Is advice that includes both business and legal advice covered by the attorney-client privilege or has it been waived?

Many Kentucky lawyers will remember that during the massive tobacco litigation some tobacco companies attempted to shield business and email documents from discovery by channeling them through their lawyers thereby claiming attorney-client privilege. This thinly veiled manipulation did not work, but did highlight the risk of losing the privilege by mixing legal advice with business advice. We found no Kentucky authority on point, but the recent Connecticut Supreme Court case Harrington v. Freedom of Info. Comm’n* is something of a clinic on when mixed business and legal advice is privileged. What follows is a short review of the case with emphasis on the risk management guidance the decision contains. We recommend it for your professional reading as well as placing a copy in your precedent file.

The plaintiff, Harrington, appealed the Commission’s denial of his Freedom of Information request to the Connecticut Resources Recovery Authority. The denial was justified on the basis that the information was protected by the attorney-client privilege. The Supreme Court reversed because the Commission failed to apply the proper standard for evaluating communications containing a mix of business and legal advice.

The Court adopted the ‘primary purpose’ test as the proper standard by noting that “There is broad consensus in other jurisdictions that if the non-legal aspects of the consultation are integral to the legal assistance given and the legal assistance is the primary purpose of the consultation, both the client’s communications and the lawyer’s advice and assistance that reveals the substance of those communications will be afforded the protection of the privilege.”

The Court then developed this structure for how to apply the standard:

“The communication must be made by the client to the attorney acting as an attorney and not, e. g., as a business advisor.... In sum, attorneys do not act as lawyers when not primarily engaged in legal activities.... [Moreover], it would seem obvious that business communications cannot be insulated from discovery by virtue of the mention of an attorney’s name, or their being directed to an attorney.”

“The line between legal advice and business advice, however, is not always clear. Fundamentally, legal advice involves the interpretation and application of legal principles to guide future conduct or to assess past conduct. It requires a lawyer to rely on legal education and experience to inform judgment.... But it is broader, and is not demarcated by a bright line.... The modern lawyer almost invariably advises his client upon not only what is permissible but also what is desirable…. [T]he privilege of nondisclosure is not lost merely because relevant nonlegal considerations are expressly stated in a communication which also includes legal advice.”

“In classifying the character of the communication, the crucial inquiry is whether the intent of the client, in deciding to approach the lawyer, is to obtain legal counsel, even if other dimensions of a matter are addressed as well.”

“[I]t is not enough for the party invoking the privilege to show that factual information might become relevant to the future rendering of legal advice. Instead, the communication must also either explicitly or implicitly seek specific legal advice about that factual information.”

“[C]lient communications intended to keep the attorney apprised of continuing business developments, with an implied request for legal advice based thereon, or self-initiated attorney communications intended to keep the client posted on legal developments and implications may also be protected.”

“[I]f the protected and nonprotected purposes of the communications are inextricably linked, thus precluding any separation of the communications into the privileged and non-privileged categories, the communications will be protected.”

“When the legal aspects of the communication are incidental or subject to separation, the proponent of the privilege may be entitled to redact those portions of the communication…. When such separation is not possible, both may be protected, as long as the primary purpose is legal advice.” (citations omitted)

*2016 BL 281220, Conn., No. SC 19586, 9/6/16

In the article Legal vs. Business Advice: Knowing When Your Advice Is Privileged* the authors offered these guidelines for when advice is legal and when business:

“Courts have found the following to be primarily legal functions:

• Advising the company on existing law;
• Performing and reporting legal research;
• Analyzing conduct for conformity with law;
• Advising on imminent litigation; and
• Opining on applicable law.”

“Courts have found the following to be primarily business functions, and thus not typically privileged:

• Negotiating a contract
• Attending business meetings;
• Attending product liability review meetings;
• Soliciting advice from outside professionals;
• Performing duties of another office – e.g., corporate secretary; and
• Acting as a scrivener.”

The article emphasized that in-house counsel may be subjected to a heightened standard when their documents are reviewed for privilege. It included the following in-house counsel best practices suggestions for preserving the privilege:

• When possible, separate legal and business advice by starting a new email chain;
• Designate requests for or discussions regarding legal advice as legal and/or privileged;
• When serving dual functions, use titles as appropriate, segregate legal files from non-legal files, and emphasize and maintain a written record of the legal aspects of any communication;
• When appropriate, use words/phrases like “privileged,” “attorney advice,” “legal,” and “work product” and reference cases, statutes, or rules;
• Do not overuse labels/designations when clearly providing only business advice;
• When in meetings or on conference calls, (1) take clear notes of who is present; (2) if only portions of discussions are privileged, label them as privileged; and (3) exclude from the conversation anyone that may waive privilege;
• Limit the recipients of privileged information; and
• When appropriate, advise recipients that they should not forward privileged information to others.

*Legal vs. Business Advice: Knowing When Your Advice Is Privileged, Jennifer Poppe, Chris Popov, and Amy Tankersley, State Bar of Texas, Corporate Counsel Section, Newsletter, Winter 2014.