Every state recognizes that the attorney-client privilege generally protects communications between company lawyers and company executives. However, a more important issue often arises when the company and an executive (or former executive) become adversaries — who owns that privilege? The most common scenario involves company executives claiming exclusive or joint ownership, in an effort to stop the company from waiving the privilege and revealing communications that hurt the executive.
The press gave great attention to a recent decision involving a KPMG partner. United States v. Stein, No. S1 05 Crim. 0888 (LAK), 2006 U.S. Dist. LEXIS 87369 (S.D.N.Y. Dec. 4, 2006). The partner claimed that she was a joint client of KPMG’s in-house lawyers. The court rejected her argument, and held that KPMG solely owned the privilege protecting communications between its in-house lawyers and the partner — and therefore could waive it. A couple of weeks earlier, the First Circuit said exactly the same thing. In re Grand Jury Proceedings, 469 F.3d 24 (1st Cir. 2006). The court recognized that when corporations and their executives are under investigation, “it might well behoove the corporation to waive the privilege, even though the waiver may damage the individual officer.” Id. at 26. The court held that the CEO did not establish that the company’s lawyers also represented him personally, and therefore had no control over the privilege.
If corporate lawyers do their job, their corporate client always has sole ownership of the privilege covering the lawyers’ communications with company executives.