Federal Court’s Recent Ruling In Vioxx Litigation Impacts Internal Communications Between In-House Counsel and Corporate Personnel

August 17, 2007

On Tuesday, August 14, 2007, a Federal District Court Judge in Louisiana issued a decision relating to electronic discovery and the attorney-client privilege, which in-house corporate counsel should consider when communicating with corporate personnel.

Judge Eldon E. Fallon has ordered Merck & Co. to produce approximately 3,000 documents (exceeding 500,000 pages), which Merck had claimed were protected from disclosure under the attorney-client privilege. This decision underscores the continuing struggle to maintain the balance between the attorney-client privilege and the often inescapable dual role played by many corporate in-house counsel as both business and legal advisor.

Judge Fallon’s decision comes on the heels of receiving a report and recommendations drafted by his appointed special master, American University law professor Paul R. Rice, who tediously reviewed each document Merck & Co. claimed was privileged. Judge Fallon adopted most of Professor Rice’s nine recommendations concerning which documents should or should not be protected by the attorney-client privilege.

What Happened: On August 22, 2005, in response to a request for production from Plaintiffs’ Steering Committee, Merck asserted the attorney-client privilege on a significant volume of documents that were identified on its first privilege log. On November 4, 2005 Judge Fallon ordered an in camera review of all withheld documents, which were individually reviewed by the Court over several months. Merck objected to the Court’s determinations after this review and petitioned for writ of mandamus before the United States Court of Appeals for the Fifth Circuit. The Fifth Circuit declined to issue a writ of mandamus on jurisdictional grounds, but suggested Judge Fallon (or his designee) reexamine the documents under a different review protocol. Following this opinion, Judge Fallon appointed Professor Rice and the second round of review began. Professor Rice issued his report in July 2007.

The Special Master’s Report: Professor Rice’s report, while providing a comprehensive review of attorney-client privilege, ultimately arrives at conclusions and guidelines regarding the privilege’s application that appear to be less favorable for Merck.

For example, certain of Merck’s documents are e-mails containing non-privileged attachments to which in-house counsel rendered line-item modifications. Merck claimed the entire attachment was privileged by virtue of the line-item revisions by in-house counsel; however, this claim was denied by Professor Rice. In making this distinction, Professor Rice wrote, “Merck cannot be permitted to manipulate the discovery process by the manner in which their in-house attorneys render their advice.” In his guideline relating to this issue, however, Professor Rice recommends that Merck be permitted to redact the electronic modifications made by counsel.

In a second example, Professor Rice’s report emphasizes the “legal assistance” requirement for application of the privilege and cautions that copying in-house counsel on every communication that “might be seen as having some legal significance at some time” does not necessarily render the communication privileged. Professor Rice, however, recognizes the dual capacity that in-house counsel often serve. Accordingly, he frames the test for application of the attorney-client privilege to mixed services communication as turning on whether “counsel was participating in the communication primarily for the purpose of rendering legal advice.” The privilege may still be waived on an otherwise potentially privileged communication by copying non-legal corporate personnel for a non-legal purpose.

What This Means: These examples underscore the need to exercise caution when communicating electronically because it cannot be assumed that all correspondence simultaneously – or even individually – disseminated to or by in-house counsel will fall under the attorney-client privilege. One suggestion by Professor Rice for protecting the privilege during simultaneous conveyances within a company (to in-house counsel and nonlegal personnel) is to blind copy in-house counsel on the communication. Another suggestion is to send a wholly separate e-mail to in-house counsel than the version disseminated to nonlegal personnel.

Corporate counsel and their respective corporate personnel should remember, however, that the application of attorney-privilege to particular communications in specific cases depends upon a careful analysis of all the facts and applicable law within their jurisdiction.

Additional Documents:

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