#CaseoftheWeek Episode 56: Analysis of Notes to Determine Attorney-Client Privilege

Episode 56 is an analysis of the decision in Diamond Resorts U.S. Collection Development vs. U.S. Consumer Attorneys. In this #CaseoftheWeek, we analyze whether attorney notes captured in a makeshift CRM application are protected from production under the traditional attorney-client privilege umbrella. 

Good morning, and welcome to our #CaseoftheWeek for February 8th, 2022. My name is Kelly Twigger. I am the CEO and founder of eDiscovery Assistant and the Principal at ESI Attorneys. I’m so happy to be here with you today. Thanks so much for joining me.

Each week, as you know, through our partnership with ACEDS, we choose a recent decision from the eDiscovery Assistant case law database and that highlights key issues for litigators and those involved in the eDiscovery process and talk about the practical implications of that decision for you, your practice and your clients. One of the things to think about here is we’ve been having a lot of discussions lately in the eDiscovery space about whether eDiscovery is just for eDiscovery practitioners or whether it’s really for all litigators. I would advocate that it is really for all litigators, especially the things we’re going to talk about today with regard to attorney-client privilege and those implications that need to be thought about at the beginning of the case.

I think it’s pretty accurate to say that most litigation teams aren’t sitting down with a discovery counsel to help them wade through issues at the beginning of the case, and I would advocate that you should be, but that you’re going to see here with discussion we have today on attorney-client privilege, that it’s really important to be thinking about these issues and how they’re going to play out in litigation at the very outset. There’s our first tip that we always talk about plan early.

Our decision today is one of the decisions in the Diamond Resorts U.S. Collection Development vs. U.S. Consumer Attorneys. This is a decision from the Southern District of Florida. Judge Bruce Reinhart is a Magistrate Judge down in the Southern District of Florida who authored this decision. It is from September 14th, 2021, so just a few months months ago.

We’re currently working on the 2021 Case Law Report with Doug Austin at eDiscovery Today, and that will be available in early March.

There are eight total decisions in the database from Judge Reinhart, so you can get a good sense that the Judge really understands the issues in discovery and offers some pretty excellent decisions.

The reason that I chose this one today is because there’s a great discussion of the elements of the attorney-client privilege and attorney work product, discussion of agency and when that applies to attorney-client privilege related issues, when waiver is appropriate, as well as clawback.

There’s lots of good language here in this decision to be able to be utilized, and this is an issue of first impression in the 11th Circuit. As the judge notes in the case, some of these issues that are presented today have not been resolved by the 11th Circuit and so they look to other jurisdictions to be able to get guidance on those issues.

All right, let’s talk about our decision in Diamond Resorts vs. US Consumer Attorneys. We are before the Court on a motion to compel. The plaintiffs here operate timeshare properties, they are owners of timeshare properties, and they have sued multiple defendants who are entities that assist consumers trying to get out of timeshare contracts. They’ve sued them for unfair competition, false advertising and trademark dilution under the Lanham Act, as well as unfair competition and torture interference under Florida law. That’s really the table that’s set here. Let’s dive into the facts on the motion to compel.

In response to a request for production, one of the defendants, DC Capital, asserted attorney-client privilege and work product privilege over account notes that it had made in a database that the Court refers to as its CRM, which is a customer relationship management database. If you’re familiar with Salesforce, that’s probably the most well known CRM application, but there are hundreds of different CRM applications and the purpose of a CRM application is really to allow you to pull in all the information that you have on an existing client in order to have a record of what the communications have been with that client, what you talked about, what the notes are from those discussions. That’s typical of a CRM. There are some things here that make the use of that database for the law firm a little bit challenging in the attorney-client privilege analysis.

The plaintiff moved to compel, following the objections, and asked the Court for an in camera review of the notes. There’s a separate issue in which DC Capital had already produced eight of the account notes, and they asked to claw those back. The analysis that we’re going to talk about with regard to attorney-client privilege and work product, applies both to the account notes that are not produced, as well as the account notes that were inadvertently produced.

Let’s understand a little bit about the relationship between the defendants, because there are multiple ones. Newton is a timeshare exit company that provides advice and assistance to Timeshare owners who want to get out of their contracts. Newton hired DC Capital, who is at issue on this motion, to compel, to assist its clients with legal representation. Both of them are defendants in the case, so we’re not talking about a third party issue. This is a full on party issue.

Now, as permitted by the District of Columbia Rule of Professional Conduct 5.4(b), DC Capital has non lawyer partners who are also executives of Newton. The named partners are relevant to the discussion, but they’re not really analyzing the decision, so we’re going to leave that out for today. Newton ESA is a business solutions company that was hired by DC Capital to provide the law firm with administrative and back office services, including, but not limited to the use of Newton’s CRM software. Essentially, you’ve got a relationship between these three parties, right? The question is whether the fact that you’ve got non lawyers who might have access to this information ultimately destroys the privilege.

A little bit about the use of the CRM software at DC Capital. Newton provides Newton ESA, which is separate from the other Newton, provides use of the CRM software. Attorneys at DC Capital use the CRM software to upload notes and document communications with their clients. Essentially, I have a phone call with my client, I make notes about it. If I’m at DC Capital, I’m an attorney, I’m uploading those notes to this CRM system.

Now, here’s the sticking point. Other DC Capital employees who are acting as valid agents for the attorney, such as paralegals, legal operations specialists and managers and customer experience specialists, have access to those CRM notes, as well as documents that are generated by DC Capital and Newton employees on behalf of Newton. The nonlawyer partners at DC Capital also have access to the notes in the CRM, including those that are generated by the attorneys. However, DC Capital says that the nonlawyer parties do not access the notes for DC Capital. Newton ESA employees also have access to the CRM, but only to those notes that are generated by other Newton employees on behalf of Newton. They do not have access to notes generated by DC Capital employees or lawyers.

The agency relationship here is between whether or not the other DC Capital employees, those are considered employees of the law firm, and then you’ve got to deal with agency relationships with Newton and nonlawyer people.

Okay, so the plaintiff argues here that the account notes are not protected by the attorney-client privilege because they are not actually the communication between the client and the lawyer. They also state that any existing attorney-client privilege was waived when DC Capital uploaded the notes to the CRM that are accessible to the non lawyer partners because that demonstrates that the notes were not, “intended to remain confidential.” They also argue that the account notes are not work product because they were not prepared for the primary purpose of anticipated litigation. They contend that although some of the descriptions contain general references to litigation that’s insufficient to carry their burden of proof to show work product.

The defendant argues on the motion to compel that the attorney-client privilege applies to the account notes because they are memorializations of the attorney-client communications. In support of that argument, DC Capital puts forth three non 11 Circuit cases, we’re in the 11th Circuit in Florida, that established the legal principle that account notes are privileged because to disclose them would, “necessarily reveal the legal advice given during those communications between attorney and client.” DC Capital also points out that many of the account notes even contain direct copies of emails exchanged between the owner clients and their DC Capital attorneys and regarding the non lawyer partners access to the CRM, DC argues that there is no waiver because although it’s true that the non lawyer partners could access the accounts in the CRM, they actually do not access them, and as such, they are still intended to remain confidential.

DC Capital also reiterates that other Newton ESA employees do not have access to the DC Capital account notes in the CRM, and thus their level of access does not jeopardize confidentiality from an analysis perspective. Regarding work product, DC Capital argues that the designated account knows constitute opinion work product and we’re prepared in anticipation of litigation. As evidence of either the ongoing or imminent litigation referred to in the account notes, DC Capital provided a declaration from a DC Capital partner that laid out with regard to each specific note how they were in reasonable anticipation of litigation, as well as attaching documents, complaints, and other information that was subsequently filed regarding those cases.

DC Capital also argues that the nonlawyer partners access to the account notes does not waive the work product privilege because the non lawyers don’t have access to the account notes and even if they did, they’re not litigation adversaries.

All right, what are the issues that are kind of tied up here? We’ve got these notes that are memorialization attorney-client communications. The first question is, are they privileged? Also, is there anything regarding the non lawyer participation or other employee participation or access to those notes that create some kind of waiver, a breach of the confidentiality for attorney-client privilege? That’s our first issue.

The second issue is, does any of that analysis change when the DC Capital lawyers upload those notes to the CRM system where non attorneys do have access? Now, these are really important issues because you’ve got big implications here. If you’re using Teams right now and you’re keeping track of conversations in notes and other people have access to that information, is that a breach of the attorney-client privilege? This is an important decision from a perspective, and quite frankly, I was surprised that there was no law in the 11th Circuit, there is law in other parts of the country, but it is not as well articulated an issue as I would have thought.

I think for most of us, we would consider that our notes as attorneys are attorney-client privileged, and so and memorializations of those conversations, which happen thousands of times every day, are in fact, privileged. This is a key issue. The Court really starts with the analysis of looking at the standard on attorney-client privilege, attorney work product agency.

With regard to the attorney-client privilege. There’s some really great language here that I think you should pay attention to. In order to claim attorney-client privilege, the proponent of the privilege must prove that what is thought to be protected is one of communication, two made between privileged persons, three in confidence, and four for the purposes of obtaining legal assistance for the client. Now, privileged persons include the client, the attorneys, and any of their agents that help facilitate attorney-client communications or legal representation. The Court notes that it is well established that, “the party invoking the attorney-client privilege has the burden of proving that an attorney-client privilege existed and that the particular communications were confidential.” The party invoking the privilege has the burden of proving by a preponderance of the evidence that each essential element of the privilege is present with respect to each communication of the document.

Now, I talked about the case law that DC Capital cited from other jurisdictions, and the Court goes through that case law in detail, and it’s a really good analysis of what other jurisdictions have looked at in terms of memorialization of client communications.

The Court also notes that it should not have to guess or speculate about the applicability of the privilege, but the party asserting it has the affirmative duty to demonstrate that it applies to each document or communications thought to be disclosed. No grouping of documents together unless we’re talking about thousands of entries. You’ve got to meet your burden for each of the documents or communications that you claim privilege for.

The Court also notes that requesting in camera review of the allegedly privileged documents is appropriate, but it is not a substitute for a party’s obligation to justify its withholding of the documents. If you are challenged on your privileged documents, you can ask the Court to conduct an in camera review, but that does not alleviate you of your obligation to demonstrate that, in fact, the privilege should apply.

Now, moving on to the analysis on the agency exception. This is really important, I’ve seen this come up in a number of cases for clients and what’s really important is that the agency exception is jurisdiction specific. What constitutes agency is going to be based on the jurisdiction that you are in, and you need to do that research independent of anything else that you’ve done previously.

Now, with regard to agency, privileged communication retains its protective status, even if it’s disclosed to a third party, as long as that third party meets the qualifications of a valid agent. Again, the party seeking the benefit of the privilege has to prove that the third party was reasonably necessary to the effective representation of the client. That is the standard that the Court enunciates here in the 11th Circuit. Again, I’m telling you, it’s different in different jurisdictions.

Since confidentiality is a requirement of the attorney-client privilege, no privilege attaches to a communication made in the presence of a third party, nor to an already privileged communication that is subsequently disclosed to a third party.

Now, the Court had already issued in this case a privilege order, and it refers to that order a few times throughout this decision and it also notes that there are distinct concepts related to privilege, that a communication is never privileged because it was not confidential when made.

In another example, a privileged communication might lose its status because it’s disclosed to a third party. Only the disclosure to a third party that is not an agent involves a waiver. In the former case where you’ve got a nonconfidential communication, the privilege never applied, so it can’t be waived. You’ve got to have actual application of the doctrine in order for waiver to apply.

Okay, so analysis of work product doctrine; work product doctrine, attorney work product doctrine to be protected as privilege is codified in Federal Rule Civil Procedure 26 (b)(3), regarding documents and tangible things. That rule says that ordinarily a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by another party or its representative, including the other party’s attorney, consultant, surety, indemnitor, insurer or agent. That’s where we get the agency analysis.

The work product doctrine protects from disclosure of documents and tangible things that are prepared in anticipation of litigation by or for a party, or buy or for that party’s attorney acting for the client. Now, as with the attorney-client privilege, the proponent of work product has the burden of proving that each document was prepared in anticipation of litigation. You can prove that by using affidavits or other evidence that demonstrate the underlying facts of the case to establish that primary purpose for work product.

There are two different kinds of work products. There are fact work product and opinion work product. Fact work product can encompass factual material, including the result of a factual investigation, and is discoverable upon a showing of substantial need. In order to discover fact work product, there are multiple factors that have to be considered. The Court here lays out three factors, but calls it a nonexhaustive list. Those three factors are the importance of the materials to the party seeking them for case preparation, the difficulty the party will have obtaining them by other means, and the likelihood that the party will not have to seek the substantial equivalent of the documents that he seeks, even if he gets them by other independent means.

Now, opinion work product is material that reflects an attorney’s mental impressions, conclusions, opinions, or legal theories. This is a quote from the Court that’s important, it states, “the 11th Circuit has held that while the disclosure of fact work product can be compelled upon a requisite showing, opinion work product enjoys a nearly absolute immunity and cannot be discovered merely upon a showing of substantial need and an inability to secure the materials by alternate means without undue hardship.”

The test is that’s laid out under rule 26(b(3)(a)(2) and has to be discoverable in only very rare and extraordinary circumstances. Remember, you’ve got to distinguish between fact and opinion work product when applying that privilege.

Now, key to the analysis here for work product privilege is that it differs from the attorney-client privilege in that a disclosure to a third party does not necessarily destroy the privilege. The proper analysis is whether the work product is created and maintained in a way that is designed to conceal it from the opposing party, not whether it was intended to be kept confidential from all third parties. Big difference in the analysis between opinion work product and fact work product.

All right, now that we’ve got all that laid out, let’s talk about applying it to the case at hand. The Court here found that DC Capital had presented sufficient evidence to support the existence of the attorney-client relationship between the client and DC Capital’s attorneys by showing the Court letters of engagement and power of attorney that established the relationship. The Court also found that the memorialization of the confidential discussions with the client and the attorney does not destroy the privilege. The very fact that attorneys made notes following the client discussions does not destroy the privilege.

The question is whether the 11th Circuit is going to adopt what these other jurisdictions have found in applying the privilege to memorialization. The Court says this, “in keeping with the findings of those cases which it does choose to follow. It follows that if the documents in question memorialize one communications, two made between privileged persons, three made in confidence, and four for the purpose of securing legal advice, then the memorializations fall within the attorney-client privilege.

They essentially rejected the plaintiff argument on the motion to compel that they were not privileged.

The Court then did an in camera review of several of the notes and a random sampling of the rest of them to determine whether those four criteria were met, but also puts a lot of weight on the entries on the privilege log that describe the notes and finds that they are all privileged and properly withheld based on the analysis that we just talked about. The Court then, discussing the loading of the account notes to the firm’s CRM, does not preclude the attorney-client privilege even though it is accessible to nonlawyer partners at the firm.

Now, this is a place where I find this case interesting because it really essentially takes DC capital’s word for it, that the non lawyers don’t have access to that information. I think that’s something that needs a little bit more factual development, but again, we’re just looking at what the four corners of this decision show us here.

In terms of proof on the fact that the nonlawyers did not have access to those notes, the defendant offered evidence that its policy is to allow nonlawyer partners access to the CRM, but that they don’t monitor the account notes, even though they could access them in their day to day roles. There’s also no evidence to show that when the lawyers uploaded the notes, they knew that the non lawyers had access to them.

I’m not sure that under other circumstances that would hold up in terms of a privilege analysis, it’s a little suspect to me, but I think it’s an interesting issue for us to note. Essentially, the Court found that the defendant believed that the notes would remain confidential.

The Court applied the same analysis to the eight notes that needed to be clawed back and found that they were attorney-client privilege and could be effectively clawed back.

All right, that is the Court analysis. What are our takeaways? Well, first, we’ve talked about this before on the #CaseoftheWeek, but it is really crucial to understand the relationships that you have and whether they create agency for purposes of privilege. Analysis of agency varies by jurisdiction, as I mentioned. You’ve got to do the analysis for each jurisdiction that you’re in, and you should know before you begin a review of documents what agency analysis is going to apply so that you can have your reviewers coding documents for privilege if they are from a particular agent and contain legal advice.

Now, we talked about this already, but this case presents the unique issue as to whether attorneys can store their notes and whether access to them by a non lawyer will break the privilege, here under the facts of this case and the analysis that’s adopted by the Southern District in the 11th Circuit, the answer is yes. They can maintain those notes in a place where non lawyers have access to them and they will maintain privilege.

Next, takeaway know the elements of the privilege and do your analysis early. Don’t wing it trying to get to the privilege log out quickly after a production. That’s where I’m seeing a lot of these privilege challenges, where the language of the privilege log is not sufficient to give the other party enough information about whether or not a document is, in fact, privileged.

The Court’s decision here goes a long way to show that the descriptions of a document on a privileged log are going to be important as to whether or not the privilege applies. Make sure that your notes are determining that they’re made in anticipation of litigation, that they’re memorializing client discussions and that they are seeking legal advice.

Okay, that’s our #CaseoftheWeek for this week. Thank you so much for joining me. We’ll be back again next week with another decision from our eDiscovery Assistant database.

If you are an ACEDS member and interested in using eDiscovery Assistant, there is a discount available to current ACEDS members as well as a free trial for those folks taking the exam. If you’ll just reach out to our team at ACEDS@eDiscoveryAssistant.com somebody will be in touch to help you get set up.

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Thanks so much. Stay safe and healthy out there. Have a great day, great week. I’ll see you next week.

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