Business and Corporate Section Monthly Article

Maintaining the Attorney-Client Privilege in General Counsel or In-House Representation

“In determining the existence of a privilege, no attempt [is] made to distinguish between 'inside' and 'outside' counsel."  (United States v. Rowe (9th Cir. 1996) 96 F.3d 1294, 1296.)  But with the proliferation of limited liability partnerships (“LLP”) and limited liability corporations (“LLC”), what communications and to whom are the communications privileged?  

California Rules of Professional Conduct, Rule 3-600(A), provides that in representing entities "an attorney must conform the representation to the concept that the organization itself is the client, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement.”

LLC management is vested with one or more managing members (Cal. Corp. Code § 17150) while LLP management is vested with general partners (Corp. Code § 15904.06) and limited partners have no right to participate in the control of the business. (Corp. Code §§15903.02, 15903.03.) 

“Those ‘who are present to further the interest of the client in the consultation’ include a spouse, parent, business associate, joint client or any other person ‘who may meet with the client and his attorney in regard to a matter of joint concern.’” (Benge v. Superior Court (1982) 131 Cal. App. 3d 336.)   Thus, a corporation's privilege extends to communications between corporate employees and counsel as long as the communications are "made at the direction of corporate superiors in order to secure legal advice."  (United States v. Chen (9th Cir. 1996) 99 F.3d 1495, 1502.) 

For each entity, the purpose of the communication is critical because Evidence Code defines the “client” by the purpose of his or her communication—that of “retaining the lawyer” or “seeking legal advice.” (Evid. Code §951.)  “For example, the privilege is not applicable when the attorney acts merely as a negotiator for the client or is providing business advice.” (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 743.)  Further, “routine, nonprivileged communications between corporate officers or employees transacting the general business of the company do not attain privileged status solely because in-house or outside counsel is ‘copied in’ on correspondence or memoranda.”  (Zurich American Ins. Co. v. Superior Court (2007) 155 Cal. App. 4th 1485, 1504.)

Therefore, in representing entities, the purpose of the communication and recipient is crucial to maintaining the privilege to those communications.

-- Andrew Servais

**This article is intended for informational purposes only and does not constitute legal advice. Any views expressed are those of the author only and not of the SDCBA or its Business & Corporate Law Section.**