As most attorneys know, a privileged communication only can be waived by the client, and when the client is an individual, it is obvious who controls that ability to waive. Things become murkier, however, when the client is a company. While controlling the privilege generally resides with the board of directors and/or those controlling the business entity, who can access privileged communications when a former senior manager becomes adverse to the company is far less clear.

Until the end of 2016, John Mooney was the CEO of Pri-Med LLC, and John Wheelock was its senior vice president in charge of sales. Mooney and Wheelock also each owned 5% equity in Pri-Med and were entitled to have that equity repurchased at the appraised value of the company as of December 31, 2016. When the buy-out time arrived, however, Mooney and Wheelock claimed that the company and various individuals took steps to depress Pri-Med’s value so as to decrease the amount they would be paid.

Litigation ensued, and one of the items requested during discovery was communications amongst the defendants concerning Pri-Med’s 2015 and 2016 valuation. The defendants refused to produce those communications, however, claiming that they were protected from disclosure by the attorney-client privilege. Mooney and Wheelock countered that, even if the documents were privileged, because Mooney was CEO at the time of the communications, he jointly held the privilege with Pri-Med and, therefore, could not be denied access to them.

As the Superior Court noted in Mooney v. Diversified Business Communications, different jurisdictions have different rules as to when a former insider can access privileged communications, but there generally are two lines of cases. One line, known as the “collective-corporate-client” approach, holds that:

[F]ormer directors or officers are entitled to privileged communications created during their tenure because both the corporation and the then-current officer or director are viewed as joint clients (or separate parts of the collective corporate client) at the time the communications occurred.

The other line follows the theory that “the entity is the client,” meaning that:

[D]espite the fact that a corporation can only act through individuals, officers and directors are not properly viewed as joint, independent clients of corporate counsel; the corporation alone is the client.

While the Superior Court noted that Pri-Med was a Delaware LLC, and Delaware law follows the collective-corporate-client approach, the Court ruled that Massachusetts law, which follows the “entity-is-client” approach, should control. The Court’s reasoning in this regard was that, because the existence of privileged communications turns on the relationship between client and counsel, not on a matter internal to the company, a traditional choice of law analysis (i.e., which jurisdiction had a more significant relationship to the communications) should be applied. Given that Pri-Med was based in Massachusetts, and because the legal advice at issue was given and received in the Commonwealth, the Court found that Massachusetts had the most significant relationship to the communications and, therefore, its law should apply. Accordingly, Wheelock and Mooney could not access the communications at issue.

Ultimately, the big takeaway from Mooney is that in-house counsel need to remind their internal business clients that the conversations they have may very well belong to the company, and that they may not have the ability to prevent anyone else from accessing those communications, and may not be able to access such communications themselves, in the future.