DETERMINING WHEN THERE IS A JOINT ATTORNEY CLIENT RELATION
The question of who is the client and thus the holder of the attorney client privilege in the corporate context can raise difficult questions. Corporations, as artificial creatures, can only speak with counsel through individual employees and agents. This can present questions about the holder of the privilege – that is, does the corporation, the individual or both have an attorney client relationship with counsel? The question can become particularly difficult when the company waives privilege and seeks the content of communications corporate counsel had with various employees. A good example is the Broadcom option backdating case where corporate counsel furnished employee statements to the government for use in the criminal trials. Those statements were initially suppressed by the district court in an opinion that was reversed by the Ninth Circuit. U.S. v. Ruehle, 583 F.3d 600 (9th Cir. 2009), discussed here.
In Ruehle, the Circuit Court did not reach the question of when an employee is a joint holder of the privilege with the company. Last week, the Circuit considered that question in U.S. v. Graf, Case No. 07-50100 (Decided July 7, 2010). There, defendant James Graf was indicted for his involvement in the fraudulent operation of Employers Mutual LLC, a purported provider of health care benefits to 20,000 plan members. In reality the, company was a fraud and plan members had no benefits over coverage.
At trial, the government sought to introduce the testimony of three attorneys who had provided legal advice to the company. Although the trustee for the company waived privilege, Mr. Graf objected claiming that he was a joint holder of any attorney client privilege with the company. The district court rejected the claim, finding that Mr. Graf did not in fact have a personal attorney client relationship with any of the attorneys and that his subjective belief to the contrary was not sufficient to sustain his claim. Accordingly, the testimony of the attorneys was admitted as part of the government’s case in chief. Mr. Graff was convicted on all counts.
The Ninth Circuit affirmed the ruling of the district court on the privilege issue. In considering the question the Court adopted the test used by the Third Circuit in In re Bevill, Bresler & Schulman Asset Mgt. Corp., 805 F.2d 120 (3rd. Cir. 1986). In that case, the court held that any privilege as to a corporate officer’s role within the company belongs to the corporation.
To evaluate whether an individual officer has a personal privilege with corporate counsel, the Bevill court employed a five factor test: (1) the person must demonstrate that he or she approached counsel to seek legal advice; (2) the individual must demonstrate that it was made clear to counsel that they were seeking legal advice in their individual capacity; (3) they must demonstrate that the attorney communicated with them in their individual capacity, recognizing that a conflict might arise; (4) the conversations with the attorney must be confidential; and (5) the substance of the conversations with counsel must not have concerned matters within the company or the general affairs of the corporation. This test has been adopted by the First, Second and Tenth Circuits and cited with approval by the Sixth Circuit.
In this case it is clear that Mr. Graf did not have a personal attorney client relationship with any of the three attorneys who testified for the government. In each instance, the retainer letter of counsel was addressed to the company and the bills were paid by the business organization. Likewise, in each instance, the discussions in which Mr. Graf was involved with counsel concerned the company, not him. While one of the attorneys did personally represent Mr. Graf before the transactions in this case and later, any conversations involving those representations were not involved here. Rather, in each conversation involved in this case concerned only the company. Accordingly, under the Bevill test, it is clear that Mr. Graf did not have an attorney client privilege with any of the three attorneys regarding the matters testified to during his trial.