Privilege Issues That Impact In-House Corporate...
Transcript of Privilege Issues That Impact In-House Corporate...
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RichHarper,LitigationPartner,[email protected]|212.408.2647
Privilege Issues That Impact In-House Corporate Counsel
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Agenda
Overview of Privilege Law
Specific Privilege Issues Facing In-House Counsel
OVERVIEW OF PRIVILEGE LAW
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Overview: The (Real) Basics
What is a legal privilege? It is a right or benefit imposed by law that provides a person or an entity the ability to refuse to disclose information.
At a practical level, it is a rule of evidence that prevents otherwise relevant information from coming out.
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Overview: The World of Privileges
Examples: • Attorney-Client Privilege • Work Product Doctrine • Common Interest Privilege (Joint Defense) • Physician-Patient Privilege • Confidential Marital/Spousal Communications • Privilege Against Self-Incrimination • Trade Secrets Privilege
There are many privileges but the first three dominate a corporate legal practice.
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Overview: The Attorney- Client Privilege
Elements: – A communication;
– made between privileged persons;
– In confidence;
– For the purpose of seeking, obtaining or providing legal advice to the client.
Purpose: To promote frank and open discussions between a client and attorney that allow attorneys to give fully informed, sound legal advice.
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Overview: Waiver of the Attorney-Client Privilege
• The client holds the privilege and therefore ultimately will decide whether to assert or waive it.
• The privilege will be waived most often when a communication is witnessed by a third party or the client did not intend the communication to be confidential.
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Overview: Work Product Doctrine
• In comparison to the attorney-client privilege, the work product doctrine protects from discovery documents or material things prepared by or for a party or by or for a party's representative in anticipation of litigation or for trial.
• Tips for preserving work product privilege: – The work product doctrine does not protect the underlying
evidence; – Include mental impressions and opinions in documents that
summarize interview and evidence; – Allow outside counsel, rather than company or its in-house
counsel, to retain consultants, investigators, and experts.
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Overview: The Common Interest Privilege
• What's the Issue? – When a party discloses attorney-client privileged or work product
information to a third party, privilege typically waived. – Is there any way to make that disclosure without a waiver? – The answer: Possibly, through a common interest privilege.
• The common interest privilege allows parties whose interests are aligned to share privileged communications.
• Elements: – (1) parties share a common legal interest; – (2) disclosing party has reasonable expectation of
confidentiality; and, – (3) the disclosure is reasonably necessary.
02 SPECIFIC PRIVILEGE ISSUES FACING IN-HOUSE COUNSEL
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In-House Counsel and Legal v. Business Advice
• As a member of the business team, in-house counsel serves as both legal advisor and business advisor. That will raise questions of what communications fall within the privilege and, as a practical matter, how to establish and maintain the privilege.
• As long as the communication is primarily or predominantly legal in nature, the privilege will not be lost because the communication refers to other business matters.
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In-House Counsel and Legal v. Business Advice
• To determine if the privilege will apply to a communication that mixes business and legal advice, courts have looked to the following factors: – The substance of the communication. Courts will not protect
communications where a substantial portion of the communication involved the rendering of business, and not legal, advice.
– The purpose of the communication. Courts look to whether the purpose of the communication or meeting was to address legal problems.
– The title of the in-house counsel. Titles that mix business and legal roles (i.e., Vice President of Business Affairs and Deputy General Counsel) do not support the finding of privilege.
– Who the in-house counsel communicated with. Copying the in-house counsel as one of several recipients of an e-mail will not be sufficient to establish the privilege.
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Legal v. Business Advice Applied: Negotiations and Corporate Agreements • Some courts have found that where an in-house attorney is leading
a negotiation, he or she is acting in a business rather than a legal function and that the privilege will not protect the in-house attorney's communications related to the negotiation. See Georgia Pacific v. GAF Roofing Mfg. Corp., 1996 WL 29392 (S.D.N.Y. Jan. 25, 1996).
• Courts will generally consider whether the lawyer applied legal acumen rather than skill at negotiation. See, e.g., Note Funding Corp. v. Bobian Investment Co., 1995 WL 662402, at *3 (S.D.N.Y. 1995).
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Legal v. Business Advice Applied: Labelling E-mails as Privileged
• As a day-to-day practical issue, many attorneys label e-mails with "Attorney-Client Privileged Communication" each time he/she believes it contains legal advice.
• Designating an e-mail as privileged will not transform that communication into a privileged material. See, e.g., Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F. Supp.2d 548 (S.D.N.Y. 2008).
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Legal v. Business Advice Applied: Labelling E-mails as Privileged
• Pro: While boilerplate labels of communications as privileged are not decisive, it indicates "the client's intent to seek legal advice and the client's belief that he is consulting . . . someone who will keep the communications confidential." Mattel, Inc. v. MGA Entertainment, Inc., 2010 WL 3705902, at *4 (C.D. Cal. Sept. 22, 2010).
• Con: Labelling every communication as "Privileged & Confidential"
is not advised because it could potentially weaken any argument that the designation is meaningful in the event of litigation or an investigation.
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Attorney-Client Privilege: What Counts as a Privileged "Communication?"
• Are documents or things sent by the client to the lawyer privileged? – Generally, no (subject to limited exceptions).
• Are law firm bills privileged? – Generally depends upon whether the bills reflect legal advice. – In New York, the privilege statute accords legal bills substantial
protection from disclosure. See, e.g., Ehrich v. Binghamton City Sch. Dist., 2002 U.S. Dist. LEXIS 19588, at *11, 20 (N.D.N.Y. 2002).
• Are draft deal documents privileged? – If the documents reflect attorney edits or hand notes, the draft
deal documents may be protected. See, e.g., Ideal Electric Co. v. Fowserve Corp., 230 F.R.D. 603 (D. Nev. 2005).
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Privileged Persons: Financial Advisors
• Some courts have held that when a financial advisor is the functional equivalent of an employee, communications between the advisor and corporate counsel are privileged.
• In In re Bieter Co., 16 F.3d 929 (8th Cir. 1994), the Court held that there was no waiver of the attorney-client privilege where: (1) the consultant was the functional equivalent of an employee of the client; (2) the communications in question fall within the scope of the consultant's duties and were made at the request of his supervisor; (3) the communications were made for the purpose of seeking legal advice for the client; and (4) the communications were kept otherwise confidential.
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Privileged Persons: Accountants
• The privilege has been extended to communications with accountants in instances where an accountant was hired to assist the attorney in rendering legal services to a client. See United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961).
• The Kovel court analogized the use of an accountant to the use of a
foreign language translator because "accounting concepts are a foreign language to some lawyers in almost all cases, and to almost all lawyers in some cases."
• The most vital concern is always that "the communication be made
in confidence for the purpose of obtaining legal advice from the lawyer."
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Privileged Persons: Crisis Management Firms
• The privilege has been extended to "crisis management" public relations firms where the firm was hired by a corporation to deal with issues related to publicity arising from a high profile litigation. See, e.g., In re Copper Market Antitrust Litig., 200 F.R.D. 213, 219, n.3, 219-20 (S.D.N.Y. 2001).
• The Copper Market court considered the following factors: (1) the PR firm "was, essentially, incorporated into [the corporation's] staff to perform a corporate function that was necessary in the context of" various litigations; (2) the PR firm had the authority to make decisions for the corporation related to its PR strategy; (3) the PR firm consulted with the corporation's attorneys often to formulate this strategy; and (4) the communications at issue were "for the purpose of obtaining legal advice."
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Privileged Persons: Who Owns the Privilege After a Merger Closes?
• The Delaware Court of Chancery has adopted the bright-line rule that any attorney-client privilege attached to pre-merger communications pass to the acquirer in the merger, unless the parties agree otherwise in the merger agreement. Great Hill Equity Partners IV v. SIG Growth Equity Fund I, 80 A.3d 155 (Del. Ch. 2013).
• The New York Court of Appeals found that privileged communications could be divided into one of two categories.
– The first is privileged communications concerning the company's general business operations. The second is privileged communications relating to the merger negotiations.
– The court stated that the latter were made at a time when the seller was in an adversarial legal position to the buyer. Accordingly, the privileged information in the first category would pass to the buyer at the close of the transaction, but the privilege related to the merger itself would stay with the seller. Tekni-Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123 (1996).
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Common Interest Privilege: Key Points
• The common interest privilege was historically applied in the criminal context but has been expanded to the civil context.
– The common interest privilege originated in a criminal conspiracy case.
• The common interest privilege applies to both the attorney-client privilege and the work product doctrine.
– Importantly, it applies only to something that is already privileged. The common interest privilege does not expand the scope of the privilege.
• It does not need to be in writing (JDA).
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Common Interest Privilege: Common Legal Interest
• Courts generally discuss the need for the legal interest to be identical or near identical. – Leader Technologies, Inc. v. Facebook, Inc., 719 F.Supp.2d 373,
376 (D. Del. 2010) ("For a communication to be protected under common interest doctrine, the interests must be identical, not similar, and be legal, not solely commercial.").
• A "common legal interest" means that the specific communication
cannot further a common business or commercial interest.
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Common Interest Privilege Applied: Corporate Acquisitions
• Issue: Can one side of a corporate deal disclose privileged information to the other side without waiver?
• Answer: Generally, no. The parties to a corporate acquisition or merger are adverse. But where the line is drawn depends on your jurisdiction:
• Delaware: See, e.g., 3Com v. Diamond II Holdings, No. 3933-VCN, 2010 Del Ch. LEXIS 126, at *32 (Del. Ch. May 31, 2010).
• New York: Ambac Assurance Corp. v. Countrywide Home Loans Inc., 27 N.Y.3d 616 (2016).
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