The Oregon Supreme Court holds that law firms can avail themselves of attorney-client privilege for in-house communications to the same extent as all other entities with in-house counsel. This is so even if the party demanding access to the communications was a current client of the firm at the time of the communication and is now suing the firm for malpractice.
Allowance of the in-house or in-firm privilege is consistent with the current national trend and is likely to increase a firm's and its lawyers' performance of their ethical and professional obligations.
An increasing number of cases from jurisdictions across the United States follow the basic fact pattern in Crimson Trace Corp. v. Davis Wright Tremaine LLP, 355 Or 476, ___ P3d ___, 2014 WL 2457574 (2014). The premise is simple: while representing a client, a lawyer working at a law firm becomes concerned about another lawyer's or the firm's handling of the client's matter. The concerned lawyer therefore consults the firm's designated in-house counsel or ethics counsel in order to obtain a better sense of the lawyer's and the firm's obligations and responsibilities to the client. When the law firm and the client subsequently part ways and the client sues the law firm for malpractice, the client demands discovery of the communications between the lawyer who had worked on the matter and the firm's in-house counsel on the ground that the firm's fiduciary duties to the client overrule or trump what would otherwise be the firm's claim of attorney-client privilege. Although there was a period in which the cases that reached this issue all held that this "fiduciary exception" did indeed override the firm's privilege claim, Oregon has now joined the consistent string of more recent cases which have upheld the privilege.
Balancing Competing Interests: Protecting the Firm and Previous Duty of Client Loyalty
The core issue here is one of balancing competing interests. A client suing a former firm for malpractice would certainly like as much information as possible about what was said by the firm at a time when the firm owed a duty of loyalty to the client. This is true even if the firm is careful (as it should and must be) not to bill any of the time for the consultation to the client and not to use as in-house counsel a lawyer performing any work on the client's matter. By contrast, the firm will contend that in-house consultation should not be treated differently for attorney-client privilege purposes than outside counsel and that since the goal of the firm and its in-house counsel is to make sure that the firm complies with its ethical and professional obligations to its clients, such communications should be encouraged.1
The Oregon Supreme Court chose not to weigh these policy interests directly, but instead to rely upon standard principles of statutory construction since, as the court noted, Oregon Evidence Code (OEC) 503, which covers attorney-client privilege, is also codified as a statute in Oregon Revised Statutes (ORS) 40.225. In so doing, the court held that since the list of exceptions to attorney-client privilege contained in OEC 503(4)/ORS 40.225(4) does not include a "fiduciary exception," the court would not, and could not, create one on its own.
Current National Trend of In-Firm Privilege Is Likely to Increase
This does not mean that lawyers and firms will always be able to claim privilege for internal communications whenever Oregon privilege law applies. As the Oregon Supreme Court noted, the standard requirements for a privilege claim (i.e., an attorney, a client, a communication about a legal matter and a reasonable expectation of confidentiality) must all be met. In addition, any claim of privilege will have to withstand potential attacks under the black letter exceptions to the attorney-client privilege, including but not limited to the crime-fraud exception. Nonetheless, allowance of the in-firm privilege is consistent with the current trend in other states, including Georgia, Illinois and Massachusetts. It seems to be a logical conclusion that upholding the privilege improves the opportunities for communication between firm lawyers and their in-house counsel thereby increasing the likelihood that the firm and its lawyers will meet or exceed their ethical and professional obligations.
1 Compare VersusLaw, Inc. v. Stoel Rives, LLP, 127 Wn App 309, 111 P3d 866 (2005), rev den, 156 Wn 2d 1008, 132 P3d 147 (2006) (denying in-house privilege) with St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn, PC, 293 Ga 419, 425, 746 SE2d 98, 105-06 (2013) (upholding privilege); RFF Family Partnership, LP v. Burns & Levinson, LLP, 465 Mass 702, 716, 991 NE2d 1066, 1076 (2013) (same); and Garvy v. Seyfarth Shaw LLP, 966 NE2d 523, 536 (Ill App 2012) (same).