Money Held by Lawyer Not Privileged -- State ex rel. Koster v. Cain
Can a law firm rely on the attorney-client privilege to avoid responding to garnishment discovery seeking information about client funds held?
In State ex rel. Koster v. Cain, 383 S.W.3d 105 (W.D. 2012), the state sought information from the law firm Stone, Rich & Fiore about how much money it was holding for its client, Hortense Cain. The law firm objected, inter alia stating that the standard form garnishment interrogatories -- which asked questions such as how much the law firm as garnishee was holding for Cain -- sought information protected by the attorney-client privilege. More generally, the firm argued, "Lawyers should not be subject to garnishment for the alleged debts of their clients."
The Western District rejected such arguments on numerous bases. Of particular interest, the appellate court first rejected a bright-line protection, stating "the attorney-client privilege does not afford an attorney with a blanket exemption from garnishment proceedings seeking to attach client funds."
The court then determined the law firm had not carried its burden of proving the interrogatories sought privileged information. In doing so, the court emphasized, "Fee arrangements usually fall outside the scope of the [attorney-client] privilege simply because such information ordinarily reveals no confidential professional communications between attorney and client, and because the information may not be incriminating." (Internal quotations omitted)
That the law firm had already disclosed its fee arrangement when it provided a settlement statement to the state particularly doomed this argument.
Finally, the court noted that communications between a non-lawyer and lawyer concerning non-legal matters are not privileged. The court found that the law firm was merely serving as a conduit for payments, which would not support an attorney-client relationship.
Thus, the quashing of the garnishment was reversed, and the law firm was ordered to provide verified answers to the interogatories within 10 days of issuance of the court's mandate.