Source: http://attorneyclientprivilege.mcguirewoods.com/chapter.aspx?ch=8
Timestamp: 2019-04-21 12:55:16+00:00

Document:
"What Client Agents Deserve Privilege Protection?"
Nearly every court considers client agents outside privilege protection unless those agents are necessary for facilitating privileged communications between clients and their lawyers. Some courts occasionally take a broader view – but without starting a trend.
In In re Riddell Concussion Reduction Litigation, the court assessed privilege protection for defendant's communications with "a public relations firm that consults with clients on communication strategies." Civ. No. 13-7585 (JBS/JS), 2016 U.S. Dist. LEXIS 168457, at *21 (D.N.J. Dec. 5, 2016). Most courts find such agents outside privilege protection, but the Riddell court held that "it is unquestionably the case that communications between and amongst Riddell and [the PR agency] for the purpose of securing legal advice are privileged." Id. at *14-15. A few weeks later, Valenzuela v. Union Pacific Railroad Co. held that a company's "right-of-way agent" deserved privilege protection under both Arizona and California law. No. CV-15-01092-PHX-DGC, 2016 U.S. Dist. LEXIS 176640, at *20 (D. Ariz. Dec. 21, 2016). But between those two decisions, a New York court applied the majority rule – holding that the plaintiff's brother (who was also funding the plaintiff's litigation) was outside privilege protection, because the plaintiff "cannot show that [his brother/litigation funder] served to facilitate attorney-client communications or representation," or acted as an agent "whose services are necessary for the provision or receipt of legal services." Kagan v. Minkowitz, No. 500940/2016, 2016 N.Y. Misc. LEXIS 4577, at *6-7 (N.Y. Sup. Ct. Dec. 9, 2016).
Many corporate executives mistakenly believe that they can share privileged communications with corporate agent/consultants without waiving the privilege. A handful of cases now and then provides a tempting sign that courts are becoming more forgiving, but the majority continues to find nearly all such agent/consultants outside privilege protection.
"Plaintiff's Live-In Boyfriend was Outside Privilege Protection, but Inside Work Product Protection: Part I"
Nearly every court finds that the only client agents/consultants inside privilege protection are those necessary for the communications between the client and her lawyer. But the work product doctrine casts a wider protective net.
In Harrington v. Bergen County, A. No. 2:14-cv-05764-SRC-CLW, 2016 U.S. Dist. LEXIS 124727 (D.N.J. Sept. 13, 2016), a civil rights plaintiff suing her former employer claimed that her live-in boyfriend was inside privilege protection – so that his presence during her communications with her lawyer did not destroy the privilege. The court acknowledged that plaintiff had been involuntarily committed to a mental hospital at the pertinent time, and that her boyfriend "has provided meaningful assistance" to her. Id. at *11. But the court was "not convinced that disclosure to [her boyfriend] was necessary or essential for Plaintiff to obtain informed legal advice." Id. The court noted that the "Plaintiff offers no medical or other expert opinion" about her inability to communicate with her lawyer without her boyfriend present. Id. at *11-12. The court stripped away privilege protection from communications in her boyfriend's presence, or later shared with her boyfriend.
Most clients (both individual and corporate) do not appreciate the miniscule range for their agents/consultants to be within privilege protection. Next week's Privilege Point will address the court's work product analysis.
("That protection extends as well to communications between (1) the attorney or his representative and (2) a representative or agent of the client, and to communications with others who are facilitating the rendition of legal services by the lawyer.").
Last week's Privilege Point described a North Carolina state court's predictable rejection of privilege protection for communications with a company's technical consultant. Does the same harsh standard apply when clients bring family members with them to lawyer meetings?
In Fox v. Alfini, plaintiff Fox ("then in her early thirties") fell ill at a chiropractor's office. Case No. 18SA92, 2018 Colo. LEXIS 962, at *4 (Colo. Dec. 3, 2018). Her parents rushed their "gravely ill" daughter to an emergency room "for what turned out to be a stroke." Id. Fox and her parents later met with a plaintiff's lawyer to discuss filing a malpractice action against the chiropractor. The defendant chiropractor discovered that the lawyer had recorded this initial meeting, and argued that the parents' presence aborted privilege protection. Not surprisingly, Fox claimed that her stroke caused "diminished mental capacity," and that "her parents' presence was necessary to facilitate her communications" with her lawyer. Id. at *5-6. The court disagreed, applying "an objective standard for determining whether a third party's presence was necessary to facilitate an attorney-client communication." Id. at *12. The Supreme Court agreed with the lower court that Fox "had not shown that her mental capacity was 'diminished such that the presence of her parents was necessary to assist in the representation.'" Id. at *15-16.
This counter-intuitive result demonstrates the difficulty of claiming privilege protection with or in the presence of client agent/consultants -- even family members. Next week's Privilege Point discusses fatal flaws in Fox's lawyer's argument.
Most client agents/consultants stand outside privilege protection. This means that: (1) communications with them do not deserve privilege protection; (2) their presence during otherwise privileged communications aborts that protection; and (3) disclosing pre-existing privileged communications to them waives that privilege. In the corporate setting, clients have other options for seeking privilege protection in such scenarios, but many of those fail.
In Technetics Group Daytona, Inc. v. N2 Biomedical, LLC, N2 and its lawyer retained a technology consultant "because of his expertise in relevant fields." No. 17 CVS 22738, 2018 NCBC LEXIS 116, at *2 (N.C. Super. Ct. Nov. 8, 2018). In a later patent dispute, N2 claimed privilege protection for communications with that consultant. The court rejected the privilege claim, holding that the technology consultant: (1) was not the "functional equivalent" of an N2 employee (because he had no "continuous and close working relationship with the company," and he "does not maintain an office at N2 or spend a substantial amount of his time working for N2"); (2) was not within the narrow privilege protection for client agents/consultants who are "nearly indispensable or serve some specialized purpose in facilitating the attorney-client communications" or “function more or less as a 'translator or interpreter' between the client and the lawyer" – but instead was "retained for the value of his own advice"; (3) could not claim that he had a "common interest" with N2, because he "help[ed] develop a solution to a technological problem" rather than cooperate "for purposes [of] indemnification or coordination in anticipated litigation." Id. at *10-11, *12, *14 (citations omitted).
Corporate executives sometimes erroneously assume that confidentiality agreements with such outside agent/consultants assure privilege protection or avoid waiver. They do not. Next week's Privilege Point discusses the same issue in a family setting.
"Courts Wrestle with Privilege Protection for Client Consultants: Part I"
The attorney-client privilege protects confidential communications between clients and their lawyers. Corporate client consultants may also deserve this protection if they act as the "functional equivalent" of corporate employees. Otherwise, most but not all courts take a very narrow view of privilege protection for communications to or from such consultants.
In Durling v. Papa John's International, Inc., No. 16 Civ. 3592 (CS) (JCM), 2018 U.S. Dist. LEXIS 11584(S.D.N.Y. Jan. 24, 2018), Papa John's relied on a third-party consultant to analyze how it should reimburse its delivery drivers. Class action plaintiffs claiming minimum wage violations sought communications between Papa John's and the consultant. The court first rejected Papa John's "functional equivalent" argument – noting that the consultant's employees were "not so fully integrated into the [Papa John's] hierarchy that its employees were de facto employees of [Papa John's]." Id.at *15. The court also found that the consultant was outside privilege protection, because its "role was not as a translator or interpreter of client communications," and that Papa John's retained the consultant "not to improve the comprehension of the communications between attorney and client, but rather to obtain information that [Papa John's] did not already have." Id. at *14. One day later, another court in Narayanan v. Southern Global Holdings Inc., similarly found that a corporation's "consulting and accounting firm" failed the "functional equivalent" standard and likewise fell outside privilege protection -- because the consultant's involvement was not "nearly indispensable or serve[d] some specialized purpose in facilitating the attorney-client communications." No. 15-CV-6165T, 2018 U.S. Dist. LEXIS 12358, at *12 (W.D.N.Y. Jan. 25, 2018). Instead, "the proof suggests that [the consultant's] role in attorney-client communications was merely useful and convenient." Id. at *19.
Most courts take this narrow approach. But next week's Privilege Point will discuss a case going the other way.
"Courts Continue to Catalogue Client Consultants Outside Privilege Protection"
Clients' agents/consultants are nearly always outside privilege protection. This generally means that their documents do not deserve privilege protection; their presence during otherwise privileged communications aborts that protection; and disclosing privileged communications to them waives the protection.
In JBGR LLC v. Chicago Title Insurance Co., No. 35140-11, 2017 N.Y. Misc. LEXIS 3008 (N.Y. Sup. Ct. Aug. 2, 2017) (unpublished opinion), the court held that the plaintiff's land-use consultant's presence at an otherwise privileged meeting destroyed the privilege. As the court explained, "while [the consultant's] advice may have been important to the legal advice given to the plaintiffs by their lawyers, it was not given to facilitate such legal advice." Id. at *8. Less than two weeks later, a federal court similarly held that the privilege did not protect a report prepared by a real estate appraiser "jointly engaged" by the client and its law firm Pierce Atwood. The court concluded that the appraiser "was not employed to assist Pierce Atwood in rendering legal advice." Portland Pipe Line Corp. v. City of S. Portland, No. 2:15-cv-00054-JAW, 2017 U.S. Dist. LEXIS 135704, at *9, *17 (D. Me. Aug. 14, 2017).
Even sophisticated corporate clients often do not understand that their agents'/consultants' involvement during privileged communications or as recipients of privileged communications usually destroys that protection. Clients sometimes erroneously think that confidentiality arrangements with such agents/consultants will avoid waiving privilege protection. That is incorrect – such agreements generally are irrelevant in analyzing privilege waiver issues.
"Court Takes a Liberal View of Privilege for Communications Between a Plaintiff and a Litigation Funder"
With litigants' increasing reliance on litigation funders, courts have had to wrestle with privilege and work product issues, including whether litigants and their litigation funders share a "common interest" allowing the former to avoid a waiver when disclosing privileged communications to the latter, and whether litigation funders can create protected work product.
In In re International Oil Trading Co. 548 B.R. 825 (Bankr. S.D. Fla. 2016), the court held that the plaintiff and its litigation funder Burford Capital shared a sufficiently common legal interest, so that the plaintiff did not waive its privilege protection by disclosing privileged communications to Burford. And the court even went beyond that — finding that Burford was a protected client agent assisting the company "'in furtherance of the rendition of legal services,'" and therefore within the privilege on that separate ground. Id. At 834 (citation omitted). The court also held that Burford could create protected work product, concluding that "[i]t does not matter that Burford's obvious purpose is to obtain a return on its investment, just as it does not matter that counsel's purpose typically is to earn a fee." Id. At 836.
Not all courts share this liberal attitude toward privilege and work product protection in the context of litigation funders, but the trend seems to be in that direction.
"Decision Highlights a Key Difference Between Attorney-Client Privilege and Work Product Doctrine Protection"
The attorney-client privilege provides absolute but fragile protection. In contrast, work product doctrine protection can be overcome — but offers more robust safety than the privilege. This distinction affects the impact of third parties' participation, and disclosure of protected communications or documents to third parties.
In Wichansky v. Zowine, No. CV-13-01208-PHX-DGC, 2015 U.S. Dist. LEXIS 132711 (D. Ariz. Sept. 29, 2015), the court dealt with plaintiff's communications with his lawyer — in the plaintiff's father-in-law's presence. The court found that the father-in-law's participation rendered the privilege unavailable — holding that the father-in-law "was not necessary to Plaintiff's communications with his counsel and [therefore] does not fall within the privilege." Id. at *6. In addressing the work product doctrine, the court applied the universal rule that "unlike the more sensitive attorney-client privilege, waiver of work product protection does not occur simply because a document is shared with a third person." Id. At *10. Because the father-in-law's "interests are aligned with Plaintiff's," disclosing work product to the father-in-law did not waive that separate protection. Id. At *11. In fact, the court concluded that the plaintiff's father-in-law could himself prepare protected work product under Fed. R. Civ. P. Rule 26(b)(3)(A) — which can cover documents prepared in anticipation of litigation "for" a party (such as the plaintiff). Id. At *7.
The attorney-client privilege and the work product doctrine apply in dramatically different ways in the context of friendly third parties — who are generally outside privilege protection but inside work product protection, and who, even themselves, can create protected work product. Corporate lawyers should remember these rules when considering their corporate clients' friendly third parties such as accountants, consultants, or other agents.
"Courts Continue to Catalogue Client and Lawyer Agents Outside Privilege Protection"
Under the majority view, the only client agents/consultants inside privilege protection are those essential for the client-lawyer communications. Although courts take a more varied view of lawyer agents/consultants, many courts hold that the only lawyer agents within privilege protection are those essentially translating or interpreting data so the lawyer can understand it.
In Cardinal Aluminum Co. v. Continental Casualty Co., Case No. 3:14-CV-857-TBR-LLK, 2015 U.S. Dist. LEXIS 95361 (W.D. Ky. July 22, 2015), the court held that plaintiff's insurance broker was outside privilege protection — despite the plaintiff's CFO's affidavit that the plaintiff relied on the broker to submit an insurance claim, negotiate with the insurance company, and advise the plaintiff about the claims process. Among other things, the court noted that "Plaintiff did not argue that its broker acted to effectuate legal representation for Plaintiff." Id. At *8. About three weeks earlier, another court addressed a company's claim that the privilege covered communications between its lawyers and environmental engineering firm AGC. NL Indus., Inc. v. ACF Indus. LLC, No. 10CV89W, 2015 U.S. Dist. LEXIS 86677 (W.D.N.Y. July 2, 2015). Although acknowledging plaintiff's argument that AGC's "actions were done at the direction of counsel," the court found that AGC was outside privilege protection — noting that "[p]laintiff has not shown that AGC acted like an interpreter or translator of client communications." Id. At *12.
One of the most dangerous client misperceptions is that the privilege can protect their communications with their agents/consultants. And one of the most dangerous lawyer misperceptions is that lawyers can automatically assume that their agents/consultants are within privilege protection.
"Courts Wrestle with Privilege Protection for Client Consultants: Part II"
Last week's Privilege Point summarized two cases finding that corporate client consultants: (1) did not meet the "functional equivalent" standard; and (2) were not "nearly indispensable" for facilitating communications between the corporate client and its lawyers. Such holdings make privilege protection unavailable for communications between the corporate client (or its lawyer) and the consultant, and also normally compel the conclusion that disclosing preexisting privileged communications to such consultants waives the privilege.
However, some cases take a more favorable view. In FiberLight, LLC v. Washington Metropolitan Area Transit Authority, Civ. A. No. 16-2248 (ESH), 2018 U.S. Dist. LEXIS 8079 (D.D.C. Jan. 18, 2018), defendant hired a consultant to analyze current and potential future development of its fiber optic system. Plaintiff, alleging breach of contract, sought the consultant's report to the defendant, challenging the defendant's redaction of the section entitled "Legal Concerns." Id. at *2. In a one paragraph analysis, the court confirmed after its in camera review that the redacted portion "reflects the views of [Defendant's] legal counsel regarding potential legal issues." Id. at *6. The court then upheld the redaction, explaining that "the sharing of such privileged information with a consultant who needs that information in order the complete a project for the company does not constitute a waiver of the privilege." Id. at *7.
Although this favorable approach represents the minority view, corporations and their lawyers should check the applicable court's privilege law for such helpful precedent.

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