Who is the organizational client and what communications are privileged?
When a lawyer represents an individual, there is usually no question who the client is. When a lawyer represents an organization (say, a corporation, a partnership, or a government body), Rule 1.13(a) of the Delaware Lawyers’ Rules of Professional Conduct (the “Rules”) states the lawyer “represents the organization acting through its duly authorized constituents.”
An organization acts, speaks, and consents through human beings (constituents). But outside counsel often refer to corporate constituents as their “clients,” and corporate constituents often refer to corporate counsel as “my lawyer”. Neither of those descriptors is really accurate, and if an organization’s lawyers and constituents actually think of, and treat, each other that way, they may be unpleasantly surprised when communications they thought were privileged turn out not to be.
Comment [2] to Rule 1.13 provides an organization’s lawyer “may not disclose to such constituents information relating to the representation except for disclosures explicitly or implied authorized by the organizational client... as permitted by Rule 1.6.” (Emphasis added.) And Comment [7] provides when there is adversity between and organization and its constituent, “discussions between the lawyer for the organization and the individual may not be privileged.” (Emphasis added.)
In the highly publicized criminal fraud trial of former Theranos CEO Elizabeth Holmes, a magistrate judge determined Holmes, individually, could not assert the attorney-client privilege with respect to certain communications between Holmes and Theranos’s counsel, Boies Schiller. The magistrate held the privilege belonged to the organization, not Ms. Holmes personally, and Theranos’s assignee had waived the privilege. The magistrate also refused to apply the common interest privilege. Regardless of whether one agrees with the magistrate’s decision, an or-ganization’s lawyers and constituents would be wise not to simply assume all of their legal communications will be deemed privileged.
This article originally appeared in the November 2021 issue of The Journal of the Delaware State Bar Association, a publication of the Delaware State Bar Association. Copyright © Delaware State Bar Association 2021. All rights reserved. Reprinted with permission.
