The world of litigation, like most businesses, is primarily driven by bottom lines, profit margins, and cost savings. This has always been true, although these tenets are forced into the foreground for many law firms in the wake of the COVID-19 pandemic. Nevertheless, before COVID-19, law firms and their clients were finding ways to cut costs by utilizing outside vendors and services in the litigation process. These services range from third-party billing administrators to public relations firms guiding multinational companies through media firestorms.

The risks associated with utilizing these third parties, however can be lost on many a busy litigation attorney. Indeed, while virtually all attorneys recognize that oversharing confidential documentation with third parties can, and often will, jeopardize the sanctity of the attorney-client privilege, it is easy to forget how fragile the privilege is. Although the exact wording can vary by jurisdiction, the Restatement of the Law Governing Lawyers aptly summarizes the waiver test for the attorney-client privilege: waiver occurs "if the client, the client's lawyer, or another authorized agent of the client voluntarily discloses the communication in a nonprivileged way." Restatement (third) of the law governing lawyers Section 79 (2000).

While the restatement definition is helpful as a jumping-off point, the above-quoted language is somewhat hollow without a more adept explanation. The seminal case on this point is United States v. Kovel, 296 F.2d 918 (2d Cir. 1961). In Kovel, an attorney utilized an accountant to assist the attorney in comprehending a client's complicated tax story, and subsequently relied on the accountant to assist in furnishing legal advice to the attorney's client. When the accountant refused to testify about the conversation with the attorney and client, the accountant was held in contempt of court. On appeal, the U.S. Court of Appeals for the Second Circuit vacated the conviction, concluding that "the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege was designed to permit."

Federal and state courts alike have generally followed the natural evolution of Kovel—the attorney-client privilege is not waived by disclosure if transmission to the third party facilitated the attorney's ability to provide legal advice. See Westinghouse Electronics v. Republic of Philippines, 951 F.2d 1414, 1428 (3d Cir. 1991) ("A disclosure to a third party waives the attorney-client privilege unless the disclosure is necessary to further the goal of enabling the client to seek informed legal assistance.") Put another way, in most cases, the third party must be indispensable to the provision of legal advice. Noticeably absent from this waiver analysis – much to the dismay of attorneys and clients alike —is a carve-out protection premised upon convenience or cost efficiency. More concerning, though, is the frequency with which these problems can arise.  For example, due in part to the growing sophistication of clients and the influx of insurance coverage in legal disputes, attorney invoices regularly contain detailed narratives regarding legal theories and strategy. Although the ultimate question regarding whether attorney invoices are privileged is beyond the scope of this article, to the extent invoices are protected, that privilege would likely be lost if an attorney or client were to utilize, for example, a third-party billing administrator. Indeed, with a few distinct exceptions, disclosures outside the scope of Kovel and its progeny would likely be "inconsistent with the privilege[,]" and thus, result in waiver. See United States v. Massachusetts Institute of Technology, 129 F.3d 681, 687 (1st Cir. 1997).

But the problems don't stop there—where the waiver of the attorney-client privilege is definable as somewhat binary (communications between an attorney and client) waiver considerations related to the attorney work product privilege are nebulous at best. Notwithstanding the minutia, many courts have looked to the restatement for guidance in developing a waiver rule applicable to the work produce doctrine. To that end, the operative rule dictates that work-product immunity is waived if either the client or lawyer "discloses the material to third persons in circumstances in which there is a significant likelihood that an adversary or potential adversary in anticipated litigation will obtain it." See Restatement (third) of the law governing lawyers Section 91 (2000).

The waiver analysis for the work product immunity is more forgiving than that of the attorney-client privilege, which, given the privileges' respective purposes, is expected. Nonetheless, because of the fact-intensive inquiry central to the analysis, the scope of the waiver rule is ineludibly limited by the precedent testing its bounds. This analysis requires more than consideration of who, or what, the third party is. Instead, courts focus on whether the third party either is an adversary, or could act as a conduit in supplying the disclosed work-product to an adversary or potential adversary.

An area where this issue arises with some regularity is when clients or law firms utilize public relations firms to guide their public image through the litigation process. See Calvin Klein Trademark Trust v. Wachner, 198 F.R.D. 53 (S.D. N.Y. 2000). In Wachner, Judge Jed Rakoff noted that, generally speaking, public relations advice is usually outside the ambit of protection of the work product doctrine. That's not to say, however, that waiver necessarily follows when an attorney provides work product to a public relations firm that maintains the work-product in confidence. "This is especially so if, as plaintiffs here assert, the public relations firm needs to know the attorney's strategy in order to advise as to public relations, and the public relations impact bears, in turn, on the attorney's own strategizing as to whether or not to take a contemplated step in the litigation itself." Put simply, the facts drive the analysis—so much so that the Pennsylvania Supreme Court remanded a similar case for want of a more complete factual record concerning the disclosure of alleged work-product from in-house counsel to a public relations firm. See BouSamra v. Excela Health, 210 A.3d 967, 980 (Pa. 2019).

Attorneys must keep a mindful eye for preservation of the attorney-client and work-product privileges. If these issues are overlooked, attorneys can find themselves knee-deep in a discovery motion sideshow arguing about the inadvertent waiver of privilege associated with hot documents. As a general rule, attorney-client communications should not be disclosed unless necessary to effectuate the provision of legal services. Regarding the work-product privilege, law firms should take steps to record the expectation of confidentiality when working with third-parties vendors. A confidentiality agreement, for example, cements the expectation of discretion that weighs against a finding of waiver. See United States v. Deloitte, 610 F.3d 129, 141 (D.C. Cir. 2010) (recognizing that "a reasonable expectation of confidentiality may be rooted in a confidentiality agreement or similar arrangement between the disclosing party and the recipient.")

The upshot to these pitfalls, however, is that as cases test the bounds of these waiver rules, the factual paradigms presented usher these analyses into the modern world of litigation. In the post-COVID-19 legal arena, remote work and technology driven cost-cutting measures will likely be in the foreground of innovative services offered to law firms. We can only hope that the expansion of these waiver rules maintain pace with the likely influx of new services offered. By the very nature of innovation, it's hard to predict what these services may entail. Regardless, attorneys should take proactive steps to not only maintain these decades of privileges, but also to advocate for their evolution in the oft-stated "new normal" ushered in with the post-COVID era.

Michael R. Romeo, an attorney with Littler Mendelson, focuses his practice on representing employers and management in employment and appellate litigation. Prior to joining Littler, Romeo clerked for Justice Sallie Updyke Mundy of the Pennsylvania Supreme Court.