Recently, the U.S. District Court for the Southern District of New York held in a discovery order that the attorney-client privilege does not apply to communications between a client-corporation and its in-house attorney when the in-house attorney was an inactive member of his state bar. In that case, Gucci America, Inc. v. Guess?, Inc., et al., 2010 U.S. Dist. LEXIS 65871, Case No. 09-CV-04373 (S.D.N.Y. June 29, 2010), United States Magistrate Judge Cott held that an inactive attorney is not an “attorney” for purposes of attorney-client privilege, and therefore the attorney-client privilege did not apply to communications between that attorney and his client-company. The court held that the attorney-client privilege could still apply if the client reasonably believed that the attorney was authorized to practice law; however, the court held that the privilege did not apply here because the client-company did not make a reasonable effort to ascertain the attorney’s qualifications and status.

This case is significant for companies that employ in-house counsel. In order to maximize the protection afforded by the attorney-client privilege, in-house counsel must maintain their active bar status to avoid any argument that the privilege should not apply to the in-house counsel. Prior to hiring an attorney as in-house counsel, a company should conduct a background check into the attorney’s qualifications as an attorney and the attorney’s state bar membership status. A company that already employs in-house counsel should establish a procedure to verify annually that their in-house attorneys’ bar status is active. The company should also require in-house counsel to immediately disclose to the company if their state bar membership expires.

Most state bar websites provide a way to quickly verify whether an attorney is an active member of the state bar. For example, a Wisconsin attorney’s license can be verified here. An Illinois attorney’s license can be verified here.