The broad concept of at-issue privilege waiver is best illustrated by the advice-of-counsel waiver doctrine which, as its moniker signals, arises when a party claims that he relied on his lawyer’s advice before engaging in certain conduct.  The doctrine invokes the sword-and-shield imagery by precluding a party from using privileged legal advice as a sword to defend his adversary’s claim and simultaneously as a shield to prevent that adversary from assessing the legal advice’s validity.

Legal Advice of CounselCourts call this waiver, recognizing that the lawyer’s legal advice is privileged in the first instance, but the client chose to waive that privilege by raising the legal advice as a defense.  The question arises, however, which lawyers’ advice comes under the waiver’s scope. The court’s decision in Symbria, Inc. v. Callen, No. 20 C 4084, 2023 U.S. Dist. LEXIS 203978 (N.D. Ill. Oct. 11, 2023), available here, shows how courts differ on the scope and reveals that lawyers should be cautious before asserting an advice-of-counsel defense.  Let’s discuss it.

A Sale and Competition

United Methodist Homes and Services (UMHS) and other owners sold their interest in several healthcare entities associated with Illinois-based Symbria, Inc. through a Stock Purchase Agreement (SPA).  The SPA contained non-competition and non-solicitation provisions preventing UMHS from engaging in competing healthcare activities, taking Symbria clients, and soliciting Symbria employees.  John Callen, a former president of a Symbria entity, had an employment agreement with the entity that contained similar anti-competition and anti-solicitation clauses.

A few years after the sale, UMHS and Callen established healthcare entities, generally known as MedRehab, that Symbria claims violates their respective restrictive covenants.  The parties argued over the scope of those restrictive covenants, with UMHS filing a declaratory-judgment action in an Illinois state court and Symbria bringing a host of breach-of-contract, trade-secrets, and business-tort claims in an Illinois federal court.

Advice of Counsel and Discovery Dispute

UMHS and Callen received legal advice regarding the scope of the restrictive covenants at various stages of the sale and post-sale litigation.  First, they received legal advice from Deal Counsel during the SPA negotiations.  Second, they received legal advice on the covenants’ scope from Startup Counsel when UMHS and Callen formed the MedRehab entities.  And third, they received legal advice from their post-sale Litigation Counsel.

In their answer to the claims presented in the federal-court lawsuit, UMHS and Callen expressly invoked the legal advice of their Deal Counsel as an affirmative defense, stating in part as follows:

UMHS counsel provided a legal opinion regarding the obligations under the SPA agreement, and concluded that it could take equity positions in joint ventures doing business in states outside of Illinois, and that such action would not violate or breach the SPA.

The court recognized that “the issue defendants’ affirmative defense has injected into this case is whether they acted in good faith reliance on advice of counsel when they took equity positions in the MedRehab entities.”

UMHS knew that its advice-of-counsel defense waived the privilege over its communications with Deal Counsel and produced “hundreds of pages of communications and documents relating to opinions provided to UMHS” by Deal Counsel.  But Symbria wanted more—it claimed that UMHS’s “at issue waiver of the attorney–client privilege extends beyond their communications” with Deal Counsel “to their communications any lawyers about the restrictive covenants in the SPA.”

The issue before the court, then, was the scope of the advice-of-counsel waiver.  Did it extend to advice received from UMHS’s Startup Counsel? To its Litigation Counsel?

Choice of Law

To decide this scope-of-waiver issue, the court first had to decide which privilege law to apply—federal or state.  The court correctly noted that, under FRE 501, state privilege law governs civil cases regarding a defense for which state law supplies the rule of decision.  And here, Symbria’s claim for breach of the restrictive covenants arose under Illinois law, so Illinois privilege law applied.

Scope of Waiver

The choice-of-law decision proved somewhat pivotal to the parties’ arguments.  Symbria cited a federal-law decision for the proposition that the advice-of-counsel waiver extends beyond the lawyers’ opinions that a defendant discloses.  By relying on legal advice, that decision held, the defendant opens the door and “must produce not only other communications and opinions of the same attorney, but also privileged information from other counsel involving the same subject.”

But federal law and Illinois privilege law differed on this scope, and with Illinois privilege law governing, the federal decision was not controlling.  Illinois privilege law, the court found, “demonstrated a protective approach to the attorney–client privilege and work product doctrine” and did not extend advice-of-counsel waiver to subsequently retained counsel.

Ruling

Applying Illinois’ protective approach, the court held that UMHS’s advice-of-counsel defense waived the privilege over its communications with Deal Counsel, as UMHS conceded, but also over its communications with Startup Counsel.  The waiver did not, however, extend to UMHS’s Litigation Counsel.

The important consideration for the court was one of timing—at what point in time did UMHS rely and act upon legal advice. Thus, the court found—

Whether [UMHS] believed the SPA permitted them to set up the MedRehab entities depends on what they knew at that time, not what their current counsel, or any other lawyer, told them after the fact.

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Sandlot baseball stars like me know that “a tie goes to the runner.”  It’s an unwritten rule, for sure, and some say a myth. In baseball, this rule provides that, in a close play, most often at first base, if the runner and the baseball reach the base simultaneously, then the runner is safe.  It appears that some courts have taken this rule to the privilege-law sandlot, where the umpire-judge’s call is unfavorable to in-house lawyers.

Presumptions, Legal Advice, and Privilege

Whether the attorney–client privilege protects an in-house lawyer’s communications often turns on whether those communications relate to legal advice rather than non-legal advice.  And while many courts are skeptical whether communications between a company’s in-house lawyer and its employees relate to legal advice, others presume the legal-advice component when the in-house lawyer communicates with outside counsel.

Take, for example, an Oklahoma federal court’s summary of two rebuttable presumptions:

(1) if outside counsel is involved, the confidential communication is presumed to be a request for and the provision of “legal advice”; and (2) if in-house counsel is involved, the presumption is that the attorney’s input is more likely business than legal in nature. As a result, most of these courts apply “heightened” scrutiny to communications to and from in-house counsel in determining attorney-client privilege.

Lindley v. Life Inv’rs Ins. Co. of Am., 267 F.R.D. 382 (N.D. Okla. 2010), aff’d in part as modified, No. 08-CV-0379-CVE-PJC, 2010 U.S. Dist. LEXIS 41798 (N.D. Okla. Apr. 28, 2010). You may also check out my ABA Business Law Today article covering and explaining these presumption issues.

But not all courts apply this in-house/outside counsel legal-advice presumption.  Some apply no presumption and hold the privilege proponent to a preponderance-of-the-evidence burden while others—like New Mexico—impose a heightened burden on in-house lawyers.

New Mexico

For those of you who are regular POP readers or have attended my “Tales from the Privilege Crypt” seminars, you know that I often highlight the New Mexico Court of Appeals’ decision in Bhandari v. Artestia Gen. Hosp., 317 P.3d 856 (N.M. Ct. App. 2013).  There, the court held this—

A court faced with a situation where the primary purpose of a communication is not clearly legal or business advice should conclude the communication is for a business purpose, unless evidence clearly shows that the legal purpose outweighs the business purpose.

If, in baseball, a tie goes to the runner, then in New Mexico privilege law, a tie goes to business advice, meaning the in-house lawyer is privileged out.  Read more about this decision, which rejected the privilege for a General Counsel’s memorandum to the CEO, at GC’s “Talking Points” Memo to CEO Not Privileged—Leads to a Punitive Damages Verdict.

And Now a New Case

With this backdrop, let’s examine the New Mexico Court of Appeals’ decision in D.R. Horton, Inc. v. Trinity Universal Ins. Co., No. A-1-CA-39929, 2023 N.M. App. LEXIS 95 (Ct. App. Dec. 18, 2023), available here.  This case involved a dispute between Horton, the insured, and Trinity, the insurer, over Trinity’s duty to defend a series of underlying construction-defect claims.

One issue in the case was the legal significance of Horton’s alleged delay in providing the insurer with notice of the claims.  And relevant to the notice issue were communications between Horton’s in-house lawyers and its outside counsel.  The insurer wanted them, but Horton claimed that the attorney–client privilege precluded their disclosure.

Burden of Proof and In-House Counsel

In the court’s view, Horton’s privilege claim fell squarely within the business advice versus legal advice conundrum in Bhandari.  The court stated that the attorney–client privilege “does not protect communications derived from an attorney giving business advice or acting in some other capacity.”  And, citing Bhandari’s tie-goes-to-business privilege rule, the court required Horton to “clearly show” that the communications’ primary purpose was legal.

While Horton had some evidence that its in-house lawyers’ communications with its outside counsel were “solely legal,” it also produced an in-house lawyer’s affidavit saying this—

The decisions regarding the tenders of the defense of the Underlying Litigations and Arbitrations were a combination of business and legal considerations, and the business considerations were integrally intertwined with the legal considerations and therefore cannot be discussed without disclosing attorney-client privileged information.

Horton took the “integrally intertwined” approach, arguing that due to the complete mixture of business and legal, the legal purpose should shield all the communications.

Ruling

But “Bhandari forecloses that approach,” the court held.  While the court agreed that “the evidence presented established an admittedly mixed purpose,” Horton produced “no evidence to demonstrate that the legal purpose ‘clearly’ outweighs the business purpose.”  So, the court ruled, Horton failed to prove the privilege’s legal-advice component and should produce communications between in-house counsel and outside counsel.

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Sticky

I am thrilled to announce the publication of Privileges and Protections: Tennessee and Sixth Circuit Law. My former law partner turned law professor Kristi W. Arth and I completed this years-long journey and are delighted that LexisNexis/Matthew Bender added this treatise to its comprehensive collection of legal publications.

Todd Presnell and Kristi W. Arth

A first-of-its-kind publication, the 700+ page Privileges and Protections contains 16 chapters addressing over 40 evidentiary privileges or related protections plus an extensive examination of conflict-of-laws issues and of the historical origins and development of evidentiary privileges from English common law to federal common law to Tennessee statutory and common law.

Privileges and Protections is a combination legal treatise and desk-reference book.  Kristi and I structured each chapter to accomplish two objectives. First, each chapter provides quick privilege answers upfront for judges and lawyers with limited time to address an issue.  Second, each chapter backs up and supplies detailed information about the purpose, development, exceptions, and open questions related to that particular privilege for judges and lawyers who wish to devote more time and careful study to the privilege issue.

This book will serve as the go-to resource for trial judges, appellate judges, trial lawyers, transactional lawyers, in-house counsel, law professors, law students, and other legal professionals who need a practical guide for applying evidentiary privileges, an in-depth treatment of the history and the policy rationales underlying those same privileges, or recommendations for the further advancement of the many unanswered questions in this heavily litigated and complex area of law.

Kristi and I are honored that William C. Koch, Jr., a former Tennessee Supreme Court Justice and current Dean of the Nashville School of Law, authored the Foreword explaining why “the subject of evidentiary privileges is an acquired taste” and concluding this—

With the publication of Privileges and Protections: Tennessee and Sixth Circuit Law, the bench and bar now have a single, authoritative point of entry into the workings of evidentiary privileges.

We agree! And if you wish to have this new comprehensive resource on your bookshelf or at your fingertips through an eBook (epub or mobi files), please visit the LexisNexis site, accessible here, for ordering information.

I do not have the words to adequately express my gratitude to the many lawyers who provided support and encouragement throughout this endeavor.  The lawyers at my law firm, Bradley, have my deepest appreciation for researching discreet topics and editing my drafts.  And while I cannot mention everyone individually, I wish to highlight a select few.

Bob Parsley, a terrific lawyer and legal writer at Miller & Martin, provided invaluable support, editing, and advice during the early stages. John Day, a prolific writer and leader in the American College of Trial Lawyers, offered sage advice throughout my venture.  Jonathan Steen, an excellent lawyer and genuine “good guy,” supported my efforts for several years.  Matt Blackburn, now working as an AUSA, supplied instrumental research and writing contributions on a difficult area.  And David Greenwald, co-author of Testimonial Privileges, encouraged me even if he may not know it.

Most of all, I am eternally grateful for my friend and colleague Kristi Arth.  After years of legal research and writing and with 11 completed chapters and 2 in the works, I still did not see the finish line.  Kristi saw the value of this publication to the bench and bar and eagerly joined me in completing the work and making it the substantive treatise that I envisioned.  This book is as much hers as mine.

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In an earlier post, Company Policy, Personal Emails, and Privilege Protection, I discussed take-aways from a federal-court decision that an employee had no reasonable expectation of privacy—and therefore no privilege protection—for emails sent to her personal attorney on her employer’s email system.  But just a few days later, the Oregon Supreme Court issued an opinion in Gollersrud v. LPMC, LLC, No. S069796, 2023 Ore. LEXIS 665 (Dec. 21, 2023), available here, taking a different view.

The court, interpreting Oregon’s rule-based attorney–client privilege (which many states also employ), eschewed any per se rule that emails sent over an employer’s email server lacked the requisite confidentiality.  On the contrary, the court held that an employee’s emails with her personal attorney were presumptively confidential and shifted the burden to the employer to make a rather heavy “evidentiary showing” that the emails lacked confidentiality.  Let’s discuss the circumstances here and how this privilege may differ depending on whether state or federal privilege law applies.

Subpoena to Third-Party Employer

David Gollersrud and his mother, Inez, sued several defendants, including Salem-based Landmark Professional Mortgage Company, for alleged wrongdoings in their real-estate investment relationship.  As part of the discovery process, LPMC issued subpoenas to Mr. Gollersrud’s former employers seeking relevant email communications.

Gollersrud moved to quash these subpoenas claiming that some of the emails sent through his employers’ servers included privileged communications with his personal attorneys.  In support, he submitted a declaration that said, in part, this—

I cannot recall all of the email communications I have sent to, received from or which include my mother over the course of almost ten years.  However, I expect many of these communications would involve: Communications including privileged communications with attorneys in this case, related cases, and other unrelated family and business legal matters.

Trial Court Ruling, a Second Declaration, and Mandamus

The trial court apparently thought little of Gollersrud’s declaration and motion and ruled that the “communications to be recovered from the employers’ servers are not privileged.”  So, Gollersrud sought clarification and an evidentiary hearing, and submitted a much better declaration stating the following—

  • None of his employers monitored his email;
  • He received no notices that his employers monitored his email;
  • No third parties had the right to access the employers’ email servers; and
  • His emails on the employers’ servers were password protected.

Importantly, LPMC submitted no countering evidence.

The trial court remained unimpressed and denied Gollersrud’s clarification and hearing requests. So, Gollersud sought relief from the Oregon Supreme Court.

Oregon’s Attorney–Client Privilege

The federal attorney–client privilege remains a creature of common law because Congress in the mid-1970s rejected including a set of privilege rules in the Federal Rule of Evidence.  See FRE 501.  Common-law application generally requires the privilege proponent to prove a confidential communication within an attorney–client relationship made for legal-advice purposes.  And as explained in my prior discussion, many federal courts hold that sending a personal email to your attorney through an employer’s server lacks the requisite confidentiality necessary to sustain the privilege.

But Oregon, like many states, houses its attorney–client privilege within a set of evidence rules.  And while Oregon Rule of Evidence 503(2) defines the privilege as covering “confidential communications made for the purpose of facilitating the rendition of professional legal services,” Rule 503(1)(b) specifically defines a “confidential communication” as—

A communication not intended to be disclosed to third persons other than those to whom disclosure is in furtherance of the rendition of professional legal services to the client or those reasonably necessary for the transmission of the communication.

So, does this specifically defined term affect whether a employee’s communication to his attorney through the employer’s email server is sufficiently confidential to remain privileged?

Ruling

Yes, the supreme court said.  And here’s why.  The court saw its job as one of statutory construction—interpreting the meaning of “confidential communication” in the employer-email setting. 

Relying on a marital-privilege decision in State v. Serrano, 210 P.3d 892 (2009), the supreme court interpreted Rule 503(1)(b)’s language “communication not intended to be disclosed to third persons,” which is admittedly “framed in the negative,” as creating a presumption of confidentiality.   And with this presumption, the burden shifted to the party seeking the privileged emails, here LPMC, to overcome the confidentiality presumption.

No Per Se Lack of Confidentiality

LPMC instead argued for a blanket, per se rule that renders non-privileged emails sent over an employer’s server because of an inherent lack of confidentiality.  The court rejected this approach, finding that Oregon’s privilege rule was “grounded in practicalities and pragmatism” and that a per se no-confidentiality rule “ignores the practical realities of modern life, and it does not reflect how many Oregonians live and work.” 

The common practice of telework has brought employer computer systems and employer paid network access into the home, with an accompanying blurring of the lines between private and work communication, and the network infrastructure supporting each.

In other words, “personal and work business is increasingly conducted from devices and accounts that are not clearly delineated.”

And No Proof

Overcoming the confidentiality presumption, according to the court, presents no small task.  It must arise from “a particular evidentiary showing” focusing on the context for the communications and the circumstances surrounding them.  Importantly, the privilege-busting party “must establish more than a risk that privileged communications might be disclosed.”

And LPMC did not meet the required “particular evidentiary showing. The only evidence in the record was Gollersud’s second declaration attesting—generally—to his understanding of his employers’ various email policies.  It does not appear that LPMC deposed the employers to ascertain their policies or whether Gollersrud acknowledged a lack of confidentiality.

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It happens more than we know—employees use their company email to send personal messages, such as scheduling a medical appointment, checking-in with a child’s teacher, or sending a resume to an employer located on greener pastures.  The messages winding their way through the company’s email system contain various levels of private information—sending the resume may be more confidential than scheduling the dog’s grooming appointment.

But significant privilege issues arise when the employee communicates with her lawyer regarding personal legal advice. AEmployee Work Emailnd those issues become amplified when the employee and her employer later become adverse in litigation and the company’s e-discovery searches uncover those personal, lawyer-related emails.  So, lawyers representing employees and lawyers representing employers should heed the court’s decision in Sickels v. McDonough, No. 4:21-CV-00963-JAR, 2023 U.S. Dist. LEXIS 201554 (E.D. Mo. Nov. 9, 2023), available here.  Let’s discuss it.

The Policy

Sherri Sickels worked as an electrician at the Department of Veteran Affairs’ St. Louis facility.  The VA permitted employees like Sickels to use the government’s email system for certain, restricted personal use, but made clear that employees had no expectation of privacy in those emails.  For instance, the VA’s computer policy, available here, stated—

And if that wasn’t clear enough, the VA employee handbook, pertinent portions available here, reiterated that—

Handbook PDF

A Lawsuit and Emails

Sickels believed that she was harassed and passed over for an internal job change because of her transgender status and ultimately filed a federal lawsuit asserting Tilte VII claims.  Her lawyer then did what all litigators do—sent document requests seeking the VA’s internal emails referencing Sickels.

After identifying search terms and applying those terms to emails of relevant custodians, including Sickels’ emails, the VA discovered 20 email communications between Sickels and her lawyer—the same lawyer representing her in the lawsuit.  These emails contained attachments and some referenced Sickels’ discrimination claims, including pleadings and discovery matters in the lawsuit.

For those puzzled by this, yes, Sickels and her lawyer communicated about the lawsuit, including about discovery, using Sickels’ VA email.

Privilege Issue

This presented the VA lawyers with an interesting privilege dilemma.  Sickels had not inadvertently produced these emails, rather the VA’s lawyers found them on the VA’s email system—the same system that Sickels’ discovery requests required them to search.

What to do?  Here, they took appropriate action.  Even though Sickels did not inadvertently disclose the privileged emails, the VA lawyers followed FRCP 26(b)(5) by sequestering the emails, notifying Sickels’ lawyer of the issue, and seeking a privilege ruling from the court.

Ruling

The court made short work of this privilege dispute, first recognizing that the attorney–client privilege protects from disclosure confidential communications between lawyer and her client.  The court then emphasized and explained the confidential element, stating this—

The communications must be confidential—that is, the client must reasonably expect that the communications will remain private.

Regarding the “reasonable expectation” requirement, the court applied the findings of other courts that an employee does not have a reasonable expectation of confidentiality over personal emails sent through her employer’s email system if two things are present.  First, the employer must have a policy in place that restricts employees’ use of the email system.  Second, the employer must have provided notice of this lack of confidentiality to the employee.

Here, the court easily found that the VA met these requirements.  Both the policy and handbook clearly stated that employees may use the agency’s email system for personal use on a limited basis but that in any event those emails were not private and subject to monitoring.  And the VA had evidence that Sickels had acknowledged that personal email use was not private.

The court held that Sickels had no reasonable expectation of privacy and the emails between her and her lawyer were not confidential.  And without confidentiality, there is no privilege and the court permitted the VA to use the 20 emails as it wishes to do.

POP Analysis

Several good takeaways here.  For lawyers representing employers, ensure that your client has an appropriate personal email policy that at a minimum declares that employees do not have a reasonable expectation of confidentiality over those personal emails.  But that policy may be no good unless you can prove the employee was aware of it, so include an acknowledgement of the non-confidentiality as you may perhaps do with acknowledgment of other policy and procedures.

For lawyers representing employees, it is common for them to email you from the workplace and, despite any non-confidentiality policy, may not fully appreciate the privilege repercussions.  When emails arrive from the employer’s email address, don’t respond, pick up the phone to explain the situation, and find a more secure and confidential avenue to communicate.

Finally, the VA lawyers’ approach to the situation represents good guidance for the rest of us.  Whenever you find yourself in possession of an adversary’s privileged information, whether through inadvertence or otherwise, the better practice is to sequester the emails, notify opposing counsel, and then seek a privilege ruling before using the information.

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