Proceed with Caution: Attorney-Client Privilege and Communications with Third-Party Consultants

In our modern economy, businesses regularly use all manner of third-party consultants for many different reasons, including cost, efficiency, and expertise. Less regularly, communications between businesses and consultants are the subject of discovery motion practice in litigation. Two recent decisions out of the Southern District of New York demonstrate why businesses that use third-party consultants should proceed with caution to preserve claims of attorney-client privilege, and prevent the disclosure of what would otherwise be privileged communications.

In a normal business setting, the attorney-client privilege is not implicated when third-party consultants are involved in typical business functions, such as meetings, revising draft documents, and setting corporate policy. However, the privilege can be, and often is, at issue when privileged communications are shared with these consultants.

The root of the problem lies with a basic tenet of the attorney-client privilege: communications between attorney and client are confidential, but once that communication is shared with a third party, the privilege is waived. In some cases, however, courts have found an exception to this normal waiver rule, depending upon the role of the third party and the nature of the communication. See PR That's Protected, Corporate Counsel (Oct. 2014) (available here).

In both of the decisions examined below, the courts were focused on the critical question underlying this analysis: was the purpose of the third-party consultant's participation to improve the comprehension of the communications between attorney and client? In both decisions, the answer was no—and because the third party was not essential to the facilitation of legal services, the privilege was held to be waived.

HR Consultant's Report Not Privileged Because It Was Not Used to Provide Legal Advice

At issue in the first decision, Scott v. Chipotle Mexican Grill, Inc., was a report prepared by the defendant company's third-party human resources consultant and addressed to the company's outside counsel. The report was based on employee interviews and described certain activities of employees who fell into an "Apprentice" job category. —F.Supp.3d —, 2015WL1424009, *5‑*7 (S.D.N.Y. Mar. 27, 2015). According to the decision, the report, termed a "job function analysis," was created prior to the underlying litigation, and its purpose was "to get a really good understanding of what [Apprentices] do...in their day-to-day jobs...." Id. at *5.

In a wage-and-hour Fair Labor Standards Act case, plaintiffs demanded production of the report. Defendant resisted production and argued that the report was privileged, because the third-party consultant prepared the report in order to help outside counsel assess a legal issue...