The Massachusetts Supreme Judicial Court recently issued a much-anticipated decision concerning communications within a law firm, holding that communications between law firm attorneys and the firm's in-house counsel concerning a malpractice claim asserted by a current client of the firm are protected from disclosure to the client by the attorney-client privilege. RFF FAMILY PARTNERSHIP, LP vs. BURNS & LEVINSON, LLP, & others, SJC-11371, July 10, 2013.
The Court concluded that such communications are confidential provided that (1) the law firm has designated an attorney or attorneys within the firm to represent the firm as in-house counsel, (2) the in-house counsel has not performed any work on the client matter at issue or a substantially related matter, (3) the time spent by the attorneys in the communications with in-house counsel is not billed to a client, and (4) the communications are made in confidence and kept confidential. Because those criteria were met in the case, the Court affirmed a judge's order allowing the defendant law firm and its attorneys to invoke the attorney-client privilege to preserve the confidentiality of the communications.
The decision is a departure from the general rule that communications regarding current clients are not protected. Accordingly, Massachusetts attorneys working in law firms who wish to keep communications with in-house counsel confidential from an existing client should meet the four conditions identified above. Neither the New Hampshire nor Maine Supreme Courts, nor the disciplinary authorities of either state have yet adopted a similar position.
For more information on professional liability matters, contact Attorney William Saturley at 603.410.1500 or a member of Preti's Professional Liability Group.
Legal updates, news and commentary from Preti Flaherty's Professional Services Attorneys
Did Massachusetts Prosecutors Cross an Ethical Line by Secretly Subpoening a Defense Attorney's Bank Records?
Tuesday, July 16, 2013
According to the June 24, 2013 edition of Massachusetts Lawyers Weekly, a Boston criminal defense lawyer is asserting the Massachusetts Attorney General’s Office violated the rules of professional conduct by secretly subpoenaing over 1,500 pages of his law office’s bank records in connection with a criminal investigation into possible witness intimidation.
The attorney represented a defendant accused of motor vehicle insurance fraud in 2008. During the March 2012 trial of the charges, several cooperating witnesses recanted, leading the superior court judge to grant defense motions for required findings of not guilty.
The trial judge was troubled, however, by the recantations by several witnesses at trial and recommended that the matter be investigated for obstruction of justice, perjury and fraud on the court.
The Massachusetts Attorney General’s Office launched a criminal investigation that resulted in indictments of the attorney’s client and his co-defendant for corruption of a witness, suborning perjury, and related charges. As part of the criminal probe, the Attorney General’s Office also subpoenaed four years of the defense attorney’s bank records, without notice to him, along with records of other attorneys connected to the case. According to Massachusetts Lawyers Weekly, a hearing was held June 26 concerning the attorney’s challenge to the subpoena. The attorney claims that Massachusetts Rule of Professional Conduct 3.8(F) requires prosecutors to obtain permission from the court and to give counsel an opportunity to be heard before subpoenaing a lawyer or his records in connection with a grand jury investigation. In addition, he alleges that the subpoena was far too broad, allowing the Commonwealth to obtain four years of his law office’s bank records, including privileged information about his other clients and cases.
The Attorney General’s Office has argued that the grand jury subpoenas were properly issued and, under United States Supreme Court precedent, do not invade the attorney-client privilege. According to the defense lawyer, the AG’s Office also alleges that Rule 3.8 (F) does not apply because the attorney’s records, and not the attorney himself, were subpoenaed by the grand jury.
The superior court’s ruling on this issue should be very instructive as to the limits of prosecutorial discretion and a prosecutor’s ethical obligations when seeking the records of an attorney.
Authorized by Attorney Simon Brown. For more information on professional liability matters, contact Simon Brown at 603-410-1500 or see Preti Flaherty's Professional Liability Group website.
The attorney represented a defendant accused of motor vehicle insurance fraud in 2008. During the March 2012 trial of the charges, several cooperating witnesses recanted, leading the superior court judge to grant defense motions for required findings of not guilty.
The trial judge was troubled, however, by the recantations by several witnesses at trial and recommended that the matter be investigated for obstruction of justice, perjury and fraud on the court.
The Massachusetts Attorney General’s Office launched a criminal investigation that resulted in indictments of the attorney’s client and his co-defendant for corruption of a witness, suborning perjury, and related charges. As part of the criminal probe, the Attorney General’s Office also subpoenaed four years of the defense attorney’s bank records, without notice to him, along with records of other attorneys connected to the case. According to Massachusetts Lawyers Weekly, a hearing was held June 26 concerning the attorney’s challenge to the subpoena. The attorney claims that Massachusetts Rule of Professional Conduct 3.8(F) requires prosecutors to obtain permission from the court and to give counsel an opportunity to be heard before subpoenaing a lawyer or his records in connection with a grand jury investigation. In addition, he alleges that the subpoena was far too broad, allowing the Commonwealth to obtain four years of his law office’s bank records, including privileged information about his other clients and cases.
The Attorney General’s Office has argued that the grand jury subpoenas were properly issued and, under United States Supreme Court precedent, do not invade the attorney-client privilege. According to the defense lawyer, the AG’s Office also alleges that Rule 3.8 (F) does not apply because the attorney’s records, and not the attorney himself, were subpoenaed by the grand jury.
The superior court’s ruling on this issue should be very instructive as to the limits of prosecutorial discretion and a prosecutor’s ethical obligations when seeking the records of an attorney.
Authorized by Attorney Simon Brown. For more information on professional liability matters, contact Simon Brown at 603-410-1500 or see Preti Flaherty's Professional Liability Group website.
NH Federal Court Issues Decision on “Claims-Made-and- Reported” Provisions of E&O Policy
Wednesday, July 10, 2013
In a decision issued last month, Clauson & Atwood v. Professionals Direct Insurance Co.,12-cv-00199-JL (May 13, 2013), the New Hampshire Federal District Court resolved an insurance coverage dispute over the meaning of a “claims-made-and-reported” provision in an errors and omissions (“E&O”) insurance policy.
Clauson & Atwood (“Clauson”), a New Hampshire law firm, had been hired to pursue a timber-trespass lawsuit in New Hampshire state court for its client, James Yager (“Yager”). Clauson, however, failed to file suit within the 3-year statute of limitations, which eventually resulted in the case being dismissed on summary judgment. Clauson appealed the trial court’s dismissal order to the New Hampshire Supreme Court. Yager, however, sought advice from another law firm which, in January of 2011, provided Clauson with written notice of Yager’s “potential” malpractice claim against Clauson and of Yager’s intent to pursue the legal malpractice claim if the appeal proved unsuccessful. The notice also encouraged Clauson to immediately notify its E&O carrier, Professionals Direct Insurance (“Professionals”), of Yager’s potential claim. Yager offered to enter into a “tolling” agreement, agreeing not to file the malpractice suit immediately, so long as Clauson agreed that any statute of limitations period applicable to the malpractice claim would be extended by agreement for an additional 12 months following resolution of the appeal. Clauson signed the tolling agreement in February of 2011.
Clauson’s E&O policy with Professionals was a “claims-made-and-reported” policy that provided coverage only for claims “first made against [Clauson] and reported [to the E&O carrier] during the policy period.” The reporting period for the policy ended on September 29, 2011. Clauson, however, did not notify Professionals of the potential claim before the September 29, 2011 deadline, apparently believing that the Supreme Court would overturn the dismissal and because the parties had agreed, by virtue of the “tolling” agreement, to “postpone” any malpractice claim until the appeal was finally resolved. Clauson submitted a renewal application to Professionals, seeking to renew the E&O policy for another 1-year period, from September 29, 2011 to September 29, 2012. Clauson’s application, however, failed to inform the carrier of Yager’s potential claim.
In early October of 2011, the New Hampshire Supreme Court affirmed the trial court’s dismissal ruling, finding that Clauson had indeed waited too long to file the timber trespass suit. A month later, Yager’s new counsel provided Clauson with a copy of a draft malpractice complaint and again directed Clauson to notify Professionals of the impending malpractice suit. Clauson promptly forwarded the draft malpractice complaint to Professionals. Yager formally filed suit against Clauson in February of 2012, and Clauson immediately demanded confirmation that Professionals intended to defend the claim and indemnify Clauson against any loss. Professionals, however, refused to defend or indemnify, asserting that Yager’s claim had not been both “made” and “reported” in the current policy period and that there was no coverage. Clauson’s declaratory judgment action soon followed.
In the Declaratory Judgment action, Professionals conceded that the malpractice claim had been “reported” within the policy period, but it asserted that the claim was not also “made” within the applicable reporting period, as required by the policy. The Federal Court agreed and held that, under Clauson’s “claims-made-and-reported” policy, a claim is “made” as soon as “the insured learns of specific circumstances involving a particular person or entity which could reasonably be expected to result in a demand or suit for money or services.” The Court held that Clauson had such knowledge in February of 2011, when it first received written notice of the potential malpractice claim. Clauson’s belief that it would prevail in the appeal did not alter the result. Moreover, Clauson’s agreement to enter into the tolling agreement was irrelevant, because Clauson had never provided a copy of that agreement to its carrier within the pertinent coverage period (September 29, 2010 – September 29, 2012). Finally, the Court rejected Clauson’s argument that Professionals had not been prejudiced by the delayed reporting. That argument was unavailing, because “there is no requirement that an insurance company prove that it was prejudiced due to lack of notice under a claims made policy.” Finally, the Court said the prejudice question was irrelevant because the issue was not one of “late notice” within the policy period; rather, Clauson was attempting to obtain coverage for a claim that was “made” before its current policy had taken effect. Because Yager’s claim was “made” prior to the inception of the current policy period, and because the policy only covered claims “made” within the policy period, the Professionals had no duty to defend or indemnify Clauson.
For more information on Professional Liability Issues, contact Attorney Greg Moffett at 603-410-1500 or visit Preti Flaherty's Professional Liability Practice Group's page.
Clauson & Atwood (“Clauson”), a New Hampshire law firm, had been hired to pursue a timber-trespass lawsuit in New Hampshire state court for its client, James Yager (“Yager”). Clauson, however, failed to file suit within the 3-year statute of limitations, which eventually resulted in the case being dismissed on summary judgment. Clauson appealed the trial court’s dismissal order to the New Hampshire Supreme Court. Yager, however, sought advice from another law firm which, in January of 2011, provided Clauson with written notice of Yager’s “potential” malpractice claim against Clauson and of Yager’s intent to pursue the legal malpractice claim if the appeal proved unsuccessful. The notice also encouraged Clauson to immediately notify its E&O carrier, Professionals Direct Insurance (“Professionals”), of Yager’s potential claim. Yager offered to enter into a “tolling” agreement, agreeing not to file the malpractice suit immediately, so long as Clauson agreed that any statute of limitations period applicable to the malpractice claim would be extended by agreement for an additional 12 months following resolution of the appeal. Clauson signed the tolling agreement in February of 2011.
Clauson’s E&O policy with Professionals was a “claims-made-and-reported” policy that provided coverage only for claims “first made against [Clauson] and reported [to the E&O carrier] during the policy period.” The reporting period for the policy ended on September 29, 2011. Clauson, however, did not notify Professionals of the potential claim before the September 29, 2011 deadline, apparently believing that the Supreme Court would overturn the dismissal and because the parties had agreed, by virtue of the “tolling” agreement, to “postpone” any malpractice claim until the appeal was finally resolved. Clauson submitted a renewal application to Professionals, seeking to renew the E&O policy for another 1-year period, from September 29, 2011 to September 29, 2012. Clauson’s application, however, failed to inform the carrier of Yager’s potential claim.
In early October of 2011, the New Hampshire Supreme Court affirmed the trial court’s dismissal ruling, finding that Clauson had indeed waited too long to file the timber trespass suit. A month later, Yager’s new counsel provided Clauson with a copy of a draft malpractice complaint and again directed Clauson to notify Professionals of the impending malpractice suit. Clauson promptly forwarded the draft malpractice complaint to Professionals. Yager formally filed suit against Clauson in February of 2012, and Clauson immediately demanded confirmation that Professionals intended to defend the claim and indemnify Clauson against any loss. Professionals, however, refused to defend or indemnify, asserting that Yager’s claim had not been both “made” and “reported” in the current policy period and that there was no coverage. Clauson’s declaratory judgment action soon followed.
In the Declaratory Judgment action, Professionals conceded that the malpractice claim had been “reported” within the policy period, but it asserted that the claim was not also “made” within the applicable reporting period, as required by the policy. The Federal Court agreed and held that, under Clauson’s “claims-made-and-reported” policy, a claim is “made” as soon as “the insured learns of specific circumstances involving a particular person or entity which could reasonably be expected to result in a demand or suit for money or services.” The Court held that Clauson had such knowledge in February of 2011, when it first received written notice of the potential malpractice claim. Clauson’s belief that it would prevail in the appeal did not alter the result. Moreover, Clauson’s agreement to enter into the tolling agreement was irrelevant, because Clauson had never provided a copy of that agreement to its carrier within the pertinent coverage period (September 29, 2010 – September 29, 2012). Finally, the Court rejected Clauson’s argument that Professionals had not been prejudiced by the delayed reporting. That argument was unavailing, because “there is no requirement that an insurance company prove that it was prejudiced due to lack of notice under a claims made policy.” Finally, the Court said the prejudice question was irrelevant because the issue was not one of “late notice” within the policy period; rather, Clauson was attempting to obtain coverage for a claim that was “made” before its current policy had taken effect. Because Yager’s claim was “made” prior to the inception of the current policy period, and because the policy only covered claims “made” within the policy period, the Professionals had no duty to defend or indemnify Clauson.
For more information on Professional Liability Issues, contact Attorney Greg Moffett at 603-410-1500 or visit Preti Flaherty's Professional Liability Practice Group's page.
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