In-House Counsel and Attorney-Client Privilege
By: Bryan K. Prosek
Q: What communications with in-house counsel will be protected by attorney-client privilege?
A: Attorney-client privilege exists with respect to a communication when
- The asserted holder of the privilege is or is sought to become a client;
- The person to whom the communication was made is an attorney;
- The communication relates to a fact of which the attorney was informed;
- The communication was made in confidence;
- The communication was made for the purpose of securing legal advice;
- The privilege has not been waived.
These six elements must be established for attorney-client privilege to apply to a communication with outside counsel or between in-house counsel and a company employee. However, courts have traditionally been biased against applying the privilege to communications between in-house counsel and company employees. Courts assume that companies will take unfair advantage of the protection of the privilege by funneling all information through in-house counsel. In addition, courts assume that most internal communications relate to business advice rather than legal advice since in-house counsel regularly provide advice on business issues. This bias makes it difficult for a company to establish all of the elements necessary for a communication to be privileged.
Answering the following questions in a manner that establishes attorney-client privilege is particularly difficult:
- Who is the client?
- Does the communication provide legal advice or business advice?
- Who within the company can waive the privilege?
Client. Three tests have evolved in different states for determining who constitutes the client: the control-group test, the subject-matter test, and the Upjohn test (from Upjohn v. United States, 449 U.S. 383 ).
The control-group test results in the most narrow application of privilege. It provides that the client is only someone from the group of people who can control or be significantly involved in the direction of the company.
Under the subject-matter test, an employee is a client for purposes of attorney-client privilege if the communication occurred at the direction of the employee's superior and the subject matter of the communication falls within the scope of the employee's duties.
The Upjohn test is similar to the subject-matter test but slightly more flexible. Under this test, an employee is a client for purposes of attorney-client privilege if the employee made the communication to in-house counsel at the direction of the employee's superior, the communication related to the employee's duties, individuals within the control group did not possess the information, and the employee knew that the communication was being made so that the company could obtain legal advice.
Legal advice. Attorney-client privilege only applies to legal advice, not business advice. Problems arise when a communication contains both legal and business advice, which is often the case in communications with in-house counsel.
The most prevalent test used to determine whether a communication containing both legal advice and business advice is protected is the predominate-purpose test. This test provides that privilege applies to the communication if in-house counsel is acting in the role of a lawyer and the predominate purpose of the communication was the seeking or provision of legal services.
Waiver. If an otherwise privileged communication is disclosed to an employee who does not qualify as the corporate client, the communication may lose its privileged status because there can be no expectation of confidentiality. Therefore, the issue of waiver depends on the test that the particular jurisdiction uses in determining who constitutes the client: control group, subject matter, or Upjohn. For example, if a jurisdiction follows the control-group test to determine who the client is for purposes of establishing attorney-client privilege, then a disclosure of the communication to anyone outside the company or to anyone in the company but outside of the control group will waive the privilege.
Establishing communications that are protected by attorney-client privilege requires the effort of both in-house counsel and company employees. Similarly, both in-house counsel and employees with access to privileged communications must know how to maintain the privilege once a communication is determined to be protected. Therefore, companies should educate in-house counsel, as well as those employees who regularly communicate with in-house counsel or regularly handle privileged communications, regarding what it takes to establish and maintain attorney-client privilege with respect to a communication.
Bryan K. Prosek is an attorney with Steptoe & Johnson PLLC and a member of ASAE's Legal Section Council. Email: firstname.lastname@example.org