April 01, 2014

Privilege: The Zone of Confidentiality Expanded

Edna Selan Epstein

Do you want your communication with a client seeking legal advice to be protected by privilege in discovery? The communication must be confidential when made and be kept confidential thereafter. Does that mean it can be conveyed to no one other than client and attorney? Of course not. Lawyers these days need an army of “others” to provide legal advice to their clients. So let’s say that the communication must remain within a zone of confidentiality.

Lawyers have always been able to share privileged communications with secretaries, paralegals, and other lawyers in their firms. Clients have always been able to share the communication with those within the business who have a “need to know.”

That zone of permissible confidentiality, until recently, did not encompass individuals not directly in the employ of the lawyer or of the client. Economic realities evolve. Increasingly, companies and even lawyers have come to employ “contract” employees who are not on the direct payroll of either the client or the lawyer.

The development of the common law is based on social realities, and the law of attorney-client privilege in the U.S. federal courts is preeminently a common-law development. Thus, the law of privilege has recognized that shifting economic reality. The sharing of privilege-protected communications with certain consultants and with nonemployees that in the past would have created a waiver of the privilege no longer always does so.

In recognizing consultants and contract employees as encompassed within the zone of confidentiality, courts speak of them as “the functional equivalent of an employee.” The factors that courts consider in determining whether a consultant or a contract employee is the functional equivalent of an employee for the purpose of according privilege protection to a communication are the following:

  1. Did the consultant or contract employee have primary responsibility for a key corporate job?
  2. Was there a continuous and close working relationship between the consultant and the company principals on matters critical to the company’s position in the litigation?
  3. Was the consultant likely to possess information that was not possessed by anyone else at the company?

A salient case that sets forth this relatively new expansion of the zone of confidentiality for privilege purposes is Twentieth Century Fox Film Corp. v. Marvel, 2002 U.S. Dist. LEXIS 22215, at *6–7 (S.D.N.Y. Nov. 15, 2002). This quotation from the court should get you started in your attempt to keep privileged what in the past would not have been:

I find that the non-employees to whom disclosure was made were the functional equivalent of employees. Fox’s determination to conduct its business through the use of independent contractors is a result of the sporadic nature of employment in the motion picture industry; for a wide variety of reasons, producers, directors and actors generally do not “turn out” movies with the same regularity with which most tangible products are produced. The fact that the nature of the industry dictates the use of independent contractors over employees should not, without more, create greater limitations on the scope of the attorney-client privilege. Since the employees in issue were the functional equivalent of employees, disclosure of otherwise privileged documents to them does not operate as a waiver of the attorney-client privilege.

Those of you who wish to pierce the privilege can continue to make the case for the proposition that this new concept of a “functional equivalent of an employee” should not be permitted to so expand the zone of confidentiality as to wipe out the concept of a breach of confidentiality and its attendant waiver of the privilege altogether.

Edna Selan Epstein

The author, an associate editor of Litigation, is the author of Attorney-Client Privilege and the Work-Product Doctrine, Fifth Edition, published by the American Bar Association.