Just how different are lawyers?

Take this case: The personnel director of a maker of kidney dialysis equipment discovers that the firm is about to ship some defective equipment.

The executive warns the top brass that the problems will have to be reported to the Food and Drug Administration and, in response, is fired. He sues for lost wages.

There is little doubt that if the firing was in retaliation for his attempts to protect the health and safety of kidney patients, the executive would win his suit.

But when just such a situation developed at the U.S. unit a Swedish manufacturer, the personnel director also was the corporate counsel. When he sued, the trial judge threw out the case, citing precedents that held that the attorney-client privilege prevents a lawyer from suing a client for retaliatory discharge.

An Illinois appellate court last month said the trial judge was wrong, and reinstated the damage suit.

The appellate judges found the precedents didn't apply because they involved relations between individuals and lawyers working for them on legal matters.

In one instance the client dismissed the lawyer when the lawyer refused to destroy documents requested by the other side. The attorney-client privilege was directly involved.

But in a corporate setting, the Sept. 10 ruling in Balla v. Gambro Inc. explained, the link between attorney and client is not nearly as clear. If the executive learned of the defective equipment while he was filling a role other than corporate counsel, then there was no attorney-client privilege, the judges said. Moreover, even when acting as a company's lawyer, an executive gets a lot of information that is not privileged.

But beyond that, the judges found that there are times when other public policy considerations override the protection of even the most confidential communications between client and lawyer. They suggested that actions to protect lives from defective medical equipment are among those exceptions.

In other cases, courts ruled that:

"Predatory hiring" can be an antitrust violation. The U.S. Court of Appeals in San Francisco said it can be illegal for a company to hire top talent simply to keep the employee out of the hands of competitors. Good evidence of such a scheme: Giving the recruited employee little to do. But it's not unlawful, the judges said, if harm to a competitor is a secondary motive when signing on an employee that the company really can use.

(Universal Analytics v. MacNeal-Schwendler, Sept. 14) The federal government has no right to bargain utility rates. Because of the supremacy of the federal government, local governments cannot tax federal facilities. Therefore, Washington argued, a Veterans Administration hospital buying electricity and water from the utility owned by the city of Columbia, Mo., should not have to pay a 7 percent add-on known as a "payment in lieu of taxes" or PILOT. That part of the bill was supposed to give the city treasury the equivalent of the tax it would get from a for-profit customer.

The federal trial court agreed the VA should not have to pay the 7 percent, but that holding was overruled by the U.S. Court of Appeals in St. Louis, which called PILOT a profit component of the utility rate that the feds have to pay just like any other customer.

(U.S. v. Columbia, Sept. 12) A doctor under contract to a company to do routine physical exams of employees can be sued for malpractice for missing serious problems. That holding from the U.S. Court of Appeals in New Orleans is a reversal of the conventional legal wisdom, which held that if the doctor is selected by and paid by a company, then the employee being examined is not truly a patient to whom a duty is owed.

The appellate judges reasoned that just by holding themselves out as skilled in the medical arts, doctors assume some obligation to everyone they treat. At the very least, they have liability to correctly interpret any tests they choose to perform. The ruling gave the green light to claims by a widow against the company doctor who took a chest X-ray of her husband as part of a company physical, but failed to diagnose the lung cancer that eventually caused his death. (Green v. Walker, Sept. 6)

Daniel B. Moskowitz is a Washington editor for Business Week newsletters.