Legal Update

Jan 14, 2013

Are Your Corporate Communications Protected by the Attorney-Client Privilege? Cases in 2012 Remind Us That Claims of Privilege By In-House Counsel Are Carefully Scrutinized By Courts

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Several cases decided within the last year serve as a stark reminder that claims of privilege by in-house counsel are closely scrutinized by courts, and oftentimes, courts conclude that communications between in-house counsel and their clients are not protected.  This alert takes a look at how some courts addressed the privilege for in-house counsel in 2012.  We also provide practical pointers on how in-house counsel can endeavor to protect client communications involving legal advice.

In order to determine whether a communication with in-house counsel is privileged, courts ask a number of questions:

What Is The Purpose of The Communication?

When a Senior Vice President of a company calls outside counsel to discuss a legal issue her company is facing, rarely is there ever a question of whether that conversation is protected by the attorney-client privilege.  Indeed, the communication is protected so long as it was between attorney and client, made in confidence for the purpose of rendering legal advice and it remains confidential.  But what if the SVP in our scenario had the same discussion with her company’s in-house counsel?  Chances are, a court would consider that conversation with much more scrutiny and might, depending on the circumstances, conclude that the same discussion is not privileged if it involved in-house counsel.  Part of the analysis the court would undertake is to ask whether in-house counsel was truly acting as an attorney who is rendering legal advice.

Recently, a United States Magistrate Judge for the Middle District of Florida distinguished between outside and in-house counsel for purposes of determining whether certain communications were protected by the attorney-client privilege.  United States ex rel. Elin Baklid-Kunz v. Halifax Hospital Medical Center, et al., No. 09-cv-1002, 2012 U.S. Dist. LEXIS 158944 (M.D. Fla. Nov. 6, 2012).  Recognizing that in-house counsel participate in a variety of non-legal decisions, involving, for example, business or public relations issues, the Magistrate Judge ruled that “[c]ommunications between corporate client and outside litigation counsel are cloaked with a presumption of privilege.  Communications between corporate client and corporate counsel--on the other hand--involve a much different dynamic and require the proponent to satisfy a ‘purpose and intent’ threshold test.”  Id. at *8-9 (citations omitted).

Under this test, if the purpose of the communication is to give or request general business advice, even between in-house counsel and the client, it is not protected by the privilege.  In considering the purpose of the communication, the Halifax court cited federal decisions out of New York, California and Louisiana in which courts held that if a communication is emailed to both a lawyer and a non-lawyer, the primary purpose of the communication could not have been for the purpose of requesting legal advice because the communication served both a business and legal purpose.

In February 2012, a United States Magistrate Judge for the Middle District of Pennsylvania, in the case of Craig v. Rite Aid Corp. et al., took a similar approach, finding that in order to protect certain communications, Rite Aid needed to “make a ‘clear showing’ that the ‘speaker’ made the communications for the purpose of obtaining or providing legal advice.”  No. 08-cv-2317, 2012 U.S. Dist. LEXIS 16418 (M.D. Pa. Feb. 9, 2012) (citations omitted).  In Craig, the court found that certain documents, including emails on which in-house counsel was copied, were not privileged because they concerned factual matters or business-related considerations in regard to Rite Aid’s restructuring process.

Who Is The Communication Between?

Courts also look to the parties to the communication to determine whether it is protected by the attorney-client privilege.  In the case of In Re Google, Inc., the United States Court of Appeals for the Federal Circuit found that an email sent by Google engineers to the company’s vice president, copying the company’s senior counsel, was not privileged.  462 Fed. Appx. 975 (Fed. Cir. Feb. 6, 2012).

Prior to the communication, senior counsel had met with the engineers to formulate a response to patent infringement claims made by Oracle, which were based on Google’s use of a Java software platform for its Android phone.  After the meeting, the Google engineers sent the email at issue stating that all of the alternatives to using the Java platform “sucked” and that the company should negotiate a license for Java (presumably with Oracle).  The court found that the communication was not privileged, pointing to the fact that in-house counsel was merely “cc’d” on the email and the engineer expressly stated that he was responding to a request from Google’s management, not Google’s attorneys

As in the cases discussed above, the Google court also examined the purpose of the communication and found that the email was directed at a negotiation strategy, not a legal strategy.  Therefore, the court concluded that the email was not privileged.

And of course a privileged communication must involve an attorney, or at least be related to the corporation’s efforts to secure legal advice.  In Halifax, the hospital attempted to shield the content of a compliance log, arguing that the entries were prepared for the purpose of obtaining legal advice.  The court disagreed, finding that none of the communications evidenced legal advice sought or received.  No lawyer commented on the information recorded, nor did any employee in the department seek the advice of counsel pertaining to the log.  The court found that the communications 1) were between non-attorneys; 2) did not reflect legal advice that had been received and then sent on to those who needed to know that advice; and 3) did not reflect information gathered for the purpose of the corporation receiving legal advice.  In finding that the privilege did not apply, the court also observed that some of the log entries did not even refer to communications, but merely factual records.

Is The Communication Confidential?

Vital to maintaining a claim of privilege is a showing that the communication was made in confidence for the purpose of obtaining legal advice from a lawyer.  In Ravenell v. Avis Budget Group, Inc., a Fair Labor Standards Act case,  plaintiffs sought disclosure of defendants’ communications with a third-party auditing company.  No. 08-cv-2113, 2012 U.S. Dist. LEXIS 48658 (E.D.N.Y. Apr. 5, 2012).  In-house counsel for the defendants hired the auditing company to disseminate and collect questionnaires for an audit via the internet.  In-house counsel also asked the auditing company to review responses to the questionnaires and make a preliminary assessment of whether the data supported a classification of an employee as exempt or non-exempt. 

The Ravenell court found that in-house counsel’s use of the auditing company to review and assess the questionnaires waived the company’s attorney-client privilege.  Disseminating and collecting questionnaires to thousands of the employees was beyond the technological capabilities of in-house counsel and, therefore, the auditing company’s involvement was essential to allow in-house counsel to render legal advice.  However, having the auditing company review the responses once collected was not essential to allow in-house counsel to render legal advice.  In that regard, the auditing company neither improved the comprehension of the communications between attorney and client nor provided advice outside the general expertise of in-house counsel.  

The above cases are by no means an exhaustive review of all of 2012 case law pertaining to the privilege for in-house counsel.  But these cases nevertheless remind us that corporate counsel’s claims of privilege are not cloaked with the presumptions enjoyed by outside counsel.

How Can I Best Protect Privileged Communications?

In-house counsel should take steps to protect their privileged communications and, on the other hand, avoid common pitfalls. 

In-House Counsel SHOULD:

  • Designate privileged communications to the corporation as being “for the purpose of rendering legal advice.” 
     
  • Have those communicating with you designate privileged communications “for the purpose of seeking legal advice.”
     
  • Keep the group of those involved in the communications narrow.  Include only those who have a need to know or who are in management roles on communications.  Keep in mind that some states, such as Illinois, follow the minority view that only communications with those within the “control group” of the company are privileged.
     
  • Parse your business roles from your legal roles as distinctly as possible.  Create documents accordingly.
     
  • Provide legal advice and conclusions in connection with your investigations, as opposed to simply conducting an investigation.
     
  • Make sure you are a member of the bar and meet continuing licensing requirements if you often provide legal counsel to the company on matters that will likely be litigated.
     
  • Include a legal title in your email signature line.
     
  • Involve outside counsel if you are in doubt!

In-House Counsel SHOULDN’T:

  • Over-designate communications as privileged.  Similarly, don’t assume that a document is privileged just because you designate it as such.
     
  • Assume a communication is privileged just because you are “cc’d” on a document, received documents or information, or were present in the room during discussions.
     
  • Assume factual information is privileged just because it was conveyed to you.
     
  • Make a habit of writing “memos to file” without communicating your legal advice to the client.
     
  • Hit “reply to all” without first considering your audience.
     
  • Assign legal functions to outside vendors who are not lawyers unless their function is outside of your general area of expertise and essential to your ability to render legal advice.

In-house counsel should take heed, however, that following these best practices will not guarantee that a communication will be found to be privileged.  Similarly, every situation is different and a court’s determination as to whether a communication is privileged is a highly fact-specific inquiry, weighing a variety of factors in varying degrees.