The Fourth District holds that an attorney cannot hide behind the shield of attorney-client privilege in seeking to avoid liability to pay a referral fee, when the client has waived the attorney-client privilege sufficiently to allow the attorney to defend the claim.
William Dietz alleged that Meisenheimer & Herron and Meisenheimer, Herron & Steele (Meisenheimer) refused to pay a twenty-five percent referral fee and that he was a third party beneficiary of the agreement between Meisenheimer and the client, Vital Services Company Inc. (Vital). Meisenheimer moved to dismiss on the grounds that it could not present a complete defense to Dietz’s claims without violating ethical duties that it owed to Vital, including the attorney-client privilege.
In the course of the referral fee litigation, Vital had entered into multiple waivers of its attorney-client privilege and its confidentiality rights. However, Meisenheimer claimed that it was unable to obtain all discovery it needed that would show Vital had not paid the contingency fee under the original fee agreement, but instead paid a different fee based on a post-settlement fee dispute negotiation between Vital and Meisenheimer.
Vital waived the attorney-client privilege with respect to anything having to do with the Vital/Meisenheimer fee dispute in the bad faith litigation, but took the position that certain tax advice had nothing to do with the fee dispute. At the time of trial Vitale waived privileges regarding any statements made between Vital and the various attorneys involved in the Vital/Meisenheimer fee dispute concerning tax advice, but would not waive the privilege as to tax advice given by its personal counsel; its tax returns; information the Meisenheimer attorney developed during his representation] inconsistent with the Vital’s tax position at the time of the settlement, but that was not discussed between any of the parties; and advice by Vital’s personal counsel to Vital about the Meisenheimer/Vital fee dispute..
At trial, in an effort to use the attorney-client privilege as a shield, a Meisenheimer attorney continued to assert that the attorney-client privilege, despite Vital’s waivers, still precluded him from explaining how the tax advice led him to conclude that Vital repudiated the original fee agreement with the referral fee. By contrast, Vital representatives testified as to the content of the tax advice Meisenheimer claimed was the privileged, and that the tax advice was not related to the fee dispute between Meisenheimer and Vital, which was based on Meisenheimer’s attempt to overcharge Vital. According to Vital, eventually the fee was paid pursuant to the original, not a new, fee agreement.
The trial court found that there had been a sufficient waiver by Vital to proceed on all causes of action except for fraud. What Vital did maintain remained privileged was not related to Meisenheimer’s attorney-client relationship with Vital. Evidence that remained within the privilege related to Meisenheimer’s motivations and actions, which are issues relevant only to fraud and punitive damages.
The Dietz court rejected the idea that precedent forbids a court from balancing the competing interest of the parties. A lawyer plaintiff cannot rely on privileged information in proving the elements of his or her claims. If this is the case, no balancing is permitted, and dismissal is required. However, a trial court can consider the interests of a plaintiff if the claim is not premised on confidential information. In fact, a trial court is required to consider such competing interests before taking the drastic action of dismissing a plaintiff’s claim.
The court noted that dismissal is reserved for the rarest of cases. There are four factors that a court must consider: the client information must be confidential and the client must be unwilling to waive the privilege. The information must be material to the defense. The trial court must determine whether it is able to effectively use ad hoc measures from its equitable arsenal such as sealing and protective orders to permit the action to proceed.
Finally, a trial court should consider whether it would be fundamentally unfair to allow the action to proceed. This is premised on the notion that the privilege may not be used both as a sword and a shield. Thus the court should consider the inherent unfairness in allowing a plaintiff to bring a claim which necessitates a defense based on confidential information.
The trial court correctly concluded that with one exception, the matters which Vital continued to claim were privileged did not arise from duties owed by Meisenheimer to Vital. The advice given by Vital’s personal counsel is not evidence that arises from an attorney-client relationship between Meisenheimer and Vital and did not arise from confidential information shared between Meisenheimer and Vital. There was no authority for the proposition that a defendant may obtain dismissal of a case merely because some evidence that might be beneficial to the defendant is protected by a privilege and is therefore not subject to discovery and/or may not be introduced in evidence.
The evidence Meisenheimmer sought to introduce regarding Vital’s tax planning, while conceding it might be relevant, was not shown to be material to its defense. The evidence was not the central issue in the case. Indeed, the trial court could not find a logical nexus between the current dispute and the privileged information. Furthermore, the scope of the evidence excluded was exceedingly narrow. Communications about the terms of the agreements and the modifications were waived, which was the key information necessary to prosecute and defend all of the causes of action except fraud. Meisenheimer made no showing in the trial court as to the specific confidential information that it claimed it was forbidden to disclose. Thus, at best, the trial court excluded only a narrow slice of evidence that was not directly relevant to the core issues of the case.
Meisenheimer declined Vital’s offer to consider further waivers if Meisenheimer would reveal to Vital the information that Meisenheimer was contending it could not disclose. The court declined Dietz’s request for an in camera hearing where the court could determine if there was relevant information left within the scope of the privilege. Thus Dietz requested that the trial court determine whether Meisenheimer had an ongoing duty to maintain the confidentiality of information it claimed was relevant to its defense, and Vital suggested an alternative procedure that may have relieved Meisenheimer of any such duty. Meisenheimer’s refusal to reveal, even to its own former client, the confidential information that Meisenheimer contended it had to disclose in order to adequately defend itself in Dietz’s action, is an additional factor supporting the trial court’s refusal to dismiss Dietz’s action in its entirety.
Further, unlike precedent where the attorney client privilege precluded a cause of action, Dietz had never participated in the sharing of confidential information with Meisenheimmer and Meisenheimer never provided legal advice to Dietz based on confidential material about the client supplied by Dietz. Dietz did not seek to stand in the shoes of the client. Thus Dietz’s action does not involve the affirmative use of the confidential information.
Meisenheimer did not seek clarification of the scope of the waiver through appropriate pre-trial discovery and motion practice. Rather Meisenheimer chose to file a motion for a protective order seeking dismissal of the action on the eve of trial. It did not seek to continue the trial to conduct further discovery in light of the trial court’s rulings. There was no due process violation.
Comment: As non-clients continue to bring actions against attorneys, the use of the attorney-client privilege as a shield from liability will continue to develop.