Settlement Agreement Not Privileged, Court Rules Reply

Mediation or Settlement Privilege • Tags: , , ,

The USDC for the Eastern District of Tennessee recently ruled that the Sixth Circuit’s settlement privilege does not prevent a non-settling defendant from obtaining the settlement agreement settlementbetween a plaintiff and a settling defendant.  Kelley v. Apria Healthcare, Inc., 2016 WL 737919 (E.D. Tenn. Feb. 23, 2016).  You may access the decision here.

Sixth Circuit’s Settlement Privilege

In Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976 (CTA6 2003), the Sixth Circuit adopted a federal common-law “settlement privilege” that prevents compelled disclosure of settlement communications and negotiations.  Critics of Goodyear correctly point out that the court was exercising diversity jurisdiction and should have applied state law—not federal law—in determining whether a settlement privilege exists under common law.

Courts outside the Sixth Circuit reject Goodyear’s analysis, but the decision remains good law.  For an explanation of Goodyear and practice tips for outside and in-house counsel, see my post Important Lessons about the Settlement Privilege.

Background

In Kelley, the plaintiff sued multiple defendants following a fire that erupted in a traveling camper and killed the camper’s occupant.  All defendants except Apria Healthcare settled, and Apria filed a motion to compel the settlement agreements.

The plaintiff and the settling defendants opposed the motion on grounds of relevancy, but also that the Sixth Circuit’s settlement privilege protected the settlement agreements from compelled disclosure.

Ruling

Noting that “a number of district courts have recognized that settlement agreements are not privileged,” the Kelley court ruled that, “[a]lthough the Sixth Circuit recognizes that the settlement privilege protects settlement negotiations from discovery, ‘this privilege does not extend to the terms of the final agreement.’” (emphasis added).

What about Confidentiality Provisions?

The plaintiff and settling defendants argued for non-disclosure because the settlement agreements contained confidentiality provisions, but the court ruled that was of no consequence, stating that the no-privilege rule “is true even where the agreement is designated as ‘confidential.’”

Protective Order

The plaintiff and settling defendants received a consolation prize as the court ruled that it would approve entry of a protective order limiting use and disclosure of the settlement agreement.  So, while the settlement privilege does not protect settlement agreements from discovery, counsel likely can limit disclosure through a court-approved protective order.

Court Rejects Privilege for Fact-Based Email Between Company’s Two Lawyers Reply

Attorney-Client Privilege • Tags: ,

Many lawyers assume that the corporate attorney–client privilege protects communications between two lawyers representing the same company.  But a recent decision from the USDC for email computerPennsylvania’s Eastern District reminds us that the privilege does not protect communications that (1) convey facts obtained from an outside source and (2) do not contain client confidences.  FTC v. Abbvie, Inc., 2015 WL 8623076 (E.D. Pa. Dec. 14, 2015).  You may read the decision here.

In Abbvie, the FTC sued Abbvie, Inc. and Besins Healthcare, Inc. alleging that the two companies filed sham patent-infringement lawsuits against two other companies to delay the latter’s approval of generic drugs.  The FTC and the defendants engaged in multi-faceted discovery dispute covering several privilege subtopics, but the dispute over one email is of particular interest.

Besins’ outside counsel, Mahoney, met with a USPTO examiner and sent an email to Besins’ European outside counsel discussing the meeting and the examiner’s decision to allow the patent at issue.  The FTC sought this email in discovery, but Besins claimed the attorney–client privilege precluded its disclosure.

The court rejected Besins’ privilege argument.  The court stated that, “[w]hile the privilege protects facts provided in confidence by the client to the attorney, ‘an important limitation of the privilege is that it does not extend to facts provided by an attorney that do not reflect client confidences.’”  Importantly, the court noted that the privilege specifically does not cover an attorney’s communication to her client of facts acquired from non-client sources.

After an in camera review of Mahoney’s email, the court noted that it simply relayed the patent examiner’s statement to Mahoney regarding a patent application, and had no “accompanying legal conclusions or perceptions.”  The email was, the court noted, simply “an unprivileged fact provided by an attorney that does not reflect client confidences.”

In short, the court ruled that “Besins cannot refuse to disclose facts simply because that information came from a lawyer.”  This ruling, buried in a lengthy opinion discussing several privilege issues, is a stark reminder that corporate lawyers should not assume that the privilege automatically covers their lawyer-to-lawyer emails.

Yes, Virginia, There is an “Insurance Compliance Self-Evaluative Privilege” Reply

In-House Counsel, Self-Critical Analysis Privilege, Waiver • Tags: , , ,

In 1897, 8-year-old Virginia O’Hanlon sent a letter to the editor of the New York Sun newspaper asking if Santa Claus existed.  The paper’s editor, Francis Pharcellus Church, responded in an Virginniaeditorial declaring “Yes, Virginia, there is a Santa Claus.”  You may read about this story on the Newseum’s website, accessible here.

While no one has asked a newspaper (or me) whether there is an Insurance Compliance Self-Evaluative Privilege, I am certain the legal public has this question on its collective mind.  So, I will end everyone’s anxiety by stating, yes, Virginia, there is an Insurance Compliance Self-Evaluative Privilege, but only in certain states.

Model Act

In 1988, the National Conference of Insurance Legislators (NCOIL) adopted a model act titled Insurance Compliance Self-Evaluative Privilege Model Act, which you can access here. The purpose of this act is to encourage insurance companies conducting activities regulated by a state insurance agency to conduct voluntary internal audits of their compliance with state and federal regulations.

The Privilege

To further this purpose, the act creates an evidentiary privilege that protects from discovery an “insurance compliance self-evaluative audit document,” which the act broadly defines as documents prepared as a result of or in connection with an insurance compliance audit.  The privilege specifically covers an audit report prepared by an auditor, memoranda analyzing all or portions of the insurance-compliance audit, discussions of implementation issues, and implementation plans that address correcting past non-compliance or preventing future non-compliance.

The privilege also precludes the examination in any civil, criminal, or administrative proceeding an insurance company’s employee or consultant hired for the purpose of conducting an insurance-compliance audit.

Exceptions

The privilege does not protect documents, communications, data, reports, and other information that an insurance agency expressly requires the insurance company to collect, develop, or maintain. There are two exceptions to the privilege: when asserted for a fraudulent purpose or the self-audit contains evidence relevant to the commission of a criminal offense.

Selective Waiver

The model act includes a selective-waiver provision that permits the insurance company to voluntarily disclose self-audits without fear that the disclosure will constitute privilege waiver in subsequent state litigation.   And to the extent that a state insurance agency has authority to compel a self-audit, this disclosure likewise does not operate as a privilege waiver in subsequent litigation.

An unanswered yet significant issue, however, is whether federal courts would adhere to the state-law selective waiver provision or rule that disclosure to a state insurance agency amounts to privilege waiver.  Fed. R. Evid. 502(a) is of no help because it applies only to disclosures to federal agencies.

Where Does the Privilege Apply?

Several legislatures have adopted, in some form, the Insurance Compliance Self-Evaluative Privilege, including Arizona, District of Columbia, Georgia, Hawaii, Illinois, Kansas, Michigan, New Jersey, North Dakota, Oklahoma, and Oregon.  The Washington Legal Foundation issued an advocacy piece, which you may access here, that outlines benefits of the privilege in today’s regulatory environment.

Is this privilege on your state legislature’s radar?

Privilege Issues for In-House Lawyers–Foreign and Domestic–in U.S. Litigation Reply

Attorney-Client Privilege, In-House Counsel • Tags: , , , ,

For all of the rules, statutes, and common-law decisions adopting and applying the attorney–client privilege, the privilege’s application in the coUS Europerporate setting remains an enigma.  And adding in-house lawyers into the privilege mix only increases its perplexity.  American law acknowledges the protections of an in-house attorney–client privilege, but “what is unclear is exactly how far this protection extends regarding the corporation’s employees and agents.” E.I. du Pont de Nemours & Co. v. Forma-Pack, Inc., 718 A.2d 1129, 1141 (Md. Ct. App. 1998).

The privilege protection for corporate-employee communications becomes even more suspect within multinational corporations with foreign-based in-house attorneys.  Choice of law and other challenging issues arise when employees communicate with foreign in-house lawyers and third parties later challenge those putatively privileged communications in U.S.-based litigation.  Courts recognize that “[d]efining the scope of the privilege for in-house counsel is complicated,” U.S. Postal Serv. v. Phelps Dodge Refining Corp., 852 F. Supp. 156, 160 (E.D.N.Y. 1994), and in-house lawyers, whether foreign or domestic, should too.

In my recent article, Privilege Issues for In-House Lawyers–Foreign and Domestic–in U.S. Litigation, I examine the application of the attorney-client privilege in the context of international law departments.  U.S. in-house counsel will find the guidance helpful as they interact with colleagues in countries with privilege laws unique from the U.S. system.

The article published in Corporate Counsel, a committee newsletter for the reputable IADC organization.

 

Court Limits Privilege Waiver Related to Advice-of-Counsel Defense in FLSA Action Reply

Attorney-Client Privilege, Waiver, Work Product Doctrine • Tags: , , ,

Employers typically waive the attorney–client privilege when they assert the advice-of-counsel defense to show their good-faith attempt at FLSA compliance.  But what is the scope of that waiver?

The SDNY recently provided its answer by limiting the scope of waiver to lawyers’ communications to employees relevant to the FLSA advice.  The court found no privilege waiver for attorney-to-attorneSlide1y communications not shared with employees  Foster v. City of New York, 2016 WL 524639 (SDNY Feb. 5, 2016).  You may read the decision here.

Advice-of-Counsel Defense

Where an employer has violated the FLSA, the statute provides for a liquidated-damages award doubling the unpaid overtime compensation unless the employer shows that it acted in good faith.  Employers often show their good faith by claiming they sought and followed the advice of counsel.  In Foster, the defendant City did just that, arguing that it implemented policies “to ensure compliance with the FLSA after consultation with counsel.”

Implied Waiver

The Foster court correctly recognized that parties implicitly waive the attorney–client privilege when they assert a claim “that in fairness requires examination of protected communications,” and that the City’s good-faith defense “effected an implied waiver here.”  But waiver is not automatic for every privileged communication that “may merely be relevant” to the defense; “the paramount consideration is whether fairness requires disclosure.”

Limited Scope of Waiver

The plaintiff sought two categories of attorney communications: (1) communications between the City’s attorneys and City employees (regardless of level); and (2) internal, attorney-to-attorney communications not revealed to City employees—in other words, “all relevant communications related to FLSA compliance.”

The SDNY found a limited waiver, ruling that the City “waived protection over communications related to legal advice about this compliance shared between attorneys and non-attorney employees, whether those employees are ‘decision-makers’ or ‘lower level employees’ who might provide input into the process.”

But using comments that employers will find useful, the court did not expand the waiver.  Stating that implied waivers are not “blunt instruments” and “must be formulated with caution,” the court refused to expand the waiver to “exclusively internal privileged communications.”

While the plaintiffs questioned how they could test the reasonableness of the City’s reliance on its attorneys’ FLSA analysis without knowing that advice, the court answered that they could not obtain internal privileged communications “unless they could show that the City knew (or should have known) that the analysis was deficient.”  With no such showing here, the court found no waiver of attorney-to-attorney communications.

Ex-Penn State GC’s Upjohn Failure Provides Lessons for Corporate Counsel 2

Attorney-Client Privilege, In-House Counsel • Tags: , , ,

In the horrific Penn State/Sandusky child-sexual-abuse scandal, a Pennsylvania appellate court dismissed criminal charges against former Penn State officials, including the former president and Attorney-Client Privilegeathletic director, after ruling that Penn State’s former GC failed to provide Upjohn warnings and breached the attorney–client privilege by providing grand-jury testimony against these officials.

This ruling produces several stories, but for in-house and outside lawyers representing corporations, this case provides a roadmap of what not to do when dealing with corporate officers.

Are You My Lawyer?

The Commonwealth OAG subpoenaed former Penn State president (Graham Spanier), finance officer (Gary Schultz), and athletic director (Timothy Curley) to testify before the investigating grand jury regarding matters related to former Penn State defensive coordinator Jerry Sandusky’s sexual assault on young boys.  Penn State’s General Counsel, Cynthia Baldwin, met with these three officials prior to their testimony, accompanied them during a preliminary OAG interview, and sat with them during their grand-jury appearance.

Baldwin did not provide the officials with any Upjohn warnings or otherwise explain the difference between her representation of the officials in their individual capacities rather than as Penn State employees. She did not advise them of their Fifth Amendment right against self-incrimination, but told them that information they relayed to her was not confidential because she may inform the Board of Trustees.

Prior to the grand-jury testimony, Baldwin did not tell the supervising judge whether she represented the officials in their individual capacity.  When the judge advised the officials of their rights as grand-jury witnesses, he indicated that they could confer with their counsel, signaling Baldwin.

Baldwin sat beside the officials during their testimony.  The officials confirmed that they were “accompanied by counsel,” and Baldwin never indicated that she represented the officials solely in an agency capacity.

Criminal Charges and Baldwin Testimony

Following their grand-jury testimony, the Commonwealth charged the officials with perjury and failure to report suspected child abuse.  The officials retained private attorneys and notified Baldwin that they considered her as their lawyer and that they were not waiving the attorney–client privilege.  Baldwin responded that she was Penn State’s counsel and did not represent them in their individual capacities.

The Commonwealth called Baldwin to provide grand-jury testimony, and in doing so she disclosed communications between her and the officials.  Based on this testimony, the Commonwealth filed additional charges against the officials for obstruction of justice and conspiracy.

Ruling

The officials moved to quash some of the charges because Baldwin breached the attorney–client privilege by testifying without authorization to waive the privilege.  The question was whether Baldwin acted as the officials’ individual lawyer during the grand-jury process or solely in their agency capacities. The trial court denied the motions.

The appellate court disagreed and ruled that Baldwin and the officials had an attorney–client relationship and their communications fell within the attorney–client privilege.  The court found “beyond cavil” that their meetings occurred for the purpose of rendering legal advice.

Decidedly Inadequate

As for the Penn State GC, the court ruled that Baldwin did not “adequately explain” her role and, while the officials knew she was the university’s GC, it is “unreasonable to conclude” that, as laypersons, they understood that she represented them only in an agency capacity.  The court found “decidedly inadequate” Baldwin’s telling the officials that she may reveal their conversations to the Board of Trustees.

The court held that “Baldwin did not provide anything akin to Upjohn warnings.” And because of this failure, the officials “reasonably believed she represented” them and the privilege therefore protected their communications.  “Consequently, Ms. Baldwin breached that privilege by testifying before the grand jury with respect to such communications.”

And the court held that Baldwin’s representation did not protect their Fifth Amendment rights.  Because of this conduct, the court quashed the charges of perjury, obstruction of justice, and conspiracy.

Lessons Learned

Because of the Baldwin fiasco, the Commonwealth must forego pursuit of serious charges related to child sexual abuse.  Beyond the societal implications, the case serves as a stark reminder of the importance of corporate counsel providing thorough Upjohn warnings when discussing issues with corporate employees.

  • The Upjohn warning should inform the employee that counsel represents the corporation, not the employee; that the interview is confidential and conducted for purpose of counsel’s rending legal advice to the company; and that the attorney–client privilege protects the discussion.
  • The warning should specifically inform the employee that the corporation may, in its sole discretion, choose to waive the privilege and disclose the conversation to third parties, including government-enforcement agencies.
  • If given verbally, counsel should prepare and read the warning from a script to ensure consistency, and then attach the script to counsel’s interview notes or summary memorandum.
  • It is preferable to have more than one lawyer present during the interview to refute any subsequent claim by the employee that counsel failed to provide the warning.
  • Consider asking the employee to sign a written acknowledgement that counsel gave the warning. However, counsel should be mindful that asking an employee to sign an acknowledgement may produce a chilling effect on his willingness to provide candid comments.
  • If the consultant asks whether he “needs a lawyer,” counsel should, consistent with ethical rules, inform him that he cannot advise him whether to obtain counsel but that he has the right to do so.

Commonwealth v. Schultz, 2016 WL 285506 (Pa. Super. Ct. Jan. 22, 2016); Commonwealth v. Spanier, 2016 WL 285663 (Pa. Super Ct. Jan. 22, 2016); Commonwealth v. Curley, 2016 WL 285707 (Pa. Super. Ct. Jan. 22, 2016).

Privilege Protects General Counsel’s Communications with Third-Party Agents Reply

Attorney-Client Privilege, Waiver • Tags: , , , ,

A Florida appellate court applied the corporate attorney–client privilege to protect communications between a condominium association’s general counsel and employees of the standing outassociation’s property-management company.  The court overruled the trial court’s determination that counsel waived the privilege because the recipients were not the association’s “employees.”  Las Olas River House Ass’n, Inc. v. Lorh, LLC, 2015 WL 8347977 (Fla. Dist. Ct. App. Dec. 9, 2015).  You may read the decision here.

The Communications

A condominium association had a management contract with a property-management company.  The association’s general counsel had multiple email communications with two employees of the property-management company (not the association) about the plaintiffs—who were corporate owners of two commercial condo units.

The plaintiffs sought these communications, and argued that the counsel waived the attorney–client privilege because the email recipients were third parties.  The trial court agreed and, without conducting an in camera inspection, ordered the documents produced.

Corporate Attorney–Client Privilege

Florida’s Evidence Code contains its attorney–client privilege, and provides that a party waives the privilege upon disclosure to third parties except those who are “reasonably necessary for the transmission of the communication.”  Fla. Stat. § 90.502.  Courts interpret this exception to include privileged communications involving a client’s agents.  Gerheiser v. Stephens, 712 So. 2d 1252 (Fla. Dist. Ct. App. 1998).

The Florida Supreme Court employs a five-part test for determining whether the attorney–client privilege protects a company’s communications.  The company must show (1) the individuals would not have communicated but for the contemplation of legal services; (2) the employee making the communication did so at the direction of a supervisor; (3) the superior made the request as part of the company’s effort to secure legal advice; (4) the communication relates to a subject matter within the scope of the employee’s duties; and (5) the company does not disseminate the communication beyond those who need to know its contents.  Southern Bell Tel. & Tel. Co. v. Deason, 632 So. 2d 1377 (Fla. 1994).

Ruling: In Camera Inspection Required?

Because the privilege, particularly in the corporate setting, protects communications flowing through agents, not just employees, the appellate court rejected the trial court’s blanket refusal to apply the privilege to the general counsel’s communications with the property manager’s employees.

Instead, the court remanded the case to the trial court, and ordered it to conduct an in camera inspection of the communications using Deason’s subject-matter corporate attorney–client privilege test.

PoP Analysis

The trial court should not have automatically rejected the privilege claims simply because the recipients were not corporate employees.  The company argued that the recipients were non-employee agents that fell within the Deason standard, and the court should have focused its analysis on that claim.

But should the appellate court have automatically required an in camera inspection?  Why can the trial court not analyze the agent question based on affidavits or other sworn testimony?  This remains a developing area, other courts apply a discretionary standard when considering in camera inspections, as I highlighted in this recent post.

Informer’s Privilege Prevents Disclosure of Confidential Informant in ISIS-Related Prosecution Reply

Government Informant Privilege • Tags: , , ,

In an ISIS-related criminal case, the USDC for the District of Minnesota applied the government–informant privilege to preclude pre-indictment disclosure of a FBI confidential informant’s Minnesota courtidentity.  The ruling means that, at least for now, the government can maintain its informant’s secrecy.  United States v. Abdulkadir, 2015 WL 9581871 (D. Minn. Dec. 31, 2015).  You may read
the decision here.

Background

In this criminal complaint, the government claims that Khaalid Adam Abdulkadir made death threats against FBI agents in various Twitter posts.  Abdulkadir’s alleged tweets came after the government’s investigations and prosecutions of ISIS recruits.

In April 2015, the FBI arrested and charged six men with conspiring to provide material support to ISIS, a story you can read here.  And on December 9, 2015, FBI agents arrested Abdirizak Mohamed Warsame and charged him with conspiring to provide material support to ISIS, the details of which are here.

The criminal complaint alleges that a “Confidential Human Source” informed the FBI that, within hours of Warsame’s arrest, Abdulkadir posted two separate tweets containing threatening communications.  The tweets, which you can read here, threatened to kill cops and FBI agents, with one stating: “They will find on the floor body’s dropping fast #kill them FBI.”

Within 10 days of the criminal complaint, Abdulkadir’s attorneys filed a motion seeking “immediate disclosure” of the “Confidential Human Source” that supplied the Twitter information to the FBI.  The government agreed that its informant was responsible for first alerting law enforcement to the Twitter communications, but refused disclosure under the government–informant privilege.

Government–Informant Privilege

The government–informant privilege protects from compelled disclosure the identity of persons, or informers, who supply information about legal violations to the appropriate law-enforcement personnel.  The U.S. Supreme Court solidified this common-law doctrine in Rovario v. United States, 353 U.S. 53 (1957).

Despite the name’s implication, the privilege belongs to the government, not the informer, but protects informers from retaliation or retribution and encourages citizens to communicate their knowledge of violations of law to government officials.

The privilege is not absolute, and must “give way” in certain circumstances.  The privilege does not protect communications between the informer and law-enforcement that “will not tend to reveal” the informer’s identity.  And, of course, the privilege does not apply after law enforcement discloses the informer’s identity.

Tipster or Participant?

As a final privilege limitation, courts will compel disclosure of the informer’s identity where his identity or communication “is relevant and helpful to the defense” or “is essential to a fair determination of a cause.”  This limitation effectively means that the court will order identity-disclosure where the informant’s information is “material” to the defense.

The defendant has the burden of showing materiality, “which requires more than speculation.”  In assessing materiality, courts apply a balancing test that weighs the public interest in protecting the free flow of information to law-enforcement officers against the criminal defendant’s right to prepare a defense.  Courts generally do not order disclosure where the confidential informant is a mere “tipster,” meaning a person who merely conveys information but does not witness or participate in the alleged crime.

Ruling

The court held that Abdulkadir failed to show that the FBI’s confidential informant was material to his defense. With no specific “facts or circumstances” alleged, the court easily applied the privilege to prevent disclosure.

The court noted that the case remains in the pre-indictment stage, and will permit Abdulkadir to renew his motion at a later date.  If the informer merely notified the FBI about Abdulkadir’s Twitter posts, and did not participate in drafting them, then Abdulkadir will have a difficult time overcoming the privilege in the future.

Verifying Interrogatory Responses—and LinkedIn Profile—Results in Deposition of In-House Litigation Counsel Reply

Attorney-Client Privilege, In-House Counsel • Tags: , , , ,

The USDC for the Southern District of California denied a corporation’s protective-order motion and allowed a limited deposition of the cdepositionompany’s in-house litigation counsel.  In doing so, the court rejected a blanket privilege claim because the in-house lawyer also carried a “Vice President” title and verified the company’s interrogatory responses.  Stevens v. CoreLogic, Inc., 2015 WL 8492501 (S.D. Cal. Dec. 10, 2015).  You may read the decision here.

Background

In a putative class action asserting intellectual-property claims against CoreLogic, Inc., the plaintiff sought to depose Rouz Tabaddor, a senior in-house litigation counsel at CoreLogic, in his “personal capacity.”  CoreLogic sought a protective order, arguing that the plaintiff should not take Tabaddor’s deposition because he obtained knowledge about the case “exclusively through privileged communications.”

LinkedIn Profile and Verification of Interrogatory Responses

Plaintiff’s counsel reviewed Mr. Tabaddor’s LinkedIn profile and learned that his CoreLogic title was “VP and Chief Intellectual Property and Licensing Counsel.” According to LinkedIn, Tabaddor’s duties included managing CoreLogic’s IP litigation but also assisting with “IP due diligence” and “generating over $25M of revenue via IP licensing/sales.”  You may review the LinkedIn profile here.

Plaintiff’s counsel therefore argued that at least some of Mr. Tabaddor’s knowledge is business-related and non-privileged.  And counsel noted that Tabaddor verified some of CoreLogic’s interrogatory responses but that CoreLogic also provided several unverified interrogatory responses.

Court Applies Shelton Standard

The court recognized that, while neither the FRCP nor the FRE prohibit attorney depositions, courts regularly discourage them.  The court noted that the 9th Circuit has not issued a published decision governing depositions of opposing counsel, and therefore relied on the 8th Circuit’s widely cited decision in Shelton v. Am. Motors Corp., 805 F.2d 1323 (CTA8 1986) for its ruling.

The Shelton case teaches us that a party may depose an opposing party’s lawyer only when it can show:

(1) no other means exist to obtain the information than to depose opposing counsel; (2) the information sought is relevant and non-privileged; and (3) the information is crucial to the preparation of the case.

For a deeper look into the standards courts apply in attorney-deposition situations, see my article Protecting the Attorney–Client Privilege—Depositions of In-House Counsel, available here.

Ruling

The court held that the plaintiff satisfied the Shelton factors and allowed a limited deposition of Tabaddor.  The court rejected some of the privilege claims because Tabaddor verified one set of CoreLogic’s interrogatory responses while other responses remained unverified.  The court allowed plaintiff to inquire into the grounds behind his verification of one but not the others, noting:

Rule 33’s requirement that answers be verified would be meaningless if corporations were permitted to have in-house counsel swear to their accuracy and then invoke the attorney–client privilege to avoid backing up their signature.

And Mr. Tabaddor’s title provided no privilege help.  The court noted that he served not only as CoreLogic’s counsel, “but also as its Vice President,” and held that the attorney–client privilege necessarily could not cover all of his verifications and communications.

To be sure, the court limited Tabaddor’s deposition to his verification and non-verification of interrogatory responses and his communications regarding certain take-down notices.  The take-away, though, is that the court rejected the attorney–client privilege in large part because the in-house lawyer—who also carried a business title—signed the company’s discovery responses.

For other cases permitting in-house counsel depositions, see my earlier post on a court allowing the deposition of an Apple, Inc. in-house lawyer, another post discussing a court’s permitting an in-house lawyer’s deposition because he authored a contract-termination letter, and my article Tips for Preventing or Limiting In-House Counsel Depositions.

Tennessee Federal Court Applies Zolin’s Discretionary Standard in Denying In Camera Privilege Review 1

Attorney-Client Privilege, In-House Counsel • Tags: , , , ,

In an interesting case in the USDC for the Middle District of Tennessee, a magistrate judge denied a corporate plaintiff’s request for an in camera review of putatively privileged documents, finding that an automatic review “would open the floodgates and allow any party to demand an in camera review” if it “expressed an unfounded suspicion” that counsel for the opposing party “misrepresented the basis of the privilege claim.” Armouth Int’l, Inc. v. Dollar Gen. Corp., judge2015 WL 6696367 (M.D. Tenn. Nov. 2, 2015).  You may read the opinion here.

Developing Issue

The Armouth case highlights a growing question—what criteria should courts use in deciding whether to conduct an in camera review of putatively privileged documents when the opposing party challenges a privilege claim?  The Armouth court distinguished a prior USDC MD TN decision, John B. v. Goetz, 879 F. Supp. 2d 787 (M.D. Tenn. 2010), which held that a “district court should require an in camera review of the disputed documents.”  Instead, it adopted the less mandatory review standard for applying the crime–fraud exception enunciated in U.S. v. Zolin, 491 U.S. 554 (1989).

Legal Hat or Business Hat?

The privilege issue in Armouth arose in a familiar setting for in-house privilege challenges—whether the in-house lawyer’s communications made for legal or business advice.  A Dollar General in-house lawyer, who also was the “head of the Compliance Department,” released a hold on the plaintiff’s merchandise.  Dollar General claimed that the lawyer’s decision was purely legal and involved only “minor business considerations.”

The corporate plaintiff challenged this assertion, claiming that the lawyer at a minimum supplied business and legal advice in his communications.  The plaintiff therefore asked the court to review the communications in camera and determine the veracity of Dollar General’s privilege claims.

Court Applies Zolin Standard

The court distinguished the Goetz decision, which included language “requiring” an in camera review, on grounds that Goetz was a complex action involving protracted discovery where the party claiming the privilege had failed to comply with multiple court orders.

Instead, the court adopted the Zolin standard, where the Supreme Court provided an in camera review standard for assessing whether the crime-fraud exception applies to a privilege claim.  Under Zolin, the judge should require a showing of a factual basis adequate to support a good-faith belief by a reasonable person that an in camera review may reveal evidence to establish that the privilege does not apply.

Once a party makes this showing, the decision to conduct an in camera review lies within the court’s discretion, and the court should consider several factors in exercising that discretion, such as the facts and circumstances of the particular case, the volume of materials subject to review, the relative importance of the putatively privileged documents to the case, and the likelihood that evidence produced in the in camera review—along with other evidence—will eviscerate the privilege’s applicability.

Applying the Zolin standard, the court found that the corporate plaintiff failed to raise its evidence above the “unsupported speculation” “that an in camera review of the emails contained in Dollar General’s privilege log would reveal communications involving business advice unprotected by the attorney–client privilege.”

The corporate plaintiff has asked the district judge–the same judge that authored Goetz–to review the magistrate judge’s decision, and lawyers and other courts will find that upcoming ruling instructive on how to challenge privilege assertions.  For now, the court’s bottom line is that “in camera review is not appropriate simply because a party objects to the assertions of privilege.”