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Court of Appeals of Georgia.


St. Simons Waterfront, LLC v. Hunter, Maclean, Exley & Dunn.

Nos. A12A0716, A12A0717.

Decided: July 13, 2012

Susan Warren Cox, Benjamin Joseph Colson, for Appellant. John Gilbert Nelson, Jenny Elizabeth Jensen, for Appellee.

This consolidated appeal follows the trial court's judgment granting and denying various aspects of a motion to compel filed by St. Simons Waterfront, LLC (“SSW”). In case number A12A0716, Hunter, Maclean, Exley & Dunn (“Hunter Maclean”) appeals the trial court's grant of the motion in favor of SSW, arguing that the trial court abused its discretion by (1) granting relief in excess of that sought in SSW's motion to compel; (2) ruling that the attorney-client privilege does not apply to communications with law firm in-house counsel after a client asserts a claim against the firm; (3) ruling that information developed by a law firm in anticipation of a potential claim asserted against it by a client is subject to discovery; and (4) ruling that documents created as part of an internal investigation conducted by a law firm regarding its potential liability are subject to discovery if that investigation occurs while the law firm continues to represent the client. In case number A12A0717, SSW appeals the trial court's denial of its motion to compel as it concerns outside counsel consulted by Hunter Maclean and argues that (1) a memorandum created by outside counsel should be subject to discovery because it was created during the time in which Hunter Maclean continued to represent SSW; (2) no attorney-client relationship existed between Hunter Maclean and the outside counsel; (3) there was no indication that Hunter Maclean intended to keep communications with outside counsel secret; (4) Hunter Maclean has waived any privilege; (5) the crime-fraud exception precludes Hunter Maclean from invoking the attorney-client privilege; and (6) if the privilege applies, SSW is entitled to information not protected by the privilege. Because the trial court employed an erroneous legal theory in reaching its decision, we vacate and remand with direction.

I. Summary of the Relevant Facts.

a. Hunter Maclean's Representation of SSW Prior to February 18, 2008. The record reflects that Hunter Maclean was retained by SSW in 2006 to represent the company through the development and sale of high-end condominiums on St. Simons Island, Georgia. But the relationship between the parties deteriorated after buyers, alleging a variety of reasons, began rescinding the purchase contracts in late 2007–early 2008.

During Hunter Maclean's initial representation of SSW, the primary attorneys working for the client were Triece Ziblut, Jennifer Mafera, and Elizabeth Thompson. Ziblut and Mafera advised the client on transactional matters and Thompson joined the representation as a closing attorney.

When buyers began to rescind in late 2007–early 2008, SSW inquired about the possibility of enforcing the specific-performance provision in the sales contract drafted by Hunter Maclean. But a member of the firm's litigation team advised that he believed it was unlikely a court would grant specific performance due to the large amount of earnest money buyers paid on the high-dollar condominiums (15 percent).1 And as attempted rescissions continued, Ziblut and Mafera asked Kirby Mason, another member of the firm's litigation team, to review the buyers' claims on behalf of SSW. In this regard, Mason reviewed and revised response letters to the rescinding buyers.

On February 18, 2008, Ziblut, Mafera, and Mason were all involved in a conference call with the SSW representatives the firm had dealt with throughout the course of the firm's representation, Anna Maria Hatfield and Janet Safran.

b. The February 18, 2008 Conference Call. The parties have two differing versions and recollections of this seminal moment in the history of the case.

1. Hunter Maclean's Version. According to Mason and Ziblut, the purpose of the call was to advise SSW as to the procedure Mason would use to negotiate with the rescinding buyers concerning the return of earnest money and settlement of claims. Thus, Mason started the conference call by explaining the process and the sufficiency of the buyers' individual claims to Hatfield and Safran when suddenly a male voice came “booming” unexpectedly over the loudspeaker. That voice belonged to Robert Mundy, the president of SSW.

Mason, Mafera, and Ziblut all testified that Mundy was angry with Hunter Maclean and clearly intended to hold the firm responsible for the buyers' rescissions. Both Mafera and Mason took a statement by Mundy to the effect of “live by the sword, die by the sword”2 to mean that SSW would hold Hunter Maclean responsible for any losses. Ziblut testified that Mundy wanted to know why settlement was being discussed and said that Hunter Maclean had been hired to protect SSW's interests. Thus, at the conclusion of the call, the three Hunter Maclean attorneys all believed it was probable that SSW would eventually file a claim against the firm.3

2. SSW's Version. According to Safran and Mundy, Mundy spoke up during the February 18 conference call because he was not interested in settling with the rescinding buyers and instead wanted to pursue specific performance. Mundy said that he did not understand Hunter Maclean's hesitation to pursue specific performance. Safran did not recall Mundy threatening Hunter Maclean, and Mundy testified that he was not looking to bring a claim against Hunter Maclean because there were closings left to finalize. Instead, his intention was to stress SSW's desire to pursue specific performance, not to settle with the buyers. Both Safran and Mundy testified that the decision to sue Hunter Maclean was made only after SSW obtained new counsel.

c. Hunter Maclean's Actions after the February 18 Conference Call. The actions of Hunter Maclean after the February 18 call, as reflected by the record and described below, form the crux of the discovery dispute at issue between the parties—including Hunter Maclean's continued representation of SSW, the undertaking of an internal investigation, Hunter Maclean's consultation with an outside expert, and Hunter Maclean's internal decision regarding a letter that Mafera was drafting for SSW.

1. Continued Representation of SSW. Mafera testified that after the February 18 call, there was an immediate decision that the firm should seek outside counsel to handle the buyers' claims for SSW. Thus, Hunter Maclean began efforts to locate a new attorney for SSW on February 19. While SSW sought counsel in Atlanta, Hunter Maclean sought to find local counsel for SSW in the Brunswick area. But as late as early March 2008, the efforts to obtain new counsel remained unsuccessful due to the specialized nature of the buyers' claims, and because the attorneys and firms consulted up to that point all had conflicts of interest.

Meanwhile, Hunter Maclean continued to complete closings and deal with the buyers' claims after February 18. As to the closings, Thompson testified that the last one she conducted on behalf of SSW occurred in April 2008. And Hunter Maclean continued to conduct closings on behalf of SSW even after SSW obtained new counsel. As to the buyers' claims, Mafera testified that Hunter Maclean helped stall, respond to, and negotiate those claims; Ziblut testified that the firm continued to write initial response letters to claims as of February 25 and conducted settlement negotiations at SSW's request; and Mason testified that Hunter Maclean did the best that it could to avoid harm to SSW until new counsel could be obtained, including trying to prevent adverse actions. Indeed, Mason testified that she personally conducted calls with some attorneys for rescinding buyers after February 18. Additionally, Brooks Stillwell—another member of the Hunter Maclean litigation team—counseled SSW after February 18 with regard to rescission letters that required immediate response, advising SSW to “get as many of them closed as quickly as you can and with the least publicity possible” and to initiate “discussions” with buyers.

Nevertheless, Mason opined that the attorney-client relationship between Hunter Maclean and SSW ended after February 18 and that the firm's involvement with SSW after that point merely entailed limited representation during a transitional period of maintaining the status quo.

2. Hunter Maclean's Internal Investigation of Potential Claims and Defenses. It is undisputed that after the February 18 conference call, and while continuing to counsel SSW, Hunter Maclean also started looking into its exposure regarding potential claims it thought SSW might assert against the firm. In fact, immediately after the call, Mason went to the office of Arnold Young, in-house general counsel for Hunter Maclean, to report that the firm had been threatened by a client and to inform him of the plan to find new counsel for SSW.

Like Mason, Ziblut also approached Young after the February 18 call and began participating in some of the firm's defense efforts, including meeting with Young, Mafera, Thompson, Mason, and Stillwell, all while continuing to assist SSW. Additionally, Ziblut and Mafera approached Stillwell on February 19 to discuss both how to help SSW with the buyers' claims and the firm's exposure to any potential malpractice that had occurred as part of the SSW representation.

Finally, while she continued to represent SSW in negotiations with the rescinding buyers and actively sought new counsel for SSW, Mason also participated in the internal investigation/defense efforts, acting as in-house counsel with Young on the matter.4

3. Hunter Maclean's Consultation with Darla McKenzie. In addition to beginning its internal investigation, Hunter Maclean also contacted Darla McKenzie, an attorney with an Atlanta law firm. Stillwell testified that he initially contacted McKenzie's firm seeking an attorney familiar with the type of claims the buyers were asserting against SSW. Mafera testified that the firm made an internal decision to hire an expert to look at the rescinding buyers' claims and that she personally spoke with McKenzie regarding this issue on February 26.

Stillwell said that he spoke with attorneys at McKenzie's firm in terms of seeking representation for the firm and that he instructed Mafera to contact McKenzie because she had been hired for that purpose. Likewise, Mafera testified that she believed she had an attorney-client relationship with McKenzie when they spoke because she had been told that McKenzie was hired to help assess and analyze the potential claims for Hunter Maclean. Thus, Mafera asserted that the firm needed advice from McKenzie regarding how to proceed and that she believed McKenzie knew that she was acting for the benefit of Hunter Maclean.

Mafera admitted that the firm was still representing SSW against the buyers when McKenzie's advice was sought, and that SSW was never told about McKenzie's hiring or her conclusions because the firm tried to find local counsel to represent SSW against the buyers, although Mafera did ask McKenzie to recommend counsel for SSW. However, Safran testified that SSW sought McKenzie's representation as it searched for outside counsel and McKenzie declined representation due to a conflict of interest.5

Hunter Maclean's responses to SSW's interrogatories and requests for admission contradict the foregoing testimony to some extent. For example, in a response to SSW's first interrogatories, Hunter Maclean listed McKenzie as an attorney “contacted about representing SSW in connection with the buyers' claims.” And in response to SSW's first requests for admission, Hunter Maclean admitted that it sought McKenzie's advice while continuing to represent SSW and further responded that “it contacted Ms. McKenzie to analyze the various claims and how best to proceed” and that it “contemplated referring [SSW] to Ms. McKenzie but [SSW] took an adverse position to [Hunter Maclean] before [Hunter Maclean] had the chance to put the two in contact.”

4. Jennifer Mafera's Letter. Finally, either before or after the February 18 conference call, Mafera began to draft a letter to SSW, at SSW's request, explaining the claims asserted by each of the rescinding buyers and providing guidance as to the possible responses to these claims.6 In addition to Mafera, Stillwell also worked on the letter and Mafera discussed its contents with Ziblut.

On February 25, SSW requested that the letter be sent to it by FedEx, and Ziblut agreed to do so on February 26. SSW then requested the letter again on February 27. However, the letter was never completed and was never sent to SSW because Young advised Mafera to stop drafting it after he perceived that SSW was adverse to the firm.7

d. Reasons for Withdrawal: SSW's Knowledge and Understanding of Potential Conflicts of Interest. The record reflects that SSW and Hunter Maclean have different understandings regarding why SSW needed to obtain new counsel.

1. Hunter Maclean's Understanding. Ziblut testified that at the time of the February 18 conference call, she had already determined that the firm needed to cease its representation of SSW and that she had informed SSW a few days before the February 18 call that it needed an independent evaluation of the buyers' claims.8 Ziblut testified that she reiterated this during the February 18 call. Mason also recalled that she explained to SSW on the February 18 call that the company would need outside counsel to evaluate questions surrounding the agreement, because Hunter Maclean had drafted the contract.

As to Hunter Maclean's belief that SSW became adverse to the firm after the February 18 call, Mafera was unsure of whether SSW was ever informed that their perceived threat to the firm had created a new, additional conflict that required Hunter Maclean to withdraw from its representation of SSW. On the other hand, Ziblut testified that she informed SSW's general counsel in South Carolina that she was concerned that SSW had become adverse to the firm, and that she informed SSW that they were adverse to the firm and needed new counsel. Nevertheless, it appears undisputed that Hunter Maclean never informed SSW that the law firm began evaluating its own exposure or building a defense after February 18, or that Mafera, Ziblut, Mason, and Stillwell were participating in preparing that defense.

2. SSW's Version. SSW's representatives—Hatfield, Safran, and Mundy—all testified that Hunter Maclean never informed SSW that the firm had a conflict of interest with SSW. Safran testified that Ziblut instructed SSW to obtain outside counsel only because SSW disagreed with Hunter Maclean's advice regarding settlement with the buyers, and because Hunter Maclean could not represent SSW in closings and in litigation after the rescissions because they had drafted the documents. Hatfield likewise testified from her notes that Ziblut told her that Hunter Maclean felt that SSW should obtain new counsel because SSW “was not taking any of their advice on the litigation” and because “[t]hey smell blood in the water and ․ feel like we might turn on them.”

e. Current Lawsuit and Discovery Dispute. After obtaining new counsel, SSW filed suit against Hunter Maclean, alleging claims for legal malpractice, breach of fiduciary duty, and fraud concerning Hunter Maclean's representation of SSW between 2006 and 2008. Specifically, SSW alleged that Hunter Maclean committed legal malpractice by failing to advise SSW properly on the requirements of the Georgia Condominium Act9 and to properly draft a form purchase contract, and in its advice and representation of SSW after buyers began to rescind the contract drafted by Hunter Maclean. Additionally, SSW alleged that Hunter Maclean breached its fiduciary duty to SSW by failing to explain the basis for the rescinding buyers' claims, withholding information requested by SSW related to the buyers' claims, continuing to represent SSW in the face of a significant conflict of interest without making full disclosure, contacting an outside attorney while continuing to represent SSW but failing to disclose to SSW the conclusions of that consultation, and misleading SSW as to the true nature of the firm's conflict of interest. Finally, SSW alleged that Hunter Maclean committed fraud by concealing its own negligence, the facts surrounding the rescinding buyers' claims, the consultation and conclusions of the outside expert, and the information related to SSW's claim for breach of fiduciary duty. Thus, SSW sought special damages, general damages, nominal damages, attorneys' fees pursuant to OCGA § 13–6–11, and punitive damages.

As discovery between SSW and Hunter Maclean ensued, SSW sought to depose and obtain documents from Darla McKenzie, the outside legal expert consulted by Hunter Maclean. McKenzie objected to SSW's request for documents on the basis that she had been instructed by counsel for Hunter Maclean that the firm intended to invoke the attorney-client privilege and, thus, objected on that basis and under the work-product doctrine. Hunter Maclean objected to the request for documents and also filed a motion for protective order and motion to quash the deposition of McKenzie, citing the attorney-client privilege and work-product doctrine. To show that an attorney-client relationship existed between Hunter Maclean and McKenzie, Hunter Maclean produced an invoice from McKenzie and her bills to the firm. The trial court granted the protective order and motion to quash on May 6, 2010.

SSW also sought to depose Arnold Young, in-house general counsel at Hunter Maclean. Hunter Maclean filed a motion for protective order and motion to quash the subpoena for the deposition of Young, again citing the attorney-client privilege and work-product doctrine. In support of its motion, Hunter Maclean submitted an affidavit from Young, describing his role at the firm and his involvement in the case after attorneys at Hunter Maclean perceived that SSW intended to hold the firm responsible for losses associated with the rescinding buyers' claims.

In response to these objections by Hunter Maclean and Hunter Maclean's privilege log, which purportedly identified 21 documents created after February 18, 2008,10 SSW filed a motion to compel discovery, arguing that the information obtained from McKenzie would have helped SSW respond to the rescinding buyers' claims, that Young's advice to the attorneys who continued to represent SSW resulted in the firm's breach of fiduciary duty and goes to the heart of SSW's claims, and that SSW was entitled to the information because it was obtained while Hunter Maclean continued to represent SSW. Ultimately, SSW requested that the trial court require Hunter Maclean to produce (1) the letter drafted by Jennifer Mafera, analyzing the buyers' claims but withheld from SSW at Young's direction; (2) a memo drafted by McKenzie and all written communications between her and Hunter Maclean; (3) a memo drafted by Kirby Mason for Arnold Young following the February 18 conference call; (4) inter-firm e-mails from February 21, 2008, regarding recommendations for another firm to handle the buyers' claims; (5) draft statements and handwritten timesheets showing work by Kirby Mason or other attorneys at the firm regarding SSW and the buyers' claims, regardless of whether the firm later billed the client for the work; (6) an opportunity to depose Young; (7) and additional depositions of Jennifer Mafera, Triece Ziblut, Kirby Mason, and Brooks Stillwell regarding their understanding and consideration of the State Bar Rules (which include the professional rules of conduct) in dealing with SSW.

On September 15, 2011, the trial court granted SSW's motion to compel except as to the documentary evidence and deposition of McKenzie, based on its finding that the attorney-client privilege applied.11 With regard to McKenzie, the trial court found that an e-mail between McKenzie and Mafera revealed that McKenzie “did not know that she was potentially representing [Hunter Maclean].” Nevertheless, the court determined that the McKenzie evidence was protected by the attorney-client privilege. As to the remaining requested evidence, the trial court found that time sheets for Hunter Maclean established that the firm continued its representation of SSW through June 2008 on various matters and summarized the ultimate issue as being “whether an attorney-client relationship exists between Arnold Young, Esq. and [Hunter Maclean], and whether the evidence that [SSW] seeks to acquire is protected as work-product by [Hunter Maclean].”

Looking to the Georgia Rules of Professional Conduct, the trial court determined that because Young was a partner at Hunter Maclean, any conflict of interest that applied to other attorneys in the firm would be imputed to Young.12 And ultimately, the trial court concluded that the firm's representation of SSW continued through June 2008, and Young's representation of Hunter Maclean created a conflict of interest which negated any presumed attorney-client privilege.

In making its findings and determination, the trial court rejected the assertion by Hunter Maclean's legal expert, who opined that the real issue in the case concerned a lawyer's obligations as to when and how to withdraw from a case13 because the court found that representation of SSW continued not only as to previously scheduled closings but also as to unrelated matters. The trial court also found that SSW “was oblivious” to the fact that Hunter Maclean felt it was potentially in an adverse position to SSW. Thus, the court determined that Hunter Maclean perceived a conflict and began taking immediate action to protect itself but did not inform SSW of the conflict and continued to represent the client. Given the foregoing facts, the court below concluded that the attorney-client privilege did not extend to Young or “any other risk management attorney within [Hunter Maclean].”14

Likewise, after reiterating that no attorney-client relationship existed between Young and Hunter Maclean, the trial court also determined that because Hunter Maclean continued to represent SSW until at least June 2008, “any documents prepared during that time that relate to [SSW] are not protected by the work-product doctrine,” citing our Supreme Court's decision in Swift, Currie, McGhee & Hiers v. Henry.15

The trial court recognized that the issues before it had not yet been decided by the appellate courts in Georgia and properly granted a certificate of immediate review. We then granted Hunter Maclean's application for interlocutory appeal, and the appeals in case numbers A12A0716 and A12A0717 followed.

At the outset, we note that a trial court's discovery order is reviewed on appeal for an abuse of discretion.16 And it is within the trial court's discretion “to determine the permissible extent of discovery, keeping in mind that the discovery procedure is to be construed liberally in favor of supplying a party with the facts.”17 With these preliminary guiding principles in mind, we turn now to the parties' claims in both appeals.

II. Case Numbers A12A0716 and A12A0717.

In case number A12A0716, Hunter Maclean appeals the trial court's grant of SSW's motion to compel, which holds that the attorney-client privilege and work-product doctrine does not apply in the case sub judice to any communications except the firm's consultation with outside counsel, Darla McKenzie. In case number A12A0717, SSW appeals the trial court's denial of its motion to compel as it concerns Hunter Maclean's communications with McKenzie. We will address these contentions together in our determination that it is necessary to remand this case to the trial court for additional proceedings consistent with this opinion.

a. Attorney–Client Privilege.

The attorney-client privilege “is the oldest of the privileges for confidential communications known to the common law.”18 And in Georgia,19 our law provides that “[c]ommunications to any attorney or to his employee to be transmitted to the attorney pending his employment or in anticipation thereof shall never be heard by the court” and that “[t]he attorney shall not disclose the advice or counsel he may give to his client․”20 Additionally, no attorney “shall be competent or compellable to testify for or against his client to any matter or thing, the knowledge of which he may have acquired from his client by virtue of his employment as attorney or by reason of the anticipated employment of him as attorney.”21 Likewise, no party or witness “shall be required to make discovery of the advice of his professional advisers or his consultation with them.”22

The foregoing statutory provisions reflect the public policy that “persons should feel that they may securely say anything to members of the profession in seeking aid in their difficulties, although the person whose advice they seek may have been employed, or may be afterwards employed, against them.”23 However, inasmuch as the exercise of the privilege results in the exclusion of evidence, “a narrow construction of the privilege comports with the view that the ascertainment of as many facts as possible leads to the truth, the discovery of which is the object of all legal investigation.”24

In considering the scope of the attorney-client privilege, we begin by noting that the privilege undoubtedly protects communications between corporate employees and in-house counsel.25 But no such bright-line rule exists for attorneys who consult with their law firm's in-house counsel regarding a potential malpractice claim by a current client. Rather, courts that have addressed this issue have taken a variety of approaches. Many courts have held that the attorney-client privilege does not protect otherwise privileged communications or legal advice in which the firm's representation of itself created a conflict of interest between the firm and the client seeking the communications or material, automatically imputing a conflict of interest to in-house counsel.26 More recently, however, a federal district court has held that such communications are protected and are discoverable only if the client can show good cause to overcome the privilege.27 Under this approach, it is for the trial court, employing a balancing test, to determine the existence of good cause .28

Georgia has yet to address the applicability of the attorney-client privilege to a law firm's in-house communications concerning a current client. To put it plainly, we are in uncharted jurisprudential waters. And while opinions from other jurisdictions can and often are useful in providing guidance on novel questions of law, our charge as a Georgia appellate court is to outline an analytical framework for the issue before us that is, to the greatest extent possible, firmly rooted in this state's statutes, case law, and rules of professional conduct. In our view, none of the decisions from other jurisdictions addressing this issue do so in a way that is entirely consistent with Georgia law.29 Hunter Maclean, however, has directed our attention to a law review article that we find to be in accord with the general principles of Georgia law outlined in this opinion, and one that provides an analytical framework striking the proper balance between safeguarding the integrity of the attorney-client privilege and honoring this state's vigorous and necessary conflict rules. For these reasons, we quote extensively from this article throughout our opinion, and reference (where necessary) the general principle of Georgia law upon which the quoted language is based. And as noted in greater detail infra, we are persuaded by—and thus adopt as our own—the article's conclusion that whether a law firm may claim privilege to legal advice regarding duties to a current client from in-house counsel “depends on whether there is a conflict of interest between firm counsel's duty to the law firm and firm counsel's duty to the outside client.”30 This question, as explained below, is largely a factual one, to be decided by the trial court.

At this juncture, it is important to emphasize that in Georgia “[a] lawyer's representation of a client [when] the lawyer has a financial or personal interest which will or reasonably may affect the lawyer's professional judgment illustrates one of the most blatant appearances of impropriety.”31 Indeed, when an attorney's own personal interests come into conflict with those of his client, “it threatens the attorney's duty of loyalty, the most basic of an attorney's duties to the client.”32 Thus, the standards governing “[t]he requirements of full disclosure and written notice to or consent from the client are intended to insure to some extent both that a client will receive professional legal services, and that a lawyer may be protected should he or she choose the risky course of representing a client despite the lawyer's potentially conflicting personal or financial interest.”33

Nevertheless, we reject the Draconian rule adopted in other jurisdictions that automatically imputes conflicts of interest to in-house counsel, because there is no explicit textual justification for such an approach in this State's rules of professional conduct,34 and adopting such a bright-line rule would, in our view, encroach upon the authority of our Supreme Court over such matters.35 Moreover, even if we were authorized to establish such a rule, we would nevertheless decline to do so because automatic imputation, inter alia, increases the cost of privileged advice by requiring firms to either retain outside counsel or hastily withdraw from the representation.36 Additionally, this approach “discourage[s] firms from seeking early advice when problems with clients arise ․,”37 thereby precluding a robust and frank assessment of potential conflicts and undermining conformity with ethical obligations.38 And the firm's “duty of loyalty to the client does not prevent the firm from attempting to defend against client claims” because the effort to defend “is no more ‘disloyal’ when it involves inside rather than outside counsel.”39

Indeed, in this very case, the facts demonstrate why a bright-line rule is entirely untenable. A lawyer who has a nonwaivable conflict of interest with a client no doubt must withdraw, but a firm concerned with whether a client has a malpractice claim against it will often need to carefully consider that question. Yet, a lawyer who must withdraw clearly cannot do so in a way that violates his ethical obligations to the client. What then is a conflicted lawyer to do when there are multiple on-going representations and, despite the lawyer's reasonable efforts, replacement counsel is unable to quickly step in and take over the representation? In such a situation, the conflicted lawyer finds himself in the awkward position of either hastily withdrawing in violation of the professional rules of conduct, having to consult with (and hire) outside counsel, or risk waiver of the privilege. Suffice it to say, we think it strains credulity to suggest that there is any basis in Georgia law for adopting a rule that places clients in the perilous position of having their lawyers withdraw prematurely or without careful advice. Accordingly, we conclude that the scope and applicability of the attorney-client privilege in circumstances like those presented in the case sub judice depends entirely on the specific facts of each given case.40

In considering the nuanced interplay between the attorney-client privilege and our conflict rules, it is helpful to begin with Rule 1 .10 of the Georgia Rules of Professional Conduct, which provides as follows:

a. While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7: Conflict of Interest: General Rule, 1.8(c): Conflict of Interest: Prohibited Transactions, 1.9: Former Client or 2.2: Intermediary.

b. When a lawyer has terminated an association with a firm, the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer unless:

1. the matter is the same or substantially related to that in which the formerly associated lawyer represented the client; and

2. any lawyer remaining in the firm has information protected by Rules 1.6: Confidentiality of Information and 1.9(c): Conflict of Interest: Former Client that is material to the matter.

c. A disqualification prescribed by this rule may be waived by the affected client under the conditions stated in Rule 1.7: Conflict of Interest: General Rule.

Imputed disqualification is also referred to as “vicarious disqualification,” and it “occurs when one attorney could handle the matter if he were a sole practitioner but is prohibited [from doing so] because of a relationship with a partner or an associate who is barred from the same representation.”41 And as the comments to Rule 1.10 illustrate, the provisions contained therein derive from the duty of loyalty an attorney owes his client, in that

[s]uch situations can be considered from the premise that a firm of lawyers is essentially one lawyer for purposes of the rules governing loyalty to the client, or from the premise that each lawyer is vicariously bound by the obligation of loyalty owed by each lawyer with whom the lawyer is associated. 42

Nevertheless, when firm counsel “individually has no conflict of interest under Rule 1.7 or Rule 1.9, and the in-firm communication meets the ordinary requirements for privilege,” we conclude that “courts should not automatically impute a conflict under Rule 1.10.”43 Instead, imputation should depend on “the structure of the in-house position.”44 Thus, when “firm counsel holds a full-time position and does not represent outside clients, courts should not impute a conflict under Rule 1.10.”45 In this regard, compensation is perhaps the clearest way to demarcate firm counsel's role, particularly through the use of billing procedures “to establish the firm as the client and to distinguish the lawyer who acts as firm counsel from other lawyers in the firm.”46 The role can be further demarcated by ensuring that its function is known and understood throughout the firm, that its compensation is not significantly determined by firm profit, and other similar measures.47

Additionally, courts should not impute a conflict to part-time firm counsel when “the lawyer who serves in that capacity does so on a formal, ongoing basis, such that the firm is clearly established as the client before the in-firm communication occurs.”48 So long as counsel in this position has had “no involvement in the outside representation at issue and the firm is clearly established as the client before the in-firm communication occurs, firm counsel should be treated as the functional equivalent of corporate in house counsel.”49 Put simply, “the same lawyer who represents the outside client cannot simultaneously represent the firm in a dispute between the firm and that client without the informed consent of both clients.”50

As for lawyers who act as firm counsel on an ad hoc basis (e.g., when the firm does not have a formal in-house counsel position or when firm counsel delegates matters to other attorneys inside the firm), these individuals “should be subject to imputation unless the firm can show that an attorney-client relationship was established before the in-firm communication occurred,” which shifts the burden to the law firm “to show that the identity and role of ‘firm counsel’ was clearly defined.”51 And as to the delegation of matters by firm counsel to ad hoc counsel, even if in-firm counsel is structured such that the attorney in that position is not subject to an imputed conflict of interest, a conflict of interest may nevertheless result if in-firm counsel delegates tasks to or directs aspects of the client representation through attorneys who are subject to imputation. Thus, in-house counsel must remain completely separate from any representation of the client, except for the limited purpose of gathering information from any attorneys previously involved in or still involved in the representation of the client.52

By following the foregoing approaches, this “eliminates the need to distinguish between communication that occurs prior to, versus in response to, a claim by the client.”53 And the distinction of when a communication occurs is then relevant “only to an analysis of waiver [when] firm counsel has a conflict of interest individually or by imputation.”54 As Professor Elizabeth Chambliss aptly explains in her thoughtful law review article, The Scope of In–Firm Privilege,

if a lawyer acts as firm counsel on an ad hoc basis and does not qualify for an exception to the ordinary imputation of conflicts, but the communication at issue occurred in response to an assertion of wrongdoing by the client, then the client's willingness to continue the representation might be viewed as a waiver of the imputed conflict. [When] the firm discovers potential wrongdoing and promptly notifies the client, there also may be an argument for waiver if the client elects to continue the representation. [When] the firm discovers potential wrongdoing and has not yet notified the client, however, there is no argument for waiver, [because] the client has not been informed of firm counsel's potential conflict.55

With regard to the waiver of firm counsel's imputed conflict, it must be remembered that law firms have ethical duties to inform clients of decisions or circumstances with respect to which the client's informed consent is required,56 and if the firm fails to provide “adequate notice to the client of the firm's potentially adverse interests, the firm has no argument for waiver of firm counsel's imputed conflict.”57 This comports with the American Bar Association's determination that consultation with in-house counsel “does not give rise to a per se conflict of interest between the firm and its client, although a personal conflict will arise if the principal goal of the ․ consultation is to protect the interest of the consulting lawyer or law firm from the consequences of a firm lawyer's misconduct.”58 In that situation, “the representation may continue only if the client gives informed consent.”59 Furthermore, it must be remembered that there is a crime-fraud exception to the attorney-client privilege,60 and it is arguable that any knowing nondisclosure of a conflict under the applicable rules of professional conduct would fall under such an exception, such as when a firm seeks in-house counsel's advice to conceal a conflict from the client.61

Given these considerations, we are mindful that there may be situations in which our rules of professional conduct require withdrawal from representing a client62 but in which withdrawal would harm the client, thereby implicating other ethical obligations .63 In such circumstances, a law firm would be well advised to explain in writing the firm's perception and (1) seek the client's informed consent for an immediate withdrawal, disclosing to the client the potential harm that could result from such withdrawal, and/or (2) seek the client's informed consent to continued representation until such time as the firm can withdraw, with disclosure that the firm will simultaneously take steps to protect its own interests.64 Nevertheless, in the latter option, in conformance with the propositions discussed supra, the firm should segregate the attorneys who will continue with the client representation and the attorneys who will conduct the investigation, except for the limited purpose of providing pertinent information necessary to begin the investigation.65

Having articulated the proper standard to apply, we must remand to the trial court for additional fact finding. On remand, the trial court should evaluate whether the communications at issue otherwise meet the standard for attorney-client privilege. In reaching this determination, “the trial court should consider the totality of the circumstances” and “[i]n addition to the requirement that an attorney-client relationship exists, relevant factors generally include, but are not limited to, the nature and purpose of the communication and how and to whom the communication was made.”66

If the communications in question meet the foregoing standard, the court should then evaluate whether the attorneys with whom those communications were made satisfy the above-described criteria such that the in-house attorney was and remained completely segregated from the underlying matter or that the client has waived any conflict or imputed conflict after having such conflict disclosed to it prior to any agreement to continue the representation. If so, the usual rules of privilege will attach. If not, then the trial court should conduct an in camera review of SSW's requested discovery and the items on Hunter Maclean's privilege log and require production of communications that implicate the conflict of interest—i.e., those discussing claims the client might have against the firm, known errors in the firm's representation of the client, conflicts in its representation, and other circumstances that would have triggered the firm's duty to advise the client and obtain the client's consent.67 Any non-privileged evidence must still, of course, comport with the requirements of OCGA § 9–11–26(b)(1).68

As to the requests pertaining to Darla McKenzie, the trial court-having determined that the information is privileged—should evaluate those items in camera to determine whether the privilege has been overcome to some extent pursuant to the general guidelines established above.69 In other words, the trial court must determine whether the attorneys with whom McKenzie communicated—aside from any necessary exchange of background information for investigation and research purposes—were subject to an imputed conflict of interest and, if so, continue to apply the analysis discussed supra.

b. Work Product Doctrine.

Georgia law protects work product under OCGA § 9–11–26, which provides in pertinent part that

a party may obtain discovery of documents and tangible things otherwise discoverable [and relevant] and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including his attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of his case and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means .70

And even if the required showing is made, “the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.”71

Much of our analysis of the attorney-client privilege supra applies to the work-product privilege as well.72 Thus, as with the attorney-client privilege, the work-product doctrine is not absolute, and attorneys “cannot cloak themselves in its mantle when their mental impressions and opinions are directly at issue.”73 Accordingly, the doctrine should not apply when a client, as opposed to some other party, seeks to discover an attorney's mental impressions because “[i]t cannot shield a lawyer's papers from discovery in a conflict of interest context anymore than can the attorney-client privilege.”74

On remand, the trial court should conduct an in camera review of the items claimed as work product pursuant to Hunter Maclean's defense efforts under the same standard we have set forth above for determining whether a conflict exists so as to overcome the attorney-client privilege. Additionally, the court should again consider whether those documents meet the standard set forth by our Supreme Court in Swift, Currie, McGhee & Hiers v. Henry such that they rightfully belong to SSW because they were created in the course of Hunter Maclean's representation of SSW.75

Accordingly, for all the foregoing reasons, we vacate the trial court's order and remand this case for proceedings consistent with this opinion.

Judgment vacated and case remanded with direction.


ELLINGTON, C.J., and PHIPPS, P.J., concur.

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