It often happens that a company obtains information critical to its claim or defense from an entity with which it has a close business relationship. The question arises whether the attorney–client privilege protects the communications. Sure, some courts extend the privilege to a client or lawyer’s agent in various, restrictive situations.
But when a Texas company claimed privilege over its non-lawyer communications with its sole-source supplier, the court rejected the privilege, ruling that the company took this agency principle “entirely too far.” LL’s Magnetic Clay, Inc. v. Safer Med. of Montana, Inc., 2018 WL 5733178 (W.D. Tex. Aug. 2, 2018). You may read the decision here.
LL’s Magnetic Clay, Inc. sued Safer Medical for federal false advertising and various related state-law claims. Safer Medical’s employee—either before or during the lawsuit (it’s unclear)—contacted Tainio Biologicals, it sole source of product ingredients, to gather “technical documents” and “confirm key technical facts.”
Magnetic Clay subpoenaed—and Tainio produced—documents that included communications between Safer and Tainio regarding the relevant, technical information. Safer Medical saw these documents, and immediately sent a claw-back letter, claiming the privilege protected the documents from discovery because Tainio, its sole-source supplier, was functioning as its agent “whose assistance [was] necessary to enable the client’s attorneys to provide legal advice.”
Law and Ruling
The court correctly cited the privilege’s foundational elements—confidential communications for legal-advice purposes—but then said this: More…
Companies searching for capital to fund litigation pursuits must first persuade a potential investment firm of the claim’s merits. These persuasion efforts often include the company’s counsel sharing legal analyses and other work-product documents with a putative financier. But this sharing leads defendants to later claim privilege waiver and seek production of the shared information.
While some courts, such as the one profiled here, have rejected these waiver claims, the Delaware federal court bucked this trend. The court rejected the work-product and common–interest doctrines and ordered a company to produce its emails and documents shared with a potential litigation-financing firm. Acceleration Bay LLC v. Activision Blizzard, Inc., 2018 WL 798731 (D. Del. Feb. 9, 2018). You may read the opinion here.
Before pursuing a patent-infringement action, Acceleration Bay LLC and its counsel communicated with Hamilton Capital about financing the litigation effort. Acceleration also provided documents so that Hamilton Capital could conduct due diligence before deciding whether to provide capital. This information exchange occurred before Acceleration and Hamilton Capital entered an agreement or filed litigation which, as we’ll see, is apparently a big deal. More…
In our complex corporate world of parents, direct and indirect subsidiaries, affiliates, mergers, acquisitions, and dissolutions, an increasingly litigated issue is whether a parent’s in-house counsel may have privileged communications with the subsidiary’s employees. The USDC for E.D. Missouri sustained a parent company’s privilege assertion over its in-house lawyers’ communications with a defunct subsidiary.
How? By invoking the joint–client doctrine. Robinson Mech. Contractors Inc. v. PTC Group Holding Corp., 2017 WL 2021070 (E.D. Mo. May 12, 2017). You may read the decision here. Let’s discuss.
When PTC Seamless Tube failed to pay Robinson Mechanical for construction work, Robinson sued Seamless and its parent, PTC Group Holding. Seamless filed for bankruptcy and, before its ultimate dissolution, transferred its documents, including privileged documents, to Holding. The Bankruptcy Court’s transfer order, available here, expressly stated that Holding’s review of Seamless’ privileged documents would not result in privilege waiver.
Robinson nevertheless moved to compel the documents, arguing that Seamless, now a dissolved entity which defaulted in the lawsuit and had no management, cannot assert the privilege. The Bankruptcy Court’s order, it argued, was simply a non-waiver provision and did not grant Holding—its parent—independent power to assert Seamless’ privilege.
Holding initially relied on the Bankruptcy Court’s order for its privilege claim, but then asserted the joint–client doctrine in supplemental briefing. Holding argued that it and Seamless were joint clients that shared in-house counsel. In support, Holding’s General Counsel filed a More…