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Crisis-management and public-relations guru Richard Levick and his team create and publish a daily podcast dedicated to in-house counsel. The podcast, In-House Warrior, features Richard interviewing lawyers and others on a variety of topics relevant to today’s in-house lawyers.

I recently sat down with Richard, virtually of course, to discuss the evolution of the corporate attorney–client privilege and how courts apply the privilege to outside and in-house counsel. Topics include regulatory advice versus legal advice, in-house counsel as a business advisors, how the privilege applies to consultants (including PR consultants), and practice tips for establishing the privilege in daily communications. And a magic wand makes an appearance—though, sadly, there is no magic privilege wand that I have found.

So, whenever you head out for your next run, walk, workout, commute, or other venture that calls for airpods and a podcast, listen to the interview and see if you agree with my comments, tips, and observations.

 

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It was only a matter of time. With virtual depositions all the (necessary) rage, it will surprise no one that a privilege dispute regarding a virtual deposition exhibit reached a judge’s chambers.

When the questioning lawyer used a privileged document in a virtual deposition, the defending lawyer—due to the document’s unclear display—failed to recognize it and lodge an objection. The court found the lawyer had waived privilege over the document even though he sent a claw-back letter to opposing counsel the same day. Orthopaedic Hosp. v. DJO Global, Inc., 2020 WL 5363307 (S.D. Cal. Sept. 8, 2020). You may read the decision here.

Use of a Privileged Document

The Orthopaedic Institute for Children filed a patent-infringement lawsuit against DJO Global over its patents for polyethylene implants for children. The parties entered a Protective Order, available here, that governed the inadvertent production of privileged material:

When a Producing Party gives notice to Receiving Parties that certain inadvertently produced material is subject to a claim of privilege or other protection, the obligations of the Receiving Parties are those set forth in Federal Rule of Civil Procedure 26(b)(5)(B).

The protective order forecasted that the parties may enter a FRE 502(d) order in the future, but apparently they never did.

DJO Global produced an 88-page agreement during discovery but attached to the agreement was a legal-opinion letter from DJO Global’s patent counsel. In this “freedom to operate letter,” the lawyer opined that Orthopaedic’s patent application was invalid and DJO Global could pursue its product development.

A Blurry Distraction

At the FRCP 30(b)(6) deposition of DJO Global’s R&D vice president, Orthopaedic’s counsel pulled out the agreement—with the privileged letter attached—and asked questions about it. The testimony went something like this—

Q.   This [legal-opinion] letter is addressed to Aaron Bailey, who’s the director of new product development at DJO, right?

A.   Correct.

Q.   Is Mr. Bailey typically the person who works on getting freedom to operate opinions, or does that usually go through John Vinciguerra?

A.   It wasn’t abnormal for Aaron or John or someone in an R&D capacity to communicate with [the lawyer].

Q.   In this letter, [the lawyer] concluded that Dr. Frankle’s patents likely would not issue; correct?

A,   Yeah, that looks to be the case.

DJO Global’s counsel did not object during this colloquy because, as he later explained, the privileged opinion letter was attached to another document and he “could not tell from the remote display … whether the [letter] had been intentionally produced.” Orthopaedic’s counsel showed the letter at the end of a “lengthy, remote deposition where documents are displayed remotely and not always clearly.”

Bright-Line Waiver Rule?

Citing privilege waiver, Orthopaedic’s lawyer sent a letter immediately after the deposition demanding production of all information related to patent opinions. Although not objecting at the deposition, DJO Global’s counsel responded with a claw-back letter the same day.  He invoked the protective order’s claw-back provision and demanded the opinion letter’s return and a destruction of all copies. Orthopaedic refused, and the court faced a privilege-waiver decision.

Under FRE 502(b), the court evaluated whether DJO Global counsel’s failure to object at the virtual deposition meant that he neglected to “promptly take reasonable steps to rectify” the inadvertent production of the opinion letter. DJO Global argued that the virtual-deposition format did not allow him to clearly see the privileged document during the deposition and that he sent a claw-back letter the same day.

The court cited cases holding that the failure to “immediately object” to the use of an inadvertently disclosed privileged document at a deposition automatically waives the privilege. But it refused to apply this “bright-line rule.”

The court nevertheless ruled that DJO Global waived the privilege because DJO Global’s counsel did not object at the deposition and did not send the claw-back letter until after receiving the post-deposition document demand from Orthopaedic’s counsel. As for the blurry view of the privileged document, the court said this—

Although the Court recognizes the technical barriers inherent in a remote deposition, whether or not the remote display of the document was clear, the coinciding testimony regarding the [opinion] letter was unmistakably about an attorney–client communication.

POP Analysis

Tough outcome here—one where the defending lawyer sent a claw-back demand on the same day that his adversary used a privileged document in a deposition. And while the court eschewed a bright-line waiver rule, permitting the questioning lawyer to use the privileged document was nevertheless fatal.

The parties contemplated entry of a 502(d) order but never entered one.  But would it have helped defense counsel? Unlikely because there is a difference between (1) seeking return of an inadvertently disclosed privileged document after disclosure and (2) seeking return after allowing one’s adversary to use the privileged material in a deposition or motion practice without objection. For more on this topic, see Court Rules that Party Waived Privilege Despite a 502(d) Order.

These courts tell us that it is the use, not the disclosure, that is fatal. This rule applies in live depositions—and now virtual ones.

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As a dejected young lawyer returning from an unsuccessful motion hearing, a senior partner consoled me by saying that he once lost “a motion to set against a pro se plaintiff.” And while that story lifted my spirits, I doubted its veracity. You may similarly doubt that Dartmouth College could lose a complex privilege dispute against a pro se plaintiff, but it certainly did and the result should serve as a lesson to the rest of us.

In a case filed by an expelled student, the New Hampshire federal court held that Dartmouth’s privilege designations exceeded the privilege’s “intended purpose.” And the court rejected multiple privilege claims over emails copied or forwarded to Dartmouth’s in-house counsel. The reason? Failure to prove that the email communications contained a legal-advice component. Anderson v. Trustees of Dartmouth College, 2020 WL 5031910 (D.N.H. Aug. 25, 2020). You may read the opinion here.

Expelled

A male Dartmouth student was arrested and found guilty for violating a restraining order that a non-Dartmouth female student obtained against him. Following a disciplinary hearing, Dartmouth expelled the student. The student pursued an unsuccessful administrative appeal and then filed a pro se federal-court lawsuit essentially claiming that Dartmouth violated its own disciplinary policies and procedures in deciding to expel him from campus. You may read the complaint here.

Not receiving the wealth of internal communications that he expected in discovery, the student filed a motion to compel and astutely asked the federal judge to conduct an in camera review of communications over which Dartmouth claimed privilege. Many of these withheld emails involved its in-house counsel. Some involved him directly while others arrived in his inbox from other Dartmouth employees cc’ing him or forwarding emails to him. The court accepted the in camera request and found many of Dartmouth’s privilege claims lacking.

Privilege “Questionable” for In-House Lawyers

While noting that the privilege encourages free and full discussions between an entity’s employees and counsel, the court also recognized that the privilege “stands as an obstacle of sorts to the search for truth.” The court would therefore “narrowly construe” the privilege to protect only communications “made for the purpose of seeking or receiving legal advice.”

As part of its narrow construction, the court warned that, for in-house counsel, “the invocation of the attorney–client privilege may be questionable in many instances.” This questioning mindset arises because courts understand that “an in-house lawyer may wear several hats,” meaning business versus legal hats, and these “distinctions are often hard to draw.”

Excessive Privilege Designations

As an initial matter, the court found that Dartmouth’s privilege claims over hundreds of emails exceeded the privilege’s “intended purpose.”  Dartmouth withheld entire email threads, some of which were external emails, simply because the thread contained a putatively privileged email. The court, clearly perplexed, asked why Dartmouth did not produce the email threads with the putatively privileged portions redacted. The “applicable law is straightforward,” the court noted, repeating it as follows:

If the nonprivileged portions of a communication are distinct and severable, and their disclosure would not effectively reveal the substance of the privileged legal portions, the court must designate which portions of the communication are protected and therefore may be excised or redacted prior to disclosure.

Dartmouth provided no reason why it did not redact the obviously nonprivileged portions of the email threads, and the court ordered it to do so.

Forwarding to or Copying In-House Counsel

The nondisclosure of these email threads had other problems. Dartmouth claimed privilege over entire email threads simply because it forwarded those threads—many of which included emails with the student—to its in-house lawyer.  In other instances, Dartmouth employees communicating internally copied the in-house lawyer and other, non-lawyer employees. The forwarding or copying came with little explanation other than “FYI” or “see below.” And while some of the forwarding and copying invited feedback, the employees sent those requests to lawyers and nonlawyers.

The court found that these emails “do not facially establish that legal advice was sought.” So, did Dartmouth prove the privilege’s legal-advice component?

“Patently Insufficient”

Dartmouth made an ipse dixit argument even though that has failed other in-house lawyers. The College argued in its brief that it “expected” its in-house lawyers to review and comment on all emails on which they were copied.  In fact, this was an established practice in the legal department.

Given the number of emails that in-house lawyers receive daily, that is a rather significant expectation and practice. But whether significant or insignificant, no Dartmouth lawyer—or anyone else—submitted a declaration proving that the in-house lawyer received those emails, whether copied or as a forwarding recipient, so he could provide the College with legal advice.

The court found Dartmouth’s ipse dixit argument “patently insufficient.” It took notice that the school failed “to provide any sort of affidavit or declaration from an individual with personal knowledge of that practice, or any other evidence that might establish that practice.”

As the court noted, the “presence of counsel’s name on a communication does not render that communication privileged.”  Parties must prove that the in-house lawyer was acting in his capacity as a legal advisor. And “merely saying that he was so acting in a memorandum of law is patently insufficient to meet the burden.”

POP Analysis

When a dejected young lawyer returns from the courthouse and informs you that she lost a motion, you can tell her not to worry—Dartmouth once lost a privilege dispute with a pro se plaintiff.  And if you have extra time for mentoring, explain that courts narrowly construe the privilege in general but particularly when the communication involves in-house counsel. Tell her to make privilege calls governed by this standard, not to over-designate, and be ready to prove—by a sworn declaration from the in-house lawyer—the basis for the privilege decision.

And that these maxims apply whether your adversary has competent counsel or no counsel at all.