Does Regulatory Advice Equal Legal Advice for Privilege Purposes? 1

Black’s Law Dictionary defines “regulation” as a “rule or order having force of law issued by executive authority of government.”  The corporate attorney–client privilege protects communications regulationseeking legal advice, so the question arises whether the privilege covers an employee’s communication seeking “regulatory advice” from its in-house lawyers.  One would think “yes”; after all, a regulation has the “force of law,” which sounds quite legal.

The USDC for Pennsylvania’s Eastern District recently provided an instructive opinion on this issue, rejecting an in-house lawyer’s privilege argument and ruling that the privilege covers communications seeking legal advice but not “regulatory advice for business purposes.”  FTC v. Abbvie, Inc., 2015 WL 8623076 (E.D. Pa. Dec. 14, 2015).  You may read the decision here.


The FTC sued Abbvie, Inc. and Besins Healthcare, Inc. alleging that the two companies filed sham patent-infringement lawsuits against two other companies to delay the latter’s approval of generic drugs.  The FTC sought in discovery an August 9, 2011 email chain that contained an Abbvie employee’s request to Abbvie’s in-house counsel for consideration of a “regulatory strategy.”

Email to In-House Counsel

Abbvie asserted that the attorney–client privilege protected the email from discovery and submitted the in-house lawyer’s declaration in support.  The declaration, which you may access here, made this statement—

The redacted portion of the August 9, 2011 email (the topmost message in the chain) is an attorney–client privilege communication from [employee] to me in which [employee] requested my legal advice.  The redacted portions of this document are not, as the FTC contends, a “business discussion” containing “business advice.”

Regulatory Advice or Legal Advice?

The court held that Abbvie failed to meet its privilege burden and found the email unprotected and discoverable.  Noting that the privilege does not cover every communication between in-house counsel and corporate employees, the court specified that the privilege “does not apply if the client seeks regulatory advice for a business purpose.”

Emphasizing the privilege’s “legal advice” requirement, the court distinguished a lawyer’s provision of regulatory advice when it is more business than legal related.  The court noted that, in the corporate environment, virtually every corporate act has the potential of violating a regulation, but “the fact of extensive or pervasive regulation does not make the everyday business activities legally privileged from discovery.”

The regulatory–business–privilege phenomenon is particularly troublesome for companies in highly regulated industries.  The court found persuasive—and privilege dooming—that Abbvie, a highly regulated pharmaceutical company, “must consider regulatory matters in making nearly all of its business decisions.”

Declaration Insufficient

Abbvie attempted to prove, through its in-house lawyer’s sworn declaration, that its employee sent the email to the in-house lawyer for legal-advice purposes.  But the court found the conclusory declaration insufficient, noting that Abbvie provided no “supporting information that would allow the court to reach the same conclusion.”

And without any (unidentified) supporting information, the court found that the employee’s email seeking “regulatory strategy” from the in-house lawyer was business related, and held that Abbvie failed to demonstrate that the employee sent the email “for the purpose of securing legal advice rather than business advice.”

Privilege Issues for In-House Lawyers–Foreign and Domestic–in U.S. Litigation

For all of the rules, statutes, and common-law decisions adopting and applying the attorney–client privilege, the privilege’s application in the coUS Europerporate setting remains an enigma.  And adding in-house lawyers into the privilege mix only increases its perplexity.  American law acknowledges the protections of an in-house attorney–client privilege, but “what is unclear is exactly how far this protection extends regarding the corporation’s employees and agents.” E.I. du Pont de Nemours & Co. v. Forma-Pack, Inc., 718 A.2d 1129, 1141 (Md. Ct. App. 1998).

The privilege protection for corporate-employee communications becomes even more suspect within multinational corporations with foreign-based in-house attorneys.  Choice of law and other challenging issues arise when employees communicate with foreign in-house lawyers and third parties later challenge those putatively privileged communications in U.S.-based litigation.  Courts recognize that “[d]efining the scope of the privilege for in-house counsel is complicated,” U.S. Postal Serv. v. Phelps Dodge Refining Corp., 852 F. Supp. 156, 160 (E.D.N.Y. 1994), and in-house lawyers, whether foreign or domestic, should too.

In my recent article, Privilege Issues for In-House Lawyers–Foreign and Domestic–in U.S. Litigation, I examine the application of the attorney-client privilege in the context of international law departments.  U.S. in-house counsel will find the guidance helpful as they interact with colleagues in countries with privilege laws unique from the U.S. system.

The article published in Corporate Counsel, a committee newsletter for the reputable IADC organization.


Privilege Protects General Counsel’s Communications with Third-Party Agents

A Florida appellate court applied the corporate attorney–client privilege to protect communications between a condominium association’s general counsel and employees of the standing outassociation’s property-management company.  The court overruled the trial court’s determination that counsel waived the privilege because the recipients were not the association’s “employees.”  Las Olas River House Ass’n, Inc. v. Lorh, LLC, 2015 WL 8347977 (Fla. Dist. Ct. App. Dec. 9, 2015).  You may read the decision here.

The Communications

A condominium association had a management contract with a property-management company.  The association’s general counsel had multiple email communications with two employees of the property-management company (not the association) about the plaintiffs—who were corporate owners of two commercial condo units.

The plaintiffs sought these communications, and argued that the counsel waived the attorney–client privilege because the email recipients were third parties.  The trial court agreed and, without conducting an in camera inspection, ordered the documents produced.

Corporate Attorney–Client Privilege

Florida’s Evidence Code contains its attorney–client privilege, and provides that a party waives the privilege upon disclosure to third parties except those who are “reasonably necessary for the transmission of the communication.”  Fla. Stat. § 90.502.  Courts interpret this exception to include privileged communications involving a client’s agents.  Gerheiser v. Stephens, 712 So. 2d 1252 (Fla. Dist. Ct. App. 1998).

The Florida Supreme Court employs a five-part test for determining whether the attorney–client privilege protects a company’s communications.  The company must show (1) the individuals would not have communicated but for the contemplation of legal services; (2) the employee making the communication did so at the direction of a supervisor; (3) the superior made the request as part of the company’s effort to secure legal advice; (4) the communication relates to a subject matter within the scope of the employee’s duties; and (5) the company does not disseminate the communication beyond those who need to know its contents.  Southern Bell Tel. & Tel. Co. v. Deason, 632 So. 2d 1377 (Fla. 1994).

Ruling: In Camera Inspection Required?

Because the privilege, particularly in the corporate setting, protects communications flowing through agents, not just employees, the appellate court rejected the trial court’s blanket refusal to apply the privilege to the general counsel’s communications with the property manager’s employees.

Instead, the court remanded the case to the trial court, and ordered it to conduct an in camera inspection of the communications using Deason’s subject-matter corporate attorney–client privilege test.

PoP Analysis

The trial court should not have automatically rejected the privilege claims simply because the recipients were not corporate employees.  The company argued that the recipients were non-employee agents that fell within the Deason standard, and the court should have focused its analysis on that claim.

But should the appellate court have automatically required an in camera inspection?  Why can the trial court not analyze the agent question based on affidavits or other sworn testimony?  This remains a developing area, other courts apply a discretionary standard when considering in camera inspections, as I highlighted in this recent post.