The Attorney-Client Privilege in New Jersey Business Litigation

New Jersey Business Litigation Attorney-Client Privilege

The attorney-client privilege in New Jersey business litigation encourages clients to inform their attorneys with honest and comprehensive information. An attorney cannot get the best result for a client if the client is not completely candid. During business litigation, a client cannot be compelled to disclose communication protected by the attorney-client privilege and the client can prevent others (i.e., the attorney and his or her assistants) from doing so.

A communication is protected by the attorney-client privilege if the communication is:

(1) Made in confidence,

(2) Between (a) an attorney and (b) a client,

(3) For the purpose of obtaining legal advice.

Covered Communications

The vast majority of communication between an attorney and client is now electronic via email, text, and chat platforms.  The form of the communication does not matter.  The privilege encompasses not only oral and written statements, but actions, signs or other means of communication.

Technically, the privilege applies only to statements made by a client. However, often disclosure of the attorney’s statements to the client would also disclose the client’s statements.  Statements by an attorney to a client are privileged in these circumstances.

A client cannot avoid disclosing facts by communicating them to the attorney.  Although you can’t be compelled to disclose what you told your attorney, you can be asked to reveal relevant facts of which you are aware.

When Are You Considered a Client for Purposes of the Privilege?

Once you retain an attorney through a formal contract, often referred to as a retention agreement, you clearly are a client.  Having a documented agreement in place is a prudent first step to enjoying the privilege.

Even without an executed retention agreement, the privilege will often apply between an attorney and a potential client. For example, the privilege covers communications made during your initial consultation with an attorney, even if you don’t ultimately retain him or her. The privilege applies any time an attorney receives information from a prospective client that would be confidential if the attorney were representing the client. However, if the attorney explicitly declines to represent you, any subsequent statements you make are not privileged.

When You and a Business Partner Retain the Same Attorney

Sometimes business partners retain an attorney jointly.  In this situation, you can review any communications that your attorney has with your fellow client.  You do not have to be present when these communications are made. Attorneys are bound by ethical rules that mandate an equal duty of loyalty and consequently, all clients have the right to be informed of the matters affecting their stake in the case.  If a joint client wants to waive the attorney-client privilege, all clients must agree on that waiver.

When a Corporation Is the Client

The attorney-client privilege in business litigation extends to corporate clients. A lawyer representing a corporate client will need to discuss a pending legal matter with company officers and employees.  The attorney-client privilege typically applies to these conversations.

Most courts apply the Upjohn test based on the U.S. Supreme Court case Upjohn Co. v. United States, 449 U.S. 383 (1981).  Under this test, communications to the corporation’s attorney are privileged if they are made: (1) by an employee (2) at the direction of a management-level employee (3) within the scope of the employee’s duties.  The Upjohn test acknowledges that employees are often involved in litigation and the corporation’s attorneys need to talk freely with them to provide effective representation

The critical point is that the communication must be kept confidential and not published to a third party outside the corporation. For example, if an employee forwards legal advice to a customer or vendor, the confidential communication has been published to a third party and is no longer protected by the attorney-client privilege.  But if the communication is employee-to-employee (e.g. an employee relays the attorney’s advice to her manager) the privilege would be maintained.  To ensure the privilege is maintained, training employees on breaking privilege is helpful.

Most courts hold that the privilege extends to former employees provided that the communications concern their activities while employed with the company.  Similarly, the trend is to extend the privilege to confidential communications between independent contractors and the corporation’s attorney when the communications otherwise satisfy the Upjohn test. Courts consider several factors that center around the closeness and continuity of the working relationship.

In a minority of jurisdictions, only communications from upper management (e.g. CEO or CFO) to the corporate attorney enjoy the privilege.  The “client” is a limited group of employees who control or have a say in the corporation’s response to legal advice. You should consult with your attorney about which persons in particular can invoke the privilege if you are in a jurisdiction that applies this principle.

As an officer or owner of a company, you should keep in mind that your in-house counsel or the attorney you hire to represent you in a business dispute generally represents the corporation, not you as an individual. Thus, if you consult the corporation’s counsel about your personal liability, your communications may not be privileged.

Who Is an Attorney for Purposes of the Privilege?

Whom you can consider an attorney is another point to keep in mind when communicating information you want kept confidential.  Depending on your jurisdiction, the privilege may apply to non-attorneys if you believe the person is an attorney.  For example, a person holds herself out as an attorney, but she is actually not licensed by the bar.

You need to be particularly careful when communicating with in house counsel. In house counsel often advise on business matters intertwined with legal matters.  Here the line of what is privileged blurs as communications regarding general business matters are not covered.

The privilege extends to communications to paralegals, secretaries, language interpreters, and other consultants who are an integral to the attorney’s representation.  These individuals cannot be compelled to reveal your confidences.  You can address any particular concerns about who will qualify in your retention agreement with your attorney.

How Long Does the Privilege Last?

Generally the privilege survives the termination of the attorney-client relationship although whether the relationship was with an individual or a corporation can affect this principle.  For example, if the communication was between your former employees and corporate counsel about matters that occurred during their employment, the privilege could apply even though they are no longer agents of the company.  For an individual, the power to assert the privilege survives death and even passes to an individual’s executor.

If you need a business litigation attorney, call Snellings Law LLC at 973.265.6100. Our attorneys are experienced with the full range of business litigation including contract and real estate disputes, as well as consumer fraud and banking cases.