State Courts Address Outsiders’ Privilege Impact: Part I

January 2, 2019

Most client agents/consultants stand outside privilege protection. This means that: (1) communications with them do not deserve privilege protection; (2) their presence during otherwise privileged communications aborts that protection; and (3) disclosing pre-existing privileged communications to them waives that privilege. In the corporate setting, clients have other options for seeking privilege protection in such scenarios, but many of those fail.

In Technetics Group Daytona, Inc. v. N2 Biomedical, LLC, N2 and its lawyer retained a technology consultant “because of his expertise in relevant fields.” No. 17 CVS 22738, 2018 NCBC LEXIS 116, at *2 (N.C. Super. Ct. Nov. 8, 2018). In a later patent dispute, N2 claimed privilege protection for communications with that consultant. The court rejected the privilege claim, holding that the technology consultant: (1) was not the “functional equivalent” of an N2 employee (because he had no “continuous and close working relationship with the company,” and he “does not maintain an office at N2 or spend a substantial amount of his time working for N2”); (2) was not within the narrow privilege protection for client agents/consultants who are “nearly indispensable or serve some specialized purpose in facilitating the attorney-client communications” or “function more or less as a ‘translator or interpreter’ between the client and the lawyer” – but instead was “retained for the value of his own advice”; (3) could not claim that he had a “common interest” with N2, because he “help[ed] develop a solution to a technological problem” rather than cooperate “for purposes [of] indemnification or coordination in anticipated litigation.” Id. at *10-11, *12, *14 (citations omitted).

Corporate executives sometimes erroneously assume that confidentiality agreements with such outside agent/consultants assure privilege protection or avoid waiver. They do not. Next week’s Privilege Point discusses the same issue in a family setting.