The Double Edged Sword: Internal Law Firm Privilege and the "Fiduciary Exception"

By Fucile, Mark J. | Defense Counsel Journal, July 2009 | Go to article overview
Save to active project

The Double Edged Sword: Internal Law Firm Privilege and the "Fiduciary Exception"

Fucile, Mark J., Defense Counsel Journal

I. Introduction

AS law firms have grown in both size and organization, internal ethics and claims advice has increasingly taken on institutional form. Where in years past a law firm lawyer might have informally sought out a seasoned colleague to discuss a sensitive question of professional ethics or a potential claim against the firm, today that same discussion is more likely to be had with a formally designated internal firm counsel or a member of a firm committee charged with providing ethics and claims advice. (1)

Paralleling this institutionalization of internal advice on ethics and claims has been the recognition of the attorney-client privilege for such internal law firm discussions not unlike the privilege long recognized for corporations and other entities. (2) At the same time, however, courts have also increasingly recognized a "fiduciary exception" to internal law firm privilege when a firm's otherwise privileged discussions put it in conflict with a current firm client. Under the fiduciary exception, the law firm's fiduciary duty to the client "trumps" the firm's internal privilege and has led to the discovery of otherwise privileged internal communications concerning the client--typically in subsequent malpractice or related lawyer civil liability litigation by the client against the firm.

The fiduciary exception is not without critics. But, regardless of its relative legal and policy merits, the fiduciary exception's increasing recognition by courts makes it a very real consideration both for internal counsel providing advice to firm lawyers and for defense counsel handling subsequent disputes in which a former client seeks such communications by way of document request or deposition. This article will examine three aspects of the fiduciary exception. First, it will briefly survey the development of the exception in the law firm context. Second, it will explore the boundaries of the exception. Third, it will then conclude with a discussion of the practical impacts of the exception for both law firm internal counsel and outside defense counsel.

II. The Fiduciary Exception in the Law Firm Context

The fiduciary exception did not originate with law firms. Rather, the exception traces its lineage to the English trust law concept that a fiduciary is prevented from asserting the attorney-client privilege against a beneficiary on a matter of trust administration. (3) In the law firm context, the generally acknowledged starting point is In re Sunrise Securities Litigation. (4)

As its name implies, Sunrise was a consolidated series of securities claims arising out of the failure of Sunrise Savings and Loan Association (Sunrise) in the 1980s. One of the defendants was the law firm that had served as Sunrise's outside general counsel. During discovery, the law firm withheld documents that, in part, concerned internal advice from firm attorneys regarding its representation of Sunrise. The firm argued that the documents were protected from discovery by the attorney-client privilege, analogizing them to a consultation with in-house counsel in the corporate context. The claimants moved to compel their production. The court initially rejected the concept that a law firm could claim privilege for internal discussions with lawyers functioning as the equivalent of in-house counsel, but then reversed itself on reconsideration, finding that "it is possible in some instances for a law firm, like other business or professional associations, to receive the benefit of the attorney client privilege with seeking legal advice from in house counsel." (5) The court, however, tempered its recognition of internal privilege by applying the fiduciary exception when the internal advice created a conflict between the law firm's own interests and that of a current client. (6) The court then returned the specific application of the exception to a special discovery master. (7)

After the Sunrise decision, the fiduciary exception in the law firm context was essentially dormant for over a decade.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

The Double Edged Sword: Internal Law Firm Privilege and the "Fiduciary Exception"


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?