For The Defense, July 2010 - DRI Today

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P R O F E S S I O N A L L I A B I L I T YIt DependsBy Shari Claire LewisThe Ins and Outs ofAttorney-Corporate-Client PrivilegeBased on educatedpredictions, we mustadvise our clients as tothe steps they can take, atthe time communicationstake place, to avoidwaiver should litigationoccur at a later date.Picture three conference rooms at the corporate headquartersof Any Corporation, Inc. In the first, outside counsel ismeeting with the company’s CEO and general counsel todiscuss acquisition of a competitor’s business. Next door,an assistant in-house counsel is attending ameeting called by the company’s risk managerand IT personnel. Across the hall, thehead of Human Resources is conducting individualinterviews of three employees whowitnessed an incident that occurred in thecompany’s manufacturing plant. The interviewsare being conducted at the request,but in the absence of, insurance- appointeddefense counsel. Each meeting results in aninternal memorandum summarizing whatoccurred. The question, “Which conversationsand resultant memoranda will haveprivileged status if an adverse party seeksdisclosure of their contents in later litigation?”The answer, “It depends.”Clients often assume that all communicationinvolving a lawyer is privilegedand, conversely, that the absence of a lawyer’sdirect participation in a communicationis fatal to a privilege claim. However,attorneycorporate- client privilege and itscousin, the work product doctrine, requirenuanced analyses. In its seminal decisionon attorneycorporate- client privilege, theSupreme Court stated, “We decline to laydown a broad rule or series of rules to governall conceivable future questions in thisarea, even were we able to do so…. Whilesuch a ‘case-by-case’ basis may to someslight extent undermine desirable certaintyin the boundaries of the attorney- clientprivilege, it obeys the spirit of the Rules.”Upjohn v. United States, 449 U.S. 383, 396(1980) (interpreting Fed. R. Evid. 501).The uncertainty is exacerbated by oftencontradictory state and federal laws that maygovern attorneycorporate- client privilegedepending on where a lawsuit is filed. Withthe ever- widening geographic presence ofcorporations, corporate counsel may havedifficulty meaningfully predicting the scopeof the privilege in future litigation in an unknownforum. While each state recognizesattorney- client privilege, the details differ—and, as we all know, the devil is in the detailsThus, those of us who counsel corporationsmust respond “it depends” to our clients’inquires. We must advise as to thesteps, based on educated predictions, that68 n For The Defense n July 2010■ Shari Claire Lewis is a partner in Uniondale, New York, office of Rivkin Radler LLP, in the firm’s Professional Liability and ProductLiability Practice Groups. Ms. Lewis’ practice, at the intersection of law and technology, includes matters involving attorneyand other professional liability, medical device and product liability, and computer and Internet litigation. She is the webcast chairfor DRI’s Professional Liability Committee.
clients may take at the time that communicationtakes place to maintain the privilegeshould litigation occur at a later date.Elements of Attorney-Client PrivilegeBroadly speaking, the four essential elementsof attorney- client privilege are that1. The person asserting the privilege wasor sought to become the client of theattorney;2. The communication was to a lawyer orhis subordinate, and the communicationwas made to that person acting in thatcapacity;3. The communication concerned a factthat was communicated to the attorneyby the client, without a non- clientpresent, for purposes of securing a legalopinion, legal services, or assistance ina legal proceeding and not for the purposeof committing a crime or tort; and4. The privilege has been claimed and notwaived by the client.See Gergacz, Attorney- Corporate ClientPrivilege §3.03:3-6 (3rd ed. 2001) (emphasisadded).The privilege extends only to the communicationitself and not to the underlyingfacts. See, e.g., Brigham & Women’s Hosp.,Inc. v. Teva Pharms. USA, Inc., 2010 U.S.Dist. Lexis 31573, at *14, (D. Del. Mar. 31,2010). A fact does not become undiscoverablemerely because it was communicatedto counsel within the attorney- client relationship.It simply must be discovered fromother sources.For example, the California SupremeCourt recently reversed an order directingdisclosure of portions of a corporate counsel’sopinion letter in which only the factualrecitations were disclosed, and everythingelse was redacted. Costco Wholesale Corporationv. The Superior Court of California,47 Cal. 4th 725 (Cal. 2009). The court heldthat it was the transmission of a communicationas part of rendering legal advice,not the communication’s content, that protectedthe entire document.The third element, above, includes the“crime-fraud exception.” Attorney- clientprivilege does not extend to communicationsadvising a client how to accomplishan illegal act. However, to trigger the exceptionmerely allege that a crime was committed,lest a mere tactical allegation defeatthe attorney- client privilege. Also, advisinga client about how to defend against allegationsthat the client committed a crimeor fraud is not subject to the exception,remaining privileged, as everyone is entitledto obtain legal defense advice.Attorney-Client PrivilegeApplied to CorporationsCorporations, as individuals, have the benefitof the attorney- client privilege. However,its application to attorneycorporate- clientcommunications is complex. As a fictionalentity, a corporation cannot, in and ofitself, act, speak, have knowledge of facts,or perform any deed necessary to invokethe attorney- client privilege. Accordingly,the attorneycorporate- client privilegerequires a factual inquiry into case- specificcircumstances, such as a speaker’s and anattorney’s relationships to a corporation,a communication’s topic and substance,and whether the communication has beentreated by a corporation as confidential.Under federal law, the attorneycorporate-client privilege must satisfy theessential elements described above and asecond set of criteria, culled from Upjohnand its progeny. To successfully invokethe attorneycorporate- client privilege, inaddition to the four elements describedabove, a corporation must establish that1. The communication was made by a corporateemployee to corporate counselupon order of superiors so that the corporationcould obtain legal advice;2. The information that corporate counselneeded to formulate legal advicewas not otherwise available to top- levelmanagement;3. The information communicated by theemployee was within the scope of theemployee’s corporate duties;4. The employee was aware that the reasonfor communication with counsel was sothat the corporation could obtain legaladvice;5. The employee was ordered to keep thecommunication confidential, and it waskept confidential; and6. The identity and resources of the opposingparty lead to the conclusion that anoverwhelming public policy need willnot be allowed to vitiate the privilege.See Gergacz, Attorney- Corporate ClientPrivilege §3.03:3-6–3-7, §3.91:3-163 (3rded. 2001).The Corporate Attorney as Legal CounselThe sine qua non of attorney- corporateclientprivilege is that an attorney act in hisor her capacity as counsel when the communicationoccurs. In today’s corporate environment,attorneys frequently have multipleroles. For example, general counsel may siton a company’s board of directors and participate,in that capacity, in nonlegal, businesscommunication. In his or her dualfunction, counsel may also engage withcorporate employees on a daily basis on awide variety of topics. Nevertheless, communicationsare not magically imbued withattorney- client privilege simply because aparticipant is admitted to the bar. Pragmatically,it is sometimes difficult to establisha clear demarcation between roles, sothe attorneycorporate communication mayhave a “blended” legal and business purpose.Although attorneycorporate- client privilegeextends to communications involvingboth in-house and outside counsel, in reality,courts scrutinize communications within-house counsel more carefully than thosewith outside counsel for several reasons. Outsidecounsel are often presumed to have beenretained because of their legal expertise toprovide specific legal services. On the otherhand, in-house counsel often wear manyhats in a company. Frequently an in-housecounsel has greater awareness of the businessinterest of the company than outsidecounsel. and primarily serves those interests.Also courts have been somewhat concernedthat corporations may try to use the merepresence of in-house counsel to cloak nonconfidentialcommunications in secrecy.Analytically, it may prove useful to askwhether communications involving inhousecounsel (1) are privileged becausein-house counsel has provided legal servicesto the corporation; (2) are privilegedbecause in-house counsel has served as thecorporate speaker in communications withthe outside counsel that enable the corporationto obtain legal advise; or (3) are notprivileged because, despite having a legallicense, in-house counsel has communicatedwith the directors, shareholders, amanagement team, or fellow employees, ina nonlegal capacity or for a purpose otherthan providing legal services.Communicating with a Corporate ClientThe attorneycorporate- client relationshipFor The Defense n July 2010 n 69
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