NEW YORK COURT HOLDS GENERAL COUNSEL WAIVED ATTORNEY-CLIENT PRIVILEGE BY NOT MAINTAINING ACTIVE BAR STATUS

Date: October 5th, 2010
Categories: Corporate Law

One of the most important tools executives have to investigate potential legal issues is the ability to speak openly with in-house company lawyers without fear such conversations will become public. It is reasonable for executives to think conversations with in-house counsel are always protected by the attorney-client privilege, but it is also incorrect. The attorney-client privilege between in-house counsel and company executives is constantly under attack by regulators and prosecutors, and subject to an increasing number of exceptions and requirements. Now, we know one requirement is that in-house counsel must be an active member of the bar in at least one state.

A federal court in New York recently ordered Gucci to produce e-mails between company executives and its General Counsel, because the General Counsel was not an active member of any state’s bar when he wrote the e-mails. Gucci hired Jonathan Moss in 2002 after he was introduced to them by Gucci’s primary law firm. Moss graduated from law school in 1993, and was admitted to the California State bar later that year. However, Moss transferred to “inactive” status in September of 1996, meaning he gave up the right to practice law or provide legal advice under his California bar membership. Moss was never admitted to any other state’s bar.

While working at Gucci, Moss was promoted several times, first to director of legal services and ultimately to Vice-President, General Counsel. While not all of his work was strictly legal, some clearly was, as he appeared in front of various tribunals for Gucci and “filed a motion for pro hac vice admission to represent Gucci in an action pending in the United States Bankruptcy Court, Southern District of New York.” Gucci Am., Inc. v. Guess?, Inc., 2010 U.S. Dist. LEXIS 65871 (SDNY June 29, 2010), at *6. Moss also filed a variety of trademark applications for Gucci with the United States Patent and Trademark Office in which he was identified as Gucci’s attorney-at-law.

Gucci filed the lawsuit against Guess alleging trademark infringement and related claims. As part of the case, Gucci produced “a privilege log that included e-mail communications” from Moss, which were withheld as being protected by the attorney-client privilege. After deposing Moss and finding out he was not an active member of any state’s bar, Guess demanded that Gucci produce many of Moss’s communications, arguing that “Moss was not an attorney to whom the privilege would apply.” Gucci Am., Inc., 2010 U.S. Dist. LEXIS 65871, at *3.

Gucci then filed a motion asking the Court to hold that Moss’s communications were protected by the attorney-client privilege, and that it did not have to give them to Guess. The Court denied Gucci’s motion, and ordered the documents be produced despite the fact that Gucci honestly, although incorrectly, believed that Moss was in fact licensed to practice law, and considered Moss to be its attorney. In doing to the court explained:

Minimal due diligence includes confirming that Moss was licensed in some jurisdiction, that the license he held in fact authorized him to engage in the practice of law, and that he had not been suspended from practicing, or otherwise faced disciplinary sanctions. “It is not unduly burdensome to require a corporation to determine whether their general counsel, or other individuals in their employ, are licensed to perform the functions for which they have been hired.” Fin. Tech. Int’l Inc., 2000 U.S. Dist. LEXIS 18220, 2000 WL 1855131, at *6. Gucci cites no authority that would relieve it of this relatively minimal undertaking.

Gucci Am., Inc., 2010 U.S. Dist. LEXIS 65871, at *25.

The case provides two critical lessons for all companies that employ lawyers. First, companies should require in-house attorneys to maintain an active state bar membership.

Second, on an annual basis companies should independently verify their in-house counsel’s bar status to determine if there is a risk that communications with that lawyer will not be privileged or protected. In ordering that Moss’s e-mails be produced, the court observed that Gucci never investigated Moss’s qualifications to practice law. However, Moss’s bar status could have at any time been quickly confirmed through a quick search on the California Bar Association’s website.[1. Most state bar associations, including Washington’s, have convenient websites where the public can easily search by name to check a lawyer’s admission status.]