The attorney-client privilege is an invaluable legal principle ensuring that attorneys and clients can freely communicate without fear that those communications will one day be disclosed to opposing counsel or others. While it is important to understand when and how this vital privilege attaches, it is equally important to understand how to properly assert and overcome challenges to the privilege during litigation to ensure that privileged communications remain protected.

Recently, the Southern District of New York issued an opinion in In re Application of Aenergy, S.A., 19-MC-542 (VEC), 2020 WL 1659834 (S.D.N.Y. April 3, 2020) (Aenergy), highlighting common pitfalls when counsel asserts the attorney-client privilege. The opinion addresses two specific areas where the assertion of the privilege can be difficult, but important, to get right: (1) communications with in-house counsel, and (2) categorical privilege logs.

Judge Caproni's analysis in Aenergy makes clear that litigators must take the following actions to properly protect attorney-client communications:

• Employees and officers should be trained on how to clearly communicate requests for legal advice from in-house counsel.
• In-house counsel must be mindful that they often play a dual role, and thus, should undoubtedly articulate in communications when they are wearing the hat of legal advisor.
• When defending the assertion of the attorney-client privilege, a declaration from a party to the communication should include the events or issues leading to the request for legal advice, as well as information describing the nature of the advice provided, in as much detail as possible without revealing privileged information.
• If a categorical privilege log is used, such a privilege log should set forth descriptive categories from which opposing counsel and the court can glean that the documents in the category all have a shared attribute that bind them together so that the assertion of the privilege was proper.

Asserting Attorney-Client Privilege Over Communication Between Employees and In-House Counsel. Courts look for very specific factors in assessing whether the attorney-client privilege has been properly asserted, and thus, a communication protected. This is especially so when courts are tasked with assessing communications between a company's employees and in-house counsel. See Bank Brussells Lambert v. Credit Lyonnais (Suisse), 220 F. Supp. 2d 283, 286 (S.D.N.Y. 2002) ("In cases involving corporations and in-house counsel, courts have maintained a stricter standard for determining whether to protect confidential information through the attorney-client privilege.").

In-house counsel can often provide a unique perspective on business issues. However, it is important to consider that when in-house counsel is asked to weigh in on both business and legal issues, there may be certain attorney-client conflicts that come with such a unique role. "Because an in-house attorney, particularly one who holds an executive position in the company, often is involved in business matters, in order to demonstrate that the communication in question is privileged, the company bears the burden of 'clearly showing' that the in-house attorney gave advice in [his or] her legal capacity, not in [his or] her capacity as a business advisor." Ames v. Black Entm't Television, No. 98-CIV-0226(LMM), 1998 WL 812051, at *8 (S.D.N.Y. Nov. 18, 1998) (citations omitted). In considering whether such communications with in-house counsel are protected under the attorney-client privilege, courts "consider whether the predominant purpose of the communication is to render or solicit legal advice." In re Cty. of Erie, 473 F.3d 413, 419-20 (2d Cir. 2007) (citing United States v. Int'l Bus. Machs., 66 F.R.D. 206, 212 (S.D.N.Y. 1974)).

In Aenergy, Aenergy S.A. (AE) moved to compel non-party General Electric Co. (GE) to produce three email threads that GE produced and then clawed-back, on the basis of attorney-client privilege. The three email threads involved communications between business employees or officers and in-house counsel. Thus, in assessing AE's motion, the court properly focused its analysis on whether the "predominant purpose" of each communication was "to render or solicit legal advice." Aenergy, 2020 WL 1659834, at *1 (citing Cty. of Erie, 473 F.3d at 419).

In examining the communications at issue, the court noted that in-house counsel often wear "two hats," and thus, communications involving in-house counsel must be carefully dissected to determine whether the focus of the communication is business advice or legal advice. Id. at *2.

The first email thread began with an email from AE's attorney to GE's in-house counsel and a GE business employee regarding a business meeting that had occurred. The business employee forwarded the email to additional GE employees. One of the employees responded with his own summary of the meeting that had occurred, with a request to a member of in-house counsel to "please opine here." The lawyer whose opinion was sought did not respond, but one of GE's officers responded with a summary of a different meeting, copying another member of in-house counsel. The court concluded that the purpose of the email thread was to summarize past business meetings and plan future ones, not request or dispense legal advice. Id. The court deduced that the request for in-house counsel to "opine here," merely sought a description of the meeting because the email also noted that the in-house attorney was present for the meeting. Id.

GE also submitted a declaration from the officer who was a party to the communications in support of its assertion of the attorney-client privilege. The officer declared that he copied the second in-house attorney "in order to seek her legal advice regarding the issues raised … and to better understand the legal situation with respect to AE's communication and to receive advice on our response." Id. at *3. The court determined that this declaration did not show that the "predominant purpose" of the email was to obtain legal advice, and found it noteworthy that the officer did not "declare that he sent the email to obtain legal advice," but declared "only that he copied [the in-house attorney] to that end." Id. While acknowledging that "a request for legal advice need not be explicit," the court held that any "implied request for advice must still be the primary reason for the communication in order for the privilege to attach." Id.

The second email thread at issue posed several questions, mostly accounting-related, to several employees, including a member of the in-house counsel team. The officer's declaration again asserted that he copied the in-house lawyer to request legal advice. However, the court observed that the questions were directed at business employees and the in-house lawyer copied never weighed in on the issues. Id. (citing Medina v. Buther, No. 15-CV-1955, 2018 WL 4383098, at *3 (S.D.N.Y. Aug. 22, 2018)).

In the same declaration, the officer opined that he copied the in-house attorney because he wanted her to provide him with legal advice, and the in-house attorney did, in fact, provide legal advice in a separate email chain. However, the court was not satisfied because the declaration provided no explanation of what legal issues were the basis for the officer seeking legal advice, and the court refused to blindly accept his assertion that the lawyer's response "was 'legal' in nature." Id. (citing MSF Holding, Ltd. v. Fiduciary Tr. Co. Int'l, No. 03-CV-1818, 2005 WL 3338510, at *1 (S.D.N.Y. Dec. 7, 2005)).

In the third clawed-back email thread an employee attached letters relevant to the underlying litigation to in-house counsel with an overview of the letters. In-house counsel then forwarded the emails to a mix of business officers and other internal attorneys directing them to take certain actions regarding the documents. Unlike the other challenged email threads, no declaration or other evidence supporting the claim of attorney-client privilege was submitted. The court concluded that there was nothing in the email thread indicating that the lawyer was dispensing legal advice, and he could have also been dispensing business advice. Id. at *4. Thus, the court had no basis to find that "predominant purpose" of the email was to dispense legal advice. Id. (citing Cty. of Erie, 473 F.3d at 420). As a result, the court ordered the production of all three of the clawed-back email threads. Id. at *2.

The court's analysis in Aenergy provides a lesson in what can be done to protect privileged communications between employees and in-house counsel even before requests for production or a subpoena are served. First, it is important to properly educate employees and officers on the attorney-client privilege and how to properly articulate requests for legal advice to in-house counsel. If Aenergy is followed, a court may reject a privilege assertion over emails where a member of in-house counsel is merely copied and is asked to give their thoughts. If the employee's intent is to seek legal advice, he or she should clearly address the request to in-house counsel and articulate the legal issue about which he or she seeks advice. Further, employees should be trained to request advice in a manner that will satisfy the "predominant purpose" standard. For example, any request for legal advice should be removed from email threads regarding business issues. Employees should be trained to begin a new email thread if they wish to request legal advice and they should not commingle that request with any requests for business advice.

Because in-house counsel often undertake multiple roles within a company, courts may heavily scrutinize communications with in-house counsel to discern whether there was a business or legal purpose for that communication. Thus, when communicating with employees, in-house counsel should bear in mind their unique role and the "predominant purpose" standard. In-house counsel should refrain from dispensing legal advice on email threads that involve business issues. Further, it is important for in-house counsel to clearly delineate between his or her role as business advisor and legal advisor. If, as in Aenergy, in-house counsel's advice could be construed as business advice or legal advice, a court may be unable to determine that the "predominant purpose" of the communication was to dispense legal advice, which the court defined as "the interpretation and application of legal principles to guide future conduct or to assess past conduct," requiring a lawyer "to rely on legal education and experience to inform judgment." Id. at *1 (citing Cty. of Erie, 473 F.3d at 420). Thus, to avoid any doubt about whether an in-house attorney is acting in their capacity as legal advisor or business advisor, he or she should, when possible, provide some articulation of the underlying legal analysis or legal principles from which he or she draws the conclusion.

Should a company find itself before a tribunal defending attorney-client privilege designations, the employees and in-house counsel involved in the communication should provide a declaration or affidavit supporting the privilege designations. To provide the court with comfort that the communications are entitled to protection, parties to the communication should, unlike in Aenergy, provide a declaration that explains, in as much detail as possible and without revealing privileged information, the events or issues leading to the request for legal advice and whether in-house counsel provided responsive legal advice. Likewise, in-house counsel should declare, in as much detail as possible without revealing privileged information, that advice was requested and he or she had to call upon their legal training and education to respond with legal advice.

Aenergy is an important reminder of in-house counsel's unique role, and the difficulties that role can present when asserting attorney-client privilege. When asserting privilege over communications with in-house counsel, any reviewing court will carefully dissect each communication. It is important to understand the steps to take to protect privileged communications between in-house counsel and employees.

Properly Asserting Privilege Designations in Categorical Privilege Logs. Categorical privilege logs can be an effective tool in any complex e-discovery case. Because categorical privilege logs are more streamlined than their document-by-document counterparts, they provide an efficient way to manage complex discovery cases with large-scale document productions. However, as evidenced in Aenergy, categorical privilege logs come with their own difficulties, and it is important to understand the proper procedure to protect attorney-client communications.

In Aenergy, the court assessed GE's privilege designations on their categorical privilege log. AE argued GE should be compelled to produce all documents withheld on privilege grounds because GE's privilege log was deficient.

Pursuant to Fed. R. Civ. P. 26(b)(5)(A), a party seeking to withhold documents must "describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim." In Aenergy, the court noted that "Fed. R. Civ. P. 26 applies with the same force to a categorical log as it does to a traditional log that lists each document individually," thus, "a categorical privilege log is adequate if it provides information about the nature of the withheld documents sufficient to enable the receiving party to make an intelligent determination about the validity of the assertion of the privilege." Aenergy, 2020 WL 1659834, at *4 (citing Auto. Club of N.Y. v. Port Auth. of N.Y. & N.J., 297 F.R.D. 55, 59 (S.D.N.Y. 2013).

The court agreed that the categorical privilege log was deficient because the privilege log descriptions were "vague and repetitive." Id. The court noted that the category descriptions generically identified internal communications between employees and in-house counsel "seeking or conveying legal advice" regarding such topics as "on-sale contracts," "Credit Facility Agreement," or "the AE-GE contracts." From these descriptions, the court could not discern any "shared attribute true of all documents in a category" that would "bind the category together[,]" and that without such a setup, a categorical privilege log does little to communicate the basis for privilege, and the log should have "included more granular and informative categories." Id. at *5. However, the court declined to grant the request that GE be compelled to produce all documents because of the privilege log deficiencies, and, instead, ordered GE to produce a revised privilege log in document-by-document form. Id. at *6

Categorical privilege log descriptions should be as detailed as possible without revealing privileged information. As the court noted in Aenergy, opposing counsel and any reviewing court should be able to discern any "shared attribute true of all documents in a category" that would "bind the category together." Categories should be as granular and informative as possible so as to satisfy any reviewing court that the party is not hiding non-privileged documents behind the guise of privilege. For example, a category such as "communications with counsel seeking or conveying legal advice regarding contracts with Company A" will likely be considered too vague if Aenergy is followed. To mitigate that risk, parties should consider providing more detailed descriptions, such as "communications with counsel seeking or conveying legal advice regarding the negotiation of sales contracts with Company A." Of course, more descriptive categories may lead to more categories in the privilege log. However, including a significant number of descriptive categories may lessen the amount of challenges by opposing counsel, and increase the chances that the court approves the categorical privilege log.

The court in Aenergy also warned against the use of repetitive categories. To reduce the risk of Aenergy type challenges, counsel should draft categories distinct enough so that opposing counsel and the court can discern a difference between categories. For example, if Aenergy is followed, a privilege log with categories such as "communications with counsel seeking or conveying legal advice" regarding "contracts with X," and "sales contracts" may be too repetitive and not granular enough to convey to opposing counsel and the court the shared attribute true of all documents in each category. More descriptive categories such as "communications with counsel seeking or conveying legal advice" regarding "the negotiation of sales contracts with Company A," and "the drafting of sales contracts with Company B" are less vague and repetitive, and thus, more likely to survive a similar challenge.

While categorical privilege logs are meant to save parties time and expense, parties must still be mindful that such logs should provide opposing counsel and a reviewing court with confidence that the producing party is not hiding non-privileged documents behind vague or ambiguous descriptions. Categorical privilege logs come with their own difficulties, and it is important for parties to understand those difficulties so as not to face expensive and time-consuming challenges from opposing counsel.

Conclusion

The attorney-client privilege is fundamental to the effective practice of law. Despite its widely recognized importance, courts will highly scrutinize a party's privilege designations, particularly when the communications are with in-house counsel. Thus, it is important to understand both when and how the privilege attaches and how to defend privilege designations in litigation to ensure privileged communications remain privileged.

Scott Kessler, a partner in Akerman's New York office, litigates complex commercial and intellectual property disputes at both the trial and appellate levels. Megan Admire is an associate in the firm's litigation practice group and focuses her practice on commercial and criminal litigation.