A fundamental understanding among both lawyers and clients is that communication between the two--especially when it reveals legal strategy--is privileged information. But a case unfolding in Pennsylvania is a reminder for in-house counsel that this isn't always so.
The privilege question arose in Nationwide Mutual Insurance Co. v. Fleming, in which Nationwide and its subsidiaries accused former Nationwide agents of providing confidential policyholder information to the insurance company's competitors.
On the second day of trial in January 2005, defense counsel challenged the privilege of a document sent by e-mail from a member of Nationwide's general counsel's office to 15 Nationwide officers, managers and attorneys. Nationwide had redacted almost all of so-called "Document No. 529," aside from its subject line: "Agent Defections." At that point the defense moved for and was granted in camera review of the document to determine if it was protected under attorney-client privilege.
Following the hearing, the trial court judge ordered Nationwide to produce the document. Nationwide, the court said, had waived privilege for Document 529 when it voluntarily disclosed two other privileged documents on the subject of agent defections. However, when the issue made its way through Superior Court in May 2007, Judge Seamus McCaffery agreed with Nationwide that the two other documents were simply routine business communications and not protected by attorney-client privilege. Thus, subject-matter waiver could not be invoked.
But if Nationwide thought it was home free with respect to Document 529, it was mistaken. Now that subject-matter waiver was off the table, the Superior Court went back to determine whether Document 529 was privileged in the first place.
Notably, the Superior Court stressed that since Nationwide had only invoked attorney-client privilege, it would not consider work-product protection for Document 529. With work product out of the picture, Pennsylvania's statute governing attorney-client protection came into play--and apparently it took Nationwide by some surprise.
A Troubling Statute
"Nationwide neglects to consider that, under this privilege, protection is available only for confidential communications made by the client to counsel," McCaffery wrote. "The very title of the relevant statutory provision specifies what is protected: 'Confidential communications to attorney.' " He affirmed the trial court order on those grounds. The issue now faces Pennsylvania's Supreme Court, where Document 529 will likely undergo a mostly fact-specific analysis. Still, the court, which now includes recently elected Justice McCaffery, will have a chance to address the statute.
"Pennsylvania is one of the minority jurisdictions that puts real teeth into the proposition that lawyers' communications to their clients are only protected to the extent that they would reveal confidences disclosed by the client to the lawyer," says David Greenwald, a partner in Jenner & Block's Chicago office. "This is an opportunity for the Supreme Court of Pennsylvania either to reaffirm that rule or to weaken the rule and broaden the protection for communications from lawyers."
Some say broadening the protection would be in the interest of all Pennsylvania lawyers.
Tom Wilkinson, a member of Cozen O'Connor and counsel for the Pennsylvania Bar Association, joined the Association of Corporate Counsel and the U.S. Chamber of Commerce in signing an amicus brief in support of Nationwide. "[We said] a client should have confidence that confidential legal advice imparted by a lawyer will be
presumptively privileged ... and there's no good reason for the privilege to be a
one-way street," he says.
David Alden, a partner in Jones Day's Cleveland office, calls the statute "cryptic" and "troubling" and believes it's somewhat outdated. "[It] doesn't include all kinds of things that, if you were really thinking about it today in light of where the law is, you would include," he says.
On the other hand, some attorneys find it comforting that the Superior Court decision doesn't focus on in-house counsel. "What we found encouraging is, unlike the way the law has recently begun to develop in Europe, it doesn't make a distinction between in-house and outside counsel," says Ron Schiller, head of litigation in DLA Piper's Philadelphia office.
The In-house Effect
If the Supreme Court affirms the Superior Court decision, Pennsylvania lawyers will have to cover all the bases with respect to privileged communications. Perhaps the simplest thing in-house counsel can do to ensure privilege, says Greenwald, is to briefly recite the information counsel has received from the client upon which
counsel is providing advice.
Lawyers also should clarify their role as a legal adviser in any communication, though this may be tough. Alden, a former in-house lawyer, says courts can sometimes be hostile to claims of in-house privilege. "A lot of courts are concerned that people are putting counsel into loops just to hide huge parts of the actual business of a company," he says. "With in-house counsel you more or less have to prove you are giving legal [rather than business] advice."
For lawyers outside of Pennsylvania, Nationwide serves as a wake-up call: Pennsylvania is not alone in its narrow reading of attorney-client privilege.
"Lawyers have this notion that no matter what jurisdiction they're practicing in, a letter or memo from a lawyer to a client that was not copied outside of the appropriate group of people and that contains legal advice will be protected from disclosure," Wilkinson says.
"That notion is not always valid. In-house counsel have to go the extra mile and investigate the scope of the privilege that's applicable in their jurisdiction."