Protecting Communications With Law Firm In-House Counsel

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More law firms are using in-house counsel to advise them on potential claims against the firm, as well as providing advice on ethics and risk management issues. In Arizona, under A.R.S. 12- 2234, in the context of civil cases, any communications between an attorney for a partnership or related entity – such as a law firm – and an employee or agent of the partnership or related entity, made for the purpose of providing legal advice or obtaining information to provide legal advice, are protected by the attorney-client privilege.

The question then becomes, how does one effectively protect such privileged communications with in-house counsel from disclosure should a claim later materialize?


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A California decision provides guidance on the best practices for protecting communications with law firm in-house counsel. In Palmer v. Superior Court, a client hired a law firm to prosecute a lawsuit. Shelton was the partner in charge. The client soon threatened claims against the firm, but insisted it continue representing him until he retained substitute counsel. During that period, Shelton consulted with two attorneys within the firm, Swope and Christman, about the client’s complaints.

When the client later sued the firm and Shelton for malpractice, the firm asserted that communications between Shelton and the in-house counsel were privileged. The firm submitted evidence that Swope was the firm’s General Counsel and Christman was its Claims Counsel, and that they shared responsibility on claims handling and loss prevention. In-house counsel had many communications advising Shelton about responding to the client’s complaints and on how to handle the client relationship. Swope and Christman assigned another partner to supervise preparation of pleadings for the client, who communicated with Shelton as their “deputy.” The firm did not bill the client for time incurred by Swope, Christman or their “deputy.”


The court of appeal first recognized that, “Large law firms increasingly are hiring their own in-house counsel to provide day-to-day ethics advice, monitor internal policies and procedures, and respond to potential and actual malpractice claims against the firm.” It then held that “an attorney who consults another attorney in the same firm for the purpose of securing confidential legal advice may establish an attorney-client relationship.”


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The court found the firm had not established an attorney-client relationship between Shelton and the “deputized” attorney, since he had not submitted a declaration and had worked on the client’s case. However, it found sufficient evidence of an attorney-client relationship between Shelton and in-house General and Claims Counsel. The attorney-client privilege applied to their communications.


The surest way to ensure confidentiality of legal advice remains to use outside counsel. Use of outside counsel raises no issues of divided loyalties of the firm to the client asserting the claim. Outside counsel has no relationship with the firm’s client and plays the traditional role of an independent lawyer retained to advise the law firm client.

However, Palmer confirms that internal consultations with in-house counsel can also be protected. The court discussed the following factors indicating a genuine attorney-client relationship with in-house counsel:

  1. The firm must have designated an attorney or attorneys within the firm to represent it as in-house or ethics counsel, so that an attorney-client relationship exists prior to the time the consultation occurs. Regardless of firm size, officially designate a qualified attorney in the firm to serve as General Counsel, Claims Counsel, etc., with the express responsibility for advising the firm and its lawyers on avoiding and responding to potential claims and ethical issues. This designated counsel can serve as liaison to the firm’s errors and omissions carrier, for procuring and maintaining coverage, and managing claims. This function should be confirmed in a written policy.
  2. Where a current client threatens litigation, in-house counsel must not have performed any work on that client matter or a substantially related matter.
  3. Time spent communicating with in-house counsel may not be billed to the client.
  4. Communications must have been made in confidence and kept confidential. Label all written communications as “Privileged & Confidential Attorney- Client Communications.” Written records of such communication should not be maintained in the underlying matter file, but in a separate file for the potential claim that is protected from access by those not a party to the consultations with in-house counsel.

Designating an in-house General or Claims Counsel is a sound risk management tool for firms of all sizes. Carefully following the procedures addressed in Palmer will help protect the confidentiality of their advice.


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No portion of this article is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only. Daniel W. Hager

Daniel W. Hager

A recognized expert in lawyers’ malpractice prevention and legal ethics, Daniel has provided consultations and risk management services to law firms for more than 20 years. Before joining AHERN as corporate counsel, Dan was a partner at AV-rated Roeca Haas Hager LLP, where he defended lawyers against malpractice and other claims for more than 25 years. AHERN Insurance Brokerage is an industry leader in providing customized insurance solutions for law firms. For more information, visit

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