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
“The
Business of Our Firm is Business”
