Who Is Really the Client?

The attorney-client privilege is one of the most basic tenants of professional liability.  While the general rule itself is uncomplicated, complex circumstances between attorneys and their clients can often trip up even the most experienced lawyer.  Take for example the following New Jersey malpractice case involving a law firm’s general counsel which raises the question: who is really the client?

The malpractice suit stemmed from advice given by an attorney at Law Firm.  The plaintiff/client consulted the attorney about instituting a “rolling furlough” as an alternative to layoffs.  The attorney allegedly advised the client that employees could legally collect unemployment on their furlough week.  A former employee subsequently sued the client claiming the furloughs were illegal and sought to recover back wages and overtime.

After suit was filed by the former employee, the attorney reviewed the complaint and advised the client that recent guidance from the state Department of Labor changed her position on the legality of employees working during a furlough.  The attorney recommended that the client pay the employees retroactively for the weeks they were laid off.

The client’s actions prompted investigation by the Attorney General’s Office and resulted in the client pleading guilty to Violation of Contract to Pay Employees under New Jersey law.  Shortly after the client came under federal investigation, the general counsel of Law Firm asked the client to sign a waiver so that it could continue legal representation during the investigation.  The client ultimately declined and obtained new counsel.

The client then sued the attorney and Law Firm for malpractice.  In the malpractice suit, Law Firm claimed that it did not have to turn over the file generated by its general counsel while investigating whether the Law Firm was conflicted out of representation after the client became the subject of a federal investigation.  The trial judge disagreed and ordered Law Firm to turn over the file.   The court noted that “ a lawyer cannot claim privilege against the client they represent. You can’t declare that one partner of the firm is not representing the client.”

The court further reasoned that “it’s clear the privilege belongs to the client, not the lawyer, even if the lawyer wants to wear two hats.” Simply put, just because the file at issue was prepared by the Law Firm’s general counsel, Law Firm was not the client.  The general counsel had a duty of care to the firm’s clients even in the role of general counsel.

While the attorney-client privilege may seem straightforward, sometimes the circumstances surrounding the privilege are less than clear.  It’s always important to keep in mind whether the privilege will apply when communicating and documenting strategic information about the case.  You do not want to be in a position where the privilege does not apply and certain information that can be harmful has to be disclosed.