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.”

Court Refuses to Expand Privilege for Intracorporate Communications

It’s a simple concept: the attorney–client privilege generally protects from compelled disclosure a client’s communications to his client.  And under the Upjohn subject matter test, the corporate attorney–client privilege generally protects corporate employees’ communications to the company’s in-house counsel. Upjohn Co. v. United States, 449 U.S. 383 (1981).

The question arises whether the privilege applies to communications between corporate employees regarding a legal matter, yet occurring without an in-house lawyer present. corporateemployeesWhile not a frequently addressed subject, several courts have applied the privilege to intracorporate communications if the communications’ purpose is to facilitate the rendition of legal services.  For a collection of cases, see Alexander C. Black, What Corporate Communications are Entitled to Attorney–Client Privilege, 27 A.L.R.5th 76 § 44 (1995).  But Magistrate Judge Stephanie A. Gallagher of the U.S. District Court for the District of Maryland recently refused to expand the privilege to communications among corporate employees and inventors of a patent owned by the corporation.  Prowess, Inc. v. Raysearch Labs. AB, 2013 WL 509021 (D. Md. Feb. 11, 2013).

Prowess, Inc. licensed a patent from the University of Maryland–Baltimore (UMB).  The patent inventors were UMB employees.  During discovery, Raysearch sought communications between the patent inventors and Prowess employees.  Prowess claimed the corporate attorney–client privilege protected these communications because they occurred at the direction of Prowess’ attorneys.

Judge Gallagher agreed that the privilege may apply to intracorporate communications, but noted that, while the patent inventors had a relationship with Prowess, they were not Prowess employees.  And on this basis, she ruled that, because the inventors were third parties, Prowess employees’ communications with the inventors “cannot be considered ‘intracorporate.’”  Judge Gallagher rejected the privilege and ordered disclosure of the conversations between Prowess employees and the patent inventors.

PoP Analysis. Judge Gallagher’s ruling comports with the maxim that evidentiary privileges should not be lightly created nor expansively construed.  United States v. Nixon, 418 U.S. 683, 710 (1974). Extending the corporate attorney–client privilege to communications between corporate employees and third parties—despite the relationship—goes too far even if these discussions will assist in-house counsel.

The Kovel doctrine may prove a better alternative to gain privilege protection for this type of communication.  Originating in United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), the doctrine holds that clients may involve certain experts (accountants in Kovel) to assist an attorney’s understanding of certain concepts.  And so long as necessary for counsel to render legal advice, the Kovel doctrine extends the attorney–client privilege to these discussions.