By Michelle Parthum, Benjamin Woodring, and Elizabeth Clarke
In-house lawyers spend their days in near-constant communication with business colleagues, counterparties at other organizations, outside counsel, and many others. Many of those communications involve sensitive, confidential information—including information that may be protected by the attorney-client privilege, attorney work product doctrine, and related doctrines.
The battles over whether such communications are properly protected under such doctrines are typically fought by outside counsel in the context of active litigation. However, years before those battles arise, in-house counsel can play an important role in handling their communications with care and ensuring that potentially privileged and protected information will not later be discoverable. This is important both to protect the organizational client’s interests and to ensure that the in-house lawyer is complying with their ethical duty of confidentiality.
To that end, this article discusses the attorney-client privilege, the attorney work product protection, and related doctrines, with a specific focus on how these doctrines apply to in-house counsel’s communications. The article addresses important differences between federal and Illinois law on these topics of which in-house counsel should be aware. The article concludes with best practices in-house counsel may wish to follow to try to ensure that their potentially privileged communications will not be discoverable in the event of litigation.
The Duty of Confidentiality
Illinois Rule of Professional Conduct 1.6 prohibits a lawyer from revealing information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized to carry out the representation, or the disclosure is otherwise permitted or required by law. Ill. R. Prof’l Conduct R. 1.6(a). The duty of confidentiality is very broad—it applies not only to information learned from the client, but also to any information relating to the representation, whatever the source. Ill. R. Prof’l Conduct R. 1.6, cmt. 3. And not only are lawyers forbidden from disclosing confidential information, they also have an affirmative duty to make “reasonable efforts” to protect that information from inadvertent disclosure. Ill. R. Prof’l Conduct R. 1.6(e).
The duty of confidentiality is “given effect,” in part, by the attorney-client privilege and the work product doctrines. Ill. Sup. Ct. R. 1.6, cmt. 3. Understanding how these doctrines work, including the unique issues these doctrines present for in-house lawyers, is essential for in-house lawyers to ensure their compliance with their duty of confidentiality.
The Attorney-Client Privilege
The attorney-client privilege applies to communications between a client and a lawyer acting in their capacity as such, made for the purpose of obtaining or providing legal advice, that are made confidentially and kept confidential. See People v. Radojcic, 2013 IL 114197 ¶40 (2013). Because the attorney-client privilege stands in tension with Illinois policy favoring broad discovery, the privilege is narrowly applied. Archer Daniels Midland Co. v. Koppers Co., 138 Ill. App. 3d 276, 278-79 (1st Dist. 1985). This is particularly true with respect to communications involving in-house counsel, because courts are wary of turning the privilege into a general shield against discovery of material evidence given the large number of employees who frequently contact a corporation’s lawyers. Id.
Two issues involving attorney-client privilege that have particular relevance for in-house lawyers are (1) identifying which employees an in-house lawyer may have privileged communications with; and (2) the requirement that privileged communications be predominantly legal in nature.
Whose Communications Are Protected?
One challenge unique to in-house lawyers is ascertaining the employees with whom the lawyer may have privileged communications. An in-house lawyer’s client is the company, not individual employees. However, the company can only act through its employees. See Ill. R. Prof’l Conduct R. 1.13(a) & cmt. 1. In the course of representing the company, the in-house lawyer will generally communicate with many employees for different reasons. The question is which of these communications fall within the protection of the attorney-client privilege.
In Illinois, there are two different tests that might answer this question. Illinois federal courts applying federal law use the majority test derived from the Supreme Court’s decision in Upjohn Co. v. United States, 449 U.S. 383 (1981). Under Upjohn, to determine whether a lawyer’s communications with an employee of a company are privileged, a court will consider (1) whether the communication was made for the purpose of obtaining legal advice; (2) whether it contained information needed by counsel; (3) whether it concerned matters within the scope of the employee’s duties; (4) whether it was made by an employee who was aware of the communication’s legal purpose; and (5) whether it was kept confidential. Id. at 394-95. The upshot of the Upjohn test is that communications between in-house counsel and the company’s employees will generally be privileged, so long as the communications occur for the purpose of legal advice and fall within the scope of the employees’ duties.
Under Illinois law, however, the narrower “control group” test is used to determine whether a lawyer’s communications with a company’s employees are privileged. Under the control group test, an attorney may only have privileged communications with members of a company’s control group—namely, top management who have responsibility for making final decisions, or necessary advisors whose opinions or advice form the basis for top management’s decisions. Consolidation Coal Co. v. Bucyrus-Erie Co., 89 Ill.2d 103, 118-20 (1982). Crucially, employees who merely supply information to the attorney or corporate decisionmakers are not part of the control group. Id. at 120.
For example, in Sullivan v. Alcatel-Lucent USA, Inc., No. 12 C 7528, 2013 WL 2637936, at *3 (N.D. Ill. June 12, 2013), the court held that one employee, who was the primary contact with counsel for a particular legal matter and whose analysis and recommendation were part of the company’s decision to settle the matter, was a necessary advisor and therefore part of the control group. By contrast, employees who merely created correspondence and documents in order to seek legal advice from in-house counsel were not members of the control group. Id. at *4.
The control group test is much more restrictive than the Upjohn test. Because it is difficult or impossible to know before litigation arises whether state or federal law will control issues of privilege, it is prudent for in-house counsel to presume that the control group test will apply, and to restrict communications conveying legal advice to members of that group when possible.
Predominantly for the Purpose of Legal Advice
In-house counsel should also take special care to ensure that the substance of their communications will qualify for attorney-client privilege. To be considered a communication for the purpose of legal advice, the advice must be sought from or given by an attorney in their capacity as an attorney, United States v. Evans, 113 F.3d 1457, 1463 (7th Cir. 1997), and the legal advice must predominate the communication, Moore v. Bd. of Trs. of Ill. Cmty. Coll. Dist. No. 508, No. 09 C 4479, 2010 WL 4703859, at *3 (N.D. Ill. Nov. 8, 2010). Importantly, communications that seek business or other non-legal advice from someone who happens to be an attorney will not be privileged. Id.
Many in-house lawyers play a dual role that involves advising the company on both legal and business matters. Courts will thus carefully scrutinize in-house lawyers’ communications to ensure that only those involving predominantly legal advice are being withheld. For example, an Illinois appellate court recently held that an email forwarding a draft lobbying presentation to the company’s general counsel was not privileged because the email did not indicate that the sender was seeking legal advice from the lawyer in his capacity as general counsel. BMM N. Am., Inc. v. Ill. Gaming Bd., 2020 IL App (1st) 190710-U, ¶74 (Jan. 23, 2020).
Additionally, in-house counsel should keep in mind that even if a communication is made predominantly for the purpose of legal advice, the privilege protects only the communication itself, not the underlying facts. Claxton v. Thackston, 201 Ill. App. 3d 232, 238 (1st Dist. 1990).
Attorney Work Product
Illinois Supreme Court Rule 201(b)(2) defines the scope of the work product protection. The doctrine applies to (1) material prepared by or for a party (2) in preparation for trial (3) which contains or discloses the theories, mental impressions, or litigation plans of the party’s attorney.
Attorney work product is another area in which Illinois law differs from federal law. Under federal law, work performed by or for a party, its attorney, or its other representative in anticipation of litigation is protected from discovery. Fed. R. Civ. P. 26(b)(3). Thus, the federal work product doctrine shields both “ordinary” work product, which is discoverable only upon a showing of substantial need, and “opinion” work product revealing an attorney’s mental processes, which receives nearly absolute protection from discovery. Appleton Papers, Inc. v. E.P.A., 702 F.3d 1018, 1023-24 (7th Cir. 2012); Costello v. Poisella, 291 F.R.D. 224, 231 (N.D. Ill. 2013).
By contrast, the Illinois work product doctrine protects only opinion work product—that is, work product that reveals the attorney’s theories, mental impressions, or litigation plans. Mlynarski v. Rush Presbyterian-St. Luke’s Med. Ctr., 213 Ill. App. 3d 427, 432 (1st Dist. 1991). Ordinary work product is freely discoverable in Illinois, even when generated by an attorney in preparation for trial. Waste Mgmt., Inc. v. Int’l Surplus Lines Ins. Co., 144 Ill. 2d 178, 196 (1991). Even opinion work product, moreover, is discoverable in Illinois upon a showing of impossibility of securing similar information from other sources. Id.
Given the wide range of legal tasks routinely handled by in-house counsel, an important limitation to keep in mind is that attorney work product protection—whether under federal or Illinois law—applies only to materials generated in anticipation of litigation or trial. Accordingly, contract drafts, for example, will generally not be protected under the work product doctrine. Although there is no firm rule governing how far in advance of eventual litigation work product can be prepared to be protected, the longer the gap between the work product and the litigation, the more skeptical a court will be. For example, one court held that a memorandum describing the results of an internal audit was not prepared for trial where there was a three-year gap between preparation of the audit and the filing of the lawsuit. Lawndale Restoration Ltd. P’ship v. Acordia of Illinois, Inc., 367 Ill. App. 3d 24, 32 (1st Dist. 2006).
Given both the preparation-for-trial requirement and the narrower scope of work product protection under Illinois law compared to federal law, the key takeaway for in-house counsel is that much of their work product may not be protected under the work product doctrine.
In-house counsel often need to bring in consultants and other third parties in connection with normal business operations, particularly significant transactions, internal investigations, or litigation. While the general rule is that including third parties in privileged communications destroys the privilege, where a third party is acting as the agent of the lawyer or the client, the privilege may still apply.
For instance, some courts have held that the attorney-client privilege may apply to communications with a third party made for the purpose of obtaining or providing legal advice where the third party is “necessary, or at least highly useful” for effective consultation between the client and lawyer. See Heriot v. Byrne, 257 F.R.D. 645, 666 (N.D. Ill. 2009) (citing U.S. v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961)); see also Lawrence E. Jaffe Pension Plan v. Household Int’l, Inc., 244 F.R.D. 412, 420 (N.D. Ill. 2006) (attorney-client privilege applied to communications between Ernst & Young and company where both parties “understood that the engagement was to assist in-house counsel in providing legal advice regarding pending or anticipated litigation”).
Similarly, some courts applying the Illinois control group test have extended that doctrine to include non-employee agents of the company, where the company gives the non-employee agent express authority to communicate with attorneys on behalf of the company for the purpose of obtaining legal advice. See Caremark, Inc. v. Affiliated Computer Servs., Inc., 192 F.R.D. 263, 267 (N.D. Ill. 2000).
However, a word of caution is warranted here. First, the foregoing doctrines have been relied upon more heavily by Illinois federal than state courts, and so there is some uncertainty about the degree to which Illinois state courts will embrace these doctrines. Moreover, there is always risk in involving third parties in attorney-client communications. In-house counsel should exercise caution when involving third parties in potentially privileged communications, and recognize that the more indispensable the third party’s participation to the provision of legal advice, the better.
At times, in-house lawyers may need to coordinate with another party’s attorney with respect to some common legal issue or strategy. Under federal law, those communications may be protected by the common interest doctrine, which allows otherwise-privileged communications to be shared between parties that have a common legal interest without giving rise to a waiver of the privilege. Monco v. Zoltek Corp., 317 F. Supp. 3d 995, 1002 (N.D. Ill. 2018).
While Illinois law recognizes the common interest doctrine, it is relatively underdeveloped and has not been extended much, if at all, outside the insurer-insured relationship. Robert R. McCormick Found. v. Arthur J. Gallagher Risk Mgmt. Servs., Inc., 2019 IL 123936, ¶31. In addition, the scope of the doctrine has not yet been clarified with precision. For example, it remains unclear whether the common interest doctrine extends beyond actual litigation to potential litigation, whether it extends beyond litigation to other common legal interests, or whether a written common interest agreement is required. See Selby v. O’Dea, 2017 IL App (1st) 151572, ¶83; Ross v. Ill. Cent. R.R. Co., 2019 IL App (1st) 181579, ¶42.
Accordingly, in-house counsel practicing in Illinois should generally presume that the common interest doctrine will not prevent waiver of their privileged communications, and should act with caution when involving third parties in potentially privileged communications.
Choice of Law
For companies with employees, operations, and customers located throughout the country, privileged communications can also raise choice of law issues. While a full discussion of such issues is beyond the scope of this article, in-house lawyers should be aware that communications they intend and understand to be privileged could later be evaluated under another state’s law that may give lesser protection to attorney-client communications.
Illinois follows the Restatement (Second) of Conflict of Laws §139, Allianz Insurance Company v. Guidant Corporation., 373 Ill. App. 3d 652, 667 (2d Dist. 2007), which distinguishes between the privilege laws of the state where the litigation is pending and those of the state with the “most significant relationship” to the communication. The Restatement’s determinations of “significance” are not always intuitive—for instance, in the context of written communications, the state with the most significant relationship is not the state from which one sends the communication, but rather the state in which such communications are received. Restatement §139(2), cmt. E.
Importantly, under the Second Restatement, if either the forum state or the state with the most significant relationship to the communication would treat it as non-privileged, then it will generally be treated as non-privileged—even if the other state would have treated it as privileged. See Allianz, 373 Ill. App. 3d at 672.
The uncertainty inherent in choice-of-law scenarios provides yet another reason for in-house counsel to exercise care in disseminating potentially privileged communications, particularly where the privilege claim is more borderline.
Best Practices for In-House Lawyers’ Communications
As discussed above, in-house counsel face substantial uncertainty in assessing whether their communications will be privileged or protected from disclosure. The applicable law may differ significantly depending upon whether federal or state (and which state’s) law applies, and many of the doctrines involve fine line-drawing—particularly for in-house lawyers balancing both legal and business responsibilities. As a result, it is important for in-house counsel to take extreme care with respect to potentially privileged communications. The remainder of this article addresses some best practices that in-house counsel may wish to follow to help ensure that potentially privileged communications are not discoverable.
First, consider the means of communication. Of course, most lawyers rely heavily upon email communication for speed and ease, but there may be certain matters for which it would be preferable to discuss in person or over the phone to avoid creating a written record.
Second, consider whom to include in the communication. To the extent possible, in-house counsel should limit the communication of potentially privileged information to members of the control group. It is also prudent to include only those with a need to know whatever information is being relayed. In addition, consider whether to include outside counsel on the communication. While the presence of outside counsel will not transform a non-privileged communication into a privileged communication, in a borderline case the involvement of outside counsel may tip the scales toward finding that communication privileged.
Third, consider the substance of the communication. If it is not predominantly legal advice, it is likely discoverable. This may mean that instead of sending one email that is 90% business advice and 10% legal advice, an in-house lawyer may be better off separating the message into two emails, one addressing just the business advice and the other addressing just the legal advice.
Fourth, strive to make clear when a communication includes legal advice. As an initial matter, in-house counsel should advise their colleagues that communications with them are not always privileged. And when sending an email or written document containing legal advice, in-house counsel may wish to use a “Privileged and Confidential” legend to alert colleagues that the communication contains legal advice and should not be further disseminated—though care should be taken not to overuse such legends, which could instill a false sense of security in colleagues or cause a court to conclude that the legend is meaningless.
Fifth, consider often-overlooked aspects of the communication. For instance, consider whether attachments to an email are independently privileged—if not, they may be discoverable. Care should also be taken in writing subject lines for emails. A privilege log produced in litigation may reveal the subject lines of withheld emails, and if the subject line contains potentially privileged, overly detailed, or inflammatory information, there is a risk that an adversary will use that information to the client’s disadvantage.
About the Authors:
Michelle Parthum is a partner at MoloLamken LLP. Ms. Parthum’s practice focuses on complex commercial litigation and appeals. She represents clients before the United States Supreme Court, the federal courts of appeals, and other federal and state courts. Her practice includes business and securities litigation. Prior to joining MoloLamken, Ms. Parthum was an associate at Cleary Gottlieb Steen & Hamilton in New York. She also served as a law clerk to the Honorable Edward C. Prado of the United States Court of Appeals for the Fifth Circuit. For Ms. Parthum’s full biography, visit: https://www.mololamken.com/professionals-michelle-parthum.
Benjamin Woodring is an associate at MoloLamken LLP. Mr. Woodring’s practice focuses on complex civil litigation, white collar matters, and appellate litigation. Prior to joining MoloLamken, Mr. Woodring clerked for the Honorable Scott Matheson, Jr. of the United States Court of Appeals for the Tenth Circuit and for the Honorable Edmond Chang of the United States District Court for the Northern District of Illinois. He also previously worked as a litigation associate at Boies Schiller Flexner LLP. Prior to law school, Mr. Woodring received his Ph.D. in English from Harvard University. For Mr. Woodring’s full biography, visit: https://www.mololamken.com/professionals-benjamin-woodring.
Elizabeth Clarke is an associate at MoloLamken LLP. Ms. Clarke’s practice focuses on complex civil litigation, white collar matters, and appellate litigation. Prior to joining MoloLamken, Ms. Clarke clerked for the Honorable Allison H. Eid of the United States Court of Appeals for the Tenth Circuit and the Honorable Edmond E. Chang of the United States District Court for the Northern District of Illinois. For Ms. Clarke’s full biography, visit: https://www.mololamken.com/professionals-232.