Apple Ruling Raises Business Fear of Legal Privileges Eroding

In-house counsel are pushing back against a ruling in a landmark technology case that they say could threaten the nature of attorney-client privilege, especially for attorneys working in fast-paced industries where the line between business and legal advice is often murky.

Two groups have made that argument in an amicus brief to the US Court of Appeals for the Ninth Circuit, which will hear oral arguments related to a district court ruling in Epic Games Inc. v. Apple Inc. in October. The US District Court for the Northern District of California ruled that Apple too broadly applied attorney-client privilege to documents that also contained business advice.

That decision needs to be reversed, TechNet and the Association of Corporate Counsel said in a June brief.

Should the ruling be upheld, it could change how companies deal with rapidly evolving questions of compliance, technology attorneys contend. Not only will it give an advantage to larger companies who can afford counsel, it also will make it harder for small and mid-size tech companies to navigate compliance with a patchwork of state and federal laws and regulation.

“Companies will be forced into a kind of blind compliance if they can’t rely on in-house attorneys to help them navigate,” said Drew Hudson, vice president and general counsel at TechNet. “What you’ll have instead is companies just kind of figuring it out based on a Google search or hoping that they figured it out. Or they won’t bother to try. That’s bad for compliance. It also creates a massive litigation risk.”

TechNet has over 100 members ranging from tech giants like Apple and Meta to startups.

In-House Versus Outside Counsel

The erosion of privilege for in-house counsel could be particularly damaging for companies specializing in complex and technical business models.

“In AI and technology the pace of change is very, very rapid,” said Will Chuang, associate general counsel at software compliance company Relyance AI. “The difference is like going to urgent care versus going to your general practitioner. Someone who knows your history versus someone who is trying get you in and out as quickly as possible.”

Chuang, who has worked in-house at several tech companies, said to help businesses optimize in a legal way you have “to talk about business realities.”

“When every possible option is on the table you really can’t separate the market opportunity in terms of dollars and the legal path to get there,” said Heather Stevenson, general counsel at Red Cell Partners, an incubation firm that has helped develop and launch 14 companies in the cyber, national security, and healthcare space.

In-house counsel in regulated industries have a dual responsibility to make sure products are both appealing to customers and in compliance with all applicable regulations and laws.

“Outside counsel cannot possibly, no matter how good they are, go as deep on every business as in-house counsel does,” said Stevenson. “It’s a real danger to how quickly companies can move, how much they can innovate and progress.”

There’s another bottom line: cost.

“The idea that you have to spend $2,000 an hour to obtain the benefit of attorney-client privilege is not a very legally compelling proposition,” said Paul Swegle, chief legal officer at Molecular Testing and general counsel at several other startups.

Primary Purpose

In the Epic Games case, Apple was found in contempt of a 2021 injunction because it extended attorney-client privilege to business documents. “Adding a lawyer’s name to a document does not create a privilege,” U.S. District Judge Yvonne Gonzalez Rogers wrote in her April decision.

Attorneys working in the tech space say it’s not that simple.

“This is a case where legal jurists live in their own world,” said Chuang. “It’s not pragmatic and doesn’t align with the reality of the job.”

The district court ruling goes against the Ninth Circuit’s previous affirmationof a primary purpose standard, which weighs that communication with a significant purpose of legal advice is protected, even if it includes business advice.

ACC and TechNet argue in their brief that the courts should adopt the primary purpose standard.

“We’re not going to have true clarity on the issues of dual purpose communication and the different standards that are applied across the various circuits in the United States until the Supreme Court makes a decision on what that one standard should be,” said Susanna McDonald, chief legal officer and vice president at the Association of Corporate Counsel.

“In-house counsel is crossing all of these barriers, and it’s really important to be able to easily ascertain what is going to fall under the dual purpose communications rule and what will not,” said McDonald

Regardless of the Ninth Circuit ruling, attorneys need to use caution when discussing legal and business matters with clients—including making it clear to clients when attorney-client privilege applies.

“Attorneys need to be on their game to avoid malpractice, and non-attorneys and companies need to realize you shouldn’t put unnecessary things in writing,” said Swegle. “If you’re going to seek legal or regulatory advice this case highlights it’s important to mark it as legal.”

Oral arguments are scheduled for Oct. 21.

The case is Epic Games, Inc. v. Apple Inc., 9th Cir., 25-2935.