Does a Law Firm Advising a Group of Outside Corporate Directors Represent the Corporation or Just the Outside Directors?

August 9, 2006

Courts sometimes wrestle with identifying the owner of the attorney-client privilege in the corporate context.

In Ex parte Smith, No. 1050607, 2006 Ala. LEXIS 107 (Ala. May 12, 2006), a bankrupt company’s trustee sought access to pre-bankruptcy communications between a group of outside directors and the group’s law firm Skadden Arps. The trustee naturally argued that Skadden represented the corporation, which he now controlled. The Alabama Supreme Court noted that the company paid Skadden’s bills, but also pointed to an explicit engagement letter indicating that the law firm represented just the outside directors and not the company. The court denied the trustee’s request.

Lawyers dealing in the corporate context should explicitly articulate the nature of their relationship, identifying exactly whom they represent.