Another Court Rejects Privilege Protection for a Corporation’s Outside Consultant

March 6, 2019

Perhaps corporate executives’ most common and dangerous privilege misperception is that they may safely disclose privileged communications to their outside consultants without waiving that protection. And perhaps their lawyers’ greatest misperception is that the lawyers can rescue the privilege protection by claiming that the consultants were helping the lawyers provide legal advice.

In SEC v. Navellier & Associates, Inc., Civ. A. No. 17-11633-DJC, 2018 U.S. Dist. LEXIS 215003, at *2 (D. Mass. Dec. 21, 2018), defendant NAI had retained outside consultant ACA Compliance Group “to conduct a compliance review of NAI’s marketing materials.” NAI claimed privilege and work product protection for ACA-related communications and documents when the SEC sought them. The court rejected the privilege claim, holding that: (1) ACA could not satisfy the client consultant privilege standard, which applies only if the consultants’ involvement is “nearly indispensable or serve[s] some specialized purpose in facilitating the attorney-client communications” (id. at *6), and (2) ACA could not satisfy the lawyer consultant privilege standard because it “was not serving an interpretive role and was not ‘necessary, or at least highly useful’ to defendants’ counsel in providing legal advice to defendants.” Id. at *9 (citation omitted). Significantly, contemporaneous documents showed that NAI’s president communicated with ACA “without any mention of counsel.” The court bluntly said that it “discounts” NAI’s lawyer’s affidavit stating that “ACA was retained . . . to assist [him] in providing legal advice to NAI in anticipation of possible litigation.” Id. at *3-4 (alterations in original). The court also rejected NAI’s work product claim, noting that “the SEC did not commence an investigation into NAI until more than two years after the end date of the time period for documents sought in the subpoena.” Id. at *11.

The privilege rarely protects communications with corporate clients’ outside consultants. Lawyers may claim privilege protection for communications with their consultants, but only if they can support a bona fide argument that they needed the consultant.