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Understanding the Limits of Attorney-Client Privilege

by: JD Holzheauser, Peckar & Abramson, P.C.
JD Holzheauser
JD Holzheauser
Most of us have a rough understanding of the attorney-client privilege. But did you know how easily you could lose that privilege? Or that some communications with your attorney may not be privileged at all?

The attorney-client privilege works to keep written and oral communications between an attorney and their client secret, but the communication must be legal advice. In other words, the communication seeking legal advice or your attorney’s response providing legal advice is protected from disclosure. Remember that bit about “legal advice” because we will come back to it later.

The privilege belongs to the client, not the attorney. Who is the client? In the context of this article, the client is the company you work for — be it the project owner, the contractor, or the subcontractor. When the company engages an outside attorney or hires in-house counsel, the attorney’s relationship is with that company. The company’s employees are representatives of the company. Therefore, your correspondence with the company’s attorney regarding legal advice for the company is protected by the attorney-client privilege.

The main rationale for the attorney-client privilege is that it allows the client and its attorney to be candid, open, and honest with each other about the client’s legal issues. An attorney needs to be able to completely analyze a client’s legal exposure and communicate that information to the client. And the client needs to provide all relevant information to the attorney for that purpose. Based on that free flow of information, the client wants to know the good and the bad.

Deciphering Privilege
First let’s focus on what is — and isn’t — privileged. Does a communication to your executive team become privileged if you copy an attorney? Not necessarily. The privilege applies to communications where legal advice is sought from, or provided by, the attorney. Imagine a project manager worried about a delay on the project. The project manager emails their superior, informing the executive of the delay and disclosing the project manager’s belief that the company may be responsible for the delay. The project manager also copies the company’s in-house counsel on the email.

That email is not privileged. The project manager is not seeking or receiving legal advice from the in-house counsel. If — in emails later in the chain — the project manager or project executive does ask the attorney how the situation is handled in the applicable contract, or the attorney provides some legal advice (solicited or otherwise), those emails in the chain would be privileged. But the earlier emails that initiated the correspondence would still not be protected. So if your company is sued by the owner at a later date for delays, your company would have to turn over that email where the project manager admits the company is likely responsible for the delay.

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But what if the initial communication does seek legal advice? Imagine the same scenario, but with the project manager seeking legal advice from the in-house counsel — asking what the contract says and what notices should be sent to whom. That conversation is solicitation of legal advice and protected by the privilege. In response, in-house counsel provides legal advice. That communication is privileged since it’s devoted to legal advice.

Let’s add another layer to the example. What if the parties are soliciting/providing not only legal advice, but also business advice? Still privileged?

The jury is out on that question right now. That type of advice is sometimes referred to as “dual purpose” advice. The Supreme Court of the United States is considering a case that may decide if all, some, or none of the in-house counsel’s dual-purpose advice is protected by the attorney-client privilege. The particulars are beyond the scope of this article, but the ultimate result will have a profound impact on the application of the attorney-client privilege in corporate settings between a company and its in-house counsel. They will also likely affect communications with outside counsel.

Unintentional Waivers
The attorney-client privilege can be lost through waiver, and it can be waived even if you did not intend to waive it. The privilege can be, and often is, waived without knowing it. Let’s look at some examples of how that can happen to focus on avoiding that waiver.

Waiver of the privilege must be voluntary. Voluntarily is not the same thing as intentionally.

For example, consider the client who discloses privileged information to a third party. We recently had a case where a client was in a lawsuit with the project owner. The owner claimed millions of dollars in damages for delays and construction defects. The owner’s outside counsel generated an in-depth report analyzing the owner’s legal position based on the facts. The lawyer sent the report to the client owner. The report was undoubtedly protected by the attorney-client privilege.

The report included a lengthy analysis and concluded that some of the owner’s claims have merit, but that other claims did not. The owner engaged a third-party consultant to assist with claims and defenses against our client. One of the owner’s employees shared the counsel’s report with the consultant. Because of this, the owner’s privilege preventing that damaging document from being seen by our client disappeared. The owner did not intend to waive the privilege, but the transmission was intentional and voluntary.

Because that analysis was sent to a third party, the privilege was waived. And to make it worse, the owner didn’t disclose the report, but the third party did produce it in discovery. The owner not only waived the privilege, but also appeared to be hiding discoverable evidence.

There are 1,000 other examples of client conduct that ends with the same result — waiver. The bottom line is that any voluntary action taken contrary to maintaining the privacy and confidentiality of legal advice may result in waiver. As stated earlier, you must practice diligence and prudence in protecting and maintaining your attorney-client privilege.

The mantra from World War I that loose lips sink ships is likely too harsh to apply here. But given the right circumstances, it could feel like your ship is sinking.

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