Generally, the attorney-client privilege protects communications between corporate in-house counsel and management relating to legal matters. However, this privilege is not limitless and communications between in-house counsel and management containing both legal and business advice may not be protected.
Recently, the New Mexico Court of Appeals ruled that a "talking points" memo prepared for a hospital corporation's CEO by its General Counsel, which contained both legal and business advice, was not protected by the attorney-client privilege. Bhandari v. Artestia General Hosp., 317 P.3d 856, 859 (N.M. Ct. App. 2014), cert. denied, 321 P.3d 935 (N.M. 2014). The Bhandari court adopted the "primary purpose standard" for evaluating whether communication between in-house counsel and management is protected by the attorney-client privilege. Id. at 862. The primary purpose standard provides that such communications are not privileged "if the primary purpose of [the] communication is to solicit or render advice on non-legal matters." Id. at 861.
In Bhandari, a hospital's legal department concluded that a doctor should be terminated after violating his employment contract. The proposed termination was complicated by the fact that the doctor's wife also worked for the hospital. Id. at 859. The hospital held a meeting with the doctor and his wife where the hospital offered to allow the doctor to resign, rather than be fired, provided the doctor's wife also resigned. Id. In preparation for the meeting, the hospital's General Counsel prepared a "talking points" memo outlining the hospital's strategy. The memo contained a heading declaring: "CONFIDENTIAL SUBJECT TO ATTORNEY-CLIENT PRIVILEGE." Id.
The doctor's wife later sued the hospital, and the trial court allowed portions of the "talking points" memo regarding the procurement of her resignation into evidence after concluding such portions constituted business, rather than legal, advice. Id. The New Mexico Court of Appeals upheld the trial court's ruling that such portions of the memo were not privileged because they constituted business advice, not legal advice. Id. at 862. However, the appellate court went further by adopting the "primary purpose standard," which states that a court should conclude that a dual-purpose communication from in-house counsel is for a business purpose unless evidence clearly demonstrates that the legal purpose of the communication outweighs the business purpose. Id.
The Florida Supreme Court also subjects claims of corporate attorney-client privilege to a heightened level of scrutiny, and has set forth the following criteria to determine whether in-house counsel's communications are protected:
- the communication would not have been made but for the contemplation of legal services;
- the employee making the communication did so at the direction of his or her corporate superior;
- the superior made the request of the employee as part of the corporation's effort to secure legal advice or services;
- the content of the communication relates to the legal services being rendered, and the subject matter of the communication is within the scope of the employee's duties;
- the communication is not disseminated beyond those persons who, because of the corporate structure, need to know its contents.
S. Bell Tel. & Tel. Co. v. Deason, 632 So. 2d 1377, 1383 (Fla. 1994). Although Florida courts have not yet adopted the primary purpose standard, the Bhandari decision is troubling given that Florida's statutory language regarding the attorney-client privilege is nearly identical to New Mexico's. See § 90.502(2), Fla. Stat. (2014), Rule 11-503, NMRA (2014). As such, Bhandari should serve as a cautionary example to in-house counsel in Florida and across the country.
To read the entire Bhandari decision, please click here.