Court Takes Narrow View of Privilege Where General Counsel Has Legal and Operational Titles 2

How many in-house lawyers have non-lawyer titles, for example, Chief Legal Officer and Secretary or General Counsel and Vice-President?  The multi-titled in-house counsel is prevalent in today’s corporate world but, as one federal court bluntly held, an in-house lawyer with legal and non-legal roles receives a narrow view of her putatively privileged communications.

In Kleen Products, LLC v. International Paper, 2014 WL 6475558 (N.D. Ill. Nov. 12, 2014), which you may access here, a defendant sought to cloak with privilege virtually all communications that he sent or on which he was the primary recipient or was carbon-copied.  Finding this position “troubling,” the court determined that “numerous allegedly privileged emails … contain nothing more than mundane chatter about routiwearing_two_hats_500_clr_12985ne business matters.”

Noting that copying an in-house lawyer “on a given communication does not automatically transform the contents of that message into a privileged request for legal advice,” the court found significant that the company’s in-house lawyer held the title of General Counsel, Chief Administrative Officer, and Senior Vice-President and Secretary.

The court agreed that “drawing a distinction between business and legal advice is not always easy,” but took a decidedly narrow view of the in-house attorney–client privilege where communications involve legal and business aspects.  Regarding the position-title issue, the court stated that, “[w]hen in-house counsel occupies both a legal and operational role, the test for determining if a document is privileged is whether the predominant purpose of the communication was to render or solicit legal advice.” And if legal advice is incidental to business advice, the privilege does not apply.

Importantly, the court held that when an employee prepares a document for simultaneous review by lawyers and non-lawyers seeking business and legal advice, the document is “not primarily legal in nature and is therefore not privileged.”  In other words, “[i]t is improper to infer as a blanket matter that any email asking for ‘comments’ that copies in-house counsel along with several other high level managers automatically is a request for legal review.”

PoP Analysis.  The court here took a strict and narrow view of the in-house attorney–client privilege, particularly in its application of the primary purpose standard.  As discussed in this prior post, courts generally apply two standards in assessing whether a corporate communication is more business or more legal related—the “because of” standard and the “primary purpose” standard.

While the primary purpose standard is the narrower of the two, the court here seems to have taken the test to an even higher level of scrutiny, particularly with its comment that a document sent for simultaneous business and legal review is automatically not privileged.

In the end, a significant lesson here is that not only do in-house lawyers receive heightened scrutiny of their communications, but even more scrutiny when the in-house lawyer carries business-related position titles.  And at the risk of stating the obvious, those in-house lawyers with additional titles should heed this case and take even greater precautions to establish and maintain the privilege over their communications.

Executive’s Emails to Personal Lawyer Not Privileged When Sent Through Company’s Email Account 1

The Delaware Chancery Court held that the attorney–client privilege did not cover a corporate executive’s emails with his personal lawyer because he sent the emails through the company’s email account.  EmailThe company maintained a policy that it may monitor employee emails, and the court found this policy nullified the executive’s reasonable expectation of privacy.  In re Information Management Services, Inc., 2013 WL 5426157 (Del. Sept. 5, 2013).

Facts

In this shareholder’s derivative action, a shareholder sued two company executives for breach of fiduciary duties.  The executives sent 362 emails to their personal lawyers about the alleged mismanagement using their work email accounts. The company moved to compel these emails claiming that the attorney–client privilege did not apply because the company reserved the right to monitor all email communications and therefore the executives had no reasonable expectation of privacy.

The company policy manual notified employees that it had unrestricted access to communications sent using the company’s computers and email servers.  The policy stated: “You should assume files and Internet messages are open to access by [company] staff.”

Ruling

One of the signature elements of the attorney–client privilege is that putatively privileged communications must be “confidential when made.”  The court noted that, in the ordinary course of business, employees who send communications within the company over the employer’s email system can reasonably expect that outsiders will not have access to the system.  But an employer’s policies and procedures may alter the employee’s reasonable expectation of privacy.  The question for the court, therefore, was whether these executives had a reasonable expectation of privacy for the 362 emails sent to their personal attorneys using the company’s email system.

The court applied the four factors originally enunciated in In re Asia Global Crossing, Ltd, 322 B.R. 247 (Bankr. S.D.N.Y. 2005) to determine the executives’ reasonable expectation of privacy.  These include:

  1.  Whether the corporation maintains a policy banning or restricting personal use, or informs employees that they have no right of personal privacy in workplace emails, or advises employees that it monitors or reserves the right to monitor emails;
  2. Whether the company monitors the use of employees’ computer or email and the extent to which the employer adheres to or enforces its policies and employees’ knowledge of or reliance on deviations from the policy;
  3. Whether third parties have a right of access to the computer or emails; and
  4. Whether the corporation notified the employee, or was the employee aware, of the use and monitoring policies.

No one factor is dispositive; nor are all four factors required.  The court, rather, balanced these factors to determine “whether the employee’s intent to communication in confidence was objectively reasonable.”

Applying these factors, the court decided that the executives did not have a reasonable expectation of privacy.  The company maintained a policy notifying employees that it monitored emails, the executives knew it, and took no actions to secure privacy other than putting “subject to attorney client privilege” in the emails’ subject lines.  In short, the confidentiality element was missing, and the attorney–client privilege consequently did not apply.

Webmail and Work Email Distinguished

The court noted a difference between an employee using the company’s email account and the employee accessing a webmail account, such as Gmail or Hotmail, through the company’s Internet.  It noted that courts generally afford greater privacy protection to webmail but have reached divergent conclusions when analyzing whether an employee had a reasonable expectation of privacy in privileged emails sent through a webmail account using the company’s Internet.

Cautionary Tale

The court also noted that a different result may occur when it is a third party seeking access to the employee’s workplace communications to a personal lawyer rather than the company.  In litigation between a company and employee, an employee has little expectation of privacy if the company maintains a monitoring policy as described in this case.  But the expectation of privacy is likely greater when a third party seeks access to these emails.