Litigators take note: Attorney-client privilege still extends to in-house counsel
A decision by a Special Master appointed in the Western District of Michigan garnered attention among attorneys for an apparent diminishment of the application of the attorney-client privilege to in-house counsel.[1] However, a careful review of the Opinion and Order actually reinforces that the privilege is still protected.
In the case, Wolverine World Wide, Inc., a footwear company, filed a lawsuit in 2018 against several insurance companies for alleged coverage failures. The Special Master ruled that an in-house counsel was not automatically entitled to the benefits of the attorney-client privilege where his main role was as a non-legal claims handler. Consequently, the plaintiff had the right to depose the attorney despite his in-house status.
Since at least the 1981 US Supreme Court decision in Upjohn Co. v United States, federal courts have consistently upheld and arguably expanded an in-house counsel’s right to the attorney-client privilege.[2] According to the In re Kellogg Brown & Root Inc., the US Court of Appeals for the DC Circuit found that “the general rule…is that a lawyer’s status as in house counsel ‘does not dilute the privilege.’”[3] That court additionally stated that, “[a]s the Restatement’s commentary points out, ‘inside legal counsel to a corporation or similar organization …is fully empowered to engage in privileged communications.’”[4]
Thus, knowing that the privilege applies to in-house counsel, the inquiry shifts to the scope of the privilege. In-house corporate counsel have myriad responsibilities, including but not limited to the areas of the business, government affairs, compliance, regulations, client training, risk identification, risk mitigation, and litigation. As trained lawyers, it is often difficult to compartmentalize and separate legal advice from business advice. Yet, the courts have attempted to do just that.
The DC Circuit went so far as to hold that:
So long as obtaining or providing legal advice was one of the significant purposes of [an] internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation and even if the investigation was mandated by regulation rather than simply an exercise of company discretion.[5]
Some courts favor a slightly narrower test. The Northern District of Ohio in the Sixth Circuit articulated the Predominant Purpose Test: “When a communication involves both legal and non-legal matters, a court must consider whether the predominant purpose of the communication is to render or solicit legal advice.”[6] However, the court stated that there is no reason to conduct the “predominant purpose” analysis when the communications only have one purpose and the in-house counsel is acting as counsel, rather than as a business advisor.[7]
In light of the federal courts’ clear deference to protecting the legal advice of in-house counsel, it may seem as if the Special Master’s December 1, 2023 decision in Wolverine World Wide, Inc. was forging new ground; it was not. That decision should be viewed through the lens of the entire record of the proceedings up to that date. Approximately a year earlier, that same Special Master issued another discovery decision related in part to assertion of the attorney-client privilege.[8] On that motion for a protective order, an insurer attempted to assert privilege over its entire claims file to insulate coverage and claims handling decisions from disclosure.[9] Citing an even earlier case decision, the Special Master found that “these privileges do not apply to claims handling files or to testimony concerning Defendants’ handling of Wolverine’s claims and investigations, regardless of whether their claim handlers went to law school.”[10]
In short, the plaintiff was seeking discovery from an insurer, whose core business was coverage and claim handling. A company business employee who makes business decisions – and who also happens to have a law degree – is not entitled to invocation of the attorney-client privilege. The December 1, 2023 decision simply reinforced this and cited to earlier reasoning. It should not signal to the bar that courts will welcome a barrage of discovery requests to in-house attorneys who serve a legal role. That sort of improper attempt to leverage or harass in-house counsel likely will not be met with court approval.
Indeed, there are well-established principles for the very narrow instances in which opposing legal outside or in-house counsel may be subject to discovery. In extreme circumstances, Rule 1.6 of the Model Rules for Professional Conduct already permits waiver of the privilege in instances involving crime or fraud. Barring these codified exceptions, a court must turn to the Shelton v American Motors Corp. decision to assess a discovery request served upon an attorney serving a legal function.[11]
In dicta, the Special Master thus analyzed whether the scenario would have met the Shelton criteria: “[f]irst, there must be no other means available to obtain the information other than to depose opposing counsel. Second, the information sought must be relevant and non-privileged. Finally, the information must be crucial to the preparation of the case.”[12]
For emphasis, the Special Master stated that she would have granted the request even under Shelton scrutiny. This conclusion may have been colored by the insurer’s past litigation conduct. The insurer allegedly hid its claim handling documents and failed to produce documents regarding insurance coverage, which made the claims handler deposition the only route of obtaining the relevant information.[13] Accordingly, having found that the claims file did not contain privileged information and that the claims handler did not perform a legal role, “the insurer cannot create a ‘shroud of secrecy’” by over-designating documents as privileged and prophylactically designating someone with a law degree to oversee the claims process.[14] Such decision was the result of lengthy, complex litigation with several rounds of discovery battles, and likely not a desire to depart from standing privilege law.
Wolverine World Wide, Inc. serves as an important reminder for in-house counsel to carefully manage the assertion of attorney-client privilege with assistance from its outside counsel.
Practical considerations
- Courts will almost always honor a particularized approach to privilege. Think about each entry on a privilege log and the justification for its listing.
- Avoid blanket privilege assertions whenever possible.
- Clearly articulate the title and job responsibilities of each custodian and emphasize their legal duties.
So that in-house counsel and their clients can further promote the free exchange of ideas and legal advice, in-house counsel are encouraged to:
- Clearly identify their job title and legal duties in the signature line of e-mails and letters.
- Write “ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL” in the subject line and body of any electronic or paper communication in which legal advice is being offered.
- Ask clients to clearly and expressly write that they are requesting legal advice in their communication to in-house attorneys.
- Separate business from legal communications whenever possible.
- Discourage forwarding of communications to non-legal personnel.
Going forward
Corporate in-house counsel are business advisors and strategists in addition to serving as legal counselors. Practitioners should be aware of the complexities of dual-purpose communication and the evolving nature of the law in this area.
For more information, please contact the authors.
[1] See generally Wolverine World Wide, Inc. v The Am. Insur. Co., No. 1.19:-cv-00010 (W.D. Mich. Dec. 1, 2023).
[2] Upjohn Co. v United States, 449 U.S. 383 (1981).
[3] In re Kellogg Brown & Root, Inc., 756 F.3d 754, 758 (D.C. Cir. 2014) (quoting In re Sealed Case, 737 F.2d 94, 99 (D.C. Cir. 1984)).
[4] Id. (quoting Restatement (Third) of the Law Governing Lawyers § 72, cmt. c, at 551 (2000)).
[5] In re Kellogg Brown & Root Inc., 756 F.3d at 758-59 (explaining the “A Significant Purpose Test”).
[6] Obergefell v Firelands Reg’l Med. Ctr., No. 3:20-cv-2579, 2023 U.S. Dist. LEXIS 78372, at *9 (N.D. Ohio May 4, 2023).
[7] Id. at *10.
[8] Wolverine World Wide, Inc. v Am. Ins. Co., No. 1:19-cv-00010, 2022 U.S. Dist. LEXIS 247699 (W.D. Mich. Sep. 26, 2022).
[9] Id. at *28-29.
[10] Id. at *30.
[11] Shelton v American Motors Corp., 805 F.2d 1323 (8th Cir. 1986).
[12] Wolverine World Wide, Inc. v The Am. Insur. Co., Case No. 1.19:-cv-00010 at *7 (W.D. Mich. Dec. 1, 2023).
[13] Id. at *8.
[14] Id. at *8-9.
