Michael Swoboda sued Continental Enterprises, claiming that it conducted an investigation into alleged trademark infringement led to his wrongful discharge. He sought the production of documents that Continental alleged were protected as work product. The district court allowed the discovery and denied the intervention by Heckler & Koch, the gunmaker whose rights about the G36 submachine gun (above) were at issue and had retained Continental.
The Fifth Circuit reversed, holding: “Continental’s work product privilege argument was overruled because Continental is a company that engages in investigative work, and the district court concluded that the discovery that Swoboda sought was produced in Continental’s ordinary course of business, i.e., in the course of a Continental investigation. HK is a gun manufacturer. Investigations are not a part of HK’s ordinary course of business. Some of the discovery that Swoboda sought was, from HK’s perspective, prepared in anticipation of litigation. We have held that an applicant-intervenor should be allowed to intervene when it ‘has a defense not available to the present defendant.’ HK has a defense unavailable to Continental, and it should have been allowed to present that defense in the district court.” Swoboda v. Manders, No. 16-30074 (Oct. 31, 2016, unpublished).
The owners of a self-storage company sued Morgan Stanley, alleging that it mishandled the negotiation of substantial insurance claims arising from Hurricane Katrina. An issue on appeal was whether, under federal common law, a communication between the company’s corporate counsel to Morgan Stanley was privileged. The Fifth Circuit noted that while “[s]everal courts — including lower courts in this circuit — have held that the [common interest] privilege extends to co-plaintiffs in litigation,” “this court has not expressly held that the privilege is inapplicable to co-plaintiffs. The Court did not need to address that issue, however, because it found that this communication was not made to “further a joint or common interest.” (emphasis in original) BCR Safeguard Holding, LLC v. Morgan Stanley Real Estate Advisor, Inc., No. 14-31068 (June 2, 2015, unpublished).
Legal advice or business discussion? This question is the key issue in most privilege disputes about in-house counsel. The Fifth Circuit addressed that question and offers practical guidance for in-house counsel in Exxon Mobil Corp. v. Hill, No. 13-30830 (May 6, 2014).
ExxonMobil intervened in tort litigation to contend that the attorney-client privilege protected a short 1988 memo by an in-house lawyer. The lawyer created the memo during negotiations between Exxon Mobil and ITCO, a company that would store oil production equipment for it. The memo recommended that Exxon Mobil, in response to an information request by ITCO, make a limited disclosure from a report it had about radioactivity associated with the equipment. As the Fifth Circuit summarized: “Stein [the lawyer] suggested that Guidry [the client] disclose only Table IV [of the report], because it contained the only data that ITCO specifically had requested, and that Guidry remove the caption ‘Table IV’ so as not to flag the existence of other tables.” (The memo identifies the sender as “Counsel,” but does not otherwise say that the contents are privileged.)
Plaintiffs contended that the effect of this advice was to conceal information about dangerous levels of radiation. The district court opinion [page 61 of the attached] rejected ExxonMobil’s position about privilege, reasoning that it had not shown that the “primary or predominant” purpose for consultation with the lawyer was for legal advice, “particularly in light of the fact that the [memo] itself does not contain any reference to a legal justification for Stein’s advice, or legal concerns prompting Guidry to seek such advice. . . . [I]t appears from the face of the document that the primary purpose of Stein’s advice to Guidry was to help secure more favorable contract terms . . . .”
The Fifth Circuit reversed. Stating that its conclusion would be the same under de novo or clear error review, the Court held: “The manifest purpose of the draft [attached to the memo] was to deal with what would be the obvious reason Exxon Mobil would seek its lawyer’s advice in the first place, namely to deal with any legal liability that may stem from under-disclosure of data, hedged against any liability that may occur from any implied warranties during complex negotiations.”
This opinion offers practical guidance for maintaining privilege as to in-house counsel. First, the memo is focused. Written in 1988, before long email chains became common, it presents a short exchange on a specific topic. Second, it has a specific audience — it is written to a specific person rather than a large group — or a “reply all.” Finally, it is clear. The memo refers directly to legal concepts such as warranty liability and property interests. The memo’s focus, audience, and clarity appear to have been critical for the Court’s analysis and the preservation of Exxon Mobil’s privilege with its in-house counsel.