Opinion ID: 1122491
Heading Depth: 3
Heading Rank: 4

Heading: The Privilege for Factual Communications Made by Employees in Response to Overtures by Someone Else in the Corporation

Text: The real debate concerning the proper scope of the corporation's attorney-client privilege is its applicability to factual communications made in response to an overture initiated by someone else in the corporation. Unless there is some self-limiting feature, the breadth of corporate activity could transform what would be witness communications in any other context into client communications. In such an event, the costs of the privilege are potentially much greater when asserted by a corporation over the statements of its agents than when asserted by an individual over his or her own statements. But there is no countervailing benefit. The rationale of the privilege is that by assuring the individual client that his or her communications cannot be disclosed without consent, it encourages the client to be candid. But this only works if the communicator controls the privilege. In the corporate context, the privilege belongs to the corporation and not the person making the communication. [4] If an employee has exposed the corporation to liability, it seems less problematic to legitimize the corporation's control over the privileged nature of the employee's communications. After all, it is the action of this employee that is being imputed to the corporation. It is this employee's statements that are directly admissible against the corporation under Rule 801(d)(2)(D), Ariz. R.Evid. This employee's statements are also the most important in enabling corporate counsel to assess the corporation's legal exposure and formulate a legal response. And none of this has anything at all to do with whether the employee is a member of a control group. We must, therefore, always look at the relationship between the communicator and the incident giving rise to the legal matter, the nature of the communication and its context. If the employee is not the one whose conduct gives rise to potential corporate liability, then it is fair to characterize the employee as a witness rather than as a client. The vice of the control group test is that it includes in the privilege the factual statements of control group employees even if they were mere witnesses to the events in question, while at the same time it fails to take into account the need to promote institutional candor with respect to factual communications of non-control group employees whose conduct has exposed the corporation to possible adverse legal consequences. The test is both overinclusive and underinclusive. We, therefore, reject the control group test as unsatisfactory on its own terms. Over and above its inadequacy as a theory to deal with the complex problems of the attorney-client privilege in the corporate context, there are other reasons to avoid the control group test. Our world is growing smaller. Corporate activity is increasingly global and almost always national. Although its outer limits are unclear, Upjohn at a minimum rejects the control group test as a rule of federal common law. We should minimize disparities between federal and state law when it comes to privilege. When clients seek legal advice, they do not expect that the privilege will exist for purposes of some claims but not others. Much litigation today consists of both state and federal claims, sometimes in the same action. Federal and state claims can be asserted simultaneously in federal and state forums. For example, there are frequently pendent state claims attached to federal question claims in the United States district courts. Similarly, there are frequently federal claims, such as actions under 42 U.S.C. § 1983, joined with state law claims in state court. The adoption of the control group test would mean that some communications would be admissible as to one claim but not the other. See Julie E. Rice, Note, The Attorney-Client Privilege in the Corporate Context: The Intersection of Federal and Illinois Law, 1984 U.Ill.L.Rev. 175, 187. It is hard to imagine a judge instructing a jury to consider a communication received in evidence as to one claim, and because of privilege, not the other. But what of Upjohn? After rejecting the control group test as too narrow a definition of the attorney-client privilege, the Court went on to hold that the communications at issue there were privileged. 449 U.S. at 395, 101 S.Ct. at 685. It declined, however, to lay down a broad rule or series of rules to govern all conceivable future questions in this area. Id. at 386, 101 S.Ct. at 681. Nevertheless, Samaritan argues that Upjohn adopted a broad version of the subject matter test, which includes within the privilege communications by all employees who speak at the direction of their corporate superiors to the corporation's lawyer regarding matters within the scope of their corporate duties in order to facilitate the formulation of legal advice for the corporation. See Harper & Row, 423 F.2d at 491-92; Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 609 (8th Cir.1977); Jack B. Weinstein and Margaret A. Berger, 2 Weinstein's Evidence, ¶ 503(b)[04], at 503-68 (1992). There is language in Upjohn to support Samaritan's argument. The Court noted that [t]he communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. Upjohn, 449 U.S. at 394, 101 S.Ct. at 685. From this, Samaritan argues that the privilege protects the employee communications at issue here because the nurses and scrub technician were carrying out their corporate duties while present in the operating room. Plaintiffs argue that the employees were merely witnesses to what happened. We are of the view that a broad interpretation of the subject matter test, requiring only that the communication concerns factual information gained in the course of performing the speaker's corporate duties, is inadequate. The employee's connection to the liability-causing event is too attenuated to fit the classical model of what it means to be a client. Such a broad standard would only exclude from the privilege factual communications of employees whose knowledge was truly fortuitous. For example, under a broad formulation, the statement of a corporate officer who glances out the window and happens to see the corporation's truck negligently collide with another vehicle would not be privileged. However, the statement of a corporate employee who is present in the truck by virtue of his or her corporate duties but was not driving the truck or otherwise involved in causing the accident would be privileged. This is the construction urged by Samaritan and the various amici. We believe, however, that the latter person also should be considered a mere witness for purposes of the privilege. Although the employee's presence, and hence the employee's knowledge, is a function of his or her corporate employment, the employee bears no other connection to the incident. The employee did not cause it. His actions did not subject the corporation to possible liability. When this employee speaks, it is not about his or her own actions, but the actions of someone else  the driver. We, therefore, reject a broad version of the subject matter test. We believe it is subject to a narrower interpretation, one more consistent with the concerns we have expressed. Many of the most often cited authorities suggest that we require that the employee's communication relate to the employee's own activities that are within the scope of his or her employment and are being attributed to the corporation. See Harper & Row, 423 F.2d at 491-92 (communication privileged where the subject matter upon which the attorney's advice is sought by the corporation and dealt within the communication is the performance by the employee of the duties of his employment); Diversified Industries, 572 F.2d at 608 (communications at issue were made by employees whose conduct was the subject of the corporate attorney's legal advice); Weinstein & Berger, supra, ¶ 503(b)[04], at 503-68 (subject matter of the communication must be the performance by the employee of the duties of his employment). We believe that a functional approach that focuses on the relationship between the communicator and the need for legal services is truer to the objective sought to be achieved by the attorney-client privilege. The California Supreme Court adopted this approach 30 years ago. D.I. Chadbourne, Inc., 36 Cal. Rptr. at 477, 388 P.2d at 709. [5] We also believe that such an approach is closer to the holding of Upjohn, if not some of its language. Recall that in Upjohn the communications were from foreign general and area managers regarding questionable payments to foreign governments. It is unclear whether these managers participated in the matters that were the subject of the investigation. The lower court had rejected the claim of privilege because these persons were not within the control group. The Supreme Court held otherwise, reversed, and remanded for further proceedings. Chief Justice Burger wrote a concurring opinion eschewing the majority's extremely fact-specific approach and distilling from the case a narrowing of the subject matter test to that conduct of an employee which could bind the corporation. 449 U.S. at 403, 101 S.Ct. at 689 (Burger, C.J., concurring.) Instead of applying a narrower version of the subject matter test, the court of appeals below adopted a broad version for communications of non-control group employees, but then, because of the concerns we have already expressed, made it qualified. A qualified privilege, however, is an uncertain privilege, and an uncertain privilege is tantamount to no privilege at all. Unless the privilege is known to exist at the time the communication is made, it will not promote candor. Thus, an uncertain privilege has the potential of achieving the worst possible result: it could harm the truth seeking process without a corresponding increase in candor. Note, Attorney-Client Privilege for Corporate Clients: The Control Group Test, 84 Harv.L.Rev. 424, 434 (1970). Balancing competing interests is appropriate when formulating the extent of the privilege, but balancing on a case by case basis defeats the purpose of the privilege. We conclude that a narrow but absolute privilege is preferable to a broad but amorphous one. We are not persuaded by the amici that, without a broader privilege, corporations will forego prompt post-accident investigations. By not extending the privilege, we place the corporate client on a par with the individual client asserting a privilege as to his or her own communications. This is the purpose of our functional approach. It is, in any event, in the interest of the corporation to be informed, and in most cases it will conclude that ignorance is too high a price to pay to avoid taking witness statements that are potentially discoverable. After all, even those statements have the more qualified protection afforded by the work product doctrine. We are not persuaded that a corporation will intentionally put itself in the position of being the last to know the facts when it is facing potential liability for the acts of its agents. Finally, under the privilege as we have defined it, the kind of communications most likely to be characterized as client statements will be privileged. Amici also argue that, without a broader privilege, corporations will cease policing their own activities to ensure that they comply with the law. We do not agree. Corporations comply with the law because they wish to avoid liability. The Rules of Professional Conduct are consistent with a functional approach. Amici have argued that a comment to ER 1.13 ([w]hen one of the constituents of an organizational client communicates with the organization's lawyer in that person's organizational capacity, the communication is protected by ER 1.6) supports their view that all employee communications are within the attorney-client privilege. But ER 1.6 is much broader than the attorney-client privilege. It protects all information relating to the representation against even non-compulsory disclosure. Rules of Professional Conduct ER 1.6 cmt. A communication is not privileged simply because a lawyer has a duty to keep it confidential. A lawyer must reveal non-privileged information when required to do so. Closer to the point is ER 4.2, which prohibits a lawyer who represents a party adverse to an organization represented by another lawyer from talking to persons in the organization whose act or omission in connection with that matter may be imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission on the part of the organization. ER 4.2 cmt. That such a person is identified with the corporate party suggests that an uninvolved employee (as we have defined it) is not. We therefore hold that, where someone other than the employee initiates the communication, a factual communication by a corporate employee to corporate counsel is within the corporation's privilege if it concerns the employee's own conduct within the scope of his or her employment and is made to assist the lawyer in assessing or responding to the legal consequences of that conduct for the corporate client. This excludes from the privilege communications from those who, but for their status as officers, agents or employees, are witnesses. We believe that this is the appropriate place to draw the line. It has all the advantages of a narrow reading of Upjohn (rough comparability with federal common law) without the attendant disadvantages of a broad reading of Upjohn (fails to limit the scope of the privilege to its purpose). Thus, litigants may not be faced with drastically different privileges in a single proceeding. Although we cannot control how federal courts will interpret Upjohn, should there be differences, they will not be as great as they would be if we adopted the control group test or the control group/qualified subject matter test adopted by the court of appeals. Our definition of the privilege dovetails with doctrines adopted in response to the problems posed by the corporate entity in other areas of the law. For example, factual communications of the employee concerning the acts of that employee that can be imputed to the corporation under the doctrine of respondeat superior will be privileged. These generally are the statements that would in other contexts be admissible against the corporation as admissions by a party-opponent under Rule 802(d)(2)(D), Ariz.R.Evid. Though we do not suggest that perfect symmetry will always prevail among the various doctrines, a unified approach to the problem posed by the corporate entity in disparate areas of the law promotes clarity, consistency, and reason.