Southern District of New York Strips Gucci of its Privilege

August 11, 2010

Most courts analyzing privilege protection honor a client’s reasonable belief that the person with whom they are dealing can act as a legal advisor. However, in a 2000 case, the Southern District of New York refused to extend that principle to corporations. Fin. Techs. Int’l, Inc. v. Smith, No. 99 Civ. 9351 (GEL) (RLE), 2000 U.S. Dist. LEXIS 18220 (S.D.N.Y. Dec. 19, 2000).

In Gucci America, Inc. v. Guess?, Inc., No. 09 Civ. 4373 (SAS) (JLC), 2010 U.S. Dist. LEXIS 65871 (S.D.N.Y. June 29, 2010), the Southern District of New York struck again. Relying on its earlier decision, the court held that the attorney-client privilege did not protect communications to and from Gucci’s Vice President and Director of Legal and Real Estate – because for thirteen years he had been only an inactive member of one bar (California). Although acknowledging that the privilege could apply if Gucci demonstrated that it “reasonably believed” its in-house lawyer was authorized to practice law, the court concluded that Gucci’s “belief cannot be characterized as reasonable” – because it never engaged in any due diligence “to confirm his professional status as an attorney.” Id. at *23-24. The court concluded that “Gucci cannot now cloak itself under a veil of ignorance to avoid its discovery obligations,” and that “Gucci itself bears responsibility for allowing its counsel to represent its interests without ensuring that he was authorized to do so.” Id. at *26-27.

Most problems like this came to light several years ago, as states began to require in-house lawyers practicing within their borders (but licensed only in other states) to register with the bar. However, this decision highlights the need for continuing corporate vigilance.