As I was developing the privileged-or-not game, I came across a number of cases in which the attorney-client privilege was mismanaged amidst the exigencies of a crisis. The chaos involved in such events leaves little time for the orchestration necessary to maximize the chance that privilege will apply to the flurry of communications to and from counsel. Thinking ahead and modeling your response to a crisis is key. Here are a few privilege-related pages for your crisis playbook.
We can all agree that managing privilege is increasingly challenging. In my quest for best
practices, I have attended numerous CLE programs on the topic and have come to a clear conclusion: Use outside counsel as much as practical to quarterback your crisis response. The issues that frustrate the application of privilege to in-house communications—your business functions, your title, your interactions with corporate constituents—usually don’t arise with outside counsel, who courts view as adorned with a cloak of independence under which privilege has been protected. Inside counsel, however, face unique threshold inquiries about our status as “attorneys” before the privilege is even considered.
Recall that a premise of Akzo Nobel Chemicals Ltd. v. Commission, in which the European Union Court of Justice determined that communications with in-house counsel are not privileged, was that in-house counsel are not independent from the business. This independence concern has surfaced in the literature that has been critical of in-house lawyers’ alignment with management instead of the client. While you may not agree with the premise, using outside counsel to quarterback your crisis response team eases the burden of arguing that crisis communications are privileged.
When a crisis arises, a company may reach out to third parties to seek advice. The jurisprudence, however, increasingly reflects a judicial penchant to declare a waiver when privileged information is disclosed to third parties. See, for example, the selective waiver doctrine. What about disclosures to PR firms? Crises are PR firms’ playpens, and increasingly, companies seek their assistance. Can you disclose privileged information to a PR firm without waiving privilege?
There are two leading cases in this area. The first is In re Copper Market Antitrust Litigation, and it established the “functional equivalent” test for PR firms: If the PR firm is the functional equivalent of a company employee, then communications with the PR firm are privileged. This test has three basic elements: 1) whether the consultant had primary responsibility for a key corporate job, 2) whether there was a continuous, close-working relationship between the consultant and the company’s principals on matters critical to the company’s position in the litigation, and 3) whether the consultant was likely to possess information that no one else in the company had.
A.H. ex rel. Hadijah v. Evenflo adopted this test but focused on whether the PR firm served an essential corporate function for which the company did not have an equivalent internal organization.
The second case is In re Grand Jury Subpoenas, in which the privilege analysis depended upon who hired the PR firm. In that case, the client was an individual, but the same rationale logically applies to PR firms that companies hire.
The lesson of these cases is that the attorney-client privilege turns on whether the PR firm was an agent of the attorney or the equivalent of the client. The easier argument is that the PR firm is a contributor in assembling the bundle of advice the law firm offers. This is more proof that establishing outside counsel as a hub of crisis communications maximizes the applicability of the privilege.
Take a quiz to find answers to the scenarios presented in the privileged-or-not game.
Brian Martin is SVP and general counsel of KLA-Tencor Corp. Send your comments and best ethics practices to him at email@example.com.