The Legal Advice Requirement of the Attorney-client Privilege: a Special Problem for In-house Counsel and Outside Attorneys Representing Corporations - Grace M. Giesel

JurisdictionUnited States,Federal
Publication year1997
CitationVol. 48 No. 3

The Legal Advice Requirement of the Attorney-Client Privilege: A Special Problem for In-House Counsel and Outside Attorneys Representing Corporationsby Grace M. Giesel*

In practice, however, advice does not spring from lawyers' heads as Athena did from the brow of Zeus. Inevitably, attorneys' opinions reflect an accumulation of education and experience in the law and the large society law serves. In a given case, advice prompted by the client's disclosures may be further and inseparably informed by other knowledge and encounters.1

I. Introduction

The attorney-client privilege protects certain communications between attorney and client from compelled disclosure. The privilege applies to clients who are individuals as well as to corporate clients.2 The lawyers providing legal services to corporations may be outside attorneys who are employees of law firms. Many corporations, however, rely on in-house attorneys for many, if not all, of their legal needs.3 Often, in-house attorneys have official responsibilities that involve them in the management of the company.4 Even if the attorneys do not have official nonlegal responsibilities, the corporation may seek the opinion of in-house attorneys with regard to all sorts of issues, some of which may be clearly legal issues, some of which may be clearly business issues, and some that are a jumble of both.5 Even outside attorneys sometimes hold positions within the management of corporations.6 Likewise, corpora-tions may consult outside attorneys, whether or not they have manage-ment responsibility, not only with regard to legal issues but also business issues or issues involving a mix of business and legal consider-ations.7

While the legal profession should perhaps cheer this evolution of roles and duties, the application of the attorney-client privilege in the corporate representation environment creates problems because the tradition of the privilege requires that it apply only to a communication involving a lawyer in his or her professional legal capacity and only if the communication relates to obtaining or rendering legal advice, services, or assistance. Courts have not agreed in denning the kinds of services rendered by attorneys that the privilege protects.8 Nor have courts acted consistently and uniformly in dealing with communications containing a mix of advice, service, and assistance.9 The resulting confusion in this area of privilege law has proved to be fertile ground for some courts' reliance upon antiquated notions about what attorneys do and particularly what attorneys, inside and out, do for corporate clients.10 Some courts have exhibited significant bias against corpora-tions and particularly against in-house counsel, reiving on assumptions based on status and supposed probabilities.11 The resultant uncertain-ty of whether the privilege applies in particular corporate settings threatens the privilege's ability to create the positive impact of client disclosure and, therefore, a positive impact on the justice system, the raison d'etre of the privilege.

At least since the time of Jeremy Bentham, a debate has raged about the benefits and burdens of the attorney-client privilege.12 Proponents of the privilege argue that the privilege must protect communications so clients will make full disclosure to their attorneys, and the attorneys, as a result of the complete disclosure, can render the best possible representation. Thus, society benefits by a superior administration of justice. In addition, full disclosure by clients in decision-making stages creates an environment of more law abidance because lawyers, aware of issues at an early stage, practice preventive law. Lesser, occasional arguments are that the privilege protects privacy interests of the clients, the autonomy of the clients, and the clients' belief in the fairness of the United States system of justice. The proponents of the privilege argue that these benefits outweigh any possible burden. Critics doubt the benefits and argue that the burden of subversion of truth, inherent in any application of the attorney-client privilege, outweighs any possible benefit, especially when the client is a corporation.13 A few scholars have attempted empirical studies to document the effect of the attorney-client privilege, but the scant data has significant faults, and is at best equivocal on the issue of whether the privilege in fact encourages candor of clients.14

This Article does not seek to enter into the debate about the benefits of the attorney-client privilege and the burdens which may accompany it. Rather, this Article accepts the fact that all United States jurisdic-tions have honored the attorney-client privilege throughout their history and continue to do so, even in light of the ongoing debate. Courts have applied the privilege uniformly to corporations as well.15 This univer-sal acceptance of the privilege by courts and legislatures of the various jurisdictions evidences a shared belief that the privilege's primary modern justification or goal is valid—that the law should encourage clients to deal with their counsel with complete candor so that superior representation can occur, that the superior representation can take justice to an elevated plane, and that the attorney-client privilege can act as the catalyst for the result of client candor. As United States District Judge Wyzanski stated in United States v. United Shoe

Machinery Corp.,16 "'[t]he social good derived from the proper perfor-mance of the functions of lawyers acting for their clients is believed to outweigh the harm that may come from the suppression of the evidence in specific cases.'"17

Assuming, as jurisdictions evidently do, that applying the attorney-client privilege creates such benefits, the certainty of the parameters of the privilege is critical. For the privilege to encourage client disclosure to counsel, a high degree of certainty must exist that the privilege will protect what the client says from disclosure in the event litigation ensues. If a client doubts at the time for disclosure that a court will protect the communication in the long run, disclosure in the short run may not occur. Thus, the efficacy of the privilege as an encourager of candor diminishes.18

Many aspects of the corporate attorney-client privilege create uncertainty.19 Yet, the courts' inconsistent application of the require-ment that the communication relate to the obtaining or rendering of legal advice, service, or assistance, and the related professional legal capacity requirement, creates substantial uncertainty in the application of the attorney-client privilege. The uncertainty causes slippage in the connection between the privilege and the goals society expects the privilege to achieve.

Ironically, courts' desire to confine the privilege to narrow parame-ters20 causes much of this confusion, inconsistency and uncertainty. With regard to corporations in general, and in-house counsel in particular, this desire to police the privilege has led some courts basically to re-evaluate the policy arguments for and against the privilege's application. These courts use the issues that are a part of the policy discussion as guides to application of the privilege in individual cases.21 In doing so, courts' decisions often seem motivated by assump-tions, fears, and probabilities suggested by the policy discussion, but unsupported by the facts of the individual cases.

From this point of recognition of the uncertainty obvious in this area of privilege law, two possible paths emerge. One can argue that the attorney-client privilege, especially as it relates to corporate representa-tion, with this legal advice slippage, does not work as an encourager of client candor; thus, courts and legislatures should abolish it.22 Alterna-tively, one can argue that the courts' application of the privilege must improve so that it will be more likely to succeed in creating an environ-ment for client candor. This Article follows the latter path, arguing that courts must define more flexibly the legal advice, service, or assistance requirement, so that the definition can mesh with what corporate lawyers, inside and outside, do in the ever-changing legal profession. In addition, courts must apply the requirement more consistently. The related professional legal capacity requirement should not receive separate analysis. Courts should determine whether the privilege applies and how it applies free of assumptions about corporate represen- tation that the facts of the individual cases before the courts do not evidence. Finally, courts must eliminate the anticorporation and anti-in-house counsel bias which is obvious in many courts' opinions, and which easily exists in the present confusion. Having accepted the balance struck by agreeing that the privilege applies to corporations and to in-house attorneys, courts should not subvert the effectiveness of the privilege by attempting to reset the balance in individual cases or by making status-based decisions. The increased certainty gained should result in the privilege as a more effective encourager of client candor in all situations.

Part II of this Article discusses the rationale of the privilege, the courts' acceptance of the privilege and the importance of certainty to the societal goals of the privilege. Part III explains the requirements of the privilege. Part IV critiques the professional legal capacity and legal advice requirements as applied by courts, especially as applied to corporations in the 1980s and 1990s. Part V discusses anticorporation and anti-in-house bias present in many decisions. Part VI concludes that the improvements suggested in this Article enhance the certainty of application of the attorney-client privilege for client corporations, and thus should enhance the achievement of the goal of the privilege recognized by courts today—encouragement of client candor.

II. Background of the Attorney-Client...

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