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In-House Counsel Committee - ATTORNEY-CLIENT PRIVILEGE IN THE CORPORATE SETTING


ATTORNEY-CLIENT PRIVILEGE IN THE CORPORATE SETTING:
HOW TO KEEP YOUR CONFIDENTIAL INFORMATION CONFIDENTIAL

A Guide for Corporate Clients

Published by the
Pennsylvania Bar Association
In-House Counsel Committee

THE ATTORNEY-CLIENT PRIVILEGE allows a client to protect information discussed with an attorney from being disclosed to another person, unit of government or business entity. The attorney-client privilege is important because it prevents access to such information during lit-igation. The privilege can be inadvertently waived, and its protections will be lost, if the client does not follow rules that are applicable to the privilege. In order to prevent loss of the privilege, the client must understand its boundaries. These boundaries are defined by what is a privileged communication, who is protected by the privilege, how inadvertent disclosure loses the privilege and special guide-lines for asserting the privilege with in-house counsel.

What is “privileged communication”?

In order to protect the ability of people to seek legal advice, the law generally protects the confidentiality of certain communications between an attorney and his or her client. These protections are granted so that clients can safely and fully disclose sensitive information as necessary to receive proper, complete legal advice.

The attorney-client privilege does not apply to all communications between lawyer and client, but instead to only certain information. The most famous, often-cited definition of attorney-client privilege was provided in the early 20th century by Professor John H. Wigmore:
Where legal advice of any kind is sought,
From a professional legal advisor in his capacity as such,
The communications relating to that purpose,
Made in confidence, by the client, are at his insistence permanently protected,
from disclosure by himself or by the legal advisor,
except the protection be waived.

Who is the “client”?

The Attorney-Client Privilege takes on a different dimension when an attorney represents a corporation (the same is true for partnerships, limited liability companies, and other legal entities). There is sometimes confusion about who the attorney really represents. When an attorney (whether an in-house lawyer or outside counsel) represents a corporation:

  • The attorney works for the corporation, which is his or her client.

  • The attorney does not (and cannot) represent any of the officers, directors or employees of the corporation as individuals with respect to their corporate activities if their interests are different from the corporation. (There is an exception in certain cases in which there is complete unity of interest and all parties consent, such as when an officer or director is sued individually for actions lawfully taken on behalf of the corporation).

  • Any personal information given to the attorney by an officer, director or employee (such as an employee’s admission to the attorney that he embezzled corporate funds) is not privileged and is not protected from disclosure. Quite the opposite is true - the attorney must disclose such information to corporate management if the information involves conduct harmful to the corporation.

    Protecting Privileged Information

    Any information subject to the Attorney-Client privilege remains protected until that protection is released by the client. This release can either be direct - by affirmatively waiving the privilege - or indirect through the client’s actions. The client must guard the privileged information and limit its disclosure. Otherwise, courts will believe there is no secret to protect. Here are some useful tips:

  • The privilege can only be waived by the client. The attorney may not properly waive the privilege without the client’s consent.

  • The privilege which applies to information shared in representation of the corporation can only be waived by the corporation. An individual officer, director or employee cannot properly waive the privilege without necessary corporate authority.

  • Treat privileged information the same as the company’s most sensitive proprietary business information. Always distribute privileged information only on a confidential, need-to-know basis within the corporation.

  • There should be a retention schedule and planned destruction date for all privileged documents. Dispose of these documents only by shredding or burning.

  • Do not discuss or disclose confidential information in a public place (such as a crowded elevator or restaurant) in which there is not a reasonable expectation of privacy.

  • Do not discuss privileged matters in business meetings (such as regular staff meetings) attended by additional employees who do not have a direct interest in the matter.

  • If privileged documents are inadvertently released to an unauthorized person (such as a fax to the wrong number), take immediate steps to retrieve the information.
    Special concerns for In-House Counsel

Many corporations (especially large companies) have discovered the economic and strategic benefits of hiring attorneys as direct employees, either in a corporate law department or in another position more directly related to corporate management. The analytical skill and legal knowledge these attorneys bring to the company, as well as the benefit of forging strong working relationships, have made these In-House Counsel trusted legal and business advisors who help maintain the company’s competitive edge.

There are special concerns when the Attorney-Client Privilege is applied to In-House Counsel. This is because the In-House Counsel may play a number of roles within the corporation, such as corporate secretary, business negotiator, or vice president. Unlike an outside attorney hired by the corporation, an In-House Counsel usually wears two hats, and is not always working in the capacity of an attorney, but sometimes in a business role. Some recent court cases have underscored that for attorney-client communications by In-House Counsel to be privileged, the corporation must be able to show the In-House Counsel was providing legal advice, not business advice.

In order to provide maximum protection to confidential information, the following guidelines may be helpful:
The In-House Counsel may communicate with any employee or agent of the corporation about their work as necessary to render legal advice for the corporation (For example, if the In-House Counsel talks with an assembly-line worker to gather information on a work site accident, that information could be privileged). Such investigations must be conducted by or under the direct supervision of the In-House Counsel.

  • In sensitive communications, try to separate the legal from the business information. (For example, in discussing your corporation’s position on various contract provisions during negotiations, segregate the legal questions from more routine information such as status updates).

  • Routine business communications (such as monthly financial statements) are not privileged just because they were sent to the In-House Counsel.

  • Communications to and from the In-House Counsel or outside attorneys for the purpose of seeking or giving legal advice should be kept as confidential as possible. Do not “cc” other employees except on a strict need-to-know basis.

  • Written communications (including electronic mail messages and informal memos) should note that you are seeking advice on a legal question if applicable, and should be clearly labeled with a legend such as

“CONFIDENTIAL: PRIVILEGED ATTORNEY-CLIENT COMMUNICATION”


  • Always be aware who is in attendance at meetings in which privileged matters are discussed. If you are concerned the presence of additional employees will waive the privilege, consult with your attorney before the meeting.
    For More Information:

This brochure is intended to provide general information only, and does not provide, and is not a substitute for, individual legal advice. For additional information about the material discussed, please consult your attorney. To obtain copies of this brochure, e-mail Louann Bell at committees@pabar.org.