Wearing Two Hats – Q2 2023 Facts & Findings

The privilege applied to communications between an attorney and a client is one of the most sacrosanct doctrines in American law. On its face, defining this privilege seems very simple – communications between an attorney and client are private and protected from disclosure.

The attorney-client privilege principle for in-house counsel can be complicated, as the client is a corporate entity comprised of a body of people. “A lawyer, employed by or retained by an organization, represents the organization, acting through duly authorized constituents.” (Model Rules of Professional Conduct, Rule 1.13(a)). A legal entity can only act through its officers, directors, shareholders, and employees. The communications between these individuals and an in-house attorney may be subject to the attorney-client communication privilege when legal advice is sought or given.

In corporate America, in-house lawyers not only represent a company, but are also employees, officers, and/or directors of the company. These in-house lawyers often wear multiple hats, juggling the roles of legal counsel alongside that of a high-level business adviser. In-house lawyers may serve on company committees or project teams in which the attorney’s role is not legal in nature or is a blend of both lawyer and businessperson. It has been said that corporate counsel are “businesspeople who happen to be lawyers.”

An in-house lawyer serving in dual legal and business roles is a valuable asset to a company, in that it has a dedicated legal counsel who is extremely knowledgeable about the company’s history, business operations, and strategic goals. However, it is very easy for the line between the legal duties and the business and operational role to become blurred. The lawyer may be able to keep these roles separate, but it is imprudent to assume the company’s employees and officers understand the nuances of legal advice vs. business advice. Assuming that all communications with an in-house attorney are protected by privilege can be dangerous.

It is well established that merely including an attorney in a communication, such as copying a lawyer on an email or having an attorney present in a meeting, does not automatically cloak that communication with privilege. Courts distinguish legal advice from business advice by analyzing the content of the communication. The traditional position of many courts is that a communication of a mixed nature is privileged if the primary or predominant purpose of the communication is legal in nature. This is often known as the “primary purpose” test, and it has been adopted by a number of federal circuit courts. To be protected, a corporate client must demonstrate that the in-house lawyer’s communication was (1) for the primary purpose of providing legal advice and (2) intended to be kept confidential.

A case in which the “primary purpose” test was challenged in connection with dual-purpose communications was recently before the U.S. Supreme Court. In In re Grand Jury, a tax law firm fought the disclosure of documents subpoenaed by the government in its criminal investigation of the firm’s client. The documents at issue were dual purpose, containing both tax preparation advice and legal advice. At issue before the court was whether to apply a broader, less stringent “significant purpose” test, adopted by a federal circuit in 2014. After oral argument was conducted in January 2023, the court took the somewhat rare path of dismissing the case as “improvidently granted.” This dismissal does not necessarily mean the court does not have an interest in the issue raised. Rather, it can indicate the facts of the case were not the right vehicle for exploring the issue. A decision in favor of the law firm and the proposed “significant purpose” test, a premise supported by thirteen amici curiae, including the American Bar Association, would have expanded the reach of privilege in dual-purpose communications. As the federal circuit courts are split on this issue, it is likely that another case involving the scope of privilege in dual-purpose communications will be before the Supreme Court in the future.

In pursuit of preserving privilege, in-house lawyers and their staff can implement some best practices:

• Separate business communications from legal communications whenever possible. Consider separate email threads for business discussions and legal advice discussions.
• Educate your clients – the company’s employees and officers – about the dual role the in-house lawyer plays. Include guidance on how best to communicate with the company’s legal department. For example, employees should understand that a request for legal advice should be stated clearly, and the communication should be directed to the attorney, rather than just copying an attorney on a communication with other employees.
• Clearly identify privileged communications as such. This will help the company’s employees remember that communications that do not bear some kind of privilege designation may not be protected.
• Remind recipients of legal advice communications to keep such communications confidential.
• Limit the participants or recipients of a communication that contains legal advice. Evidence that a communication intended to be legal advice was kept confidential is important in an analysis of a privilege claim. If too many employees are given access to a privileged communication, the company could be deemed as having waived the privilege.
• Consider outsourcing sensitive investigations to outside counsel, where the privilege line is clearer.
• Distinguish communications and activities of an in-house lawyer who has a title that mixes legal and business functions. For example, there may be extra challenges in defending a privileged communication from an assistant general counsel and vice president of human resources. In such situations, which are not uncommon in a company, the lawyer and their staff should ensure separate and distinct management of records and communication of each role.

One thing to remember if you work for a multinational company is that American privilege doctrines are some of the strictest in the world. Many countries do not recognize privilege for in-house attorneys. In-house attorneys and their teams should proceed carefully when communicating with company employees outside of the United States and should not assume privilege will be recognized in a foreign jurisdiction.

In-house attorneys, paralegals, and their teams serving in dual capacity must carefully separate their legal and business communications and activities and ensure their clients know where that
line is. While this is not an easy task, it is essential to upholding the ethical duty of preserving the privilege between in-house counsel and the client company.

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Author Biography:  Lisa M. Stone, ACP, has been a paralegal for over 25 years and is currently a senior paralegal with T.D. Williamson in Tulsa, Oklahoma. Lisa spent 18 years working in employment and litigation practice groups. Lisa became a Certified Paralegal in 1996 and has earned Advanced Certified Paralegal credentials in Discovery, Contracts Administration/Contracts Management, and Business Organizations: Incorporated Entities. She has a BA in political science. Lisa has been a member of NALA’s Certifying Board since 2016 and is presently the Chair. Lisa was the Tulsa County Bar Association Paralegal of the Year in 2014 and a NALA Affiliated Associations Achievement Award recipient. Email: lisastone4599@gmail.com