Court Rejects Privilege for “Reserve Amount” Set by In-House Claims Counsel Reply

If an insurance company may have to pay a claim, it typically sets aside a sum of money—the reserve—to fund that claim if and when payment becomes necessary. And if the company’s in-house claims counsel decides the reserve amount, the question arises whether the attorney–client privilege or work-product doctrine protects that decision from discovery.

The Arizona federal court, applying federal law, rejected a surety company’s privilege and work-product arguments, and ordered it to disclose its reserve amount to its adversary. The court made this ruling even though the company’s Senior Claims Counsel “solely” set the amount “in his capacity as legal counsel.” Western Surety Co. v. United States, 2018 WL 6788665 (D. Ariz. Dec. 26, 2018). You may read the decision here. More…

Privilege Issues Confronting the Trump–Cohen Special Master

As detailed in my post, Reports of the Privilege’s Death are Greatly Exaggerated, the SDNY rejected the U.S. Attorney’s request that its “taint team” conduct the initial privilege review of documents seized in the FBI’s raid on attorney Michael Cohen’s Trump Tower office.  The Court likewise rejected Cohen and President Trump’s request that their respective legal teams make the initial privilege calls.

Instead, the court, in this Order, appointed former magistrate judge Barbara S. Jones as Special Master to conduct the privilege review. Special Master Jones submitted her initial report to the Court on May 4, 2018, which you may read in full here.

To date, the USAO has produced to Cohen and Special Master Jones electronic contents of certain telephones and iPads as well as electronic copies of eight boxes of hard-copy documents. The USAO anticipates producing the final bulk of seized materials by May 11, 2018.  The privilege review is underway, and Cohen and Trump’s lawyers will provide their first privilege designations to the Special Master today, May 7, 2018.

So, what privilege issues are likely to arise requiring the Special Master’s privilege decision?  Here are a few.

Disclosure Protections

Let’s first identify the legal protections that Cohen and Trump may assert to preclude documents from federal prosecutors’ review.

Obviously, Cohen and Trump will assert protections afforded by the attorney–client privilege.  The privilege is quite narrow, as it only protects confidential communications between a client and her lawyer made for legal-advice purposes.  The privilege belongs to Cohen’s clients, not Cohen, although Cohen must assert the privilege unless his client(s) direct otherwise.

It is likely that the raid consumed communications between Cohen and his lawyers, including lawyers representing him in adult-film star Stephanie Clifford’s pending California case against Trump.  If so, Cohen owns that privilege and will certainly assert it.

A less-mentioned protection that may become operative is the work-product doctrine.  This doctrine generally protects documents evidencing an attorney or party’s opinions and mental impressions made when involved in or anticipating litigation.  Given that Cohen negotiated a non-disclosure agreement with Clifford, whether on his behalf or Trump’s, a plausible argument exists that Cohen and Trump anticipated some litigation involving her.  They will have to prove it, though.

Who are the Clients?

Special Master Jones must identify Cohen’s attorney–client relationships before analyzing the privilege elements.  Cohen disclosed that, from 2007 through January 2017, he “worked at the Trump Organization” serving in the role of “Executive Vice President and Special Counsel to Donald J. Trump.”  In this role, he “served as legal counsel to Trump Organization, Donald J. Trump.”  What do these vague statements mean from a client-identification perspective?  Special Master Jones will need to know.

In 2017–2018, Cohen also represented three other clients. He represented President Trump in the Clifford matter and Elliot Broidy, the former RNC Deputy Finance Chairman, in a non-disclosure arrangement with a former model. (New York Times story here).

And he may or may not have represented Fox News’ Sean Hannity.  Cohen says yes, but Hannity denies it.  Special Master Jones must determine whether Cohen and Hannity had an attorney–client relationship before deciding whether the privilege protects their communications from federal prosecutors’ review.

Legal Advice or Business Advice?

Cohen’s role with the Trump Organization will pose another set of privilege issues.  Special Master Jones will consider whether the privilege protects communications between Cohen and other Trump Organization employees.  The privilege only covers communications made so that the lawyer—purportedly Cohen—can render legal advice to his client (whoever that is).

The privilege will not protect Cohen’s communications involving business advice for the Trump Organization.  More…

Court Orders Production of Documents Shared with Litigation-Financing Firm 1

Companies searching for capital to fund litigation pursuits must first persuade a potential investment firm of the claim’s merits.  These persuasion efforts often include the company’s counsel sharing legal analyses and other work-product documents with a putative financier.  But this sharing leads defendants to later claim privilege waiver and seek production of the shared information.

While some courts, such as the one profiled here, have rejected these waiver claims, the Delaware federal court bucked this trend.   The court rejected the work-product and common–interest doctrines and ordered a company to produce its emails and documents shared with a potential litigation-financing firm.  Acceleration Bay LLC v. Activision Blizzard, Inc., 2018 WL 798731 (D. Del. Feb. 9, 2018).  You may read the opinion here.

Background

Before pursuing a patent-infringement action, Acceleration Bay LLC and its counsel communicated with Hamilton Capital about financing the litigation effort.  Acceleration also provided documents so that Hamilton Capital could conduct due diligence before deciding whether to provide capital.  This information exchange occurred before Acceleration and Hamilton Capital entered an agreement or filed litigation which, as we’ll see, is apparently a big deal. More…