Court Finds In-House Counsel Privilege “More Difficult,” and Explains Why

The USDC for the ED Louisiana issued a short but instructive privilege opinion for in-house lawyers.  The court found the in-house counsel privilege “more difficult” to apply, ruled that an executive’s cc’ing in-house counsel is insufficient, imposed a “primary purpose” standard, and generally rejected the privilege because there was “no indication” that the employee emailing the in-house lawyer was seeking legal advice.  Texas Brine Co. v. Dow Chemical Co., 2017 WL 5625812 (ED La. Nov. 21, 2017).  You may read the opinion here.

More Difficult

Dow Chemical challenged the privileged nature of several emails involving Texas Brine’s in-house lawyers, and the court recognized the difficulty in assessing in-house lawyers’ privilege assertions.  The court found it “more difficult” to define the privilege’s scope because in-house counsel “serve multiple roles,” including non-legal ones, and have an “increased level of participation in the day-to-day operations of the corporation.”

The Primary Purpose or A Primary Purpose?

Because of a perceived increase in corporate counsel’s business roles, the court required the Texas Brine lawyers to prove that “the primary purpose” of the emails was to secure legal advice.  The court explained this “test” as whether the in-house lawyer participated in the communication “primarily for the purpose of rendering legal advice.”  Merely identifying a legal issue in the email is insufficient—the “lawyer’s role as a lawyer must be primary to her participation.” More…

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.

Significant D.C. Circuit Decision for Attorney–Client Privilege and Internal Investigations 1

The D.C. Circuit Court of Appeals issued a significant decision upholding the attorney–client privilege for internal investigations conducted at in-house counsel’s direction.  The Court ruled that the privilege applied even where governmentConfidential Report Blue Tone Brochure regulations required the investigation and non-attorneys conducted the employee interviews. And in a move that will please in-house counsel, the Court rejected a narrow view of the primary purpose test for dual-purpose communications. In re Kellogg, Brown & Root, Inc., 2014 WL 2895939 (D.C. Cir. June 27, 2014).  You may read the opinion here.

An employee of Kellogg, Brown & Root, Inc., a Department of Defense contractor, filed a qui tam action asserting that KBR defrauded the government by inflating its DoD invoices and receiving improper kickbacks.  DoD regulations require defense contractors to maintain policies triggering internal investigations when misconduct claims arise.

When apprised of the potential wrongdoing, KBR’s in-house counsel directed an internal investigation pursuant to KBR’s Code of Business Conduct.  Non-attorneys working under the in-house lawyer’s direction conducted the employee interviews, and KBR required its employees to sign confidentiality agreements—but these agreements did not mention the attorney–client privilege.

The employee later sought production of the internal investigation report.  The district court rejected KBR’s privilege argument after finding that KBR conducted the internal investigation because of its corporate policy and DoD regulatory requirements, and not for the “primary purpose” of providing legal advice.  The district court held that the primary purpose test shielded internal investigation reports only where the company would not have conducted the investigation “but for” the purpose of seeking legal advice.

The D.C. Circuit reversed.  And in ruling that the attorney–client privilege protected KBR’s internal investigation, the Court made three critical holdings.

First, the Court rejected the notion that the privilege did not apply because non-attorneys conducted the employee interviews.  The Court held that the privilege applies so long as the company’s legal department directed the investigation, stating that “communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected by the attorney–client privilege.”

Second, the Court held that the privilege applied even though KBR did not inform its employees of the interview’s purpose and that the confidentiality agreement signed by the employee did not mention that the discussions were privileged.  The Court refused to require companies to “use magic words to its employees in order to gain the benefit of the privilege for an internal investigation,” and held that KBR satisfied its burden by telling the employees that the interviews were highly confidential and not to discuss the matter without authorization from KBR’s General Counsel.

Third, the Court rejected a narrow interpretation of the primary purpose test for dual-purpose communications and adopted a new, broader standard. Noting “evident confusion” about this test and stating that the district court’s “but for” test was “not appropriate for attorney–client privilege analysis,” the Court followed the Restatement (Third) of the LawDC Circuit Governing Lawyers § 72, and articulated this test: “Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?”

In other words, the Court rejected the sole causation test in favor of a broader test that, “sensibly and properly applied, … boils down to whether obtaining or providing legal advice was one of the significant purposes of the attorney-client communication.”

PoP Analysis

The KBR decision represents a significant victory for in-house lawyers overseeing internal investigations.  With more governmental regulations mandating corporate investigations and more corporations implementing mandatory investigation policies, it seems short-sighted that these events would vitiate, rather than strengthen, the attorney–client privilege.

And the Court’s rejection of the narrow “but for” primary purpose test runs contrary to several recent decisions concerning dual purpose communications.  In one decision, a state court adopted a heightened burden for in-house counsel—for a dual-purpose communication containing an equal amount of legal and business advice, the in-house lawyer has to “clearly show” that the legal purpose outweighs the business purpose for the privilege to apply.  See my blog post, GC’s “Talking Points” Memo to CEO Not Privileged—Leads to a Punitive Damages Verdict, for further discussion of this case. And for a discussion of how other courts apply the “because-of” and “primary purpose” standards in these situations, see my prior post titled Dual-Purpose Emails to In-House Counsel: Are They Privileged?