Preserving the Attorney-Client Privilege for Communications with In-House Counsel
LACBA Update, January 2011
By John W. Amberg, member and former chair, LACBA Professional Responsibility and Ethics Committee, and a partner in Bryan Cave LLP. He can be reached at firstname.lastname@example.org. The opinions expressed are his own.
The continuing recession has forced business clients to economize by referring less work to outside lawyers and, if they are large enough, relying more on their in-house legal staff. However, a recent case illustrates a serious pitfall that can result in the loss of the attorney-client privilege for communications between in-house counsel and their corporate clients.
Though extension of civil rights to corporations remains a controversial subject following the U.S. Supreme Court’s Citizens United decision earlier this year,1 the law has long recognized that confidential communications between an attorney and a corporate client are entitled to the same privileged status as other clients.2 The privilege extends to communications with in-house counsel as well as outside counsel.3
In California, the attorney-client privilege is governed by statute. Section 954 of the Evidence Code states that “the client, whether or not a party, has a privilege to refuse to disclose, and to prevent another from disclosing, a confidential communication between client and lawyer….” “Client” is defined in Evidence Code Section 951 as “a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity….” Evidence Code Section 950 defines “lawyer” as “a person authorized, or reasonably believed by the client to be authorized, to practice law in any state or nation.” In-house counsel present a special case for the privilege, because not all of their advice is legal and not all in-house lawyers are admitted to practice in the state in which they reside and work.
While Section 6125 of the Business and Professions Code limits the practice of law in California to persons who are active members of the State Bar of California, California Rule of Court 9.46 creates a safe harbor for in-house counsel, who are permitted to practice law in California though not being active members of the State Bar if they register and otherwise meet the criteria for admission to the State Bar. Sometimes overlooked, however, is the requirement that the lawyer must be an active member in good standing of the bar of at least one “United States state, jurisdiction, possession, territory or dependency.”4
Recently, the failure of a California in-house lawyer to maintain an active bar membership led to a cascade of woes, including the loss of his client’s attorney-client privilege and, ultimately, his job. Jonathan Moss graduated from law school and was admitted to the State Bar of California in 1993. In 2002, Moss was hired by Gucci America, Inc. He was promoted to the position of legal counsel in 2003 and became director of legal services in 2005. In 2008, he was promoted to vice president, director of legal and real estate. He provided Gucci with legal advice and regularly appeared before courts and administrative agencies. Gucci never confirmed Moss’ bar status as an attorney.
In 2009, Gucci sued Guess?, Inc. for trademark infringement in the U.S. District Court for the Southern District of New York.5 During the lawsuit, Gucci produced a log that claimed the privilege for e-mails of its in-house counsel Moss. In his deposition, Moss revealed that he had been an inactive member of the State Bar of California for three years. While not technically incorrect, the truth was more dramatic. In fact, Moss had not been an active member of the State Bar for more than 13 years, including his entire career with Gucci.6 Two months after the deposition, Moss reactivated his status, but it was too late, and Gucci terminated him.
Guess? demanded production of the e-mails on the ground that no privilege had attached, since Moss was not authorized to practice law in any state, and Gucci moved for a protective order. Wounded by its faithless servant, Gucci gamely argued that the privilege applied because Moss was still a member of the California bar, albeit an inactive one, and that he could practice because he was admitted in the federal court in the Central District of California. The magistrate judge rejected these arguments, noting that only active members of the State Bar could practice under Section 6125 and the Rules of the State Bar of California,7 and that it was a misdemeanor in California for a “voluntary inactive member” to hold himself out “as practicing or entitled to practice law.”8 The court also cited the local rules of the Central District, which limit admission to “persons of good moral character who are active members in good standing of the State Bar of California.”9
Taking note of the law that extends the privilege to communications with persons who are mistakenly believed to be attorneys, the magistrate judge nevertheless refused to protect Gucci. Gucci’s belief that Moss was a lawyer must be reasonable, the court held, and once the company promoted him to a legal position, it was “obligated to conduct some due diligence to confirm his professional status as an attorney….” (Emphasis in original.) The court noted that Gucci had been paying the lawyer’s inactive status bar membership fee every year and held that it could not rely on Moss’ representations or “cloak itself under a veil of ignorance….”10 Denying the protective order, the court tartly put the responsibility on the company to ensure that its counsel was authorized to practice law.11
The lesson for in-house counsel in California is to maintain your active bar membership, lest you undermine the privilege for your communications, and risk your job in the balance. The lesson for corporate employers is to confirm that your in-house lawyers are active members of a bar—on at least an annual basis and without relying on the lawyers themselves—or to start sending more work to your outside counsel.
1 Citizens United v. Federal Election Commission, __ U.S. __, 130 S. Ct. 876 (2010).
2 U.S. v. Louisville & Nashville R. Co., 236 U.S. 318, 336 (1915); D.I. Chadbourne, Inc. v. Superior Court, 60 Cal. 2d 723 (1964).
3 Upjohn Co. v. United States, 449 U.S. 383 (1981); U.S. v. Rowe, 96 F. 3d 1294 (9th Cir. 1996).
4 Cal. R. Ct. 9.46(c)(1).
5 Gucci America, Inc. v. Guess?, Inc., Case No. 1:09-cv-04373 SAS.
6 Id.; Memorandum and Order filed on June 29, 2010, 2010 WL 2720079 at *3.
7 Rules of the State Bar, Title 2, Rights and Responsibilities of Members, Rule 2.30(B): “No member…occupying a position wherein he or she is called upon in any capacity to give legal advice or counsel…shall be enrolled as an inactive member.”
8 Id. at *6; Bus. & Prof. Code §6126.
9 Id.; C.D. Cal. Civ. L.R. 83-2.2.
10 Id. at *8.