United States: How Law Firms Can Preserve In-House Privilege

As published in The Daily Report

It's one of those calls attorneys hate to get. An angry client complains that the amount billed was too high and that the work performed wasn't worth what was charged. Or, worse, the client calls to complain about the recommended approach to a matter—or suggests that a mistake was made. For many attorneys, calls like these could prompt a call to the firm's in-house counsel or other risk manager. But how to do so in a way that preserves the law firm's privilege?

Earlier this decade, there were several high-profile decisions in states like Georgia and Massachusetts examining the extent to which law firms enjoy the protections of the in-house privilege. The complicating factor, according to courts, was that if a law firm is seeking internal advice about an ongoing client factor, there may be a conflict of interest between the law firm's interests and the client's interests. Indeed, some critics maintained, if a lawyer is seeking legal advice internally while a client representation is ongoing, is it possible that the lawyer is thinking about his or her own interests before the client's? However, most jurisdictions have soundly resolved this issue in favor of law firms to protect their privilege with their in-house general counsel—with some parameters and caveats.

For some law firms, this may involve working with outside counsel when facing a claim or specific legal issue. Other law firms may have dedicated in-house general counsel or a risk management team that represent the firm's legal interests and advise or counsel the firm's attorneys.

This article summarizes some tips for lawyers and firms to help protect and preserve the in-house privilege in working with in-house counsel.

Treat In-House Counsel as Counsel to the Firm in Form and Substance

Although general counsel or the risk manager of a firm is often part of the firm's management or leadership, it is helpful to remember to treat the general counsel or risk manager as counsel to the firm, both in form and in substance. For some firms, this means having a specifically-identified general counsel or deputies. A constant pro hac assignment of GC responsibilities for a revolving door of firm attorneys may cause a third-party to question whether the firm is truly treating their in-house attorney as an attorney to the firm.

Even for firms that do not have a formal general counsel's office, it can be helpful to have a designated person who handles risk management issues to help coordinate the firm's investigation of or attention to a potential claim—and help maintain the privilege.

Ensuring the effectiveness of in-house counsel typically involves the assignment of responsibilities to that counsel, including the investigation and analysis of matters that might involve attorney exposure and generally advising firm attorneys on risk management. In-house counsel's role may also include purchasing legal malpractice insurance, identifying and resolving conflicts of interests, advising attorneys on ethical obligations, reporting potential claims and actual claims, and updating the status of the firm's partnership agreement or corporate structure.

To ensure the legitimacy of the office, many in-house counsel in law firms will act in the same manner as the firm's attorneys do for outside clients. For many firms, this involves using separate billing numbers for general counsel matters and tracking time, among other administrative procedures that confirm the general counsel is dedicated to the firm's interests.

It is not uncommon for a general counsel or risk manager for a firm to appoint deputies to assist with the investigation or overseeing of matters. Most firms will ensure that if a specific client matter is being reviewed, the representative of the firm's in-house counsel will not be an attorney who worked extensively on that matter (or whose work is subject to a potential claim).

Talk to Your GC About Concerns

A law firm's general counsel or risk manager has a host of duties. However, attorneys in law firms can be made aware of who the GC is in their firm so that they can loop in that office in the event of a concern or a potential claim. Involving the in-house counsel or risk manager can help ensure the protection of the privilege between the attorney and law firm, while acting to see that the client's needs are being met if the concern relates to an ongoing representation. 

If an attorney is concerned about a specific risk with regard to a client matter but does not discuss it with the in-house counsel, that could create risk for the firm. Indeed, if the attorney talks to other attorneys within the firm about that risk—but does not involve the general counsel or equivalent person—there is a possibility that such communications would not be protected by any in-house privilege. This can be particularly important when an attorney notices a potential claim and has concerns about what to do next.

More often than not, the general counsel can help attorneys—regardless of their seniority—with a gut-check about the proper course of conduct or ethical procedure. It can also be important for insurance coverage purposes for attorneys to talk to their in-house counsel about potential claims or risks. Many insurance policies for law firms require firms to either provide timely notice of a claim (or even those circumstances that could potentially lead to a claim). If an attorney keeps that information to himself or herself and then the risk manager of the firm is unaware of the risk in applying for or renewing insurance, it could put coverage at risk. 

In-House Counsel Has Seen It Before

Most law firm general counsel or risk managers have seen it all before. What may seem like an unmanageable crisis to an attorney in the firm may have an easy solution if presented to the general counsel or risk manager. The in-house counsel can also have unique perspective about other issues facing the firm, from ongoing claims and representations to historical claims that can provide unique insight in how to resolve ongoing issues.

For certain issues, the in-house counsel may choose to hire outside counsel to advise the firm or represent it—although many firms are well-equipped to address and resolve many issues with the use of their in-house counsel. An attorney working with their firm's in-house counsel may not only be able to better navigate any complex ethical or risk management issues, but can also take steps to help ensure the protection of the privilege.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.