Feature

posted 22 Jun 2010 in Volume 12 Issue 12

Transatlantic Privilege

With transatlantic law firms increasingly combining forces and communicating electronically with global clients, Thomas E Spahn, a partner at McGuireWoods, reveals how to navigate the maze of legal privilege stances in the US and Europe.

The oldest legal privilege protects communications between lawyers and their clients. One recent US case has traced this protection back to Roman times.¹ The immunity continued to evolve and eventually spread from England to the colonies, and thereafter to every jurisdiction in the US. Perhaps the privilege became so important in the US because litigation has also flourished there. This has resulted in extensive and intrusive pre-trial discovery, thus necessitating elaborate protections for communications between lawyers and their clients.

European countries (and eventually the EU) also created their own protections. Perhaps because pre-trial discovery did not become as widespread in Europe, or for other reasons, most European countries did not develop a lawyer-client communication protection as broad or as deep as that found in US jurisdictions. Unfortunately, the gap between the two systems has not narrowed and has caused increasing concern (at least on the American side) about the protections that US clients and lawyers have come to expect.

There are several key differences between the attorney-client privilege recognised in the US and in Europe – many of which are affected by the increasing use of email and other types of electronic communication.

Defining the client

Jurisdictions differ as to the ‘client’ whose communications might deserve protection. In all but a handful of US jurisdictions (notably Illinois), the attorney-client privilege protects communications between a corporate lawyer and any corporate employee with facts that the lawyer needs – regardless of that employee’s place in the corporate hierarchy.²

By contrast, in the UK the House of Lords specifically declined in 2004 to support the Court of Appeals’ conclusion that attorney-client privilege did not cover communications between the Bank of England’s lawyer and lower-level bank employees.³ The issue thus remains open in the United Kingdom, as it does in other European countries.

The applicability of privilege to such intra-corporate communications obviously has an enormous impact, especially because corporate lawyers can now much more easily communicate electronically with any level of corporate employee in any country. An uncertain privilege provides little if any protection, so many American lawyers are justifiably worried about the uncertainty of any protection for their communications with lower-level corporate employees.

In-house privilege

Every United States jurisdiction treats in-house corporate lawyers the same as outside lawyers in analysing the privilege protection for their communications. As numerous articles have noted, many European countries do not protect communications to and from in-house lawyers, and the EU has so far resisted calls to extend the privilege.⁴ On April 29 2010, Advocate General Kokott recommended that the EU Court of Justice reaffirm this narrow approach.⁵ This difference remains one of the largest gulfs between the US and Europe, and is exacerbated by the increasing ease of communications between US-based in-house lawyers and European-based corporate employees.

Treat as fragile

Every US jurisdiction recognises the tremendous fragility of the attorney-client privilege (mostly because it provides absolute protection from discovery to communications that are among the most pertinent in any dispute). Legal privilege does not apply ab initio to communications which corporate clients do not treat as the ‘crown jewels’ (as one American court put it).

Many European countries do not consider the privilege to be as fragile, however, as evidenced by the permissibility of government review of otherwise protected documents collected during investigations.

In the US, prosecutors routinely set up what are called ‘taint teams’ to segregate and review protected documents that investigators have seized. Members of those ‘taint teams’ have nothing to do with the government’s substantive investigation or prosecution.

Interestingly, however, the European approach might also actually affect the privilege in the United States.⁶ The EU’s use of ‘dawn raids’ arguably destroys the necessary confidentiality expectation for any otherwise privileged document housed in EU countries. Such seizures obviously have an impact in the EU, but some have worried that the vulnerability of privileged documents in the EU destroys the required expectation of confidentiality in the United States. In other words, privileged documents a client or lawyer sends to Europe are not entitled to protection in the US because they are not being treated like the crown jewels, as is required to deserve protection from US discovery.

Electronic communications obviously play a large role in this analysis. Under the most frightening scenario, the vulnerability of US-based computer servers to EU ‘dawn raids’ might reach back to destroy the confidentiality expectation for all communications on such servers – even if no outsider ever actually reviews the servers’ contents. No US court has gone that far, but the risk remains.

Electronic risks

Every US jurisdiction protects communications between clients and lawyers where the ‘primary purpose’ is the request for, or rendering of, legal advice.

However, the increasing use of email communications has threatened corporate legal privilege.

In a case arising from many thousands of products liability cases against Merck, one US court held that employees’ or even lawyers’ inclusion of numerous direct or copy recipients in email communications (beyond those directly requesting or needing legal advice) might demonstrate that the communications did not meet the ‘primary purpose’ test and therefore did not deserve privilege protection.

Not every American court has moved in this direction, but on both sides of the Atlantic the increasing use of electronic communications jeopardises legal privilege because clients often include unnecessary personnel in those communications.

Unfortunately, lawyers usually find that they have very little control over their clients’ indiscriminate inclusion of numerous colleagues in their emails. Clamping down on such a corporate practice would require engineering a basic cultural change in all corporations.

Indeed, many would argue that insisting on direct communications only between a corporate lawyer and the specific employee requiring legal advice would be counterproductive, because it would deprive others of the guidance that they may not need at the moment, but would help guide their conduct in the future.

Discovery issues

The logistics of discovery in disputes differ in the United States and Europe. As long as companies primarily face litigation only in the US, they usually do not have to worry much about the difference in substantive privilege law between the US and European countries. This is because nearly every American court applies US privilege law to any communication that “touch[es] base” with the United States.⁶

Only a handful of United States courts have applied foreign privilege law to communications at issue in a US dispute. Most notably, well-respected US Magistrate Judge James Francis examined the privilege law of more than 30 countries (from Botswana to Trinidad and Tobago), and ultimately denied privilege protection to communications between Novartis’s Swiss employees and its Swiss in-house lawyers because Swiss law did not protect such communications.⁷

However, American plaintiffs’ lawyers are now nosing around Europe looking for clients and litigation there is on the uptick.

In another troublesome development for American companies, one court held that a US court could compel discovery sought by a party engaged in arbitration before the International Chamber of Commerce of the International Court of Arbitration. The court concluded that a private Chamber of Commerce arbitration should be considered a “tribunal” for the purposes of permitting discovery in the United States. So discovery is increasing in the European sector, which exacerbates the significant differences in privilege protection between Europe and the United States.⁸ Unsurprisingly, most of the discovery fights nowadays involve emails or other forms of electronic communication.

Inadvertent disclosure

The United States has started to adapt its laws to the increasing likelihood that privileged documents⁹ will be inadvertently disclosed.

The new Federal Rule of Evidence 502 indicates that inadvertent disclosure of a privileged document (which occurs most frequently in large-scale document productions) will not automatically waive the attorney-client privilege protection, and will never trigger what is called a “subject matter waiver” (which can require the disclosure of additional privileged documents on the same subject matter).

Other new federal rules invite courts to allow what are called “clawback” provisions, which permit a litigant to retrieve any accidentally produced privileged documents.

If the trend continues towards more discovery in European countries, American companies will have to hope that European law eventually takes
the same approach. At present, an American company which mistakenly discloses a privileged communication in Europe will have to argue that a US court would be forgiving and allow retrieval of the documents.

Of course, companies have always made such mistakes, ever since a secretary put a letter in the wrong envelope. However, the ease of transmitting emails, features such as ‘auto fill’ that can quickly send an email to the wrong person and other technological ‘advances’ have substantially increased the number and extent of inadvertent disclosures.

Even without the advent of electronic communications, the distinctions between US and European attorney-client privilege protections could result in adverse privilege rulings and decreased communications.

Clients and lawyers on both sides of the Atlantic should be wary of the existing risks to available protection – and mindful of developments both in the law and in technology.

References

1. Evergreen Trading, LLC v. United States, 80 Fed. Cl. 122, 128 n.6 (Fed. Cl. 2007)

2. Upjohn Co. v. United States, 449 U.S. 383 (1981)

3. Three Rivers District Council v. Governor & Co. of Bank of England (No. 6), [2004] UKHL 48 (H.L. Nov. 11, 2004)

4. Akzo Nobel Chems. Ltd. v. Comm’n of European Comtys., Nos. T-125/03 & T-253/03 (Ct. First Instance Sept. 17, 2007) (available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX: 62003A0125:EN:HTML) (not in English)

5. Op. of Advoc. Gen. Kokott, Case C-550/07 P (Apr. 29 2010) (Akzo Nobel Chems. Ltd. v. European Comm., appeal pending, E.C.J.)

6. In re Christensen, S.D.N.Y. Misc. No. M19-138 (JFK), 2006 U.S. Dist. LEXIS 11779, at *2 (S.D.N.Y. Feb. 3, 2006)

7. In re Rivastigmine Patent Litig. (MDL No. 1661), 237 F.R.D. 69 (S.D.N.Y. 2006) (U.S. District Judge Harold Baer approved Magistrate Judge Francis’s ruling, In re Rivastigmine Patent Litig., 239 F.R.D. 351 (S.D.N.Y. 2006))

8. In re Application of Babcock Borsig AG, 583 F. Supp. 2d 233, 240 (D. Mass. 2008)

9. Fed. R. Civ. P. 16(b) Advisory Committee Notes on 2006 Amendment; Fed. R. Civ. P. 26(f) Advisory Committee Notes on 2006 Amendment.

– tspahn@mcguirewoods.com