Filed: November 18, 2010
Opinion by Judge Michael D. Mason
Held: To shield communications with non-lawyers using the attorney-client privilege, a party must show that the communication was reasonably necessary for the purpose of obtaining or providing legal advice. If the client is an individual, this means satisfying the "derivative privilege" test. If the client is a corporation, it must establish that the third parties are the “functional equivalent” of the client using a five-factor test.
Facts: A defendant attempted to discover communications by and between a plaintiff, its accountants, and its lawyer. The plaintiff claimed attorney/client privilege.
Analysis: The attorney/client privilege may protect communications involving an accountant when the accountant enables communication with the attorney by 'translating' complex accounting concepts. This privilege is narrowly interpreted. Most courts limit the application to instances where the accountant was necessary to facilitate the communication.
There is a four-part test: 1) to whom was the advice provided - client or lawyer; 2) where client's in-house lawyer is involved, whether counsel also acts as a corporate officer; 3) whether the accountant is regularly employed by the client; 4) which party initiated or received the communications.
Where the client is a corporation, there is a five-part test: 1) whether the communication was made for the purpose of securing legal advice; 2) the employee making the communication did so at the direction of his corporate superior; 3) the superior made the request so that the communication could secure legal advice; 4) the subject matter of the communication is within the scope of the employee’s corporate duties; and 5) the communication is not disseminated beyond those persons who need to know its contents.
In the given circumstances, the Court found it impossible to tell from a review of the documents and the privilege log the nature of the advice being sought or offered and the role being served by the intermediaries. The accountants had served the client for decades. A number of the communications were more than 10 years old, much older than the dispute. It was frequently difficult to tell who initiated the communication and why. Accordingly, the Court held the plaintiff had failed to meet its burden and it compelled production of the documents in question.
*The Court then stayed the effect of its order for 10 days to allow for the plaintiff to submit further information to the Court.
The full opinion is available in pdf.