SCOTUS Nominee’s Latest Privilege Opinion: A Win for Corporate Legal Counsel Reply

Judge Brett Kavanaugh, President Trump’s nominee to replace Justice Kennedy on the U.S. Supreme Court, recently authored an important attorney–client privilege opinion for corporate legal counsel.

Judge Kavanaugh held that the privilege covered a General Counsel’s communications involving legal and business issues because “one of the significant purposes of [her] communications was to obtain or provide legal advice,” with an emphasis on “one.”  Federal Trade Comm’n v. Boehringer Ingelheim Pharmaceuticals, Inc., 2018 WL 3028972 (CADC June 19, 2018). You may read the decision here.

A GC’s Communications

In 2008, Boehringer, a pharmaceutical company, negotiated a patent-infringement settlement with generic-drug manufacturer Barr Pharmaceuticals.  The agreement was a so-called “reverse-payment” settlement because the patent holder (Boehringer) paid the alleged infringer rather than the other way around.

The FTC, which monitors reverse-payment settlements to ensure compliance with antitrust laws, issued a subpoena to Boehringer requesting, in part, communications involving Boehringer’s General Counsel. The requested communications allowed the GC “to analyze and navigate the treacherous antitrust issues surrounding reverse payment settlements,” but also reflected her communications with Boehringer executives regarding a possible settlement.  Boehringer argued that the attorney-client privilege protected the entirety of the communications.

Two Purposes

Noting that the attorney–client privilege “applies whether the attorney is in-house counsel or outside counsel,” Judge Kavanaugh recognized that “[t]he application of the attorney–client privilege can become more complicated when a communication has multiple purposes—in particular, a legal purpose and a business purpose.”

Judge Kavanaugh found that the GC’s communications had a legal purpose—“to help the company ensure compliance with the antitrust laws and negotiate a lawful settlement.”  But he also found that the communications had a business purpose—“to help the company negotiate a settlement on favorable financial terms.”

Two Tests

Although not widely litigated, and therefore subject to some uncertainty, courts generally apply two standards in assessing whether the privilege covers corporate counsel’s dual-purpose communications—those that pertain to legal and business issues.

Some courts apply a “because-of” test, meaning that the privilege applies only when an employee communicates with the GC because of legal advice.  It is akin to a sole-cause standard.

Other courts apply a primary-purpose test, meaning that the privilege applies if a primary—not sole—purpose of the GC’s communication involved legal advice.

Ruling

Citing In re Kellogg Brown & Root, Inc., 756 F.3d 754 (CADC 2014), which I discussed here, Judge Kavanaugh applied the primary-purpose test.  He noted the “inherently impossible task” of finding “‘the one primary purpose’ of a communication,” and therefore held that the primary-purpose test requires courts to determine “whether obtaining or providing legal advice was one of the significant purposes of the attorney–client communication.” (emphasis by Judge Kavanaugh).

The Association of Corporate Counsel and the U.S. Chamber of Commerce filed a well-written amicus brief, which you may read here, in support of the primary-purpose test.

Focusing on “one significant purpose” of an in-house lawyer’s dual-purpose communication reduces the uncertainty in the attorney–client privilege, which is important because “an uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all.” (citing Upjohn).

Here, Judge Kavanaugh found that, even though the GC’s communications served a business purpose, at least one significant purpose of her communications included formulating legal advice on the reverse-payment settlement.  So, the privilege applied.

Pop Analysis

While Judge Kavanaugh’s opinion applies existing circuit precedent, the decision provides additional authority for corporate legal counsel to argue that the privilege should protect their communications from disclosure even if the discussion involves business-related items.

And if the Senate confirms the president’s nomination, you can begin that argument with “As now-Justice Kavanaugh held in the Boehringer case, …”

Hole-in-One Leads to GC’s Deposition. Here’s How.

The Greenbrier Classic, the annual PGA Tour event in West Virginia, operated by Old White Charities, Inc., has a unique fan experience.  Each spectator receives $100 if a Tour player sinks a hole-in-one on the course’s par-3 18th hole, $500 if a second player aces the hole, and $1,000 if a third accomplishes the feat.

During the 2015 tournament, Greg McNeill sank a hole-in-one, providing the spectators with an instant $18,900 in cash.  Later that day, Justin Thomas used his pitching wedge to ace the 137 yard hole, giving the spectators another $173,500!  Alas, there was no third ace, but the spectators left the tournament with a collective payout of $192,400.  Read the ESPN article chronicling the feat here.

Insurance Coverage?

Surely the Classic’s operator, Old White, had insurance for such an unlikely yet expensive accomplishment?  Well, it thought so, but the insurance company denied coverage because the policy contained a hole-length-limitation clause requiring the shot to be at least 150 yards for coverage to apply.  With the PGA’s pin placement that day, the length from tee box to hole was only 137 yards—13 yards shy of the insurance company’s mandate.

No Way!

Old White sued its insurance agency, Bankers Insurance, alleging negligence for failing to procure coverage without a hole-length limitation.  During discovery, Old White moved to compel the deposition of Melvin Tull, Bankers Insurance’s General Counsel.  Bankers, which did not have the opportunity to file a written response, argued that, because Tull is a GC, “there is no way [a deposition] would not violate the attorney–client privilege.”

Yes, Way!

The court ruled that, regardless of the attorney–client privilege, Old White could depose the General Counsel.  The court noted that More…

Does Advice-of-Counsel Defense Waive Privilege for In-House Lawyers?

Aa a general rule, clients waive the attorney–client privilege when they assert an advice-of-counsel defense and, consequently, must produce their lawyer’s advice-related communications.  The waiver’s scope, however, is not as well-known.  Does the waiver apply to communications with outside counsel and in-house lawyers?

The Utah federal court faced this specific question and narrowly construed the scope of waiver.  The court held that a client’s advice-of-counsel defense waived the privilege over its communications with outside counsel, but that the waiver did not extend to its communications with in-house counsel.  Hoopes v. Owners Ins. Co., 2018 WL 1183374 (D. Utah Mar. 6, 2018).  You may read the decision here.

Bad-Faith Claim

A Geico insured struck an 11-year-old pedestrian on Main Street in Heber City, causing severe injuries to the minor. Geico paid its insurance limits, but the minor’s mother filed breach-of-contract and bad-faith claims against her uninsured-motorist carrier when it failed to promptly settle that matter.

The UIM carrier had retained outside counsel to investigate and opine on coverage and payment issues.  The carrier asserted the advice-of-counsel defense and agreed that the defense waived the privilege over its communications with outside counsel.  The carrier, however, refused to produce communications between its claims adjuster and in-house lawyer.

Sword and Shield

The mother moved to compel the claims-adjuster–in-house lawyer communications, essentially arguing that waiver is a broad concept and must include all advice-related communications, including those with in-house counsel. More…