As in-house counsel you wear many, many hats. Often your role involves advising key executives in large and small business decisions. You may also find yourself in conversations with more junior employees that come to you for legal advice. All of these conversations would typically invoke the attorney-client privilege. After all, as in-house counsel, you are no less bound to the rules of professional conduct than your outside counsel counterparts. But, when you’re involved in all of these conversations, and advising all of these people, you may lose sight of who is actually your client and when the attorney-client privilege applies.
Not surprisingly, in-house counsel owes its duties to the corporation and not to its employees. Therefore, many interactions between in-house counsel and corporate employees are not protected by the attorney-client privilege.
When Does the Privilege Apply?
Because in-house counsel often gets involved in strategy discussions and business decisions, identifying which, if any, of those converstaions are privileged is not as straightforward as most companies would hope. In fact, when the communication does not include legal advice—for example, when in-house counsel engages in a series of email communications regarding business decisions wholly unrelated to ongoing or potential litigation matters—the privilege will likely not apply, even if those communications were between in-house counsel and the most senior employees within the organization.
The controlling case on this issue is Upjohn v. United States. In Upjohn, the Supreme Court held that courts must look to the nature and purpose of the communications to determine whether the privilege applies. Under the Upjohn test, if in-house counsel needs the communication in order to supply legal advice to the corporate entity and the communication falls within the scope of the employee’s corporate duties, then the privilege applies. The court in Upjohn rejected the argument that only employees who exercise control or management over the company’s affairs could engage in privileged conversations, holding that communications between in-house counsel and lower level employees could also be privileged as long as they meet the test described above.
The Issue of Dual Capacity
There are times when in-house counsel can also represent employees in a legal capacity. However, in such cases, the relevant rules of professional responsibility impose additional requirements before acting in that dual capacity. First, in many states, in-house counsel must explain the fact that they represent the interests of the corporation to employees before engaging in any conversations with them, when counsel knows or reasonably should know that the organization’s interests are adverse to the employee’s. Furthermore, while in-house counsel may represent employees with the informed consent of both the employee and the corporate entity, they risk creating significant conflicts of interest which could bar them from representing either the entity or the corporate employee.
Waiving the Privilege
Note that when we say that the privilege applies, it only applies to the organization. In other words, the corporate entity controls the privilege and may waive the privilege at any time, even if that means creating criminal or civil liability risks for the individual employee that was a party to the communication. When companies choose to waive the privilege, it is typically in the context of obtaining cooperation credit from the government during the course of a government investigation. The ability to unilaterally waive the privilege will be affected if the in-house counsel represents both the employee and the corporation, which in turn should impact your company’s decision to allow the in-house counsel to engage in dual representation or not to the extent permitted by law.
Cutting Through the Weeds
While the test can be complicated and often fact-dependent, the important takeaways are as follows:
Not all communications between employees and in-house counsel will be protected by the attorney-client privilege, only those that meet the Upjohn standard
As part of meeting the Upjohn standard, in-house counsel must provide adequate warning to employees about the potentially adverse interests of the corporation relative to the employee and must explain that the attorney represents the corporation, not the employee
While in-house counsel can in some limited circumstances represent both the corporate entity and employees, it often creates significant conflicts of interest which risk the privilege for all parties involved as well as the ability for the in-house counsel to continue to represent the corporate entity
Beyond familiarizing yourself with Upjohn, you should make sure that you are familiar with your state’s rules of professional conduct. If you need to, consult an ethics attorney for guidance before seriously offering legal advice to your coworkers, especially when dealing with any criminal or civil investigations.
For more information about attorney-client privilege, join us for a roundtable in NYC on February 2, 2017. Click here for more details and to RSVP.