M E M O
TO: Supreme Court Justices
FROM: Jim Harris
RE: Proposed N.D.R.Ev. 502 - Lawyer-Client Privilege
DATE: November 28, 2000
At the November 22, 2000 rules conference, the court directed me to check other states regarding the lawyer-client privilege as applied to corporations. My research indicates some states that have adopted the Uniform Rules of Evidence have broadened the control group test for representatives of a corporate client to variations of the subject-matter test. Additionally, I found a helpful annotation at 26 A.L.R. 5th 628 which suggests a trend to broaden the attorney-client privilege beyond the control group to some variation of the subject-matter test.
Uniform Rules of Evidence Annotation
According to the Annotation to Uniform Rules of Evidence 502, 13 states have adopted Rule 502, or a variation. The U.L.A. annotation says the version of the rule adopted in Alaska, Arkansas, Maine, New Hampshire, and Oklahoma follows our current N.D.R.Ev. 502, which uses the "control group" test for defining representative of the client and provides: "A 'representative of the client' is one having authority to obtain professional legal services, or to act on advice rendered pursuant thereto, on behalf of the client." I have not found any cases from those states which elaborates on the scope of the "control group" test.
The U.L.A. annotation cites versions of Rule 502 from Idaho, Mississippi, and Oregon which uses language that is broader than the "control group."
The Idaho version provides: "A 'representative of the client' is one having authority to obtain professional legal services, or an employee of the client who is authorized to communicate information obtained in the course of employment to the attorney of the client."
The Mississippi version provides: "A 'representative of the client' is one having authority to obtain professional legal services, or to act on advice rendered pursuant thereto, on behalf of the client, or an employee of the client having information needed to enable the lawyer to render legal services to the client."
The Oregon version provides: "'Representative of the client' means a principle, an employee, an officer or a director the client: (A) Who provides the client's lawyer with information that was inquired during the course of, or as a result of, such person's relationship with the client as principle, employee, officer or director, and as provided to the lawyer for the purpose of obtaining for the client the legal advice or other legal services of the lawyer; or (B) Who, as part of such person's relationship with the client as principle, employee, officer or director seeks, receives, or applies legal advice from the client's lawyer."
I did not find any Idaho or Mississippi cases discussing their version of a representative of a client. In State ex rel. Oregon Health Sciences Univ. v. Haas, 942 P.2d 261 (Or. 1997), however, the Oregon Supreme Court construed Oregon's statue for lawyer-client privilege. The court's opinion generally discusses the purpose of the lawyer-client privilege to encourage full and frank communication between attorneys and their clients so legal advice can be given after the attorney has been fully informed by the client. 942 P.2d at 265, citing Upjohn Co. v. United States, 449 U.S. 383 (1981). In Haas, 942 P.2d at 270-71, the court considered legislative history to construe the meaning of representative of a client and concluded (1) any employee of a corporate client may be a representative of the client, and (2) the interaction with the corporate client's lawyer need not be a regular part of the employee's job for the employee to qualify as a representative of the client.
According to the U.L.A. annotation, the version of Rule 502 adopted in Delaware, Nebraska, Vermont, and Wisconsin does not include subdivision (a)(2), which defines representative of the client. However, Vermont Rule of Evidence 502(a)(2) provides:
(2) A "representative of the client" is (A) a person having authority to obtain professional legal services or act on advice rendered pursuant thereto, on behalf of the client, or (B) any other person who, acting in the scope of employment for the client, makes or receives a confidential communication necessary to effectuate legal representation for the client. In case of a corporation, the officers and directors and those person who have the authority to control or substantially participate in a decision regarding action to be taken on the advice of a lawyer are also "representatives of the client."
In Baisley v. Missisquoi Cemetery Ass'n, 708 A.2d 924, 930 (Vt. 1998), the Vermont Supreme Court said the language was taken from Rule 502(a)(2) of the Uniform Rules of Evidence, which was modified in 1986 to bring the rule in conformity with Upjohn.
The U.L.A. annotation also says 15 other states have adopted the Uniform Rules of Evidence, but have omitted Rule 502 from their version of the rules. Those states are Arizona, Colorado, Iowa, Michigan, Minnesota, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Utah, Washington, West Virginia, and Wyoming.
However, Arizona has enacted Ariz. Rev. S. § 12-2234(B) which says:
B. For purposes of subsection A, any communication is privileged between an attorney for a corporation, governmental entity, partnership, business, association or other similar entity or an employer and any employee, agent or member of the entity or employer regarding acts or omissions of or information obtained from the employee, agent or member if the communication is either:
1. For the purpose of providing legal advice to the entity or employer or to the employee, agent or member.
2. For the purpose of obtaining information in order to provide legal advice to the entity or employer or to the employee, agent or member.
Utah Rule of Evidence 504(4) also provides:
A "representative of the client" is one having authority to obtain professional legal services, or to act on advice rendered thereto, on behalf of the client, or one specifically authorized to communicate with the lawyer concerning a legal matter.
The commentary to the Utah rule provides:
Rule 504 is based upon proposed Rule 503 of the United States Supreme Court. . . .
The Committee revised the proposed rule of the United States Supreme Court to address the issues raised in Upjohn Co. v. United States, 449 U.S. 383, 101 S.Ct. 677 (1981), as to when communications involving representatives of a corporation are protected by the privilege. The Committee rejected limiting the privilege to members of the "control group" and added as subparagraph (a)(4) a definition for "representative of the client" that includes within the privilege disclosures not only of the client and the client's formal spokesperson, but also employees who are specifically authorized to communicate to the lawyer concerning a legal matter. The word "specifically" is intended to preclude a general authorization from the client for the client's employees to communicate under the cloak of the privilege, but is intended to allow the client, as related to a specific matter, to authorize the client's employees as "representatives" to disclose information to the lawyer as to that specific matter with confidence that the disclosures will remain within the lawyer-client privilege.
Additionally, Louisiana has adopted the Uniform Rules of Evidence and its Code of Evidence 506A(2) provides:
(2) "Representative of the client" is:
(a) A person having authority to obtain professional legal services, or to act on advice so obtained, on behalf of the client.
(b) Any other person who makes or receives a confidential communication for the purpose of effectuating legal representation for the client, while acting in the scope of employment for the client.
I have also found a useful 1995 annotation on this subject - Alexander C. Black, Determination of Whether a Communication is From a Corporate Client for Purposes of the Attorney-Client Privilege - Modern Cases, 26 A.L.R.5th 628 (1995). Because this annotation is over 100 pages long, I have only copied part of it for the Court -- the table of contents and Section 2, which summarizes the annotation. The hard copy of the entire annotation is in my office.
The A.L.R. annotation explains the "control group" test was widely used in the 1960's and 1970's and is now applied in only a few jurisdictions. Id. at § 2, p. 650. Sections 4 through 16 of the annotation discuss cases applying the "control group" test. Those cases are mainly from Illinois and Texas and emanate from two key cases from those states. See National Tank Co. v. Brotherton, 851 S.W.2d 193 (Tex. 1993) and Consolidation Coal Co. v. Bucyrus-Erie Co., 432 N.E.2d 250 (Ill. 1982).
In Consolidation Coal, 432 N.E.2d at 254-55, the Illinois Supreme Court reviewed the three major tests for defining client in the corporate context: (1) the control group test; (2) the subject-matter or scope-of-the-employment test from Harper & Row Publishers, Inc. v. Decker, 423 F.2d 487 (7th Cir. 1970), aff'd by equally divided court, 400 U.S. 348 (1971); and (3) the modified subject-matter test from Diversified Indus., Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1977) (en banc). The Illinois Supreme Court held the corporate attorney-client privilege applies to communications by members of the corporate control group and the court defined the control group as those who had the ability to make a final decision on the matter, or those without whose opinion a final decision would not ordinally be made. Consolidated Coal, 432 N.E.2d at 257-58. The court stated the narrower control group test strikes a reasonable balance by protecting consultations with counsel by those who are the decision makers or who substantially influence corporate decisions, and by minimizing the amount of relevant factual material which is immune from discovery. Id. at 257.
In National Tank, 851 S.W.2d at 198, the Texas Supreme Court relied on Texas Rule of Civil Evidence 503, which defined representative of a client in language identical to current N.D.R.Ev. 502(a)(2), and held a corporation can claim the attorney-client privilege only as to statements made by employees with authority to obtain professional legal services, or to act on advice rendered pursuant thereto, i.e., the control group.
Except for Leer v. Chicago, M., St. P. & P. Ry. Co., 308 N.W.2d 305 (Minn. 1981), the other cases discussed in Sections 4 through 16 of the A.L.R. annotation largely apply Illinois law. In Leer, at 308-09, the Minnesota Supreme Court discussed the three tests for the attorney-client privilege in the corporate context - the control group test, the subject-matter test, and the modified subject matter or "Weinstein" test. The court did not adopt any of the three tests, because it concluded under of any of those tests, the attorney-client privilege did not encompass communications about events which were known by the employee solely because the employee witnessed an accident. Id. at 309.
In Sections 17 through 30, the A.L.R. annotation discusses variation of the "subject-matter" test which essentially states:
[A]n employee of a corporation, though not a member of its control group, is sufficiently identified with the corporation so that his communication to the corporation's attorney is privileged where the employee makes the communication at the direction of his superiors in the corporation and where the subject matter upon which the attorney's advice is sought by the corporation and dealt with in the communication is the performance by the employee of the duties of his employment.
Harper & Row, 423 F.2d at 491-92.
The A.L.R. Annotation suggests that although some jurisdictions follow the control group test, most jurisdictions that have considered the issue have adopted variations of the broader "subject-matter" test, which are reflected in the titles to Sections 17 through 21. See § 17, View that communication must concern matters within scope of employment and be at supervisor's direction; § 18, View that communication must concern matters within scope of employment; § 19, View that communication must concern matters within scope of employment and be at supervisor's direction, and employee must be aware that legal advice is sought; § 20, View that communication must arise out of employee's employment and employee must be natural spokesperson for corporation; § 21, View that employee must directly seek legal advice or communication must concern employee's own conduct.
Southern Bell Tel. & Tel. Co. v. Deason, 632 So.2d 1377 (Fla. 1994), is an example of the variations. In Deason, at 1383, the Florida Supreme Court rejected the "control group" test and applied a combination of the subject-matter test established in Harper & Row, 423 F.2d at 491-92, and Diversified Indus., 572 F.2d at 609. The Florida Supreme Court outlined the following criteria for deciding whether communications by a representative of a corporation were protected by the attorney-client privilege: (1) the communication would not have been made but for the contemplation of legal services; (2) the employee making the communication did so at the direction of his or her corporate superior; (3) the superior made the request of the employee as part of the corporation's effort to seek legal advice or services; (4) the content of the communication relates to the legal services being rendered, and the subject-matter of the communication is within the scope of the employee's duty; and (5) the communication is not disseminated beyond those persons who, because of the corporate structure, need to know its contents.
The gist of the A.L.R. annotation reflects a trend to broaden the attorney-client privilege beyond the control group to some variation of the subject-matter test. See generally, Annot. at § 2, pp. 648-54. The question for this Court involves a policy issue. If the Court decides to retain the control group test in the current rule, obviously no amendment to N.D.R.Ev. 502 is necessary. If the court decides to broaden the scope of the attorney-client privilege to some variation of the subject-matter test, some amendment to N.D.R.Ev. 502 is necessary and the question involves the choice of appropriate language. Examples of language employing the subject-matter test can be found in the proposed rule currently pending before the court and in the provisions from Arizona, Idaho, Mississippi, Oregon, Louisiana, Utah, and Vermont, which are quoted on pages 2-4 of this memorandum.