A federal court in Virginia has held that communications between counsel for Lumber Liquidators and the company’s crisis management firm are not subject to attorney-client privilege or work product protection. Earlier this year, Lumber Liquidators was hit with a number of class action suits based on allegations that it sold laminate flooring from China that contained highly toxic levels of formaldehyde. In June 2015, ten class-action suits against the company were consolidated into Multidistrict Litigation panel in the Eastern District of Virginia. In the MDL proceeding, counsel for class plaintiffs challenged Lumber Liquidators’ claim of privilege and work product protection for its counsel’s communications with Mercury Public Affairs, a crisis management firm hired to deal with public relations fallout from the controversy. In support of its request to withhold production of documents, Lumber Liquidators argued that the crisis management team was tightly integrated into the company’s damage control operations and subject to protection from disclosure. The trial court agreed that the crisis management team was not an “outsider,” resulting in waiver of protections, but it rejected the claim of privilege and work product protection because the communications were not addressed to legal advice and otherwise were not prepared in relation to litigation or trial. In particular, the court found that the crisis management team was merely assisting counsel in the business activity of managing a public relations crisis.
In general, the attorney-client privilege applies only to confidential communications exchanged between privileged persons (including counsel) that are aimed at conveying or seeking legal advice. The separate work product doctrine protects documents and materials that are prepared in anticipation of litigation by or for a party or its representative. Significantly, attorney client privilege does not apply where counsel is seeking or providing confidential businessadvice, rather than legal advice. Where there is an overlap, a court will analyze the “predominant purpose” of the communication to determine whether privilege applies. Similarly, work product protections do not attach if the materials were prepared for an ordinary business purpose, rather than for litigation or trial. It is worth noting that in the First Circuit, the attorney-client privilege and work product protections have been applied in a narrow manner. SeeUnited States v. Textron Inc. and Subsidiaries, 577 F.3d 21, 27 (1st Cir. 2009) (holding that the test for work product protection is whether the document was “prepared for use in possible litigation[.]”).
The Lumber Liquidators case provides an important reminder that one should not assume that all confidential communications with trusted advisors are covered by privilege and work product protections. Parties and their counsel should take care to strictly observe the requirements for preserving the protections, while also remaining mindful of the risk of waiver through disclosure to third parties.
Access the Court’s Order here.