Of course clients call me for advice on how to handle sticky situations with employees – that’s a major part of my job. And they know that our communications are subject to the sacred attorney-client privilege. But what companies need to understand is that this privilege might be waived by its corporate management, including officers and directors. It’s fine if the client knowingly chooses to waive it, with a full understanding of the consequences of such waiver – but, unfortunately, it can also be waived unintentionally. A recent case provides an excellent warning to companies (and their attorneys) about this.
As the D.C. federal court explains in Smith v. Ergo Solutions, LLC, the attorney-client privilege protects confidential communications made between clients and their attorneys when the communications are for the purpose of securing legal advice or services. The court notes that not all advice is privileged – legal advice is, but business advice is not. Often, however, the two are intertwined – my clients and I might discuss the legal implications of various options, but we’ll also talk about the practical implications as well. This intermingling of business and legal advice often comes up when I do an investigation into an employee complaint. But as the U.S. Court of Appeals for the D.C. Circuit stated, “[s]o long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation[.]”
Now, as the court observed, the client must “zealously protect the privileged materials, taking all reasonable steps to prevent their disclosure.” This means that they can’t disclose the privileged information – if they do, then they have waived the privilege. This is exactly what happened in the Smith case.
There had previously been complaints against a managing partner of the company, and the company hired a lawyer to conduct an investigation. The lawyer prepared a report, summarizing his findings and recommendations, which were implemented by the company. Subsequently, there was another complaint against the same managing partner, followed by a lawsuit against him and the company. During the course of the lawsuit, both the former HR manager and the managing partner were deposed, and both of them, pretty understandably, talked about the lawyer’s investigative report in detail. After all, it was relevant to the current lawsuit, so it makes sense that they would discuss it – right? The plaintiff then asked for a copy of the report, but the defendants claimed that it was protected by the attorney-client privilege. In response, the plaintiff argued that the privilege had been waived by both the former HR manager and the managing partner, since they chose to discuss the report in their respective depositions.
The court held that the former HR manager had not waived the privilege – because he was no longer an employee of the company, he could not waive the privilege on behalf of the company. But the court reached a different result with regard to the managing partner, who was also a part-owner of the company. As the court noted, “[T]he power to waive the corporate attorney-client privilege rests with the corporation’s management and is normally exercised by its officers and directors.” Therefore, when the managing partner discussed the content of the report and the recommendations that it contained (and his attorney allowed him to do so without objection!), he waived the privilege as to the report – even though he didn’t mean to!
So, a company’s corporate management – including its officers and directors – need to be very careful in talking about their communications with the company’s attorneys, and, like here, in relying on an attorney’s written report. If they disclose the substance of what was discussed or what was contained in the writing – what the attorney said and what the attorney recommended – it is possible that they could end up waiving the attorney-client privilege.