How to Protect Against the Disclosure of Legal Advice in a Corporate Setting: The Bane of Mixed Message Communications
In this article, I will focus on the problem posed by mixed message communications. These are communications that include both legal and business advice. We will explore whether, and to what extent, such communications are protected from disclosure under the attorney-client privilege. This is part of an ongoing series exploring the attorney-client privilege.
Here’s what we’ve covered in our previous two articles:
In our first article of this series, we explored Pharma Software’s reaction to Maria’s sexual harassment claim. We addressed the question of whether the notes taken during a human resources investigation and certain email communications between Saul Goodman and Jose were subject to disclosure as part of a lawsuit filed by Maria against the company.
In our second article, we discussed whether Saul’s discussions with another software engineer, Louise, were protected by the Attorney-Client privilege under the Supreme Court’s decision, Upjohn v. U.S. This case requires legal counsel to provide a warning to employees who are not considered part of the company’s control group. The purpose is to extend the protections of the Attorney-Client privilege to conversations between corporate counsel and more rank-and-file employees.
In the case between Pharma Software and Maria, Maria’s counsel demanded all emails between Saul Goodman, company counsel, and Jose. Among the emails covered by this demand were the following:
Email #1, from Maria: Dear Jose: I wanted to touch base on the financial situation of the company and whether we should be remitting dividends to our shareholders. The tech space is under a lot of pressure due to interest rate hikes slowing down projects. To cut costs, I think we should consider reassigning contract personnel to the Novella project, which has lower hourly rates. By the way, with the Michal situation, maybe we should limit his contact with our female personnel. When you have time, we should set up a meeting to discuss this.
Email #2, from Maria: Dear Jose: The situation with Maria has gotten more serious as she has submitted a formal complaint against Michal for sexual harassment. Understand that the law requires us to investigate these types of claims, and the investigation should be conducted by an outside party. I understand Michal has been accused of harassment before, and his conduct has caused several of our female engineers to resign. If there are written records concerning these incidents, we will need to preserve them. Unfortunately, Michal’s conduct can no longer be ignored.
The question is if, or to what extent, each of these emails is shielded from disclosure under the attorney-client privilege.
The Upjohn decision did not provide guidance on whether a particular communication is considered legal advice, thus protected from disclosure, or business advice, which is subject to discovery.
When the messages are mixed, including both legal and business advice, the determining factor is state law.
Different states have adopted varying standards to evaluate mixed messages, but there are two main competing standards—the Primary Purpose Test and the Significant Purpose Test.
Under the Primary Purpose Test, if a court determines that the primary purpose of a mixed message communication is the rendering of legal advice, then the communication will be considered covered by the Attorney-Client Privilege and not subject to disclosure.
Contrastingly, under the Significant Purpose Test, if a court determines that a mixed message communication includes legal advice that is “significant” to the communication, even if it is not the primary purpose, such communication would also be considered privileged and shielded from disclosure.
Most jurisdictions, including New York, Florida, and Texas, have adopted the Primary Purpose Test.
Under the two principal tests applied by the states, let’s evaluate our emails. Reasonable minds may differ, but this is my take:
The principal purpose of the first email seems to be providing business advice to Jose regarding cost-cutting measures in a high-interest environment. In a state like New York, which has adopted the Primary Purpose Test, there is a likelihood that the entire email would be subject to disclosure in discovery.
However, in the District of Columbia, which has adopted the Significant Purpose Test, it is a closer call. The reference to the “Michal situation” and the recommendation to limit his contact with female employees raise the question of whether this is a “significant” component of the email, potentially shielding the entire email from disclosure.
By contrast, in the second email it is clearer that the purpose behind this email is to provide Jose with legal advice. Firstly, the email is marked as “Privileged and Confidential.” Secondly, it clearly provides Jose with legal advice on the company’s duty under the law to investigate and preserve information regarding Michal’s misconduct. So, on balance, this email is more likely to be shielded from disclosure under both the Primary Purpose and Significant Purpose tests.
Because mixed message communications between attorneys and their clients can create problems in determining whether they are covered by the attorney-client privilege, it is recommended that counsel and their clients avoid such communications whenever possible. The uncertainty surrounding the disclosure of mixed message communications is heightened by the lack of a federal standard. Determining the scope of the attorney-client privilege depends on the vagaries of state law.
To address this situation, commentators have recommended that corporate counsels develop guidelines for their companies on how communications between legal and staff should be handled. This can help reduce the risk of confidential communications becoming news headlines or being used against them in legal proceedings.