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United States v. United Shoe Machinery Corp.

United States District Court for the District of Massachusetts · 1950 · Civil Procedure

Civil ProcedureAttorney-Client Privilegeattorney-client privilegecorporate clientin-house counseloutside counselpatent departmentlegal advice vs business advice

Facts

United Shoe Machinery Corporation and its subsidiaries and affiliates used the same inside and outside counsel, and the court treated them collectively as the client for purposes of the privilege claim. The defendant claimed privilege over documents in four categories: communications to or from independent lawyers, communications to or from the corporation's legal department, communications to or from its patent department, and working papers of persons in the patent department. The court found that the corporations and their employees sought legal advice in good faith rather than to commit a crime or tort, and that the defendant had seasonably claimed privilege without waiving it by producing documents under subpoenas pursuant to an agreement preserving the claim. The dispute centered on whether the communications were legal rather than business in character, whether they were based on confidential internal information, and whether the persons involved were acting as attorneys.

Issue

Which of the challenged corporate documents fell within the attorney-client privilege? More specifically, did the privilege cover communications involving outside counsel, in-house legal counsel, the patent department, and patent-department working papers?

Rule

The privilege applies only if (1) the holder is or sought to become a client; (2) the person receiving the communication is a member of the bar or subordinate and, in connection with the communication, is acting as a lawyer; (3) the communication relates to a fact communicated by the client, without strangers present, primarily to secure a legal opinion, legal services, or assistance in a legal proceeding, and not to commit a crime or tort; and (4) the privilege is claimed and not waived. The privilege is strictly construed, does not protect mere business advice, and does not protect legal advice based on facts obtained from outsiders or public documents. In this case, a document was protected only to the extent it was prepared by or for independent counsel or the general counsel and his immediate subordinates, was prepared principally to solicit or give legal advice or legal services, and contained confidential information from corporate officers or employees not disclosed publicly or before third persons, or opinions based on such information not intended for disclosure to third persons.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Summit Alloy Works, a manufacturer in Cleveland, asks its outside law firm in Columbus for advice about whether a proposed distributor rebate program complies with federal law. The firm's letter analyzes the statute, predicts litigation risk, and also recommends postponing the launch because the publicity could upset customers and investors.

If the letter is offered in discovery, which is the best answer regarding privilege?

Explanation. The privilege is strictly construed but is not lost merely because a lawyer's communication includes economic, policy, or public-relations considerations along with legal advice. The key is whether the communication was prepared principally to solicit or give legal advice and whether the protected portion contains confidential internal information or opinions based on it. A communication is not automatically privileged merely because it is with outside counsel, and litigation need not already be pending.