Big News From The Big Easy: The Fifth Circuit Protects The Privilege For Communications Between In-House Counsel And Their Business Colleagues

Here's a guest post we received from Reed Smith's Andrew Stillufsen about a discovery topic that afflicts drug/device defendants, as well as those representing any large corporate entity - the applicability of the attorney/client privilege to communications authored by in-house counsel. Andy describes a recent successful outcome in a case involving a large oil company, but for the underlying subject matter, the dispute could just as easily have arisen in drug/device litigation. As always, all the credit and/or blame for this post goes to the guest poster.

In-house counsel everywhere, and those who rely on their advice, breathed a sigh of relief last month when the Fifth Circuit overturned a district court decision and found that a memo drafted by in-house counsel at the request of a business colleague in connection with a contract negotiation was in fact protected by the attorney-client privilege. This case serves not only as a validation of the role of in-house counsel in corporate transactions, but also is an important reminder of the importance of establishing the elements of the privilege on the face of a document, and thus be able to withstand even the most demanding court review.

In Exxon-Mobil Corp. v. Hill, ___ F.3d ___, 2014 WL 1796646 (5th Cir. May 6, 2014), the court was presented with a question that many courts grapple with every day: is a document drafted by an in-house lawyer a confidential communication for the purpose of providing legal advice, or merely a business communication that happened to be drafted by a lawyer? Since the answer was not apparent on the face of the document, the court was forced to take a deep dive into the context of the drafting of the memo, and fortunately found that, given this context, it was in fact privileged.

The document at issue, called the Stein Memo after its author, was created in a fairly typical manner. In the late 1980s Exxon was negotiating with another company over a contract to clean its oilfields and store the cleaned materials, which included substances contaminated by naturally occurring radioactive materials ("NORM"). A business person involved in the negotiations asked in-house counsel Stein for advice regarding how to respond to a request from the other company for some relevant test results. Stein's advice, including which test results to disclose and proposed language to accompany the test results, was memorialized by her in the Stein Memo.

Fast forward over twenty years to...