The Ins and Outs of Attorney-Client Privilege

The attorney-client privilege, a cornerstone of the laws of evidence, is a legal concept that safeguards from disclosure confidential communications between an attorney and the attorney’s client regarding legal advice. It derives from statutory and common-law principles in all 50 states. The privilege, which is the oldest recognized in U.S. jurisprudence, has its roots dating back to the reign of Queen Elizabeth I in the 16th century, making it a testament to the enduring nature of legal principles.

The privilege allows attorneys to represent their clients adequately and zealously, with full knowledge of the subject matter of their representation. However, not all communications between attorney and client are protected. Generally, to be privileged, a communication must (1) seek legal advice (2) from a legal professional in his or her capacity, (3) be related to that legal purpose, (4) be made in confidence, and (5) be made by the client. The form of the communication is often immaterial. Thus, privileged communications can be made orally, via written document or email exchange, or in another form. This article first discusses the elements of the attorney-client privilege, followed by recent cases concerning the potential waiver of the privilege. This article then discusses how to assert the privilege and outlines how long the privilege will last. The last two sections discuss the waiver of the privilege and an extension of the privilege: the common interest doctrine.

Elements of the Attorney-Client Privilege

An attorney-client relationship must exist. There must be an attorney-client relationship for the privilege to occur, and the client must seek legal advice. The privilege applies to both prospective clients and actual clients. Those clients may be individuals, corporations, partnerships, or associations who consult a lawyer in that lawyer’s professional capacity. In the context of a corporation, privilege can also apply to communications between the corporation and its staff counsel or outside counsel. For corporate clients, courts are particularly cautious in applying the privilege to ensure corporations cannot shield information by merely routing it through in-house counsel. Nonetheless, communications between a corporation’s attorney and an employee are privileged “regardless of [the employee’s] position when the communications concern matters within the scope of the employee’s corporate duties and the employee is aware that the information is being furnished to enable the attorney to provide legal advice to the corporation.”

The communication must be for and relate to a legal purpose. For a communication to be protected, it must be made by “a member of the bar of a court” who is acting as a lawyer, and it must be “made for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding.” When a lawyer performs nonlegal services—such as supplying business advice or acting as an accountant, insurance adjuster, public relations professional, or otherwise—the privilege does not attach. For example, in an insurance context, if an attorney performs the function of a claims adjuster, courts will generally find that the attorney-client privilege does not apply because that is a normal, nonlegal business function of an insurance company. However, “the line between what constitutes claim handling and the rendition of legal advice is often more cloudy than crystalline,” and courts must often engage in an in camera review of each potentially protected communication to determine whether the attorney was performing legal services.

Courts have found that attorneys sometimes wear two hats—“that of claims handler and legal counsel.” In In re Residential Capital, LLC, the court stated that under New York law, “an insurance company’s claim handling activities are generally subject to discovery even if they were performed by an attorney” in analyzing whether Certain Underwriters at Lloyd’s of London had improperly withheld claims handling documents based on attorney-client privilege and the work-product doctrine. The court held that where an attorney serves “as both legal counselor and claims handler,” only the portion of the communications that are for legal services will still be protected.

The Supreme Court recently dismissed In re Grand Jury, which evaluated the same issue and declined to expand the scope of that attorney-client privilege protection for dual-purpose communications (i.e., legal and nonlegal advice). Accordingly, a divide remains on whether the “primary purpose” or the “significant purpose” test applies. Most jurisdictions have determined that dual-purpose communications are protected where the primary purpose of the communication is obtaining or providing legal advice. In contrast, others find privilege if a significant purpose of the communication is legal advice, which is, in theory, a much broader standard. Regardless of which test is used, a party seeking to prevent disclosure must establish whether a communication was for a legal service or some nonlegal service or business function. The inquiry is generally fact-based and is made on a communication-by-communication basis.

The client must make the communication. However, the privilege may also protect an attorney’s communications to a client so long as the other elements are met. Communications by an attorney to a client may also be privileged if disclosure “would directly or indirectly reveal the substance of a confidential communication by the client and if it was considered to be confidential by the client.”

The communication must be intended to be confidential. For example, a client or prospective client speaking to a lawyer about a pending lawsuit in a private office with no one else present would suggest that the conversation was confidential. In contrast, if a client speaks to an attorney in a public setting near others and in a loud voice, courts may question whether those communications were intended to be held in confidence.

In MacFarlane v. Fivespice LLC, the party seeking disclosure argued that a conversation was not privileged because the attorney and client met at a public café. The court closely scrutinized the circumstances of the conversation and found that the conversation occurred during the café’s off-peak hours, there were few people present, no one sat near the attorney and client, the attorney’s and client’s voices were not raised, and their booth was 10 feet away from any occupied table. Thus, the court concluded that the café was a “sufficiently confidential setting for maintaining the attorney-client privilege.”

If a client repeats an otherwise confidential conversation to a third party, or if a third party is present when the attorney and client communicate, the conversation may not be privileged. However, this general premise does not apply to agents of the employee or agents of the client so long as the agents “help facilitate attorney-client communications or the legal representation.” In an insurance context, it is sometimes necessary for an insured or the insured’s counsel to communicate with an insurance broker about a pending claim because the broker placed the policy and is familiar with the policyholder’s operations. In such cases, communicating information that would otherwise be deemed confidential generally will not amount to a waiver of the privilege based on the applicability of the “necessary intermediary doctrine,” which provides that the attorney-client privilege is not destroyed if a third party’s participation is necessary for adequate legal representation. The third party’s participation must be made for the purpose of obtaining legal advice or developing a strategy and need not be pertinent to the litigation itself. In addition, in most jurisdictions, if an insurer has a duty to defend its insured, communications between the insurer and the insured remain privileged.

What Is Not Protected by the Privilege

The attorney-client privilege protects the disclosure of communications but not the disclosure of the underlying facts that comprise the communication. In Upjohn Co. v. United States, the Supreme Court held:

The protection of the privilege extends only to communications and not to facts. A fact is one thing and a communication concerning that fact is an entirely different thing. The client cannot be compelled to answer the question, “What did you say or write to the attorney?” but may not refuse to disclose any relevant fact within his knowledge merely because he incorporated a statement of such fact into his communication to his attorney.

In Upjohn, the Court held that communications made by employees to a company’s general counsel and outside counsel were privileged regardless of the employees’ position. However, the Court noted that the government was “free to question the employees who communicated with [general counsel] and outside counsel[.]” Thus, the privilege cannot be used to shield discoverable facts from disclosure merely because they were communicated to an attorney.

How to Assert the Privilege

The party asserting the privilege bears the burden of establishing that an attorney-client relationship existed and the privileged nature of the communication. The privilege can be asserted in any proceeding in which testimony is compelled, such as civil, criminal, or administrative trials, or regulatory and disciplinary proceedings. If the privilege applies, compelled disclosure is prohibited regardless of need, subject to a few exceptions. The privilege must be asserted throughout the discovery process in document production, interrogatory responses, and depositions. Federal Rule of Civil Procedure 26(b)(5) provides as follows:

When a party withholds information otherwise discoverable by claiming that the information is privileged or subject to protection as trial-preparation material, the party must:

(i) expressly make the claim; and

(ii) describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.

The Federal Rules of Civil Procedure do not detail how privileged communications should be reviewed or how a party may assert privilege. Accordingly, some courts have created checklists for privilege logs. For example, the U.S. District Court for the Middle District of Florida concluded that a “proper privilege log” should contain the following:

1. the name and job title or capacity of the author of the document;
2. the name and job title or capacity of each recipient of the document;
3. the date the document was prepared and, if different, the date(s) on which it was sent to or shared with persons other than the author(s);
4. the title and description of the document;
5. the subject matter addressed in the document;
6. the purpose(s) for which it was prepared or communicated; and
7. the specific basis for the claim that it is privileged.

Meanwhile, some courts, like the Northern District of Texas, have come to more general conclusions, stating that “a privilege log must identify each document and provide basic information, including the author, recipient, date and general nature of the document.”

When a party provides an inadequate or untimely privilege log, the court may choose between four remedies: (1) give the party another chance to submit a more detailed log; (2) deem the inadequate log a waiver of the privilege; (3) inspect in camera all of the withheld documents; and (4) inspect in camera a sample of the withheld documents.

If there is a dispute over whether a communication is privileged, courts will often engage in an in camera review; however, some courts have declined to do so.

How Long Does the Privilege Last?

Potentially, forever. The attorney-client privilege remains in effect after the attorney-client relationship ends and even after the client dies. An attorney may never divulge the contents of those communications or a client’s secrets without the client’s permission unless an exception applies.

Waiver of the Privilege

As a general principle, “communications between an attorney and a client that are made in the presence of or subsequently disclosed to third parties are not protected by the attorney-client privilege.” And if you fail to assert a claim of privilege, it is likely waived.

Privileged documents may also be inadvertently produced to an opposing party during discovery. Federal Rule of Civil Procedure 26(b)(5)(B) sets forth steps the parties must take when a privileged communication is inadvertently produced:

If information produced in discovery is subject to a claim of privilege or of protection as trial-preparation material, the party making the claim may notify any party that received the information of the claim and the basis for it. After being notified, a party must promptly return, sequester, or destroy the specified information and any copies it has; must not use or disclose the information until the claim is resolved; must take reasonable steps to retrieve the information if the party disclosed it before being notified; and may promptly present the information to the court under seal for a determination of the claim. The producing party must preserve the information until the claim is resolved.

Another form of waiver is the “at issue” waiver, which occurs when a party puts the subject matter of a privileged communication at issue in litigation. This requires the invasion of the privilege to determine the validity of a claim or defense of the party asserting the privilege, and that the application of the privilege would deprive an adversary of vital information. Privileged communications are not at issue merely because a party alleges in a responsive pleading that it was not negligent or did not engage in the conduct of the claim asserted against it. For example, in American Re-Insurance Co. v. U.S. Fidelity & Guaranty Co., the court found that an insurer did not put its privileged communications at issue by alleging that a proposed settlement was reasonable and made in good faith. Conversely, in Travelers Property Casualty Co. of America v. Renaissance, the court found that an insurer impliedly waived the privilege and allowed the discovery of an insurer’s in-house counsel’s communications when a disclaimer letter was drafted by the in-house counsel and sent under the adjuster’s signature because, during her deposition, it became clear the adjuster did not have personal knowledge regarding why the claim was denied and that she had relied on the knowledge of in-house counsel.

A Potential Extension—The Common Interest Doctrine

There are several exceptions to the attorney-client privilege, and the common interest exception is arguably the most relevant to the insurance industry. The common interest exception allows separately represented parties with a common legal interest to share information without waiving the attorney-client privilege if a joint defense effort or strategy has been decided upon. There must be an agreement to pursue a joint strategy, and the party invoking the privilege bears the burden of demonstrating mutual assent to that agreement.

The common interest doctrine is not definitive in protecting insureds against disclosure of privileged information when an insurer is involved in the insured’s defense. For example, in MapleWood Partners, L.P. v. Indian Harbor Insurance Co., the court found that when an insured voluntarily purchased an insurance policy that included a cooperation clause, it was obvious that the insurer shared a legal interest with the insured, the communications were not privileged, and the insurer had a right to review them. Conversely, in Eastern Air Lines, Inc. v. U.S. Aviation Underwriters, Inc., the court found a similar cooperation clause did not override or “eviscerate” the attorney-client privilege.

A policyholder may also be permitted to use the common interest doctrine as a shield to preclude a liability claimant from accessing privileged communications between the policyholder, its insurer, and its defense counsel.

Conclusion

The attorney-client privilege encourages open communication among attorneys, their clients, and certain necessary third parties. However, the scope of the privilege is nuanced and ever-changing, making it vital for attorneys to remain aware of how they may inadvertently erode the privilege in cases, particularly those involving coverage disputes.