UPDATE on 1/9/2011:
See below for my original post about Jonathan Moss, an in-house attorney whose inactive bar status led a magistrate judge to rule that none of his communications were protected by the attorney-client privilege. Last week, in a well-reasoned opinion, the district court judge (Judge Shira Scheindlin) set aside the magistrate judge's order and held that all of Moss's communications made for the purposes of giving legal advice are privileged.
ORIGINAL POST:
This is the cautionary tale of Jonathan Moss, Esq., whose career as in-house counsel for Gucci America, Inc., came to an end earlier this year. The story, as set forth in an opinion by Magistrate Judge James L. Cott in the Southern District of New York, is almost tragic. Moss was admitted to the California bar in 1993, but he began work in non-legal positions for Pricewaterhouse Coopers and McKesson Health Solutions. In 2002, he got a job at Gucci, where the hiring officer “thought that Moss’s legal education and business experience made him well suited for the position.” Moss was the only lawyer in the office, and he soon became known as the company’s lawyer. For example, he appeared on behalf of the company in bankruptcy court, represented it in employment-related matters before the EEOC, and filed trademark applications for Gucci under a power of attorney. Eventually, he was promoted to the position of Vice-President, General Counsel of the company.
There was just one problem, lurking beneath the surface: in 1996, Moss changed his California bar license from “active” to “inactive.” The main practical effects of this change were to lower his yearly fee and exempt him from continuing legal education requirements. Well, there was one other thing: it meant he was no longer licensed to practice law in any jurisdiction.
None of this bothered anyone until Gucci sued Guess?, Inc. alleging trademark infringement. During discovery, Gucci produced a privilege log showing that many communications to and from Moss had been withheld on the basis of attorney-client privilege. Moss was deposed, and counsel for Guess? learned that Moss had no “active” license in any jurisdiction. Smelling blood in the water, Guess? asked for all the Moss documents, claiming there was no attorney-client privilege because there was no, uh, attorney. Gucci moved for a protective order.
Mag. Judge Cott denied it. He reasoned that there was no attorney-client privilege because Moss’s inactive California license did not permit him to engage in the practice of law in California or anywhere else, so none of the communications involved an attorney (one of the prerequisites for the attorney-client privilege). Judge Cott also held that it was unreasonable for Gucci to believe that Moss was a practicing attorney because it had never done even the most basic due diligence to confirm Moss’s professional status.
This is potentially a harsh result for Gucci. It hired a law school graduate who had passed the California bar exam and been admitted to practice there. He had come recommended to Gucci by a law firm (Patton & Boggs). It even paid a yearly fee for Moss’s (inactive) law license. It seems to me that there’s a pretty good argument that Gucci’s non-lawyer executive had good reason to believe that their communications with Moss would be privileged.
In a separate order, Mag. Judge Cott ruled that many of the communications were nonetheless shielded from discovery as “work product”—that is, documents prepared in anticipation of litigation. But it still orders Gucci to produce documents in which Moss apparently discusses his subjective opinions of trademark infringement allegations, on the theory that communications concerning the “cease and desist” letters were not made “in anticipation of litigation.” (A questionable theory, in my view. But that's for another post--if you're lucky.)
The objections to both the Magistate’s orders are due today. In fact--they were filed, and here's the brief. Gucci argues that Mag. Judge Cott's decision is clearly erroneous because Moss was a member of the California bar and therefore an "attorney" for purposes of the attorney-client privilege; that, in any event, Gucci had a "reasonable belief" that he was an attorney; and that Mag. Judge Cott's ruling would have "far-reaching implications" if upheld.
It will be interesting to see how this turns out…
The opinion contains reasons. Whether that makes it a "well-reasoned opinion" is a matter of taste.
ReplyDeleteFor me, the opinion draws a false distinction between what Gucci knows and what Moss knew. On page 17 it cites to declarations from "six current and former executives" stating that they considered Moss an attorney. This overlooks that Moss, a Vice-President at Gucci, is a Gucci executive who did not have a reasonable belief that he was an attorney.
Second, the opinion claims that requiring a company to ensure that its in-house counsel are licensed attorneys would "place an unfair and potentially disruptive burden on corporate entites. To require business to continually check whether their in-house counsel have maintained active memberships in bar associations before confiding in them simply does not make sense." The opinion does not explain how this burden is potentially disruptive. All a company has to do is require its attorneys to maintain an active status as a member of the bar. I have yet to find maintaining my active status in the bar disruptive or burdensome. It is not particuarly hard to attend CLE's and document my attendance. I wish the judge had explained the perceived burden because that part of the order just made me think the judge was out to lunch.
Perhaps the opinion reaches the correct result. However, at least a couple of the reasons it uses to get to that result are a stretch.
I neglected to mention that Judge Scheindlin should get some kudos for putting the legal citations in footnotes rather than in the body of the opinion. See http://aja.ncsc.dni.us/courtrv/cr38-2/CR38-2Garner.pdf
ReplyDeleteInteresting points.
ReplyDelete1) You criticize the judge for not imputing Moss's knowledge of his own inactive status to the corporation. This seems unfair, as it fuses the attorney and the client into a unitary whole. The fair question, it seems to me, is whether any of Moss's superiors knew or should have known about his inactive status. Though it's a debatable point, I think the purposes of the privilege are best served by a "no" in this case. Moss was the only attorney, and he held himself out as an attorney. I think you make the mistake of assuming that non-attorneys - i.e., everyone else in the company -- know anything about the finer points of attorney registration. That's inside baseball.
2) You don't mention that this issue is subsidiary to the judge's core holding -- which is that Moss was an "attorney" for purposes of the privilege because he was "a member of the bar." Under the judge's core analysis, that ends the inquiry -- it doesn't matter whether or not he was "active" or "inactive" under the California bar's rules; what matters is that he was a member of the bar. This again strikes me as the correct result for furthering the purposes of the privilege. This is something we can expect the average client to be on the hook for verifying. The intricacies of "active" vs. "inactive" bar status, not so much.
3) You say the judge is "out to lunch" for thinking it would be a burden for a corporation to be constantly checking the status of any in-house attorney it employs. But the client can't just, as you claim, "require its attorneys to maintain an active status"; it has to constantly verify that its attorneys are complying. And the penalty for failing is vitiation of the privilege. This is particularly weird in a case like this one, where there is a one-man legal department, and that one-man is going to be the only one in the company who has any idea that there is such a thing as an "inactive bar status." Also, under your theory, an attorney who is two days late sending in her dues would have two days of completely unprotected communications with all her clients. (I see no basis for restricting your reasoning to in-house attorneys, do you?) Considering that the privilege is there to protect clients, that seems to me an unacceptable result.
4) So it is not, as you imply, that it is an enormous burden for an attorney to maintain an active law license. The burden is requiring a regime of constant vigilance over your attorneys, with the penalty for failure being the extreme sanction of allowing discovery of attorney-client communications that were made for the purpose of giving legal advice.