Applying the attorney-client privilege to communications to and from in-house counsel can be a vexing problem in managing litigation.
Over the years, I’ve increasingly seen numerous disputes in court, as well as arbitral and regulatory proceedings, where internal communications with in-house counsel thought by the company to be protected by the privilege were compelled to be disclosed in the litigation to the company’s detriment, embarrassment and frustration.
This usually occurs when, in the crush of business matters, management pays too little attention to understanding the basic principles applicable to this issue, and also lacks a sensitivity to the various circumstances in which it might arise.
While the attorney-client privilege applies equally to in-house counsel as it would to outside counsel, and can extend to communications with not only management but employees and even former employees, not all such communications with in-house counsel or in their presence are privileged. Even if they are privileged, they can be waived.

Elements of the privilege

For starters, all elements of the privilege must be met. In its simplest form, those elements are: (1) the holder of the privilege is seeking legal advice (2) from a lawyer acting as a lawyer (3) who provides legal advice (4) confidentially, and (5) the privilege is claimed and not waived.
In assessing whether communications are protected by the privilege, one must be careful to distinguish between communications for purposes of legal advice and other communications made in the course of their duties.
For example, communications that pertain primarily to business or management decisions are not protected by the attorney-client privilege. In-house counsel must be functioning as a lawyer giving legal advice. As for those circumstances where legal and business advice is being communicated, the legal advice must predominate for the privilege to apply. If the legal advice is merely incidental to the business advice, the communication is not privileged.
This seems fairly straightforward, but it can get complicated when in-house lawyers wear other hats and have other functions in addition to providing legal advice. In those situations, the issue is whether the lawyer was acting as a lawyer rather than as a business advisor or management decision maker.
One indicator is the lawyer’s place on the organizational chart of the company. For example, if the lawyer works for the legal department, the presumption is that he or she is providing legal advice. If the lawyer works for some other management or business unit, the opposite presumption may be in play.
Even if the lawyer works in the legal department, however, the presumption as to providing legal advice may not apply, such as where in-house counsel serves as a member of a business committee. While membership on a business committee doesn’t necessitate a conclusion that counsel was not acting as an attorney, it may lead to an inference that the attorney was acting in a non-legal capacity, particularly if the attorney is a voting member. In all events, the ultimate inquiry, once again, is whether the attorney is participating predominantly as a business actor or a lawyer.
Given the foregoing, when confronted with such circumstances, in-house counsel should try and separate out legal discussions and advice from business and management discussions and decisions; in other words, draw as bright a line as possible between those types of discussions in terms of time.
Other circumstances that frequently come up where the attorney client privilege is thought by the company to apply, include:
Labeling documents with the phrase “confidential and privileged”, “attorney client communication” or words to that affect;
Copying numerous internal people to a communication including in-house counsel;
Adding in-house counsel to an internal group telephone call or meeting;
The mere inclusion of in-house counsel in these communications does not cloak the communications with the privilege and thus protect them from disclosure. For the privilege to apply, the communication must have been for the primary purpose of legal advice. The mere presence of in-house counsel does not shield otherwise un-privileged communication from disclosure. Put another way, communications can’t be withheld from discovery requests merely because they are communicated to the company attorney, even in counsel’s physical presence, if the communication is unprivileged.

Burden of Proof

In assessing whether the attorney client privilege attaches to a communication, one should also keep in mind that courts generally apply a case by case analysis in evaluating the claim of privilege; and the burden to prove that the privilege applies rests on the proponent. Accordingly, not only must all the elements of the privilege be present but there must be sufficient evidence to establish the privilege if such a claim is challenged.

Waiver

Even if communications are privileged and are claimed, the privilege can still be lost if it is deemed to have been waived. In its most basic form, waiver occurs when an otherwise privileged communication no longer is confidential because it is disclosed to a 3rd party. Frequent examples of such a waiver include: discussing legal advice with a business partner; and disclosures during internal investigations to regulators, insurers, auditors, other counsel for employees, officers and directors, court filings, or the media. Quite a laundry list! One must also keep in mind that a waiver can be express or implied. In other words, both deliberate and inadvertent disclosure of protected communications can waive the privilege; it does not require intention.

Fairness Doctrine

Lastly, even if the privilege applies and is not waived, the privilege may be “pierced” by a court upon a showing that the information sought is needed, relevant, material and incapable of being secured through any less intrusive means. Known as the “fairness doctrine” it has been applied by courts in fact specific circumstances when necessity can be established. (A “crime fraud exception” also exists upon a showing that privileged communications were in furtherance of a crime of fraud.)
While the foregoing may appear to be a lot to digest and consistently apply in the day to day world of in-house counsel, the basic principles are simple and straight forward. The trick is to sensitize yourself to the various circumstances in which the privilege and waiver can apply and to plan/act accordingly in a timely fashion. To assist you in this, I recommend an annual review of the basic principles and circumstances concerning the privilege and its waiver at the beginning of every year with key staff and management.
My thanks to our associate Attorney Mike Duffy for providing me with a review of the case law and key cases applicable to the subject of this installment.

A founding partner of the Boston-based law firm, Ruberto, Israel & Weiner, P.C., Barry Weiner has been a business trial and appellate lawyer for over 40 years. He’s also served as an arbitrator, mediator and a master in the courts, and he teaches advanced alternative dispute resolution at Boston University School of Law. He can be reached at [email protected] or 617.742.4200.