PA Supreme Court Not Making In-House Counsel’s Life Easier

The Pennsylvania Supreme Court’s recent Nationwide Mut. Ins. Co. v. Fleming --- A.2d ----, 2010 WL 336171 (Pa. 2010) decision provides little guidance on the attorney-client privilege’s applicability to in-house counsel communications to his client involving more than legal advice.

Instead, the evenly split Supreme Court left standing the Superior Court’s controversial Nationwide Mutual Insurance Company v. Fleming decision denying attorney-client privilege protection to in-house counsel’s confidential communication to the corporate client containing legal advice regarding litigation.

At issue was Nationwide’s in-house attorney’s memorandum to its officers regarding the defection of Nationwide’s agents, providing the strategy behind Nationwide’s lawsuits against former agents and their new agencies, and opining as to the litigation’s likely outcome.

Although not invoking the work product doctrine, Nationwide asserted that the document was protected from disclosure by the attorney-client privilege.

Defendants argued that because two other attorney-client communications contained the same “agent defection” subject matter Nationwide had waived privilege, i.e., a director’s memorandum to Nationwide officers, employees, and attorneys outlining its response to the agents’ defections which was not labeled privileged and/or confidential; and a “Privileged and Confidential” labeled memorandum from an in-house attorney to officers, managers, and attorneys outlining counsel’s understanding regarding departing agents and the need to obtain information to assess legal options.

The trial court found that Nationwide had waived its privilege by improperly using the attorney-client privilege as both a sword and a shield through disclosing favorable “agent defection” communications while withholding an unfavorable one as privileged.

In its appeal, Nationwide argued that because the other documents were unprivileged routine business communications not revealing any protected communications to its counsel, their disclosure could not waive the attorney-client privilege as to the subject document.

The Superior Court affirmed holding that the subject document was never privileged. Instead, it
interpreted the attorney-client privilege statute as only protecting confidential communications made by a client to counsel in connection with the provision of legal services and would only protect the subject document to the extent the communications “contain and would thus reveal confidential communications from the client.”

The Superior Court found that the subject document reveal[ed] no confidential facts communicated by to counsel,” and, as a result, was not protected by the attorney-client privilege.

Because the four-member Supreme Court of Pennsylvania panel considering the appeal was equally divided, the Superior Court’s decision was affirmed.

In his opinion supporting affirmance, Justice Eakin concluded that the matter turned on waiver, finding that Nationwide “waived attorney-client privilege with respect to the subject of agent defections upon disclosing in the follow up documents, and cannot claim the privilege applies to the subject document containing the same subject matter, as well as potentially damaging admissions.”

Justice Saylor’s opinion supporting reversal concludes that all the Justices agreed that the subject document “reveals confidential client communications” and “exemplifies the substantial difficulty with a narrow approach to the attorney-client privilege rigidly centered on the identification of specific client communications, in that attorney advice and client input are often inextricably intermixed.”

Because of this unavoidable intertwining, Justice Saylor expressed a preference for protecting all confidential attorney-client communications providing legal advice instead of only client-to-attorney communications.

The lesson appears to be pare down every communication for which attorney client protection will be sought to exclusively those providing legal advice and analysis.

Further, the Nationwide Mut. Ins. Co. v. Fleming opinion suggests that to preserve the privilege, in house counsel must somehow prevent its “privilege seeking communication’s” subject matter from ever being disseminated by it or the client.