Courts Analyze the Subtle Distinction between Referring To and Relying Upon Advice of Counsel

December 20, 2006

Because the attorney‑client privilege normally does not protect the fact of a communication between a lawyer and client, clients generally do not waive the privilege by answering a deposition question such as “did you talk to your lawyer before you signed that contract?” On the other hand, clients clearly waive the privilege (and usually trigger a subject matter waiver) by affirmatively relying on their lawyers’ advice to gain some advantage in litigation.

In Breit v. SmartVideo Technologies, Inc., Civ. A. No. 1:06-CV-850-MHS, 2006 U.S. Dist. LEXIS 73822, at *4 (N.D. Ga. Oct. 10, 2006), the court held that two corporate executives did not waive the attorney‑client privilege despite testifying that they relied on their lawyer’s advice about “what filings needed to be made with the SEC.” The court noted that the executives “merely testified in that SmartVideo [client] generally relied on [their lawyer’s] advice in connection with this and other matters involving the SEC. At no point did they disclose any portion of an attorney client communication.” Id. at *7. Six days later, however, another court held that an insurance company waived the privilege (and triggered a subject matter waiver) by filing an affidavit indicating that it made a coverage decision only after receiving a letter from outside counsel. N. Am. Foreign Trading Corp. v. Mitsui Sumitomo Ins. USA, Inc., Nos. 05 Civ. 5827 (SAS)(KNF) & 05 Civ. 4807 (SAS)(KNF), 2006 U.S. Dist. LEXIS 75385 (S.D.N.Y. Oct. 16, 2006). The court rejected the company’s argument that it was merely providing a chronological list of events, noting that the company had disclosed “the essence of the attorney’s advice.” Id. at *5.

As in so many other areas, litigants must become familiar with the very subtle distinction between referring to a lawyer’s advice and relying on that advice.