Attorney-Client Privilege and the In-House Counsel

August 13, 2008

Reprinted and/or posted with the permission of Daily Journal Corp.  (2008).

In 1981, the Supreme Court extended the attorney-client privilege to in-house counsel.  Upjohn Co. v. United States, 449 U.S. 383 (1981).  The role of in-house counsel has increasingly expanded to encompass participation in decisions about business, technical, scientific, public relations and advertising issues, in addition to purely legal issues.  This dual role can raise significant complications during discovery.  Courts fear that businesses will attempt to immunize internal communications from disclosure by placing legal counsel in strategic positions to filter documents through the legal department.  Therefore, courts must often distinguish between a lawyer's legal and business work.

The advent of electronic communication makes it easy to add an attorney to e-mails discussing business or legal issues, or both.  As a result, many courts require a clear showing that the attorney was acting in his or her legal capacity for privilege to apply.

A recent case articulated a "primary purpose" test requiring that the primary purpose of the communication be legal.  In re Vioxx Products Liability Litigation, 501 F. Supp. 2d 789 (ED. La. 2007).  In Vioxx, Merck & Co. asserted privilege over approximately 30,000 documents during the course of discovery, the majority of which were electronic communications.  Merck claimed that extensive regulation of corporations created potential legal issues in virtually all its communications with legal and non-legal departments, requiring a collaborative effort protected under the attorney-client privilege.  The court disagreed.  It recognized that some tasks that do not appear to be legal can be legal in nature; however, a corporation must establish a primary legal purpose for each communication to obtain the benefits of the privilege.

The court defined certain parameters for the "primary purpose" test.  The number of lawyers or non-lawyers included in a communication is not dispositive - if the prior purpose is mixed, it does not become magically unmixed with an increase in counsel as recipients.  Additionally, counsel's recommendation of, or involvement in, a business transaction does not necessarily place the transaction under the cloak of privilege.  The court noted that "this [rule] cannot be gotten around by the simple expedient of putting a lawyer in the shoes of the executive or ... giving the legal department the power of the corporate executive."

Most importantly, the manner in which a company circulates documents by e-mail has consequences.  Certain documents that may actually deserve privilege can be discoverable due to the corporation's method of dissemination.  For example, when a communication is simultaneously sent to both lawyers and non-lawyers, the sender or recipient usually cannot claim that the primary purpose of the communication is legal simply because it "serves in both a business and legal capacity."  To avoid this complication, the court suggested sending one e-mail to counsel and another to non-lawyers.   If that e-mail has a mixed purpose but is primarily legal, then the e-mail sent to counsel will be privileged.   Although this seems somewhat contradictory, the court was emphasizing the importance of the method in which information is communicated as evidence of a primary legal purpose.

Furthermore, where a communication with its attachments has been sent to both lawyers and non-lawyers, the lawyer's response is not privileged because the initial communication was not privileged.  The lawyer must first create a privileged document by sending it solely to lawyers or the client so that the responses are also privileged if primarily legal.  Therefore, the emphasis is placed not only on the substantive nature of the communication, but also on the method of communication to determine privilege.

Vioxx was recently followed by the Middle District of Florida.  In re Seroquel Products Liability Litigation, 606md1769, (M.D. Fla. May 7, 2008).  In Seroquel, plaintiffs sought a motion to compel the defendant corporation to produce documents "improperly designated as privileged and documents for which privilege should be deemed waived." The court relied on Vioxx and held that simultaneous communication to both lawyers and non-lawyers often waives privilege.  The court noted that the defendant "chose, as part of its business organization, to mix legal consultation with many other sources for creating final documents.  This choice makes it difficult to determine the primary purpose in creating the communication and to determine whether the attorney's roles were providing legal (rather than business) advice." The court held that most of the claims of privilege by the defendant were not sustainable.  Although Seroquel did not add parameters to the primary purpose test, its emphasis on the mode of communication reaffirms the reasoning in Vioxx.

Alternatively, some jurisdictions have a more relaxed standard for separating business and legal advice for in-house counsel.  See e.g. Lambert v. Credit Lyonnis (Suisse), 160 F.R.D. 437 (S.D.N.Y. 1995), which found that since employees may hold decision-making power collectively, circulation of confidential communications among employees does not waive privilege.  Regardless, it is better to err on the side of caution and take deliberate steps to avoid disclosure of privileged information during discovery.

In order to avoid waiving privilege during discovery, in-house counsel should clearly delineate legal from business advice wherever possible.  Treat privileged documents carefully.  Counsel should refrain from sending e-mails and attachments to both lawyers and non-lawyers if the sender hopes to maintain privilege over the communication.  If counsel receives an e-mail sent to both lawyers and non-lawyers, counsel must be sure to create a new document before commenting or making changes in order to reassert privilege over the new edits and communication.  Writing "counsel is addressing the following legal issues" at the beginning of communications expected to be privileged can be an added safeguard.  Even with these precautions, certain documents' privileged nature may be called into question.

For example, the Vioxx court wanted the identity and relationship of all parties to the communications, an explanation of the substantive nature of the communication, and how the parties evolved.  The party claiming privilege was required to bring forth affidavits from individuals with personal knowledge about the purpose of each communication in question and a list of employees in the legal department with their job description, credentials and additional titles and responsibilities.  The company had to provide the court with its policies on the preservation of confidentiality, policies establishing restrictions on the circulation of confidential communications, and affidavits to prove the guidelines were distributed and followed.  To avoid this arduous process during discovery, counsel should keep detailed logs of communications expected to remain privileged in the event of litigation.

Although Vioxx is not binding in all jurisdictions, its message is universal - ensure that e-mails and documents are clearly for the purpose of attorney review and comment.  Do not attach privileged information to documents discussing non-legal issues and clearly delineate in your communications between legal and non-legal issues.  Where legal and business advice seem inextricably intertwined, the bottom line is: Do your best to separate the two, clearly state when you are giving legal advice, and do not include nonlegal parties in communications expected to be privileged.

The articles on our website include some of the publications and papers authored by our attorneys, both before and after they joined our firm. The content of these articles should not be taken as legal advice. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views or official position of Robins Kaplan LLP.


Roman M. Silberfeld


National Trial Chair

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