When employees speak to in-house counsel, it is often assumed that the information is protected by the attorney-client privilege. However, as demonstrated in a recent decision in a New York federal district court, not all communications between in-house counsel and company employees are privileged. The Court in Spectrum Dynamics Med. Ltd. v. Gen. Elec. Co., Case No. 18-CV-11386 (S.D.N.Y. Aug. 10, 2021) (Parker, J.) examined the factors considered to determine whether a corporate lawyer’s advice — solicited by an employee at a company intellectual property “bootcamp” — fell within the attorney-client privilege. Every company employee, from CEO on down, should be familiar with the factors analyzed here to ensure that information can be protected in the event of litigation.
In Spectrum, an inventor and employee of Defendant GE was attending the “bootcamp” organized by GE’s intellectual property lawyer. The event was only attended by GE employees and consultants, and an inventor sought out GE’s intellectual property lawyer for advice of a legal nature concerning patent filings. The inventor took handwritten notes during the conversation. Years later, these notes were mistakenly disclosed within a document production. After the inadvertent disclosure, GE sought the return of the notes claiming privilege and Spectrum filed a motion to compel that the documents remain in its possession.
The Spectrum Court analyzed whether the inventor’s notes constituted protected legal advice. The Court stated that in-house counsel’s communications with the company are protected by privilege but only in some circumstances. The general rule is that communications are privileged if the predominant purpose is to seek legal advice. However, if the primary purpose is to seek business advice or information, the privilege does not apply. Importantly, the communication does not have to solely focus on legal advice. For example, the Court noted that discussing costs and collateral non-legal risks (such as politics, appearances, morals, and insurance) is acceptable so long as the predominant purpose of the communication is to render legal advice. Further, the inclusion of scientific or technical information (especially in the context of applying for a patent) will not necessarily displace privilege.
In the case, the inventor’s notes, while handwritten from a conversation at a “bootcamp,” memorialized that the inventor was asking advice of GE’s intellectual property lawyer on legal matters. The company’s position was also substantiated by the inventor’s sworn statement and a sworn statement by the lawyer in question. The Court found that the communication was protected by the attorney-client privilege because the inventor, a company employee, had the expectation that the company lawyer was responding in his legal capacity.
It is worth noting that the protective order in Spectrum provided for a heightened standard for inadvertent disclosure. The Court noted that “usually, when a privileged document is inadvertently disclosed, Federal Rule of Evidence 502 provides that privilege is not waived by the disclosure if “(1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error.” However, in this case, the parties agreed in their protective order that waiver of privilege would not occur unless the production was “completely reckless” i.e., the party has “shown no regard for preserving the confidentiality of the privileged documents.” The Court found that such reckless disregard was not present. Therefore, prudent attorneys drafting protective orders should strive to negotiate provisions which contain a similar heightened standard to avoid the loss of privilege incident to an inadvertent production of privileged material.
The lesson for businesses from Spectrum is that they can benefit from the attorney-client privilege if their employees seek legal counsel from their in-house attorney. This is true even if the advice was sought by less formal means than might otherwise occur at the top tier of a large corporate structure. However, employees should be warned not to mix the conversation with the attorney so they preserve legal advice as the predominant purpose. Companies should educate employees and be proactive to avoid a scenario where it is unclear whether privilege applies and a court must weigh these factors to decide the issue.