August 26, 2011 Articles

Attorney-Client Privilege and Former Directors and Officers

What happens to attorney-client and work-product privilege if a director or officer leaves the corporation and then becomes adverse to it in litigation?

by Joshua Heidelman and Michael J. Schrier

It is black-letter law that where a corporation is the client, the attorney-client and work-product privileges (for convenience, both will be referred to here as the "privilege") extend to the executives, directors, and other members of the corporation's "control group" (or whatever label a particular jurisdiction assigns to such individuals). The necessity for such a rule is fairly obvious—a corporation can only communicate and act through its directors and officers. But what happens to the privilege if a director or officer leaves the corporation and then becomes adverse to it in litigation? Must the corporation produce privileged documents to the director or officer that were created or communicated during that person's tenure, or can the otherwise privileged documents be withheld? What if the director or officer is demanding production of documents he or she actually created or received while still with the corporation?

Consider the following two scenarios. In Scenario No. 1, you represent a corporation in a suit against a former officer who has formed a competing company, usurped corporate opportunities, and otherwise breached his or her fiduciary duties. In Scenario No. 2, a former officer or director sues the corporation you represent, either for wrongful termination or based on some other corporate misconduct or waste (to which he or she, of course, had a front-row seat). In both scenarios, the director or officer seeks production of correspondence and other work product received from or sent to outside counsel. When the corporation claims privilege and the former director or officer moves to compel, what is the result?

The answer depends on which jurisdiction's law applies, because the law on this issue is in a state of flux. The flux may be partly explained by what appear to be competing absurdities on each side of the debate. At one extreme, if the privilege is upheld, the corporate officer is denied access to documents he or she may have previously received, read, or perhaps even have written—hardly in keeping with the policy goals of preventing the disclosure of legal advice (assuming an appropriate protective order could be entered). At the other extreme, if the privilege is not upheld, documents the officer received only because of her corporate position are freely available to her, despite the fact that she is now in an adverse position.

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