What Business Students Should Know About Attorney–Client Privilege

• Author: Robert Draba,Brent Marshall
• Published date: 01 June 2012
• Date: 01 June 2012
• DOI: http://doi.org/10.1111/j.1744-1722.2012.01108.x

Journal of Legal Studies Education

Volume 29, Issue 2, 297–312, Summer/Fall 2012

What Business Students Should Know

About Attorney–Client Privilege

Robert Draba and Brent Marshall*

I. Introduction

On December 27, 2001, Martha Stewart sold shares of stock in ImClone

Systems, Inc. (“ImClone”), a company that develops biologic medicines. The

next day, ImClone announced that the Food and Drug Administration had

rejected the company’s application for approval of a cancer-fighting drug,

and its stock price declined.

Early in 2002, various government agencies and a congressional sub-

committee initiated investigations into Stewart’s December 27 sale of stock.

On June 23, 2002, Stewart composed an e-mail containing her account of her

sale of ImClone stock. She sent this e-mail to an attorney who was one of the

lawyers representing her in her dealings with the government. The following

day, Stewart forwarded a copy of that e-mail to her daughter, Alexis Stewart,

without making any changes to it.1

On August 21, 2003, the government asked the court to decide whether

the e-mail that Martha Stewart sent to her attorney and then forwarded

to her daughter was protected from discovery either by the attorney–client

privilege or the attorney work-product doctrine. While the court held that

the e-mail was protected from discovery as attorney work product, it was

not protected by the attorney–client privilege.2The court also observed

that Stewart’s June 23 e-mail to her attorney was clearly protected by the

attorney–client privilege until she waived the privilege by disclosing the

∗We are attorneys with the U.S. Department of Justice, Washington, DC. The views expressed

herein are ours and are not purported to reflect those of the U.S. Department of Justice.

1United States v. Stewart, 287 F. Supp. 2d 461, 462–63 (S.D.N.Y. 2003).

2In pertinent part, the court held that Martha Stewart’s e-mail was prepared in anticipation of

litigation and would not have been prepared in substantially similar form but for the prospect

of that litigation. Therefore, it was protected attorney work product. Id. at 466–68.

C2012 The Authors

Journal of Legal Studies Education C2012 Academy of Legal Studies in Business

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298 Vol. 29 / The Journal of Legal Studies Education

e-mail to her daughter. The rule is that disclosure to a third party of one’s

communication with an attorney eliminates whatever privilege the commu-

nication may have originally possessed. There is no exception to this rule for

family members.3

The case of Martha Stewart illustrates how easily the attorney–client

privilege can be waived. Had Stewart understood the simple concept of third-

party waiver, she probably would not have shared that e-mail with her daugh-

ter. The Stewart case also illustrates that courts expect businesspeople to

know something about the rules of attorney–client privilege.4When busi-

nesspeople operate outside those rules, courts will order them to turn over

documents they thought were protected by the attorney–client privilege.

The case law on attorney–client privilege is extensive and can be some-

what complex.5Over seven hundred articles in Westlaw, for example, have

the phrase “attorney–client privilege” in the title; in the last three years alone,

there have been over 3700 federal cases in which the phrase “attorney–client

privilege” appears at least once. However, business law and legal environ-

ment textbooks typically have a short or even no discussion of issues related

to attorney–client privilege.6

This article presents three practical and easy-to-remember principles of

attorney–client privilege that every business student should know and that

every professor of business law could use in teaching classes in business law

and legal environment. They are as follows:

1. The attorney–client privilege protects communications involving the legal

advice of attorneys, not communications involving their business advice.

3Id. at 464.

4See also McElroy v. Gemark Alloy Ref. Corp., 592 F. Supp. 2d 508, 522 n.5 (S.D.N.Y. 2008) (“It

is unlikely that an experienced businessman would be ignorant of the attorney–client privilege

and what it entails.”); Robert A. Prentice, The Case for Educating Legally-Aware Accountants,38Am.

Bus. L.J. 597, 600 (2001) (stating that “the law is an absolutely critical element of the business

world and that most businesspersons should be familiar with its basic elements”).

5See Paul R. Rice,Attorney–Client Privilege in the United States (2d ed. 2007); Jerold

S. Solovy et al., Protecting Confidential Legal Information: A Handbook for Analyzing Issues Under the

Attorney–Client Privilege and the Work Product Doctrine, 805 PLI/Lit 81 (2009).

6Murray S. Levin, The Attorney–Client Relationship as a Business Law-Legal Environment Topic,21J.

Legal Stud. Educ. 241, 247 (2004) (analyzing twenty-eight business law and legal environment

textbooks and finding that a majority of the textbooks devoted no words to attorney–client

privilege).