Mixing Business and Legal Advice Can Be Dangerous for In-House Counsel

Over the years, I have written a lot of blog posts on the attorney-client privilege, and they cover a wide variety of issues. One issue that comes up very frequently (whether in-house counsel realize it or not) is what happens when a communication with an attorney intertwines legal and business advice? As Marriott Vacations Worldwide found out last year, the answer is not always crystal clear and, more importantly, may create issues for in-house counsel and the client.

As part of Marriott’s discovery responses in RCHFU v. Marriott Vacations Worldwide, the company objected to producing a strategic plan memorandum to the Corporate Growth Committee (the “CGC”) based on the attorney-client privilege. The plaintiff challenged Marriott’s objection, which left Marriott with the burden of proving that the CGC memorandum was privileged. In analyzing the issue, the Court began by recounting a few overarching principles:

Business communications are not protected merely because they are directed to an attorney, and communications at meetings attended or directed by attorneys are not automatically privileged as a result of the attorney’s presence. The corporation must clearly demonstrate that the communication in question was made for the express purpose of securing legal not business advice.

The Court then addressed the more specific issue of what happens when a document contains both legal and business advice:

Where business and legal advice are intertwined, the legal advice must predominate for the communication to be protected. … When the legal advice is merely incidental to business advice, the privilege does not apply.

As far as the CGC memorandum was concerned, the Court held that because “the primary purpose” of the document was for business advice, it was not privileged. As the court noted, however, this did not preclude going through the memorandum and redacting portions of it that did constitute legal advice. In the case of the CGC memorandum, however, the court refused to do so and delivered a body blow to Marriott’s in-house counsel when explaining why:

In significant respect, the legal duty to protect the attorney-client privilege falls on the legal department, the in-house counsel, involved. When tasked with the CGC memorandum, their duty was to inform the Corporation of the operation of the privilege and to take steps to protect their advice. This could have included blocking the advice into separate paragraphs or pages, including it in confidential addendum or even a separate memorandum. … By so intertwining the legal advice within a majority of contribution of business advice, an implicit waiver of the attorney-client privilege occurred as to the advice for a number of reasons. … The information is intertwined so completely that it would be impractical to attempt redaction.

In light of this, and a host of other decisions on the privilege, one of the most important things in-house counsel can do is to make sure the company’s business people understand the basic concepts that (i) the privilege only applies to communications that are in furtherance of obtaining legal advice; and (ii) simply copying an attorney on an email or having an attorney present at a meeting will not be enough to render such an email or meeting discussions privileged. Indeed, having such conversations not only can make it less likely that your company ever will be in the position that Marriott found itself, but also will lessen the chance that in-house counsel will be called out by a judge for not protecting the company’s confidential information.