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Ethical Traps For In-House Counsel In Business Litigation

Ethical Traps For In-House Counsel In Business Litigation

WCBA Bar Flyer
(March 12, 2014)

A key aspect of representing businesses in North Carolina is assisting in-house counsel avoid the myriad of ethical landmines they confront every day. Three issues our in-house client representatives confront regularly are: (1) the effects of mixing business and legal advice on the attorney/client privilege; (2) the tendency of employees to think they are the client when, in fact, the corporation, not the employee, is the client; and (3) the mistaken belief that in-house counsel not admitted in North Carolina can defend depositions of corporate officers in North Carolina.

Lawyers who graduated from law school before the 1990s are regularly surprised at the relative lack of deference courts now give many communications with in-house counsel. The attorney/client privilege applies in North Carolina if: (1) the relation of the attorney and client existed at the time the communication was made; (2) the communication was made in confidence; (3) the communication relates to a matter about which the attorney is being professionally consulted as a lawyer; (4) the communication was made in the course of giving or seeking legal advice for a proper purpose (while litigation need not be contemplated for the privilege to apply, the privilege does not apply to communications regarding business advice or communications with counsel for purely informational purposes); and (5) the client has not waived the privilege. See In re Miller, 357 N.C. 316, 335, 584 S.E.2d 772, 786 (2003).

Many corporate employees and in-house counsel believe that the protections of the attorney/client privilege attach if in-house counsel are included as a recipient of the communication. This is simply not true. Communications with counsel that seek business advice or that appear to be for purely informational purposes are not privileged. See Isom v. Bank of America, N.A., 177 N.C. App. 406, 411, 628 S.E.2d 458, 462 (2006).

It is well settled here and in most other American jurisdictions that a corporation cannot insulate its files from discovery simply by copying in-house counsel. Similarly, the mere fact that an in-house attorney attended a meeting does not render privileged everything said or done at that meeting. Isom v. Bank of America, N.A., 177 N.C. App. 406, 628 S.E.2d 458, (2006).

Identity of the Client
Employees of corporations regularly believe that in-house counsel are their counsel, rather than the company's counsel. This mistaken belief leads employees to believe the attorney/client privilege attaches to all their communications with in-house counsel, rather than just those communications seeking legal advice on behalf of the corporation within the employee's course and scope of employment. This misconception often results in a cavalier attitude in emails with in-house counsel. These cavalier emails can be costly when discovered in the course of litigation.

Lawyers representing a corporate client have an ethical duty to ensure that employees of the corporate client know that the lawyer represents the corporation, not the employee, should a potential conflict develop. NC Rules of Professional Conduct, Rule 1.13(f). Failure to do so may result in disqualification of the lawyer and disciplinary action by the State Bar.

Appearance at Deposition by Those not Admitted in North Carolina
An appearance at a North Carolina trial or deposition by counsel not admitted in North Carolina is the unauthorized practice of law. See N.C.G.S. 84-4 and 84-5. Unauthorized practice of law is a misdemeanor in North Carolina. Id. Protect your in-house counsel colleagues who are not admitted to practice in North Carolina from sanctions by ensuring that he or she is admitted pro hac vice prior to the time that any appearance at trial or in deposition is made. Recent rule changes have made pro hac vice admission more expensive and time consuming than it used to be, but this remains a hurdle that must be jumped in order to protect your in-house client representative who is not admitted in North Carolina. See N.C.G.S. 84-4.1.

This information should not be interpreted as legal advice with respect to specific situations. Article originally appeared in the WCBA Bar Flyer. Reproduced with permission.

Mark A. Finkelstein
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