Attorney-Client Privilege Considerations for Family Businesses

The attorney-client privilege is one of the oldest privileges recognized under U.S. law. It provides important protections for communications between a client and their attorney.

However, those protections are not absolute. The following article will explore the attorney-client privilege, describe when it applies and when it does not, and highlight other important considerations.

What Is the Attorney-Client Privilege?

The attorney-client privilege is a rule of evidence. In other words, it impacts what information a third party is able to compel someone to disclose. More specifically, the attorney-client privilege protects from compelled disclosure communications that are:

• (1) Between a client and their attorney;
• (2) Confidential when made;
• (3) Intended to remain confidential; and
• (4) Made for the purpose of obtaining legal advice.

The protections of the attorney-client privilege survive indefinitely. This means that the protections remain in place even when the attorney-client relationship ends, no matter if the relationship ends due to voluntary termination or due to the death of one of the parties.

Waivers and Exceptions

While the protections of the attorney-client privilege are strong and long-lasting, they can be waived both voluntarily and involuntarily. Since a waiver of the attorney-client privilege could cause highly confidential information to be made public, it is important to be aware of what behavior results in the privilege being waived.

Presence of a Third Party

Generally, if a third party is present during a communication between a client and their lawyer, then the attorney-client privilege is waived. This means that if a third party sits in on an in-person meeting between a client and their lawyer, is copied on an email, or is similarly involved in a communication, that communication is not protected by the attorney-client privilege. As such, it is important for clients to be mindful of who is included in a conversation before divulging sensitive information.

Crime Fraud Exception

The attorney-client privilege does not apply when a client seeks advice in order to further ongoing or future criminal or fraudulent acts. In other words, if the client is using the attorney to find out how "best" to break the law, then the attorney-client privilege does not apply. This is true even if the lawyer does not know they are being used in furtherance of crime or fraud.

Inadvertent Waiver

If a client inadvertently discloses to a third party information that would otherwise be protected by the attorney-client privilege, then the attorney-client privilege is waived. Depending on both the specific circumstances of the disclosure and the applicable law, an inadvertent disclosure may operate as a "subject matter waiver."

In the case of a subject matter waiver, the attorney-client privilege is waived not only as to the specific information that was disclosed but also as to all information that concerns the same subject matter as the information disclosed. This can be devastating, and clients should take great care to avoid inadvertently disclosing sensitive information.

Voluntary Waiver

The attorney-client privilege belongs to the client, not the attorney. As such, only the client can voluntarily waive the privilege.

However, there are circumstances where waiving the attorney-client privilege can be advantageous in litigation, and it is the attorney, not the client, that is likely to be the one to identify when those circumstances arise. As a result, it is important for clients to trust their attorneys when they suggest that waiving the privilege is the best option.

When the Company Is the Client

Unique considerations are added to the attorney-client privilege analysis when a company rather than an individual is the client. First, since companies are inanimate legal entities, the question arises as to who the "client" is that may communicate with a lawyer and enjoy the protection of the attorney-client privilege while doing so.

Most jurisdictions hold that communications between any employee of a company, no matter their position or rank, and the company's lawyer (whether in-house or outside counsel) can qualify for the attorney-client privilege so long as the communication was made for the purpose of obtaining legal advice.

Second, a similar issue arises as to who has the power to voluntarily waive the company's attorney-client privilege. The answer to that question, in most jurisdictions, is that the management of a company, to wit, its directors and officers, are the ones empowered to waive the company's attorney-client privilege.

It is important to note that in the majority of jurisdictions, that power is granted exclusively to a company's current directors and officers. Such a rule means that once a director or officer leaves a company, they are left powerless to decide whether the company should assert or waive the privilege over a specific communication, even if that director or officer was the one that made the communication in question.

Conclusion

The law surrounding attorney-client privilege is nuanced and varies by jurisdiction. Be sure to talk to your legal counsel about attorney-client privilege issues before divulging confidential information to them.