Identifying and Preserving the Attorney-client Privilege in Various Business Transactions
| Publication year | 1992 |
| Pages | 24 |
61 J. Kan. Bar Assn. September-October, 24 (1992). IDENTIFYING AND PRESERVING THE ATTORNEY-CLIENT PRIVILEGE IN VARIOUS BUSINESS TRANSACTIONS
Vol. 61, September/October, 1992
Copyright (c) 1992 by the Kansas Bar Association; David J. Haydon
DAVID J. HAYDON is an associate in the firm of Stinson, Mag & Fizzell in Kansas City, Mo. He received his B.S.B., with distinction, from the University of Kansas in 1987, and his J.D. from the University of Virginia in 1990 where he was an articles editor for the Virginia Tax Review. His area of practice focuses on general corporate law.
The attorney-client privilege dates back centuries to Anglo-Saxon jurisprudence. The work product doctrine, by which both materials prepared in anticipation of litigation and an attorney's thought processes are given various degrees of protection from disclosure, is relatively contemporary in origin, dating back to the Supreme Court's seminal 1947 decision in Hickman v. Taylor. [FN2] The evolution of these two concepts over the past 45 years has occurred primarily in various federal forums. This article is intended to provide an overview of the operation of the attorney-client privilege and, to a lesser extent, the work product doctrine within the context of certain business transactions. [FN3] While state protections are available and are discussed, the focus of this article will be primarily federal in nature.
*25 I. THE ATTORNEY-CLIENT PRIVILEGE
The attorney-client privilege, when applied to the circumstances of a given case, either prohibits or, in the case of waiver, permits testimony concerning confidential communications between attorneys and clients. Initially, the attorney-client privilege was formulated in part to prevent an attorney from testifying against his client. Policy and societal considerations for having such a privilege have expanded far beyond that initial concept.
Its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyers being fully informed by the client. [FN4] "The lawyer-client privilege rests on the need for the advocate and counselor to know all that relates to the client's reasons for seeking representation if the professional mission is to be carried out." [FN5] The privilege prohibits the compelled disclosure of communications between the attorney and the client. The privilege may not be operative, however, if the attorney or the client voluntarily (and, on occasion, inadvertently) discloses confidential facts and advice to third persons or outside entities. Such disclosures may constitute a waiver of the privilege, which may, in turn, result in the discovery of the frankest communications between the attorney and the client.
A. Early Definitions of the Privilege
Commentators, judges and legal scholars have defined and redefined the elements of the attorney-client privilege over the past 90 years. [FN6] In its barest terms, the following essential elements must be present in order for a party to resist successful discovery of, or testimony concerning, "privileged" communications between attorney and client:
(1) A communication; (2) Made between privileged persons; (3) In confidence; (4) For the purpose of seeking, obtaining, or providing legal assistance for the client. [FN7] The attorney-client privilege exists to prevent certain potentially relevant evidence from being presented to a fact-finder or to an adversary.
1. The Proposed Federal Rules of Evidence. In November 1972, the Supreme Court of the United States approved and sent to Congress a proposed set of Federal Rules of Evidence. Before adoption, each proposed rule was referred to as a Standard. The proposal sent to Congress was the first successful attempt to collect and codify the various rules of evidence which were then being applied at the federal court level. Among those proposed rules were twelve separate rules relating to the substantive laws of privilege, specifically rules regarding communications concerning (1) an individual's political vote, (2) trade secrets, and (3) identities of informers, or between (4) psychotherapist and patient, (5) husband and wife, (6) priest and penitent, and (7) attorney and client.
*26 2. Supreme Court Standard 503. Proposed Rule 503 (known as Supreme Court Standard 503) contained a comprehensive and helpful definition of the attorney-client privilege and the terms and phrases which orbit around any discussion of the attorney-client privilege: "lawyer," "client," "representative of the lawyer" and "confidential communication." Because the standards were, as drafted in 1971, an attempt to restate the law then being applied, they remain a "convenient, comprehensive guide to the federal law of privilege" [FN8] even though Congress did not ultimately approve them.
SUPREME COURT STANDARD 503
(a) Definitions-As used in this rule:
(1) A "client" is a person, public officer, or corporation, association, or other organization or entity, either public or private, who is rendered professional legal services by a lawyer, or who consults a lawyer with a view to obtaining professional legal services from him.
(2) A "lawyer" is a person authorized, or reasonably believed by the client to be authorized, to practice law in any state or nation.
(3) A "representative of the lawyer" is one employed to assist the lawyer in the rendition of professional legal services.
(4) A communication is "confidential" if not intended to be disclosed to third persons other than those to whom disclosure is in furtherance of the rendition of professional legal services to the client or those reasonably necessary for the transmission of the communication.
(b) General rule of privilege-A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client, (1) between himself or his representative and his lawyer or his lawyer's representative, or (2) between his lawyer and the lawyer's representative, or (3) by him or his lawyer to a lawyer representing another in a matter of common interest, or (4) between representatives of the client or between the client and a representative of the client, or (5) between lawyers representing the client. [FN9]
3. Supreme Court Standards 511 and 512. Two of the Supreme Court's other proposed rules in the privilege area dealt with the waiver of privilege. Supreme Court Standard 511 related to the voluntary disclosure of the privilege:
A person upon whom these rules confer a privilege against disclosure of the confidential matter or communication waives the privilege if he or his predecessor while holder of the privilege voluntarily discloses or consents to disclosure of any significant part of the matter or communication. This rule does not apply if the disclosure is itself a privileged communication. [FN10] Supreme Court Standard 512 attempted to provide guidance for the courts on the subject of what types of prior disclosure do not constitute waiver: "Evidence of a statement or other disclosure of privileged matter is not admissible against the holder of the privilege if the disclosure was (a) compelled erroneously or (b) made without opportunity to claim the privilege." [FN11]
4. Congressional Action and Rule 501. Congress eliminated each of the twelve proposed Rules of Evidence relating to privilege in response to outcries from a number of competing interests contending that the proposed rules on privilege were, for various reasons, ill-advised. In their place, Congress enacted into law one rule on the subject, Rule 501. That single rule provides as follows:
Except as otherwise required by the Constitution of the United States or provided by act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness, person, government, State, or political subdivision thereof shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness, person, government, State, or political subdivision thereof shall be determined in accordance with State law. [FN12] 5. Federal Question and Criminal Law Cases. Rule 501, Federal Rules of Evidence, delegates the development and interpretation of the law of privilege to the judiciary, subject only to "the principles of the common law ... in the light of reason and experience." [FN13] Rule 501 basically provides that in criminal cases and in most federal question cases a federal common law of privilege would apply. This federal common law shall be judge-made and shall be based on existing federal law on the subject.
6. Diversity Cases. The second sentence of Rule 501 has generally been read to provide that in diversity cases in which "State law supplies the rule of decision," privilege shall be determined in accordance with the law of privilege of the forum state. Thus, in certain commercial litigation cases, such as a breach of contract case or a shareholder suit, a federal court should look to and apply the state law of privilege.
*27 B. The Federal Law of Privilege and Its Corporate Application (1962-1981)
By the mid-1960s, it was well established that the attorney-client...
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