the privilege over the tape, the government could try to overcome the privilege by asserting the “crime/fraud exception.” Simply put, a client’s communication to an attorney cannot be privileged if the communication was made with the intention of committing or covering up a crime or fraud.

At worst, if a payment to the model was actually made (not yet confirmed), such a payment might have to be reported under federal campaign finance law. The failure to do so could be a campaign finance violation. Trump allies, however, would argue any such payment was not campaign-related, but a common occurrence for a celebrity dealing with the tabloids. In any event, failing to report a campaign-related payment is not a ordinarily a crime.

Lastly, why would an attorney record his privileged conversations with a client? Only attorney Cohen can answer that (and he has not). It could be innocuous—instead of taking notes, he recorded conversations. But not advising Trump of the recording is problematic. Nevertheless, under New York law, one party recording another party without his consent is legal. (N.Y. Penal Law §§ 250.00, 250.05.)  If Cohen, however, leaked the tape when it was still considered privileged, and before Trump waived the privilege, he could face discipline from the State Bar of New York for breaching an attorney’s duty of confidentiality. (New York Rule of Professional Conduct 1.6.)  Regardless, the President was certainly not pleased with Cohen’s secret recording:

If you have any questions or would like more information, please contact Greg Fayard at [email protected].

Attorney-Client Privilege? FBI’s Raid of President Trump’s Personal Lawyer’s Office

Posted on: April 10th, 2018

By: Gregory T. Fayard

On April 9, 2018, federal agents raided the law office of Michael Cohen, President Trump’s personal attorney. The purpose of the raid purportedly concerned a payment made to porn actress Stormy Daniels related to an alleged 2006 affair she had with Donald Trump in exchange for her silence. The FBI’s aggressive move certainly raised eyebrows among legal ethicists. Wouldn’t the FBI be prevented from reviewing a lawyer’s files based on the sacrosanct attorney-client privilege? After all, the attorney-client privilege is intended to allow lawyers to give honest legal advice without worrying about incriminating a client.

Not necessarily. To obtain a federal search warrant of an attorney’s office, high-level approval within the Justice Department must be obtained and special DOJ guidelines must be followed when the search target is an attorney. The warrant was also reviewed and approved by a federal judge.  Further, attorney client communications may be discovered under the rarely used and hard to meet “crime-fraud” exception to the privilege. That is, a client cannot hide evidence of a crime by relying on the attorney-client shield.  The concern for the Justice Department is whether any evidence from the raid will be admissible if “tainted” by the “fruit of the poisonous tree.” To deal with spoliation through “tainted” evidence, the Justice Department has used  “taint teams”—government attorneys who are segregated from FBI agents and prosecutors involved in the investigation. (“Taint Teams and the Attorney-Client Privilege,” Loren E. Weiss, Gregory S. Osborne, December 2015) Taint teams are charged with sifting through seized files and determining what prosecutors can and can’t use. (Id.)

In rare cases, a judge could appoint an independent special master to review the files or examine seized documents him or herself.  (United States v. Taylor (D. Me. 2011) 764 F.Supp.2d 230.)  Further, prosecutors can seize evidence of criminal activity that lies beyond the scope of a warrant if it is in plain view, like drugs, guns or other contraband—not likely at issue here.

In any event, Mr. Cohen will certainly contest the FBI raid as an overreach, including why the Justice Department did not issue a subpoena instead of a search warrant. A subpoena would give Mr. Cohen time to protect client confidences and seek court guidance on the attorney-client issues. While the FBI seems to be pushing the envelope as to the bounds of the attorney-client privilege, others have critiqued the raid as going beyond the scope of Robert Mueller’s Special Counsel investigation into collusion between Russia and the Trump Campaign.

If you have any questions or would like more information, please contact Greg Fayard at [email protected].