What transactional lawyers need to know about attorney-client privilege

While the attorney-client privilege in litigation matters is usually straight-forward, the determination of privilege in a transactional setting can be much more convoluted.

In a recent article in Business Law Today, “Attorney-client Privilege: Pitfalls and Pointers for Transactional Attorneys,” Raymond L. Sweigart, Pillsbury Winthrop Shaw Pittman LLP, presents a case history that offers some guidance for applying attorney-client privilege in transactional matters.

Whether privilege will apply is often determined by the primary purpose of the lawyer’s work in the transactional matter. A lawyer who primarily provides non-legal services, such as business strategy, may not apply the attorney-client privilege. “Courts have decided that the privilege does not apply to communications made to or by a lawyer who is transacting business that might have been transacted by another agent who is not a lawyer,” says Sweigart. In short, lawyers must function solely or primarily as a legal advisor to apply the privilege.

Dual-purpose communications—involving both legal and business matters—are common in the legal world; however, these communications can make for a complicated interpretation of what is covered by attorney-client privilege. For example, in the case of Georgia-Pacific Corp. v. GAF Roofing Mfg. Corp., in-house counsel for GAF reviewed and commented on documents related to GAF’s potential acquisition of Georgia-Pacific, as well as negotiated various provisions related to the transaction. When the deal fell apart, Georgia-Pacific filed suit and subsequently sought to compel testimony from GAF’s counsel. Georgia-Pacific argued that GAF’s counsel was not protected by attorney-client privilege because they served as negotiators, not legal advisors. The court agreed.

The case of Note Funding Corp. v. Bobian Investment Co. illustrates an opposite outcome. Note Funding demanded hundreds of business negotiation documents, assuming no legal content in the papers. However, as Bobian’s lawyers’ advice in the documents included business considerations from a legal perspective, the court determined that the privilege still applied.

There is no such thing as “blanket protection” when it comes to attorney-client privilege. When serving a dual role in both a legal and business matter, a lawyer should take special consideration of how to handle confidential communication.

The following tips help clarify whether a communication is covered by attorney-client privilege:

• Become familiar with your state’s approach. Each state decides when the privilege applies to lawyers acting as negotiators.
• Watch the choice of law and forum selection provisions in the contract.
• Discuss with the client what advice they are seeking and in what context they are applying your advice. Also warn the client of when they may not be protected by the privilege.
• Consider having separate business counsel present at negotiations to advise the client and report on business issues.

Business Law Today is a publication of the Section of Business Law.

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