Edwards Wildman Palmer v. Superior Court

The attorney-client privilege has been a hallmark of Anglo-American jurisprudence for almost 450 years, yet its boundaries and confines remain subject to testing from litigants—including legal malpractice plaintiffs. Thus, the California Court of Appeal recently examined the applicability of the privilege in the context of intra-firm communications between attorneys regarding a dispute with a client in a subsequent action for malpractice by that client in Edwards Wildman Palmer LLP v. Superior Court (2014) 231 Cal.App.4th 1214. In Edwards Wildman Palmer, the court held that where a genuine attorney-client relationship exists between the attorneys who engage in the intra-firm communications, the attorney-client privilege remains applicable.

In Edwards Wildman Palmer, the plaintiff brought a legal malpractice action arising from an underlying invasion of privacy action commenced on his behalf by his former counsel, an international law firm (the “Firm”). The plaintiff’s relationship with his former counsel quickly degenerated after the filing of the underlying action, with the plaintiff complaining that the Firm had presented him with a vastly inaccurate budget, had overbilled, and had failed to properly advise him regarding the consequences of his lawsuit. (231 Cal.App.4th at 1220-21.) In response to the plaintiff’s complaint, the primary attorney handling the underlying action consulted with two other Firm attorneys—the Firm’s general counsel and the Firm’s “claims counsel”—with respect to framing responses to the plaintiff’s claims and further representation of the plaintiff. (Id. at 1221-22.) In addition, the Firm’s general counsel and claims counsel “deputized” another attorney to supervise the handling of the underlying action. (Id. at 1222-23.)

The plaintiff ultimately retained successor counsel to handle the underlying action, and sued the Firm for legal malpractice. In the legal malpractice case, the Firm asserted the attorney-client privilege with respect to communications among the initial handling attorney, the Firm’s general counsel and claims counsel, and the attorney deputized to assist with the handling of the underlying action. The plaintiff successfully moved to compel further responses, convincing the trial court to adopt the so-called “fiduciary” or “current client” exception to the privilege. The Firm responded with a petition for a writ of mandate. (Id. at 1223.)

The Court of Appeal partially granted the Firm’s writ of mandate, reiterating that in California the “attorney-client privilege is a legislative creation, which courts have no power to limit by recognizing implied exceptions.” (Id. at 1230.) Consequently, the court concluded that the fiduciary or current client exceptions—common law exceptions which essentially provide that “a law firm cannot assert the attorney-client privilege against a current client when self-representation creates a conflict of interest with that client, or otherwise breaches the firm's duties to the client”—could not apply, because no statute authorized this type of an exception to the attorney-client privilege. (Id. at 1231.)

As to the issue of a potential conflict of interest arising in instances where a firm represents both itself and the client on the same matter, the court held the existence of a conflict was immaterial (at least as to the privilege’s applicability) because nothing in the Evidence Code permitted a waiver of the attorney-client privilege in the event of a violation of the Rules of Professional Conduct. (Id. at 1233.) Further, although the court did express some concern about “thorny ethical issues” where a firm acts as counsel for both itself and a client simultaneously, it did note that “it is not a foregone conclusion that an attorney's consultation with in-house counsel in regard to a client dispute will always be adverse to the client.” (Ibid.)

The court went on to reject the plaintiff’s concern that holding the attorney-client privilege applicable in these circumstances would allow firms to conceal information through the creation of “artificial” attorney-client relationships after the fact, by noting that the privilege would, of course, only protect communications and not facts relating to the representation. Moreover, the court noted that the privilege would only apply when a party resisting discovery could demonstrate the existence of a genuine attorney-client relationship between an attorney and in-house counsel at a firm. (Id. at 1234.)

The court then listed four “factors” that “provide a helpful template for a court in determining” whether a genuine attorney-client relationship exists between an attorney and a firm’s in-house counsel: (1) the law firm must have designated, either formally or informally, an attorney or attorneys within the firm to represent the firm as in-house or ethics counsel, so that there is an attorney-client relationship between in-house counsel and the firm when the consultation occurs; (2) where a current outside client has threatened litigation against the law firm, the in-house counsel must not have performed any work on the particular client matter or a substantially related matter; (3) the time spent on the in-house communications may not have been billed to the client; and (4) the communications must have been made in confidence and kept confidential. (Id. at 1234-35.)

Applying these factors to the facts before it, the Court of Appeal concluded that the Firm had shown sufficient evidence to establish an attorney-client relationship between the initial handling attorney and the Firm’s general counsel and claims counsel. However, the Court of Appeal found insufficient evidence to establish an attorney-client relationship between the initial handling attorney and the attorney deputized to assist the general counsel and claims counsel, as the deputized attorney was not acting in his “normal” role as counsel for the Firm and had actually performed work on the underlying action. (Id. at 1236-37.)

Accordingly, Edwards Wildman Palmer is a “must read” case for any firm which has, or is planning to add, a framework for counseling its attorneys in the face of a difficult client and/or potential claims of malpractice. Under the decision, the protections of the attorney-client privilege may attach to an intra-firm consultation concerning matters of professional liability, but only if the framework created is sufficient to establish a “genuine attorney-client” relationship. Attorneys seeking to ensure the privilege remains applicable should therefore carefully examine the four “factors” set forth by the Edwards Wildman Palmer court.