Introduction<\/p>\n
This paper discusses current issues in ethics.\u00a0 It includes a discussion regarding ethical issues confronted by attorneys working as in-house counsel.\u00a0 It also addresses the areas of wrongful disclosure, duty to disclose controlling authority, spoilation, ex parte temporary restraining orders, and attorney disqualification.<\/p>\n
As in-house legal departments continue to grow, the number of ethical concerns surrounding this area of practice also increases.\u00a0 In-house lawyers face unique legal concerns as lawyers who are full-time employees of corporations.<\/p>\n
In Tesoro Petroleum Corp. v. Coastal Refining & Marketing, Inc.,754 S.W.2d 764 (Tex.App.\u2014Houston [1st Dist.] 1988, writ denied), the court of appeals held the award of attorneys fees for the work of in-house counsel did not violate public policy or the code of professional responsibility. In Campbell, Athey & Zukowski v. Thomasson, 863 F.2d 398 (5th Cir. 1989), the Fifth Circuit accepted the reasoning in Tesoro, and held the same applied to a law firm represented by one of its own attorneys.<\/p>\n
In Am. Home Assur. Co., Inc. v. Unauthorized Practice of Law Committee, 121 S.W.3d 831 (Tex.App.\u2014Eastland 2003, pet. granted), liability insurers sought a declaratory judgment against the state\u2019s unauthorized practice of law committee to determine that the use of staff attorneys to represent insured was not the unauthorized practice of law.\u00a0 The trial court entered a judgment in favor of the committee and insurers appealed.<\/p>\n
On appeal the committee contended the use of staff attorneys violated the Texas rules of professional responsibility for three reasons: \u201c(1) no attorney can serve two masters; (2) the insurance companies\u2019 right to control and direct staff counsel violates the lawyer\u2019s professional code of ethics because he cannot exercise his independent judgment; and (3) therefore, the use of staff counsel should be prohibited because the employee-lawyer is subject to an irreconcilable conflict between his employer and the insured.\u201d Id. at 835-36.<\/p>\n
The court of appeals reversed, holding the staff attorney\u2019s status as an employee did not create an irreconcilable conflict.\u00a0 It determined the question of whether the staff attorneys served one or two masters spoke only to ethical conflicts, not to whether the corporation was engaged in the unauthorized practice of law (the issue in the case).<\/p>\n
It further held the insurance companies were not engaged in the unauthorized practice of law.\u00a0 It reached this conclusion although corporations may not practice law in the state of Texas, and the staff attorneys as agents of the insurance corporations practicing law on behalf of the insured.<\/p>\n
See also, Unauthorized Practice of Law Committee v. Nationwide Mut. Ins. Co., 155 S.W.3d 590 (Tex.App.\u2014San Antonio 2004, reh\u2019g overr.).<\/p>\n
In re Valero Energy Corp., involved an action for breach of fiduciary duty involving a joint venture.\u00a0 Valero claimed the trial court abused its discretion by ordering the company to produce documents prepared by in house counsel that were protected by attorney-client privilege.\u00a0 The Court explained Valero and its fellow joint venturer were not joint clients.\u00a0 Therefore, Valero was \u201centitled to seek confidential legal advice from its in-house attorneys concerning its duties as pipeline operator, even though it owed a fiduciary duty to the joint venture.\u201d\u00a0 Id. at 459.<\/p>\n
III.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Wrongful Disclosure<\/p>\n
Texas Rule of Civil Procedure 193.3 provides that a party may withhold privileged material or information which is otherwise responsive to discovery requests provided it follows the steps for withholding laid out by subsection (a) of the rule.\u00a0 Subsection (d) of the rule, also known as the \u201csnap-back provision,\u201d applies when a party inadvertently produces privileged documents to an opposing party.\u00a0 Tex. R. Civ. P. 193.3(d); Warrantech Corp. v. Computer Adapters Servs., 134 S.W.3d 516, 525 (Tex.App.\u2014Fort Worth 2004, no pet.).\u00a0 It allows a party to snap-back materials inadvertently produced within ten days after the producing party discovers the production was made.\u00a0 Comments on the rule explain that the rule focuses on the intent to waive the privilege rather than the intent to produce the material or information.\u00a0 Tex. R. Civ. P. 193.3(d) cmt. 4.<\/p>\n
In re Christus Spohn Hosp. Kleberg, 222 S.W.3d 434 (Tex. 2007), involved a medical malpractice action where the defendant hospital sought to recover privileged documents mistakenly provided to their designated testifying expert witness.\u00a0 Thus, the court was required to examine the interrelation between the snap-back provision and Texas Rule of Civil Procedure 192.3(e)(6), which provides that all material provided to a testifying expert must be produced.\u00a0 The court concluded: \u201cRules 192.3(e)(6) and 192.5(c)(1) prevail over Rule 193.3(d)\u2019s snap-back provision so long as the expert intends to testify at trial despite the inadvertent document production.\u201d\u00a0 Accordingly, once a testifying expert receives privileged documents, those documents may not be retrieved if the party who designated the expert continues to rely upon that designation for trial.<\/p>\n
In In re Parnham, \u2014S.W.3.d\u2014, 2006 WL 2690306 (Tex.App.\u2014Houston [1st Dist.] Sept. 21, 2006, no pet.), a client sought a writ of mandamus to vacate the trial court\u2019s order sanctioning his attorneys with disqualification for attempting to copy and examined privileged documents inadvertently disclosed by opposing counsel.\u00a0 Specifically, counsel for the defendant in the underlying action arrived to review documents responsive to a limited set of discovery requests.\u00a0 Staff for the producing party inadvertently left the entire litigation file in the room where the review took place.\u00a0 After reviewing the file and taking notes, counsel for the defendant notified the producing party\u2019s staff of the copies they wished to order as was previously arranged.\u00a0 When the documents came back from the copy company the next day, counsel for the producing party realized opposing counsel had ordered his entire attorney-client correspondence file, as well as other privileged material, copied.\u00a0 He did not forward the documents to opposing counsel and immediately invoked privilege.<\/p>\n
The parties attempted to reach an agreement regarding the use of the privileged information, but were unsuccessful.\u00a0 As a result, the producing party sought disqualification, which the trial court granted.\u00a0 The Court explained Rule 193.3 does not specifically restrict the use of the information, but acknowledged the information is privileged from use once the privilege is asserted.\u00a0 It held that \u201crule 193.3 does not provide authority for disqualification of counsel who review inadvertently disclosed materials during the course of discovery.\u201d<\/p>\n
In re JDN Real Estate-McKinney L.P., 211 S.W.3d 907 (Tex.App.\u2014Dallas 2006, mandamus denied) involved a city-initiated condemnation action to acquire property through eminent domain.\u00a0 During the course of discovery the producing party disclosed over a hundred documents, including correspondence with attorneys handling a related matter.\u00a0 After receiving the documents, the requesting party discussed them with the attorneys in the related matter and producing counsel, as well as, referred to some of the documents in a hearing where the producing party was present.<\/p>\n
The producing party only attempted to snap-back the materials when the receiving party attached one as evidence in support of its motion to dismiss four months later.\u00a0 The trial court allowed the producing party to snap back the documents.\u00a0 The receiving party moved for mandamus on grounds of waiver by undue delay, disclosure to a third party, the offensive use doctrine, and the crime-fraud exception.<\/p>\n
Waiver via undue delay<\/p>\n
The court of appeals recognized that the producing party did a poor job of screening documents.\u00a0 It noted rule 193.3 focuses on the intent to waive privilege, and that a party who fails to diligently screen documents before producing them does not waive privilege.\u00a0 It then refused to find waiver based on undue delay explaining the moving party\u2019s evidence only established poor screening and did not evidence an intent to waive privilege.<\/p>\n
Waiver via disclosure to third-parties<\/p>\n
The court of appeals further held disclosure to the third party attorneys in the related matter did not waive privilege.\u00a0 It explained the attorney-client privilege is not waived if the communication is shared with a third person who has a common legal interest with respect to the subject of the communication. See In re Auclair, 961 F.2d 65, 69 (5th Cir. 1992).<\/p>\n
Waiver via offensive-use doctrine<\/p>\n
The offensive-use doctrine waives privilege when the party requesting discovery establishes: (1) the party asserting the privilege seeks affirmative relief; (2) the privileged material is such that, if believed by the trier of fact, in all probability would be outcome determinative; and (3) disclosure of the material is the only way the requesting party may obtain the evidence.\u00a0 Republic Ins. Co. v. Davis, 856 S.W.2d 158, 163 (Tex. 1993) (orig. proceeding); see also, Alford v. Bryant, 137 S.W.3d 916, 921 (Tex.App.\u2014Dallas 2004, pet. denied).\u00a0 This method of waiver applies to confidential, attorney-client communications.\u00a0 Republic Ins., 856 S.W.2d at 164; see Alford, 137 S.W.3d at 921.<\/p>\n
In JDN the reviewing court found the requesting party failed to produce any evidence the information could not be obtained from another source.\u00a0 211 S.W.3d at 923.\u00a0 Consequently, it held the trial court did not abuse discretion by determining the producing party did not waive the ability to assert privilege pursuant to the offensive-use doctrine.\u00a0 Id.<\/p>\n
Crime-Fraud Exception<\/p>\n
Once a party establishes the applicability of a privilege, the burden shifts to the requesting party to establish an exception to privilege.\u00a0 Marathon Oil Co. v. Moye, 893 S.W.2d 585 (Tex.App.\u2014Dallas 1994, no writ).\u00a0 Texas Rule of Evidence 503 provides there is not a privilege if the services of the attorney were sought or obtained to enable or aid a person to commit or plan to commit what the client knew or reasonably should have known to be a crime or fraud.\u00a0 Tex. R. Evid. 503(d)(1).\u00a0 In order to apply the exception, the moving party must establish a prima facie case of contemplated fraud, and that there is a relationship between the requested document and the prima facie proof offered.\u00a0 Granada Corp. v. First Court of Appeals, 844 S.W.2d 223, 227 (Tex. 1992).<\/p>\n
The requesting party in JDN only offered general assertions alleging the elements of the crime-fraud exception were satisfied.\u00a0 211 S.W.3d at 924-25.\u00a0 The court of appeals disagreed and held the trial court did not abuse its discretion on those grounds.<\/p>\n
Texas Disciplinary Rule of Professional Conduct 3.03(a)(4), governing candor to the tribunal provides that a lawyer shall not knowingly \u201cfail to disclose to the tribunal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel.\u201d\u00a0 Tex. Disciplinary R. Prof’l Conduct 3.03(a)(4).\u00a0 \u201cLegal argument based on a knowingly false representation of law constitutes dishonesty to the tribunal.\u201d\u00a0 In re Colonial Pipeline Co., Texaco Inc., 960 S.W.2d 272, 273 (Tex.App.\u2014Corpus Christi 1997, no writ).<\/p>\n
Introduction This paper discusses current issues in ethics.\u00a0 It includes a discussion regarding ethical issues confronted by attorneys working as in-house counsel.\u00a0 It also addresses the areas of wrongful disclosure, duty to disclose controlling authority, spoilation, ex parte temporary restraining orders, and attorney disqualification. Ethical Issues for In-House Counsel As in-house legal departments continue to
LEER M\u00c1S<\/a><\/p>\n