Many in-house counsel and legal commentators posit that courts are increasingly eroding the corporate attorney-client privilege, particularly as it applies to in-house counsel. A relatively recent decision from a Wisconsin federal court may buttress that sentiment.
In Solis v. Milk Specialties Co., 854 F. Supp. 2d 629 (E.D. Wis. 2012), the Labor Department filed a petition to enforce an administrative subpoena requiring Milk Specialties Company (MSC) to produce two reports: (1) MSC’s Five Year Strat Plan and (2) Dust Review Report. The genesis of these documents is important. On April 12, 2010, MSC and OSHA settled an OSHA citation against MSC for allegedly violating a general duty clause through existence of combustible dust hazards without proper ventilation. In January 2011, MSC’s in-house counsel asked MSC’s VP for Enviromental Health & Safety to begin a review process that resulted in the Strat Plan and Dust Review Report. MSC argued that OSHA took the position that MSC must comply with NFPA standards in order to meet OSHA standards under the general duty clause.
In July 2011, OSHA issued a new citation based on an employee complaint, and in August 2011, OSHA initiated another investigation following a fire incident resulting from a dust explosion in a machine. OSHA issued an adminstrative subpoena in the fire investigation that covered the Strat Plan and Dust Review Report. The Dust Review Report contained cost estimates for equipment in order to become NFPA compliant, and the Stat Plan provided the Environmental VP’s opinion on additional steps MSC could take to become NFPA compliant.
The Court rejected MSC’s claim that these two reports were protected from subpoena by the attorney-client privilege. The Court correctly stated that, to gain protection under the privilege, MSC had the burden of showing that the documents were prepared for purposes of rendering legal advice, but noted that “carrying that burden is more difficult for in-house counsel because counsel is often involved in business matters as well as legal.”
Even though employees prepared the two reports at the request of MSC’s attorney, the Court ruled they were neither legal advice nor prepared to secure legal advice. MSC argued that the two reports provide a basis for in-house counsel to render advice as to mitigating the risks of additional litigation and financial exposure if OSHA’s NFPA standards were required. Rejecting this argument, the Court stated:
Without further explanation, it appears the only advice [the in-house lawyer] could provide to MSC, as a result of [the VP’s] opinions, is how to come into compliance with OSHA’s understanding of regulatory requirements. This is, at bottom, business advice. . . . [I]t would not constitute legal advice if [the VP] had independently informed MSC’s management of how to comply with regulations; coming from the mouth of an attorney does not change that.
This decision shows the difficulty in convincing a court that the attorney-client privilege protects communications from executives to in-house lawyers. Here, the in-house counsel asked a VP to prepare reports about complying with certain regulatory standards so the company could respond to OSHA arguments; yet, the Court found the reports to be business advice. While the opinion is silent on this issue, one wonders whether the Court would have reached a different result if the reports–
- Began with an introduction that the employee produced the reports at counsel’s request;
- That the reports are confidential; and
- That the employee prepared the report so that in-house counsel could provide legal advice to the company.
Because of the overwhelming amount of cost-related data, perhaps the Court would have reached the same decision. But implementing these type of explanatory statements on the reports and transmittal emails will go a long way in convincing a judge reviewing reports in camera that the attorney-client privilege applies.