• Beware What You Share: Steps to Avoid Waiving the Attorney-Client Privilege
  • November 10, 2009 | Author: Laura D. Windsor
  • Law Firms: Troutman Sanders LLP - Atlanta Office; Troutman Sanders LLP - Richmond Office
  • You receive an e-mail from your company’s attorney with important legal advice regarding a pressing issue that your company faces. Because the issue is on everyone’s mind these days, you forward the attorney’s e-mail to numerous employees and copy several administrative assistants and your marketing department to keep them informed. Is there anything wrong with this scenario? Well, many clients forward e-mails containing legal advice under the assumption that the advice is protected by the attorney-client privilege. What clients do not always realize, however, is that their actions could destroy the privilege’s protection.

    What Constitutes a Privileged Communication?

    In order for a communication to be protected by the attorney-client privilege, three requirements must be met. First, the communication must be made for the purpose of obtaining or providing legal advice. If the communication is primarily a general business discussion, it is not privileged. Second, the communication must be between a client and an attorney or, if the communication is only between employees of the client, it must specifically note that the information shared is advice provided by the clients’ attorney or request information at the direction of the client’s attorney to enable the attorney to give advice. Third, the communication must be intended to be confidential and actually kept confidential. If the client does not maintain the confidential nature of the communication -- and instead discloses it to individuals outside of the attorney-client relationship -- then the client waives the privilege.

    This presents a very real problem because company managers often feel that they must share advice from an attorney with other employees, but not all company employees are within the attorney-client relationship. Instead, only those employees who are “directly concerned” with or have “primary responsibility” for the subject matter of the communication (in other words, only those with a “need to know” the information) are within the attorney-client relationship. Sharing a privileged communication with any other employee waives the privilege. For example, if an automobile manufacturer is attempting to remedy a design defect that has created legal liability, then the vice president for design definitely has a need for legal advice relating to the decision to redesign the defective part. On the other hand, an autoworker on the assembly line would only need to know about the details of the actual production procedure to be implemented -- and nothing about the legal basis for that procedure. If any legal advice regarding the redesign is disclosed to the autoworker, the communication would no longer be considered confidential and the attorney-client privilege would be waived.

    Real Life Examples Where the Privilege Was Waived

    In a case in the Southern District of New York, a media and communications company’s attorneys had instructed the editors at a sports magazine not to give the plaintiff (an associate editor at the magazine) any additional work assignments when she threatened to sue. The editors discussed this legal advice during a meeting, and later one of them recounted the meeting’s details to a retired magazine employee who worked only sporadically as a freelance editor. The court held that the attorney-client privilege had been waived as to the substance of the editors’ meeting (and therefore as to the legal advice discussed during that meeting) because of the editor’s disclosure to the retired employee. As with the hypothetical autoworker on the assembly line, the retired employee may have needed to know what procedure to follow (i.e., not to assign work to the plaintiff), but there was no reason to inform him of any legal analysis forming the basis for the procedure.

    In a more recent case, the same court also concluded that an internal company email regarding the classification of the defendant employer’s employees was not protected by the attorney-client privilege. The email, written in part by the employer’s assistant general counsel, recommended that certain IT employees be reclassified from exempt to nonexempt pursuant to an internal Fair Labor Standards Act (FLSA) audit. Some of those IT employees received the email in the natural course of business, sued the employer for unpaid overtime under the FLSA, and produced a copy of the email during discovery in the case. The employer argued that the plaintiff employees should return or destroy all copies of the email because it was protected by the attorney-client privilege, but the court disagreed. Although the court accepted the fact that the email incorporated the legal advice provided by the employer’s assistant general counsel, the email was not privileged because it did not specifically state that it included privileged information or that any of its information had been obtained from counsel. In short, the employer did not show that the recipients of the email would have understood that it contained or referenced a communication from counsel -- instead the employer asked the court to assume that they would have understood it as such. The court refused to do so. Furthermore, the email did not give any indication to its recipients that it contained legal reasoning or legal advice that should be held in confidence and the company took no steps to prevent its dissemination. As a result of the company’s missteps, the plaintiffs had their smoking gun in the case -- an email which effectively demonstrated that the company knew that they had been misclassified as exempt.

    In a case in the Northern District of Texas, S.E.C. v. Microtune, Inc., Microtune argued that documents relating to an internal investigation of its stock options practices were protected from discovery. The fact that the documents were made by or sent to outside counsel was not sufficient to invoke the attorney-client privilege. Instead, the court looked at the fact that Microtune had already disclosed a significant amount of the information to third parties, including its own auditing firm. This disclosure waived any attorney-client privilege that may have existed, and the court ordered Microtune to produce all documents relating to its internal investigation -- not just those that had actually been disclosed.

    Steps to Avoid Inadvertent Waiver of the Privilege

    In light of these all too common mistakes, consider the following tips to preserve and protect your company’s privileged communications:

    • Beware what you share: Share privileged communications only with those company employees who have a need to know the legal analysis itself.
    • Share only what you must: If employees need to know a policy or procedure related to the legal advice, but not the legal advice itself, do not forward the attorney’s legal advice directly to them. Doing so would destroy the confidential nature of the communication and risk waiver of the privilege. Instead, preserve the privilege by informing these employees of the policy or procedure in an entirely separate communication that neither discloses the legal analysis nor mentions a legal basis for the policy or procedure discussed.
    • Clearly indicate that it’s legal advice: When sharing these communications, be sure to clearly state that you are sharing confidential legal advice. If you must share communications via e-mail, the e-mail should be limited to recipients who need to know the information and contain both a limit on its dissemination and a notation that the information should remain confidential. For example, the e-mail could include this disclaimer: “Confidential and privileged legal advice is contained in this email. Do not forward this e-mail or disseminate the information contained herein.”
    • Send separate communications: Send separate communications to parties who may be protected under attorney-client privilege and those who are not. For example, if you want the thoughts of both the Chief Financial Officer and the General Counsel regarding a draft contract, send separate communications to each individual.
    • Don’t mix business and legal advice: Along the same lines, if you are in-house counsel, separate your legal advice from non-legal advice in distinct communications. If an e-mail to an attorney asks a legal question and also covers a multitude of general business topics, the e-mail might not be protected because it would not be primarily for the purpose of seeking legal advice. Keeping an e-mail limited strictly to legal advice is a safer approach.
    • Avoid sharing with outside parties: Do not share privileged communications with outside parties. If it becomes necessary to share or seek information relevant to the legal advice, limit the communication or request to only the information the outside party needs to know without reference to the actual legal advice or analysis rendered or being sought. Some outside parties may be considered company agents and, therefore, within the contours of the privilege because of their position (e.g., a medical director or accountant). However, because the definition of “agent” in connection with the attorney-client privilege is not clearly defined by all courts, it is better to follow these rules and not forward the privileged communication to third parties.
    • Educate your employees: When and if litigation begins, determine which employees will be communicating with the attorneys and instruct those employees on the importance of protecting the privilege and avoiding disclosures to employees and third parties who are not within the attorney-client relationship. If it is necessary to obtain information from other employees or outside parties at counsel’s request, clearly state in these communications that your request is being made at the direction of counsel, constitutes attorney work product, and should remain confidential.

    Ultimately, the ability to withhold otherwise discoverable information under the attorney-client privilege is just that -- a privilege. In order to preserve that privilege, maintain the confidential nature of your legal advice and consider following the steps outlined above.