Court Recognizes Common Law 'Self Protection' Exception to Statutory Attorney-Client Privilege

In Litigation Involving Dispute Between Client and Lawyer or Law Firm

Squire, Sanders & Dempsey, L.L.P. v. Givaudan Flavors Corp., Slip Opinion No. 2010-Ohio-4469.
Cuyahoga App. No. 92366, 2009-Ohio-2490. Judgment of the court of appeals reversed, and cause remanded to the trial court.
Pfeifer, Lundberg Stratton, O'Connor, O'Donnell, and Cupp, JJ., concur.
Lanzinger, J., concurs in judgment only.
Brown, C.J., not participating.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-Ohio-4469.pdf

(Sept. 28, 2010) The Supreme Court of Ohio held today that Ohio recognizes a common law “self protection” exception to attorney-client privilege that permits an attorney to testify concerning attorney-client communications where such testimony is necessary to establish a claim for legal fees on behalf of the attorney or to allow an attorney to defend against a charge of malpractice or other wrongdoing in litigation between the attorney and a client.

The Court held further that attorney work product including mental impressions, theories and legal conclusions are subject to discovery upon a showing of good cause if the information sought to be discovered is directly at issue in the case, the need for the information is compelling, and the evidence cannot be obtained elsewhere.

The Court’s 6-0 decision, authored by Justice Terrence O’Donnell, reversed a ruling by the 8th District Court of Appeals.

From 2003 to 2007, the Cleveland-based law firm of Squire, Sanders & Dempsey (SSD) represented Givaudan Flavors Corporation in product liability litigation. In 2007, Givaudan severed its relationship with SSD and retained new outside counsel. SSD billed Givaudan for $1.8 million in unpaid legal fees. When Givaudan refused to pay, SSD filed suit. Givaudan filed a counterclaim alleging that SSD had overbilled for services it had performed, had billed Givaudan for services that were never performed, and had engaged in other false, deceptive and unethical business practices during the period of representation.

During the pretrial discovery process, Givaudan refused to produce any of the billing records or other documents relating to the legal services SSD had provided during its representation, or to answer most of the questions posed to company officials by SSD during depositions. Givaudan also asserted that because communications between itself and the law firm during the period of representation were exempt from disclosure under the attorney-client privilege, SSD was barred from disclosing documents in its own files that included communications between the law firm and Givaudan. SSD asked the trial court to order Givaudan to comply with its discovery requests and respond fully during depositions in the case.

The trial court granted the motion to compel discovery, holding that a common law exception to the statutory attorney-client privilege set forth in R.C. 2317.02 allows disclosure of otherwise confidential communications when such disclosure is necessary to the fair adjudication of a lawsuit between a lawyer or law firm and a client arising from their business relationship. Givaudan appealed that ruling.

On review, the 8th District Court of Appeals reversed the trial court’s order compelling Givaudan to comply with SSD’s discovery requests. In its opinion, the court of appeals held that the trial court erred in recognizing a self-protection exception to attorney-client privilege, and that communications between SSD and Givaudan during the period of representation were privileged under R.C. 2317.02(A) and were not subject to discovery or disclosure at trial unless SSD could show that Givaudan had waived the privilege either by giving express consent to disclosure or by voluntarily testifying about those communications. SSD sought and was granted Supreme Court review of the 8th District’s decision.

In today’s decision, the Supreme Court reversed the 8th District and reinstated the trial court’s order compelling discovery of communications between Givaudan and SSD during the period of representation. Justice O’Donnell noted that Ohio courts have recognized several exceptions to the attorney-client privilege codified by R.C. 2317.02(A) notwithstanding their absence from the text of the statute. As examples, he pointed to the “crime-fraud” exception that bars use of attorney-client privilege to conceal an attorney’s cooperation with a client’s wrongdoing; the lack-of-good-faith exception that prevents an insurer from using attorney-client privilege to conceal its bad-faith denial of a claim pursuant to state insurance statutes; and the joint-representation exception that prevents one co-litigant from using attorney-client privilege to conceal information from another party represented by the same attorney in the same case.

With regard to the “self-protection” exception at issue in this case, Justice O’Donnell wrote: “The self-protection exception dates back over 150 years to its articulation by Justice Selden in Rochester City Bank v. Suydam, Sage & Co. (N.Y.Sup.Ct.1851) … There, he wrote, ‘[w]here the attorney or counsel has an interest in the facts communicated to him, and when their disclosure becomes necessary to protect his own personal rights, he must of necessity and in reason be exempted from the obligation of secrecy [sic].’ (emphasis added in part.) Since that time, this exception has become firmly rooted in American jurisprudence. The Supreme Court of the United States recognized it in Hunt v. Blackburn (1888) … and courts and commentators have accepted the self-protection exception as black-letter law defining which communications are subject to the attorney-client privilege.”

“Notably, Ohio courts, including this court, have recognized the self-protection exception. In Estate of Butler (1939) the beneficiaries of the estate of Henry V. Butler challenged the administrator’s payment of legal fees to Butler’s attorney, Grover C. Brown. The probate court struck Brown’s testimony regarding the services he rendered to Butler as privileged pursuant to G.C. 11494, the predecessor to R.C. 2317.02(A). The court of appeals reversed, holding that ‘an attorney in matters pertaining to his interest has a right to testify and is not precluded from doing so by virtue of [G.C.] 11494. The rule is very broad which permits testimony of an attorney in support of his claim for fees.’ …We affirmed that decision, explaining that ‘[s]ince the administrator was charged with maladministration in the allowance and payment of Brown’s claim against the estate, the defense of the administrator was dependent upon establishing the correctness of the claim by showing the amount and value of the services which Brown had rendered to Butler. … We noted that ‘the testimony of Brown (should not) have been wholly excluded on the ground that he had been counsel and attorney for Butler.’”

“Further, the self-protection exception to the attorney-client privilege permitting the attorney to testify also applies when the client puts the representation at issue by charging the attorney with a breach of duty or other wrongdoing … (A) client may not rely on attorney-client communications to establish a claim against the attorney while asserting the attorney-client privilege to prevent the attorney from rebutting that claim. Rather, ‘the attorney-client privilege exists to aid in the administration of justice and must yield in circumstances where justice so requires,’ … The same considerations of justice and fairness that undergird the attorney client privilege prevent a client from employing it in litigation against a lawyer to the lawyer’s disadvantage.”

The Court also rejected Givaudan’s claim that SSD was barred by the privilege conferred on attorney work product from deposing Givaudan’s in-house corporate counsel, Frederick King and Jane Garfinkel, regarding the basis for their judgments that SSD was not providing effective legal representation and had overcharged for its services.

Justice O’Donnell wrote: “When the attorney-client relationship has been put at issue by a claim for legal fees or by a claim that the attorney breached a duty owed to the client, good cause exists for the production of attorney work product to the extent necessary to collect those fees or to defend against the client’s claim. … Thus, attorney work product, including but not limited to mental impressions, theories, and legal conclusions, may be discovered upon a showing of good cause if they are directly at issue in the case, the need for the information is compelling, and the evidence cannot be obtained elsewhere. Here, attorney work product, including information sought from King and Garfinkel regarding the staffing of the butter-flavor litigation, trial strategy, resources committed, and views that the firm provided inadequate representation through counsel lacking sufficient leadership, qualification, and experience, is directly at issue, as the reasonable value of the legal services performed by Squire Sanders and the quality of its legal work are the pivotal issues in this lawsuit, and the need for this evidence is compelling.”

“ … This information is otherwise unavailable to Squire Sanders because it is within the exclusive possession and knowledge of Givaudan, King, and Garfinkel. Accordingly, testimony of King and Garfinkel and documents related to the value and quality of the legal services rendered by Squire Sanders are not protected from discovery in this case by the work-product doctrine.”

Justice O’Donnell’s opinion was joined by Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Maureen O’Connor and Robert R. Cupp.

Justice Judith Ann Lanzinger entered a separate opinion concurring with the Court’s judgment but disagreeing with the distinction drawn by the majority between exceptions to and waivers of the attorney client privilege. She wrote: “(I)n its attempt to distinguish waiver from exception, the majority uses overly broad language and declares that an exception ‘falls into the category of situations in which the privilege does not attach to the communications in the first instance and is therefore excluded from the operation of [R.C. 2317.02.]’ What the majority fails to recognize is that an exception, like a waiver, arises because of some action taken by the client. It is only when the client puts the attorney’s representation at issue that the privilege no longer applies. The majority, however, would retroactively apply that action and hold that the privilege never existed. Because I believe that common-law exceptions are really no different than common-law waivers, I concur in judgment only.”

Chief Justice Eric Brown did not participate in the court’s deliberations or decision in the case.

Contacts
John M. Newman, 216.586.7207, for Squire, Sanders & Dempsey LLP.

Anthony J. Hartman, 216.781.5515, for Givaudan Flavors Corp.

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