Ambulance Chasing is (Sort of) OK Again in TX

Federal District Court Strikes Down Texas Criminal Restrictions on Professional Solicitations

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

McKinley and Villasana v. Abbott, A-01-CA-643-LY (W.D. Tex. Mar. 25, 2010)

Brief Summary
The United States District Court for the Western District of Texas permanently enjoined enforcement of provisions of the Texas Penal Code which prohibited legal and medical professionals from soliciting individuals who were involved in accidents, arrested, or named as defendants in civil lawsuits for a 30-day period.

Complete Summary
In 1993, Texas prohibited certain licensed professionals (including attorneys, chiropractors, physicians, surgeons and private investigators) from sending solicitation letters to certain individuals who were involved in accidents, arrested or named as defendants in civil lawsuits for a 30-day period. In 2009, the Texas Assembly amended the law to impose criminal sanctions for such solicitations. The U.S. District Court for the Western District of Texas permanently enjoined the enforcement of the law.

Two professionals challenged the law as an unconstitutional limitation on commercial speech. The standard of intermediate scrutiny under Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980), requires that laws regulating truthful and non-deceptive commercial speech must directly and materially advance a substantial state interest and be narrowly drawn.

A criminal defense attorney challenged the provisions that prohibited lawyers licensed in Texas from making solicitations to those who were arrested or served with a summons within 30 days of arrest or issuance of summons. The court focused on the potential harm to the individuals to whom solicitation was prohibited. It noted that a criminal defendant has a right to a speedy trial and the right to counsel, both of which require quick access to representation. The court also contrasted the privacy interests of accident victims with persons who were recently charged or arrested for a crime, finding that the latter do not possess the same need for privacy protection. Finally, the court found that the criminal consequences imposed on soliciting attorneys did not directly or materially advance a substantial state interest and that the law was not narrowly drawn under the Central Hudson test.

The second plaintiff, a chiropractor, challenged the provisions that prohibited medical professionals from making solicitations to accident victims within 30 days of an accident. The state argued that there were substantial interests in protecting Texas citizens from emotional distress, stopping medical providers from making false, misleading or deceptive solicitations, protecting the privacy of Texas citizens, and maintaining ethical standards for chiropractors. The court found that those interests were substantial and that therefore the state met the first test under Central Hudson. But the state did not meet the second and third factors — that the law directly and materially advances the state’s interests and that it was narrowly drawn. The court also was concerned that this prohibition applied to medical professionals, which as a group had not previously been regulated in this manner. Moreover, plaintiff chiropractor was able to establish the benefit of early medical treatment. The alternative could be a substantial time period between injury and treatment. As such, the court found that the statute created a large gap between the supposed harm and the speech ban.

Significance of Opinion
Regulations on professional solicitations have been upheld previously and are not new to the legal profession. The U.S. Supreme Court previously has deferred to a state’s interest in protecting the privacy rights of accident victims. This case, however, presents an interesting example of when a state can overreach. The criminal consequences to the professionals was a compelling reason to strike the law, as was the effect of the law upon criminal defendants with competing constitutional protections such as the right to a speedy trial and right to counsel.

Trending: Lawyer Mobility Eroding State Jurisdiction Boundaries

Trio of Recent Decisions Address Lawyer Mobilityand Further Erode State-Based Jurisdictional Barriers

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

New York State Bar Ass’n Professional Ethics Comm. Op. 835 (Dec. 24, 2009)
Schoenefeld v. State of New York, 09-CV-504 (N.D.N.Y. Feb. 11, 2010)
In re Anthony, No. 20090576, 26 Law. Man. Prof. Conduct 125 (Utah, Feb. 2, 2010)

Brief Summary
Three recent opinions address lawyer mobility between jurisdictions. An opinion from the New York State Bar Committee for Professional Ethics issued a strong plea urging the New York Assembly or the Appellate Divisions to develop rules to address the issue of whether an out-of-state lawyer may serve as in-house counsel for a New York corporation and maintain an office in New York. A federal district court opinion discusses the challenge to New York’s requirement of non-resident New York licensed lawyers (but not resident New York lawyers) to maintain an office in New York. The court found that the restriction could give rise to a challenge under the Comity Clause. In a third case, a long-practicing lawyer from California challenged Utah’s admission policy requiring out-of-state lawyers to have graduated from ABA-accredited law schools. The Utah Supreme Court found that a lawyer’s unblemished record can outweigh the educational accreditation requirements.

Complete Summary
In a recent Ethics Opinion, The New York State Bar Association Committee on Professional Ethics issued a plea to the New York Assembly to develop rules to address whether an out-of-state lawyer may serve as in-house counsel for a New York corporation and maintain an office in New York:

“The question whether an out-of-state lawyer may serve as in-house counsel for a New York corporation and maintain an office in New York for that purpose is a question of law, and is not answered by the New York Rules of Professional Conduct. The question is therefore beyond our jurisdiction and we offer no opinion on the question. Because the question is a recurring one, however, this Committee urges the Appellate Divisions and/or the New York State Legislature to provide further guidance regarding whether and to what extent out-of-state lawyers – especially in-house lawyers who provide services solely to a corporate employer – are authorized to practice law in New York.”

In Schoenefeld, the United States District Court for the Northern District of New York ruled that the Comity Clause (“The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.”) could provide the basis for a suit challenging a provision of the New York Judiciary Law (the Residency Provision). The Residency Provision required only non-resident lawyers to have offices in New York. A New Jersey-based lawyer claimed that the law damaged her when she refrained from accepting New York legal cases, although she was otherwise fully credentialed, purely on the basis of not having an office in the state. She argued that the law impermissibly imposed differing requirements on resident and non-resident attorneys. The court dismissed two of her three claims that the law violated various provisions of the U.S. Constitution, and concluded that New York has an interest in insuring that non-resident attorneys are familiar with New York law, are accessible to New York clients, courts and other parties, and maintain a stake in the integrity of the New York state bar. But the court allowed the third claim — that the Residency Provision allegedly violated the Comity Clause — to proceed. Here, the out-of-state attorney was able to establish sufficient facts, if taken as true, that she had a protected interest in practicing law in New York while a resident of New Jersey. At this preliminary stage however, the state offered no substantial reasons for the Residency Provision’s different treatment of residents and non-residents. Nor did it show any substantial relationship between that treatment and the state’s objectives. The court did not expressly find that the Residency Provision was constitutional or not.

In the case In re Anthony, another lawyer mobility restriction was lifted for a meritorious California attorney in Utah. The Utah Supreme Court waived the state’s rule requiring a lawyer to have graduated from an ABA-accredited law school. In 1980, Thomas Anthony graduated from Western State University College of Law, which was then a state-accredited but not ABA-accredited law school. (It eventually received full accreditation in 2009). Anthony applied to sit for the Utah bar in 1988, which at the time accepted his educational background. But he did not ultimately take the exam that year. Twenty years later, Anthony again applied for admission to Utah. In the interim, however, the state had changed its rules to require that an applicant must have graduated from an ABA-accredited school. As such, Anthony’s 2008 application was denied by the bar. Anthony petitioned the Utah Supreme Court for extraordinary relief. He supplemented his petition with proof of his 28-year unblemished professional history and support from judges, clients and fellow attorneys. The Court took three steps. First, it agreed that appealing the bar’s denial of admission through its internal structure would have been a futile exercise. Second, it waived Anthony’s particular barrier of graduating from a non-accredited law school. Finally, it directed the Utah bar to implement a waiver process for non-resident attorneys who have graduated from non-accredited law schools. The Court was influenced by the primary goal of the admission process — to protect the citizens of Utah by ensuring that licensed attorneys are competent and ethical. Having proven he met both goals, Anthony was therefore eligible for admission to take the Utah bar exam.

Significance of Opinions
These three matters reflect the growing push toward greater acceptance of the mobility of lawyers, in a world where restrictions based solely on state boundaries correspond less and less to the realities of law practice.

Missouri Adopts Uniform Bar Examination

Missouri has become the first state in the nation to adopt the Uniform Bar Examination (UBE). The UBE will test general, not state-specific, law. It will first be used for the February 2011 Bar Examination.

To ensure applicants have competency in Missouri law, applicants for admission by examination will also complete a course on Missouri law.

The Missouri Board of Law Examiners’ press release on adoption of the UBE is available at https://www.mble.org/news.action?id=780.

P.S. On a presumably unrelated note, the Missouri Board of Law Examiners is seeking a new executive director. See https://www.mble.org/news.action?id=840.

U.S. Supreme Court Finds Bona Fide Error Not Always Bona Fide Defense in FDCPA Cases

U.S. Supreme Court Holds That the Bona Fide Error Defense in the Fair Debt Collection Practices Act Does Not Include Mistakes of Law

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, ___ U.S. ___ (08-1200, April 21, 2010)

Brief Summary
The U.S. Supreme Court held, 7-2, that the Fair Debt Collection Practices Act does not provide debt collectors and their attorneys with a good faith defense to liability for mistakes of law, even in the context of litigation.

Complete Summary
The Fair Debt Collection Practices Act (the Act), 15 U.S.C. § 1692k, regulates interactions between commercial debt collectors and consumers. Attorneys engaged in debt collection litigation may be debt collectors for the purposes of the Act. Heintz v. Jenkins, 514 U.S. 291 (1995). Congress declared that the Act’s express purpose was “to eliminate abusive debt collection practices by debt collectors, [and] to ensure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” 15 U.S.C. § 1692k(g). One of the key provisions within the Act is a debt collector’s potential defense to civil liability if the debt collector can show that “the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. § 1692k(c).
 
Respondents, a law firm and one of its attorneys, filed suit against petitioner to foreclose a mortgage on real property she owned. The complaint included a demand that the debt be disputed in writing. At the time of filing suit, it was an open question whether a debt collector could demand that a debt be disputed in writing (the federal circuits still are split on this issue). Petitioner disputed the debt, in writing, and the claim was dismissed. Petitioner then sued respondents in a class action for violation of the Act, arguing that the Act does not require disputes to be in writing. Respondents argued that the bona fide error defense applied to this alleged violation, as it arose from a debt collector’s reasonable good faith interpretation of the legal requirements of the Act.

The Supreme Court disagreed, holding instead that the bona fide error defense can only be used with respect to a debt collector’s factual errors, not mistakes of law. The Court focused first on the maxim that ignorance of the law provides no excuse for violating it. Likewise, it shied away from treating the Act’s liability as akin to requiring “willful” conduct, which often excludes mistakes of law from liability.

The Court found support for its interpretation through textual and legislative historical analysis. It noted that the bona fide error defense in the Act was modeled on the 1968 Truth in Lending Act (TILA). In 1977, when the Act was passed, three courts of appeal had interpreted the TILA bona fide error defense to refer to clerical — not legal — errors. Three years later, when Congress amended the TILA to include legal errors in its defense, it could have amended the Act in the same way but chose not to do so. By not doing so, the Court reasoned that Congress did not wish to extend the bona fide error defense to mistakes of legal interpretation under the Act.

Justice Stephen Breyer, joining in the majority, urged attorneys to turn to the Federal Trade Commission for an advisory opinion. (Both Justice Sonia Sotomayor’s majority opinion and Justice Anthony Kennedy’s dissent noted, however, that this process can be time consuming, and only four such advisory opinions have been rendered this decade.) Justice Antonin Scalia, concurring in part and concurring in the judgment, urged the Court to apply only a textual analysis to the Act, not a legislative history approach. Dissenting, Justice Kennedy, joined by Justice Samuel Alito, favored a more expansive interpretation of “bona fide error” to extend its definition to include factual and legal errors, positing that the focus should be on whether the debt collector evidenced a subjective intent to violate the Act.

The Court declined to address whether the inclusion of an “in writing” requirement in a notice sent to a consumer violates the Act. At present, the U.S. Court of Appeals for the Third Circuit has held that a consumer’s dispute of a debt under the Act must be in writing to be effective, while the U.S. Court of Appeals for the Ninth Circuit has held that the Act does not impose this requirement. Compare Graziano v. Harrison, 950 F.2d 107, 112 (3rd Cir. 1991); Camacho v. Bridgeport Financial, Inc., 430 F.3d 1078, 1082 (9th Cir. 2005).

Significance of Opinion
This decision clearly opens the door to potential liability under the Act for lawyers who may make a good faith legal error, even in the context of litigation. Attorneys can still invoke the bona fide error defense for violations of the Act arising from qualifying factual errors. But the lesson here is clear that lawyers must err on the side of caution when making demands covered by the Act, at least until Congress considers whether to amend the Act to expressly include a defense for good faith errors of law.

Virtual Law Offices In New Jersey

Some states – like New Jersey – have a bona fide office rule. For those of you in states without one – like Oregon – it can look something like this:

1:21-1. Who May Practice; Appearance in Court

(a) Qualifications. Except as provided below, no person shall practice law in this State unless that person is an attorney holding a plenary license to practice in this State, has complied with the Rule 1:26 skills and methods course requirement in effect on the date of the attorney’s admission, is in good standing, and, except as provided in paragraph (d) of this Rule, maintains a bona fide office for the practice of law

(Emphasis in Original). The rule, however, is silent as to whether New Jersey lawyers can have virtual law practices.  Until now.  The Advisory Committee on Professional Ethics (ACPE) and the Committee on Attorney Advertising (CAA) recently issued a joint opinion. The opinion, found here, states in part:

A so-called “virtual office” does not qualify as a bona fide office.  A “virtual office” refers to a type of time-share arrangement whereby one leases the right to reserve space in an office building on an hourly or daily basis.  Accordingly, an attorney’s use of a “virtual office” is by appointment only.  The office building ordinarily has a receptionist with a list of all lessees who directs visitors to the appropriate room at the appointed time.  Depending on the terms of the lease, the receptionist may also receive and forward mail addressed to lessees or receive and forward telephone calls to lessees.

With today’s rapidly changing electronic world, opinions like this will continue to surprise me. My brick and mortar may be in Portland, but I’m in Chicago typing this blog post and I may even do a little work today. But maybe not – it’s a beautiful sunny day and I’m not used to that. For a counter point of view, you can check out North Carolina 2005 Formal Ethics Opinion 10, which allows the virtual practice of law.

Rather than repeat the analysis that is already out there, consider checking out these links for some information:

• For a general discussion, see the article over at law.com or the discussion by George Conk at Otherwise.
• Over at Virtual Law Practice, they note that the opinion “does not address web-based, virtual law offices or the use of technology to deliver legal services online” and observes: “[h]ow this restriction will affect solos and small firms wanting to form completely virtual law offices is yet to be seen.”
• Or read the discussion over at MyShingle by Carolyn Elefant titled:  “NJ’s Bonafide Office Rule Would Have Me Doubled Over with Laughter Except That It Will Double The Cost Of Legal Services”.

Does Your Firm Have a Retirement Age?

Many lawyers are vigorous, active, and effective well past the age of 65, while we have all encountered lawyers younger than that who would probably be well advised to take an early retirement. But what if your firm policy restricts your options?

Apparently in response to pressure from the Equal Employment Opportunity Commission, Kelley Drye & Warren announced in the past few days that it has dropped its mandatory retirement policy.

Firm Chairman John M. Callagy said the firm’s  partnership agreement was amended last month to allow equity partners to continue on past age 70. Senior partners will now be judged solely on performance, like other partners.

Callagy did not cite a specific reason for the change but indicated the policy no longer served the firm’s ”business interests”, and not coincidentally, observed that the EEOC wanted Kelley Drye to do it. Callagy indicated Kelley Drye told the EEOC about the impending amendment before the lawsuit. The announcement by the firm came just days after the firm responded to an age discrimination suit filed by the EEOC in January, Equal Employment Opportunity Commission v. Kelley Drye & Warren, 0655-cv-10.

Eugene T. D’Ablemont, a 79-year-old lawyer who had been a Kelley Drye equity partner, made the complaint which led to the EEOC filing. The Kelley Drye rules had required partners to give up their equity interest at 70, when they would then become “life partners” receiving annual payments, and those who continued to practice, like D’Ablemont, could also receive a bonus.

After the complaint, the EEOC argued that Kelley Drye’s system discriminated against partners 70 and older who kept working by paying them less. The firm’s amendments will still allow partners to retire and receive the life-partner payments, but since some partners older than 70 will remain within the equity ranks, the bonus aspect will be eliminated.

It remains unclear whether the EEOC will continue to press the lawsuit.

Does your firm have a retirement age? If so, you should review your policies, procedures, and firm agreements and consider whether you are in step with evolving law in this area of law firm practice management.

Thought About Ediscovery Ethics Lately?

Our partner Steve Puiszis recently commented on Hinshaw’s Practical Ediscovery Blog on the recent Lawson case in his post “A primer on ediscovery ethics”.  To view the entire post check here.

For those who are too lazy to click over and/or need more reason, here is the first paragraph:

A primer on ediscovery ethics
March 29th, 2010 | By Steve Puiszis
Lawson v. Sun Microsystems, Inc., 2010 WL 503054 (S.D. Ind. February 8, 2010)

Lawson is an ediscovery decision that has flown under the radar of most bloggers and legal commentators. It is a relatively short opinion, addressing whether sanctions should be imposed on the plaintiff and his former attorneys after the plaintiff unlocked certain password-protected documents produced by defendant in discovery that were privileged. The decision, however, implicates a number of ethical issues and the case could be used in teaching a course on ediscovery ethics. Because of the brevity of the district court’s opinion, many of the facts discussed below are taken from the Magistrate’s Report and Recommendation which can be read here.

Ninth Circuit Reverses, Says “No” to Attorney Seeking to Discharge Discipline Penalty in Bankruptcy

Ninth Circuit Reverses Prior Decision Based on a Subsequent Statutory Charge and Holds That Lawyer Cannot Discharge in Bankruptcy the Costs Owed to Bar Assessed in Disciplinary Proceeding

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

State Bar of California v. Findley (In re Findley), 593 F.3d 1048 (9th Cir. 2010)

Brief Summary
The Ninth Circuit reversed a prior decision, based on a subsequent change in California statutes, and joined other federal courts in holding that disciplinary costs imposed on attorneys by the California State Bar are intended as penalties and therefore are not dischargeable in bankruptcy.

Complete Summary
In disciplining an attorney, the State Bar of California imposed a one-year suspension and ordered the lawyer to pay the $14,054 cost of the disciplinary proceeding. The attorney filed for Chapter 7 bankruptcy before the cost order became final, but the after his misconduct occurred. The lawyer contended that the bankruptcy court’s order discharged his debt to the Bar, and he thus refused to pay the disciplinary cost, which payment was a precondition for reinstatement. The State Bar then brought the present suit, arguing that 11 U.S.C. § 523(a)(7) excepted the disciplinary cost from discharge pursuant to a 2003 change in California law. The bankruptcy court granted the Bar summary judgment, but the Bankruptcy Appellate Panel reversed because, under a prior version of California Business and Professions Code § 6086.10, the Ninth Circuit had held that such costs were dischargeable. See State Bar of California v. Taggart (In re Taggart), 249 F.3d 987 (9th Cir. 2001). The Bar appealed to the Ninth Circuit.

The Ninth Circuit held that the cost award was not dischargeable, thus diverging from its opinion in Taggart. The issue under 11 U.S.C. § 523(a)(7) was whether the cost award was either a nondischargeable “fine, penalty, or forfeiture payable to and for the benefit of a governmental unit,” or rather a dischargeable “compensation for actual pecuniary loss.”

In Taggart, the court attempted to discern the legislative intent behind § 6086.10(a), and held that disciplinary costs were compensatory rather than penal. In response to Taggart, the California legislature in 2003 added subsection (e) to § 6086.10. According to the present opinion, the express wording and legislative history of subsection (e) undermined the result in Taggart.

The court noted that subsection (e) now provides expressly that cost awards under § 6086.10 are “penalties” and that such costs are imposed “to promote rehabilitation and to protect the public.” Further, the Enrolled Bill Report for the relevant Assembly Bill twice noted that under this subsection disciplinary cost awards would be non-dischargeable in bankruptcy, and the drafter explained on the record that disciplinary costs are sanctions intended as punishment. The court therefore held that the express purpose of § 6086.10(e) undermined the court’s prior inference of legislative intent in Taggart, and that disciplinary cost awards are excepted from discharge in bankruptcy under 11 U.S.C. § 523(a)(7).

Significance of Opinion
This holding brings the Ninth Circuit’s interpretation of California law in line with the holdings of other federal courts, which have addressed discharge of attorney disciplinary costs under other states’ laws. Notably, other courts that have addressed this issue have, for the most part, analogized such costs to criminal restitution awards imposed for the cost of litigation rather than prevailing party fees in civil litigation. Given the growing apparent consensus on this matter, attorneys in jurisdictions that have not yet addressed the subject may be advised to assume that disciplinary costs are non-dischargeable in bankruptcy.

Not Thinking “Outside the Box” Can Get You Disqualified

Expert Witness Work Leads to Conflict of Interest, Imputed Disqualification

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Outside the Box Innovations, LLC v. Travel Caddy, Inc., 2010 WL 364220 (Fed. Cir. 2010)

Brief Summary
A law firm was disqualified on appeal because one of the firm’s partners submitted a declaration as an expert witness on attorney fees for the opposing party at trial.

Complete Summary
An attorney acted as an expert witness on attorney fees for plaintiff at trial. Defendant then sought to retain the attorney’s firm, King & Spalding, for appellate work on the same matter. Plaintiff moved to disqualify the firm based on Georgia’s conflict of interest rule, GRPC 1.7.

Plaintiff argued that its position on appeal would rely in part on the attorney’s expert testimony. Therefore, if the attorney’s firm were representing defendant, it potentially would have to challenge the testimony of one of its own attorneys in order to adequately represent the defendant.

Before applying GRPC 1.7, the court stated that it doubted the attorney, who had testified as an expert witness only on attorney fees, had an attorney-client relationship with the plaintiff. The court nonetheless held that the prospect of the firm needing to challenge its own attorney could materially and adversely affect the firm’s representation of defendant. Even assuming this conflict was waivable, the court disqualified the firm because there had been no showing that defendant had received written information about the material risks, or that defendant was given an opportunity to consult with independent counsel, or that defendant had, in fact, waived the conflict.

Significance of Opinion
Regardless of whether a lawyer serving as an expert witness has established an attorney-client relationship with the party for whom she testifies, the lawyer’s firm has to be cognizant of the real potential for imputed conflicts. This opinion serves as a stark reminder that conflicts of interest can arise when circumstances may compromise the representation for a range of possible reasons, other than multiple client conflicts, and that at a minimum the lawyer or firm would be well advised to obtain informed consent before undertaking the representation.

Confusion Over Clarity Regarding Confidentiality in Pennsylvania

Pennsylvania Supreme Court Splits on Rationale for Subject Matter Waiver; Avoids Decision on Scope of Privilege for In-House Counsel-to-Client Communication

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Nationwide Mutual Ins. Co., et al v. Fleming et al, No. 32 WAP 2007 (Supreme Court of Pennsylvania, Western District, January 29, 2010)

Brief Summary
A split decision by Pennsylvania’s Supreme Court informs, but was unable to finally decide, the important principal issue on appeal: whether and under what circumstances the attorney-client privilege applies to communications by in-house counsel relating to litigation and reflecting confidential information from the client as well as legal advice to the client. The court instead decided the case by finding subject matter waiver, while disagreeing on the application of that rule here as well.

Complete Summary
The Pennsylvania Supreme Court affirmed a lower court’s result by virtue of an even split among the four sitting justices. The discovery dispute arose out of an insurance company’s (“Company”) suit against its former insurance agents (“Agents”). During the discovery process, Company produced two documents but withheld a third on the basis of attorney-client privilege. 

The first produced document was a memo drafted by an in-house lawyer outlining reasons why Company had severed ties with former Agents. It had been sent to a group of employees, including other in-house lawyers. The second pertained to the Company’s policy for dealing with Agents’ defections. It was drafted by a Company administrator and had been sent to a group of officers and employees.

The third document, which was not produced, contained litigation strategy about the departures. It was drafted by Company’s in-house general counsel and sent to Company executives and members of Company’s legal team. Among other things, the document contained litigation strategy. It stated that the Company cannot reasonably expect the lawsuits to succeed and that the primary purpose of the litigation was to send a message to current employees.  

The trial court reviewed the withheld document in camera and found that Company waived its attorney-client privilege for the withheld document when it produced the two other documents. The trial court relied materially on its conclusion that the Company had selectively produced two favorable documents on the same subject matter, but withheld the allegedly privileged document, which was less than favorable. 

On initial appeal to the Superior Court, the court held that the withheld document was not privileged. It held that the attorney-client privilege protects client-to-attorney communication, but that communications from attorney to client are privileged only to the extent they contain and would reveal confidential communications from the client, thus not including the attorney’s legal advice.

The Pennsylvania Supreme Court accepted review to consider the question of the scope of the attorney-client privilege in Pennsylvania law, specifically whether and under what circumstances the attorney-client privilege applies to communications by in-house counsel relating to litigation and reflecting both confidential information from the client as well as legal advice to the client. The Pennsylvania Supreme Court was split 2-2 (with two other justices not participating) on the ultimate question of whether the document was protected from discovery. The consequence of the split was to affirm the result below (requiring disclosure of the document) but without majority approval for the reasoning of either of the lower courts on the questions of privilege or waiver.

Two justices voted to affirm the lower courts’ result, discussing privilege law generally but ultimately treating the withheld document as privileged arguendo and thus not deciding that issue. Rather, these two justices concluded, as did the trial court, that the Company waived any privilege to the withheld document when it produced the two other documents, particularly because of the Company’s apparent attempt to use the privilege as both a sword (with the produced documents) and a shield (with the withheld document). The court found persuasive state and federal case law for recognizing and applying the principle of subject matter waiver.  

The two remaining justices voted to reverse the lower courts’ result, finding first that the document was privileged, adhering to a 109-year-old precedent that would categorically protect all attorney-to-client communications. These justices relied heavily on the briefs of amici curiae, including the Association of Corporate Counsel, recognizing the significant interests at stake in protecting the ability of in-house counsel to communicate candidly with the companies they advise. These justices also would recognize the doctrine of subject matter waiver that is set forth in federal case law and which was applied by the two affirming justices. However, they disagreed with the conclusion of the other two justices. Rather, they would conclude that no waiver occurred here because, although the produced documents were similar to the withheld document, there was not a sufficient subject-matter nexus to merit waiver of the privilege.

The decision can be found at one of the following three sites:

http://www.courts.state/pa.us/OpPosting/Supreme/out/J-27-2008pco.pdf http://www.courts.state/pa.us/OpPosting/Supreme/out/J-27-2008oisa.pdf http://www.courts.state/pa.us/OpPosting/Supreme/out/J-27-2008oisr.pdf

Significance of Opinion
This much-awaited decision (the case was argued in March 2008) reflects a significant fissure in the Pennsylvania Supreme Court on how to define the scope of privilege for attorney-to-client communications, not only in the context of in-house counsel communications but also more generally.
The two justices who did venture an opinion on the issue supported categorical protection, even if it means overprotection, of communications from a lawyer to a client.

Note that the parties here did not raise, and thus the court did not consider, the application of the attorney work product doctrine.