Fashion, In-House Counsel, Legal Ethics, S.D.N.Y., Shira Scheindlin

Good News for In-House Counsel: Privilege Prevails in Showdown at Gucci Gulch

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Back in April 2010, we bestowed Lawyer of the Day honors upon Jonathan Moss, former in-house counsel to Gucci. There was a question, however, as to how much of a “lawyer” Moss was.

During his seven years working at the luxury fashion house, Moss did not have an active law license: he was a graduate of Fordham Law and a member of the California bar, but with “inactive” status. As a result, during the discovery process in some trademark litigation, opposing counsel from Guess? challenged Gucci’s assertion of attorney-client privilege over communications to and from Moss. The reasoning: because Moss wasn’t entitled to practice law in any jurisdiction, due to his inactive status with the California bar, the attorney-client privilege did not extend to communications with him.

A federal magistrate judge sided with Guess, concluding that Gucci’s communications with Moss weren’t privileged — and subject to disclosure. Yikes. After conducting an investigation that confirmed Moss’s inactive bar status, Gucci fired him in March 2010.

But now a federal district judge — Judge Shira Scheindlin, that delicious judicial diva of Zubulake fame — has set aside the magistrate’s order, and granted Gucci’s motion for a protective order….

Check out Judge Scheindlin’s opinion and order over here (PDF). Look for it to be widely cited in the future, just like her Zubulake rulings. Her Honor has a willingness to publish detailed opinions about issues that many judges (or their law clerks) might find insufficiently sexy to write about, but that are of great importance to the practicing bar (e.g., electronic discovery).

Here’s a report on her Gucci ruling, from the New York Law Journal:

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Southern District Judge Shira A. Scheindlin held that Gucci was entitled to assume its communications with Jonathan Moss were privileged as it discussed alleged trademark infringement by Guess Inc. and other companies….

Judge Scheindlin set aside the magistrate judge’s order and granted a protective order sought by Gucci, saying the company should not be penalized for Mr. Moss’ failure to tell the company of his bar status.

Judge Scheindlin acknowledged that one element of the classic test for invoking the privilege is that the person to whom the communication was made be “a member of the bar of a court.” Mr. Moss, she said, “clearly held that status.”

However, she said, even if the communications were not made to an attorney, “the privilege may be successfully claimed if the client reasonably believed that the person to whom the communications were made was in fact an attorney.”

She said, “Every communication on legal matters (as opposed to business advice) between Moss and his employer were clearly intended to be protected attorney-client communications. The purpose of the privilege is to protect client communication, and to encourage full and frank disclosure when seeking legal advice, which is why the client holds the privilege and only the client can assert or waive.”

Judge Scheindlin, known as a practical, no-nonsense jurist — although note that she is not related to Judith Sheindlin, aka “Judge Judy” — also cited pragmatic considerations:

[S]he said Gucci “convincingly argued” that rejecting the privilege “would place an unfair and potentially disruptive burden on corporate entities.”

The judge wrote, “To require businesses to continually check whether their in-house counsel have maintained active membership in bar associations before confiding in them simply does not make sense.”

To play devil’s advocate, this sort of checking isn’t that difficult. Above the Law’s in-house columnist, Mark Herrmann, previously explained how to set up a system for avoiding Gucci-style privilege problems.

Of course, it’s better to be safe than sorry. Despite Judge Scheindlin’s ruling, if you’re an in-house lawyer you really should maintain an active law license. The fees aren’t that onerous — what’s a few hundred bucks? — and the continuing legal education requirements aren’t that bad either (assuming your jurisdiction even has a CLE requirement; a fair number, such as Massachusetts and D.C., do not).

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Gucci and Moss may have won a reprieve here, but the overall lesson to be learned is clear: the potential consequences of being found to lie outside the circle of privilege are simply too great to merit the risk.

P.S. Although I’m mainly a writer and editor these days, I handle the occasional legal issue for Breaking Media, ATL’s parent company. So I maintain an active law license here in New York, where Breaking Media is based, so when colleagues consult me about legal issues the communications will be protected by privilege.

P.P.S. ATL can help when it comes to CLE requirements. Click here for some highlighted offerings from our friends at ALI-ABA.

Court Finds Gucci Communication With Unlicensed Lawyer Privileged [New York Law Journal]
Gucci America, Inc. v. Guess?, Inc.: Opinion and Order [U.S. District Court for the Southern District of New York via NYLJ]

Earlier: Inside Straight: Business Development (Part 2)
In-House (and Inactive) Lawyer of the Day: Jonathan Moss

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