August 17, 2017

Tenth Circuit: Attorney-Client Privilege Belongs to Party who Hires Attorney, Not its Executives

The Tenth Circuit Court of Appeals issued its opinion in United States v. Merida on Tuesday, July 12, 2016.

Jason Merida was the executive director of construction for the Choctaw Nation. After an investigation revealed he had engaged in several acts of fraud to the detriment of the Nation, he was charged with several counts related to embezzlement, conspiracy, and failing to report income on his tax returns. Prior to trial, Choctaw’s attorney interviewed Merida. At the beginning of the interview, the attorney informed Merida that he was the attorney for the Nation and the interview was covered by the attorney-client privilege.

The Nation allowed portions of the interview to be used at trial to impeach Merida. When the impeachment testimony was admitted, Merida’s counsel objected and requested a bench conference. He moved for a mistrial, arguing the transcript was protected by the attorney-client privilege because the Nation’s attorneys were acting as Merida’s attorneys during the interview. The district court denied the motion, finding that any privilege belonged to the Tribe. The trial proceeded. After several hours of jury deliberations, the jury delivered to the court a note stating, “We can’t agree on a single count. What are your directions?” The court provided a modified Allen instruction and suggested that they adjourn for the evening and reconvene in the morning. The jury requested to be allowed to vote before adjourning, and quickly returned verdicts of guilty on six counts and not guilty on one count. Merida was sentenced accordingly and appealed, contesting only the court’s denial of his motion for mistrial.

The Tenth Circuit found no error in the district court’s determination that any privilege belonged to the Nation, and further found that its precedent required that determination. The Circuit noted that the Nation’s attorney did not aver that he was Merida’s attorney, but rather said that he was representing the Nation and any conversation was covered by the attorney-client privilege. Merida argued he reasonably believed the attorney was working for him, but the Circuit disagreed, noting that the privilege only applies where the client has sought out the attorney’s services. Since Merida was summoned by the Nation and had not requested the attorney’s services, the privilege did not apply to him.

The Tenth Circuit further evaluated any error that may have been caused, and determined it was harmless beyond a reasonable doubt. The evidence of Merida’s guilt was overwhelming, whereas the questioning that provoked Merida’s motion for a mistrial was only a few pages of the 5,000 page transcript. Merida also argues that it was a “close case” based on the jury’s note that it could not agree on a single count, but the Tenth Circuit found that the circumstances of the case strongly supported a reading that the jury had agreed on six of the seven counts but could not agree on the seventh—a “single” count.

The Tenth Circuit affirmed the district court’s denial of a mistrial because the attorney-client privilege belonged to the Nation. Judge Lucero wrote a separate concurrence to emphasize that Merida could not have subjectively believed the attorney-client privilege to apply to him.

New Rule 502 Added to Colorado Rules of Evidence

The Colorado Supreme Court issued Rule Change 2016(03), adopted and effective March 22, 2016, adding a new Rule 502 to the Colorado Rules of Evidence. Rule 502, “Attorney-Client Privilege and Work Product; Limitations on Waiver,” addresses disclosures of communications covered by the attorney-client privilege or work product doctrine. The rule is effective March 22, 2016. The rule is available below or on the State Judicial website.

Rule 502. Attorney-Client Privilege and
Work Product; Limitations on Waiver

The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or work-product protection.

(a) Disclosure Made in a Colorado Proceeding or to a Colorado Office or Agency; Scope of a Waiver. When the disclosure is made in a Colorado proceeding or to an office or agency of a Colorado state, county, or local government and waives the attorney-client privilege or work- product protection, the waiver extends to an undisclosed communication or information in a Colorado proceeding only if:
(1) the waiver is intentional;
(2) the disclosed and undisclosed communications or information concern the same subject matter; and
(3) they ought in fairness to be considered together.

(b) Inadvertent Disclosure. When made in a Colorado proceeding or to an office or agency of a Colorado state, county, or local government, the disclosure does not operate as a waiver in a Colorado proceeding if:
(1) the disclosure is inadvertent;
(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and
(3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following C.R.C.P. 26(b)(5)(B).

(c) Disclosure Made in a Federal or other State Proceeding. When the disclosure is made in a proceeding in federal court or the court of another state and is not the subject of a court order concerning waiver, the disclosure does not operate as a waiver in a Colorado proceeding if the disclosure:
(1) would not be a waiver under this rule if it had been made in a Colorado proceeding; or
(2) is not a waiver under the law governing the state or federal proceeding where the disclosure occurred.

(d) Controlling Effect of a Court Order. A Colorado court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court – in which event the disclosure is also not a waiver in any other proceeding.

(e) Controlling Effect of a Party Agreement. An agreement on the effect of disclosure in a Colorado proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.

(f) Definitions. In this rule:
(1) “attorney-client privilege” means the protection that applicable law provides for confidential attorney-client communications; and
(2) “work-product protection” means the protection that applicable law provides for tangible material (or its intangible equivalent) prepared in anticipation of litigation or for trial.

For all of the Colorado Supreme Court’s adopted and proposed rule changes, click here.

Bills Regarding Trustee Notification, Recorded Documents, and More Signed

On Wednesday, March 18, 2015, Governor Hickenlooper signed nine bills into law. Governor Hickenlooper has now signed 58 bills this legislative session. The bills signed Wednesday are summarized here.

  • HB 15-1010 – Concerning a Presumption that a Trustee has Notified a Beneficiary when the Trustee has Adopted a Beneficiary Notification Procedure, and, in Connection Therewith, Clarifying that a Trustee May Deliver Information to Beneficiaries Electronically, by Reps. Tracy Kraft-Tharp & Dan Nordberg and Sen. Cheri Jahn. The bill creates a presumption that a beneficiary of a trust has received notifications about the status of a trust when the trustee has notification procedures in place, and also allows electronic notifications for beneficiaries who elect electronic notifications.
  • HB 15-1022 – Concerning Juveniles Charged with Certain Minor Offenses, by Rep. Beth McCann and Sens. Pat Steadman & John Cooke. The bill allows police officers to issue petty offense tickets to juveniles if certain conditions are met.
  • HB 15-1028 – Concerning Repeal of the Mercantile Licensing Standards, by Rep. Jon Keyser and Sen. Cheri Jahn. The bill repeals licensing requirements for merchants because the requirements are not enforced.
  • HB 15-1062 – Concerning Increasing the Penalties for Persons who Engage in Animal Fighting, by Reps. Jovan Melton & Steve Lebsock and Sens. David Balmer & Jerry Sonnenberg. The bill requires mandatory fines for convictions for animal fighting.
  • HB 15-1064 – Concerning Access to the Safe Deposit Box of a Decedent, and, in Connection Therewith, Limiting the Obligations of Custodians who Access the Box, by Rep. Dan Nordberg and Sen. Chris Holbert. The bill clarifies who has access to a decedent’s safe deposit box under the Colorado Probate Code and and clarifies that the custodian is not deemed to have knowledge about the contents of the box.
  • HB 15-1069 – Concerning Information Required to be Included in Recorded Written Instruments Filed with the County Clerk and Recorder to Claim a Homestead Exemption, by Rep. Su Ryden and Sen. Chris Holbert. The bill adds a requirement that a property owner’s name be included on a homestead exemption document.
  • HB 15-1071 – Concerning Clarification that, Following a Merger of Entities, the Surviving Entity is Entitled to Control the Premerger Attorney-Client Privileges of a Constituent Entity, by Rep. Jon Keyser and Sen. Owen Hill. The bill specifies that a corporation that merges with another entity inherits the attorney-client privilege from the other entity.
  • SB 15-057 – Concerning the Reporting Requirements of the Colorado Clean Claims Task Force, by Sen. David Balmer and Rep. Angela Williams. The bill changes the reporting requirements for the Colorado Medical Clean Claims Task Force so that the reports will go to the Commissioner of Insurance and the business committee of the General Assembly.
  • SB 15-142 – Concerning a Change in State Law to Make Requirements for Moneys Held in Escrow for the Payment of Ad Valorem Property Taxes the Same as the Requirements of the Federal “Real Estate Settlement Procedures Act of 1974”, by Sen. Ellen Roberts and Rep. Dan Pabon. The bill conforms state law to the requirements of the federal Real Estate Settlement Procedures Act, specifically repealing May 30 date for final settlement and changing the provision to reference RESPA.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

HB 15-1071: Attorney-Client Privilege Vests in Surviving Entity Post-Merger

On January 9, 2015, Rep. Jon Keyser and Sen. Owen Hill introduced HB 15-1071 — Concerning Clarification That, Following a Merger of Entities, the Surviving Entity is Entitled to Control the Premerger Attorney-Client Privileges of a Constituent Entity. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Existing law specifies that when entities merge, all of the privileges of each of the merging entities vest as a matter of law in the surviving entity. The bill clarifies that the attorney-client privilege is among the privileges that vest in the surviving entity.

The bill was assigned to the House Business Affairs and Labor Committee. It passed committee reading unamended and was referred to the House Committee of the Whole, where it also passed Second and Third Reading unamended.

Tenth Circuit: Privilege Cannot Be Used as Both Sword and Shield

The Tenth Circuit Court of Appeals issued its opinion in Seneca Insurance Co., Inc. v. Western Claims, Inc. on Monday, December 22, 2014.

Seneca hired Western Claims to investigate an insured’s claim for wind and hail damage to buildings. Western’s adjuster investigated and found some damage but determined the buildings had not suffered hail damage to the roof. Later, the insured asked Seneca to reopen its claim based on an estimate from its roofing contractor that it had suffered hail damage to the roof. Eventually, the insured sued Seneca, Western, and the adjuster in Oklahoma state court, claiming all three had mishandled its claims, and sued Seneca for breach of insurance contract, bad faith, and fraud.

During the litigation, Seneca’s claims examiner prepared a large loss report and distributed it to several Seneca executives. Seneca also sought advice from two attorneys in separate firms regarding the lawsuit. The attorneys advised Seneca regarding its potential bad faith liability and recommended settling the lawsuit for $1 million and then suing Western and the adjuster to recover. Seneca followed this advice. In discovery, Seneca disclosed that it had settled the litigation “on advice of counsel.” Western Claims filed a motion to compel documents Seneca relied on in settling the litigation. Seneca objected to the motion and again at trial, claiming the attorney-client privilege and work product doctrine, but the district court found Seneca had put the documents in issue. At trial, several Seneca executives testified that they agreed upon the $1 million settlement “on advice of counsel.”

At the close of Seneca’s case-in-chief, the district court granted Western Claims’s motion for judgment as a matter of law regarding Seneca’s equitable indemnity claim, but allowed the negligence claim to be submitted to the jury, where Western Claims ultimately prevailed. Seneca appealed the district court’s decision to allow Western Claims to discover the correspondence from its attorneys. Western Claims cross-appealed the district court’s denial of its motion for judgment as a matter of law as to the negligence claim.

Seneca argued the district court erred in concluding it waived its right to claim attorney-client privilege and work product protection regarding the correspondence from its attorneys. The Tenth Circuit evaluated whether some “affirmative act” by Seneca waived the privilege. It found that, when Seneca claimed it relied on “advice of counsel” for the settlement amount, it put that advice at issue and thus waived privilege. Seneca claimed that the information was available in other sources, but the Tenth Circuit disagreed, finding that Seneca expressly relied on “advice of counsel” and could not use the advice both as a sword and a shield.

The district court’s judgment was affirmed.

Colorado Court of Appeals: Defendant’s Right to Conflict-Free Counsel Violated When Sentencing Discussions Revealed

The Colorado Court of Appeals issued its opinion in People v. Delgadillo on March 1, 2012.

Sixth Amendment—Conflict of Interest—Attorney-Client Privilege.

Defendant appealed the judgment of conviction entered on a jury verdict finding him guilty of first-degree sexual assault and two counts of contributing to the delinquency of a minor. The judgment was reversed, the sentence was vacated, and the case was remanded for further proceedings.

Defendant took the stand at trial to testify in his own defense. Defendant testified that his counsel advised him that he would receive a sentence of twenty-five to thirty years, if found guilty. Outside the presence of the jury, defendant’s counsel testified in camera regarding his communications with defendant regarding the potential sentence, and defendant indicated that he would have taken the plea bargain instead of proceeding to trial if he had been told that the actual range was four to sixteen years if the sentences were to run concurrently. The case proceeded, and defendant was found guilty.

Defendant contended his Sixth Amendment right to conflict-free counsel was violated when the court swore in his trial counsel and permitted counsel to testify about communications he had with defendant about the ongoing representation. No one asked defendant whether he would waive the attorney–client privilege to allow his counsel to testify, or explained what the consequences might be if defense counsel testified inconsistently with defendant’s trial testimony. The record reflects defense counsel’s inherent conflict in simultaneously trying to respond to questioning from the court and the prosecutor, to justify his earlier advice to defendant, and to remain a zealous advocate on behalf of his client. In the circumstances presented here, including defense counsel’s disclosures of attorney–client privileged information, defense strategy, and the specter of an ineffective assistance claim, there was an actual conflict of interest that deprived defendant of conflict-free representation. Accordingly, the judgment was reversed, the sentence was vacated, and the case was remanded for a new trial.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on March 1, 2012, can be found here.