Massachusetts Court Provides Helpful Guidance to Retailers on Attorney-Client Privilege with Outside Consultants

Attorney-client privilege refers to the legal rule that prevents communications between a lawyer and a client from being used in court. Courts have tended to keep the circle of the privilege fairly small. As a result, unintended waiver of the privilege, especially in the era of modern technology, is a risk. One way that the privilege is often inadvertently waived is through the inclusion of outside parties in communications with attorneys, or by disclosing attorney-client privileged communications to outside parties after the fact. Courts have held that these types of disclosures can waive the privilege. This results in otherwise confidential communications falling into the hands of an opposing party, as has happened to leading retailers.

A recent Massachusetts court decision provides helpful guidance to retailers who work with independent contractors such as brokers, project managers and public relations consultants. In some cases, these contractors may be involved in matters that become the subject of litigation. When that happens, the issue of protecting attorney-client privilege communications can be presented. Retailers must be aware that the inclusion of independent contractors in communications with the retailer’s attorneys or the disclosure of attorney-client communications to those third parties could potentially destroy the attorney-client protection and allow that information to be used in litigation. The recent Massachusetts case follows a line of court cases where courts have held that certain consultants can be included in communications with attorneys without breaking the attorney-client privilege. But the case also highlights the fact that this exception is a narrow one and parties need to proceed with caution when involving any non-employees in communications with a company attorney.

When an attorney represents a company, the privilege generally protects communications between the lawyer and the employees of the company. The recent Massachusetts ruling held that the attorney-client privilege could also extend to individuals who, while not technically “employees” of the company, serve as the “functional equivalent” of employees. The case addressed the question of whether the inclusion of a real estate broker, who was not an employee of the company, on e-mails with the company’s lawyer waived the attorney-client privilege. Following a leading federal court precedent, the court ruled that, in the particular circumstances of the case, the broker was the “functional equivalent” of an employee, and the privilege was not waived by including him on e-mails.

While the decision appropriately recognizes the complex realities of the modern business world, the court was careful to limit the scope of its ruling. The broker in question had served as the company’s exclusive leasing agent and real estate advisor for a number of years and had become “a key decision leader” for senior management. In the court’s view, it was critical that the broker had a “close, long-standing, pivotal role in the business transactions of the client company.” The court added, “Not all (or even many)” such consultants would meet the “functional equivalent” test. Therefore, the decision expands the scope of the privilege in Massachusetts, but also serves as a cautionary tale.

There is no guaranteed method for ensuring that a court will consider communications with a consultant to be covered by the attorney-client privilege. The decision will depend upon the role of the particular consultant within the company. However, businesses can take steps to bolster the assertion that a consultant’s communications should be covered. Those steps might include adding appropriate language to the consulting contract indicating that the consultant will assist the client in legal matters and interface with the client’s attorneys. Companies might also add language to their legal engagement letters, specifically identifying any consultants who may be necessary in communications with the attorney and stating that the parties will regard communications with those consultants as privileged. Companies should proceed with caution in this area, and seek specific guidance from their attorneys before routinely copying consultants on e-mails and other confidential communications.

Related topics: Liability, Retail