When a party hires a third party marketing or public relations consultant, the party may later assert that the communications are within the attorney-client privilege because the third party personnel were the “functional equivalents” of employees.
In Schaeffer v. Gregory Village Partners, L.P., No. 13-cv-04358 (N.D. Cal. Jan. 26, 2015), the district court held that a public relations consultant, Craig, was the functional equivalent of an employee and therefore was within the privilege. Craig was hired to assist defendant regarding possible contamination from its property and potential remediation. Craig was directly involved in the project, conducting community research, meeting with defendant’s Board to develop strategy, developing talking points to be used with government officials, attending meetings with third party “stakeholders,” and, along with defendant’s outside counsel, participated in public meetings conducted by the local municipality. According to the court, the functional equivalence doctrine applies where a “consultant performs work that is substantially intertwined with the subject matter of a corporation’s legal concerns, and the consultant provided information to the corporation’s attorney to aid the attorney in advising the corporate client.” Craig, although retained for only a limited time and purpose, was “very much intertwined” with the company’s legal troubles, and Craig’s activities involved the collection of information for and at the direction of counsel.
The district court in Church & Dwight Co., Inc. v. SPD Swiss Precision Diagnostics, GmbH, No. 14-cv-585 (S.D.N.Y. Dec. 19, 2014), came to the opposite conclusion regarding a third party marketing firm that was hired to assist defendant with the launch of a product that was the subject of subsequent litigation. The defendant shared privileged legal advice and other communications with the marketing firm during the course of the engagement. The court held that defendant failed to satisfy the elements of the “functional equivalent” test. First, defendant argued only that its in-house marketing team was too small to do the job on its own, not that the outside marketing firm had primary responsibility for a key corporate job. Second, defendant did not establish that there was a “continuous and close working relationship between the consultant and the company’s principals on matters critical to the company’s position in litigation.” Third, defendant did not show that the consultant “is likely to possess information possessed by no one else at the company.” Finding that defendant was “no different than most companies who hire external advertising agencies,” the court explained that applying the functional equivalence doctrine here would “swallow the privilege waiver rule and would extend the attorney-client privilege to communications with any third party who was hired to assist the client with something the client could not do on its own.”