Privilege, Joint Clients, and Corporate-Formation Lawyer’s Deposition

Two well-intentioned gentlemen, Stuart and Eric, want to open a restaurant, and need to form a business entity to do so.  Eric says that his lawyer, Adam, can set up an LLC and draft the operating agreement.  Stuart agrees, perhaps because Adam’s law firm represents him on other matters, and meets Lawyer Adam to sign the operating agreement.

You can guess what happens next.  Stuart becomes unhappy with the restaurant’s business operations, and sues Eric and the LLC for breach of contract, breach of fiduciary duty, and an accounting.  Stuart wants to depose Lawyer Adam, but Adam, citing the attorney–client privilege, refuses to testify about his communications with Eric regarding preparation of the operating agreement.

Several issues arise.  Who is Lawyer Adam’s client—Eric? Stuart? The LLC? All of the above? Does the privilege for Adam’s communications with Eric preclude disclosure to Stuart? What level of proof is necessary to establish the privilege elements?  The court’s decision in Hinerman v. The Grill on Twenty-First, LLC, 2018 WL 2230763 (Ohio Ct. App. May 11, 2018), available here, answers these questions.  Let’s dissect the opinion, and heed its lessons. More…

Straight Outta Kentucky: Boilerplate Objections Waive Privilege

Remember R&B artist Prince Phillip Mitchell?  The Louisville native is a long-time singer-songwriter who reached his height of popularity in the 1970s.  He wrote and recorded several songs, including Star in the Ghetto, which appeared on his 1978 album Make it Good.

Fast forward ten years to 1988, when rap group N.W.A. released its debut album, Straight Outta Compton, produced in large part by Andre Romelle Young—known to us as Dr. Dre.  This album contained Dr. Dre’s rap tune, If It Ain’t Ruff.

Fast forward thirty years to 2018, where Mitchell claims in a Kentucky federal court that, in writing, producing, and publishing If It Ain’t Ruff, Dr. Dre “unlawfully and intentionally sampled the distinctive and important elements” from Star in the Ghetto, and therefore infringed on his copyright.  You may read the complaint here, and Insider Louisville’s story about the case here.

Let’s get to the privilege issue; after all, this is a privileges blog and not a 1970s R&B blog (through that would be more fun). More…

Employee Purloins In-House Lawyer’s Privileged Emails. Now What?

We often hear of an employee downloading trade secrets and other proprietary information when he leaves a company, but what happens when the employee downloads privileged emails between himself and in-house counsel?  Can the pilfering employee keep his communications even though it is the company’s privilege? Should the court disqualify the employee’s counsel for reading and not returning the privileged emails?  The court’s opinion in Sanchez v. Maquet Getinge Group, 2018 WL 2324679 (N.J. Super. Ct. App. Div. May 23, 2018), provides lessons on these issues.  You may read it here, and I discuss it below.

What Happened?

Oscar Sanchez worked as a compliance officer (yes, compliance officer) for Maquet, a pharmaceutical company that designs, manufactures, and distributes medical devices. Sanchez received a disciplinary warning, and then downloaded two Maquet executives’ hard drives and a “binder full of emails” that included emails between him and Maquet’s in-house lawyer regarding FDA compliance issues.

Sanchez took the privileged emails even though he signed a “Confidential Information, Invention Assignment, and Non-Compete Agreement” with Maquet prohibiting him from disclosing confidential information and requiring him to return company documents upon termination.  Maquet learned of Sanchez’s possession of its privileged communications when he produced them in discovery, and immediately demanded their return.

Privilege is Threshold Issue

Sanchez first argued that the privilege did not apply because the in-house lawyer was only copied on emails or did not respond to the emails and, consequently, did not provide legal advice.  The appellate court upheld the trial court’s privilege finding, noting that Sanchez labeled the emails “ATTORNEY CLIENT PRIVILEGE.”  Looks like an easy call there. More…