Attorney-Client Privilege for Transactional Lawyers II

In my last post I discussed the general parameters that courts have applied in determining whether the attorney-client privilege can be evoked by a transactional lawyer for communications that the lawyer engaged in while working on a deal in the event that litigation later arises regarding the deal itself.  I believe that the inevitable dual role that transactional attorneys, both in-house and from outside law firms, generally play in assisting with negotiating and documenting a deal presents significant challenges in protecting the privilege.  Therefore it is essential for deal lawyers to understand and follow certain basic guidelines so that there is a greater likelihood that privilege can be successfully asserted if desired and that clients fully understand the risk and likelihood that sensitive communications may ultimately be disclosed in future litigation.  Suggestions include the following:

  1. Determine which state law regarding attorney-client privilege is likely to apply to the particular transaction and analyze the applicable case law to identify the likely boundaries of the privilege and the work product doctrine that will be established by the courts in that state.  The choices made in the transaction documentation with respect to governing law and forum selection will likely have a significant impact on defining the relevant legal landscape.
  2. Communicate with the client before the transactional engagement begins regarding the scope of advice that the client is seeking and the purposes for which the client intends to use that advice.  Once these communications are completed ensure that any engagement letters are carefully prepared to emphasize (if true) that the primary purpose of the engagement is to provide the client with legal advice.
  3. During the preliminary communications and prior to execution of the engagement letter ensure that the client has been formally advised and warned about the possibility that the attorney-client privilege may not be available to protect sensitive communications in the event that litigation regarding the transactions arises at some point in the future.  This is particularly important when the client has asked the attorney to actively participate in business negotiations during the course of the transaction.
  4. Attempt to carefully plan every communication with the client to avoid unnecessary mixing of legal and business advice that might adversely impact the availability of the attorney-client privilege for the communication in the future.
  5. Avoid inadvertent or simply clumsy use of the assertion of privilege that may later be used to deny the privilege to all communications including those that might otherwise qualify for protection.  For example, the common practice of affixing “attorney-client privileged” legends on all communications should be avoided and this practice should be limited to truly sensitive communications that include content that would clearly fall within the permitted scope of the privilege (i.e., legal advice).
  6. Carefully monitor participation in meetings and other streams of communication in which both business and legal matters are discussed and consider breaking those discussions out separately so that a clearer line can be drawn between privileged and unprivileged communications.

The content in this post has been adapted from material that will appear in Business Counsel Update (Summer 2008) and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.

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