X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
In-house counsel are aware of a growing pressure in their lives: the increased scrutiny into whether all aspects of their practice are protected by the attorney-client privilege and the work product doctrine. Outside counsel may take the privilege for granted in their normal practice, and thus have little practical concern with its scope. They may not be fully aware of the real risks that their in-house counterparts are now facing on a regular basis — and how this impacts on all lawyers who represent corporate clients. Directors, officers and corporate employees need to know whether what they say to an in-house lawyer is going to be privileged; or whether they are speaking with an unwarranted candor. Increasingly, outside counsel will be asked to give prescriptive advice on when in-house counsel’s role could take them beyond the privilege. Even with the best advice, ambiguous circumstances will always exist, and we will find outside litigation counsel in discovery battles over the privilege’s application to in-house counsel. An important difference between in-house and outside counsel is the proximity of in-house counsel to the client. In-house counsel is present at the corporation’s premises, or is readily accessible. The corporation’s leaders, and employees, will see corporate counsel more regularly than they will interact with outside counsel. This accessibility extends to the perceived ease of interoffice telephone calls or e-mail; and the lack of competition for in-house counsel’s attention from other clients. This physical proximity is important because it provides the basis for familiarity and intimacy. Add to this closeness the fact that in-house counsel, the corporation’s leaders and its employees all work together for the same entity. Within these connections, a strong working bond with in-house counsel is likely to form and grow over time. This relationship lends itself to the in-house lawyer not only giving legal advice, but in sharing his or her insights, opinions and experience more broadly. Lawyers and nonlegal advice Lawyers are stereotyped as obfuscators, or likely to ruin a deal through overly technical legal concerns that have little or no chance of actually occurring. The reality is that many lawyers — by nature or experience — have considerable insight into human behavior, business practices and the long-term effects of decisions. Legal training and practice constantly require lawyers to think about the far-reaching consequences of choices and actions, a valuable practical skill in any matter, whether business or legal. Similarly, lawyers develop a facility for getting things done — a critical business skill. Thus, even if the lawyer was hired only to be a lawyer, the corporate leadership may come to realize that their in-house counsel also has much to offer on making good business decisions. It is this relationship that is at the core of lawyer-client communications losing the protection of the attorney-client privilege. There are times when the lawyer is not really acting like a lawyer, but as a business adviser. At these times, everyone — lawyers, directors, officers or employees — need to have a heightened awareness that they may not be speaking to someone practicing law. Absent such awareness, corporate leaders or employees may speak with a candor necessary to get good business advice from the in-house lawyer, thinking somehow that this conversation (or memorandum or e-mail) is privileged. This may be a comforting thought at the time, but the reality might be that the comfort is unwarranted because the courts have found that no privilege exists for that kind of communication. An example elucidating the issue occurs when the corporation assigns the lawyer to conduct investigations into an employee’s sexual harassment/discrimination claims. Since such claims immediately raise the threat of a potential lawsuit, requesting that general counsel look into the underlying conduct seems natural. Moreover, lawyers are particularly skilled in this sort of task, knowing how to ask questions and find out information that might otherwise remain obscure. Finally, the lawyer is right there, present within the corporation; and he or she has the corporate leaders’ trust. If the task is not truly legal in nature, however, the lawyer’s work may not be privileged or protected by the attorney work product doctrine and the lawyer may wind up as a witness in the case instead of the one handling the case. As stated by New Jersey’s Supreme Court, “[w]hile an organization or corporation … can be a ‘client’ for purposes of the privilege … a fine line exists between an attorney who provides legal services or advice … and one who performs essentially nonlegal duties.” Payton v. New Jersey Turnpike Authority, 148 N.J. 524, 550 (1997). That case involved sexual harassment claims. These claims were investigated by counsel, whose detective work would not be protected because it was not the same as legal work even if litigation ultimately might arise from “the subject of the attorney’s activities.” The lawyer became a nonlawyer even though his investigation was directed to meet an internal corporate anti-harassment policy and the corporation’s statutory legal duties to investigate the employee’s claims. That is the blunt language used in Payton: a lawyer who is not performing a legal service or providing legal advice does “ not qualify as a ‘lawyer’ for purposes of the privilege.” (Emphasis added). Without some reflection, it may not be immediately apparent that a lawyer investigating a sexual harassment claim would ever be outside the privilege or work product doctrine especially if the investigation was conducted to conform to a legal requirement. The distinction in function is pointed out in Waugh v. Pathmark Stores Inc., 191 F.R.D. 427, 431 (D.N.J. 2000). In that case, involving a claim of racial discrimination, in-house counsel did not conduct an investigation into the actual conduct nor make any remedial decisions. The investigation was done by another employee. The lawyer attended meetings discussing that investigation, but only to acquire information for the purpose of providing legal advice. Thus, the privilege and work product doctrine applied. THE FORCES AT ISSUE Two widely different perceptions of in-house counsel set the boundaries of the courts’ analyses on these issues. The first point is that the in-house lawyer is a lawyer, and his or her relationship to the corporation should be treated with as much respect as if he or she was outside counsel. As Judge Wyzanski stated in the seminal case of U.S. v. United Shoe Machinery Corp., 89 F.Supp. 357, 360 (1950), the privilege applies to in-house lawyers who practice within the realities of modern corporate law practice. “The type of service performed by house counsel is substantially like that performed by many members of the large urban firms.” The second parameter is that a corporation with in-house counsel is in a position to misuse that office for the purpose of improperly shielding discoverable matters. One oft-quoted cite gives some sense of this latter point: “Legal departments are not citadels in which public, business, or technical information may be placed to defeat discovery and thereby ensure confidentiality.” SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 515 (D. Conn. 1976). Use of the word “citadel” is not simply a metaphor; to many courts the attorney-client privilege is the equivalent of a sacrament, and its violation or misuse a type of profanity. The bias by some courts against in-house counsel is recognized in legal literature. See e.g., Amber Stevens, “An Analysis of the Troubling Issues Surrounding In-House Counsel and the Attorney-Client Privilege,” 23 Hamline L. Rev. 289, 309 (1999) and Grace Geisel, “The Legal Advice Requirement of the Attorney-Client Privilege: A Special Problem for In-House Counsel and Outside Attorneys Representing Corporations,” 48 Mercer L. Rev. 1169, 1208 (1997). An extreme expression of this bias is found with some commentators who “view in-house counsel as being co-opted into the business culture, and thus as being simply business advisers.” They would remove the privilege from in-house counsel altogether. The immutable conclusion that lawyers give up their professional ethics after walking through the corporate door — with clients simultaneously surrendering their expectation of being able to speak candidly with their counsel — does not represent the law in America, Upjohn Co. v. U.S., 449 U.S. 383 (1981). That result, however, is not universal. See, e.g., Anastasia Pryanikova, “Successive Representation in Cross-Border Practice: Global Ethics or Common Rules,” 10 Transnat’l L. & Contemp. Problems 325, 337 (2000). While this piece is not about legal ethics and in-house counsel, all lawyers serving corporate clients must understand that the potential bias about counsel’s status can have an impact on any decision. Biases operate best just outside conscious evaluation. Taking steps to remove that undercurrent of doubt can be vital to protecting the privilege. These preconceptions can lose some of their force through a detailed presentation adducing counsel’s actual conduct under the unique circumstances of each particular case. If in-house counsel facing a subpoena can demonstrate a legal practice with all the indicia of a lawyer working as lawyer, his or her chances of being treated within the privilege will increase. Implementing procedures and practices before the crisis arrives, developed by in-house and outside counsel, can create the record that the court needs to protect the privilege. Developing such practices will also focus in-house counsel’s ability to recognize circumstances where the protection of the privilege or work product doctrine may be at risk. In turn, this will provide counsel with the opportunity to explain the issue to the corporation’s decision-makers. They may still decide to go to the lawyer for business advice, or have the lawyer conduct an investigation because circumstances require a thorough answer from a close and trusted source. Properly informed, however, they will make these choices knowingly and will not find out too late that a conversation may not be privileged nor a document protected from discovery. For those confronted by these issues, or those who can foresee them arising, read the cases in your jurisdiction and get the related ethics opinions or advisory comments from state or local bar associations. It is also worth your time to read the legal literature, which can open your eyes to present and potential issues. A few hours’ study and reflection could make an immeasurable difference. Lee Applebaum has been a commercial litigator with Fineman & Bach since 1989. He can be contacted at [email protected] in Philadelphia.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.