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Second Circuit Reins in Risk of 'At-Issue' Attorney-Client Privilege Waivers

BY Michael Dockterman
March 30, 2009

We are proud to say that we live by the Rule of Law. But in law, as in most other endeavors, exceptions can swallow the rules if the rule-makers are not careful. One area where exceptions pose a particular concern is when the privilege over communications with lawyers is called into question because those communications have been invoked to show someone's good faith in attempting to follow the law. It seems only fair to require someone to disclose what her lawyer actually said when she implies that she was acting in good faith because a lawyer told her that her conduct was lawful. But how far can the exception go before it swallows the rule and opens the door to disclosure of all legal communications, even when the substance of the communication is not “at issue”? This was the question recently before the United States Court of Appeals for the Second Circuit, which tried to bring clarity to a rule that has confused the courts for more than 30 years.

Background

The context for most businesses is clear. Companies seek privileged legal advice every day on myriad subjects, ranging from business transactions to compliance issues to defending claims or litigation. Companies and their lawyers take careful steps to preserve the legal privilege and to retain their ability to control whether they may at some point decide to waive the privilege. In some situations, a company may decide to defend a claim that it acted in bad faith, or that it engaged in an intentional or willful violation of the law, by asserting that it relied in good faith on the advice of counsel in embarking upon the course of conduct that is the subject of the litigation. In that circumstance, the company has squarely and affirmatively placed the legal advice it received “at issue” by relying upon that legal advice as a defense. Courts have universally observed the fairness of a rule that a client may not use the legal advice as a sword to defeat the claim against it while simultaneously shielding that legal advice and its underpinnings from examination.

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