Pennsylvania lawyers finally have some guidance from the state Supreme Court about the status of the attorney-client privilege after the justices ruled Thursday that it attaches not only to communication from the client to the lawyer, but to communication going the other way around as well.
"We hold that, in Pennsylvania, the attorney-client privilege operates in a two-way fashion to protect confidential client-to-attorney or attorney-to-client communications made for the purpose of obtaining or providing professional legal advice," Justice Thomas G. Saylor said for the 5-2 majority in Gillard v. AIG Insurance Co.
The ruling is a win for seven amici filers ranging from the Association of Corporate Counsel to the Philadelphia Bar Association and serves to clarify an area of law left in limbo from inconsistent court decisions in the state.
"Pennsylvania courts have been inconsistent in expressing the scope of the attorney-client privilege," Saylor said. "Presumably, the disharmony relates to the ongoing tension between the two strong, competing interests-of-justice factors in play — namely — the encouragement of trust and candid communication between lawyers and their clients and the accessibility of material evidence to further the truth-determining process."
Saylor said the majority agrees with other courts that have struggled with unraveling attorney advice from client input and have, in turn, stressed the need for greater certainty to foster frankness of communication between lawyers and their clients.
"Indeed, we believe it would be imprudent to establish a general rule to require the disclosure of communications which likely would not exist (at least in their present form) but for the participants' understanding that the interchange was to remain private," Saylor said.
This is the second time the justices have heard the issue of privilege. The high court wasn't able to issue a majority opinion in Nationwide v. Fleming, which meant the underlying Superior Court decision, which Justice Seamus P. McCaffery wrote, stood as precedent. In Nationwide, the Superior Court ruled communications from attorneys to their clients — in that case in-house counsel to business executives — were not privileged.
The court then agreed to hear Gillard, a case in which the Superior Court relied on the ruling in Nationwide. The full complement of the court was able to hear the case, unlike in Nationwide. McCaffery and Justice Debra Todd had to recuse from Nationwide because they sat on the Superior Court panel that heard the case and Justice Joan Orie Melvin recused because her brother represented one of the parties in Nationwide.
In the resulting Supreme Court decision in Nationwide, Justices Max Baer and J. Michael Eakin never addressed the merits, ruling the insurance company waived any privilege when it provided similar documents on the same subject matter. Chief Justice Ronald D. Castille and Saylor wrote an opinion arguing for privilege to be a two-way street.
With all seven justices sitting in Gillard, Saylor was joined in the majority by Castille, Baer, Todd and Orie Melvin. McCaffery and Eakin each wrote a dissenting opinion.
McCaffery took the majority to task in his dissenting opinion, saying they were legislating from the bench.
Saylor had to deal with Section 5928 of the Judicial Code, which expressly states that in a civil matter, counsel cannot divulge "communications made to him by his client, nor shall the client be compelled to disclose the same."
Saylor said the majority acknowledges this legislation, but said it didn't think the General Assembly intended to place such strict limits on privilege. Instead he relied on the court's 111-year-old decision in National Bank of West Grove v. Earle , which ruled privilege was a two-way street.
"Relying primarily on policy-based arguments, the majority reads a provision not enacted by the General Assembly into the Pennsylvania attorney-client privilege statute," McCaffery said. "With this decision, the majority has, in my view, acted in a legislative capacity, and therefore, I must respectfully dissent."
Saylor countered that his position wasn't all that different from McCaffery's, who he said admitted in the dissent that communications from a lawyer to a client are protected when that communication was based off of information provided by the client.
"[W]e appreciate that client communications and attorney advice are often inextricably intermixed, and we are not of the view that the legislature designed the statute to require 'surgical separations' and generate the 'inordinate practical difficulties' which would flow from a strict approach to derivative protection," Saylor said.
Saylor concluded his opinion by acknowledging the potential for abuse the majority decision creates, such as ordinary business matters being disguised as relating to legal advice. But he said that, for the present, the court believes the existing practices, procedures and limitations, including in camera review and the boundaries ascribed to privilege, will provide the necessary checks.
McCaffery said Section 5928 "could hardly be clearer" that it was not meant to protect communications from lawyers to clients.
"Here, the majority ignores the plain text of the statute and decades of decisional law faithful to that statutory text to hold that the privilege operates in a 'two-way fashion' not only to protect confidential client-to-attorney communications, but also to protect broadly attorney-to-client communications regardless of whether they implicate confidential facts disclosed by the client," McCaffery said.
He said there hasn't been inconsistency in prior court decisions, but rather an occasional sentence taken out of context to support the majority's view. He said the majority even admitted Earle 's "brevity and relative obscurity," making it questionable precedent.
McCaffery said he understood the public policy concerns raised by the amici filers, but said they are addressed by the work-product privilege.
In his dissent, Eakin said he could not support providing privilege to communications that contain no information at all emanating from the client. The underlying suit in Gillard involved a bad faith case. Eakin created a hypothetical based on a similar fact pattern, describing a case in which an insurance company's lawyer tells a lawyer there is no basis for denying an insurance claim and the client responds that it didn't care and wasn't going to pay until it had to.
Eakin said the reply would be privileged but questioned why the lawyer's initial advice would need to be privileged considering that wouldn't protect any disclosures from the client.
Eakin said that perhaps the court should expand the attorney-client privilege to protect communications from the lawyer to the client, but should do so through a rule and after public comment. It may also be appropriate, he said, for the General Assembly to draft legislation to address these concerns.
David J. Rosenberg of Weber Gallagher Simpson Stapleton Fires & Newby in Pittsburgh represented AIG. He said the opinion was good news for lawyers and clients in Pennsylvania. He said he thought it was interesting that the justices raised the issue of how the law affects in-house counsel even though that wasn't at issue in Gillard.
"They made a point to discuss that, and to me that kind of fixes [ Nationwide ]," Rosenberg said.
Rosenberg had pointed out in oral argument that the two justices in Nationwide who found the privilege was waived must have thought there was privilege there to begin with. He said Thursday that the majority ruling in Gillard addressed that point and clearly found there was privilege.
Claire Neiger of Michael T. Sosnowicz & Associates represented William Gillard and said she couldn't comment without having a chance to read through the opinion.
Rob Byer of Duane Morris represented a number of the amici filers. He said he was happy there was a clear majority with no ambiguity in the opinion's holding.
"This really brings Pennsylvania law into accord with the law in just about every other jurisdiction," Byer said. "This is really beneficial for not only the legal profession in that it really fosters open communication between lawyers and clients, but I think it also has a very beneficial role in terms of the current policy debate with respect to corporate compliance by allowing in-house counsel to freely communicate what they observe, what they advise within the confines of the corporation without being afraid that it isn't privileged."
Byer also pointed out that Todd's joining the majority was a departure from the position she took at the Superior Court level in Nationwide when she joined McCaffery's opinion.
Reprinted with permission from The Legal Intelligencer, © ALM Media Properties LLC. All rights reserved.