Finally, because the common interest doctrine is merely an extension of the attorney-client privilege rather than an independent privilege, and the attorney-client privilege logically requires a communication between the attorney and client, some courts hold that the common interest doctrine does not apply to communications between two parties when an attorney is not also involved.
Privileged information should be disseminated as little as possible, even by employees within the same company. Clients who seek to share information with consultants, advisors or other businesses should be informed that doing so will likely waive any privilege as to that information unless it enables them to pursue a joint legal strategy. Further, the client should be warned against disclosing privileged information to third parties when no attorney is present.
Does the Privilege Apply to Drafts?
An important consideration when working toward a final product with the client is whether the drafts and underlying documents could be unearthed by adversaries somewhere down the road. This issue often arises in the context of business documents, tax returns or regulatory filings.
As explained above, the privilege will not apply to a draft where legal assistance is not provided. The court will look at whether the primary motivation for the attorney’s involvement was the need for legal advice or because of business concerns. Thus, while documents related to tax returns are not privileged when the attorney provides accounting services in simply preparing the returns, those same documents may be privileged if an attorney uses them to provide legal advice as to whether the client should file an amended return. In the corporate context, draft proposals and draft reports created for the board which do not clearly provide legal advice have been held not privileged.
Even where the communications at issue relate to legal advice, the party asserting the privilege has the burden of establishing that they were intended to remain confidential. This can be an uphill battle when the client intended the final product to be shared with a third party.
Indeed, some courts take the view that if any version of the document is intended to be shared with a third party, that communication as well as all underlying documents (including preliminary drafts and any attorney’s notes containing material necessary to the preparation of the document) become discoverable. The theory is that because the client ultimately intended to publish some version of the content in the draft, the client could not have intended it to be confidential.
Alternatively, denial of the privilege as to drafts may be based on the “subject matter” waiver. By voluntarily disclosing the final version, the client waives the privilege as to the substance of the communication, including the underlying details of the information ultimately published. Drafts and documents relied on in preparation of an estate tax return, a draft bankruptcy form, and drafts of proposed SEC filings have been held not privileged based on this reasoning.
On the other hand, the argument can be made that the client must have intended the underlying documents and drafts to remain confidential and that is the precise reason the drafts themselves were not shared with a third party. Otherwise the draft would have been the final shared product. In Iowa Pac. Holdings, LLC v. Nat'l R.R. Passenger Corp., business negotiations between the parties broke down, resulting in a suit for breach of an oral contract and promissory estoppel. In rejecting Iowa Pacific’s demand for National Railroad’s drafts of the contract at issue, the court held that a draft contract prepared by the attorney contains information shared between attorney and client which entitles it to protection. 2011 WL 1527599, *4 (D. Colo. Apr. 21, 2011). Ultimately, these courts believe that the purpose of the privilege will be hindered if clients and attorneys cannot freely exchange information via preliminary drafts.
Under this approach, there is a further split as to how far the privilege extends. The more protective stance calls for the privilege to be applied to all drafts and underlying documents, even as to information eventually disclosed to third parties in the final version (as long as the draft itself is not shared). Others courts extend the attorney-client privilege to cover only those portions of the draft not actually published to third parties, requiring redaction where the draft and final version are not identical.
Of course, drafts and underlying documents created because of impending litigation, such as draft complaints and draft affidavits, could constitute work product even if not covered by the attorney-client privilege. Such drafts have been afforded protection even when the final version is filed because they reflect the mental processes and opinions of the attorney.
The split in authority as to when drafts are privileged is disconcerting considering the vast amount of documents lawyers are asked to review before they are published to third parties. The moral here is to be aware that any documents prepared or notes made on the way to the final version may end up in the hands of a future adversary, and consider the potential impact on the client during the drafting process.
Are Communications with Former Employees Protected?
Another question addressed by courts with increasing frequency is whether privilege attaches to communications between the attorney and the corporate client’s former employees which take place either during or after employment.
The starting point here is Upjohn v. United States, in which the Supreme Court analyzed the scope of the privilege when the client is a corporation. 449 U.S. 383 (1981). The Court rejected the “control group” theory, which limits privilege to communications between the attorney and senior management with the authority to bind the corporation, in favor of the “subject matter test.” Under that test, the privilege extends to any employee regardless of position as long as the communication is made to the attorney at the direction of corporate superiors, the information concerns matters within the scope of the employee’s corporate duties, and the employee is aware the communication serves the purpose of enabling the attorney to provide the corporation with legal advice.
While providing a framework for analyzing privilege as to current employees, the Court explicitly refused to consider whether the privilege could extend to former employees. However, Justice Burger, in his concurring opinion, said that he would extend the privilege to include communications where “an employee or former employee speaks at the direction of management with an attorney regarding conduct or proposed conduct within the scope of employment.”
Courts have had no trouble reaching a consensus on the view that the attorney-client privilege continues to protect privileged communications occurring during the period of employment, even after the employment relationship ends.
But the existence of privilege as to communications between a corporation’s attorney and a former employee taking place after employment terminates is not so clear. The situation often arises when the client corporation becomes involved in litigation concerning matters that took place during the former employee’s employment and the corporation’s attorney wants to prepare the former employee for deposition. Most courts appear to agree that communications post-employment may be privileged if they relate to the employee’s conduct and knowledge obtained during employment and are limited to the facts of the current litigation.
The issue was covered in depth in Peralta v. Cendant Corp., 190 F.R.D. 38 (D. Conn. 1999). There, a former employee brought an employment discrimination suit upon his termination. Cendant Corporation’s counsel discussed the underlying facts of the case and Cendant’s position with Peralta’s former supervisor, who was no longer employed by the corporation, prior to the former supervisor’s deposition. Peralta sought to uncover the details of that communication, but the court held the communication privileged, recognizing that “the attorney-client privilege is served by the certainty that conversations between the attorney and client will remain privileged after the employee leaves.”
Importantly, the court held that the privilege applied only insofar as the nature and purpose of the communications were to learn facts related to Peralta’s termination while the former supervisor was still employed. Conversation related to facts developed during the litigation, such as testimony of other witnesses which the former supervisor would not have known during employment or matters that could change the former supervisor’s testimony, would not be privileged.
The vast majority of federal courts considering this issue follow Peralta’s reasoning. Still, a few courts have rejected the extension of the privilege to former employees. They argue that former employees are not the client and share no identity of interest in the outcome of the litigation with the corporation. Therefore such communications should be treated no differently from communications with any other third-party fact witness. These courts criticize the Peralta line of cases for failing to consider the requirement from Upjohn (including Justice Burger’s concurring opinion) that the employee or former employee speak with the attorney at the direction of management – something a former employee rarely satisfies. The principle underlying the attorney-client privilege (i.e., encouraging the client’s honesty by ensuring privacy) is not served if the former employee is no longer a representative of the client, for instance where the former employee has independent counsel and interests adverse to the company.
While the communications could potentially be protected work product to the extent the attorney’s mental impressions and legal theories are involved, courts are also split on whether this doctrine applies to communications with former employees.
For example, in Domingo v. Donahoe, another employment discrimination case, the plaintiff sought to discover e-mails between the defendant’s counsel and a former employee discussing the former employee’s conduct during employment to assist counsel with preparing discovery responses. 2013 WL 4040091, *6 (N.D. Cal. Aug. 7, 2013). Although the court made no decision on whether attorney-client privilege applied, it held that work product protection applied because the e-mails containing questions from counsel and the employee’s responses could potentially reveal counsel’s thought processes.
However, the same courts that refuse to consider the former employee as part of the attorney-client relationship between the corporation and counsel find that sharing the attorney’s mental impressions with the former employee, a third party who is not a client, waives work product protection.
While counsel should be confident that confidential communications with a current employee will remain protected if the employee leaves the company, they must also pay attention to Peralta’s limits on the privilege for post-employment conversations. Only those communications whose “nature and purpose” were for counsel to learn facts related to a legal action that the former employee was aware of as a result of his or her employment are privileged. Post-employment discussions should not go into any details regarding strategy or status of the ongoing litigation, which would open the door to attacks on privilege and invite the court’s scrutiny.
Because the privilege is in derogation of the search for truth, courts will only apply it when the requirements are clearly met. The burden then falls on attorneys to stay up-to-date on the intricacies of the privilege and pass on their knowledge to clients who all too often make incorrect assumptions regarding the privilege’s scope.
Clearly labeling written communications seeking or rendering legal advice, separating legal advice from responses to business concerns or other matters, and limiting dissemination of privileged information to only those who need it will go a long way to maintaining the privilege. It may also help to remind the client that communications do not become privileged simply because it is shared with an attorney, but privileged status may be lost when shared with third parties, even inside the company or with business partners. While these may seem like common sense tips, the amount of litigation on the attorney-client privilege suggests that the guidelines are not so easy to follow on a daily basis. The bottom line is that the attorney-client privilege requires diligence by both the attorney and client to ensure its protection.