A Georgia federal court, sitting in diversity, applied Georgia’s accountant-client privilege to documents exchanged between a Texas accountant and his North Carolina client. The documents would not have been privileged under Texas or North Carolina law because neither state has an accountant-client privilege. But the federal court applied the forum (Georgia) state’s privilege law with little meaningful conflict of law analysis, resulting in a potential windfall for the North Carolina plaintiff and hardship on the Georgia defendant. Christenbury v. Locke Lord Bissell & Liddell, LLP, 285 F.R.D. 675 (N.D. Ga. 2012).
Georgia by way of North Carolina and Texas
The Christenbury case involves a professional negligence claim against an Atlanta attorney regarding tax advice provided to a North Carolina client. The attorney moved for production of documents exchanged between the client and his Texas accountant, whom the client retained post transaction to assist in tax-return preparation. The North Carolina client argued that Georgia’s accountant-client privilege statute protected the documents from discovery, while the defendant attorney argued that Georgia’s privilege law did not apply because the client’s communications with his accountant occurred entirely outside of Georgia.
Georgia on the Court’s Mind
The all-time great hit, Georgia on My Mind, popularized by Ray Charles, contains these lyrics:
Other arms reach out to me
Other eyes smile tenderly
Still in peaceful
dreams I see
The road leads back to you
Perhaps the Court had this tune in mind when it ruled that Georgia’s accountant-client privilege applied to the North Carolina client’s communications with his Texas accountant. The court reviewed Georgia’s privilege, contained in a state statute, and noted that it contained no geographic boundaries. And the court found that Georgia’s public policy of protecting communications between an accountant and her client conflicts with Texas and North Carolina’s failure to recognize the privilege. And finally, the court relied upon a Maryland federal court’s decision to apply Maryland’s accountant-client privilege to a New York accountant and his New York client. Hare v. Family Publications Serv., Inc., 334 F. Supp. 953 (D. Md. 1971).
This case highlights the important conflict of privilege law analysis that many lawyers and courts choose to ignore. This conflict issue appears to be a matter of first impression in Georgia; and while the court may have correctly predicted Georgia law, one may question the court’s analysis in reaching this decision. Did this client, residing in a state (North Carolina) that does not recogize the accountant-client privilege, expect that his communications with an accountant residing in another state (Texas) does that also not recognize the privilege were privileged? Hard to believe that was a legitimate expectation.
The court, sitting in diversity, properly applied Georgia law to this question, but this application of law must include Georgia’s conflict of laws rules. The court failed to discuss whether Georgia’s conflict of laws rules warranted application of the forum law from the old territorial approach of the First Restatement of Conflicts of Laws, or whether Georgia’s conflict of privilege laws embraced the most significant relationship test outlined in the Second Restatement. Georgia recently rejected the Second Restatement‘s choice of law analysis in the torts arena, see Dowis v. Mud Slingers, 621 S.E.2d 413 (Ga. 2005), and perhaps this decision would have persuaded the court to predict that Georgia courts would do the same in the privilege arena. But the analysis was never performed.
One may also question the court’s reliance upon the Maryland federal-court decision’s in Hare. The court stated that Georgia courts find persuasive federal courts’ decisions interpreting federal civil rules. But evidentiary privileges are substantive, not procedural, law and are controlled at the federal level by federal common law under Fed. R. Evid. 501 rather than the federal rules of civil procedure. Moreover, the Hare court, sitting in diversity, applied state law rather than federal.
In sum, perhaps a Georgia court would take the territorial approach and apply its own accountant-client privilege to communications between out-of-state accountants and their clients, but the Christenbury court’s analysis in reaching this decision may be questioned. For a detailed analysis of how conflict of laws rules apply to evidentiary privileges, check out my chapter in Evidentiary Privileges for Corporate Counsel. And in the meantime, enjoy classic Ray Charles’s rendition of Georgia on my Mind.