Court Rejects Privilege for Chipotle Consultant’s Report to Outside Counsel Reply

In a wage-and-hour case against Chipotle Mexican Grill, the USDC SDNY ruled that the attorney-client privilege did not protect a consultant’s report prepared for and delivered to Chipotle’s outside counsel.  In doing so, the court provided an instructive analysis of the Kovel doctrine.  Scott v. Chipotle Mexican Grill, Inc., 2015 WL 1424009 (SDNY Mar. 27, 2015).  You may read the Slide1decision here.

Counsel’s Retention of Consultant

Chipotle retained a law firm to assess whether the restaurant chain had properly classified its apprentices under the FLSA.  Chipotle, through the law firm, retained an HR consultant who conducted a “job function analysis” and provided its resulting report directly to the law firm.  Chipotle explained that the purpose of the consultant’s investigation was to gain an understanding of the apprentices day-to-day job and provide the law firm with this information so the firm could provide legal advice to Chipotle.

Plaintiffs’ counsel learned of the consultant’s report and moved to compel its production.  Chipotle, relying on the Kovel doctrine, argued that the attorney-client privilege protected the report from discovery.

The Kovel Doctrine

Arising from the court’s decision in United States v. Kovel, 296 F2d 918 (2d Cir. 1961), the Kovel doctrine extends the attorney-client privilege to experts, such as an accountant, that the attorney retains to assist her in understanding complex issues so that she can provide legal advice to the client.  The Kovel doctrine recognizes a “privilege derivative of the attorney-client privilege where a third party clarifies or facilitates communications between the attorney and client in confidence for the purpose of obtaining legal advice from the attorney.”

Under the Kovel doctrine, the privilege attaches to third-party reports made at the attorney’s or client’s request where the report’s purpose is to put complicated information received from the client into a form usable by the attorney.  In other words, the third-party takes a client’s complicated information and transforms it into a form that the attorney understands so that the attorney can render legal advice to the client.

Court’s Ruling

Applying Kovel, the court stated that Chipotle’s claim that its outside counsel needed an HR consultant to evaluate whether Chipotle properly classified its employees “strain[ed] credulity.”   Although the consultant drafted her report for and delivered it to Chipotle’s outside counsel, the court noted that “this formalism is insufficient to establish that it is a privileged communication.”

And the report did not state that the law firm retained her to assist in providing legal advice; nor did the consultant label the report “confidential” or “privileged.”  Moreover, the consultant set up interviews with Chipotle employees without mentioning that the interviews were privileged, confidential, or conducted to assist Chipotle in receiving legal advice.

The court found that Chiplotle failed to present evidence that the consultant was taking information that was incomprehensible to its attorneys and putting it into a “usable form.”  Rather, the consultant simply combined employee interviews and provided the attorney with a report of her factual analysis.

For these reasons, the court found that Chipotle failed to prove the consultant’s report fell under the Kovel doctrine and ordered its production.

PoP Analysis

The Kovel doctrine is a narrow exception to the rule that the attorney-client privilege does not protect communications from a non-client to the attorney.  The Scott decision should remind lawyers needing expert assistance to understand complicated factual issues to take certain steps to ensure the privilege applies.  Some practice tips include:

  • The attorney should retain the specialist;
  • Ensure the engagement letter expressly states that the specialist’s services are for the purpose of understanding the client’s information so the attorney can provide the client with legal advice;
  • The engagement letter should describe the reasons why the information the attorney needs from the specialist is complicated and in need of interpretation into a format the attorney can understand;
  • The specialist should receive and gather information in a confidential manner and take steps to ensure its continued confidentiality;
  • The specialist should inform any interviewees that the meetings are confidential and conducted so that the company’s attorney can render legal advice, and consider obtaining a written acknowledgement from the interviewee on these points; and
  • All communications between the specialist and the attorney should be confidential and labeled “Confidential & Privileged.”

Court Permits In-House Lawyer Deposition—But With Instructions to Preserve the Privilege Reply

Lawyers are increasingly seeking depositions of companies’ in-house lawyers, and this phenomenon likely corresponds with in-house counsel increasingly assuming business-related roles or tasks within the company.  In Sand Storage, LLC v. Trican Well Serv., L.P., 2015 WL 1527608 (S.D. Tex. Apr. 2, 2015), the Depositioncourt ordered an in-house lawyer’s deposition—albeit with privilege protections—and provided a good overview of the law on this subject.  You may read the decision here.

Background

Sand Storage and Trican entered into a sand-storage contract.  Trican later sent Sand Storage formal notice of its failure to perform its contractual obligations.  Trican’s in-house lawyer signed the letter, a copy of which you may read here.

Sand Storage sought the in-house lawyer’s deposition, arguing that it is entitled to discover the bases for the alleged failed performance from the person who authored the letter identifying the performance issues, regardless whether he is a lawyer.

Lawyer’s Affidavit

Trican’s in-house lawyer filed an affidavit, available here, stating that he did not make the decision to terminate the contract.  Although he consulted with a Trican businessperson “for the purpose of facilitating the rendition of professional legal services” regarding the Sand Storage agreement, he did not expressly identify the decision-maker.

And after this consultation, he determined that Trican needed to notify Sand Storage of the deficiencies and then drafted the notice letter.  He disavowed any personal knowledge of the statements in the notice letter.

Deposition Ordered

The court noted that depositions of opposing counsel are “disfavored” and that it should permit these depositions in “limited circumstances.”  Relying upon Nguyen v. Excel Corp., 197 F3d 200 (CTA5 1999) and Shelton v. American Motors Corp., 805 F2d 1323 (CTA8 1986), the court required Sand Storage to prove these three factors in order to depose Trican’s in-house lawyer:

  1. No other means exist to obtain the information than to depose opposing counsel;
  2. The information sought is relevant and non-privileged; and
  3. The information is crucial to the preparation of the case.

Based on the facts before it, the court found that the source of the notice letter’s statements regarding Sand Storage’s alleged non-performance was crucial and relevant to the case, and that Sand Storage had no other means to determine Trican’s decision-maker without deposing the in-house lawyer.  The court therefore allowed the in-house lawyer’s deposition.

Privilege Protections

The court, however, implemented privilege-protection measures.  Although ruling that the source of information contained in the notice letter and Trican’s decision-maker were facts and not privileged, it also ruled that Sand Storage’s counsel could not inquire into communications between Trican’s in-house lawyer and Trican employees, which are privileged.

The court therefore limited the deposition’s scope to factual matters underlying the notice letter and instructed Sand Storage’s counsel to “not intentionally solicit information that is privileged.”  And the court ruled that the in-house lawyer’s deposition did not constitute waiver of the privilege on any other matter.

PoP Analysis

One wonders whether this issue ever arises if Trican’s in-house lawyer had not authored the letter and simply provided legal advice to Trican businesspersons regarding the contractual issues.  If a Trican businessperson signed and sent the letter, then the in-house lawyer’s deposition likely never becomes an issue.

Even so, Trican successfully limited the deposition’s scope and preserved its privilege, a navigation that provides guidance for other in-house lawyers faced with this issue.  And for a detailed review of the legal issues surrounding in-house lawyers’ depositions, see my article titled Protecting the Attorney-Client Privilege–Depositions of In-House Counsel, available here.  You may also find my post, Tips for Preventing or Limiting In-House Counsel Depositions, helpful.

Illinois Rejects Self-Critical Analysis Privilege—Will Other States Follow? Reply

In a long-awaited ruling, the Illinois Supreme Court refused to recognize a common law self-critical analysis privilege and ordered production of a company’s quality-review report generated in response to an infant’s death.  Although arguably a narrow ruling, this decision will likely influence other state courts faced with a similar issue—do public-policy considerations warrant recognition of a common law self-critical analysis privilege.  Harris v. One Hope United, Inc., 2015 IL 117200 (Ill. Mar. 19, 2015).  You may read the decision here.

Illinois Supreme Court

Illinois Supreme Court

The Case

An infant died while in her mother’s care and in One Hope United’s family services program. The public guardian, acting as the infant’s estate administrator, filed a wrongful death suit against the mother and One Hope. Discovery revealed that One Hope investigated the death and prepared a post-death “Priority Review” report that evaluated its services.

One Hope refused to produce the Priority Review report on grounds that the self-critical analysis privilege protected its disclosure. The trial court refused to recognize the privilege, held One Hope in “friendly contempt,” and set the stage for appeal. In a decision profiled in this post, the appellate court also refused to adopt the privilege.

Pertinent Issues

As noted in my prior post, a threshold issue was whether the Illinois evidence rules permitted courts to adopt new common-law evidentiary privileges and modify existing privileges, or whether that role fell exclusively within the legislature’s domain.  And if the evidence rules permitted common-law privileges development, did public policy considerations compel adoption of a self-critical-analysis privilege.

The Ruling

The Supreme Court assumed, without directly addressing, that it could adopt new common-law privileges, but only in “rare instances.”  Those instances arise where the privilege proponent sufficiently proves each of four elements: (1) the communications originated in a confidence that they would not be disclosed; (2) confidentiality is essential to the maintenance of the parties’ relationship; (3) the relation at issue is one which “in the opinion of the community ought to be sedulously fostered”; and (4) the injury to the relation produced by disclosure outweighs the benefit of the truth-finding process and “the correct disposal of litigation.”

As to the 4th element, which focuses on public-policy considerations, the Supreme Court noted that adopting new privileges “involves a balancing of public policies which should be left to the legislature” and that the judiciary’s function was not “to promote policies aimed at broader social goals.”

So, the court looked for any legislative evidence to inform whether it should adopt a self-critical analysis privilege in this instance.  Reviewing the Child Death Review Team Act, which governs governmental panels reviewing minors’ deaths, and the Medical Studies Act, which creates a medial peer-review privilege, the court determined that these acts did not favor adoption of a self-critical analysis privilege.  The court reasoned that the Illinois legislature could have extended the peer-review privilege to entities such as One Hope, but did not; and the Child Death Review Team Act arguably encouraged rather than discouraged disclosure.

In sum, the court refused to recognize a common law self-critical analysis privilege because it is a “matter more appropriately a subject for legislative action.”  The court avoided “judicial infringement upon what is principally a policymaking decision for the legislature,” and reviewed whether public-policy expressions in existing legislation “warrant[ed] a ‘rare’ exercise of judicial authority” in recognizing new privileges.  Finding no legislative support, the court rejected the privilege.

PoP Analysis

The court focused on existing legislation relevant to One Hope’s activities and concluded that “the type of information sought in discovery here is not subject to a self-critical analysis privilege.” This limitation indicates that Illinois courts may re-consider a self-critical analysis privilege in other contexts; however, the Harris ruling tells us that adoption of new common law privileges is “rare” and existing legislation must clearly point toward the privilege’s adoption in a particular set of circumstances.

So, how will other states react to Harris when determining whether to adopt a self-critical analysis privilege? The self-critical analysis privilege, a product of the medical peer-review privilege first adopted in Bredice v. Doctors Hosp., Inc. 50 FRD 249 (D.D.C. 1970), encourages entities to undertake candid and unrestrained self-examinations for quality-improvement purposes by promising protection from discovery.  The theory is that entities will not be forthcoming and candid in their self-analyses without confidentiality assurances, and the lack of candidness will thwart improvement.

The Harris court effectively declined to assess whether Illinois common law should encourage self-examinations by adopting the privilege, instead scanning statutes to discern whether the legislature had already made this public-policy determination.  Courts in other states, however, may not feel constrained by existing legislation, particularly when legislatively approved state evidence rules, like FRE 501, permit common-law development of evidentiary privileges.

Illinois interprets this development opportunity narrowly, but other states may not.

My thanks to Jeff Bergman of the Chicago litigation firm of Mandell Menkes for informing me of the court’s release of this opinion.

Joint Clients and the Privilege—A New Wrinkle Reply

The joint-client doctrine, which applies when one lawyer represents two or more clients, holds that the attorney–client privilege protects lawyer–client communications against all others but not when the clients become adverse to each other.  Separately, the at-issue waiver doctrine provides that a client waives the attorney–client privilege when he claims that the attorney breached a Joint Clientduty arising from the attorney–client relationship.

But what happens to the privilege when one, but not the other, of the lawyer’s joint clients sues the lawyer for malpractice—can the nonsuing client assert the privilege to prevent disclosure of attorney–client communications made in the course of joint representation?

In what appears to be a matter of first impression, a California appellate court answered in the negative, ruling that one joint client waives the privilege for all joint clients when he charges the attorney with malpractice.  Anten v. Superior Court, 183 Cal. Rptr. 3d 422 (Ct. App. 2015).  You may read the decision here.

In Anten, Lewis Anten and Arnold and Lillian Rubin retained a law firm to represent them on a matter of common interest.  Anten later sued the law firm for malpractice, but the Rubins did not.  Anten sought discovery of communications between the Rubins and the law firm, but the law firm asserted that the attorney–client privilege protected those communications and the Rubins had not waived it.

The court rejected the privilege and identified two bases for its ruling.  First, the court determined that, because the Anten and the Rubins were joint clients of the law firm, their communications were confidential and privileged as to strangers, but not between themselves.  In other words, the Rubins had no expectation of confidentiality with respect to Anten.  No confidentiality equals no privilege.

Second, the court held that considerations of “fundamental fairness” weighed in favor of vitiating the privilege.  It found unfair the situation where one joint client could prevent a lawyer from introducing communications in a suit to collect his fee.  And conversely, it found unfair the situation where a nonsuing client could prevent disclosure of communications in the other client’s suit against the lawyer.  The court also found “substantial” the risk of collusion between the joint clients in the former situation and the lawyer-nonsuing client in the latter situation.

PoP Analysis.  Given the joint-client doctrine, the court’s ruling on the first-impression issue is not surprising.  Joint clients must know and understand that communications with their lawyer, whether in separate or joint meetings, are not confidential between themselves.  And they must know that it is unlikely that they can raise the privilege to preclude disclosure of their communications in any subsequent suit involving the clients and lawyer as adversaries.

The Anten case provides lawyers with a take-away as well.  Lawyers representing multiple clients should ensure that their clients understand the lack of confidentiality between themselves of lawyer communications—in any situation. A best practice is to include these statements in the engagement agreement or otherwise having the client sign an acknowledgement.

Legal Analysis v. Conclusion: A Dividing Line for the Deliberative-Process Privilege Reply

The First Circuit joined the Second and D.C. Circuits in ruling that the deliberative-process privilege protects legal counsel’s conclusions and opinions in situations where the governmental agency based a particular decision on counsel’s opinion rather than her reasoning or analysis behind the opinion.  Governmental agencies at the federal, state, and local levels will likely use this reasoning/opinion dividing line in responding to FOIA or state public-records requests.  New Hampshire Right to Life v. U.S. Dep’t of Health & Human Servs., 2015 WL 467525 (CTA1 Feb. 4, 2015).  You may read the decision here.

New Hampshire Right to Life (NHRTL) submitted a FOIA request to and later filed suit against HHS seeking documents related to HHS’s grant award to Planned Parenthood of Northern New Englancrossinglined.  HHS withheld documents containing Office of General Counsel’s advice to HHS that it could legally issue the grant to Planned Parenthood.

FOIA’s Exemption 5 shields documents from disclosure that are normally non-discoverable in civil litigation, including documents protected by the deliberative-process privilege and the attorney–client privilege.  The deliberative-process privilege protects communications that are predecisional and deliberative.

NHRTL argued, however, that HHS waived the privilege because it adopted the OGC’s advice—that HHS could legally issue the grant—as “policy of the Agency.”  While it is true that an agency adoption of predecisional opinions as policy obviates the privilege, the court created a demarcation line between adoption of legal opinions and adoption of the reasoning and analysis behind those opinions.

The court said that it makes “no sense” to adopt a “categorical rule” that “every time an agency acts in accord with counsel’s view it necessarily adopts counsel’s view as ‘policy of the Agency.’”  This is especially true where counsel’s advice is simply that the agency has no legal barrier preventing it from making a particular position.

The court followed cases in the Second and D.C. Circuits in ruling that Exemption 5 does not protect legal opinions from disclosure only when the agency actually adopts the reasoning behind counsel’s opinions.  In other words, an agency’s reliance on a document’s conclusions in rendering a decision does not necessarily mean the agency relied on the document’s analysis.  It is only the agency’s adoption of counsel’s reasoning that destroys the privilege.

The court highlighted the instrumental reasoning behind the deliberative-process privilege by recognizing the chilling effect on agencies seeking counsel’s advice for any broader rule:

It is a good thing that Government officials on appropriate occasion confirm with legal counsel that what the officials wish to do is legal.  To hold that the Government must turn over its communications with counsel whenever it acts in this manner could well reduce the likelihood that advice will be sought.

The moral of the story is that, to keep the privilege, government agencies should carefully rely upon its counsel’s conclusions in their decision-making process and avoid expressly adopting counsel’s reasoning or analysis.  For other cases, see National Council of La Raza v. Dep’t of Justice, 411 F.3d 350 (CTA2 2005) and Electr. Frontier Found. v. U.S. Dep’t of Justice, 739 F3d 1 (CTADC 2014).

Notable Ruling on the Corporate Attorney–Client Privilege and Former Employees Reply

An issue often discussed but infrequently addressed is whether the attorney–client privilege protects communications between corporate counsel, including in-house lawyers, and the company’s former employees.  One federal court—predicting Louisiana law—recently ruled that the privilege protects counsel–former-employees’ communications in certain circumstances.  Hanover Ins. Co. v. Plaquemines Parish Gov’t, 2015 WL 546699 (E.D. La. Feb. 10, 2015). You may read the decision here.

The Issue

In a massive construction lawsuit over the design and building of a community center in Bootheville, Louisiana, the parties deposed the general contractor’s Former Employeeformer vice-president and the architect’s former construction administrator.  Both were employed with their respective firms during the construction but had since left.  And each met with his former company’s lawyers to prepare for the deposition.

Deposing counsel asked about deposition-preparation conversations with their former employers’ counsel and the documents they reviewed.  Counsel for the former employers objected on attorney–client privilege grounds, and a motion to compel ensued.

The court framed the issue: “the question presented is simple, even if the answer is not: are conversations between counsel for a corporation and the corporation’s former employees entitled to the attorney–client privilege, and, if so, to what extent?”

Choice-of-Law

In this diversity case, the court first questioned whether federal or state privilege law applied, properly ruling that, under FRE 501 and the Erie Doctrine, federal courts apply state law which, here, is Louisiana’s law.  Louisiana courts have not issued a “reasoned decision” whether the privilege applies to former employees, so the federal court predicted Louisiana law in reliance upon Chief Justice Burger’s concurring opinion in Upjohn Co. v. United States, 449 U.S. 383 (1981) and opinions from the 4th and 9th Circuits. In re Allen, 106 F.3d 582 (CTA4 1997); In re Coordinated Pretrial Proceedings, 658 F.2d 1355 (CTA9 1981).

Ruling

The court found it clear that “some privilege exists” between a corporation’s counsel and its former employees, and just needed to outline its scope and parameters.  The court ruled that the privilege applies, “at a minimum,” where—

  1. The company employed the employee during the time relevant to the lawyer’s current representation;
  2. The former employee possesses knowledge relevant to the lawyer’s current representation; and
  3. The communication’s purpose is to assist the company’s lawyer in
    1. evaluating whether the employee’s conduct has bound or would bind the company;
    2. assessing the legal consequences of that conduct; or
    3. formulating appropriate legal responses to actions that others have taken or will take with regard to that conduct.

PoP Analysis

The Hanover decision provides authority for corporate lawyers—whether outside or in-house counsel—to claim privilege over communications/interviews with former employees. But corporate lawyers should not take this decision as a blanket privilege for all communications and, instead, should ensure that former-employee interviews specifically fall within the parameters. One suggestion is to discuss these parameters with the former employee before the substantive interview and perhaps have her sign a statement acknowledging the reasons for the interview and her understanding of its confidential and privileged nature.

The court applied Louisiana (the forum state) law without addressing whether Louisiana’s conflict-of-laws rules dictated the application of another state’s law.  Although likely a moot point because the communications occurred in Louisiana, judges and practitioners should always consider whether the forum state’s conflict-of-laws rules dictate that another state’s privilege law applies to the putatively privileged communication. For more information on this topic, see this post and my article titled The Application of Conflict of Laws to Evidentiary Privileges.

Court Rejects Privilege for Company’s Lawyer–Risk-Management Director Reply

Companies that have an attorney leading its internal risk-management department should pause and read the court’s decision in Casey v. Unitek Global Services, 2015 WL 539623 (E.D. Pa. Feb. 9, 2015).  The court ruled that the attorney–client privilege did not protect from discovery internal discussions involving its risk-management director, who was an attorney and managed litigation arising from insurable claims.  You may read the decision here.

Slide1This case involves an employment discrimination suit brought against Unitek by its former Director of Risk Management.  The Plaintiff–DRM was a licensed attorney who, among other duties, managed litigation arising from insurable claims against Unitek.  One of Unitek’s in-house lawyers verified that, in this role, the lawyer–DRM attended quarterly litigation meetings that involved discussions regarding matter-specific litigation strategy, evaluation, cost-benefit analysis, and Unitek’s legal theories.  See the in-house lawyer’s declaration here.

Unitek sought a protective order preventing the Plaintiff–DRM from using putatively privileged communications in her prosecution.  The court, however, rejected Uniteck’s assertion that the privilege covered discussions involving the DRM, even though she was a lawyer.

The court found that the DRM position did not require “legal knowledge, much less a juris doctor.”  Even though she managed litigation, the court equated her role to “an in-house insurance broker and claims adjuster.”  Although the court acknowledged that her role was “quasi-legal,” it found that she was “acting as a client to outside counsel” rather than “as Unitek’s attorney.”

Unitek proved that she was involved in privileged-type discussions at quarterly litigation meetings, but failed to prove that it actually sought her legal advice or opinion as to any of the insurable claims at any of these meetings.  In short, the court held—

[The] management of insured claims in litigation does not establish an attorney–client relationship.

The court also addressed the dual role of in-house lawyers stating, without caveat, that “in-house counsel play a dual role of legal advisor and business advisor.”  To invoke the privilege, Unitek must “clearly demonstrate” that communications involving the lawyer–DRM were made for the “express purpose of securing legal not business advice.”  And here, the court found that the lawyer–DRM did not receive any communication “in her role as a legal advisor.”  For further discussion on this dual-purpose issue, see this blog post and this one.

PoP Analysis.  The court’s analysis and conclusions should provoke companies to reassess whether it can claim privilege over a litigation manager’s communications. If the position is more akin to an insurance claims-adjuster, then it is less likely that a company can successfully invoke the corporate attorney–client privilege.  And if a true attorney–client relationship is lacking, then discussions in which these employees participate could be subject to privilege waiver.

Important Lessons about the Settlement Privilege Reply

Did you know there is a settlement privilege?  Not many do, primarily because few courts have adopted the privilege.  The Sixth Circuit adopted a federal common-law settlement privilege in Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976 (CTA6 2003), but other courts reject the Goodyear decision.  See, e.g., In re MSTG, Inc., 675 F.3d 1337 (Fed. Cir. 2012); Matsushita Elect. Indust. Co. v. Mediatek, Inc., 2007 WL 963975 (N.D. Cal. 2007).

MediationA recent federal-court decision highlights some of the misconceptions and misassumptions about the so-called settlement privilege, and provides lessons for in-house and outside counsel participating in settlement negotiations.  Babcock & Wilcox Power Generation Group, Inc. v. Cormetech, Inc., 2015 WL 350392 (N.D. Ohio Jan. 23, 2015).  You may access the decision here.

Brief Background

Babcock presents a classic example of how the settlement privilege arises.  Kansas City Power & Light Co. sued Babcock over its installation of a nitrogen-oxide reducing system that contained a catalyst module built by Cormetech.  KCPL and Babcock settled their dispute, and Babcock sued Cormetech for indemnification.

In discovery, Cormetech sought settlement communications between KCPL and Babcock and documents created for settlement purposes.  Babcock asserted the federal common-law settlement privilege adopted in Goodyear or, alternatively, the Ohio state-law mediation privilege.

Conflicts-of-Law Issues

The court quickly raised the issue whether federal or state privilege law applied. Because this case was a diversity action involving a state-law contract claim, federal common-law did not apply, rendering the federal settlement privilege inapplicable.  Babcock argued that privilege law is procedural, rather than substantive, thereby requiring application of federal privilege law, but the court summarily and properly discarded that legal theory.

Babcock correctly noted that Goodyear adopted the federal common-law settlement privilege in a diversity case involving state-law claims.  Indeed, one can criticize Goodyear for applying the wrong law—it clearly should have applied state law.  But, the Babcock court ignored that aspect, stating simply that “be that as it may, the Court in Goodyear did not discuss why it applied federal common law to the privilege asserted.”

State Mediation Privilege & Choice-of-Law Contract Provisions

Fortunately for Babcock, it added the alternative argument that Ohio’s mediation privilege applied.  Ohio’s mediation statute provides that “mediation communications will be privileged against disclosure,” Ohio Rev. Code Ann. § 2710.02, and the court found that this state-law privilege protected the KCPL/Babcock communications from discovery.

Interestingly, the KCPL/Babcock settlement agreement contained a choice-of-law provision stating that Missouri law governed the agreement.  The Babcock–Cormetech dispute was in Ohio, and the parties argued and applied the Ohio mediation privilege even though the underlying mediation occurred in Missouri and the resulting settlement agreement designated Missouri law as governing.

Because Cormetech failed to advance Missouri law, the court simply did not “consider whether Missouri law applies to the privilege asserted here.”  This is disappointing from an academic standpoint as it deprives us from obtaining guidance on choice-of-law contractual provisions concerning privilege law.

PoP Analysis

The Babcock decision presents several practice tips for lawyers involved in settlement negotiations.

  • Always assume a third-party may later seek your settlement-related communications;
  • Know whether your state jurisdiction has a statutory mediation privilege or common-law settlement privilege;
  • Do not rely solely on FRE 408 (or state-law equivalent) disclaimers as privilege-protectors—these rules pertain to admissibility only;
  • Label settlement communications with opposing counsel and settlement neutrals as “privileged and confidential”;
  • If your state has a mediation privilege, then identify that authority (statute or common law) in your communications;
  • Ensure that all settlement-related communications and documents are confidential when delivered and kept confidential thereafter;
  • In the resulting settlement agreement, insert the appropriate choice-of-law provision and expressly state that this provision includes the chosen law’s mediation or settlement privilege.

Developing Issue: Attachments to Privileged Emails Not Necessarily Privileged Reply

An issue that has historically received little attention in privilege law is whether the attorney–client privilege protects from discovery documents sent as email attachments where the email communication itself is privileged.  This issue, however, is receiving increasing attention and lawyers should not assume that the privilege automatically covers the attachment just because it covers the email.

The attorney–client privilege protects email communications between a client and his attorney, including communications between an employee and his company’s attorney, when the email is confidential when sent, kept confidential thereafter, and is for purposes of soliciting or receiving legal advice. Many lawyers, outside counsel and in-house counsel alike, assume that an email meetinemail attachmentg these criteria means that attachments to the email necessarily receive the same protection.

Courts are increasingly challenging that assumption.  Federal and state courts are looking beyond the email to determine whether the attachment independently meets the criteria to support application of the attorney–client privilege.  Courts have held that attachments to emails “must independently earn that protection.”  AM General Holdings, LLC v. The Renco Group, LLC, 2013 WL 1668627 (Del. Ch. Ct. Apr. 18, 2013).  They recognize with increasing regularity that email attachments can be produced independently of the cover email.  Muro v. Target Corp., 2006 WL 3422181 (N.D. Ill. Nov. 28, 2006).

Similarly, courts find that sending email communications to third parties not only waives the privilege with respect to the email, but also to any attachment to the email.  United States v. ChevronTexaco Corp., 241 F. Supp. 2d 1065 (N.D. Cal. 2002).

In Kleen Products, LLC v. International Paper, 2014 WL 6475558 (Nov. 12, 2014), which was the subject of an earlier post concerning the in-house attorney–client privilege, the court held that the privilege did not attach to a PowerPoint presentation sent for review to the company’s in-house attorney.  In so holding, the court stated:

Attachments which do not, by their content, fall within the realm of the attorney–client privilege cannot become privileged by merely attaching them to a communication with the attorney.

The take-away here is that courts are increasingly scrutinizing attachments to determine whether they warrant privilege protection independent of the privileged-nature of the cover email.  Lawyers, particularly in-house lawyers, should heed this increasing scrutiny and ensure that employees sending attachments via email establish and maintain the privilege over the attachment just as they would over the email.

Improving the chances of gaining privilege protection includes, by way of example only, labeling the attachment as “Protected by the Attorney–Client Privilege” and “Confidential,” stating that the document is sent for purposes of seeking legal advice, and stating that any recipient should not distribute attachment further without counsel’s authorization.

What’s Mine is Not Yours: Former Officers and the Corporation’s Attorney-Client Privilege Reply

Many issues arise when an officer or director involuntarily leaves a company.  Companies are quick to enforce non-compete agreements and protect trade secrets against the former officer, but often do not consider protection of legal communications in which the officer participated.

A former officer inherently maintains insider information, including the contents of privileged emails and other communications that he created or Firedreceived.  And he may personally possess this information because he extracted them prior to leaving or otherwise had them in his personal possession during the normal course of business.

But in post-departure litigation between the officer and the company, the question arises whether the corporation may prevent the use of privileged, officer-created communications or whether the privilege equally belongs to the former officer turned adversary.

In my recent article, What’s Mine is Not Yours: Former Officers and Directors and the Corporation’s Attorney-Client Privilege, co-written with Kristi Wilcox Arth, I discuss that courts take two approaches to this issue: the collective-corporate-client approach and the entity-as-client approach.  The approach a court takes will determine whether the corporation may prevent a former officer from using privileged communications.

This article, available here, was originally published in The Corporate Counselor, and I thank this publication for permission to reprint the article on my blog.  The article was later re-published in The Association of Corporate Counsel Newsstand and Corporate Counsel.  And for a specific discussion of a court addressing these issues, see my prior post “Who’s the Client? Former CEO Not Entitled to Company’s Privileged Documents”.

I hope you find the article informative and helpful.