Court Rejects Privilege for Chipotle Consultant’s Report to Outside Counsel 1

In a wage-and-hour case against Chipotle Mexican Grill, the USDC SDNY ruled that the attorney-client privilege did not protect a consultant’s report prepared for and delivered to Chipotle’s outside counsel.  In doing so, the court provided an instructive analysis of the Kovel doctrine.  Scott v. Chipotle Mexican Grill, Inc., 2015 WL 1424009 (SDNY Mar. 27, 2015).  You may read the Slide1decision here.

Counsel’s Retention of Consultant

Chipotle retained a law firm to assess whether the restaurant chain had properly classified its apprentices under the FLSA.  Chipotle, through the law firm, retained an HR consultant who conducted a “job function analysis” and provided its resulting report directly to the law firm.  Chipotle explained that the purpose of the consultant’s investigation was to gain an understanding of the apprentices day-to-day job and provide the law firm with this information so the firm could provide legal advice to Chipotle.

Plaintiffs’ counsel learned of the consultant’s report and moved to compel its production.  Chipotle, relying on the Kovel doctrine, argued that the attorney-client privilege protected the report from discovery.

The Kovel Doctrine

Arising from the court’s decision in United States v. Kovel, 296 F2d 918 (2d Cir. 1961), the Kovel doctrine extends the attorney-client privilege to experts, such as an accountant, that the attorney retains to assist her in understanding complex issues so that she can provide legal advice to the client.  The Kovel doctrine recognizes a “privilege derivative of the attorney-client privilege where a third party clarifies or facilitates communications between the attorney and client in confidence for the purpose of obtaining legal advice from the attorney.”

Under the Kovel doctrine, the privilege attaches to third-party reports made at the attorney’s or client’s request where the report’s purpose is to put complicated information received from the client into a form usable by the attorney.  In other words, the third-party takes a client’s complicated information and transforms it into a form that the attorney understands so that the attorney can render legal advice to the client.

Court’s Ruling

Applying Kovel, the court stated that Chipotle’s claim that its outside counsel needed an HR consultant to evaluate whether Chipotle properly classified its employees “strain[ed] credulity.”   Although the consultant drafted her report for and delivered it to Chipotle’s outside counsel, the court noted that “this formalism is insufficient to establish that it is a privileged communication.”

And the report did not state that the law firm retained her to assist in providing legal advice; nor did the consultant label the report “confidential” or “privileged.”  Moreover, the consultant set up interviews with Chipotle employees without mentioning that the interviews were privileged, confidential, or conducted to assist Chipotle in receiving legal advice.

The court found that Chiplotle failed to present evidence that the consultant was taking information that was incomprehensible to its attorneys and putting it into a “usable form.”  Rather, the consultant simply combined employee interviews and provided the attorney with a report of her factual analysis.

For these reasons, the court found that Chipotle failed to prove the consultant’s report fell under the Kovel doctrine and ordered its production.

PoP Analysis

The Kovel doctrine is a narrow exception to the rule that the attorney-client privilege does not protect communications from a non-client to the attorney.  The Scott decision should remind lawyers needing expert assistance to understand complicated factual issues to take certain steps to ensure the privilege applies.  Some practice tips include:

  • The attorney should retain the specialist;
  • Ensure the engagement letter expressly states that the specialist’s services are for the purpose of understanding the client’s information so the attorney can provide the client with legal advice;
  • The engagement letter should describe the reasons why the information the attorney needs from the specialist is complicated and in need of interpretation into a format the attorney can understand;
  • The specialist should receive and gather information in a confidential manner and take steps to ensure its continued confidentiality;
  • The specialist should inform any interviewees that the meetings are confidential and conducted so that the company’s attorney can render legal advice, and consider obtaining a written acknowledgement from the interviewee on these points; and
  • All communications between the specialist and the attorney should be confidential and labeled “Confidential & Privileged.”

Ball Four: Roger Clemens Ordered to Produce Lawyer’s Emails with PR firm and Sports Agent 1

In the defamation action filed against Roger ClemensClemens by his former trainer, Brian McNamee, the USDC for the Eastern District of New York labeled Roger Clemens’ handling of attorney–client privilege claims as “troubling,” ruled that Clemens’ failure to produce a privilege log waived his privilege claims, and, in any event, rejected Clemens’ privilege assertion over his lawyers’ communications with a public relations firm and Clemens’ sports agent.  McNamee v. Clemens, 2013 WL 6572899 (E.D.N.Y. Sept. 18, 2013).  You may access the Court’s opinion here.

On December 13, 2007, former U.S. Senator George Mitchell issued the “Mitchell Report,” a copy of which is available here, that included McNamee’s statements that he injected Roger Clemens with performance enhancing drugs. Five days later, Clemens’ lawyers retained a public relations strategist.  McNamee later filed a defamation suit, available here, alleging that Clemens conducted a PR campaign to damage McNamee’s reputation and brand him a liar.

McNamee claimed that this PR campaign included Clemens’ 2008 interview with Mike Wallace on 60 Minutes.  You may view a highlight of that interview, which includes Wallace discussing McNamee’s potential defamation action, below.

During discovery, McNamee sought all communications between Clemens’ lawyers and the PR firm and Clemens’ sports agent.  Clemens asserted the attorney–client privilege, arguing that his PR consultant was “a full-fledged, yet non-attorney, member of his legal team,” and that the privilege protected communications with his sports agent because the agent was “the equivalent of in-house counsel.”

Inadequate Privilege Log and Waiver

Clemens asserted the attorney–client privilege, but did not include a privilege log with his privilege objections.  Instead, Clemens submitted a privilege log only after the Court ordered that he produce the withheld documents for an in camera inspection.  The Court ruled that Clemens’ failure to submit a privilege log resulted in a waiver of all his privilege and work-product objections.  As noted in this earlier post, and this one, courts increasingly rule that the failure to submit a privilege log constitutes privilege waiver.

The Court further ruled that the late-filed privilege log was nevertheless insufficient to avoid privilege waiver.  Although the privilege log contained each document’s date, author, recipients, and subject, the Court ruled that the subject line contained “exceedingly unhelpful descriptions” to enable it to properly evaluate the privilege claims.

Lawyer Emails with PR Firm and Sports Agent

Despite its waiver ruling, the Court reviewed over 900 pages of the putatively privileged communications with the PR firm and the sports agent.  The Court noted that the attorney–client privilege may extend to non-lawyers, including consultants and agents, assisting a lawyer in representing a client. But the privilege does not apply if the PR firm’s advice is simply helpful to the lawyer; instead, the “critical inquiry” is whether the lawyer and PR consultant or agent communicated in confidence and for the purpose of the client receiving legal advice.  In other words, the consultant or agent’s communication must be “primarily or predominantly of a legal character.”

The Court ruled that Clemens failed to meet this burden.  Clemens failed to show that PR consultant or sports agent performed any work other than standard public relations and agent-related services for Clemens, or that these communications were necessary so that Clemens’ lawyers could provide him with legal advice.  Most of the emails, the court ruled, “seem designed to manage the public’s perception of Clemens as opposed to discussing legal strategy.”  Clemens privilege claim failed, and the Court ordered production of all communications with the PR firm and the sports agent.

Epilogue

Claiming that the judge “overlooked controlling authority” and “a number of facts,” Clemens’ lawyers filed a lengthy motion asking the Court to reconsider her ruling. McNamee responded, but as of the date of this post the Court had not issued a ruling.

Judge Facciola Rules that Privilege Protects Lawyer–Consultant Communications in Limited Circumstances

In an opinion by noted e-discovery expert Magistrate Judge Facciola, the USDC for the District of Columbia held that, under the Kovel doctrine, the attorney–client privilege extends to communications between a lawyer and a consultant when the consultant is “providing assistance in developing litigation and legal strategies.”  But the court refused to preclude the consultant’s entire testimony, requiring instead that the lawyer assert privilege objections on a question-by-question basis.  Goldstein v. FDIC, 494 B.R. 82 (D.D.C. 2013) (Facciola, M.J.).

Magistrate Judge Facciola

Magistrate Judge Facciola

In Goldstein, the trustee of a bank placed in receivership retained Protiviti, Inc. to provide financial and tax assistance to the Trustee’s management of the bank’s estate.  The Trustee sued later the FDIC asserting that it improperly rejected the trustee’s claim to certain loan proceeds,, and the FDIC issued a subpoena seeking testimony from Protiviti.  The Trustee, citing the Kovel doctrine, moved to quash the entire deposition on the grounds that Protiviti’s participation was necessary for the effective consultation between client and attorney.  Judge Facciola, citing D.C. Circuit precedent, ruled—

if a consultant is so intertwined with the attorney in a case, such that he is providing assistance in developing litigation and legal strategies in a manner similar to multiple attorneys working on a case in a law firm, the attorney–client privilege extends to those consultants.

Here, the Trustee submitted a fairly straightforward declaration stating that he retained Protiviti to “assess potential litigation against the FDIC-R and other parties and to provide assistance and advice to counsel and the estate with respect to certain potential claims.”  You may access the Declaration here.  Judge Facciola found these statements sufficient to cause the Trustee concern about Protiviti disclosing privileged communications at a deposition.

But Judge Facciola also noted that the attorney–client privilege does not apply to every communication; rather, the fundamental question is whether the communication was made for the purpose of securing either an opinion on law, legal services, or assistance in some legal proceeding.  And because of this limitation, the judge refused to quash the entire deposition, but ruled instead that Protiviti witnesses should answer questions at a deposition and Trustee’s counsel should object “to certain questions on a case by case basis, as questions implicating privileged conversations arise.”