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| Be Careful Not to Destroy the Attorney-Client Privilege When Sharing "Confidential" Legal Advice The attorney-client privilege is the time-honored rule that confidential communications between an attorney and a client in the course of a professional relationship cannot be disclosed without the consent of the client. The privilege is based on the belief that sound legal advice or advocacy depends on the lawyer and client engaging in full and frank communications and that such communications are encouraged by protecting their confidentiality. One well-known exception to the attorney-client privilege occurs when attorney-client communications are shared with a person who is not a party to the attorney-client relationship. When that happens the privilege is destroyed and the communications may be discovered by interested third parties. In light of a recent federal court decision, advertising agencies and their clients must use caution when sharing privileged information with one-another, so that they do not inadvertently destroy the privilege. For example, when the agency's counsel provides written advice to the agency concerning how to ensure a particular advertisement complies with applicable laws, that document is protected by the attorney-client privilege. A third-party, therefore, would not be entitled to obtain a copy of that document in a litigation concerning the advertisement. But if the agency forwards a copy of its lawyer's advice to the advertiser, then the privilege may be compromised unless there also is an attorney-client relationship between the advertiser and the law firm providing the advice. In matters where the protection of the attorney-client privilege is important, therefore, agencies and their clients should both consider entering into formal retainer agreements with the law firm providing advertising counsel, as this may be the only way to assure that documents and other communications containing legal advice can be shared between the agency and advertiser without waiving the privilege. COURT HOLDS THAT DOCUMENTS CONTAINING LEGAL ADVICE OF THE ADVERTISER'S COUNSEL CONVEYED TO AGENCY ARE NO LONGER PRIVILEGED The federal court for the Southern District of New York, which encompasses Manhattan, Westchester and several other local areas, recently considered the issue of whether an agency involved in a litigation is required to produce documents containing the legal advice of an advertiser's attorney that the advertiser had forwarded to the agency. The Court held that because no attorney-client relationship existed between the agency and the advertiser's lawyer, the documents at issue were not privileged and the agency, therefore, was required to produce the documents to the Federal Trade Commission, which was involved in a lawsuit against the advertiser. At issue were approximately fifteen pages of advertising copy prepared by the agency, and reviewed by the agency's client's in-house lawyer. The lawyer made written annotations on the documents and sent them back to the agency. While investigating a false advertising claim against the advertiser, the FTC served a third-party subpoena on the agency, seeking any documents relating to the ad campaign that the agency had prepared for the advertiser. In response to the subpoena, the agency produced non-privileged documents but withheld the documents containing the legal advice of the advertiser's lawyer on the ground that the attorney-client privilege protected the documents. However, the FTC argued that any privilege that attached to the documents belonged to the advertiser only and that the advertiser had waived the privilege when it provided the documents to the agency. The FTC, therefore, sought a court order requiring the agency to produce the documents. Relying on an extension of the attorney-client privilege known as the common-interest doctrine, the agency argued that the advertiser's counsel was effectively acting as counsel for both the advertiser and the agency. The agency argued that because the advertiser and the agency both had a common interest in creating advertising that did not violate applicable regulations, all communications between the advertiser's lawyer and the agency were protected by the attorney-client privilege. The Court rejected the agency's argument. It held that, although the advertiser's counsel reviewed advertising materials prepared by the agency and "advised the agency about potential legal objections that television networks might have concerning advertisements," she did not do so in the capacity as the agency's counsel. As there was no attorney-client relationship between the advertiser's counsel and the agency, there could be no privilege. The Court, therefore, ordered the agency to produce all of the documents to the FTC. In making its determination, the Court looked to the "intent of the client," specifically whether the agency "reasonably understood the communications to be confidential." Even though it was common practice for the agency to work with its clients' attorneys to ensure that all legal and regulatory requirements were satisfied, the court reasoned that (i) the agency had "not established that it intended [the advertiser's counsel] to act as its attorney, or that it reasonably understood its communications with her to be confidential;" andThe New York Court followed that rule, stating that the agency and its client's "joint enterprise was commercial and an element of making that enterprise succeed was ensuring that advertisements were compliant." Although the agency clearly received legal advice from its client's counsel, the Court found that such advice "was ancillary to the business relationship." The Court specifically rejected extending the common-interest doctrine under these circumstances, as doing so "would mean that [the agency] has an attorney-client privilege with each and every one of its clients' counsel even though it has never retained any of them." TO PREVENT WAIVER OF THE PRIVILEGE, AGENCY AND ADVERTISER SHOULD BOTH RETAIN THE ADVERTISING COUNSEL The Court's decision could affect the manner in which many advertising agencies deal with their clients. Agencies must be extremely cautious about sharing communications from their counsel with their clients, and their clients must have the same concern when sharing such information with ad agencies. While the Court's decision left open the possibility that something less formal might suffice, it suggests that the best way for agencies and advertisers to prevent waiver of the attorney-client privilege when a law firm is providing counsel to both of them, is for both the agency and the advertiser to enter into a retainer agreement with the firm. The solution is not as clear in the case of in-house counsel, but it appears that a standard agency-client agreement could be tailored to make clear that the attorney in question (whether employed by the agency or its client) will act as counsel for both entities, thereby triggering the common-interest extension of the attorney-client privilege. © 2001 Davis & Gilbert LLP |
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