Can client claim privilege if client does not know his attorney is not licensed? -- UPDATED

A federal court magistrate in New York has decided that information shared with someone the client mistakenly thought was a licensed lawyer is not protected by the attorney/client privilege.

In this case, a trademark infringement claim by Gucci America Inc. against Guess Inc., Guess sought discovery of Gucci's communications with its in-house counsel Jonathan Moss, who was not licensed to practice law in any state at the time. He had been a member of the California bar until 1996 or 1997, but then became inactive. Gucci claimed the communications were protected by the attorney-client privilege but the magistrate disagreed.

In his order, the magistrate states that Gucci cannot "cloak itself under a veil of ignorance" to avoid handing over to a competitor communications with its former chief in-house counsel and held that Gucci could not justify its "mistaken belief" since the company "was plainly in a position to confirm the extent of [Mr. Moss'] qualifications as a legal professional and failed to do so."

Over at the Legal Ethics Forum Prof. Stephen Gillers argues that the decision is wrong because arguably "Gucci officers acted reasonably. The fact that they could easily have discovered [the lawyer's] inactive status (stressed in the opinion and by Guess?) doesn't mean they were unreasonable in accepting that he was a lawyer under the facts of the case. And a lawyer can be inactive one place and active elsewhere."

I agree with this, up to a point. It depends on what the client knew and when. If they knew the guy was not an attorney and confided in him anyway, I don't think the client has a right to then claim the privilege. But if they were, as Prof. Gillers points out, reasonable and really did not know of the attorney's inactive status, I would agree the client should be given the benefit of the privilege. Remember that the attorney client relationship can arise out of a misunderstanding - when the client believes there is a relationship because the attorney was not clear about whether he or she would accept the representation. (remember the Togstad case?)

Following that same line of reasoning, a client should be allowed the benefit of the relationship (the privilege) if the client reasonably believed the attorney was an attorney and that they (client and attorney) had a professional relationship.

Now that the real status of the lawyer is known, another question arises. What if the court takes the magistrate's recommendation and rules against Gucci; can Gucci sue the attorney for malpractice for having hurt Gucci's case because he was negligent in handling his licensing requirements. And, if so, can the attorney claim comparative negligence because Gucci failed to institute a policy to check on the licensing status of its in-house attorneys?

The magistrate's order is available here. For more on this story go to Law.com.

UPDATE #1 (July, 2010): Go here for Prof. Stephen Gillers follow-up comments on the opinion holding that Gucci can't claim privilege over communications with one of its in-house lawyers.

UPDATE #2 (Jan 2011): The magistrate's decision holding that information shared with someone the client mistakenly thought was a licensed lawyer was not protected by the attorney/client privilege was overturned.  See here.