When planning your business and tax structure with your lawyer, it is important to understand what is privileged and what is not. Often times, clients divulge information to their lawyer and wonder whether that information is “attorney-client privileged” or not. Attorney-client privilege is an important legal protection offered to persons, companies, and organizations who provide confidential information and who seek counsel from their lawyer or law firm. Under law, an attorney cannot be required to provide attorney-client privileged information to a plaintiff in a law suit (e.g. creditor) or to a government agency (e.g. the IRS) except under limited situations. Here are a couple of common situations where you may lose attorney-client privileged information and some tips to make sure your confidential information provided to your lawyers doesn’t run into the exceptions.
EXCEPTIONS TO THE ATTORNEY CLIENT PRIVILEGE RULE
1. THIRD PARTY NON-LAWYER PRESENT- Was a third party present with your lawyer when the information you want to be privileged was discussed. For example, was your accountant or financial adviser present when discussing information you want to remain confidential and to remain privileged. Keep in mind that if a third party is present in a meeting or on a conference call then that third party may be required to provide information or documents from the meeting and that your accountant, consultant or adviser can’t raise the attorney-client privileged defense for you unless they are actually your attorney. If an third party professional does need to be hired (e.g. an accountant or CPA), that third party can be hired or brought into the matter by the attorney and the privileged may remain in tact. This is known as a “Kovel” hiring of the accountant and stems from a case where a lawyer engaged an accountant for the client and the accountants work therefore was covered under the lawyer’s attorney-client privilege.
TIP: For sensitive matters where you want information to remain confidential and privileged, do not involve outside parties as those outside parties or non-attorney advisers as those parties cannot raise the attorney-client privileged defense.
2. ONLY LEGAL ADVICE IS ATTORNEY-CLIENT PRIVILEGED – Only information exchanged when seeking legal advice is attorney-client privileged. This is especially tricky for companies who have their own “in-house” legal counsel who also offers business advice. Only the information exchanged that pertains to legal advice would be privileged. For example, was an organization chart of the companies holdings “privileged” when provided to the company lawyer also manages those assets for the business? Also, what if that lawyer disseminated that organization chart to accountants, property managers, or other non-lawyers? If they did, then that information is no longer attorney-client privileged.
TIP: If you have sensitive documents or information you want to keep in communication only with your lawyer, ask your attorney to identify the document as “Attorney-Client Privileged” and do not provide it to non-lawyers.
Not all information with your lawyer needs to be attorney-client privileged but keep these tips in mind when communicating highly-sensitive information to your attorney and let your attorney know before you provide the confidential information that you intend it to be privileged so that they can ensure that your information is properly handled and so that non-lawyer third-parties are only involved when the privilege can be maintained.