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Although the attorney-client privilege in Pennsylvania cloaks all communications from a client to a lawyer, it doesn’t protect the lawyer’s communications with the client unless its disclosure would risk exposing the client’s communication, a federal judge has ruled. In Coregis Insurance Co. v. Law Offices of Carole F. Kafrissen, U.S. District Judge Eduardo C. Robreno of the Eastern District of Pennsylvania rejected the argument that the 3rd U.S. Circuit Court of Appeals has already effectively extended the privilege to cover all communications from lawyer to client. Lawyers for Coregis cited a footnote in the 3rd Circuit’s 1997 decision in In re Ford Motor Co. In the footnote, the appellate court said: “It should be noted that the law makes no distinction between communications made by a client and those made by an attorney, provided the communications are for the purpose of securing legal advice. … In other words, the entire discussion between a client and an attorney undertaken to secure legal advice is privileged, no matter whether the client or the attorney is speaking.” But Robreno found that the footnote was both dicta and wrong. “To follow the 3rd Circuit’s dictum in footnote nine would place the court on a collision course with a well developed and consistently applied Pennsylvania rule on attorney-client privilege,” Robreno wrote. “Under these circumstances, and with the greatest respect, the court declines to take Pennsylvania law on attorney-client privilege to where neither the Pennsylvania legislature nor the Pennsylvania Supreme Court authorizes this court to go.” As a result, Robreno ruled that Coregis must turn over two documents from its outside lawyers for an in camera inspection so that the court can determine if the privilege applies. The ruling is just the latest twist in a hard-fought and sometimes ugly battle between a malpractice insurer and a lawyer. In a previous opinion, Robreno ruled that since Coregis had voluntarily paid $800,000 to settle the claim by Kafrissen’s former client, it cannot demand that Kafrissen reimburse it — even if she threatened to give her former client a $3 million consent judgment. Robreno found that Coregis knew that Kafrissen’s threat was “illusory” and that any consent judgment she entered on her own could never be enforced against the insurer. As a result, Robreno found that the settlement Coregis struck with Kafrissen’s former client, Cynthia Clark, was a “voluntary” payment that it cannot now seek to recover from Kafrissen. That ruling was fatal to both of Coregis’ claims. But the litigation continued because Kafrissen had filed a counterclaim against Coregis for bad faith. Kafrissen claims that Coregis engaged in bad faith by settling the malpractice suit without her knowledge or consent and in a way that harmed her reputation. The malpractice suit was filed in 1998 by Clark who claims Kafrissen’s mishandling of her medical malpractice claim cost her millions. During the 1994 trial of Clark’s suit, Kafrissen settled with one of the doctors for $600,000 — $200,000 from the doctor’s primary carrier and $400,000 from the CAT Fund. In the settlement, Clark also agreed to limit her recovery from the nonsettling defendants to $200,000 each. In a separate settlement, the Philadelphia College of Osteopathic Medicine agreed to be held vicariously liable for the negligence of the remaining nonsettling defendants and, in exchange, was removed from the verdict form. The jury found in Clark’s favor and awarded her $4.1 million, finding two doctors equally responsible. But the doctor who had taken the case through trial argued that Clark’s settlement with the other doctor had effectively limited her recovery to an additional $200,000. Kafrissen argued that the settlement with the first doctor was designed only to protect the CAT Fund and therefore did not affect her right to collect half of the verdict, or $2.05 million, from the nonsettling doctor. The trial judge agreed, but said Clark was entitled to just $1.05 million because the joint tortfeasor release with the first doctor was intended to cap the CAT Fund’s contribution and that she was therefore not entitled to receive the $1 million in CAT Fund coverage for the second doctor. But the Pennsylvania Superior Court reversed and held that the joint tortfeasor release was “clear and unambiguous” in limiting Clark’s recovery from the nonsettling defendants to $200,000 each. In her legal malpractice suit, Clark complained that Kafrissen had “failed to understand” the scope of the joint tortfeasor release and “did not fully explain” it to Clark. Coregis provided Kafrissen a defense to the suit, but reserved its right to deny coverage. In 1998, Coregis filed the federal declaratory judgment suit, seeking a ruling that it owed no coverage because Kafrissen had failed to notify the insurer of Clark’s potential claim when she first obtained the policy. Clark demanded $3 million to settle the legal malpractice suit — the limit of Kafrissen’s policy. Coregis claims that when it refused to pay the demand, Kafrissen’s lawyer threatened to enter a consent judgment in Clark’s favor unless Coregis dropped the federal suit. Ultimately, Coregis settled with Clark for $800,000, but continued the federal suit to seek reimbursement from Kafrissen. Judge Robreno found that the insurer’s decision to settle with Clark had effectively mooted its claim for a declaratory judgment. He also ruled that Coregis had no right to seek reimbursement of its voluntary payment to Clark. As a result, the only claim left was Kafrissen’s bad faith claim. Robreno’s opinion on the attorney-client privilege stems from a discovery dispute in which Kafrissen was demanding that Coregis turn over her claims file, including documents from an outside lawyer. Coregis turned over some of the documents, but said six were protected by either the work product doctrine or the attorney-client privilege. After an in camera review, Robreno found that four of the documents were not protected by the work product doctrine and ordered their production. He also found that the remaining two documents, communications between outside counsel and Coregis, were potentially entitled to the protection of the attorney-client privilege. But under Pennsylvania law, Robreno found that the attorney-client privilege applied only to communications by the client to the lawyer, and that communications from the lawyer to the client were protected only to the extent that disclosure would reveal communications of the client to the attorney. Robreno asked Coregis to propose redactions of the portions that, if disclosed, would reveal the client’s communications. Coregis opted instead to take an appeal to the 3rd Circuit under the collateral order doctrine. Kafrissen’s lawyers urged Robreno to declare the appeal frivolous, order production of the documents forthwith, and proceed to trial. Coregis responded by arguing that Robreno’s original ruling on the attorney-client privilege was incorrect since it protects all communications between clients and their lawyers. Now Robreno has issued an opinion that reaffirms and more fully explains his ruling. Robreno found that Pennsylvania’s attorney-client privilege is statutory and clearly protects only communications from the client to the lawyer. “The apparent one-sidedness of the Pennsylvania statute on attorney-client privilege is not a matter of whim or oversight, but rather it is based on sound policy judgments,” Robreno wrote. In 1900, Robreno found, the Pennsylvania Supreme Court held in National Bank of West Grove v. Earle that communications from a lawyer to a client were protected. But in the 101 years since Earle was handed down, Robreno found that the Pennsylvania Supreme Court has never cited it. And the 1976 statute is “plainly at odds” with Earle, he found. As a result, Robreno concluded that “ Earle was either overruled by the legislature directly or by the Pennsylvania Supreme Court sub silentio.” Looking to more recent case law, Robreno found that Pennsylvania courts “have developed a corollary extending the privilege of the statute to the communications from the attorney to the client that, if disclosed, would necessarily reveal the confidences made to him by the client.” Robreno rejected Coregis’ argument that the 3rd Circuit has extended the privilege to cover all communications by lawyers to clients, saying the appellate court’s comment in a footnote to the Ford Motor Co. decision was clearly dicta since it did not relate to the holding in that case. Although dicta from higher courts is “entitled to deference” by inferior courts and “should not be disregarded except for good cause,” Robreno found that it would be wrong to follow the Ford Motor footnote because Pennsylvania courts have been consistent in extending the attorney-client privilege to lawyers’ communications only when they would reveal a client’s communications.

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