Attorney-Client Privilege Protects Law Firm from Shareholder Derivative Suit, Appellate Court Rules
Upholding a San Diego Superior Court dismissal of a shareholder derivative suit against a law firm, a state appeals court agreed that the litigation against the law firm, which served as outside counsel to the closely held corporation, Brion Reilly Inc., was precluded by attorney-client privilege, the Metropolitan News-Enterprise reports.
Because the defendant law firm, Greenwald & Hoffman, can’t defend itself without violating the privilege, which it is duty-bound not to do, the corporation on whose behalf the suit was brought must either waive the privilege or see the suit dismissed, explains the Fourth District Court of Appeal in an opinion yesterday. However, the dissolving architectural design corporation—in which the plaintiff, Mark Reilly, was a 49 percent shareholder and the defendant, Lena Brion, was a 51 percent shareholder—is either unable or unwilling to do so.
Reilly contended in his suit that the Greenwald firm had committed constructive fraud and negligent misrepresentation by allegedly telling Brion she could keep corporate assets without compensating him for them.
