Attorney-Client Privilege for Transactional Attorneys

Attorney-Client privilege is a particularly tricky issue for attorneys who handle business transactions in Phoenix, as they so often have clients for both legal and non-legal services. A client who requires legal services is protected by quite strict attorney-client privilege ethics rules. However, a client who is provided strictly non-legal services cannot be protected by attorney-client privilege. The ambiguous part comes when a client uses both legal and non-legal services. Transactional attorneys repeatedly face this situation.

The Rules

• A lawyer may not act unfavorably to a current client.
• A lawyer may act unfavorably to a former client only if the new issue is clearly unrelated to the issue the lawyer previously handled.
• A conflict that affects one member of the firm affects all members in the firm.
• A client may waive conflicts if provided proper disclosure and consent. The court usually takes the client’s expected level of sophistication and understanding into account when judging the validity of waivers.

Legal vs. Non-Legal Services

If a lawyer advises on both legal and non-legal matters, it is important to establish what communications will be covered under attorney client privilege and what will not. Attorneys should discuss with the clients the nature of advice they are seeking and warn clients when discussions are not protected. Additionally, transactional attorneys should acquaint themselves with the particular provisions of privilege in their state, as these may differ.

For courts to consider communications privileged the “dominant purpose” of discussion must be about legal matters—and unable to be provided by a non-legal agent. As an example, advice on business strategies is not protected but questions on what structure to form that business would.

Accidental Clients

Transactional attorneys are much more likely to acquire “accidental” clients, who will also be covered by attorney-client privilege, making attorney-client privilege much more difficult to navigate.

The clients of transactional attorneys often represent not simply people but entities—corporations, trade associations and syndicates. Therefore, more than the single individual in contact with the lawyer may be harmed by a breach of attorney-client privilege. It is crucial for a transactional attorney to establish who is actually a client, and if they receive legal or non-legal services.

Please note: attorney-client relationship can be established without the presence of an engagement letter or a fee-paying arrangement. Simply providing legal advice, receiving confidential information or otherwise treating the entity as a client can establish that relationship.

To avoid accidental clients, a letter of engagement from the client stating both who is a client and who is excluded (such as affiliates, parents, subsidiaries etc.) limits the chance of a lawsuit. However, such a letter should be sent to the non-client entities to ensure their consent.

Joint Representation

Another grey area that transactional attorneys often find themselves in is the issue of joint representation. Transactional attorneys may represent multiple clients in the same legal matter. Each client is owed zealous representation so problems may arise where there is significant disagreement. While frank discussions may be expressed, where there is “fundamental antagonism” between clients, a lawyer must withdraw representation. It is the responsibility of the attorney to validate that the partners are in agreement of their goals. 

When times are good, clients rarely worry about violations of attorney-client privilege. However, when investors lose money, they are quick to blame their transactional attorney whether the financial loss was related with any ethical missteps on the part of the attorney or not. Taking the time to establish conflicts ahead will save transactional attorneys much heartache and financial problems. 

This article brought to you courtesy of the Phoenix business law firm of The Law Offices of Donald W. Hudspeth. To contact the Phoenix business transactions attorneys, call 866-696-2033

SYNOPSIS

 Attorney-Client privilege can be an issue for attorneys in business transactions in Phoenix. Business firms in Phoenix explain the ambiguity between both legal and non-legal services.

The Law Offices of Donald W. Hudspeth, P.C.

Business Law, Commercial Litigation & International Business Law

www.AZBUSLAW.com – 866-0696-2033 - TheFirm@azbuslaw.com

“The Business of Our Firm is Business”

St. Paul, Problems of Being Human and Small Businesses Dealing with AngiesList.com

St. Paul, Problems of Being Human

and

Small Businesses Dealing with AngiesList.com

 

by Donald W. Hudspeth

            Like many people with a standard Midwest religious upbringing I struggle to do the right thing and, sometimes, to know just what that is under the circumstances.  But, as St. Paul discussed in Romans 7 [1] “being good is not that easy, even when we are so inclined” (and he was a Saint.) Hardly a week goes by I do not regret some act or omission – usually one made in passing while I was working on something else. I understand the likelihood of such mistakes and work to understand and accept such human failings in others.

           

This leads me to the problems that I see my business owner clients having with public review sites like AngiesList.com. The Terms of Use for AngiesList state in Article 14 that the customer is not to post unfair or unreasonable reviews. In particular Article 14(c) states that the customer:  

Will not submit any reviews that may be considered by AngiesList to be unlawful, harassing, libelous, abusive, threatening, obscene, profane hateful, offensive, harmful, vulgar, distasteful, invasive of another person’s privacy or proprietary rights or racially, ethnically or otherwise objectionable.[2]  

But, contrary to these rules of posting, my small business clients have been severely hurt by AngiesList subscribers who “game the system.” For example, one of my firm’s business owners had a negative review posted by where his customer who (accidentally or on purpose) listed the wrong number for the business. Because of the wrong phone number, AngiesList could not notify the business of the negative review – nor did it try by Googling my client to obtain a correct phone number or email address. (It would seem with such great power would come great responsibility.)

By the time my client learned of the negative post the response time had passed. In addition to having a wrong phone number, the posting was factually inaccurate and encouraged other prospective customers not to do business with them. The “don’t ever do business with this so and so” kind of post.  

Under city, state, county and federal law, my business client would be served with notice of the complaint, and would be given the opportunity to defend itself before an impartial judge or jury. It could perhaps even countersue for breach of contract and/or trade disparagement. What my business owner client really wanted was “due process,” which the law affords and AngiesList does not.  When my client later learned of the complaint and contacted AngiesList about the false, and hereto unknown, post, the local AngiesList representative declined to remove the negative post or allow my business client the opportunity to respond. This one post essentially destroyed my client’s business because locally, virtually everyone checks AngiesList before hiring a business in the construction trade.  

In another case one of my business client’s customers unilaterally breached signed a enforceable contract (after the customer had signed, storm chasers knocked on the customer’s door and offered to do the work for half price), then the customer used an extremely negative post with the Better Business Bureau (about the alleged extreme unfairness of the business seeking to enforce the written contract on which it had already partially performed) to force the business to accept the breach. 

Again, the review was one-sided and encouraged others not to do business with them. The customer basically stated to the business: “Refund my $1000 deposit or this post will go live in one week and destroy your business.” The negative and abusive post was particularly harmful in this case because it would go live right before a huge trade show in a local arena – at which and from which the business would hope to derive its next six months of business. So, again the business acceded. 

Even worse are the malicious postings to so-called “fraud report” sites (ripoffreport.com is an example) which posts are often nothing more than venting by persons with an axe to grind. We may understand the right and need to vent – but how, where and at what personal cost to the business owner) and social cost in the loss of a good business? And, where is the justice and due process in all of this?  Google theoretically (and actually) can monetize ripoffreport.com entries which match search terms, and so will elevate them to the front page because the search term results also contain negative words in association with the search term.  To aggravate matters, ripoffreport.com has a strict “Non-removal policy“.  Even if the review is unfair or inaccurate, even if the aggrieved party obtains an injunction through a court ordering it be removed, even if the original author wants to remove the post, it stays.

 In the above cases the business owners could have likely prevailed – at least in part - at law on the customer’s over-stated facts and assertions. And, the businesses could have perhaps prevailed on their counterclaims for breach of contract and trade disparagement. But the business owners could not afford the negative review, which of course “thousands upon thousands” of potential customers could see on the internet. 

As a matter of public policy of course we all want to be able to make informed decisions about providers of goods and services, and we want justice for consumers in their dealings with small businesses. But now, due to the power of the Internet, and the apparent acquiescence of third party review sites – which are ostensibly neutral in policy but which in practice allow, if not encourage, unfair and unreasonable results – businesses lack the means to have a fair determination of business disputes. Now it is just a power game of the consumer and the internet against the small business. Justice is not served where the business must risk its very existence to contest a single claim and sometimes is denied the right to do even that. 

It comes back to St. Paul. Each of us has done wrong; each of us has a bad day at work and has caused a client inconvenience or harm. Most of us, like St. Paul, seriously hate that. But, we do not expect or deserve to have our lives ruined by those who would take advantage of the situation. Third party review sites need to be regulated – or to self regulate – to afford due process. Otherwise, they will increasingly become a tool of extortion by an unreasonable, and often lawfully incorrect, consumer.[3]

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The Law Offices of Donald W. Hudspeth, P.C.

Business Law, Commercial Litigation & International Business Law
www.AZBUSLAW.com  - 866-696-2033 - TheFirm@azbuslaw.com

“The Business of Our Firm is Business”

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[1] Romans 7:15 I do not understand what I do. For what I want to do I do not do, but what I hate to do. New International bible (© 1984) 

[2] AngiesList.com Terms of use Web. July 22, 2012.  Note: Terms of Use subject to change without notice.

[3] In the vast majority of my business to business cases the party “acting out” is not doing so from “evil,” but because it does not know what the law is. I submit much the same thing is occurring  with consumers who assume they are right, but may not prove to be so in fair  adjudication of the matter.