Transcript Attorney Client Privilege and the Insurer in the Twenty

Attorney/Client Privilege and the Admiralty
Practitioner in the Twenty-First Century
Tulane Admiralty Law Institute
2015
Robert G. Clyne
President
The Maritime Law Association of the United States
Senior Vice President, General Counsel & Corporate Secretary
American Bureau of Shipping
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Agenda
I.
II.
III.
IV.
V.
VI.
Basics of the Attorney/Client Privilege
Exceptions/Waiver of Attorney/Client Privilege
New Technology, New Issues for Attorney/Client
Privilege
In re Vioxx: A Failed Attempt to Adapt the Privilege to
New Technological Consequences
Real World Hypotheticals: What New Challenges Might
the Attorney/Client Privilege Face?
What can attorneys do to maintain the privilege in
light of new technologies?
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Basics of the Attorney/Client Privilege
• The attorney/client privilege “recognizes that
sound legal advice or advocacy …depends
upon the lawyer being fully informed by the
client.” Upjohn Co. v. United States, 449 U.S. 383,
389 (1981).
• Privilege belongs to the Client and Lawyer may
not waive it without client’s informed consent.
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Basics of the Attorney/Client Privilege
• Intention of confidentiality is key. Broad
distribution may lead to waiver.
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Basics of the Attorney/Client Privilege
• Attorney/client privilege protects from disclosure:
― Communications
― Made in confidence
― Between an attorney
― And a client
― For purposes of seeking or rendering legal advice
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Basics of the Attorney/Client Privilege
• The Privilege protects:
1) Communications
 Any information transmitted between a client and a lawyer; more than
just text (i.e. images, videos, etc…)
 Protects the legal advice contained in the communication, not
necessarily the facts within the communication.
2) Made in Confidence
 Intention of confidentiality is key.
― Holmes v. Petrovich Devel. Corp., 191 Cal. App. 4th 1047 (2011):
Employee communications on company email when policy stated
that emails would not be private resulted in waiver of the privilege.
― Lenz v. Universal Music Corp., 2010 U.S. Dist. Lexis 125874 (N.D. Cal.
Nov. 17, 2010): Privilege waived after communications with attorneys
were referenced generally in emails, online chats, and on a blog
reporting on the case.
 Inadvertent waiver may waive privilege, but there is an opportunity to
restore the privilege.
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Basics of the Attorney/Client Privilege
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The Privilege protects:
3) Between parties in a privileged relationship (attorney and client)
 When the client is an entity, who constitutes “the client”?
― Control Group Test: those individuals with substantial decision making
authority; generally senior management. Philadelphia v. Westinghouse Elec.
Corp., 210 F. Supp. 483 (E.D. Pa. 1962).
― Subject Matter Test: employees not within the “control group” if made at the
direction of their superiors on the subject matter upon which the entity is
seeking legal advice. Harper & Row Publishers, Inc. v. Decker 423 F.2d 487 (7th
Cir. 1970).
 Former and joint employees
― Privilege can extend to former employees when communications; (1)
concern knowledge obtained or conduct which occurred during course of
former employee’s employment; OR (2) relate to communications that were
privileged and occurred during the employment relationship.
― Am. S.S. Owners Mut. Prot. & Indem. Ass’n v. Alcoa S.S. Co., 232 F.R.D. 191, 197
(S.D.N.Y. 2005), 2005 AMC 2711: Disclosure by an entity to individuals having
roles with multiple entities will not waive privilege against those other entities,
when the disclosure was made within that individual’s role within a privileged
relationship.
 Third Parties
― Privilege can extend to certain third parties acting as agents of the attorney;
e.g. accountants, experts, insurance agents.
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Basics of the Attorney/Client Privilege
• Who is the Attorney?
 In-House Counsel
― In-House Counsel typically has responsibilities that require
both business and legal advice.
― If the primary purpose of the communication is to solicit or
provide legal advice the Courts will treat it as privileged.
 Claim Adjusters
― Claim Adjuster’s conduct not privileged because he/she
happens to be a lawyer.
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Basics of the Attorney/Client Privilege
• The Privilege protects:
4) For the purposes of providing legal advice
 Mere involvement of an attorney in the communication is insufficient.
― United States ex rel. Baklid-Kunz v. Halifax Hospital Medical
Center, 2012 U.S. Dist. LEXIS 158944 (M.D. Fla. Nov. 6, 2012): Simply
cc’ing an attorney is insufficient.
 Not all corporate investigations may qualify.
 Mixed purpose communications.
― Primary Purpose Test: is the central or core purpose of the
communication for obtaining legal advice?
o The extent to which courts extend this privilege over the nonlegal components of communications varies. Pittsburgh
Corning Corp. v. Caldwell, 861 S.W.2d 423 (Tex. App.
Houston 14th Dist. 1993) (broad coverage) versus In re Sealed
Case, 737 F.2d 94 (D.C. Cir. 1984) (narrow coverage).
― Because of Test: would the communication not have been
created in its current for but for the prospect of litigation?
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Basics of the Attorney/Client Privilege
What is Work Product Privilege?
• A distinct privilege from the Attorney/Client Privilege.
• Aims to protect the work and mental impressions of an
attorney or party in litigation from discovery by opposing
counsel.
• Elements:
 Otherwise discoverable tangible or documentary items;
 Prepared specifically in anticipation of particular litigation.
• May be waived if not otherwise discoverable due to
undue hardship.
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Basics of the Attorney/Client Privilege
Attorney/Client Privilege versus Work Product Privilege
• While often related, the Work Product privilege differs in
a number of ways:
 Work Product Privilege does not require that an attorney was
involved, no communication must have taken place, and need
not relate to legal advice.
 Unlike Attorney/Client Privilege, Work Product Privilege must
actually relate to litigation.
 Work Product Privilege can be waived by an adversary’s basic
showing of absolute need, while the Attorney/Client Privilege is
absolute (subject to certain exceptions).
 Work Product Privilege may expire at the conclusion of the
litigation at issue, while Attorney/Client Privilege lasts forever.
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Basics of the Attorney/Client Privilege
• Internal Corporate Investigations
 Not all investigations are privileged
 Where investigations are routine and there is no meaningful
oversight by attorneys or request for legal advice, privilege
may be denied
 Courts have discounted the Self-Evaluative Privilege
 Better practice to shield investigation is to use outside
counsel
 In Re Kellogg Brown & Root
 Chevron Midstream Pipelines LLC vs. Settoon Towing et.al.
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Exceptions to/Waiver of Attorney/Client Privilege
• The Crime/Fraud Exception
 To prevent abuse of the privilege, contravening the policy goal of encouraging
complete justice.
 When advice is sought to further the planning of a crime or fraud.
 Focus on the state of mind of the client in seeking the advice.
• Advice of Counsel Exception
 To prevent use of the privilege as a sword and a shield.
 When the client places the information protected by privilege at issue for their
own benefit, privilege will be waived.
― Scotstoun Shipping Co. Ltd. v. Diplomatic Marine, Inc., 1980 AMC 1404:
Plaintiff asserted reasonableness of settlement as support for why Defendant
owed indemnification, and Plaintiff thereby waived the right to assert
privilege over attorney communications concerning discussions of the
reasonableness of the settlement.
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Exceptions to/Waiver of Attorney/Client Privilege
• Fiduciary Exception
 To effectuate the intent of a trust relationship.
 A trustee may not exercise the privilege against the beneficiaries of the trust,
when the information was obtained to benefit the trust.
• Good Cause Exception
 To effectuate the intent of the corporate shareholder relationship.
 Corporate management may not exercise the privilege when information was
obtained to benefit the corporation. However, it remains the burden of the
shareholders to show good cause in any particular situation. Garner v.
Wolfinbarger, 430 F.2d 1093 (5th Cir. Ala. 1970).
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Exceptions to/Waiver of Attorney/Client Privilege
• Common Interest/Joint Defense Doctrine
 An exception to waiver of the privilege.
 When co-parties have a common interest, they may share privileged information
within the context of the common interest between themselves without fear of
waiving that privilege.
― In re Grand Jury Subpoenas, 902 F.2d 244 (4th Cir. 1990): assignee subsidiary
could not waive parent company’s shared common interest privilege
unilaterally against a third party.
― In re Skiles, 102 S.W.3d 323 (Tex. App. Beaumont 2003): Settlement
negotiations between adverse insurer and insured regarding representation
costs for third party suit, were privileged against that third party in the
underlying suit.
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Exceptions to/Waiver of Attorney/Client Privilege
Insurance Context
• Protecting the Attorney/Client Privilege in the triparite relationship of
insured, insurer and attorney.
• Common Interest Doctrine/Joint Defense Doctrine is not an
independent privilege; rather, it is a limited exception to the general
rule that disclosure of privileged communications to a third-party
waives the privilege.
 Requires insured and insurer to share genuine common and legal
interest.
 Common Interest Doctrine does not apply to communications between
insured and insurer without involvement of counsel.
 Common Interest Doctrine does not apply where the insurer has denied
coverage on a claim because there is no common interest.
 The application of the Common Interest Doctrine is less clear in the
circumstances of a Reservation of Rights or in cases that are still under
investigation and a coverage determination has not been made.
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Exceptions to/Waiver of Attorney/Client Privilege
Insurance Context
• In Declaratory Judgment actions there is no common interest
and privilege does not apply in reverse to allow the insurer
access to privileged communications between the insured
and the attorney.
 Some courts differ on the basis that there was a common interest prior
to the filing of the Declaratory Judgment Action (i.e. at the time the
privileged communications were made).
• Where a third-party seeks discovery of privileged
communications between the insured and insurer, the
protection of such communications are assessed on a case
by case basis.
 Was there a joint interest and attorney involvement at the time the
communications were made?
 Has coverage been denied or disputed?
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Exceptions to/Waiver of Attorney/Client Privilege
Insurance Context
• First Party Coverage
• Subrogation Matters
 Privilege is straight forward except when facts are adduced in the recovery
action that call coverage into question.
• Liability Defense Cases
 Common Interest Doctrine/Joint Defense Doctrine will typically apply vis-à-vis
third-parties but not necessarily in a subsequent action between insured and
insurer
 Same rules apply to Excess Liability Insurers
• Bad Faith Litigation
 Courts differ on application of Attorney/Client Privilege in the bad faith
context
 If insured can make a prima facie showing of a bad faith claim, some Courts
have applied the fraud exception to otherwise privileged communications
between counsel and the insurer (“the facts are in the file”).
 Other courts have expressly rejected the notion that evidence of bad faith is
tantamount to fraud and reject the exception to privilege.
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Exceptions to/Waiver of Attorney/Client Privilege
Broker
• Broker’s communications with insured may be protected if
Broker’s participation is necessary to the legal representation
(e.g., assisting attorney with gathering factual information
and/or preparation for litigation).
 SR International Business Insurance Co. v. World Trade Center
Properties LLC
― (Post 9/11 communications between the attorneys for the lease
holders and Willis were not protected by the attorney/client
privilege, the common interest doctrine or the work product
doctrine).
 For Common Interest Doctrine to apply requires that insured and
broker have a common “legal” interest as opposed to a common
“commercial” interest (i.e. payment of the claim).
 Privilege is more likely to apply when the insured can demonstrate
that the Broker was acting as agent and communications sought
concerned facts involving the Broker’s work as agent (best example
is outsourcing insurance services).
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Exceptions to/Waiver of Attorney/Client Privilege
• “Culture of Waiver”
 The privilege may be waived voluntarily, and such waiver will likely apply to that
information in all further proceedings.
― Courts are split as to the extent of waiver, but most circuits (e.g. United States
v. Massachusetts Institute of Technology, 129 F.3d 681 (1st Cir. 1997)) find
waiver. Only the Eighth may not (Diversified Industries v. Meredith, 572 F.2d
596 (8th Cir. 1978)).
 The Holder Memo: willingness to waive privilege during corporate investigations
should be considered when making the decision whether or not to prosecute.
 Lobbying by the ABA and other parties has resulted in the scaling back of
emphasis on this factor.
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New Technology, New Issues for Attorney Client Privilege
• Various modern technologies have the potential to
result in new issues regarding the application of the
privilege:
 New Methods of Communication
― Email, Texting, Instant Messaging, Social
Media, (Facebook, YouTube, Snapchat,
LinkedIn, Twitter, etc.), Blogging.
― Recorded communication through words,
sound, picture, and video.
 New Norms of Communication
― Electronic communication of various types
now a common form of interpersonal
communication.
― Mixing business and personal.
― All electronic communication leaves records.
 New Methods of Transmission and Storage
― Cloud storage, metadata.
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In re Vioxx: A Failed Attempt to Adapt the
Privilege to New Technological Consequences
• In re Vioxx, 501 F.Supp. 2d 789 (E.D. La. 2007)
 Multidistrict class-action litigation involving various products liability, tort,
failure-to-warn, fraud, and warranty claims with respect to Vioxx prescription
drug, manufactured by Merck.
 During discovery, Merck submitted a privilege log covering “approximately
30,000 documents, amounting to nearly 500,000 pages”.
 Faced with the impossibility of an in camera review, a Special Master and
Special Counsel were appointed to devise an efficient process to review all
referenced documents for privilege.
 Solution: document categories defined for broad determinations of the
application of the privilege.
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In re Vioxx: A Failed Attempt to Adapt the
Privilege to New Technological Consequences
• Vioxx Privilege Categories
1) Addressed solely to an attorney with limited circulation and identifiable legal
question: Privileged.
2) Addressed to both attorneys and non-lawyers for their review, comment, and
approval: Not Privileged.
3) Addressed to both attorneys and non-lawyers for both legal and non-legal
purposes: Not Privileged.
4) Addressed solely to an attorney with an attachment for examination, review,
comment, and/or approval: Privileged.
5) Messages from an attorney thereafter disseminated amongst non-attorneys,
unless the result of clear dissemination so that corporate responsibilities could be
fulfilled: Not Privileged.
6) Addressed to an attorney with non-lawyers copied on the message: Might be
Privileged.
7) Messages to or from an attorney where the substance of the advice was not
included or attached: Not Privileged.
8) Message threads which included attorney interaction at some point within the
thread, but not all: Might be Privileged in Part.
9) Messages qualifying for work-product would be separately protected under that
privilege.
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In re Vioxx: A Failed Attempt to Adapt the
Privilege to New Technological Consequences
• Assessing the Vioxx Methodology
 Attempted to address common result of modern communications
technology: extremely large quantities of recorded communications
potentially associated with any issue.
 Attempt to address quantity led to reduction in quality: focus on parties
involved over purpose for communication.
 Failure to consider the role non-lawyers of varying types and levels play in
corporate operations, and who should be included within the privileged
corporate entity.
 Lesson: even routine attorney-client privilege assessments can be uniquely
complicated by modern communications technologies.
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Real World Hypotheticals: What new challenges
might the Attorney/Client Privilege face?
• The Hack: Sony Pictures Entertainment
 On November 24, 2014, hackers calling themselves the “Guardians of Peace”
infiltrated the computer systems of Sony Picture Entertainment. Around 38
million files were stolen, ranging from film products, to personal information of
staff, to internal emails. These files were released to a variety of file sharing
sites and other sources.
 Amongst the material released was information qualifying as trade secrets,
intellectual property, and potentially privileged legal advice.
 Perhaps in an effort to protect privilege and other rights associated with the
released material, Sony Pictures issued letters to various media groups
demanding that they cease publication of the released materials.
 How might attorney/client privilege be best addressed in the event of
malicious third party releases of otherwise privileged information? What steps,
if any, might be proper and expected to maintain the privilege? To what
extent should the privilege cover documents released in such a fashion, so
that they are in actuality publically available?
Sources: http://blogs.reuters.com/alison-frankel/2014/12/15/sonys-big-bluff-cant-beat-first-amendment/ ,
http://www.reuters.com/article/2014/12/15/us-sony-cybersecurity-media-idUSKBN0JT09M20141215 ,
http://www.usatoday.com/story/news/world/2014/12/17/north-korea-sony-hack/20558135/
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Real World Hypotheticals: What new challenges
might the Attorney/Client Privilege face?
• Always Listening: Samsung SmartTVs
 The Privacy Policy accompanying Samsung SmartTVs contains the following
language:
― “Please be aware that if your spoken words include personal or other
sensitive information, that information will be among the data captured
and transmitted to a third party.”
 Recent news stories have seized upon this language to highlight that
Samsung SmartTVs (amongst other everyday gadgets) have and exercise the
ability to transmit conversations occurring within range of those devices to
third parties, generally for marketing purposes.
 Given this knowledge, could discussion of potentially privileged matters
within the vicinity of devices with such capabilities affect the privilege? Might
attorneys be obligated to learn of and ensure that equipment located in the
office is not transmitting such information to protect the privilege?
Sources: http://www.cnn.com/2015/02/11/opinion/schneier-samsung-tv-listening/ ,
http://www.thedailybeast.com/articles/2015/02/05/your-samsung-smarttv-is-spying-on-you-basically.html,
http://fusion.net/story/49352/all-the-smart-gadgets-are-spying-on-you/
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Real World Hypotheticals: What new challenges
might the Attorney/Client Privilege face?
• The Cloud: The Roles of Third Parties
 The Cloud refers to servers maintained by third parties which can be
accessed by persons purchasing storage space on those servers from
anywhere via an internet connection.
 In addition to the storage of potentially privileged information within the
systems of unrelated third parties, it is now common knowledge that outside
parties, for example, government surveillance programs put in place by
many countries, potentially have access to cloud-stored information within
the servers and during transmission.
 What steps, if any, can attorneys take to ensure documents stored in the
cloud maintain privilege? Should the reasonable expectation that cloudstored documents can be accessed by third parties and governments affect
the privilege analysis for those documents?
Sources: http://money.cnn.com/2014/09/03/technology/enterprise/what-is-the-cloud/,
http://www.law360.com/articles/558606/prism-scatters-attorney-client-privilege
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What can attorneys do to maintain the privilege
in light of new technologies?
• Stay informed
 Understand how new technologies collect, transfer, and store potentially
privileged communications to direct and help avoid usage that may forfeit
the privilege.
• Understand the policies underlying the privilege
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Consistent underlying policy rule has historically underlined the creation of
varied exceptions to and adaptations of the attorney client privilege:
― “[S]ound legal advocacy . . . depends upon the lawyer being fully
informed by the client.” Upjohn Co. v. United States, 449 U.S. 383, 389
(1981).
• Support prevention efforts outside the courtroom
 As the response to the Holder Memo shows, lobbying by professional groups
like the ABA has been successful in protecting the attorney-client privilege.
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Questions?
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