Third-party advisors regularly assist corporate executives and boards of directors in making business decisions. It is important for corporate clients and their counsel to understand whether their communications with these advisors concerning legal matters are protected by the attorney-client privilege. Courts have struggled over the years to develop an analytical framework that justifies allowing a corporation to share privileged communications with advisors without risking waiver of the attorney-client privilege. Careful attention must be paid to the applicable privilege rules, as courts have applied three very different standards to analyze when privileged material may be shared with business advisors without risking waiver.
The first standard is the “functional equivalent” standard. This standard arose as a natural extension of the Supreme Court’s decision in United States v. Upjohn, which rejected the “control group” test for evaluating when a corporation’s communications are privileged and held as privileged communications between a corporate attorney and an employee of the corporation acting within his scope of employment. Going a step further, some courts have held that communications between a corporate attorney and an outside advisor who is the “functional equivalent” of an employee are also privileged provided that the communications were made for the purpose of seeking or rendering legal advice.