Courts Take an Expansive View of the “Functional Equivalent” Doctrine
September 5, 2012
Under what is called the “functional equivalent” doctrine, courts sometimes treat independent contractors as if they are corporate employees when analyzing privilege protection. Most courts examine criteria such as the independent contractors’ physical presence at the client’s offices, etc. Courts taking an expansive view of the doctrine bump into the traditional principle that the only client agents/consultants within the privilege are those necessary for the transmission of communications with the client’s lawyer.
In In re Flonase Antitrust Litigation, Civ. A. Nos. 08-CV-3149 & -3301, 2012 U.S. Dist. LEXIS 91155 (E.D. Pa. July 2, 2012), the Eastern District of Pennsylvania found that employees of a “national consulting firm that provides pharmaceutical consulting services” should be considered the “functional equivalent” of GlaxoSmithKline employees. Id. at *7. The court rejected what it called a “narrow construction” of the functional equivalent doctrine, finding it “‘”too restrictive” to be realistic in today’s marketplace, where businesses frequently hire contractors and still expect to be able to seek legal advice.'” Id. at *31 (citation omitted). The court found that the consulting firm “acted as an integrated member of the brand maturation team,” and “played a crucial role in the team, assisting in an administrative, managerial, and analytic capacity.” Id. at *22.
Most courts apply the “functional equivalent” doctrine on an individual basis, rather than extend privilege protection to an entire consulting firm. Such a broad approach to the doctrine provides an immensely valuable argument to companies which have involved outsiders in otherwise privileged communications.
Courts Take an Expansive View of the “Functional Equivalent” Doctrine
April 18, 2007
Although the vast majority of courts find a client’s agents or consultants outside the attorney-client privilege, courts increasingly treat as company employees those agents or consultants who are the “functional equivalent” of employees.
Two recent decisions take a very expansive view of this doctrine. In Memry Corp. v. Kentucky Oil Technology, N.V., No. C04-03843 RMW (HRL), 2007 U.S. Dist. LEXIS 3094 (N.D. Cal. Jan. 4, 2007) (not for citation to the N.D. Cal. per N.D. Cal. Civ. Local R. 3-4(e)), the court extended privilege protection to defendant’s adviser — who was intimately involved in defendant’s negotiations and designated as its Rule 30(b)(6) witness. The court acknowledged that the adviser did not draw a salary, keep track of the time he worked for defendant or work in defendant’s office. The court nevertheless concluded that the consultant “should be characterized as the functional equivalent of an executive, due to his high-level oversight of the company and his interest in the company’s financial health.” Id. at *11. Seven days later, another court found that an auto dealership’s adviser satisfied the “functional equivalent” standard. The adviser performed site design and evaluation services, and investigated regulatory requirements covering the project site. The court acknowledged that the adviser had other clients, and spent only about one-quarter of his time on the dealership’s project. MLC Auto., LLC v. Town of Southern Pines, No. 1:05cv1078, 2007 U.S. Dist. LEXIS 2941 (M.D.N.C. Jan. 11, 2007).
It will be interesting to see if these decisions represent a trend toward expanding the “functional equivalent” doctrine — using it to extend privilege protection to more types of client agents/consultants.