"Never write if you can speak, never speak if you can nod, never nod if you can wink." - 19th century Boston political boss Martin Lomasney.
Introduction
The attorney-client privilege is a critical tool in fostering a full and frank dialogue between attorneys and their clients, which allows for better understanding of the client's factual issues and a greater opportunity for high-quality representation. The Supreme Court recognized that this privilege is just as important for in-house attorneys as it is for outside firms in Upjohn Co. v. United States, when the Court extended the privilege to communications between an in-house attorney and any employee within that company for the purpose of receiving legal advice, subject to certain limitations.
This "subject matter test" outlined in Upjohn remains the majority rule in the United States, but not for the rest of the world. As such, it is imperative to know and understand the variations of the attorney-client privilege in different states and countries. This QuickCounsel examines the predominant tests of privilege for in-house counsel in the United States, the risks involved with communicating with branch offices in other countries, and potential protective measures an attorney may take in order to prevent the discovery of communication between an in-house lawyer and his or her corporate client.
Privilege in the United States
The attorney-client privilege protects the disclosure of certain confidential information conveyed between a client and his or her attorney. This is one of common law's oldest privileges, but courts have struggled in applying it to situations where the client is a corporation. The Supreme Court's landmark Upjohn decision in 1981 eschewed the so-called "Control Group Test," whereby the attorney-client privilege applied to communications between in-house attorneys and only those employees "in a position to control" the corporation. The Upjohn "subject matter test" considered the lawyer's primary responsibility: to provide legal advice based on a full understanding of the facts of the matter - facts of which those in a position to "control" may not even be aware. As a result, the Court held that a communication that is made for the purpose of obtaining legal advice should be privileged so long as the employee providing the information did so within the scope of his or her employment.
The Upjohn test was declared the rule of federal common law, and has been affirmed in 16states. But the landscape continues to shift, and as of 2012, seven states still followed the control group test, while the question of which test to apply remained undecided in 27 states. Federal courts will apply the Upjohn subject matter test in non-diversity cases, but in diversity cases it will apply the state rule for the state in which the court sits.This inconsistency can leave in-house counsel in an uneasy state when communicating with other employees. Still, under either test, the only communications that are protected are those that:
- involve an attorney (with an active bar membership), are made in confidence and, are made for the purpose of obtaining or seeking legal advice.
So, despite the wider purview of the Upjohn test in terms of the people involved in the communication, the privilege is still limited to communication that is predominantly legal in nature. For example, business emails on which the corporate counsel is CC'ed will not be protected, nor will an email with an attorney merely because it contains a "PRIVILEGED" notice at the top or bottom. While such notices are indicative of the sender's intent, they do not necessarily shield a communication from discovery by themselves. As a consequence, the protective measures taken by in-house counsel may, in fact, fail to protect those communications from discovery.
Looking Abroad, Touching Base at Home
Privilege rules vary drastically in different countries, especially with regard to their application to in-house counsel. In determining which country's laws apply to cross-border disputes, U.S. courts will determine which country has the most compelling interest in maintaining the confidentiality of the communication. American federal courts will follow a foreign country's privilege rules if the communication in question "touches base" with that country and it qualifies as privileged under local laws. Therefore, American privilege laws will govern any communication "touching base" with the United States. However, the "touch base test" is highly fact-intensive and difficult to predict - even communications directly concerning foreign litigation, made between two parties located outside the U.S. have been found to touch base with the U.S. because they were part of the company's "global litigation strategy."
The uncertainty of which law will apply to any particular case is compounded by the drastic differences in privilege that different countries afford corporate attorneys. Communications that cross borders may be protected in some countries and not in others, and it is imperative to know how inconsistent laws can affect different correspondences. For example, the European Court of Justice, which adjudicates cases under the laws of the European Union, has repeatedly held that attorney-client privilege does not apply to lawyers employed by their clients. So, if a company is sued in European Court, a communication between its U.S.-based counsel and its France-based counsel may not be privileged, while that same communication would be protected in American court.
Maintaining Privilege
First, encouraging employees to prefer telephone calls or in-person meetings over email and written memoranda will greatly reduce the amount of communication potentially subject to discovery. Legal departments should also educate non-legal employees on the intricacies of attorney-client privilege and how it can be waived. In order to minimize the confusion of what is privileged and what is not, communications with in-house counsel seeking legal advice should:
- be explicitly labeled as seeking legal advice, only concern the provision of that legal advice, not be distributed beyond those essential employees that require such legal advice, contain some form of explicit warning identifying the corporation, not the employee, as the client (especially in the case of internal investigations), and explain the limits of the privilege and to whom it belongs.
In-house counsel may also want to file privileged documents separately and clearly indicate when a communication is made in anticipation of litigation. Even documents that have legal implications and are marked appropriately, such as compliance violation logs, can be excluded from the privilege. Above all, companies should encourage oral communication, especially when it concerns legal advice.
When dealing in other countries, hiring local outside counsel will provide the company with the highest level of protection afforded in that country. The privilege laws in foreign countries apply most broadly to communications with outside counsel, so limiting legal communications to outside attorneys will maximize that protection. Having U.S. outside counsel hire the local outside counsel will further protect the privileged communication.
Minimizing the amount of information sent between inside counsel and any foreign office is crucial. Companies may limit a foreign office's access to servers in the United States containing legal data, or to servers located elsewhere containing legal data pertaining to the United States. All efforts should be made with the basic goals of determining exactly (a) who the client is, (b) who the attorney is - if there is one by local standards - and (c) whether privileged information is being exchanged. Simplifying processes and establishing clearly structured channels of communication will provide multinational corporations a safe landscape in which to operate when a problem arises in another country.
Conclusion
Martin Lomasny's plea to avoid written communication is especially true today, when multinational corporations risk exposure of seemingly confidential communications because of variations in privilege law. Limiting the amount of written legal advice is the best way to protect oneself, and increased education on the particular privilege laws of each country in which a company operates is also essential. A nod or a wink may not suffice to communicate effectively, but more verbal communication across borders will help in-house counsel protect the advice they provide their clients.
Additional Resources
- Steps In-House Counsel May Take to Preserve the Attorney-Client Privilege Akzo EJC Press Release New York Law Journal, "'Azko Nobel': Implications for American Lawyers" James Maton, "Privilege in the United Kingdom," Edwards Angell Palmer & Dodge Cleary Gottlieb, "The Brussels Court of Appeal Recognizes In-House Counsel Legal Privilege" LexMundi, "Global Practice Guide: In-House Counsel and the Attorney-Client Privilege"