Another Court Finds that Widespread Internal Circulation of Privileged Communications Destroys a Company’s Privilege

May 5, 2010

The increasing use of e-mail often induces (or tempts) company employees and even in-house lawyers to widely circulate protected communications within the corporation. Several recent decisions have found that circulation beyond those with a “need to know” (1) aborted the privilege, (2) waived the privilege, or (3) demonstrated that the e-mails must have been primarily motivated by business rather than legal concerns.

In Orion Corp. v. Sun Pharmaceutical Industries, Ltd., Civ. A. Nos. 07-5436 & 08-5545 (MCC), 2010 U.S. Dist. LEXIS 15975, at *26 (D.N.J. Feb. 18, 2010), third party Novartis withheld some marketing documents as privileged – acknowledging that “there were 112 recipients of the confidential presentations at issue,” but arguing that “all were members of Novartis management.” Defendant (challenging Novartis’ privilege claim) argued that Novartis had failed to “adequately identify the individuals who received copies of the presentations and to explain why these individuals needed the asserted privileged information to carry out their employment duties.” Id. at *27. The court agreed with defendant that Novartis’ “broad classification” of the recipients as “management” did “not convince the Court that dissemination was limited to individuals that needed to know the information contained in the presentations.” Id. The court found a waiver, and ordered Novartis to produce the documents.

This troubling line of decisions seems to ignore both the increasing use of e-mail within corporations, and the ultimate benefit of widespread intra-corporate circulation of privileged communications (which can help educate corporate employees about legal issues and assist in assuring compliance with the law).