Communicating with Third-Party Consultants Without Forfeiting Attorney-Client Privilege

Working with third-party vendors, such as advertising agencies, financial advisors, and law firms, is common practice in most industries. Using the expertise of a third party frees up company resources so employees can focus on other projects, and it allows a company to access the expertise of others without bearing the overhead costs associated with employing such experts. Despite the advantages of working with consultants, the vendor relationship can pose certain legal risks if precautions are neglected.

In situations where the business needs to discuss matters with both the outside consultants and the attorney, the business may need for these discussions to be confidential, meaning that it needs to preserve the attorney-client privilege that will keep them confidential. But careless communications may inadvertently waivie the attorney-client privilege. This post will review one case, then discuss some of the precautions organizations can take to avoid the potential pitfalls of working with third-party consultants.

Universal Standard Inc. v. Target Corp.

Universal Standard Inc. v. Target Corp., decided in May of 2019, was a trademark dispute over the question of whether attorney-client privilege was waived by sharing privileged communications with a public relations firm. A magistrate judge in the Southern District of New York ruled that emails exchanged among a company, its attorneys, and its public relations firm were not privileged or protectable attorney work product.

In July of 2018, Universal Standard Inc., a “size-inclusive” brand of women’s clothing, sued Target Corporation for selling a size-inclusive women’s clothing line under the brand “Universal Thread,” which they alleged constituted unfair competition and trademark infringement.

During discovery, Target obtained emails that had been sent between Universal Standard, its attorneys, and its public relations firm, BrandLink. When Target attempted to address the contents of the emails during a deposition, Universal Standard objected on the grounds that the emails were protected by attorney-client privilege, shut the questioning down, and demanded that Target destroy the emails. Target rejected Universal Standard’s demand and filed a motion containing three arguments:

1. Universal Standard waived attorney-client privilege by failing to include required information in its privilege log,
2. Universal Standard also waived privilege by exchanging the attorney emails with BrandLink, a third party, and
3. The emails were not protected attorney work product.

The attorney-client privilege protects confidential communications between attorney and client, when the client is obtaining legal advice. In this case, the emails at issue had been exchanged not just between attorney and client, but also with a third party. The court noted that the “general rule” is that disclosing otherwise privileged information to a third party waives the privilege.

There are numerous exceptions to that rule, and in this case the court considered three. Attorney-client privilege would not have been waived if:

• The third party’s presence on the communication is necessary to facilitate communications between attorney and client, as an accountant or translator might do;
• The third party is the “functional equivalent” of an employee rather than an independent contractor; or
• The third party is a consultant used by the attorney to assist in handling a client’s legal problems, providing needed information so the attorney can give legal advice.

BrandLink was a third party, not a communications liaison for the company and attorney. It functioned as an independent contractor, not an employee. It was hired for business purposes, not to assist with legal matters. Therefore, the courts found that none of these exceptions applied to this case.

Finally, the court considered whether the emails were protected by the work product doctrine, which protects the confidentiality of documents prepared by an attorney or those working with an attorney prior to legal proceedings. Universal Standard would have had to prove that the emails were prepared specifically in anticipation of litigation, but they could not.

Guidelines for Organizations

If there are privileged or confidential communications with legal counsel, the business must implement safeguards to avoid inadvertently waiving the attorney-client privilege.

Businesses should undergo legal training as the first line of defense. Many businesspeople are unaware of the importance of maintaining privilege, and how it can impact the continued success of their business; thus, employees do not understand the consequences of their actions and may inadvertently waive the privilege by disclosing legal advice to a vendor.

Annual or periodic training should educate your business team and offer practical tips for how to avoid an issue. For example, the ultimate answer to a legal question can be communicated to a third-party, but the communications leading to that answer cannot, so personnel should be trained to monitor their email chains. (Using outside legal counsel for training sessions can take the burden off your in-house legal counsel; outside counsel will also get to know your business and be better equipped to assist you in the future.)

If you wish to involve a third-party vendor in legal communications, discuss the risks with legal counsel first. In some situations, having your attorney contract with and communicate directly with the vendor instead of the business can avoid waiving privilege because the consultant is providing information to the attorney to support legal advice.

The attorney-client privilege gives attorneys the ability to have open, honest communications with their clients. Often, those open, honest communications are material you’d rather not share with your competitors and opponents. So it’s important that businesses appreciate the value of the privilege and work to protect it, even when outside consultants are involved in a project.

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Featured Image by Rebecca Sidebotham.