Oregon State Bar Bulletin — NOVEMBER 2014



Parting Thoughts

The Elephant on the Crimson Trace
By Gary Berne



Mark Fucile’s Managing Your Practice column (September 2014) discusses Crimson Trace Corp. v. Davis Wright Tremaine LLP, 355 Or 476 (May 30, 2014). Crimson holds that communications between lawyers and their firm’s in-house counsel fall within the attorney-client privilege even where the communications concern possible malpractice as to an existing “outside” client of the lawyers and the firm. Thus, the communications are not discoverable by the outside client in a future malpractice case.

Mark ends with the understated advice: “Crimson Tracedoes not offer lawyers a ‘free pass’ from the need to obtain conflict waivers when circumstances warrant.” In my view, the Crimson circumstances are in reality a code red in two respects: 1) the Crimson situation will always warrant conflict waivers if the lawyers are going to claim an attorney-client privilege as to communications with each other because they will now have two clients with adverse interests; and 2) the lawyers should not undertake to represent each other without first obtaining the waiver.

RPC 1.7(a)(1) and (2) say that a current conflict of interest exists if the representation of one client will be directly adverse to another client or if there is a “significant risk” that representation of the client will be materially limited by a lawyer’s responsibilities to another client or a personal interest of the lawyer. RPC 1.10(a) imputes the conflict of interest to all lawyers of the firm:

While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so… unless the prohibition is based on a personal interest of the prohibited lawyer… and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.

The firm and its lawyers cannot have it both ways — claiming privilege as “clients” of each other but not disclosing to the outside client that the firm wishes to serve potentially adverse clients and obtaining a written waiver.

The waiver needs to be obtained before the lawyers undertake to represent each other. Under RPC 1.7, a lawyer “shall not represent a client if the representation involves a current conflict of interest.” RPC 1.7(b) creates an exception to the prohibition if, among other things, the client gives informed consent and the lawyer obtains a written waiver. But the language of rule is “shall not,” so the waiver must be obtained before the lawyers undertake to represent each other.

Informed consent requires the lawyers to communicate “adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” RPC 1.0(g). And in some cases the conflict is sufficiently severe that the lawyer cannot represent both clients. RPC 1.7(b)(3) and (4). Thus, in the Crimson scenario, an attorney must disclose not only that the client may have a malpractice claim but also that a) all members of the firm will have a conflict if some of the lawyers are going to advise other members of the firm; and b) the lawyers will advise each other via privileged attorney-client communications that will not be disclosed to the client. RPC 1.0(g) requires that the letter recommend that the client seek independent legal advice to determine if consent should be given.

And, if the lawyers proceed with the in-house discussions and delay in obtaining a conflicts waiver from the client, they are now in a position where they might have to resign from both engagements and face additional exposure for a breach of loyalty to their first client.

The irony is that consultation within the firm may increase the risk that the client will make a claim because the lawyer now might have to obtain informed consent on two fronts: 1) consent to continue the representation despite a possible error by the lawyer; and 2) consent to continued representation despite the conflict created by the firm’s lawyers now representing both themselves and their client, information that might scare any client.

I leave to Mark to tell us whether the conflict waiver requirements continue forward if the firm and its lawyers are going to claim attorney-client privilege as to their internal communications even after they cease representing their outside client. RPC 1.9 concerning duties to former clients would seem to apply, so short of a possible work product privilege, the in-house communicators might need to continue to be careful.

 


ABOUT THE AUTHOR

Gary Berne is a shareholder with Stoll Berne in Portland.

© 2014 Gary Berne


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