Attorney-Client Privilege, Corporations, and California’s Approach

A recent decision by a federal district court in California underscores the importance of attorney-client privilege when the client is a corporation. That case answered the question of whether attorney-client privilege survives the dissolution of a corporation. The answer to that question, ruled by the judge, is that such attorney-client privilege does not survive when a company dissolves.

In that case, a now defunct company was seeking to prevent certain documents from being discovered in the ongoing litigation, but the district court ruled against them. In its ruling, the court stated unequivocally that “when a corporation ceases to exist, the corporate powers, rights, and privileges of the corporation shall cease.” This even includes otherwise confidential communications between the then corporation and its attorneys.

California’s Approach

This recent ruling marks a good time to discuss and better understand what the attorney-client privilege is and how it is applied in California. Though the legal doctrine of privileging communications between a client and attorney has deep roots in our western system of justice, the law establishing it in California is a statute.

Evidence Code section 954 grants the right to refuse to disclose and prevents others from disclosing communications made between a client and attorney. This right belongs to the client, not the attorney, and as a result it is the client that is always in charge of how, when, or whether information given to an attorney can be disclosed. This right extends to corporations in their communications with their legal team over any number of issues.

Once corporations and attorneys are involved, however, the issue of attorney-client privilege gets a bit stickier than in other situations. In a criminal defense case, for example, it is clear that anything a defendant says to his or her attorney is protected. But it is important to note that not all communications by a corporate employee to an attorney are protected by the attorney-client privilege.

The California Supreme Court addressed this issue in a case from 2009. In that case, a lower court ruled that parts of a report issued from an attorney to a corporation could be discovered in litigation because the discoverable facts were not part of an attorney client privilege, but the Supreme Court of California put a stop to that approach.

In its ruling, the high court held that the very transmission of information from an attorney to a client is privileged. This holds true even when a portion of that information would otherwise be discoverable by other means. The test to determine whether a communication between an attorney and corporate employee is protected by privilege is the dominant purpose test. This test asks what the dominant purpose of the communication between an employee and attorney is. If it is about an attorney-client matter, then it is protected; if not, then the communication likely does not have privilege protection.

Guiding Your Company

Your attorney plays a key role in the development and progress of your company. At The Royse Law Firm we can help you guide your company in a number of important areas of law. From general corporate and security law to immigration and tax considerations, contact us so we can be your company’s legal partner.

Disclaimer: This blog and website are public sources of general information concerning our firm and its lawyers, as well as the information presented. They are intended, but not promised or guaranteed, to be correct, complete, and up-to-date as of the date posted. This blog and website are not intended to be, and are not, sources of legal opinion or advice. The materials, information, and communications on this blog and website do not apply to any particular person, entity, or situation, and do not apply to you or to your specific situation. You will need to consult with an attorney and/or other appropriate professional about your specific situation. Thank you.
Roger Royse
rroyse@rroyselaw.com

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
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