Scope of the Privilege: Direction of the Communication Matters
Many in-house attorneys are surprised to learn that their communications to their clients may be discoverable under the current state of the law in Pennsylvania. On January 29, 2010, the Pennsylvania Supreme Court issued its much anticipated decision in Nationwide Mutual Insurance Co. v. Fleming. The case had been pending on appeal from the Superior Court since 2008, and the result has critical implications for the way the Pennsylvania bar – including in-house counsel – approach the practice of law. Because there was a split among the four Supreme Court Justices who participated in the decision, the Superior Court’s decision was affirmed by the Supreme Court. The Superior Court’s Opinion operates to narrow the commonly accepted interpretation of the attorney-client privilege and challenges very fundamental assumptions about the scope of its protection.
At issue in Fleming was an internal memorandum authored by in-house counsel and distributed to 35 key personnel within Nationwide, including employees, officers, and attorneys. Although the document included the in-house attorney’s candid assessment that the company was unlikely to prevail in the underlying litigation, the Superior Court held that the document was not protected by attorney-client privilege. Instead, the court focused on the direction of the privilege and reasoned that confidential communications from client to counsel seeking legal advice are protected under the privilege; however, communications from counsel to client are insulated by the attorney-client privilege only to the extent that they reiterate confidential communications made by the client for the purposes of obtaining legal advice. Neither the Superior Court nor the Supreme Court addressed the application of the work product privilege, as this privilege was never asserted by Nationwide’s counsel.
Under the Superior Court’s logic, the scope of the privilege is severely limited in those situations where the communication comes from the counsel to the client, such as an email from in-house counsel to the client or a memorandum from outside-counsel to the in-house attorney. Under this scenario, attorney to client communications are only protected by the attorney-client privilege when they reveal confidential information provided by the client for the purposes of securing advice. This restrictive view of the privilege echoes the narrowly tailored language of the Pennsylvania attorney-client statute codified at 42 Pa.C.S.A. 5928 and aptly titled “Confidential communications to attorney” (emphasis supplied).
The Supreme Court did not directly address the scope of this derivative protection on appeal, both because it was equally divided and also because the issue was decided on other grounds, including subject matter waiver. Both the trial court and the Supreme Court’s Opinion in support of affirmance focused on the issue of subject matter waiver. The trial court criticized Nationwide’s counsel for using the attorney-client privilege as both a shield and a sword in producing arguably privileged documents that were helpful to their case, while withholding harmful documents on the same subject matter on the basis of attorney-client privilege.
Since the Supreme Court’s January decision, counsel for Nationwide has filed a Petition for Reargument. Additionally, on March 16, 2010 the Supreme Court agreed to hear another attorney-client privilege case on appeal from the Superior Court, Gillard v. AIG Insurance. In the interim, the Superior Court’s pronouncement on the direction of the privilege remains good law in Pennsylvania. As a practical matter, there are several take away lessons for in-house attorneys in the wake of Nationwide.
Practice Pointers for In-House Attorneys
- When Possible, Claim Work Product: Trial counsel for Nationwide did not seek the additional protection of work product. In all communications, but particularly in those from counsel to client, consider whether there is both an attorney-client and work product privilege applicable to the document. In situations where only attorney-client applies, it is less likely that your document will be discovered if it expressly incorporates the confidential information provided by your client.
- Incorporate Client Communications: Incorporating the information provided to you by your client (even if only by reference) into your communications to your client will decrease the likelihood that the communication will be discoverable.
- Wear Your “Lawyer Hat”: As a general matter, routine business communications are not protected by the attorney-client privilege. Frequently, in-house attorneys are asked to perform many roles and act as both counsel and business advisor. Mere recitations of an in-house attorney’s understanding of a business decision are not protected under the Superior Court’s decision. Be mindful of this distinction. As an added protection, get in the habit of endorsing all emails, memos, and correspondence with the work product and attorney-client privileges where applicable to reflect that the document was authored in a legal capacity.
- Be Consistent on Your Privilege Calls to Avoid Waiver: If challenged by your opponent, production of seemingly innocuous attorney-client privileged communications can result in a domino effect that results in the production of all material on that subject, irrespective of privilege. When conducting your privilege reviews, be consistent in your privilege calls to avoid the waiver argument.
- Limit Dissemination of Privileged Materials: Also be aware that dissemination of material internally to non-lawyers can strip otherwise privileged information of its protection.
Erin Beckner is an associate and Gary Hunt is a shareholder at the law firm of Tucker Arensberg, P.C. Both Erin and Gary focus their practice on complex commercial litigation. Erin also focuses on large scale e-discovery matters. If you have questions regarding this alert, please contact Erin at email@example.com or 412.594.5604 or Gary Hunt at firstname.lastname@example.org or 412-594-5518.