Business Law and Business Litigation: The Problem of the Corporate Client and the Attorney-Client Privilege
By Bryan K. Gould and Philip R. Braley
The attorney-client privilege is a rule of evidence protecting certain communications between an attorney and a client from compelled disclosure. The privilege allows a client to “refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client.” N.H. R. Evid. 502(b). Because an entity client can communicate with counsel only through human beings, the question that arises is: which such persons’ communications with counsel are protected by the entity’s privilege? The answer to that question under New Hampshire law may surprise you.
Under New Hampshire Rule of Evidence 502(a)(2), an individual may be considered a representative of the corporation for attorney-client privilege purposes only if that person has “authority to obtain professional legal services, or to act on advice rendered pursuant thereto, on behalf of the client.” The language used in the rule is known as the “control group test,” and it is the narrowest recognized test for determining the scope of the privilege as applied to an entity client. See id., Reporter’s Notes (“Uniform Rule 502(a)(2) adopts a definition in terms of authority to obtain or act upon the basis of legal services, the so-called ‘control group’ test, which the Federal Advisory Committee described as ‘the most restricted position.’”).
The New Hampshire Supreme Court has yet to explicitly apply the control group test, but it has been described by one court in the following terms:
Emphasis supplied. Philadelphia v. Westinghouse Electric, 210 F. Supp. 483, 485 (E.D. Pa. 1962), petition for mandamus and prohibition denied sub nom. General Electric Co. v. Kirkpatrick, 312 F.2d 742 (3rd Cir. 1962), cert. denied, 372 U.S. 943 (1963).
… if the employee making the communication of whatever rank he may be, is in a position to control or even to take a substantial part in a decision about any action which the corporation may take upon the advice of the attorney … then, in effect, he is (or personifies) the corporation when he makes his disclosure to the lawyer and the privilege would apply.
In at least one case, New Hampshire’s superior court has applied the control group test in deciding which corporate employees could be interviewed by opposing counsel without prior notice to the corporation’s lawyer.
Emphasis supplied. Totherow v. Rivier College, slip op. at 7-8, No. 05-C-296 (N.H. Super. Feb. 20, 2007) (Lynn, C.J.), citing Fair Automotive Repair, Inc. v. Car-X Serv. Sys. Inc., 471 N.E.2d 554 (Ill. App. 1984). It is worth noting that under Judge Lynn’s articulation of the test, the roster of persons within the control group as to one litigated matter may differ from the roster for another matter.
Utilizing this test [i.e., the control group test], I hold that plaintiffs’ counsel may initiate ex parte contacts with, and may conduct ex parte interviews of, all current employees of defendant other than those high level management officials … who are responsible for or are significantly involved in the making of final decisions with regard to the [employer’s] legal position in this litigation. The mere fact that an employee of the [employer] may possess factual information concerning the litigation, or even may have engaged in conduct that could be imputed to the [employer] or upon which the [employer] could be found liable, does not render such a person a member of the control group.
In contrast, federal courts exercising federal question jurisdiction or applying federal common law employ the much broader “subject matter” test when determining the boundaries of an entity client’s privilege. In Upjohn Co. v. United States, 449 U.S. 383 (1981), the United States Supreme Court concluded that “[t]he control group test adopted by the court below … frustrates the very purpose of the privilege by discouraging the communication of relevant information by employees of the client to attorneys seeking to render legal advice to the client corporation.” Upjohn, 449 U.S. at 392. The subject matter test broadens the class of individuals whose communication with a corporation’s attorney will be deemed privileged by examining a set of factors, including:
Id. at 394-96. Thus, under the subject matter test, communications between a corporation’s lawyer and a low-level employee who is clearly not within the control group may still be protected by the privilege.
1. Whether the employee communicated with the lawyer at the direction of the employee’s superior;
2. Whether the employee knew that the purpose of the communication was to get legal advice for the corporation; and
3. Whether the communication concerned a subject within the scope of the employee’s duties for the corporation.
Lawyers should remain mindful, however, that New Hampshire’s federal district court will not apply the subject matter test in every case before it. This is because state law governing privilege will generally apply to diversity cases in federal court. See Fed. R. Evid. 501. See, e.g., Klonoski v. Mahlab, slip op. at 6-9, No. CV-95-153-M (U.S. Dist. N.H. July 16, 1996) (McAuliffe, J.), rev’d. on other grounds, 156 F.3d 225 (1st Cir. 1998) (applying control group test instead of Upjohn’s subject matter test while sitting in diversity).
In light of New Hampshire’s adoption of the “control group” test, attorneys and representatives of their entity clients must be disciplined about their communications. In our experience, very few corporate legal departments are aware of the constraints imposed on a corporation’s privilege in New Hampshire. We therefore recommend that New Hampshire lawyers explain the privilege’s limitations in writing to in-house counsel at the outset of the representation. Once this groundwork has been laid, the lawyer should have a discussion with corporate counsel about who can fairly be included in the control group for purposes of the representation. It is also helpful to preface written communications of a sensitive nature with a notation such as “Privileged Communication – Circulate Only to Control Group.” And, finally, the lawyer should remain vigilant about who participates in meetings and conference calls on behalf of the entity so that the privilege is not waived.
[This article originally appeared in the New Hampshire Bar News, December 14, 2012.]