The In-House Attorney-Client Privilege:
The Scope of the Privilege for Businesses and
Law Firms
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Ajamie LLP
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The In-House Attorney-Client Privilege
LAWYER
BUSINESS PERSON
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Negotiating agreements
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Drafting contracts
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Gathering facts
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Preparing reports
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Preparing letters
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Advising on personnel issues
The In-House Attorney-Client Privilege
“THE COMPLETE LAWYER”
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Understands the client’s business
Learns the facts
Understands the legal issues
Researches legal options
Develops one or more solutions
Presents pros and cons of options
Helps the client decide
Helps the client implement legal advice
Monitors compliance with advice
THE LAWYER DOES NOT SIMPLY RECITE PRINCIPLES OF LAW
THE LAWYER PUTS THOSE PRINCIPLES INTO PRACTICE
The In-House Attorney-Client Privilege
THE ATTORNEY-CLIENT PRIVILEGE
The oldest privilege known to the law.
Applies to attorney-client communications, including
communications to and from an attorney’s assistant or
those working under the attorney’s direction.
The communications must be made and maintained in
confidence; privilege can be waived by disclosure.
Privileged communications cannot be discovered or used
as evidence in a court proceeding.
The In-House Attorney-Client Privilege
THE WORK PRODUCT DOCTRINE
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Protects materials and mental impressions
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Anticipated or actual litigation
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Extends to the litigant’s lawyers, employees,
insurers, indemnitors, consultants, and other agents
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Waived by disclosure
THE CONCEPT: A LITIGANT’S IDEAS AND STRATEGIES SHOULD
NOT BE SERVED UP TO THE OPPONENT.
The In-House Attorney-Client Privilege
Upjohn v. U.S. –
A leading case on privilege
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Upjohn v. U.S., 499 U.S. 383 (1981):
– The U.S. Supreme Court applied the privilege to corporate
communications.
– Upjohn’s in-house general counsel initiated an FCPA investigation.
– Holding: Confidential communications to and from the general
counsel and those acting on his behalf are privileged. The privilege
extends to communications to and from employees at all levels.
Court rejected the “control group” test.
– Benefits of the privilege: Ensure full and frank discussion between
lawyer and client; ensure that lawyer has full information; facilitate
compliance with the law.
The In-House Attorney-Client Privilege
MUST RELATE TO LEGAL ADVICE
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In the U.S., communications with in-house counsel are typically
privileged if they relate to legal – rather than business – advice.
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Some U.S. courts apply heightened scrutiny to in-house
communications because of the perceived tendency to mix legal
and business functions.
The In-House Attorney-Client Privilege
MUST RELATE TO LEGAL ADVICE
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Exxon Mobil Corp. v. Hill, 751 F.3d 379 (5th Cir. 2014):
In-house lawyer helped client answer questions from a
contractor
 The lawyer prepared a letter for the business person to
send, with disclaimers of liability
 The lawyer’s advice was recorded in a memo
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IS THE MEMO PRIVILEGED?
The In-House Attorney-Client Privilege
MUST RELATE TO LEGAL ADVICE
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District court (E. D. La.):
Holding: No privilege. Memo can be discovered and used
by adverse parties in litigation.
 “Although there may be an unstated operating
presumption that communications with outside counsel
constitute legal advice, this presumption does not apply to
communications with in-house counsel because of the
many nonlegal responsibilities in-house counsel
assumes.”
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The In-House Attorney-Client Privilege
MUST RELATE TO LEGAL ADVICE
District court - There is more:
Communications to and from in-house counsel are privileged
only upon a clear showing in-house counsel gave advice
in a professional legal capacity.
A double-standard for
in-house lawyers?
The In-House Attorney-Client Privilege
MUST RELATE TO LEGAL ADVICE
FIFTH CIRCUIT:
The district court got it wrong. The memo is privileged.
The memo was drafted during contact negotiations where both sides were assisted by
counsel. The negotiations involved legal issues such as indemnities. The letter the
lawyer wrote was intended to limit Exxon Mobil’s liability.
Viewed in this context, the memo “cannot be mistaken for anything other than legal
advice.”
The record is “devoid of any indication that the lawyer was providing business advice
divorced from its legal implications.”
The In-House Attorney-Client Privilege
MUST RELATE TO LEGAL ADVICE
WHY THE STARK DISCREPANCY between the District Court’s and Fifth
Circuit’s opinions?
Incomplete understanding of in-house role?
Assumption that all corporate employees are running the business?
Bias against in-house lawyers?
Belief that law imposes a higher burden on in-house communications?
OR …
The In-House Attorney-Client Privilege
MUST RELATE TO LEGAL ADVICE
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Lawyer’s communications do not reflect legal concerns?
Communications emphasize business issues or minimize legal
issues?
Counsel’s communications are “unprofessional”?
We are not able to see the memo and decide.
The In-House Attorney-Client Privilege
Other cautionary cases
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In re Kellogg Brown & Root, 756 F.3d 754 (D.C. Cir. 2014):
– District court slammed an in-house investigation; characterized the
investigation as a typical business function.
– D.C. Circuit reversed: The KBR investigation was similar to the
Upjohn investigation. As in Upjohn, the KBR investigation meets the
requirements of the privilege.
– An investigation can have both a business and legal purpose. If a
significant purpose is to provide legal guidance, the privilege will
apply.
The In-House Attorney-Client Privilege
Other cautionary cases
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Komoulis v. Indep. Fin. Mktg. Group, --F.Supp.2d--,
2014 WL 223173 (E.D. Pa. Jan. 21, 2014):
– Outside lawyer was part of human
resources team.
– Court found that “predominant purpose” of
the advice was business-related.
– “Despite its legal content, human resources
work, like other business activities with a
regulatory flavor, is part of the day-to-day
operation of a business; it is not a
privileged legal activity.”
The In-House Attorney-Client Privilege
THE FIDUCIARY EXCEPTION
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Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1981):
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Shareholders sued corporation in dispute over corporate stock.
Shareholders wanted the company to produce corporate counsel’s
advice to the company on issuance of the stock.
Held: On a showing of good cause, the company must share
counsel’s records with the corporate shareholders.
“Where the corporation is in suit against its stockholders on charges of
acting inimically to stockholder interests… the availability of the
privilege [is] subject to the right of the stockholders to show cause why
it should not be invoked in this particular instance.”
THE COURT SET OUT FACTORS THAT DEMONSTRATE GOOD CAUSE
(“Garner factors”).
The In-House Attorney-Client Privilege
IS GARNER STALE?
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A 1981 case
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Specifically dealing with shareholder claims
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Is it a stale case?
No! The case remains relevant. In 2014 the Delaware
Supreme Court adopted the Garner principles.
The In-House Attorney-Client Privilege
The Delaware Supreme Court adopted a
fiduciary exception to the attorney-client
privilege
Wal-Mart Stores, Inc. v. Indiana Elec. Workers Pension Trust
Fund IBEW, 95 A.3d 1264 (Del. 2014):
– Corporate shareholder demanded inspection of corporate records under
Delaware law.
– Delaware Court of Chancery, citing Garner, found that shareholder showed
“good cause” to obtain privileged materials.
– Delaware Supreme Court adopted Garner.
– The shareholder demonstrated good cause to obtain the corporate lawyers’
records.
– The shareholder is ordered to take steps to preserve confidentiality of the
records.
The In-House Attorney-Client Privilege
You are suing
your law firm…
Competing rights:
Right of client to full disclosure
from its fiduciary
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Right of law firm to obtain
advice of counsel, particularly inhouse counsel
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What happens when a client
wants to discover
communications with its law
firm’s in-house lawyers?
The In-House Attorney-Client Privilege
Now things will really get wild.
Option 1: The law firm is a fiduciary and must
produce to the client in-house
communications regarding the client’s matter.
Many law firms have in-house counsel, just like business corporations.
When a client sues his lawyer, must the law firm produce records of communications
to and from the firm's in-house counsel concerning the client’s matter?
Several federal courts have said YES when the evidence concerns communications
made while the attorney-client relationship existed:
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Asset Funding Group LLC v. Adams & Reese LLP, 2008 WL 4948835 (E.D. La. 2008)
Cold Spring Harbor Lab. v. Ropes & Gray LLP, 2011 WL 2884893 (D. Mass. 2011)
Thelen Reid & Priest LLP v. Marland, 2007 WL 578989 (N. D. Cal. 2007)
Koen Book Distribs. v. Powell, Trachtman et al., 212 F.R.D. 283 (E.D. Pa. 2002)
Bank Brussels Lambert v. Credit Lyonnais (Suisse), S.A., 220 F.Supp.2d 283 (S.D.N.Y.
2002)
The In-House Attorney-Client Privilege
Option 2: The law firm has the right to
consult with in-house counsel and keep those
consultations confidential
The supreme courts of three states have sided with law firms on this issue.
The courts held that the law firm’s right to obtain legal advice, particularly
advice from its in-house lawyers, trumps the client’s interest in disclosure
of these communications:
 RFF Family Ptshp. v. Burns & Levinson, LLP, 991 N.E.2d 1066 (Mass. 2013)
 St. Simon’s Waterfront, LLC v. Hunter, Maclean, et al., 746 S.E.2d 98 (Ga. 2013)
 Crimson Trace Corp. v. Davis Wright Tremaine LLP, 326 P.3d 1181 (Ore. 2014)
The In-House Attorney-Client Privilege
A test for applying the law firm
in-house privilege:
The law firm has designated an attorney or
attorneys within the firm to represent the firm
as in-house counsel,
2. The in-house counsel has not performed any work on the client
matter at issue or a substantially related matter,
3. The time spent by the attorneys in these communications with inhouse counsel is not billed to a client, and
4. The communications are made in confidence and kept confidential.
1.
RFF Family Partnership, LP v. Burns & Levinson, LLP, 465 Mass. 702, 991
N.E.2d 1066, 1068 (Mass. 2013).
The In-House Attorney-Client Privilege
Another test for the law firm
in-house privilege:
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There is a genuine attorney-client relationship
between he firm’s lawyers and its in-house
counsel,
The communications in question were intended
to advance the firm's interests in limiting
exposure to liability rather than the client's
interests in obtaining sound legal
representation,
The communications were conducted and
maintained in confidence, and
No exception to the privilege applies.
St. Simons Waterfront, LLC v. Hunter, Maclean,
Exley & Dunn, P.C., 746 S.E.2d 98 (Ga. 2013).
The In-House Attorney-Client Privilege
Texas: Huie v. DeShazo
A trust beneficiary sought discovery of the trustee’s
consultations with a lawyer. The consultations dealt with
trust matters.
Holding: The trustee’s communications with the lawyer are
privileged.
The trustee owes the beneficiary a duty of full disclosure of all
material facts. The attorney-client privilege does not limit this
duty. The beneficiary may discover facts but not
communications between the trustee and his lawyer for the
purpose of obtaining legal advice.
Huie v. DeShazo, 922 S.W.2d 920 (Tex. 1996).
The In-House Attorney-Client Privilege
YOUR CLIENT’S BUSINESS MAY BE GLOBAL,
BUT THE PRIVILEGE IS NOT.
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In some foreign jurisdictions, communications with in-house counsel are not privileged,
even if they relate to legal advice. These jurisdictions include most European countries
(France, Spain, Italy, Germany, Poland), Japan, and Korea.
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Notably, the same communications would be privileged in these jurisdictions if they
involved outside counsel.
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In-house counsel are considered to lack the required “independence” from the company
for the attorney-client privilege to attach. Outside counsel are considered to have this
“independence.”
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The civil codes of civil law jurisdictions may limit application of the privilege. The scope
of the privilege also may depend on the opposing party and the type of proceeding.
The In-House Attorney-Client Privilege
IN-HOUSE PRIVILEGE
NOT RECOGNIZED IN THE EU
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Akzo Nobel Chem. Ltd. & Akros Chem. Ltd. v. Comm’n,
Case C-550/07 P (Eur. Ct. Just. 2010)
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European Commission conducted a “dawn raid” as part of an antitrust
investigation. Investigators obtained two emails between an in-house
counsel and a manager related to legal advice.
Company sued to recover these emails, claiming they were privileged.
Several groups—including the International Bar Association, European
Lawyers Association, Association of Corporate Council Association,
Great Britain, Northern Ireland, and the Netherlands—intervened on
behalf of the company and argued that the emails were privileged.
The In-House Attorney-Client Privilege
NOT RECOGNIZED IN THE EU
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Akzo Nobel Chem. Ltd. & Akros Chem. Ltd. v. Comm’n,
Case C-550/07 P (Eur. Ct. Just. 2010)
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Holding: The emails were not privileged because the in-house counsel
was not “independent” of the company.
– “[T]he requirement of independence means the absence of any
employment relationship between the lawyer and his client, so
that legal professional privilege does not cover exchanges within
a company or group with in-house lawyers.”
– Confirmed existing EU caselaw related to antitrust investigations.
AM&S Eur. Ltd. v. Comm’n, Case 155/79, 1982 E.C.R. 1575
(1982).
The In-House Attorney-Client Privilege
NOT RECOGNIZED IN THE EU
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Akzo Nobel Chem. Ltd. & Akros Chem. Ltd. v. Comm’n,
Case C-550/07 P (Eur. Ct. Just. 2010)
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“An in-house lawyer . . . does not enjoy the same degree of
independence from his employer as a lawyer working in an external
law firm does in relation to his client. Consequently, an in-house
lawyer is less able to deal effectively with any conflicts between his
professional obligations and the aims of his client.”
An in-house lawyer’s employment “does not allow him to ignore the
commercial strategies pursued by his employer, and thereby affects
his ability to exercise professional independence.”
The In-House Attorney-Client Privilege
NOT RECOGNIZED IN THE EU
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Akzo Nobel Chem. Ltd. & Akros Chem. Ltd. v. Comm’n,
Case C-550/07 P (Eur. Ct. Just. 2010)
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The emails would have been privileged under English and Dutch law
(the in-house counsel was licensed in the Netherlands), but this was
irrelevant.
– “The uniform interpretation and application of the principle of legal
professional privilege at European Union level are essential in
order that inspections by the Commission in anti-trust
proceedings may be carried out under conditions in which the
undertakings concerned are treated equally.”
The In-House Attorney-Client Privilege
Considerations:
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Respect the fact that some courts are skeptical of the in-house
lawyer’s role.
When communicating regarding legal advice, make clear that
you are dealing with legal issues. Establish linkage to legal
advice.
Communicate in a professional manner so a court will
understand that you are acting as a lawyer. Overly casual
tweets and e-mails can be misunderstood. If you do not take
your words seriously, neither may a court.
Think about who should receive your communications. A wide
distribution list might signal that you do not intend a privileged
legal communication.
Add terms such as “confidential” or “attorney-client privilege” as
appropriate.
Remember that a judge might end up reading your mail, memos
and reports. Keep your content and tone professional.
Educate fellow counsel and management on importance of the
privilege and what must be done to maintain privilege.
The In-House Attorney-Client Privilege
Thank You
Dona Szak
dszak@ajamie.com
Jack Edwards
jedwards@ajamie.com
713-860-1600
www.ajamie.com
The In-House Attorney-Client Privilege