In Dahl v. Bain Capital Partners, LLC, Civil Action No. 07- 12388 (D. Mass. 2010), the United States District Court for the District of Massachusetts recently held that, under the facts of the case, email communications and attachments sent to a financial adviser by the attorney for the defendant were not privileged communications but, instead, were discoverable by the plaintiffs. The underlying lawsuit in Dahl concerned the leveraged buyouts of a number of companies of which the plaintiffs were shareholders. The defendants were financial firms, primarily private equity firms, and were involved in the leveraged buyouts. The plaintiffs alleged the defendants illegally colluded to artificially fix the sales price of the target companies’ securities, depriving the plaintiffs of the true value of their stock.

During the course of discovery, the plaintiffs sought communications concerning the buyout from the defendants, including JP Morgan. JP Morgan withheld email communications between it and counsel for Michael’s Stores, one of the target companies, claiming the communications were protected by the attorney-client privilege. The email communications concerned: (1) the negotiation and execution of legal documents related to the sales process, such as confidentiality agreements; (2) issues of due diligence, including discussions about information requests from potential bidders and the process by which the requested information would be disseminated; (3) documents created by JP Morgan about the sales process submitted to Michael’s Stores’ board of directors; and (4) documents created by JP Morgan outlining the sales process for potential bidders. At the time of the communications, JP Morgan was acting as a financial adviser to Michael’s Stores and was managing the bidding process by which the company would be sold. With regard to most of the emails, JP Morgan asked to provide “feedback” on legal documents based on its “financial expertise and industry experience.” In the remaining emails, JP Morgan provided information to or sought information from Michael’s Stores’ legal counsel concerning the sale process. The plaintiffs contended the attorney-client privilege was waived by Michael’s Stores, rendering the communications discoverable as JP Morgan was a third-party to the attorney-client relationship.

JP Morgan argued the communications were privileged under an exception to the general rule that disclosing attorney-client communications to a third-party undermines the privilege because JP Morgan was a third-party employed to assist a lawyer in lending legal advice. The court stated, under applicable law, the exception only applies where the third-party communications are necessary, or at least highly useful, for the effective consultation between the client and the lawyer. The court added, to satisfy the “necessary” requirement, the involvement of the third party (JP Morgan) must be “nearly indispensible” to serve some specialized purpose in facilitating the attorney-client communications. The exception does not apply to instances where an attorney’s ability to represent a client is merely improved by the assistance of a third party.

The court also stated the exception only applies to communications in which the third party plays an interpretive role. In other words, the third party’s communication must serve to translate information between the client and lawyer. Moreover, the court stated the exception applies only to communications made for the purpose of rendering legal advice, rather than business advice.

Applying these principles to the communications at issue, the court ruled the emails were not privileged. The court ruled JP Morgan’s review of legal documents and legal advice to provide “feedback” was not enough to show that JP Morgan was necessary, or at least “highly useful,” in facilitating legal advice. Furthermore, the court ruled JP Morgan’s role with respect to the emails was to provide advice based on its “financial expertise and industry experience,” which is more in the realm of business advice rather than legal advice.

As to the email communications regarding the sales process, the court ruled Michael’s Stores’ lawyers were not relying on JP Morgan to translate or interpret information given to them by Michael’s Stores. Rather, the lawyers received information from JP Morgan that Michael’s Stores did not have, such as JP Morgan’s dealings with potential bidders. The information discussed and the documents attached to the emails, such as letters to potential bidders, were created by JP Morgan as part of its role as a financial adviser charged with managing the sales process. The fact that information and documents were then provided to Michael’s Stores’ lawyers to aid in the provision of legal advice did not thereby shield the communications from discovery.

Whether an “advisor’s” communications are afforded the attorney- client or work-product protection is a fact-driven inquiry. Cautious attorneys and advisors should clearly define the advisor’s role. To be afforded a privilege, the advisor’s role must be to translate the information exchanged between the client and his/her attorney to render legal advice as opposed to business advice.