You’re having lunch with someone from the business and talking about a project that’s not going well and could lead to unhappiness on both sides – your company and the customer.  Your buddy is spilling her guts about several of the problems they are encountering on the project and her concern that they may not be performing up to the contract terms.  Your first thoughts are that she’s being overly harsh on herself and the team as some of the things she is mentioning may not be a big deal and there is time to correct them.  Then she tells you not to worry about it too much because she and her team have been marking all of their emails and other documents discussing the problems as “Attorney-Client Privilege” so that the team can write down whatever they want and it will never be seen by the customer.  Oh crud, (or words to that effect) you think.   This is a real problem.

One of the in-house lawyer’s most valuable tools is the attorney-client privilege and the ability of the client to ask pointed and raw questions for the purpose of obtaining legal advice.  If not utilized properly, however, this tool can turn into a ballistic missile aimed right at your company.  The applicability and proper use of the attorney-client privilege is a very misunderstood area, especially in the in-house world.  There are a number of things both counsel and the client need to know in order to avoid common mistakes and provide the best possible case for claiming the privilege.  Since some courts are looking at in-house counsel assertions of privilege with a wary eye, it is now more important than ever to get this right.  This edition of Ten Things will discuss what is necessary to claim and preserve the attorney-client privilege.

1. What is the Attorney-Client Privilege? The attorney-client privilege protects from disclosure to third parties: (a) confidential communications; (b) between an attorney and client; (c) made for the purpose of obtaining or providing legal advice.  Unless all three of these prongs are met, the communication is not privileged.  The purpose of the privilege is to allow clients to discuss issues openly in order to obtain legal advice from both in-house and outside counsel without fear that those communications will be disclosed to third parties.   The parameters of the attorney-client privilege in a particular situation depend on the law of the state where the communication took place.   Consequently, it’s important that in-house counsel have a good understanding of how the privilege applies in the state (or country) where their headquarters is located and/or the state (or country) where the attorney practices if not the same as the headquarters. The discussion here is general to the United States and not specific to any state or other country.  Just know that the attorney-client privilege outside the U.S. can be very limited or may not exist at all.  Click here to see a useful summary of how the attorney-client privilege applies globally.
2. Why should I care? If you or the business get the privilege “wrong” there may be numerous long-term consequences for your company.  First, if people mistakenly think documents are privileged, they might be careless in how they write things down, thinking the document will never be seen outside the company.  I am not implying anyone would be untruthful, just that people are more precise, thoughtful, and professional if they know what they write may be seen by third parties.  Second, if you waive the privilege for one document, chances are high that you may have waived the privilege with respect to other documents covering the same subject matter. Third, overly aggressive use of the “privileged” label can cause judges to think that the company is attempting to hide documents and find that such documents — even those legitimately privileged — should be turned over to the other side.  Any of these developments can severely jeopardize your chances of winning in litigation and could lead to a damages award to the other side, as well as the release of potentially embarrassing documents the business thought were privileged.
3. How does it work? The attorney-client privilege applies in limited circumstances, in particular:
   1. Requests for legal advice from a client to an attorney.
   2. Requests for information from an attorney for information needed to formulate or provide legal advice.
   3. The legal advice is actually given by the attorney.

Many lawyers (in-house and outside counsel) mistakenly believe anything they write for any reason is protected by the attorney-client privileged.  They are wrong.  Unless the communication meets the test of (a) – (c) it is not privileged.   Below, I discuss some ways to help best ensure that truly privileged communications are treated as such.  That said, it is up to you to take care to ensure that your communication is privileged or, if at all debatable, that you write the document with the understanding that it may be seen by third-parties, including any adversaries of the company.  See my prior post on writing smart.

4. Legal advice vs. Business advice. In order to invoke the attorney-client privilege, the communication must deal with legal advice.  Legal advice is broader than just litigation-related communications, i.e., it covers all legal advice including transactional and regulatory.  Business advice, however, is never privileged, and – for in-house counsel in particular – the line between the two can appear blurry.   To add to the fun, different judges see things differently with respect to what constitutes legal advice and what constitutes business advice, i.e. what one judge sees as protected legal advice another judge will see as just business advice and subject to discovery.   You need to be constantly vigilant regarding the scope of your communications with the business and understand when you are or are not giving legal advice and, if you are, that you take the extra step to clearly note in the communication that you are providing legal advice.
5. Who can be in the loop? A key test of whether the privilege applies depends on who receives the communication. If a document that is otherwise privileged is shared with third parties, then the privilege is lost.  A third party is generally anyone other than (a) the company’s lawyers, (b) employees of the company with a “need to know,” (c) certain agents of the company and the attorney, and (d) any parties with whom the company has a joint defense or common interest agreement.  The key here is to limit distribution of privileged communications within the company to those with a “need to know” as the bigger the circle of recipients the greater the chance a court may rule the privilege does not apply.  Sometimes it can be difficult to determine which third parties qualify as proper “agents” of the company.  If you get it wrong, the privilege may be lost.  For example, sharing privileged communications with third party contractors/consultants, public relations firms, insurance brokers, and other third parties may destroy the privilege.  Whether or not this so depends on the facts and the laws of any particular state.
6. You must keep legal advice confidential. It is absolutely critical that you and the company keep legal advice confidential.  It cannot be passed along outside that company– a common problem with business colleagues who do not understand the problems doing so can cause.  Likewise, everyone needs to be extremely careful when discussing or accessing privileged communications in public areas, e.g., restaurants, elevators, airplanes, trains, sporting events, etc.  I have personally overheard or seen numerous privileged communications in these places.  As a lawyer, you need to maintain “situational awareness” at all times, and if you must discuss or access privileged information in a public area take extra precautions to not be overheard and not expose your laptop screen to prying eyes.  If that is not possible, you should simply defer the conversation or work until you can get to a private area.  Likewise, as much as you love your spouse or significant other, you cannot discuss privileged information with him or her.  And, as noted above, the more people in the loop on privileged communications the greater the chance that someone trips up on the confidentiality prong.  Bottom-line:  the fewer people receiving the legal advice the better.  Only those with a “need to know” should receive privileged communications (and you should spend time thinking this issue through before sending out any privileged communication).
7. “Confidential” does not mean privileged. A common misperception among the business is that all confidential information is privileged or if they label the communication as privileged they can keep the documents out of the hands of third parties.  As we’ve seen, this is not correct and the fact that there is a non-disclosure agreement or other type of confidentiality agreement in place will not make a document privileged nor will it preserve the privilege if it is disclosed to a third party.  Many business people also believe that if they simply include a lawyer as a recipient of the email then the contents of the email are privileged.    It is very important that you take the time to train your business colleagues and fellow lawyers on this issue.  First, labeling something privileged does not make it privileged.  It depends on whether the communication is for the purposes of obtaining or receiving legal advice.  If that is not the case, there are no magic words that transform an everyday business communication (sensitive or not) into a privileged communication.  Second, the business needs to understand that simply copying a lawyer on the communication (or inviting a lawyer to a meeting) does not make it privileged either.  The communication still needs to meet the test of asking for or providing legal advice.  Another vulnerable spot for privilege issues is attachments to emails.  Unless the attachment on its face or by its contents reflects that it is for the purpose of obtaining legal advice there is a real risk that a court may not view the attachment as privileged, and thereby separating the “privileged” cover note/email from the “non-privileged” attachment and causing headaches for the company.
8. Waiving the privilege. Unfortunately, it is easy to waive the attorney-privilege.  If you disclose a privileged communication to a third party it is very likely waived.  You can also inadvertently waive the privilege.  This typically arises in the context of exchanging documents during the discovery process in litigation, especially when the parties are exchanging a large volume of documents.  Federal Rules of Evidence, Rule 502(d) provides a simple and effective mechanism to cure an inadvertent disclosure of privileged documents during discovery.  Moreover, if privileged documents are accidentally produced not only is there no waiver in the instant case, under FRE 502(d) there is no waiver in any other federal or state proceeding.   With respect to the discovery process, while it is expensive and painful, it is very important that in-house counsel be highly involved in any document production for litigation and that there is a robust plan designed to locate and cull out privileged documents.  Additionally, companies are seeing regulators such as bank regulators demanding that the attorney-privilege be waived regarding certain documents (e.g., internal investigations) as part of any deal to settle or resolve an investigation.  Finally, there are issues around whether a party forced to disclose privileged communications in one jurisdiction due to a subpoena has waived the attorney-client privilege in general as it regards those documents, or if a company can engage in a selective waiver of the privilege.  If you find yourself in any of these situations, you should engage experienced outside counsel to advise you.
9. Other privileges. The attorney-client privilege is not the only privilege available to you.  Though beyond the scope of this post, here are some short descriptions of several others that may apply to your situation and are worth investigating:
   1. The Attorney Work Product privilege. The attorney work-product privilege/doctrine protects from disclosure to third parties materials that are prepared by or for a party or its representative motivated by or in anticipation of litigation.  Note that it does not protect documents prepared for commercial transactions or other non-litigation related legal work (which may still fall under the attorney-client privilege).  A key document used to determine if the Attorney Work Product privilege applies is the litigation hold.  Generally, documents prepared after a litigation hold is put in place and which are otherwise motivated by or in anticipation of that litigation are protected.  Documents created before a litigation hold is in place may be protected but you can see the problem that arises if you claim litigation was anticipated but you did not put a litigation hold in place.  The privilege also applies to documents prepared by non-attorneys, if prepared at the direction or under the supervision of lawyers.
   2. The “self-critical analysis” privilege. In some jurisdictions, the self-critical analysis privilege is a qualified privilege that encourages companies to honestly evaluate themselves in light of some problem or incident yet protects the company from that report or analysis from being used against it in litigation.  Note that whether or not this privilege exists at all is under debate.  This is also the time to mention that internal investigations require special attention when it comes to privilege issues.  Never begin an internal investigation with potential legal issues without consulting with counsel (in-house or external).  You will want to maximize the ability to claim privilege from the beginning, generally by having Legal run the investigation.
   3. Joint Defense/Common Interest privilege. These privileges – really just extensions of the attorney-client privilege – allow separate companies with common legal interests to share privileged communications between them so long as the communications otherwise meet the test for attorney-client communications.  The agreements do not need to be in writing (though it’s obviously better if there is a written agreement). Moreover, common interest (or “community of interest”) privilege can apply to more than just litigation, i.e., it can apply to mergers or other situations where legal interests are aligned.
10. Best practices to preserve the attorney-client privilege.  There are several things you (and your business colleagues) can do to ensure the best possible outcome with respect to protecting the privilege:
    1. The most important thing you can do is to be sure to properly label communications that meet the test for attorney-client communications. The document/email should be labeled “Attorney-Client Communication – For Purpose of Legal Advice.”
    2. Be sure that the document/email clearly states that the person is seeking legal advice or that you (as attorney) are responding to a request for legal advice, e.g., “I am providing you legal advice regarding [X], or “I am seeking your legal advice regarding [Y].” Be sure that any attachment you are being asked to review (or have reviewed and are sending back to the client) is also properly labeled, i.e., “Privileged and Confidential – Legal Advice/Review Sought.” This will give you a better opportunity to claim that the privilege applies to both communications.  It may sound a little silly, but using seven or eight words to clearly state in the cover note/email or on the face of the attachment that legal advice/review is the purpose of the communication can go a long way in convincing a judge that the privilege should apply.
    3. If legal advice is being sought in any email or a memorandum, be sure that the business puts the lawyer in the “to” line vs. the “cc” line. It is difficult to argue that the privilege applies when it appears that the lawyer is not the primary recipient of the communication.
    4. Limit circulation of legal advice and privileged communications internally to those that need to know.
    5. Keep the communication confidential and do not permit the legal advice to be circulated outside the company.
    6. Don’t claim the privilege when it’s not applicable. Not all of your communications are privileged.  If you or your colleagues are incorrectly labeling everything as “attorney-client communication” you can blow your chances of keeping truly privileged documents safe because a judge will, quite frankly, not believe you on the ten actual privileged documents when there are dozens or hundreds of incorrectly labeled documents.
    7. Write smart regardless of your level of confidence that the attorney-client privilege applies. You should always anticipate that anything you write may ultimately end up in the hands of your adversaries.
    8. Know the applicable laws in your state regarding the attorney-client privilege. Everyone on the legal team should know and understand the basics.  Be zealous in your review of documents in production for litigation and if you think the judge got it wrong, strongly consider appealing the judge’s order and moving for a writ of mandamus if necessary.
    9. Understand that outside the United States privilege issues get tricky and you should be very careful with respect to what you think might be a privileged communication.
    10. Train the business on all of the above and find teachable moments when you see something that jeopardizes the privilege or is not a proper use of the privilege.

The attorney-client privilege is a valuable asset of your company.  Treat it as such.  Identify outside counsel to help answer questions about the privilege and ask them for a free CLE/presentation on the scope of the privilege in your state.  Train yourself, your team, and the company on best practices.  Be constantly vigilant and in teaching mode on the issue — and fight like hell to preserve and maintain the privilege when challenged.  Finally, here are two of my favorite blogs:  Presnell on Privileges and McGuire Woods Privilege Points.  Subscribe to these blogs and keep them handy for reference, they are well written and full of very helpful information on privileges.

Sterling Miller

September 30, 2015

Follow me on Twitter @10ThingsLegal where I post articles and stories of interest to in-house counsel daily. 

(If you find this blog useful, please click “follow” in the top right and pass it along to colleagues or friends and/or “Tweet” it. “Ten Things” is not legal advice or legal opinion.  It is intended to provide practical tips and references to the busy in-house practitioner and other readers. You can find this blog and all past posts at www.TenThings.net.  If you have questions or comments, please contact me at either sterling.miller@sbcglobal.net or smiller@goberhilgers.com)