May 18, 2016 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.
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.
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