Individuals Should Take Care When Seeking Legal Advice From Corporate Counsel
Corporate officers must be cautious about seeking legal advice from the company’s lawyers because those communications might not be protected by the attorney-client privilege. A recent decision issued by the United States District Court for the Western District of Pennsylvania in Gary Miller Imports, Inc. v. Doolittle, No. 11-178 Erie (W.D. Pa. August 7, 2014) is a case in point.
Carter and Brent Doolittle were directors of and minority shareholders in Gary Miller Imports, Inc. The Doolittles obtained legal advice from lawyers in the same firm that represented Gary Miller Imports in corporate matters. Gary Miller Imports subsequently sued the Doolittles claiming that they had stolen from the business and sought the production of communications between the law firm and the corporation’s directors or officers. The law firm objected to producing certain documents relating to its dealings with the Doolittes on the grounds that they were protected by the attorney-client privilege. Gary Miller Imports responded that it, not individual corporate officers like the Doolittles, controlled the attorney-client privilege.
In addressing this question, the court noted that any privilege that exists as to a corporate officer’s role and function within a corporation belongs to the corporation, not the officer. Therefore, a corporate official cannot prevent the corporation from waiving the privilege with respect to the individual’s discussions with corporate counsel about corporate matters. However, a corporate officer will be permitted to assert the attorney-client privilege if certain conditions are met. Specifically, the individual must be able to show that: a) he or she approached the lawyer for the purpose of seeking legal advice; b) he or she made it clear that he or she was seeking legal advice in his or her individual, rather than corporate capacity; c) the attorney decided to communicate with the person in his or her individual capacity, knowing that a conflict could arise between the individual and the corporation; d) the communications were confidential and e) the substance of the conversations with counsel did not concern matters within the company or the general affairs of the company. After reviewing the evidence that was placed before it, the court stated that it was inclined to find that all of these factors had been satisfied and that the documents were protected by the attorney-client privilege. A final decision was postponed, though, until after the court conducted an in camera review of the materials in question.
Corporate officers who decide to seek advice from the same lawyers or law firm that represent the company must keep in mind that the discussions might not be protected by the attorney-client privilege if a dispute arises between the official and the company. Great care must be taken to ensure that the individual can demonstrate that the conversations revolved around personal, rather than company-related issues, and that the attorney realized that he or she was communicating with the officer in his or her individual capacity. Given the risks involved, if a legal matter might have any relationship to issues taking place within the corporation, serious consideration should be given to the use of an attorney who has no connection with the company or its legal affairs.