Just because a law firm yells attorney-client privilege doesn’t mean it can automatically escape a malpractice claim.
Too bad for Irell & Manella. Looks like that firm will have to endure a $150 million malpractice action a while longer, because today Santa Ana U.S. District Judge Andrew Guilford rejected the firm’s motion to dismiss a complaint brought by Charter Communications Inc.
Case law does not “require dismissal whenever a law firm defendant suggests that client confidences are threatened,” Guilford wrote (.pdf). “Instead, they require a showing that the case can be tried fairly only by revealing client confidences.”
Which Irell has yet to demonstrate, the judge ruled.
Irell represented the cable company and its chairman, uber-rich techie Paul Allen, in acquiring existing cable systems across the country. According to the tentative ruling (which had to assume the allegations are true), one of Irell’s associates mistakenly deleted two paragraphs of a contract, which led to Allen acquiring a type of stock he wasn’t supposed to. That forced Charter to pay Allen “millions of dollars” to undo the damage.
L.A.-based Irell tried to snuff the suit by arguing it could not defend itself without revealing Allen’s client confidences, over his objections. And while Guilford found that very well may end up the case, “the dust of initial posturing has not yet sufficiently settled” to determine whether Irell could mount a defense without breaking privilege.
The court found Irell had not yet pinpointed the specific privileged issues it needs to be able to discuss. Plus, Charter says Allen “has agreed to numerous waivers of his confidentiality rights.” So even though Irell still says these waivers will not allow it a full defense, “this issue has not been adequately tested,” Guilford ruled.
Irell did get a few kind words from the judge, who denied the motion without prejudice.
“The court is aware of the danger to [Irell] of a ‘death by pin pricks,’” Guilford wrote. “In other words, the court realizes that multiple decisions that this or that part of [Irell’s] papers is unnecessary could, added together, prejudice [the firm’s] ability to mount a full defense. The court will avoid that result.”
— Dan Levine
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