Moreover, once nonattorney professionals, such as auditors, accountants, valuation experts, public relations personnel, and others, join communications between the attorney and the client, the contours of the attorney-client privilege and the work-product doctrine become even more complicated—and the requirements of invoking protection become more onerous. While communicating with someone outside the attorney-client relationship usually waives the privilege—and, in some cases, work-product protection—communications with nonattorney professionals that are essential to an attorney’s ability to provide legal advice to her client are likely still protected. However, the elements of the privilege or work-product doctrine still need to be satisfied, and the nonattorney professional’s involvement must be in furtherance of the provision of legal advice (as opposed to, for example, tax preparation, business advice, or financial services).
All of these rules and exceptions can be dizzying, and they are land mines for the unwary. In this piece, we attempt to unravel them by focusing on several recent federal cases that have tackled these thorny issues. We begin with an overview of the attorney-client privilege and work-product doctrine and then consider the challenges that can arise when a nonattorney professional is brought into the attorney-client relationship, focusing on how the Kovel doctrine has addressed this issue. (We do not attempt to cover every issue that arises in connection with the attorney-client privilege and work-product doctrine, such as the common interest rule, the functional equivalent doctrine, or the adequacy of privilege logs. Perhaps we will revisit these matters in a future piece.)
We hope that the reader comes to appreciate that attorneys and their clients cannot assume that all of their communications, and communications between them and nonattorney professionals, are protected from disclosure. Attorneys and their clients should tread carefully and should thoughtfully consider throughout their relationship whether their emails, memos, letters, texts, and other communications are protected.
Overview of the Attorney-Client Privilege
While the elements of the attorney-client privilege under federal law have been stated in various ways, this recent articulation is representative:
Under federal law, the attorney-client privilege applies only if all the following are met:
- the asserted holder of the privilege is or sought to become a client;
- the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer;
- the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers(c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and
- the privilege has been (a) claimed and (b) not waived by the client.
Monterey Bay, 2023 WL 315072, at *6 (emphasis added) (separation added between numbered paragraphs for clarity of presentation).
The key elements that are the focus of this article are (1) whether the communication was made to an attorney in order to provide legal advice as opposed to business advice and (2) whether the presence of a “stranger” to the attorney-client relationship destroys the privilege. The inquiry is highly fact-specific, and the proponent of the privilege generally bears the burden of proving its applicability. A general assertion of privilege is not sufficient, even with a lawyer present on communications. United States v. Hamdan, No. 19-60-WBV-KWR, 2021 WL 1931626, at *3 (E.D. La. May 13, 2021).
As to the necessity of actually communicating about legal advice, “[t]he mere fact . . . that a document was transmitted between an attorney and a client does not render the document privileged. Rather, it ‘must contain confidential communications relating to legal advice.’” Monterey Bay, 2023 WL 315072, at *6 (citation omitted). The privilege is not available “where the communication is not in furtherance of the securing of legal advice.” United States v. Coburn, No. 2:19-cr-00120, 2022 WL 357217, at *3 (D.N.J. Feb. 1, 2022) (emphasis in original). For example, “[a]dvice that is predominantly concerned with corporate business, technical issues, or public relations is not protected.” Id. This may seem like an obvious point, but it sometimes trips up attorneys and their clients, who wrongly assume that anything they say to each other is protected. (It is also worth reminding the reader that writing Attorney-Client Privilege, Work Product, Privileged and Confidential, or the like on a document does not convert a nonprivileged document into a privileged one. Likewise, the absence of such labels does not render a privileged document not privileged. However, such headings or labels can be helpful to identify potentially privileged material in a subsequent review and to prove the intent or understanding of the author of a document. While these labels are not a substitute for satisfying the elements of the privilege or work-product doctrine, it is a good practice to appropriately label documents as privileged or work product, even if such labels will not carry the day.)
The privilege can be especially challenging for in-house attorneys, who often wear two hats: one as legal adviser and one as a participant in business decisions. Courts recognize this:
Because in-house lawyers often perform both legal and business functions, “communications between a corporation’s employees and its in-house counsel, though subject to the attorney-client privilege, must be scrutinized carefully to determine whether the predominant purpose of the communication was to convey business advice and information or, alternatively, to obtain or provide legal advice[,]” with only the latter being protected by the attorney-client privilege.
Monterey Bay, 2023 WL 315072, at *7 (citation omitted).
A document that “is ‘predominantly a business communication’ is not protected merely because it ‘involved legal considerations’ and ‘counsel was copied.’” Id. There is no shortage of case law rejecting assertions of the attorney-client privilege where the communication between the attorney and the client does not reflect legal advice, which then results in disclosure of attorney-client communications.
Even where the attorney-client privilege is properly asserted, it can be waived. “It is well-established that the attorney-client privilege is waived if the holder of the privilege voluntarily discloses or consents to disclosure of any significant part of the communication” to a third party. Id. This means that the party invoking the privilege must show that it was both made in confidence and “maintained in confidence.” Id. (emphasis added).
Waiver can occur inadvertently, as when a client sends an attorney communication to someone whom she wrongly assumes is covered by the attorney-client relationship. It can occur intentionally, such as by using privileged advice as a defense to legal claims. Attorneys and clients must carefully consider whether communications that they are sharing will result in waiver. We will further discuss below when sharing privileged communications with nonattorney professionals, such as accountants, will or will not waive the privilege.
Overview of the Work-Product Doctrine
The work-product doctrine prevents disclosure of documents in the narrow circumstance of documents prepared in anticipation of litigation. “[D]ocuments and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative” are eligible for work-product protection. Id. at *9 (citing Fed. R. Civ. P. 26(b)(3)(A)). Work-product protection applies if “the material at issue ‘(1) [is] a document or a tangible thing, (2) that was prepared in anticipation of litigation, and (3) was prepared by or for a party, or by [its] representative.’” Id. (citation omitted). It is important to remember that if work-product assertions are challenged, courts will typically require proof of its application through evidence—affidavits, deposition testimony, live testimony, or otherwise. Mere conclusory statements by counsel may not be enough. Id. Documents prepared for a business purpose or in the ordinary course of business are not protected by the work-product doctrine, even if litigation is anticipated or pending at the time that the documents were created. The documents must have been prepared because of the prospect of litigation. Id. at *10; see also United States v. Coburn, No. 2:19-cr-00120, 2022 WL 357217, at *4 (D.N.J. Feb. 1, 2022) (“Documents created in the ordinary course of business are not protected by the work-product doctrine.”).
In addition, while the attorney-client privilege is usually absolute if it is properly invoked and not waived, the same is not true of work-product protection. Parties seeking work product may be able to overcome its protection if they show a substantial need for it, even where its elements are otherwise satisfied:
Pursuant to Federal Rule of Civil Procedure 26(b)(3)(A), “work product materials are discoverable if (i) they are otherwise discoverable under Rule 26(b)(1), and (ii) the party seeking them shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.” “A substantial need exists ‘where the information sought is essential to the party’s defense, is crucial to the determination of whether the defendant could be held liable for the acts alleged, or carries great probative values on contested issues.’”
Monterey Bay, 2023 WL 315072, at *11 (citations omitted).
Even if a showing of substantial need is made, courts will typically protect against the disclosure of an attorney’s or other representative’s “mental impressions, conclusions, opinions or legal theories” concerning litigation. Id.
In contrast to the attorney-client privilege, work product is not waived merely by sharing material with third parties. Waiver of work product occurs where a party acts in a manner inconsistent with the doctrine, such as by disclosing work product to an adversary or to another person in a manner that “substantially increases the opportunity for potential adversaries to obtain the information.” Id. at *10 (citation omitted). Not all sharing of work product outside the attorney-client relationship results in waiver.
Divergence of Attorney-Client Privilege and Work-Product Doctrine
The different waiver rules for attorney-client privilege and work product are important because sharing protected information with third parties may waive one protection but not the other. For example, an attorney who writes protected memos about litigation strategy may waive attorney-client privilege by sharing those memos with a nonattorney professional, but the memos can still be protected by the work-product doctrine if sharing the memos does not substantially increase the likelihood of an adversary obtaining the documents. United States v. Sanmina Corp., 968 F.3d 1107, 1122 (9th Cir. 2020) (holding that the work-product doctrine protected the disclosure of documents even where attorney-client privilege was waived as to those documents). However, remember that this circumstance only applies where the underlying documents are actually made in anticipation of litigation.
Nonattorney Professionals and the Kovel Doctrine
As discussed above, sharing attorney-client communications can result in waiver of the attorney-client privilege. However, courts have recognized that certain nonattorney professionals can be included in such communications without waiving privilege. But communications with nonattorney professionals are not protected simply because an attorney is also involved. The scope of the protections over communications with nonattorney professionals is relatively narrow.
In United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961), the court held that the attorney-client privilege “can protect communications between a client and his accountant, or the accountant and the client’s attorney, when the accountant’s role is to clarify communications between attorney and client.” Monterey Bay, 2023 WL 315072, at *7 (quoting United States v. Ackert, 169 F.3d 136, 139 (2d Cir. 1999)). Analogizing an accountant to an interpreter, courts have recognized that “[j]ust as an interpreter can translate between an attorney and client who speak different languages, ‘Kovel recognized that an accountant can play a role analogous to an interpreter in helping the attorney understand financial information passed to the attorney by the client.’” Id. (quoting Ackert, 169 F.3d at 139).
For the so-called Kovel doctrine to be properly invoked, the nonattorney professional must be helping an attorney understand or interpret information in such a way as to assist the attorney in providing legal advice. Disclosures to third parties “do not constitute a waiver when the disclosure is ‘necessary for the client to obtain informed legal advice’ or if the disclosure is made to an ‘agent’ assisting the attorney in giving legal advice to the client.” Hydrojet Servs., Inc. v. Senry Ins. Co., No. 20-4727-SWR, 2022 WL 2168438, at *5 (E.D. Pa. June 16, 2022) (citation omitted). Put another way, disclosure to an agent is privileged “only if the disclosure was to an agent whose services are necessary for effective [legal] representation of the client’s interests. This means that the agent must evaluate the information and in a sense translate it into understandable terms for the non-expert attorney.” Tonti Mgmt. Co. v. Soggy Doggie, LLC, No. 19-13134, 2020 WL 9172077, at *5 (E.D. La. June 25, 2020).
The Kovel rule has limits. It does not shield “a communication between an attorney and a third party . . . solely because the communication proves important to the attorney’s ability to represent the client.” Monterey Bay, 2023 WL 315072, at *7 (quoting Ackert, 169 F.3d at 139). Rather, “[f]or the Kovel rule to apply, the attorney must have been relying on the third party advisor ‘to translate or interpret information given to [the attorney] by his client[,]’ not to provide information that the client did not already have.” Id. (quoting Ackert, 169 F.3d at 139–40).
Whether communications with a nonattorney professional, such as an accountant, auditor, valuation expert, other financial expert, or other professional are protected from disclosure is a fact-intensive inquiry. Courts will consider whether the engagement letter, statement of work, or other description of a project—while not dispositive—describes the purpose of the professional’s engagement as legal or nonlegal in nature. In a recent case denying protection of the attorney-client privilege to a consultant’s communications, the court noted that the consultant’s statement of work contained “several explicit disavowals of any attorney-client relationship.” United States v. CIT Bank, N.A., No. 4:14-CV-00833, 2021 WL 4439516, at *5 (E.D. Tex. Sept. 28, 2021) (noting that the statement of work at issue went so far as to expressly disclaim the rendering of legal advice or a legal opinion). In another case, the court denied protection of the attorney-client privilege where the accountant’s engagement letter stated that he was retained to provide tax preparation services—the court noted that such services did not constitute legal advice. IQL-Riggig, LLC v. Kingsbridge Techs., No. 19 CV 6155, 2021 WL 1172654, at *2 (N.D. Ill. Mar. 29, 2021). And in a fairly recent court of appeals decision, the court held that communicating certain attorney memos to a law firm waived the attorney-client privilege where the law firm was hired “for the purpose of conducting a fair market value analysis to be used for tax compliance reasons,” which was not considered a “legal purpose.” United States v. Sanmina Corp., 968 F.3d 1107, 1117 (9th Cir. 2020).
Courts also will carefully scrutinize the role of the nonattorney professional. Classification of the professional as an attorney’s “agent” is insufficient to invoke privilege. “The critical inquiry is whether the representative furthers the provisions of legal services to the client.” CIT Bank, 2021 WL 4439516, at *6; see also Tonti Mgmt. Co. v. Soggy Doggie, No. 19-13134, 2020 WL 9172077, at *5 (E.D. La. June 25, 2020) (“Mere classification as an ‘agent’ of the attorney or client, however, is not sufficient, in and of itself, to sustain the attorney-client privilege. The party who claims that a third party is its agent for purposes of the privilege ‘bears the burden of showing that the person in question worked at the direction of the lawyer, and performed tasks relevant to the client’s obtaining legal advice, while responsibility remained with the lawyer. Moreover, when the third party is a professional, such as an accountant, capable of rendering advice independent of the lawyer’s advice to the client, the claimant must show that the third party served some specialized purpose in facilitating the attorney-client communications and was essentially indispensable in that regard.’ The critical inquiry is whether the representative ‘furthers the provision of legal services to the client.’” (internal citations omitted)). “Indeed, even a lawyer’s consultation with an expert to better advise his client is insufficient to give rise to privilege. The key is whether the third party was necessary for the rendering of legal advice or was instead providing business or some other expertise.” Tonti Mgmt., 2020 WL 9172077, at *12.
For example, communications about accounting services will not be protected if they are not for the purpose of assisting counsel in providing legal advice:
For the attorney-client privilege to attach to communications between an attorney and an accounting service, the purpose of the communications must be to seek and render legal advice, not accounting services. An accountant’s preparation of tax returns qualifies as an accounting service, not a legal service. Likewise, documents used both to prepare tax returns and to advance a party’s interests during litigation are not privileged.
IQL-Riggig, 2021 WL 1172654, at *2; see also CIT Bank, 2021 WL 4439516, at *5.
Similarly, communications during a meeting with counsel and a certified public accountant (CPA) were not protected where no evidence showed that the CPA was hired to assist the attorney in providing legal advice. United States v. Hamdan, No. 19-60-WBV-KWR, 2021 WL 1931626, at *6 (E.D. La. May 13, 2021). And communications with a public relations firms concerning “public disclosure, communications, potential litigation and related legal strategy” may not be protected from disclosure if they “bear too tenuous a connection to the provision of legal advice or confidential preparation for litigation.” United States v. Coburn, No. 2:19-cr-00120, 2022 WL 357217, at *6 (D.N.J. Feb. 1, 2022). But, in the same case, communications with an accounting firm concerning an internal investigation were “closely related to the provisions of legal advice” because the nature of the matter “would understandably make accounting expertise vital to any law firm” providing legal advice. Id. at *6.
Given the different rules concerning attorney-client privilege and the work-product doctrine, the Kovel doctrine does not neatly fit into the work-product waiver analysis. That is because work-product waiver focuses on whether disclosure has been made to an adversary, or to someone else in such a way that there is a substantially increased opportunity for an adversary to receive the information. That generally does not occur when work product is shared with a nonattorney professional, even one who is not assisting counsel. Nevertheless, courts may look to the existence of a Kovel relationship when considering work-product waiver issues. For example, the existence of a valid Kovel arrangement could be evidence that sharing work product with a nonattorney professional did not increase the risk of disclosure to an adversary. Therefore, counsel should, when appropriate, invoke Kovel to protect both the attorney-client privilege and the work-product doctrine.
What can we take away from all this? The primary point is that attorneys and their clients need to be aware that not every communication between them is protected by the attorney-client privilege or work-product doctrine. And if invocation of privilege or work-product protection is challenged, the proponents of such protection will have to prove, through evidence, that a valid basis for the privilege or work-product protection exists.
In addition, when nonattorney professionals are brought into the mix, privilege will be waived if the professional is not assisting counsel in providing legal advice (but work-product protection may be available). And, again, merely pointing to the presence of an attorney on communications with nonattorney professionals will not protect the privilege.
For these reasons, attorneys, their clients, and their nonattorney professionals should consider these pointers as they navigate their relationships:
- For each communication between counsel and client, consider whether it is for a legal or other purpose. The attorney-client privilege only protects confidential communications made for the purpose of securing legal advice. It does not protect communications about business issues that are not of a legal nature. In-house attorneys should pay particularly close attention to this as they often perform multiple functions at a company.
- The work-product doctrine only protects materials prepared in anticipation of litigation. Communications between the attorney and the client not in anticipation of litigation are not protected work product.
- If privilege or work-product protection is challenged, be prepared to defend the invocation of such protections with real evidence. Relying solely on the existence of an attorney-client relationship is likely not enough.
- The attorney-client privilege is usually waived if confidential communications are shared outside the attorney-client relationship. Attorneys and clients need to be very careful about whom they share their communications with, and they should not share communications outside their attorney-client relationship with anyone who is not assisting counsel in providing legal advice.
- Even where attorney-client privilege is waived, the work-product doctrine might protect communications from disclosure if the communications were prepared in anticipation of litigation and the sharing of such communications did not substantially increase the risk that an adversary will receive the communications.
- Communications with a nonattorney professional whose work is necessary to assist counsel in providing legal advice may be protected under Kovel. Therefore, when retaining nonattorney professionals, make clear what their purpose is in an engagement letter. If it is for the purpose of assisting counsel in providing legal advice, counsel should enter into the engagement letter with the professional and make that point clear. A so-called Kovel letter accomplishes this purpose.
Robert Hoff is a partner and Chloe Booth is an associate at Wiggin and Dana LLP in New York City, New York.