Does the Attorney -Client Privilege Cover Communications between Company Counsel and the Company’s Employees?
In our last article, Jose was puzzling out a litigation that had been initiated against his company by a former employee. We discussed whether or not certain communications and work products could be shielded from disclosure by the Work Product and Attorney-Client Privileges. In this article, we are going to drill down on the extent to which the Attorney-Client Privilege may cover discussions between company counsel and company employees.
In a recent case pending before the U.S. District Court for the Southern District of New York—Grossberg v. Fox corporation—a motion was filed by Fox News to prevent the disclosure by a former employee of the content of discussions she had with company lawyers concerning another case she was involved in. The matter highlights the risks hazarded by company counsel in having confidential discussions with employees who are not executives or directors of the Company.
In the seminal case in this area—Upjohn v. United States—the U.S. Supreme Court acknowledged that in order to be able to protect a company’s interests, at times, it was necessary for company counsel to be able to confer with employees of the company who were not part of the company’s “control group.” Until Upjohn, the Attorney-Client Privilege only covered communications between legal counsel and such “control group” members as the Company’s owners, officers, directors, and designated agents.
The court did not squarely adopt a standard governing principle on the thorny issue of whether a communication, involving mixed legal and business advice, was covered by the privilege. They did, however, hold that when interacting with employees not considered part of the “control group,” concerning a legal subject that the Attorney-Client privilege could be extended if the employee was warned that:
(i) legal counsel represents the company, not the employee, (ii) the privilege belongs to the Company, (iii) the conversation between counsel and the employee is necessary because the information sought is not generally available, and (iv) the employee is obliged to treat the conversation as confidential except where it is necessary to disclose the content of the conversation to other employees on a need-to-know basis.
Although Upjohn is a federal case that, technically, only applies to matters governed by Federal law, in practice, many of the individual states have adopted Upjohn as guidance on the scope of the Attorney-Client Privilege in the corporate context. Although the requirement to give employees the Upjohn warning is not universally required by state law, it is a practice that is recommended out of an abundance of caution.
The conundrum persists as to whether a particular communication is considered legal advice, and so protected from disclosure, or business advice and fair game for discovery. There is no universally accepted guidance on this. In general, there are two 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.
Under the Significant Purpose Test, if a court determines that a mixed message communication comprises legal advice that is “significant” to the communication, even if it is not the primary purpose behind the communication, such communication would also be considered privileged and shielded from disclosure.
On balance, most jurisdictions, including New York, Florida, and Texas, have adopted the Primary Purpose Test. According to an analysis recently published by Blumberg Law, certain types of advice are treated differently depending on the standard adopted by the state in question. For example, in the employment context, the advice provided by in-house counsel to human resources departments concerning complaints of unlawful discrimination would not be considered covered by the Attorney-Client Privilege. This is true in states having adopted the Primary Purpose Test, but would be considered covered under the privilege by states adopting the Significant Purpose Test.
Since corporate counsel can wear many hats, whether communications with company employees are covered or not under the Attorney-Client Privilege needs to be thoughtfully considered.
First, it is recommended that when conferring with employees who are not part of the “control group” of a company that the Upjohn warning be given.
Second, efforts should be made to avoid as much as possible mixed message communications that can muddy whether a communication is legal or business in nature.
It is also worth considering that there is no common standard that corporate counsel can rely on and that each jurisdiction may have slightly different standards governing this assessment. What has been recommended is that corporate counsels should develop guidelines for their companies about how communications between legal and staff should be handled so as to reduce the risk that confidential communications will become a news headline or cannon fodder in a litigation.