Benjamin Franklin famously observed that “An ounce of prevention is worth a pound of cure.”1 Nothing could be truer, and that axiom applies with full force to both lawyers and clients in promoting the existence (and avoiding the waiver) of the attorney-client privilege in the various situations in which it might apply. The privilege preserves the sanctity of attorney-client communications. As noted in the examples below, mindfulness on the part of both lawyers and clients is a key factor in establishing and maintaining the privilege. Clients often don’t know that the privilege has limitations and exceptions. It’s thus incumbent on lawyers to educate their clients on the boundaries of the privilege and to remain aware of situations that may result in its waiver.
Privilege Basics
The privilege applies to trust settlors, trustees, executors and other fiduciaries no less than it does to other clients.
The privilege is at the core of our legal system; it shields from discovery the communications between lawyers and clients, thus permitting full and open communications. As defined, the privilege exists when:
- The asserted holder of the privilege is (or sought to become) a client;
- The individual to whom the communication was made: (1) is a member of the bar of a court or a subordinate of such a member, and (2) in connection with this communication, is acting as a lawyer; and
- The communication was for the purpose of securing legal advice.
Third-Party Presence
The presence of a third party will destroy the privileged nature of the communication between lawyer and client. In what later blossomed into litigation in which I represented the creditor, a client sought legal advice from a lawyer in connection with establishing asset protection trusts for what the client (a debtor) later characterized as “estate planning” (her creditor characterized it instead as “fraudulent transfers”). When the client’s deposition was taken at the office of her lawyer in connection with the creditor’s subsequent lawsuit, I noticed that the defendant-client didn’t drive a car and that the lawyer’s office had no real waiting room. Deposition questioning of the defendant-client revealed that her neighbor drove her to the estate-planning meeting and that because there was no waiting room, the neighbor sat in on the meeting. I then asked her to state fully and completely precisely what had been discussed between her and her lawyer in the estate-planning meeting. Her lawyer couldn’t stop the questioning; the privilege had been waived by the presence of the neighbor.
Had her lawyer remained mindful of the parameters of the attorney-client privilege at the time of the planning meeting and honored them, the disaster (from the client-debtor’s perspective) that occurred at the deposition would never have happened.
The same caution applies when, as sometimes occurs, well-heeled clients want their circle of professional advisors to meet and confer as a group. Often that involves their lawyer, their investment advisor, their accountant and potentially others. The presence of the non-lawyers will typically constitute a waiver of the privilege that might otherwise be maintained if the meeting was solely with the lawyer. Mindfulness permits intelligent planning to avoid that result.
A recent variation that involved a colleague at my office: An ultra-high-net-worth client summoned his four different sets of lawyers, each from a different country, to an offshore meeting in Europe to discuss and coordinate his various legal and business concerns and to simultaneously review and revise his estate planning. The U.S.-based lawyer became aware that the attendees would include financial and other non-legal advisors from other countries. In those other countries, the formulations of the attorney-client privilege were markedly different from the U.S.-based version of the privilege, and the presence of the non-lawyers wouldn’t vitiate the privilege in the non-U.S. jurisdictions. That gave no solace to the U.S. lawyer; it created no exception to the U.S. rules.
But, his mindfulness of the issue permitted adjustments to be made in advance concerning who would attend which meetings and how information would be communicated, permitting successful protection of the attorney-client privilege from a U.S. perspective.
Kovel Letter
It’s possible to shield communications between a lawyer and a non-lawyer third party in limited circumstances via a so-called “Kovel letter.” Based on the facts in the landmark case of United States v. Kovel,2 if a lawyer retains the services of a third-party expert that the lawyer relies on in providing legal advice to the client, the communications between the lawyer and the third party may be protected by the attorney-client privilege. The Kovel case involved an accountant as the third party; the analysis has expanded over time to other types of advisors.
The factors and requirements that permit Kovel privilege protections apply regardless of the specific skill set of the third party. That said, the considerations apply just as much in a trust or fiduciary setting as in other settings. It’s a fact-specific inquiry.
The upshot: The attorney-client privilege can apply to communications between a lawyer and a non-lawyer third party if the communication is “made in confidence for the purpose of obtaining legal advice from the lawyer.”3
The Kovel court held that the attorney-client privilege could reasonably extend to an accountant assisting a law firm in an investigation into an alleged federal income tax violation. The court stated that the privilege could be extended to protect communications that were “necessary, or at least highly useful,”4 to discussions between the client and the attorney, the very relationship that “the privilege is designed to permit.”5 The privilege can cover communications with an expert who provides what a court will accept as a legitimate translation or interpretation function because such communications help the attorney better understand and convey information and may be used in providing legal advice.
Kovel, and the cases that it spawned, thus require that to create and maintain attorney-client privilege with such third parties, the expert advice be in support of legal advice. The “translation” and “interpretive” characteristics are key elements. Mere business advice and business discussions are insufficient. In addition, a pre-existing business relationship between the client and the non-legal expert will undercut the argument that Kovel protections should apply; third-party advice that looks and feels like the regular business advice ordinarily given by that expert directly to the client won’t bring the communications within the Kovel protections.
Kovel-based claims of privilege will invite careful scrutiny. Over the years, our litigation system has progressively tilted in favor of more disclosure as opposed to less, both of information and documents. The successful invocation of the attorney-client privilege operates as a bar to disclosure and an impediment to evidence collection, in conflict with the disclosure trend. Courts will therefore review it closely to ensure a fair application of the rules.
In that spirit, aggressive attempts to employ Kovel protections have often come up short. In one notable example, in a will contest I handled that resulted in an unreported opinion, the defendant was accused of undue influence; the defendant claimed that the defendant’s adult daughter was rendering Kovel-protected advice to the defense lawyer in discussing with him the facts of the case and the defense lawyer’s approach to defending it. The defense claimed that the daughter was better at explaining the parent-defendant’s actions and that she therefore was performing something akin to a translation function. The notion that the communications between the lawyer and the defendant’s daughter were Kovel-protected was, charitably, a stretch and was rejected. Using true forensic consultants is no guarantee of success; the Kovel criteria are typically hotly contested by the litigants and are just as typically applied rigorously by the courts.
Covered Documents
Mindfulness of which documents are subject to the attorney-client privilege (and which aren’t) is likewise of importance. Documents that weren’t privileged in the first place don’t take on privileged status simply because they’re now shared directly between the lawyer and the client. Put differently, a business record that’s otherwise discoverable doesn’t take on a mantle of attorney-client protection and become something other than a business record because it was sent to a lawyer. In that circumstance, what are arguably protected from disclosure are the communications between the client and the attorney that accompany or refer to the business record.
Additionally, slapping a label on a communication and branding it an “attorney-client privileged communication” doesn’t make it so, any more than putting a Maserati logo on a Volkswagon changes the nature of the car. Mindfulness and client education are particularly appropriate as to this issue because of the frequency with which such misguided labeling appears to occur. A memorable example: The settlor of a trust sent an email to his hand-picked non-lawyer and best-friend trustee, not to his lawyer, which he captioned “Attorney-Client Privileged Communication.” He then laid out step by step in the course of two single-spaced pages precisely how he had fraudulently conveyed his assets just before being pursued criminally and civilly for what turned out to be billions of dollars in damages.
The email was disclosed in discovery, as it had to be. It wasn’t a communication between the settlor and his lawyer, a prerequisite for an attorney-client communication (nor did it seek or relate to legal advice if it had actually been delivered to the lawyer instead of the trustee, nor would it have survived the application of the crime-fraud exception to the attorney-client privilege, a subject for another day).6
Mindfulness and client education: The settlor had indeed been advised by his lawyer to put nothing in writing after becoming the target of civil and criminal litigation. Some clients just need more education than others.
Trustee-Lawyer Communications
This raises the question in a different context of whether and to what extent a trustee’s communications with his lawyer are privileged. Some jurisdictions have adopted a fiduciary exception to the attorney-client privilege and held that beneficiaries are permitted access to communications, legal opinions and the like between the trustee and the trustee’s counsel if the legal advice is obtained in the context of the trustee’s fiduciary role and is for the administration of the trust. Some jurisdictions have rejected the fiduciary exception either via case law or by statute. Beyond that, in jurisdictions that have embraced the fiduciary exception, if the trustee uses their own funds to engage counsel to represent them in their individual capacity in anticipation of (or in connection with) litigation by beneficiaries, and segregates their communications with personal counsel from the balance of the trust communications, the privilege may hold and communications between the trustee and their separate counsel may be protected from disclosure.
Waiver
In all instances when the attorney-client privilege applies to a situation or relationship, the privilege is easily waived. Remind clients of this periodically. If the client shares with a third party some or all of the communications with their lawyer, the privilege is likely to be deemed waived. The question at that point is the scope of the waiver: whether it’s restricted to the actual communication or whether more broadly to the subject matter referenced in the communication.
Endnotes
1. www.ushistory.org/franklin/philadelphia/fire.htm.
2. United States v. Kovel, 296 F.2d 918 (2d Cir. 1961).
3. Ibid., at p. 922.
4. Ibid.
5. Ibid.
6. Cendant Corporation v. Shelton, et al., Civ. No. 3:06CV00854 (AWT) (2006).