Preserving The Attorney-Client Privilege For In-House Counsel

Courts impose on corporate entities the burden of demonstrating that communications and documents shared with in-house counsel are protected by the attorney-client privilege. When companies cannot satisfy this burden, courts have ordered production of emails involving legal counsel, compliance logs and internal audits. As a result of these court orders, companies have been forced to produce, often to their detriment in litigation, confidential attorney-client communications.

Courts examine evidence submitted in support of a privilege assertion rigorously. If there is any indication that an overly broad privilege is being asserted or that there is some perceived abuse of the privilege to protect “business” documents, disclosure will likely be required. As will be discussed, Merck was required to go to extraordinary lengths to protect the privilege some years ago in the Vioxx MDL.

In an article titled, “Preserving the Attorney-Client Privilege for In-House Counsel,” published in AHLA Connections (December 2013), Thomas E. Zeno and Emily E. Root of Squire Sanders, provide practical advice for in-house counsel and their clients to increase the likelihood of preserving the privilege.

The authors’ tips may be summarized as follows:

1. Clients should make a clear request for legal advice. Although an email that begins, “Joe, I’d like your legal advice on the following situation…” may sound stilted or overly formal, this communication signals to a reviewing court that the client is requesting legal advice.
In-house counsel should provide a clear link between their legal advice and its legal justification.

For example, if it is the company’s argument that the primary purpose of a communication was to obtain legal advice, the assertion of the privilege will be strengthened if the in-house lawyer’s revision to draft advertising is accompanied by a statement such as “To comply with FDA rules…”.

2. Avoid sending mixed purpose emails. If in-house counsel is providing both non-privileged business advice on a particular transaction and legal advice, the two should be kept separate. Some courts have taken the position that corporations that choose to communicate with legal and non-legal staff simultaneously should recognize that the privilege may not attach to such mixed purpose communications.

3. The company should give consideration to email formatting. If an employee sending an email to in-house counsel is seeking legal advice, it is not helpful if multiple non-lawyer recipients are listed in the “To” field. If non-lawyers are receiving a copy of a request for legal advice so that they know that the request was made, only the lawyers should be listed in the “To” field. Although this may seem like a minor point, these issues can take on a life of their own during heated motion practice before a federal magistrate judge.

4. Courts reviewing privilege claims often review the job descriptions for the staffers involved. For non-legal employees, it may be helpful to provide a discussion in the job description about what kind of legal information or advice they may have to be kept apprised of to avoid the claim that the non-legal employee’s receipt of legal advice was not necessary. In the case of counsel, the job description should clearly define the attorney’s business-related functions.

5. In-house counsel’s advice should not be broadly disseminated. Management should provide a separate communication to company employees to put into effect the operational changes recommended by counsel rather than circulate the lawyer’s work product.

The most important observation made by Zeno and Root is that courts’ different treatment of in-house counsel stems largely from their multiple roles within their organizations, not all of which involve the rendering of legal advice.

They write, in pertinent part:

Across the health care industry, health systems, physician groups, and pharmaceutical, medical device, and life sciences companies are adopting new approaches to risk management. In response to pressures like self-disclosure obligations and the specter of False Claims Act investigations, legal personnel are becoming more integrated into these organizations. Increasingly, lawyers are involved in and advising on day-to-day operations much more than five or ten years ago.

Health care organizations also are facing tightening budgets, and many are trying to control costs by having in-house counsel handle matters that previously would have been referred to outside counsel. These multiple roles exact a cost on the privilege. When organizations assert the attorney-client privilege over communications with lawyers acting in these expanded roles, they seek to shield documents and communications that generally have been available to the government through subpoena or to civil litigants through discovery.

Issues of privilege were the subject of prolonged and heated discovery proceedings in In re Vioxx Prod. Liability Litig., MDL No. 1657, which was litigated in the United States District Court for the Eastern District of Louisiana during the mid-2000’s. 

In that matter, the court expressed the concern that businesses would seek to immunize internal communications from discovery by placing legal counsel in strategic corporate positions and funneling documents through counsel and thereby defeating plaintiffs’ legitimate discovery needs. In the Vioxx MDL, Judge Fallon bemoaned that “this discovery dispute has dragged on for over a year and, at times, has seemed hopelessly endless. Although Merck has produced over two million documents in this MDL, the company has also asserted attorney-client privilege as to approximately 30,000 documents which it contends need not be produced.”

Merck argued that because the drug industry is so extensively regulated by the FDA, virtually everything a member of the industry does carries potential legal ramifications vis-à-vis government regulators. The MDL court appreciated how certain functions performed by counsel, such as commenting upon editing television ads and other promotional materials could, in fact, be legal advice within the context of the drug industry. Despite this understanding, the MDL court was not willing to concede that all of the documents Merck had labeled privileged should be afforded protection.

As reflected in the court’s ruling, some of Merck’s privilege assertions met with more success than others. For example, under its “pervasive regulation” theory, Merck convincingly argued that the breadth and scope of FDA regulation made broad legal involvement in business operations a necessity.

However, Merck met with less success in making its “collaborative effort” theory.  In arguing  “collaborative effort”, Merck contended that emails addressed to multiple legal and non-legal people within the company were attorney-client protected despite a distribution pattern that indicated that these communications serve both legal and non-legal purposes.

The “collaborative effort” argument did not succeed because the court recognized that in every company all corporate departments are part of a “collaborative effort.” According to the court,

“To say that wide dissemination to non-lawyers within a company for their technical input is primarily legal makes no more sense than saying that communicating with in-house counsel is primarily scientific because scientific validity is at the heart of FDA regulations and, as a consequence, of what lawyers must be concerned about in public statements, advertisements and labels.”

More broadly, if the courts were to accept the “collaborative effort” argument, the MDL court believed that it would effectively immunize from discovery all such internal communications within the drug industry and preclude plaintiffs from discovering communications potentially vital to their claims of knowledge, failure to warn and intentional misrepresentation.

In-house lawyers are likely to become increasingly entwined within the fabric of their clients’ business. At the same time, it is clear that the in-house attorney-client privilege is under attack.   Although there is no fool-proof method of protecting the privilege, Zeno and Root’s article offers valuable guidance if a contested privilege issue is submitted to the court for resolution. 


Does Coito Dilute Work Product Privilege In California?

On June 25, 2012, the California Supreme Court issued its long-awaited decision in Coito v. Superior Court, addressing the issue of whether a party in litigation could rely upon the work product doctrine to withhold witness statements obtained by its attorneys or the identities of persons who had given such statements. 

In summary, while parties in California have long relied upon dicta in the Court of Appeal decision in Nacht v. Lewis for the proposition that such information is protected from disclosure by the work product doctrine, case-by-case determinations may now be required to determine whether a party must provide such information to its adversary in discovery in California state court cases.

 Fortunately for state court judges who will be required to make these case-by-case determinations, Coito is a well-drafted decision that contains an excellent discussion of the policy considerations underlying this privilege. Trial courts that must make discovery decisions concerning the application of the work product privilege, and the litigants who will be required to present their arguments on the subject, have been provided with excellent guidance by the California Supreme Court. In citing the U.S. Supreme Court’s landmark decision in Hickman v. Taylor, the court reaffirms its commitment to the privilege and reminds trial court judges that “discovery was hardly intended to enable a learned profession to perform its functions either without wits or on wits borrowed from the adversary.”  Be that as it may, defense counsel will now be required to conduct discovery battles to maintain the protection of the work product privilege.

The Coito court rejects the dicta in Nacht that provided for an absolute privilege for witness statements, holding instead that witness statements may be entitled to an absolute privilege only under certain circumstances.  The court explains that, “In light of the legislatively declared policy and the legislative history of the work product privilege, we hold that the recorded witness statements are entitled as a matter of law to at least qualified work product protection. The witness statements may be entitled to absolute protection if defendant can show that disclosure would reveal its ‘attorney’s impressions, conclusions, opinions, or legal research or theories.’ (§ 2018.030, subd. (a).)  If not, then the items may be subject to discovery if plaintiff can show that ‘denial of discovery will unfairly prejudice [her] in preparing [her] claim . . . or will result in an injustice.’ (§ 2018.030, subd. (b).)”

As for the identities of persons who provided witness statements to counsel, those will now be easier to obtain in California state court cases.  The Court explained, “As to the identity of witnesses from whom defendant’s counsel has obtained statements, we hold that such information is not automatically entitled as a matter of law to absolute or qualified work product protection. In order to invoke the privilege, defendant must persuade the trial court that disclosure would reveal the attorney’s tactics, impressions, or evaluation of the case (absolute privilege) or would result in opposing counsel taking undue advantage of the attorney’s industry or efforts (qualified privilege).”

This decision may certainly have an impact on litigation strategy in California.  The decision whether to require a party to turn over witness statements obtained by counsel, or disclose the identities of persons who provided statements, will generally be left to the discretion of the judge.   Some judges may be more inclined to require the production of this information than others.  In employment litigation, for example, there is concern in the defense bar that "employee-leaning" judges will automatically order disclosure of statements obtained by the employer’s counsel.

Accordingly, defense counsel will have to give some further thought concerning whether to obtain written statements, mindful that they may potentially have to one day disclose those statements to the opposing party or, at the very least, the identities of the individuals from whom statements were taken. 

This may require an especially important strategic decision in class actions and collective actions, where defendants often obtain a great many written statements from putative class members early in the case for use at a later time.  Should a defendant be concerned that, as a result of Coito, it may be required to turn over witness statements early in the case, thereby educating the plaintiff’s counsel about the defendant’s strategy?  Could this encourage plaintiff’s counsel to contact putative class members who have provided statements to try to get them to recant their statements or to try to stop other putative class members from speaking with defendant’s counsel?  Only time will tell how these scenarios will play out.

 In the final analysis, Whether Coito  properly balances the competing interests of fair disclosure and the protection afforded by the work product privilege will be determined in the years to come. However, if nothing else it clear, it is certain that the decision will generate numerous discovery battles throughout the state over the extent to which the work product privilege should be applied on a case-by-case basis.

No Interlocutory Appeal To Protect Attorney-Client Privileged Documents

The United States Supreme Court yesterday held, in Mohawk Industries, Inc. v. Carpenter, No. 08-678, that a party may not immediately appeal court discovery orders that require the disclosure of documents and information covered by the attorney-client privilege.  This holding resolves a split in the circuits and will change the law in at least the DC and Ninth Circuits. The unanimous Court rejected the argument that attorney-client privilege disclosure rulings are different from other kinds of orders because once the privilege is lost, it cannot ever be restored. The Court (in Justice Sotomayor’s first opinion) noted that the ultimate remedy lies in reversal and a new trial at which the materials at issue would not be disclosed. Justice Sotomayor stated:

"The question before us is whether disclosure orders adverse to the attorney-client privilege qualify for immediate appeal under the collateral order doctrine. Agreeing with the Court of Appeals, we hold that they do not. Postjudgment appeals, together with other review mechanisms, suffice to protect the rights of litigants and preserve the vitality of the attorney-client privilege."

This is not a particularly revolutionary decision. After all, the Court has, for several terms, been narrowing interlocutory appellate rights as, at the same time, also requiring specific pleading (see, e.g.,Ashcroft v. Iqbal) in an effort to reduce expensive litigation proceedings. Moreover, at oral argument in the case, the primary issue came down to whether the attorney-client privilege was sufficiently important to warrant interlocutory appeal when balanced against the policy interests of the finality rule. Why, the justices asked, should the attorney-client privilege be given greater deference than trade secrets, for example?  My D.C. partner Stuart M. Gerson notes that for practitioners, both litigators and others who may be involved in investigations later subject to litigation, the significance of this holding is that heightened attention should be given to how privileged information is recorded to minimize the impact if that information is later disclosed. As a safeguard against disclosure, Stuart adds, experienced litigators and investigators tend to write cryptically and briefly, if at all, when they take notes. If one is inclined to take the formal statement of a witness to lock him or her into a particular rendition of fact, it should be done with the expectation that the statement very well may ultimately be disclosed, even if the statement is made in the context of an Upjohn investigation. Of course none of this changes the prevailing rule that attorney-client privilege can only be overcome upon a showing of critical necessity. However, courts dislike privilege and frequently misapply the law.  So, be careful out there.

E-Discovery and New Federal Rule of Evidence 502

 On September 19, 2008, President Bush signed S. 2450 into law and new Evidence Rule 502  was added to the Federal Rules of Evidence.  The new rule provides for protections against waiver of the attorney-client privilege and work product immunity. The practical effect of the new legislation should be to reduce the often staggering legal costs corporations often incur in complex litigation, particularly in producing electronic discovery.  In drafting the legislation, the Advisory Committee of Evidence Rules recognized that lawyers spend significant time and effort preserving the attorney-client privilege and work product.  Under the prior rule, if a protected document was produced, even accidentally, there was a risk that a court would find a subject matter waiver that would apply, not only to the instant case and document, but to other cases and documents as well.  Thus, lawyers placed an enormous amount of effort (and expense) into pre-disclosure document review to protect against inadvertent disclosure.  Although waiver issues always have been a concern in document-intensive litigation (and will no doubt continue to be in the future), the increased discovery burden created by e-discovery brought this issue to the boiling point over the past two years.  Under the new rule, the jeopardy to corporations (and their law firms for permitting a waiver) is substantially mitigated.

The new rule does not address the scope of the attorney-client privilege or work product protection.  Rather, the new rule covers issues of scope of waiver, inadvertent disclosure, and the controlling effect of court orders and agreements.

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