Solo/Small Firm
Confidential Matters
A look at attorney-client privilege in transactional practice
By Katherine Kunz
Keeping privileged material confidential is often wrongly perceived as more of a litigator’s “issue” when it comes to accurately classifying materials as “privileged” or “work product” during the discovery process. However, a transactional attorney’s proactive steps in safeguarding attorney-client confidentiality are critical should a dispute arise out of a trans-action at a later date. Solo and small-firm transactional practitioners, who often don multiple hats over the course of a deal as commercial and legal counsel, must take particular care to keep their clients’ legal privi-leges secure.
Who Is the Client?
First, transactional attorneys must keep a clear understanding of who
their client is in order to maintain that client’s privilege,
particularly if the client is a corporate entity. Cor-porate privilege
will generally belong to the corporation itself and not to its
employees. A corporation must act through its representative. Corporate
attorney-client privilege therefore applies to representatives with
author-ity to obtain or act on legal advice, as well as to any other
employee who makes or receives a confidential com-munication for the
purpose of obtain-ing legal advice while acting in the scope of
employment.1
Furthermore, if the transaction involves simultaneous representation of different corporate entities, be aware of the possibility of conflict of inter-est and secure appropriate waivers—or, possibly, separate counsel for each entity—if needed. Corporate parents and subsidiaries are generally viewed as separate legal entities. When a parent corporation and its subsidiary differ over whether to invoke attorney-client privilege, a court may be asked to determine which entity may assert the privilege. This analysis turns in part on whether the parent and subsidiary are joint clients of their legal counsel or merely one client.
What Material Is Privileged?
Transactional attorneys may find themselves grappling with a client
who expects every non-public piece of information about a deal to be
“privileged” simply by virtue of an attorney’s involvement. While
attorney-client privilege protects facts contained in attorney
communications, a client cannot protect a material fact with privilege
merely by communicating it to an attorney. Furthermore, if the purpose
of a communication is com-mercial rather than legal advice, that
communication may not be privileged under the Texas Rules of Evidence
Rule 503(a)(2).
In practice, determining whether a communication amounts to “business” versus “legal” advice can be challenging, particularly where a transactional attorney may be acting in a dual role as business adviser and lawyer. However, recent Texas appellate decisions have found that where a communication is made “to facilitate the rendition of legal services,” that communication will likely be privileged notwithstanding whether its “primary” purpose is legal or commercial.2
When Is Privilege Waived?
Texas Disciplinary Rules of Professional Conduct Rule 1.05 states that
an attorney must not knowingly reveal confidential information of a
client or former client to a third party without the client’s consent.
“Confidential information” includes privileged information, as well as unpriv-ileged client information acquired by the attorney during the course of the representation.
Within a corporate structure, multi-ple employees may take different views toward maintaining a privilege. Typically, the corporation itself (rather than any individual employee or offi-cer) will hold the privilege and the entity’s board of directors or other governing body would determine waiver, rather than any individual officer or director.
Solos and small-firm transactional attorneys are often called upon to act as both commercial and legal counselors during a deal. Being mindful of privi-lege pitfalls that may transpire while doing so is not simply a matter of good lawyering but will also keep your client in the best strategic position possible with regard to privileged material should any future litigation arise. TBJ
KATHERINE KUNZ is
an associate of Quinn Emanuel Urquhart & Sullivan in Houston. She
practices commercial civil litigation in state and federal courts. Kunz
is a life fellow of the Texas Bar Foundation and a member of the Young
Professionals Council of the Houston Urban Debate League.