Opinion ID: 2039191
Heading Depth: 1
Heading Rank: 5

Heading: Joint-Client Exception.

Text: Only a few exceptions have been carved from the attorney-client privilege. See Hickman v. Taylor, 329 U.S. 495, 511, 67 S.Ct. 385, 393-94, 91 L.Ed. 451, 462 (1947) (recognizing that exceptions tend to have a detrimental effect on attorney advocacy). One such exception exists where two or more persons jointly consult with the same attorney to act for them in a matter of common interest. See City of Coralville v. Iowa Dist. Ct., 634 N.W.2d 675, 677-78 (Iowa 2001). This exception is known as the joint-client exception. Actual consultation by both clients with the attorney is not a prerequisite to the application of the joint-client exception. Id. at 677-78. The attorney is duty-bound to divulge such communications by one joint client to the other joint client. Id. Thus, when the same attorney acts for two parties, the communications are privileged from third persons in the controversy, but not in a subsequent controversy between the two parties. 1 John W. Strong, McCormick on Evidence § 91, at 365-66 (5th ed.1999). We recognize this exception extends to situations where the same attorney represents two parties, separately interested in a matter of common interest. City of Coralville, 634 N.W.2d at 677-78; Henke v. Iowa Home Mut. Cas. Co., 249 Iowa 614, 619, 87 N.W.2d 920, 924 (1958) (holding attorney-client privilege does not exist because the attorney has a duty under the circumstances to divulge communications from one client to the other). The rationale for the joint-client exception is simply that if it appears the secret or imparted communication is such that the attorney is under a duty to divulge it for the protection of the others he has undertaken to represent in the involved transaction, then the communication is not privileged. Henke, 249 Iowa at 619, 87 N.W.2d at 924. On two prior occasions, we have permitted discovery of communications between an attorney and a client under the joint-client exception. In Henke, we held that communications between an automobile liability insurer and an attorney employed by the insurer to defend the insured in litigation resulting from an automobile accident were not privileged in a subsequent action by the insured against the insurer for bad faith and negligence in failing to settle the underlying litigation within the policy limits. 249 Iowa at 619, 87 N.W.2d at 924. More recently, in City of Coralville, we held that communications between city officials and an attorney retained by the city to defend the city and a police officer in an action for damages arising out of an arrest were not privileged in a later action by the police officer against the city arising out of the settlement of the first action after that point in time where the facts revealed an attorney-client relationship formed between the attorney and the police officer. 634 N.W.2d at 679. Brandon relies on these cases to support her claim for discovery in this case. She claims she formed an attorney-client relationship with Thill once he filed the Illinois lawsuit in her name. When an attorney enters an appearance in court on behalf of another, we presume an attorney-client relationship exists between the attorney and the person on whose behalf the attorney enters the appearance. See Henke, 249 Iowa at 617, 87 N.W.2d at 923. We recognize this presumption because an attorney has no right to bring an action on behalf of an individual without authorization. By bringing an action, the attorney subjects the client to sanctions, counterclaims, discovery requests, and a judgment for costs if the suit is unsuccessful. Additionally, under Illinois law, where Thill filed Brandon's tort suit, it is unethical and illegal for an attorney to bring an action on behalf of an individual if there is no attorney-client relationship. Foley v. Metro. Sanitary Dist., 213 Ill.App.3d 344, 157 Ill.Dec. 514, 572 N.E.2d 978, 984 (1991). We assume an attorney is acting ethically and legally when an attorney brings an action on behalf of an individual and therefore a presumption that an attorney-client relationship exists is warranted. A party may rebut the presumption of an attorney-client relationship by evidence that the client did not assent to the filing of the action. See Henke, 249 Iowa at 617-18, 87 N.W.2d at 923. Although it is critical that there be an undertaking by the lawyer to represent the purported client, it is equally important that there be an acceptance of the lawyer's services by the alleged client. See Henke, 249 Iowa at 617, 87 N.W.2d at 923; City of Coralville, 634 N.W.2d at 679. Further, although [t]he fact that another selects and pays [the] attorney is a factor in determining the existence of an attorney-client relationship, this circumstance does not prevent the formation of such a relationship. Henke, 249 Iowa at 617, 87 N.W.2d at 923; accord City of Coralville, 634 N.W.2d at 679. Applying this law to the facts and circumstances of the present case, we conclude there was substantial evidence to support the trial court's conclusion there was an attorney-client relationship between Thill and Brandon. In a letter dated March 7, 2001, Brandon's counsel informed West Bend that neither Brandon nor her counsel intended to pursue a claim against the tortfeasor and authorized West Bend to bring the action against the tortfeasor to protect its subrogation rights. West Bend and Thill knew under Illinois law that such an action had to be brought in Brandon's name. Instead of hiring other counsel, which would have preserved West Bend's attorney-client privilege, West Bend hired Thill to file the subrogation action in Brandon's name. On May 9, 2001, Thill informed Brandon's attorney that West Bend filed an action in Illinois naming Brandon as the plaintiff. Not only did Brandon assent to the representation by Thill in her attorney's letter of March 7, 2001, Brandon's insurance policy contractually required Brandon to assent to the representation. Part F of the insurance policy issued by West Bend to Brandon provided: Our right to recover payment A. If we make a payment under this coverage form and the person to or for whom payment was made has a right to recover damages from another we shall be subrogated to that right. That person shall do: 1. whatever is necessary to enable us to exercise our right. The facts of the present case are not much different from the facts in City of Coralville, 634 N.W.2d 675. In City of Coralville, the city and one of its police officers were sued under 42 U.S.C. § 1983 and common law for damages allegedly arising out of an arrest made by a police officer. 634 N.W.2d at 676. The city authorized an attorney to file an appearance on behalf of the officer in order to avoid a default judgment. Id. at 676-77. The assistant city attorney informed the officer that the city had a legal obligation to provide a defense to the officer. Id. at 676. The officer never consulted with the attorney who appeared on the officer's behalf. Id. at 679. The officer was unaware that the attorney filed the appearance. Id. Under these circumstances, we found an attorney-client relationship existed between the attorney and the officer because the city informed the officer that the city had an obligation to defend the officer, and the attorney did in fact represent the officer by filing two appearances and motions. Id. In the present case, Brandon's attorney acknowledged West Bend's subrogation rights and authorized West Bend to pursue those rights. The insurance policy contractually obligated Brandon to assent to the representation. Thill undertook that representation by filing an action naming Brandon as plaintiff. These facts will not allow West Bend to rebut the attorney-client relationship presumed by Thill's act of filing the subrogation claim in Brandon's name. It is equally clear from the record that Brandon and West Bend did maintain a common interest in the Illinois action. In Henke, we noted a common interest exists where two or more parties consulted an attorney for the mutual benefit of the parties. 249 Iowa at 618, 87 N.W.2d at 923. In City of Coralville, we characterized a common interest as two or more parties having an interest in some problem or situation. 634 N.W.2d at 677. At the time Thill filed the Illinois action in Brandon's name, West Bend claims Thill filed the action solely to protect West Bend's subrogation interest and not Brandon's interest. It points to the fact that Thill settled the Illinois case without Brandon's active participation. The flaw in this argument is that West Bend did not have an interest in the proceeds from the Illinois action until Brandon received full compensation for her damages under the full recovery rule governing UIM coverage. Iowa Code section 516A.4 gives West Bend the right of reimbursement from or subrogation to Brandon's recovery from the underinsured tortfeasor. Iowa Code § 516A.4 (2001). The right of reimbursement is limited by the goal of underinsurance, which is to fully compensate the insured for his or her damages. McClure v. Northland Ins. Cos., 424 N.W.2d 448, 450 (Iowa 1988). The full recovery rule requires that the insurance company's claim for reimbursement does not mature until the insured has been fully compensated for his or her damages. Cont'l W. Ins. Co. v. Krebill, 492 N.W.2d 405, 406-07 (Iowa 1992). At the time Thill filed the Illinois action, Brandon was entitled to receive Schultz's $20,000 in addition to the $5000 medical payment she previously received from West Bend because she had not yet been fully compensated for her damages. If at a later time it is determined that Brandon's damages exceed $325,000, Brandon would be entitled to the underinsured motorist limits ($300,000), the $5000 medical payment, and the $20,000 proceeds from the Illinois lawsuit under the full recovery rule. On the other hand, if at a later time it is determined that Brandon's damages are less than $325,000, West Bend would be entitled to reimbursement from Brandon for the $5000 medical payment it made and/or from the Illinois settlement proceeds she received in an amount equal to the excess she recovered for her damages. [2] At the time Thill filed suit in Illinois, West Bend took the position Brandon's damages were less than West Bend's underinsured limits; therefore, it claimed it was entitled to any settlement proceeds recovered in the Illinois action. At that point in the controversy, Brandon claimed her damages exceeded West Bend's UIM limits. West Bend's argument overlooks that if it is ultimately determined Brandon's damages exceeded $325,000, West Bend would not be entitled to any of the Illinois settlement proceeds. Until Brandon's damages are finally determined in the UIM action, West Bend's right of reimbursement remains unknown. Because West Bend's right of reimbursement was unknown at the time Thill filed the Illinois action, Thill's representation of Brandon in the Illinois action was for the mutual benefit of Brandon and West Bend, who had a common interest in a recovery against Schultz. Therefore, communications with Thill during the period of joint representation are subject to the joint-client exception to the attorney-client privilege and the work product doctrine.