Bernard A. Burk, Assistant Professor of Law Faculty Fellow, Parr Center for Ethics University of North Carolina School of Law, wrote to me in response to my original post with a couple of important points:
1. There is a line of federal district and bankruptcy court decisions in the 90s and 2000s denying or limiting the privilege under similar circumstances. The cases reason, more or less, that internal consultation with firm counsel regarding the firm's rights and duties vis-à-vis a client, at least while the engagement continues, violates the firm's fiduciary duty of loyalty and thus should not be shielded by the attorney-client privilege. They cases include (among others) In re Sunrise Sec. Litig., 130 F.R.D. 560, 595 (E.D. Pa. 1989); Koen Book Distributors v. Powell, Trachtman, Logan, Carrie, Bowman & Lombardo P.C., 212 F.R.D. 283 (E.D. Pa. 2002); Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 220 F.Supp.2d 283 (S.D. N.Y. 2002); SonicBlue Claims LLC v. Portside Growth & Opportunity Fund Ltd. (In re SONICBlue Inc.), No. 03-51775, Bloomberg law Citation: 2008 BL 15488 (Bankr. N.D. Cal. Jan. 18, 2008); Thelen Reid & Priest LLP v. Marland, No. C 06-2071 VRW, 2007 BL 226352 (N.D. Cal. Feb. 21, 2007).
There are all kinds of reasons why, in my humble opinion, the earlier federal decisions are poorly reasoned and implement bad policy. But the issue has been current a lot longer than some may think, and until recently was regularly decided the other way.
2. The ABA House of Delegates recently adopted a resolution supporting the decisions in Georgia and Massachusetts.
Thanks to Bernie for the updates!