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Attorney-Client Privilege Protections for Non-Employees
C r i t e r i a f o r t h e f u n C t i o n a l e q u i v a l e n t t e s t
By Brian A. Zemil, Litigation News Associate Editor Although federal courts recognize The Supreme Court held that the status Since the Bieter decision, other federal of an employee is not a consideration for courts have extended the functional equiva- lent doctrine to communications involving privilege applies, instead opting for a case- a wide variety of third-party independent by-case analysis of the reasons for the com- contractors. The doctrine has been applied “functional equivalent” of employees, to financial consultants (Export-Import Bank they disagree about the evidence required whether the privilege could apply to third- of the U.S. v. Asia Pulp & Paper Co.); accoun- tants (RoDa Dril ing Co. v. Siegal); construc- A federal district court in Pennsylvania The U.S. Court of Appeals for the Eighth tion consultants (American Manufacturers Mutual Insurance Co. v. Payton Lane Nursing “broad, practical approach” and rejecting Home Inc.); independent credit counsel- the “stringent, multi-factor” tests used by ing consultants (In re e2 Communications, poration’s independent consultant could Inc.); invention consultants (Coorstek, Inc. v. “The case law has not yet clearly estab- fall within the scope of the attorney-client Reiber); insurance consultants (United States lished what the criteria for being deemed privilege. in In re Bieter Company, a party v. Graf); and public relations consultants a ‘functional equivalent of an employee’ are so that privilege protection wil attach cations between counsel and a contractor “The case law regarding the functional to communications. it is an evolving area hired to provide real estate advice. The equivalent test is fol owing the economic of the law,” says Edna S. Epstein, Chicago, court in Bieter stated, “when applying reality that businesses regularly outsource author of The Attorney-Client Privilege and the attorney-client privilege to a corpora- work,” says Epstein. “Accordingly, the case tion or partnership, it is inappropriate to law is sweeping into the category of ‘func- distinguish between those on the client’s tional equivalent of an employee’ third the geNesis oF the FuNctioNAl
payroll and those who are instead and for parties that in the past would have been equiVAleNt doctriNe
considered mere ‘consultants,’ whose par- The functional equivalent doctrine protects and non-employees who are the functional munications may fal within the privilege as long as the independent consultant is the emerged after Upjohn Company v. United functional equivalent of an employee. The APProAches to determiNiNg
States, in which the United States Supreme court found that the real estate consultant FuNctioNAl equiVAleNce
was intimately involved on a daily basis in Recently, the U.S. District Court for the the client’s business and “was in all relevant Eastern District of Pennsylvania chose to respects the functional equivalent of an Published iN litigAtioN News, Volume 38, Number 1, FAll 2012. 2012 Americ AN bAr AssociAtioN. reProduced with PermissioN. All
rights reserVed. this iNFormAtioN or ANy PortioN thereoF mAy Not be coPied or dissemiNAted iN ANy Form or by ANy meANs or
stored iN AN elec troNic dAtAbAse or retrieVAl system without the exPress writ teN coNseNt oF the AmericAN bAr AssociAtioN.
multi-factor tests used by other courts. in What evidence is required for the functional equivalent test?
In Re Flonase, purchasers of Flonase and c o u r t s a p p l y i n g b r o a d , p r a c t i c a l a p p r o a c h
Attorney-Client Privilege Protections for Non-Employees a generic manufacturer filed an antitrust • In Re Flonase Antitrust Litigation, No. 08-Cv-3149 (E.D. Pa. July 2, 2012).
C r i t e r i a f o r t h e f u n C t i o n a l e q u i v a l e n t t e s t
case al eging that Flonase’s manufacturer, • Banco Do Brasil v. 275 Washington St. Corp., No. 09-11343-Nmg, 2012 U.S. Dist. LExiS 51358 (D. mass. Apr. 12, 2012).
• United States v. Graf, 610 F.3d 1148 (9th Cir. 2010).
By Brian A. Zemil, Litigation News Associate Editor competitive conduct designed to delay the • RoDa Dril ing Co. v. Siegal, 552 F.3d 1203 (10th Cir. 2009).
entry of cheaper, generic versions of the • Stafford Trading, Inc. v. Lovely, No. 05-C-4868, 2007 U.S. Dist. LExiS 13062 (N.D. il . Feb. 22, 2007).
• MLC Auto., LLC v. Town of S. Pines, No. 1:05-cv-1078, 2007 U.S. Dist. LExiS 2841 (m.D.N.C. Jan. 11, 2007).
• In re e2 Communications, Inc., No. 02-30574-BJH-11, 2006 Bankr. LExiS 4575 (Bankr. N.D. Tex. June 15, 2006).
• Neighborhood Dev. Col aborative v. Murphy, II , 233 F.R.D. 436 (D. md. 2005).
nications between gSK and its third-party • Western Res., Inc. v. Union Pac. R.R. Co., No. 00-2043-Cm, 2002 U.S. Dist. LExiS 1911 (D. Kan. Jan. 31, 2002).
• Fed. Trade Comm’n v. Glaxosmithkline, 294 F.3d 141 (D.C. Cir. 2002).
• In re Copper Market Antitrust Litig., 200 F.R.D. 213 (S.D.N.y. 2001).
tract characterized Swiftwater as an inde- • In re Bieter Co., 16 F.3d 929 (8th Cir. 1994).
pendent contractor hired to work with gSK to develop the Flonase brand maturation c o u r t s a p p l y i n g s t r i n g e n t , m u l t i - f a c t o r a p p r o a c h
plan. Swiftwater’s projects included work- • A.H. ex rel. Hadjih v. Evenflo Co., Inc., No. 10-cv-02435-RBJ-KmT (D. Colo. may 31, 2012).
ing with gSK’s legal department and the • Steinfeld v. IMS Health, Inc., No. 10-cv-3301, U.S. Dist. LExiS 142288 (S.D.N.y. Dec. 9, 2011).
• LG Elec. v. Whirlpool Corp., 661 F. Supp. 2d 958 (N.D. il . 2009).
• Exp.-Imp. Bank of the U.S. v. Asia Pulp & Paper Co., 232 F.R.D. 103 (S.D.N.y. 2005).
• In re Bristol-Myers Squibb Sec. Litig., 2003 U.S. Dist. LExiS 26985 (D.N.J. June 25, 2003).
client privilege would extend to Swiftwater if it acted as the functional equivalent of an akin to the “control group” test rejected in isbister, Baltimore, Publication and Content employee at gSK. A special master initial y Officer of the ABA Section of Litigation. issued a decision ruling that the Swiftwater “While no magic incantation exists to courts’ decisions applying a broad, practi- ensure a consultant is covered by the privi- lege, a party can improve the chances of special master’s ruling. Finding in favor of non-employees possess a significant rela- maintaining the privilege if it includes in gSK, the district court noted that the U.S. tionship to the client and engage in trans- the consulting contract some explanation Court of Appeals for the Third Circuit had actions for which legal advice is necessary. of how the consultant’s work will assist the not adopted a definition for the functional The district court adopted this approach party with legal matters and why the work cannot be conducted in-house,” says ian H. courts do not agree on the necessary pred- Upjohn, and the widespread use of inde- Fisher, Chicago, cochair of the Section of icates for extending the attorney-client Litigation’s Trial Evidence Committee. “The privilege to a corporation’s independent contract should expressly recognize that the consultant will work with the party’s attor- neys and that the party expects the commu- equivalents of employees of gSK, because nications to be confidential,” adds Fisher. which include the fol owing factors identi- fied in In Re Bristol Myers Squibb Securities outcome of a privilege chal enge, but it that necessitated consultation with gSK’s may help define the parameters of the rela- tionship so that third parties can behave rated in the staff to perform a corporate appropriately when handling legal matters function which is necessary in the context PrActice tiPs
for a client,” says Joan K. Archer, Kansas of actual or anticipated litigation; pos- City, mO, cochair of the Section’s Pretrial exists for a non-employee, “counsel wil authority to make decisions on behalf of independent contractor is the functional the proper way to communicate in writing confidentiality and stating the legal pur- ence within the consultant’s field.
pose for the communication,” says Archer. Nevertheless, “much depends on how art- The district court rejected this definition, ful y counsel are able to make their case deeming it “narrow” and “too restrictive” and how ‘strict constructionist’ on the privi- those roles required communications that lege a particular court may be,” cautions that it contained an authority requirement were treated confidential y,” says John B. Published iN litigAtioN News, Volume 38, Number 1, FAll 2012. 2012 Americ AN bAr AssociAtioN. reProduced with PermissioN. All
rights reserVed. this iNFormAtioN or ANy PortioN thereoF mAy Not be coPied or dissemiNAted iN ANy Form or by ANy meANs or
stored iN AN elec troNic dAtAbAse or retrieVAl system without the exPress writ teN coNseNt oF the AmericAN bAr AssociAtioN.

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