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In-House Counselís Inactive Bar Status Causes Loss of Privilege

By Duchess Harris, Litigation News Associate Editor – August 24, 2010

Ruling that a corporation did not take reasonable precautions to confirm in-house counsel’s authority to practice law, a federal magistrate judge from the U.S. District Court for the Southern District of New York rejected the corporation’s assertion of attorney-client privilege for communications involving its in-house counsel who was an “inactive” member of the State Bar of California.


Inactive Bar Status
The discovery order in Gucci America, Inc. v. Guess?, Inc. focused on the bar status of Gucci’s in-house counsel. During the deposition of Gucci’s in-house counsel in a trademark infringement case, opposing counsel discovered that the in-house counsel’s bar membership had been “inactive” the entire time he was employed by Gucci.


Arguing that no attorney-client privilege could apply because of the in-house counsel’s inactive bar status, opposing counsel then demanded production of certain email communications on Gucci’s privilege log that involved the in-house counsel.


The magistrate judge ruled that Gucci could not claim attorney-client privilege with regard to the email communications with its in-house counsel because he was not authorized to practice law at the time the communications were made.


Client’s Reasonable Belief
The court analyzed whether Gucci “reasonably believed” its in-house counsel was “authorized to practice law,” which could support the privilege. However, after reviewing declarations by Gucci’s executives and outside counsel, the court ruled that Gucci’s belief was not reasonable because it had not undertaken “any effort to ascertain his qualifications as an attorney” during the in-house counsel’s eight years of employment with the company.


According to the decision, Gucci was obligated to undertake some “minimal due diligence” to support its belief. The court even used the example of an “attorney search” of the State Bar of California’s website to verify counsel’s bar status.


Obligation to Check In-House Counsel’s Bar Status?
The decision appears to place the burden on corporations, and potentially outside counsel, to check in-house counsel’s bar status before placing documents involving that counsel on a privilege log.


Morgan Chu, Los Angeles, a member of the ABA Section of Litigation’s Trial Attorney Advisory Board, urges that litigators approach this decision with caution because it is subject to further review.


“There are also many questions unanswered,” Chu says. “For example, what is the dividing line for when a client is or is not reasonably relying on a lawyer being a member of the bar? Should a corporate client check the bar credentials of its in-house lawyers every year to ensure they have paid bar dues?” asks Chu.


However, this decision may cause litigators to now search bar association websites for information about the bar status of their opponent’s purported in-house counsel.


“Although [the decision] might seem as an outlier now, I suspect that over time we might see more of these decisions, as litigators become aware of the issue and this decision,” says Richard L. Horwitz, Wilmington, DE, cochair of the Section’s Committee on Corporate Counsel. “As information about bar status is more readily available, it will be easier for parties in litigation to check status and, equally important, it will be easier for corporations to check the bar status of their inside counsel,” says Horwitz.


Horwitz also notes that outside counsel must always carefully evaluate the elements of the attorney-client privilege when preparing privilege logs or otherwise asserting the privilege. That evaluation may now also need to include confirming in-house counsel’s qualifications to practice law.


Keywords: litigation, inactive bar status, in-house counsel, Gucci America, Inc. v. Guess? Inc.


 
Related Resources

  • » Gucci Am., Inc. v. Guess?, Inc., 2010 U.S. Dist. LEXIS 65871 (S.D.N.Y. June 29, 2010).
 
  • October 29, 2010 – While the legal obligation to maintain an active license to practice law is first and foremost on the attorney, it is the client (in this case the corporate employer of the inhouse counsel) who suffers the consequences of an inability to assert attorney-client privilege or attorney work product. From a cost benefit analysis, it is easier for the corporate employer to pay the annual dues of one active bar (with the paid receipt attached to the expense report) than to lose the privilege in litigation to preserve the ability to claim the privilege.

  • September 21, 2010 – Actually, this seems like a pretty limited situation. I assume the attorney in question wasn't licensed anywhere else? The California rule is that the client is entitled to assume the protection of the privilege so long as the lawyer is licensed to practice law somewhere in the world. The rule is extremely broad so if the attorney wasn't licensed or active at all then the ruling makes a lot of sense.

  • September 1, 2010 – Then doesn't it follow that in-house counsel will face disciplinary proceedings for practicing law without a license? Especially after his client told the court under oath that they believed he was a lawyer and relied on him as their counsel. Doesn't the responsibility lie on the attorney to maintain his license to practice, and not on the company to just pay his fees.

  • August 28, 2010 – I hope that no one is surprised by this decision. Corporations have a very easy way to confirm in-house counsel's bar status every year. All they have to do is pay the annual dues for one active bar membership. That way, they'll have proof every year of active membership at a nominal cost. If you are not an active member of at least one bar (and authorized to practice as house counsel in the jurisdiction where you are employed), then you are not acting as an ATTORNEY and the corporation cannot assert the attorney-client privilege. Not too difficult to understand.


 

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