A federal magistrate judge in Chicago on Tuesday is slated to hear arguments about a critical in-house counsel issue: Whether or not lawyers at McDonald's USA retained their attorney-client and work product privilege while communicating with other employees and an outside consultant.

Earlier this month two lead plaintiffs in an antitrust class action filed a motion to compel McDonald's to produce 19 documents it has listed as privileged. The suit involves a former "no poach" provision in the company's contracts with franchisees, which required restaurants not to solicit or hire employees from other McDonald's restaurants without the other franchisee's consent.

McDonald's is represented by Gibson, Dunn & Crutcher, with San Francisco partner Rachel Brass opposing the motion to turn over the documents. Brass did not return messages seeking comment, and her office deferred questions to McDonald's, which also did not return messages.

Brass' court filing, though, makes clear where her client stands on the privilege issue. "Plaintiffs' arguments boil down to nothing more than an objection to McDonald's existence as a large corporation with complex legal needs," it states. "But that does not somehow eviscerate its entitlement to privileged legal advice."

The plaintiffs' legal team is led by Lieff Cabraser Heimann & Bernstein, with San Francisco partner Yaman Salahi writing the motion to compel production of the documents. Salahi confirmed the hearing date Tuesday but declined further comment.

In their court filings, the parties tend to agree that the communications fall into three key categories:

  • Some 14 documents sent by various in-house counsel, often including McDonald's U.S. general counsel Mahrukh Hussain, to large lists of employees.
  • Four business-related email attachments, two of which were sent by Hussain, that were copied to various employees and in-house lawyers; a third was sent by senior counsel Danny Sikka to human resources employees requesting feedback about a proposed reorganization; and the fourth sent by Hal Merck, then McDonald's managing counsel, to legal and government affairs employees about a congressional inquiry.
  • One memo sent by in-house counsel to various people, including to an outside consultant from McKinsey & Co.

Salahi's motion argues that many if not all of the 14 documents sent to large groups fail the privilege test because the company has not shown that all the recipients needed access to the communications.

His motion says several of the emails appear to be primarily business documents that happened to be copied to in-house lawyers. He suggests an in camera review of the four emails should determine if they are non-privileged business communications or legal and therefore privileged documents.

Finally, Salahi argues the privilege was waived when one email included an outside consultant, even though it came from an in-house counsel.

In her opposing motion, Brass argues that in-house counsel's "advice to all employees about issues related to their duties—like that in the first 14 documents Plaintiffs challenge—is privileged. And it is no surprise that in limited circumstances this requires advice to entire departments about a significant legal issue."

Her motion argues the four email attachments were sent to in-house attorneys to obtain their legal advice, and therefore remain privileged even if they do serve a business purpose.

And she argues privilege was not waived where the consultant's role was little different than the employees he worked alongside, which the court had already ruled earlier in this same case.

As Brass sums it up in her motion: "A company's general counsel emails human resources employees advising them on compliance with wage and benefit laws. An in-house lawyer lays out an initial legal analysis of a congressional inquiry for executives and the company's legal team. A senior employee sends a draft document to in-house counsel and asks for his legal analysis. These are the communications Plaintiffs seek to discover, each a blackletter example of attorney-client privilege."

A recent article by Jeffrey Reilly, who serves as general counsel at Miles & Stockbridge, suggests that courts have generally upheld in-house counsel privilege but have found exceptions, especially in the three areas that the plaintiffs are attacking.

"The attorney-client privilege does not automatically protect communications simply because a lawyer participated in them," Reilly wrote.

On Tuesday, in U.S. District Court for the Northern District of Illinois, McDonald's and the plaintiffs may find out which arguments sway U.S. District Magistrate Judge David Weisman of the Northern District of Illinois on in-house counsel privilege.