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Employers Await High Court Clarity on Attorney-Client Privilege

Nov. 4, 2022, 9:30 AM

The US Supreme Court’s upcoming look at whether attorney-client privilege extends to business-related communications has particular implications for employers and their counsel, who routinely exchange information that blends legal and business advice.

The justices last month agreed to take up In re Grand Jury to clarify the standards that federal courts should use to determine what types of information exchanged between a lawyer and a client is privileged and thus protected from disclosure during litigation.

In the case, the US Court of Appeals for the Ninth Circuit ruled in 2021 that a law firm must turn over requested tax-related records because its corporate client primarily sought business, not legal, advice.

But federal appeals courts’ conflicting tests for determining what information is privileged is undermining the doctrine’s purpose of promoting candid communications between clients and their attorneys, particularly in the employment context, legal observers say.

Human resources professionals and managers communicate with in-house or outside counsel about a wide variety of employment issues where legal and business matters often overlap, such as written discussions on compliance with new federal workplace regulations or disciplinary matters.

For example, a manager might seek advice on whether a worker should be fired for poor performance and if he or she is subject to a legally enforceable noncompete agreement, said Steven Pearlman, a partner at Proskauer Rose LLP.

“Whether or not it is enforceable requires a critical legal analysis. But whether or not someone is meeting performance expectations, it could be argued that in some instances you’re looking at business considerations,” Pearlman said. “I could argue that a significant portion of this communication in that context deals with legal issues.”

The line between what constitutes legal and non-legal advice is not always clear because attorneys usually have business responsibilities as well as legal duties, said Michael Brewer, a managing partner at Baker & McKenzie LLP. The Ninth Circuit’s analysis is problematic because it assumes that all communications from a lawyer have one, predominant purpose, he said.

Even if the justices’ ultimate ruling disadvantages employers, “it is always helpful to have consistent guidance from the highest court as opposed to the current limbo in different jurisdictions, which could lead to forum shopping,” said Pryor Cashman LLP partner LaKeisha M.A. Caton.

Sowing Confusion

The Ninth Circuit joined the Second, Fifth, and Sixth circuits in adopting the primary purpose test, under which the overarching purpose of the communications at issue determine whether the attorney-client privilege applies.

This narrow application of privilege contrasts with the District of Columbia Circuit’s 2014 opinion in In re Kellogg Brown & Root Inc., in which now-Justice Brett Kavanaugh wrote that privilege can exist if the “solicitation of legal advice was one of the material purposes of the communication.”

The law firm’s petition for Supreme Court review urged the justices to adopt the D.C. Circuit’s broader approach. Doing so is consistent with the high court’s 1981 opinion in Upjohn Co. v. United States, which said attorney-client privilege aims “to encourage full and frank communication between attorneys and their clients,” the petition said.

The Ninth Circuit’s decision would “yield unpredictability in its application” and chill communications between clients and their attorneys because it allows disclosure any time a non-legal motivation behind a communication outweighs the legal purpose, according to the filing. The US Chamber of Commerce, which filed an amicus brief in support of the petitioner, also shared this view.

“If you’re the plaintiff bar, you would want to press the envelope with the judge in your case to try to get to those privileged documents because there may be good information that may help the plaintiff’s case,” said Greg Riolo of Jackson Lewis PC.

Records potentially could show, for instance, that “counsel gave advice that their client didn’t follow. If you have that in the case, it could have real problems from an employer standpoint,” Riolo said.

Be Proactive

“A client shouldn’t be hamstrung in their ability to communicate with counsel for fear of losing privilege when these issues are intertwined, and that is why it’s so important the Supreme Court provides the clarity employers need here in order to facilitate attorney-client communications over employment issues,” Pearlman said.

To help prevent future legal headaches, companies should operate under the assumption that the more stringent Ninth Circuit standard will be ultimately will be applied, attorneys said. This means employees and counsel should explicitly identify in their written communications when legal advice is their primary purpose, so they can preserve information that may otherwise lose protections.

“Just be careful of what you put in writing,” Caton said. “You can assume something is privileged, but there’s anyways a possibility that opposing counsel is going to challenge it.”

“This is something employers should do regardless of how the Supreme Court’s decision comes down,” she said.

Employees and their counsel should provide context contemporaneously because “privilege determinations are usually done months or years after the fact in litigation,” said Jeffrey P. Mongiello of Epstein Becker Green PC.

“The reality of this situation is that a lot of employers send their day-to-day communications, not thinking about an email being produced during discovery or being shown to them at deposition one day, let alone thinking about privilege,” he said. “But if they’re writing something they know must be shielded,” they should take caution.

To contact the reporter on this story: Khorri Atkinson in Washington at katkinson@bloombergindustry.com

To contact the editor responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com;
Rebekah Mintzer at rmintzer@bloombergindustry.com