When Lawyers Wear Two Hats: Privilege and In-House Counsel
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Legal departments with large staffs of dedicated attorneys have long been common in major corporations. But a growing number of smaller organizations now employ in-house counsel. This can pose special challenges to both the attorneys and the organizations they serve, because the attorneys are more likely to juggle multiple responsibilities, performing both legal and nonlegal duties. While the attorney-client privilege and work-product doctrine protect the attorney’s role as a lawyer, the mere fact that an attorney provided some other business advice or performed some other task does not give special protection to otherwise discoverable information. This article will explore that distinction.
General Scope of the Attorney-Client Privilege
Both state and federal law protects certain communications between attorneys and clients. The Indiana Code, for example, provides that attorneys cannot be required to testify “as to confidential communications made to them in the course of their professional business, and as to advice given in such cases.” I.C. 34-46-3-1(1). Similarly, the basic federal formulation of the privilege protects “(1) . . . confidential communication; (2) to a lawyer or his subordinate; (3) for the primary purpose of securing either a legal opinion or legal services, or assistance in some legal proceeding.” Alpert v. Riley, 267 F.R.D. 202, 208 (S.D. Tex. 2010)(emphasis in original; citation and internal quotations omitted). Federal courts apply federal common-law principles to criminal actions and civil claims and defenses governed by federal law, but state privilege law applies to federal civil claims governed by state law. Fed. R. Evidence 501.
Of the three basic elements of the privilege, the requirement that the communication must be made to an attorney is probably the most straightforward. The privilege extends to the attorney’s agents, e.g. Hudson Ins. Co. v. Oppenheim, 899 N.Y.S.2d 29, 30 (N.Y. App. Div. 2010), including “any law student, paralegal, investigator or other person acting as the agent of a duly qualified attorney.” Zelaya v. UNICCO Service Co., 682 F. Supp. 2d 28, 38 (D.D.C. 2010). In-house counsel are attorneys for this purpose, provided that they were acting as attorneys when the communication at issue was made. Stoffels v. SBC Commc’ns, Inc., 263 F.R.D. 406, 411 (W.D. Tex. 2009).
Different authorities state the elements of attorney-client privilege in different ways, but all require that the communication have been confidential. Disclosure of the communication, therefore, “waives the attorney-client privilege because it is inconsistent with the attorney-client relationship.” U.S. v. Deloitte LLP, 610 F.3d 129, 140 (D.C. Cir. 2010). In the leading case addressing the privilege as it applies to in-house counsel, the Supreme Court observed that “the privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice.” Upjohn Co. v. United States, 449 U.S. 383, 390 (1981). Upjohn found communications between in-house counsel and relatively low-level corporate employees to be privileged because “they were made to counsel for Upjohn acting as such, at the direction of corporate superiors in order to secure legal advice from counsel.” Id. at 394.
Finally, to be privileged, the communication must have been for the purpose of providing or obtaining legal services. This can raise concerns for in-house counsel, who may wear more than one “hat” in their organization; as the discussion below will show, the distinction between legal and nonlegal advice will not always be clear in practice. The basic rule, however, is that “in order to successfully assert the attorney-client privilege, the corporation must clearly demonstrate that the communication in question was made for the express purpose of securing legal not business advice.” Southeastern Pennsylvania Transp. Auth. v. CaremarkPCS Health, L.P., 254 F.R.D. 253, 259 (E.D. Pa. 2008) (internal quotations omitted).
General Scope of the Work-Product Doctrine
More than 60 years ago, the Supreme Court rejected a party’s attempt, “without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party’s counsel in the course of his legal duties.” Hickman v. Taylor, 329 U.S. 495, 510 (1947). Thus, the work-product doctrine protects the adversarial nature of litigation and prevents parties from free-riding on their opponents’ efforts. E.g., In re Professionals Direct Ins. Co., 578 F.3d 432, 438 (6th Cir. 2009).
Rule 26(b)(3) generally protects from disclosure “documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative.” Fed. R. Civ. Proc. 26(b)(3)(A). A party can obtain such materials only upon a showing that “it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.” Fed. R. Civ. Proc. 26(b)(3)(A)(ii). Although the work-product doctrine is a procedural doctrine governed by federal law in all federal cases, see Professionals Direct, 578 F.3d at 438, Indiana’s rule echoes the federal one. Compare Ind. R. Trial Proc. 26(B)(3) with Fed. R. Civ. Proc. 26(b)(3).
The work-product doctrine protects materials made specifically to prepare for a pending or possible lawsuit, but it does not protect material prepared in the more ordinary course of business. A document was “prepared in anticipation of litigation” when two conditions have been satisfied. First, it must have been “prepared ‘because of’ a party’s subjective anticipation of litigation, as contrasted with ordinary business purpose”; second, that subjective anticipation must have been “objectively reasonable.” Professionals Direct, 578 F.3d at 439. The work-product privilege “depends on the motivation behind its preparation, rather than on the person who prepares it.” Boyer v. Gildea, 257 F.R.D. 488, 491 (N.D. Ind. 2009). This distinction means that the material need not have been prepared by an attorney to be protected; it may, for example, have been prepared by a corporate employee to prepare for defense of a looming claim. But it also means that the mere fact that an in-house attorney prepared it does not suffice to protect it, if the attorney prepared it as part of his or her general business duties.
Rule 26 permits discovery of work product upon a showing of “substantial need” by the requesting party, and a showing that the requesting party cannot obtain it without undue hardship. Fed. R. Civ. Proc. 26(b)(3)(A)(ii). Under all circumstances, however, the court must “protect against the disclosure of the mental impressions, conclusions, or legal theories of a party’s attorney or other representative concerning the litigation.” Fed. R. Civ. Proc. 26(b)(3)(B). Thus, so-called “opinion work product” is never discoverable. E.g., Hisaw v. Unisys Corp., 134 F.R.D. 151, 152 (W.D. La. 1991).
Impact on Business Advice by an In-House Lawyer
The fact that an in-house lawyer may perform additional roles within a company raises special challenges not generally faced by attorneys in private or government practice. Legal advice is protected from disclosure, but business advice is not. Courts recognize that “in-house counsel may play a dual role of legal advisor and business advisor,” and the attorney-client privilege applies to communications with in-house attorneys only when the “primary purpose” of those communications was to “gain or provide legal assistance.” CaremarkPCS Health, 254 F.R.D. at 258 (internal quotations and citations omitted).
Similarly, because the work-product doctrine applies only to material prepared in anticipation of litigation, it does not necessarily protect everything prepared by in-house attorneys. Because courts emphasize the motive for preparing a document – was it drafted to prepare for a possible lawsuit or would it have been drafted anyway? – routine reports and memoranda are discoverable. The same is true for routine work performed by an in-house attorney performing a different role in the company. A memorandum analyzing the merits of a wrongful-termination lawsuit is probably not discoverable. On the other hand, an earlier memorandum recommending the employee’s termination, written by the attorney in his or her dual role as director of human resources, may be discoverable (particularly if the memo primarily discusses the employee’s deficiencies and not the company’s possible liability).