Internal communications at law firm deemed privileged

When a disgruntled client sent Michael D. MacClary and Francis E. Perkins Jr. a legal-malpractice demand letter last year, the Burns & Levinson partners turned to their in-house ethics counsel for advice.

Six months ago, the client made good on its threat to sue the Boston firm for allegedly failing to secure a first mortgage lien in a $1.4 million real estate transaction. But the client also did something that lawyers say is becoming increasingly common in malpractice suits against large firms: It sought disclosure of the discussion MacClary and Perkins had with the ethics counsel, B&L managing partner David P. Rosenblatt.

Though Massachusetts Superior Court Judge Thomas P. Billings recently denied Burns & Levinson’s motion to dismiss (see sidebar) and ordered disclosure of some of the documents from the attorneys’ meeting, he ruled that the conversation itself was privileged and thus off limits.

The judge acknowledged that his holding was at odds with a ruling issued by U.S. District Court Judge Richard G. Stearns, who found in a 2011 malpractice suit against Ropes & Gray that law firm consultations fall within the “fiduciary exception” to the attorney-client privilege. Billings also noted that U.S. District Court Judge Nathaniel M. Gorton reached the same conclusion as Stearns in a 2007 case involving Hale & Dorr.

The issue has never been considered by the Supreme Judicial Court, Appeals Court or 1st U.S. Circuit Court of Appeals.

Boston attorney Thomas E. Peisch, who represents Burns & Levinson, said the mere possibility that a judge would order a lawyer to disclose the substance of a private consultation with in-house counsel was a “frightful” one.

“Judge Billings has now held that … the deliberations and the consult that the recipient undergoes are protected,” Peisch said. “That’s something every Massachusetts lawyer should be breathing a huge sigh of relief about.”

Richard E. Briansky and Amy B. Hackett, of Prince, Lobel, Tye, are representing the plaintiff. Briansky said his discovery request was made in part because Burns & Levinson still represented the client, RFF Family Partnership, when the two B&L lawyers sought the in-house expert’s input.

Because the firm continued its relationship with the client for another 15 months, Burns & Levinson had a duty of full disclosure to the client, even about facts related to the malpractice, he said.

Briansky said a law firm should not be allowed to assert a privilege in an effort to keep internal communications from a client — particularly when the client is accusing the firm of malpractice, and the communications in question relate to the alleged misconduct, as was the case with Burns & Levinson.

But the Boston lawyer declined to answer whether he would have made the discovery request had the B&L partners sought advice from an outside law firm.

The 14-page decision is RFF Family Partnership, LP v. Burns & Levinson, LLP, et al.

Singling out lawyers

Peisch, who practices at Conn, Kavanaugh, Rosenthal, Peisch & Ford, said Billings’ ruling means his clients will not be required to reveal during depositions any information about their meeting with Rosenblatt.

“I am free to direct them not to answer. Believe me, I intend to do that,” he said, adding that Burns & Levinson denies any wrongdoing in the case. (MacClary, Perkins and Rosenblatt declined to comment for this story.)

Peisch said he could not explain why the privilege question has never gone up on appeal, then added that “unprincipled clients” are now bringing claims against lawyers with greater frequency.

“Every other professional person on the planet has an unfettered right to seek legal counsel when a claim of wrongdoing is made,” he said. “Why should lawyers be any different?”

A ruling against Burns & Levinson would have constrained lawyers accused of malpractice from seeking advice from risk-management partners — an outcome that would have been bad for attorneys and clients, Peisch said.

“If an obstetrician commits malpractice while delivering a baby and gets a nasty-gram from the mother, that doctor is free to consult a lawyer without any fear that those consultations are going to be disclosed,” he said. “The relationship between the doctor and the mother is probably not fiduciary, but it is certainly just as sensitive and intimate.”

Meanwhile, Billings called the issue a thorny one, but said the policy reasons in favor of encouraging lawyers to seek advice outweighed the competing goal of promoting full disclosure.

The contrary rulings from Stearns and Gorton reflect the majority view in most jurisdictions, added Billings, who said he opted to follow two recent state cases from Ohio and Illinois, which recognized the privilege.

“Ultimately, it is usually in the interests both of the first attorney and of the client that the ethical issues be examined by a competent advisor who has been fully informed of all relevant facts with none withheld out of fear that the consultation may not remain private,” Billings said. “I hold, therefore, at least in theory, communications between [the B&L partners], on the one hand, and Rosenblatt on the other, which constituted the seeking or giving of ethical or other legal advice (including the relation of facts relating to the advice sought), would be privileged.”

Swinging pendulum

According to Burns & Levinson’s Superior Court filings, as well as the firm’s filings in related litigation in Land Court and U.S. District Court, Rosenblatt had not been involved in any part of the client’s underlying real estate transaction.

Legal-malpractice lawyer Richard M. Zielinski, who has defended law firms across the country, said he has never seen a case in which a judge “would order this same conversation be turned over if the lawyer called an attorney from outside their firm; it shouldn’t be any different just because you’re going to your own general counsel who is completely detached from the case.”

Zielinski said the Burns & Levinson case raises “tremendously important issues.”

“There was a time when the vast majority of cases were coming out against this kind of privilege,” he said. “I believe, however, the modern emerging trend is that the pendulum’s swinging back the other way, and we’re seeing more opinions like [Billings’], which is a good thing.”

To minimize the risk of disclosure, Zielinski said, he advises attorneys to follow a number of steps.

Firms should include a provision in their engagement letters asking clients to acknowledge that the lawyers may, at times, seek internal advice about their ethical and legal obligations, he said. The acknowledgment should state that such advice does not waive the firm’s privilege.

Zielinski said the provision does not change the fact that a law firm still has a duty to fully disclose all facts material to the client’s interest. For example, Massachusetts Rule of Professional Conduct 1.4 imposes an obligation to keep clients reasonably informed of material events in a case and bars lawyers from withholding information that serves their own interests.

Rule 1.7 governs client conflicts of interest and states that if the probity of a lawyer’s conduct is questioned, it may be impossible to give neutral advice, Zielinski said. Such a conclusion would require a law firm to make a disclosure or potentially withdraw from continued representation.

“It may well be that after a law firm has these kinds of privileged consultations, other provisions in the ethics rule will require some disclosure,” Zielinski said. “It’s just that the particular communication where the lawyer is seeking out the advice is protected.”

But R. Alan Fryer of the Badger Law Group, who represented the plaintiff in the Hale & Dorr lawsuit, said the fact that Burns & Levinson continued advising the client for more than a year is highly probative.

“The basic point we made to Gorton was that if the law firm continues to represent the client while it’s having these internal discussions about their handling of the case, it can’t be privileged,” he said. “I don’t see any reason why you should be able to hide information from your own client that affects the client’s case.”

Tips for protecting internal communications

Legal-malpractice lawyer Richard M. Zielinski of Boston’s Goulston & Storrs advises law firms to take the following steps to protect their internal communications:

1. Include language in an engagement letter asking clients to acknowledge that lawyers working on their cases may at times need to seek internal advice about their ethical and legal obligations.
2. Ask clients to acknowledge that such consultations do not waive a law firm’s intra-firm privilege.
3. Appoint a partner to be the firm’s go-to general counsel or ethics advisor. That person should not have performed any legal work on the underlying client matter.
4. Do not bill the client for any time spent working on an internal investigation.
5. Do not place any documents from an internal investigation into the client’s file; they will become the client’s property.