Sharing Protected Information with Potential Litigation Funders Reply

Parties seeking financing to fund their litigation efforts must, of course, share information with the potential funder so that it can make an informed investment decision.  The attorney-client privilege or the work-product doctrine protects some of this information, such as a lawyer’s analysis of potential claims.

Parties adverse to the funded party now routinely seek this shared information in discovery, arguing that the party waived any privilege or work-product protections by sharing protected information with the litigation-financing company.  Many issues arise, such as the different waiver standards for the attorney-client privilege and the work-product doctrine, and whether the common-interest doctrine offers non-waiver protection.

In an article published in the Spring 2018 issue of Today’s General Counsel, I explore these issues.  You may read the article here.

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.


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, …”

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…