Your company’s outside counsel has just given you, an executive at the company, a candid written assessment of a sensitive legal problem. Your natural instinct is to share that assessment with the people who need to act on it. But before you forward that email, pause. The same confidentiality that makes legal advice valuable can be lost the moment it travels to the wrong person.
In this article, we will explore the basics of the attorney-client privilege for companies and how sharing otherwise privileged information with the wrong people can waive the privilege, making that candid legal advice you received accessible by the other side in litigation.
Why It Matters
The attorney-client privilege shields confidential communications made, between a client and a lawyer, for the purpose of the client obtaining legal advice. It exists to encourage the kind of full and frank discussion between a company and its lawyers that is necessary to allow the attorney to provide good legal advice.[1] The privilege belongs to the company, not to an individual at the company, and the privilege can be given away — usually by accident.
Here is the warning worth taking seriously: if a court decides that the privilege has been waived, the protected legal advice is no longer confidential. Your adversary in a lawsuit, a regulator, or a government investigator can demand it, read it, and use it against you. Worse, in many courts the waiver of privilege does not stop at the single document you shared. Disclosing one privileged communication can, in some cases, waive protection over every related communication on the same subject.[2]
So, how does waiver occur? And how can you accidentally waive the privilege? Put simply, most states, including Kentucky and Indiana, follow the general American rule: voluntarily disclosing privileged material to someone outside the attorney-client relationship waives the privilege. The question, then, is who counts as “outside” the client when the client is a company? The answer depends less on titles than on “why” the advice is being shared and how carefully confidentiality is preserved.
Other Executives in the Company
Let’s start with sharing the privileged communication with other executives at the company – think about the C-suite here. Sharing with fellow senior leaders in the company is generally safe, but not always and not automatically. Courts generally protect attorney-client privileged communications shared with employees who are “directly concerned” with the matter or who need the advice to do their jobs — and they find waiver when advice is passed to employees who did not need it.[3] A useful discipline is to apply the familiar “need-to-know” standard: limit distribution to the company’s leaders whose responsibilities actually touch the issue, rather than the full executive suite by default. When you do need to distribute the materials to other executives, be sure that you remind them that the information is privileged legal advice from counsel and that they are not to share it with anyone. Without these warnings, one of those executives may forward that email to the wrong person and the privilege vanishes.
The Company’s Outside Accounting Firm
We hear all the time that the accounting firm is the “trusted partner” of the company, and that they know everything about the company. But this one carries real risks. An accounting firm is a separate business, and handing your lawyer’s legal advice to a third party ordinarily breaks the privilege.[4] The result can change if the accountant is engaged by or for counsel to help the lawyer understand technical facts and render legal advice — a recognized exception when the accountant’s role is genuinely to assist the lawyer, not simply to provide accounting services.[5] But that exception is difficult in its application, and it can be even more difficult to predict how a judge might rule. Put simply, there is a great deal of risk in providing your confidential legal advice to outsiders, even when they are providing the company other professional services. Always consult with your counsel before discussing your legal situation or advice with the accounting firm.
The In-House PR Department
Your company has a great internal PR team. They help the company succeed by keeping up the public image. Sometimes that includes how to publicly address legal issues facing the company. And because PR staff are your own employees, it might seem like they are part of “the client,” so you would think that sharing the legal advice with them does not present any problems. No so fast. Although sharing with internal employees is less risky than sending the legal advice outside the company, it is still risky. You can only share and still maintain the privilege if there is a genuine legal purpose and confidentiality is maintained. Courts have protected communications even with outside public relations advisers when they are helping counsel manage the legal dimensions of a crisis, yet have refused protection where the work is “ordinary public relations advice”.[6] Ask your attorney first and be prepared to discuss whether the PR department is helping your lawyers or simply doing routine communications work; the answer may drive the outcome. Again, if the information is ultimately shared, be sure that the PR employees understand the privileged nature of the communication, the need for maintaining confidentiality, and the role of the attorney.
All Employees
Hopefully, if you have read this far, you’re already thinking that sharing the company’s legal advice with all of its employees is a bad idea. Broad, company-wide distribution is an extremely high-risk choice. The more widely that legal advice is circulated, the harder it is to argue that it was ever meant to stay confidential, and the greater the chance that it reaches someone with no need to know it. If that results, the end result is – you guessed it – the waiver of privilege. Of course, sometimes the entire company needs to know what happened in a particular situation. Courts have found no waiver where a company shared only a summary of an outcome without revealing the underlying legal advice itself.[7] If the workforce needs direction, communicate the decision — not the privileged analysis behind it – and ask your counsel to help you with what information needs to be distributed and what does not.
Practical Takeaways
The attorney-client privilege is durable but not indestructible. A few habits protect it: share only with those who genuinely need the legal advice, route third parties through counsel, keep the material marked and confidential, and most importantly, seek your counsel’s advice about with whom you may communicate before you forward that email.
[1] See Upjohn Co. v. United States, 449 U.S. 383 (1981).
[2] See, e.g., In re Columbia/HCA Healthcare Corp. Billing Pracs. Litig., 293 F.3d 289 (6th Cir. 2002).
[3] See, e.g., Barton v. Zimmer Inc., 2008 WL 80647 (N.D. Ind. Jan. 7, 2008).
[4] See, e.g., Heartland Consumer Prods. LLC v. DineEquity, Inc., 2018 WL 3574737 (S.D. Ind. July 25, 2018).
[5] United States v. Kovel, 296 F.2d 918 (2d Cir. 1961).
[6] See In re Grand Jury Subpoenas Dated Mar. 24, 2003 Directed to (A) Grand Jury Witness Firm & (B) Grand Jury Witness, 265 F. Supp. 2d 321 (S.D.N.Y. 2003).
[7] In re Witham Mem’l Hosp., 706 N.E.2d 1087 (Ind. Ct. App. 1999).
