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…

Penn State Loses Privilege Clash over Internal Investigation, and the Reason May Surprise You

In the continuing fallout from the reprehensible Jerry Sandusky scandal, a PA appellate court rejected Penn State’s attorney–client privilege claim over documents that Louis Freeh’s law firm generated during its internal investigation.  The reason?

The court found that there was no attorney–client relationship between Penn State and Freeh’s law firm, and, without this relationship, the privilege did not cover communications between Penn State Board of Trustees and Freeh’s firm.  The court made this finding even though the Board Chair signed the engagement letter and the Board paid Freeh’s fees.  Estate of Paterno v. NCAA, 168 A.3d 187 (Pa. Super. Ct. 2017).  You may read the decision here.

The Forgotten Privilege Element

Regular readers of this blog know that the party asserting the attorney–client privilege must show three primary elements: a (1) confidential (2) communication made for (3) legal-advice purposes.  We too often, though, presume—and forget about—a threshold element: a lawyer–client relationship. More…