In-house counsel's dual legal and business responsibilities can frequently create issues when assessing the extent of attorney-client privilege that applies to internal documents. With in-house counsel participating in more strategic and business-focused roles, old assumptions about privilege and communications with other corporate employees face new challenges. At the same time, mergers, restructuring and other corporate transitions may result in multiple entities or individuals claiming the right to attorney-client privilege or arguing that it's been waived.

Two disputes this past year highlight how trial and appellate courts can take different views of privilege than those used within an organization. These decisions provide an opportunity for all in-house counsel to reassess current privilege practices and procedures.

In re Google: “CC” ≠ attorney-client privilege

In re Googleis an interlocutory Federal Circuit decision from Oracle's battle over intellectual property claims against Google. During early discovery, Google inadvertently produced “autosave,” or draft, versions of an email it had identified in its privilege log. Among those documents was an email that a Google engineer wrote to the vice president of the Android platform and to Google's in-house counsel, which included the designation “Attorney Work Product” at the top of it. The email conveyed that Google's founders had asked the engineer to look into alternatives for the Android platform. The engineer responded that no viable options existed and that Google should negotiate a license from Oracle to use Java intellectual property in Google's Android platform.

Google tried to clawback all versions of the email. It argued that the email was part of an internal investigation conducted by in-house counsel and was therefore protected by the attorney-client privilege and work-product doctrine. The district court disagreed and rejected Google's protection claims on the grounds that Google had not met its burden of making a “clear showing” that the email was sent to in-house counsel in his capacity as an attorney conducting a legal investigation. The Federal Circuit affirmed the district court's ruling on that point, and, in a nonprecedential opinion, specifically rejected Google's argument that the decision diluted the privilege outlined in Upjohn v. United States. Ultimately, the Federal Circuit found, a party claiming privilege must “sufficiently establish the communication at issue relates to professional legal services as opposed to business considerations.”

Escue v. Sequent, Inc.: Attorney-client privilege belongs to the corporation

In Escue v. Sequent, Inc., a corporate merger led to dueling claims of attorney-client privilege. Plaintiff Escue had been a 100 percent shareholder of a company that merged with defendant Sequent. Escue brought suit to rescind the merger agreement, claiming that Sequent had misrepresented the value of the company by concealing the fact that it was the subject of an ongoing criminal investigation.

During discovery, a dispute arose between the parties regarding the attorney-client privilege. Escue argued that Sequent could not withhold documents on the basis of privilege because he was within the privilege as a former Sequent owner and director. The district court disagreed, emphasizing two key principles of corporate privilege law: (1) the corporation, not its officers, holds the privilege, and (2) a corporation's officers when making decisions for the company act as fiduciaries who are bound to pursue the best interests of the company, rather than their own personal interests. Accordingly, the district court held, a former officer or director, once no longer acting on behalf of the corporation, has no control over a corporation's attorney-client privilege and cannot exercise or waive the privilege on behalf of the company.

The district court also considered Escue's argument that the privilege had been waived during merger negotiations. It rejected his assertion that a “duty to disclose” during the merger discussions required Sequent to waive its privilege, but the court agreed that waiver occurred for information communicated during a phone conversation in which Escue's private attorneys had participated. The corporation's outside counsel believed he was speaking to a board member of his client and disclosed the details of a criminal investigation. He learned while on the call that third-party counsel was on the line, but continued to discuss privileged information. Even though the waiver wasn't intentional (and the outside attorney didn't have the authority to waive the corporation's privilege), the court found the privilege waived as to the phone call because counsel “should have known” that continuing the conversation would waive the privilege and because the corporation failed to act promptly to limit the consequences of the disclosure.

Conclusion: Privilege predictions

Changing business and legal landscapes mean that in-house counsel will likely see more challenges to claims of privilege over communications with other employees. Simply including counsel on a distribution list is not enough to coat communications in attorney-client privilege or work-product protection. Instead, if In re Google is any predictor, a party claiming privilege needs to make a “clear showing” that the involved communication relates to in-house counsel working in her capacity as an attorney. The nature of a communication matters more than in-house counsel's particular job title. In addition, communications involving in-house counsel in sometimes murky transactional settings need to be carefully considered in order to preserve attorney-client privilege. As indicated by these recent cases, courts are keeping a keen eye on privilege issues and closely testing privilege claims by companies in litigation; in-house counsel are well-advised to keep an eye on those issues, too.