B. Availability and Scope of Privilege

1. Attorney-Client Privilege

By now it is axiomatic that the attorney-client privilege applies to entities, CFTC v. Weintraub, 471 U.S. 343, 348 (1985); Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 608 (8th Cir. 1978), and that "corporations, like individuals, enjoy the protection of the attorney-client privilege." State ex rel. Lause v. Adolf, 710 S.W.2d 362, 364 (Mo. App. 1986). Moreover, "the privilege applies without distinction to lawyers who are in-house counsel or outside counsel for an organization." Restatement, § 123, Comment i6; see also Shelton v. American Motors Corporation, 805 F.2d 1323, 1326, n.3 (8th Cir. 1986). Although the availability of privilege is undisputed, "the administration of the attorney-client privilege in the case of corporations . . . presents special problems." Weintraub, 471 U.S. at 348. Among those are questions relating to who speaks for the corporation, and nature of communications that are protected, and who can appropriately waive the privilege on the corporation's behalf.

Initially, the attorney-client privilege applies to communications made between privileged persons (attorneys, clients, and agents of either) in confidence for the purpose of obtaining or providing legal assistance for the client. Restatement, § 118. In the corporate setting, the definition of who is a privileged person (i.e., who is the client or its agents) may need clarification.

Prior to the Supreme Court's decision in Upjohn v. United States, 449 U.S. 383 (1981), many jurisdictions utilized the "control group test" to determine the scope of the corporate attorney-client privilege. That test extended the privilege only to communications from those in certain high-level positions within the corporation. The focus was on the nature of the speaker’s corporate position, not on the nature of the communication. Since Upjohn, few jurisdictions continue to use this test. Although the Supreme Court in Upjohn did not explicitly sanction the "subject matter test" for use in federal court, its discussion in that case, as well as the subsequent Weintraub decision, 471 U.S. 348, present strong indication that the subject matter test will be utilized in federal cases.7 That test, originally set forthwith in Diversified Industries v. Meredith, 572 F.2d 596 (8th Cir. 1978), has been adopted as well in Missouri. See Delaport v. Robey Building Supply, Inc., 812 S.W.2d 526, 531 (Mo. App. 1991).

Under the subject matter test, the "privilege covers counsel's communication with both top management and lower level employees. . . . The lower level employees are covered if:

  1. Communication was made for the purpose of securing legal advice;

  2. The employee making the communication did so at the direction of his corporate superior;

  3. The superior made the request so that the corporation could secure legal advice;

  4. The subject matter of the communication is within the scope of the employee's corporate duties; and

  5. The communication is not disseminated beyond those persons who, because of the corporate structure, need to know of its contents.

Delaport, 812 S.W.2d. at 531; see Meredith, 572 F.2d at 609.8 Thus, availability of the privilege turns not on who made the communication, but rather on the purpose and nature of the communication made.

A persistent issue in the application of the attorney-client privilege in a corporate setting, and particularly with regard to in-house counsel, relates to the requirement that the purpose of the communication be to secure legal advice. In a corporate setting, counsel frequently provide both business and legal advice. In order to assure application of the privilege, the distinction between legal and business advice must be explored and special care must be taken. See generally, Scott Flucke, The Attorney-Client Privilege in the Corporate Setting: Counsel’s Dual Role as Attorney and Executive, 62 UMKC L. Rev. 549 (1994).

"Legal advice concerning commercial transactions is often intimately intertwined with and difficult to distinguish from business advice." Sedco International v. Cory, 683 F.2d 1201, 1205 (8th Cir. 1982), cert. denied, 459 U.S. 1017 (1983); see also Coleman v. American Broadcasters Companies, 106 F.R.D. 201, 206 (D.D.C. 1985). The mere fact that business considerations are weighed, id., or that "business advice is given or solicited, does not . . . automatically render the privilege lost: where the advice given is predominantly legal, as opposed to business, in nature the privilege will still attach." United States v. Davis, 132 F.R.D. 12, 16 (S.D.N.Y. 1990); see also Burton v. R.J. Reynolds Tobacco Co, 1997 WL 45229 (D. Kan. 1997), at 2. Moreover, the possibility that advice rendered by a corporation’s attorney "could conceivably affect [a client’s] success (or failure) as an ongoing entity . . . does not convert advice rendered by its attorney into discoverable "business advice" --- such a construction of the attorney-client privilege would eviscerate the privilege and essentially render it a nullity . . . ." Great Plains Mutual Ins. Co. v. Mutual Reinsurance Bureau, 150 F.R.D. 193, 197 (D. Kan. 1993).

In drawing the line between unprotected business advice and protected legal advice, many courts focus on the purpose of obtaining advice from counsel. See, e.g., Zullig v. KCPL, 1989 WL 7901 (D. Kan. 1989) at 2; Cuno v. Pall Corporation, 121 F.R.D. 198, 201 (E.D.N.Y. 1988); Hardy v. New York News, 114 F.R.D. 633, 643 (S.D.N.Y. 1987). Courts and commentators recognize, however, that it is often difficult to determine whether a client's communication is for the purpose of obtaining legal advice or for other purposes. See Sedco, 683 F.2d at 1205, citing 8 J. Wigmore, Wigmore on Evidence, § 2296 (McNaughten rev. 1961) and Diversified Industries, 572 F.2d at 610.

Some courts look to the nature of the communication sought to be protected in order to determine whether the attorney-client privilege applies. Where pre-existing documents or reports that are generated in the ordinary course of business are held by the attorney, these documents will not be deemed to fall within the scope with the privilege. Southern Guarantee Insurance Company of Georgia v. Ash, 192 Ga. App. 24, 383 S.E.2d 579, 583 (1989) (the privilege "would never be available to allow a corporation to funnel its papers and documents into the hands of lawyers for custodial purposes and thereby avoid disclosure . . . .); see Zullig at 2; Simon v. G.D. Searle, 816 F.2d 397, 403 (8th Cir.) ("business documents sent to corporate officers and employees, as well as the corporation's attorneys, do not become privileged automatically"), cert. denied, 484 U.S. 917 (1987). Where documents consist of factual information that does not call for legal opinion or analysis, they are not properly covered by the privilege. In re Micropro Securities Litigation, 1988 WL 109973 (N.D. Cal. 1988); Weil Ceramics & Glass Inc. v. Work, 110 F.R.D. 500, 504 (E.D.N.Y. 1986).

The mere fact, however, that documents or records contain technical data does not defeat application of the privilege. "[W]here the principle purpose is securing legal advice, the privilege will be upheld despite the inclusion of technical data in the communication." Cuno, 121 F.R.D. at 201; see also Davis, 132 F.R.D. at 15 (factual data transmitted through an attorney is not protected per se; where factual data is integrated with legal thoughts and mental processes, protection of the privilege may attach).

Some courts look to the totality of the circumstances surrounding a particular communication to determine whether the privilege applies. See Southern Guarantee Insurance Co., 383 S.E.2d at 583. This will include the form the communication takes. Thus, the court in Southern Guarantee refused to find the privilege applicable to communications from counsel disseminated in newsletter format. The court found the use of a newsletter "more consistent with dissemination of routine business advice than with transmittal of confidential legal advice . . . ." Id. at 583-584. Others look closely at the nature of the advice given, and where it relates to economic rather than legal matters, the privilege will not apply. Davis, 132 F.R.D. at 16.

In the past, even where business and legal advice were interwoven in a document, stamping that document "Confidential" and placing it in a file marked "Legal" would generally have afforded it full protection. Today, courts are much more willing to look behind appearances and examine each document to determine whether it is protected. Although the privilege does not require that an express request for legal opinion appear within the four corners of a document sought to be protected, Cuno, 121 F.R.D. at 202, the inclusion of such a request will facilitate protection. The mere fact that business considerations or ramifications are weighed in the giving of legal advice does not vitiate the attorney-client privilege. Coleman, 106 F.R.D. at 206. When, however, "the ultimate corporate decision on a matter is based on both business policy and a legal evaluation, the business aspects of the decision are not protected simply because legal considerations are also involved." Hardy, 114 F.R.D. at 643-44.

Moreover, "[t]he mere attendance of an attorney at a meeting, even where the meeting is held at the attorney's instance, does not render everything done or said at that meeting privileged. For communications at such meeting to be privileged, they must have related to the acquisition or rendition of professional legal services and must have retained confidential character." Zullig, at 2, quoting International Telephone & Telegraph Corp. v. United Telephone Company of Florida, 60 F.R.D. 177, 185 (M.D. Fla. 1973); see also Burton, at 2-3. Just as communications at such a meeting are not automatically privileged, neither are the minutes of business meetings attended by attorneys unless they specifically contain communications for the purpose of obtaining legal advice, and then only to the extent of the communication and receipt of such advice. Simon, 816 F.2d at 403.

Once it is determined that information or documents are privileged, that privilege must be protected in order for it to be retained. See In re Hillsborough Holdings Corp., 34 Fed. R. Evi. Serv. 216, 220 (Bankr. Ct. M.D. Fla. 1991). In a corporate setting, the privilege can be lost if the communication is shared beyond those who "reasonably need to know of [it] in order to act for the organization." Restatement, §123(4). Generally, people who "need to know" are those agents who are responsible within the organization "for accepting or rejecting a lawyer's advice" or "acting on legal assistance provided by the lawyer." Id. at Comment g. Thus, the fact that advice received from a corporate attorney is communicated by one corporate employee to another does not defeat the privilege if the purpose of that communication is to transmit the advice of counsel to an employee with a need to know and act on that advice. Cuno, 121 F.R.D. at 202-203. Care must be taken to track such dissemination and insure that it does not go beyond those with a legitimate need to know.

The corporate setting raises questions as well with regard to assertion and waiver of the privilege. "The privilege for organizational clients can be asserted and waived only by a responsible person acting for the organization for this purpose." Restatement, Comment j. Generally, only top management may control the confidentiality of corporate information, and only on the corporation's behalf. See ABA/BNA Lawyers’ Manual, 91:2204. "The power to waive the corporate attorney-client privilege rests with the corporation's management and is normally exercised by its officers and directors." Weintraub, 471 U.S. at 348; see also, ABA/BNA Lawyer's Manual, at 91:2205; United States v. Chen, 99 F.3d 1495, 1502 (9th Cir. 1996). The power of an organization to waive the privilege is determined under the laws of agency as well as state corporation law, Restatement, §128, Comment c; Weintraub, 471 U.S. at 348, n. 4, and must be exercised consistent with the manager's fiduciary duty to act in the best interest of the corporation. Lause, 710 S.W.2d at 364.

Waiver may occur, however, in a variety of other ways. The privilege may be waived by disclosure of information beyond those covered by the privilege or by placing the lawyer's assistance or the confidential communication in issue. See generally Restatement, §129-130; ABA/BNA Lawyers’ Manual, 91:2205. Generally, compelled disclosure under court order is not considered a waiver, but the question whether voluntary disclosure in non-public proceedings constitutes a waiver is still the subject of extensive debate and controversy. See generally, ABA/BNA Lawyers’ Manual, 91:2209; Diversified Industries, 572 F.2d at 611.

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