Attorneys, and clients, are often guilty of taking the position that any communication involving an attorney is privileged and not subject to disclosure. The law, of course, is much more nuanced. In today’s world, where reliance on in-house counsel is expanding, and attorneys are consulted as much for their business advice as their legal advice, questions regarding the extent of attorney-client privilege have become more complex.
On November 9, 2020, the North Carolina Business Court issued a very helpful opinion analyzing the extent of attorney-client privilege in scenarios where attorneys serve in multiple roles within an organization. Chief Judge Bledsoe’s opinion in Buckley LLP v. Series 1 of Oxford Insurance Company NC LLC, 2020 NCBC 81, resolved competing motions to compel, where each side sought to compel documents being withheld by the other on the basis of attorney-client privilege and the work product doctrine.
Plaintiff Buckley, LLP is a law firm that obtained an insurance policy through Defendant Oxford, which included coverage for the loss of key employees. One of Buckley’s named partners, Andrew Sandler, retired shortly after the policy went into effect, and Buckley filed a $6 million dollar claim with Oxford under the policy. Oxford refused to pay the claim, arguing that certain exclusions in the policy apply. Significantly, Oxford contended that Buckley failed to inform Oxford of material facts regarding Sandler prior to the policy taking effect. Prior to the date of the policy, Buckley had already received allegations of misconduct by Sandler and retained the law firm of Latham & Watkins to investigate the misconduct allegations. Sandler negotiated a retirement agreement with Buckley rather than participate in the investigation and left Buckley shortly after the policy took effect.
In discovery, Buckley sought Oxford’s internal communications and documents related to its investigation of Buckley’s claim. Oxford’s general counsel was a member of the team that reviewed Buckley’s claim, and Oxford withheld many of those documents involving its general counsel on the basis of attorney-client privilege. Similarly, Oxford sought discovery of Buckley’s documents and communications with Latham & Watkins regarding the internal investigation of the misconduct allegations. Buckley refused to produce its communications with Latham & Watkins on the grounds of attorney-client privilege. Both sides filed competing motions to compel, which the Business Court resolved in a single opinion. The Business Court ultimately ordered both parties to produce many, but not all, of the documents they were withholding.
Attorney-client privilege only attaches when the communication “is made in the course of giving or seeking legal advice for a proper purpose.” As a general rule, if an attorney is not acting as a legal advisor when the communication was made—for instance, by providing financial advice or acting as a business advisor—it is not privileged. In instances where communications contain both legal and business advice, courts will look to the “primary purpose” of the communication.
Applying these principles, the Business Court found that many of Oxford’s general counsel’s communications were not privileged. The Business Court concluded that Oxford’s general counsel had a substantial role in the company in reviewing and processing claims for payment. The Business Court noted that some of the general counsel’s communications reflected the primary purpose of providing legal advice, but most showed her engaging in claim review “in the ordinary course of Oxford’s business.”
This “ordinary course of business” analysis also applied to many of Buckley’s communications with Latham & Watkins. The Business Court noted that materials “created in the ordinary course of business” and “pursuant to company policy” are typically discoverable and not privileged. The Business Court noted that, in this instance, the internal investigation was required by Buckley’s own firm policies, which weighed heavily in favor of the documents’ disclosure. The fact that Buckley chose to hire a prominent law firm to conduct the investigation did not automatically extend privilege to all of its communications with Latham. The Business Court ultimately determined that many of the documents were “unrelated to the rendition of legal services” and ordered their production.
The Business Court’s opinion is a useful reminder that discovery is a broad tool in litigation, and a lawyer’s participation does not always render a document privileged. Businesses working with attorneys in in-house or business advisory roles should consider the following, when facing questions of what might become public in a protracted litigation:
- Was the attorney providing legal or business advice?
- Did the advice require the attorney to use their legal expertise, or simply their business judgment?
- Is the communication about a particular legal issue, or is it about our company’s ordinary business?
- Why was this document created? Is it the result of a company policy?