Attorney/Client Privilege and the Admiralty Practitioner in the Twenty-First Century Tulane Admiralty Law Institute 2015 Robert G. Clyne President The Maritime Law Association of the United States Senior Vice President, General Counsel & Corporate Secretary American Bureau of Shipping

Agenda Basics of the Attorney/Client Privilege Exceptions/Waiver of Attorney/Client Privilege New Technology, New Issues for Attorney/Client Privilege In re Vioxx: A Failed Attempt to Adapt the Privilege to New Technological Consequences Real World Hypotheticals: What New Challenges Might the Attorney/Client Privilege Face? What can attorneys do to maintain the privilege in light of new technologies?

Basics of the Attorney/Client Privilege The attorney/client privilege “recognizes that sound legal advice or advocacy …depends upon the lawyer being fully informed by the client.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). Privilege belongs to the Client and Lawyer may not waive it without client’s informed consent.

Basics of the Attorney/Client Privilege Intention of confidentiality is key. Broad distribution may lead to waiver.

Basics of the Attorney/Client Privilege Attorney/client privilege protects from disclosure: Communications Made in confidence Between an attorney And a client For purposes of seeking or rendering legal advice

Basics of the Attorney/Client Privilege The Privilege protects: Communications Any information transmitted between a client and a lawyer; more than just text (i.e. images, videos, etc…) Protects the legal advice contained in the communication, not necessarily the facts within the communication. Made in Confidence Intention of confidentiality is key. Holmes v. Petrovich Devel. Corp., 191 Cal. App. 4th 1047 (2011): Employee communications on company email when policy stated that emails would not be private resulted in waiver of the privilege. Lenz v. Universal Music Corp., 2010 U.S. Dist. Lexis 125874 (N.D. Cal. Nov. 17, 2010): Privilege waived after communications with attorneys were referenced generally in emails, online chats, and on a blog reporting on the case. Inadvertent waiver may waive privilege, but there is an opportunity to restore the privilege.

Basics of the Attorney/Client Privilege The Privilege protects: Between parties in a privileged relationship (attorney and client) When the client is an entity, who constitutes “the client”? Control Group Test: those individuals with substantial decision making authority; generally senior management. Philadelphia v. Westinghouse Elec. Corp., 210 F. Supp. 483 (E.D. Pa. 1962). Subject Matter Test: employees not within the “control group” if made at the direction of their superiors on the subject matter upon which the entity is seeking legal advice. Harper & Row Publishers, Inc. v. Decker 423 F.2d 487 (7th Cir. 1970). Former and joint employees Privilege can extend to former employees when communications; (1) concern knowledge obtained or conduct which occurred during course of former employee’s employment; OR (2) relate to communications that were privileged and occurred during the employment relationship. Am. S.S. Owners Mut. Prot. & Indem. Ass’n v. Alcoa S.S. Co., 232 F.R.D. 191, 197 (S.D.N.Y. 2005), 2005 AMC 2711: Disclosure by an entity to individuals having roles with multiple entities will not waive privilege against those other entities, when the disclosure was made within that individual’s role within a privileged relationship. Third Parties Privilege can extend to certain third parties acting as agents of the attorney; e.g. accountants, experts, insurance agents.

Basics of the Attorney/Client Privilege Who is the Attorney? In-House Counsel In-House Counsel typically has responsibilities that require both business and legal advice. If the primary purpose of the communication is to solicit or provide legal advice the Courts will treat it as privileged. Claim Adjusters Claim Adjuster’s conduct not privileged because he/she happens to be a lawyer.

Basics of the Attorney/Client Privilege The Privilege protects: For the purposes of providing legal advice Mere involvement of an attorney in the communication is insufficient. United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, 2012 U.S. Dist. LEXIS 158944 (M.D. Fla. Nov. 6, 2012): Simply cc’ing an attorney is insufficient. Not all corporate investigations may qualify. Mixed purpose communications. Primary Purpose Test: is the central or core purpose of the communication for obtaining legal advice? The extent to which courts extend this privilege over the non-legal components of communications varies. Pittsburgh Corning Corp. v. Caldwell, 861 S.W.2d 423 (Tex. App. Houston 14th Dist. 1993) (broad coverage) versus In re Sealed Case, 737 F.2d 94 (D.C. Cir. 1984) (narrow coverage). Because of Test: would the communication not have been created in its current for but for the prospect of litigation?

Basics of the Attorney/Client Privilege What is Work Product Privilege? A distinct privilege from the Attorney/Client Privilege. Aims to protect the work and mental impressions of an attorney or party in litigation from discovery by opposing counsel. Elements: Otherwise discoverable tangible or documentary items; Prepared specifically in anticipation of particular litigation. May be waived if not otherwise discoverable due to undue hardship.

Basics of the Attorney/Client Privilege Attorney/Client Privilege versus Work Product Privilege While often related, the Work Product privilege differs in a number of ways: Work Product Privilege does not require that an attorney was involved, no communication must have taken place, and need not relate to legal advice. Unlike Attorney/Client Privilege, Work Product Privilege must actually relate to litigation. Work Product Privilege can be waived by an adversary’s basic showing of absolute need, while the Attorney/Client Privilege is absolute (subject to certain exceptions). Work Product Privilege may expire at the conclusion of the litigation at issue, while Attorney/Client Privilege lasts forever.

Basics of the Attorney/Client Privilege Internal Corporate Investigations Not all investigations are privileged Where investigations are routine and there is no meaningful oversight by attorneys or request for legal advice, privilege may be denied Courts have discounted the Self-Evaluative Privilege Better practice to shield investigation is to use outside counsel In Re Kellogg Brown & Root Chevron Midstream Pipelines LLC vs. Settoon Towing et.al.

Exceptions to/Waiver of Attorney/Client Privilege The Crime/Fraud Exception To prevent abuse of the privilege, contravening the policy goal of encouraging complete justice. When advice is sought to further the planning of a crime or fraud. Focus on the state of mind of the client in seeking the advice. Advice of Counsel Exception To prevent use of the privilege as a sword and a shield. When the client places the information protected by privilege at issue for their own benefit, privilege will be waived. Scotstoun Shipping Co. Ltd. v. Diplomatic Marine, Inc., 1980 AMC 1404: Plaintiff asserted reasonableness of settlement as support for why Defendant owed indemnification, and Plaintiff thereby waived the right to assert privilege over attorney communications concerning discussions of the reasonableness of the settlement.

Exceptions to/Waiver of Attorney/Client Privilege Fiduciary Exception To effectuate the intent of a trust relationship. A trustee may not exercise the privilege against the beneficiaries of the trust, when the information was obtained to benefit the trust. Good Cause Exception To effectuate the intent of the corporate shareholder relationship. Corporate management may not exercise the privilege when information was obtained to benefit the corporation. However, it remains the burden of the shareholders to show good cause in any particular situation. Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. Ala. 1970).

Exceptions to/Waiver of Attorney/Client Privilege Common Interest/Joint Defense Doctrine An exception to waiver of the privilege. When co-parties have a common interest, they may share privileged information within the context of the common interest between themselves without fear of waiving that privilege. In re Grand Jury Subpoenas, 902 F.2d 244 (4th Cir. 1990): assignee subsidiary could not waive parent company’s shared common interest privilege unilaterally against a third party. In re Skiles, 102 S.W.3d 323 (Tex. App. Beaumont 2003): Settlement negotiations between adverse insurer and insured regarding representation costs for third party suit, were privileged against that third party in the underlying suit.

Exceptions to/Waiver of Attorney/Client Privilege Insurance Context Protecting the Attorney/Client Privilege in the triparite relationship of insured, insurer and attorney. Common Interest Doctrine/Joint Defense Doctrine is not an independent privilege; rather, it is a limited exception to the general rule that disclosure of privileged communications to a third-party waives the privilege. Requires insured and insurer to share genuine common and legal interest. Common Interest Doctrine does not apply to communications between insured and insurer without involvement of counsel. Common Interest Doctrine does not apply where the insurer has denied coverage on a claim because there is no common interest. The application of the Common Interest Doctrine is less clear in the circumstances of a Reservation of Rights or in cases that are still under investigation and a coverage determination has not been made.

Exceptions to/Waiver of Attorney/Client Privilege Insurance Context In Declaratory Judgment actions there is no common interest and privilege does not apply in reverse to allow the insurer access to privileged communications between the insured and the attorney. Some courts differ on the basis that there was a common interest prior to the filing of the Declaratory Judgment Action (i.e. at the time the privileged communications were made). Where a third-party seeks discovery of privileged communications between the insured and insurer, the protection of such communications are assessed on a case by case basis. Was there a joint interest and attorney involvement at the time the communications were made? Has coverage been denied or disputed?

Exceptions to/Waiver of Attorney/Client Privilege Insurance Context First Party Coverage Subrogation Matters Privilege is straight forward except when facts are adduced in the recovery action that call coverage into question. Liability Defense Cases Common Interest Doctrine/Joint Defense Doctrine will typically apply vis-à-vis third-parties but not necessarily in a subsequent action between insured and insurer Same rules apply to Excess Liability Insurers Bad Faith Litigation Courts differ on application of Attorney/Client Privilege in the bad faith context If insured can make a prima facie showing of a bad faith claim, some Courts have applied the fraud exception to otherwise privileged communications between counsel and the insurer (“the facts are in the file”). Other courts have expressly rejected the notion that evidence of bad faith is tantamount to fraud and reject the exception to privilege.

Exceptions to/Waiver of Attorney/Client Privilege Broker Broker’s communications with insured may be protected if Broker’s participation is necessary to the legal representation (e.g., assisting attorney with gathering factual information and/or preparation for litigation). SR International Business Insurance Co. v. World Trade Center Properties LLC (Post 9/11 communications between the attorneys for the lease holders and Willis were not protected by the attorney/client privilege, the common interest doctrine or the work product doctrine). For Common Interest Doctrine to apply requires that insured and broker have a common “legal” interest as opposed to a common “commercial” interest (i.e. payment of the claim). Privilege is more likely to apply when the insured can demonstrate that the Broker was acting as agent and communications sought concerned facts involving the Broker’s work as agent (best example is outsourcing insurance services).

Exceptions to/Waiver of Attorney/Client Privilege “Culture of Waiver” The privilege may be waived voluntarily, and such waiver will likely apply to that information in all further proceedings. Courts are split as to the extent of waiver, but most circuits (e.g. United States v. Massachusetts Institute of Technology, 129 F.3d 681 (1st Cir. 1997)) find waiver. Only the Eighth may not (Diversified Industries v. Meredith, 572 F.2d 596 (8th Cir. 1978)). The Holder Memo: willingness to waive privilege during corporate investigations should be considered when making the decision whether or not to prosecute. Lobbying by the ABA and other parties has resulted in the scaling back of emphasis on this factor.

New Technology, New Issues for Attorney Client Privilege Various modern technologies have the potential to result in new issues regarding the application of the privilege: New Methods of Communication Email, Texting, Instant Messaging, Social Media, (Facebook, YouTube, Snapchat, LinkedIn, Twitter, etc.), Blogging. Recorded communication through words, sound, picture, and video. New Norms of Communication Electronic communication of various types now a common form of interpersonal communication. Mixing business and personal. All electronic communication leaves records. New Methods of Transmission and Storage Cloud storage, metadata.

In re Vioxx: A Failed Attempt to Adapt the Privilege to New Technological Consequences In re Vioxx, 501 F.Supp. 2d 789 (E.D. La. 2007) Multidistrict class-action litigation involving various products liability, tort, failure-to-warn, fraud, and warranty claims with respect to Vioxx prescription drug, manufactured by Merck. During discovery, Merck submitted a privilege log covering “approximately 30,000 documents, amounting to nearly 500,000 pages”. Faced with the impossibility of an in camera review, a Special Master and Special Counsel were appointed to devise an efficient process to review all referenced documents for privilege. Solution: document categories defined for broad determinations of the application of the privilege.

In re Vioxx: A Failed Attempt to Adapt the Privilege to New Technological Consequences Vioxx Privilege Categories Addressed solely to an attorney with limited circulation and identifiable legal question: Privileged. Addressed to both attorneys and non-lawyers for their review, comment, and approval: Not Privileged. Addressed to both attorneys and non-lawyers for both legal and non-legal purposes: Not Privileged. Addressed solely to an attorney with an attachment for examination, review, comment, and/or approval: Privileged. Messages from an attorney thereafter disseminated amongst non-attorneys, unless the result of clear dissemination so that corporate responsibilities could be fulfilled: Not Privileged. Addressed to an attorney with non-lawyers copied on the message: Might be Privileged. Messages to or from an attorney where the substance of the advice was not included or attached: Not Privileged. Message threads which included attorney interaction at some point within the thread, but not all: Might be Privileged in Part. Messages qualifying for work-product would be separately protected under that privilege.

In re Vioxx: A Failed Attempt to Adapt the Privilege to New Technological Consequences Assessing the Vioxx Methodology Attempted to address common result of modern communications technology: extremely large quantities of recorded communications potentially associated with any issue. Attempt to address quantity led to reduction in quality: focus on parties involved over purpose for communication. Failure to consider the role non-lawyers of varying types and levels play in corporate operations, and who should be included within the privileged corporate entity. Lesson: even routine attorney-client privilege assessments can be uniquely complicated by modern communications technologies.

Real World Hypotheticals: What new challenges might the Attorney/Client Privilege face? The Hack: Sony Pictures Entertainment On November 24, 2014, hackers calling themselves the “Guardians of Peace” infiltrated the computer systems of Sony Picture Entertainment. Around 38 million files were stolen, ranging from film products, to personal information of staff, to internal emails. These files were released to a variety of file sharing sites and other sources. Amongst the material released was information qualifying as trade secrets, intellectual property, and potentially privileged legal advice. Perhaps in an effort to protect privilege and other rights associated with the released material, Sony Pictures issued letters to various media groups demanding that they cease publication of the released materials. How might attorney/client privilege be best addressed in the event of malicious third party releases of otherwise privileged information? What steps, if any, might be proper and expected to maintain the privilege? To what extent should the privilege cover documents released in such a fashion, so that they are in actuality publically available? Sources: http://blogs.reuters.com/alison-frankel/2014/12/15/sonys-big-bluff-cant-beat-first-amendment/ , http://www.reuters.com/article/2014/12/15/us-sony-cybersecurity-media-idUSKBN0JT09M20141215 , http://www.usatoday.com/story/news/world/2014/12/17/north-korea-sony-hack/20558135/

Real World Hypotheticals: What new challenges might the Attorney/Client Privilege face? Always Listening: Samsung SmartTVs The Privacy Policy accompanying Samsung SmartTVs contains the following language: “Please be aware that if your spoken words include personal or other sensitive information, that information will be among the data captured and transmitted to a third party.” Recent news stories have seized upon this language to highlight that Samsung SmartTVs (amongst other everyday gadgets) have and exercise the ability to transmit conversations occurring within range of those devices to third parties, generally for marketing purposes. Given this knowledge, could discussion of potentially privileged matters within the vicinity of devices with such capabilities affect the privilege? Might attorneys be obligated to learn of and ensure that equipment located in the office is not transmitting such information to protect the privilege? Sources: http://www.cnn.com/2015/02/11/opinion/schneier-samsung-tv-listening/ , http://www.thedailybeast.com/articles/2015/02/05/your-samsung-smarttv-is-spying-on-you-basically.html, http://fusion.net/story/49352/all-the-smart-gadgets-are-spying-on-you/

Real World Hypotheticals: What new challenges might the Attorney/Client Privilege face? The Cloud: The Roles of Third Parties The Cloud refers to servers maintained by third parties which can be accessed by persons purchasing storage space on those servers from anywhere via an internet connection. In addition to the storage of potentially privileged information within the systems of unrelated third parties, it is now common knowledge that outside parties, for example, government surveillance programs put in place by many countries, potentially have access to cloud-stored information within the servers and during transmission. What steps, if any, can attorneys take to ensure documents stored in the cloud maintain privilege? Should the reasonable expectation that cloud-stored documents can be accessed by third parties and governments affect the privilege analysis for those documents? Sources: http://money.cnn.com/2014/09/03/technology/enterprise/what-is-the-cloud/, http://www.law360.com/articles/558606/prism-scatters-attorney-client-privilege

What can attorneys do to maintain the privilege in light of new technologies? Stay informed Understand how new technologies collect, transfer, and store potentially privileged communications to direct and help avoid usage that may forfeit the privilege. Understand the policies underlying the privilege Consistent underlying policy rule has historically underlined the creation of varied exceptions to and adaptations of the attorney client privilege: “[S]ound legal advocacy . . . depends upon the lawyer being fully informed by the client.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). Support prevention efforts outside the courtroom As the response to the Holder Memo shows, lobbying by professional groups like the ABA has been successful in protecting the attorney-client privilege.

Questions?