Professional Liability Matters

The law in Pennsylvania, like most other jurisdictions, is clear that the attorney-client privilege survives the death of an individual. However, until recently the law was not so clear as to whether that same privilege applies to a corporation after it dissolved or “died.” Earlier this year the Pennsylvania Superior Court answered this question in Red Visions Systems v. National Real Estate Information Services, and just recently, the state Supreme Court denied allocator, leaving the Superior Court’s decision as the law of the state.

In general, the attorney-client privilege protects confidential communications between an attorney and her client when made for the purpose of obtaining or providing legal advice. The AC privilege applies not only to individual clients, but also to corporations. In the case of corporations, courts have held that the AC privilege may extend to third parties hired by legal counsel when necessary for the effective consultation between the attorney and the corporate client. However, the “agent of attorney” exception to the privilege is not unlimited, and may lead to the unintended discovery of information when used for an improper purpose.

The attorney-client privilege encourages full and frank communication between attorney and client, whether the client is an individual or a large corporation. Protecting confidential communications promotes broader public interests in the observance of law and the administration of justice. However, in shareholder derivative actions alleging harm by the corporation against stockholders, some courts have held that the corporate attorney-client privilege should be balanced with the interests of the shareholders, and that the privilege may therefore be subject to limitations. This is known as the “fiduciary exception,” which was recently upheld in Delaware.

Generally, we’re encouraged to share, to cooperate, and to collaborate. But, that’s not always the case for lawyers. Attorneys may shy away from these niceties because open communication may result in the unintended disclosure of non-public information during discovery. The attorney-client privilege obviously protects those communications between professional and client. The common-interest privilege goes further. The common-interest privilege protects the confidentiality of communications passing amongst attorneys for different parties, often in the context of a joint defense effort. This privilege affords all parties the opportunity for open communication, in turn enabling counsel to strategize in anticipation of or in the course of litigation. This privilege was significantly expanded in a recent decision out of New Jersey which expressly adopted broad confidentiality protections in the common interest scenario.

The attorney-client privilege does not provide an excuse to withhold all damaging documents. Documents in an attorney’s possession are not necessarily privileged and the refusal to produce discoverable materials may be grounds for sanctions. A Massachusetts court is currently considering whether a prominent, global law firm should be sanctioned for the allegedly imprudent conduct of a former partner. An appellate panel ruled that the trial court erred in deciding that the partner acted in good faith when he invoked the work-product doctrine to conceal key information in a suit against a former client. The appellate court has yet to determine whether sanctions are appropriate.