Episode 130: Do You Know Whether Privilege Applies to Your Third Party Agencies?

In Episode 130, our CEO and Founder, Kelly Twigger discusses whether communications between the Catholic Church and its PR firm were privileged communications following an in camera review by the court in In re Roman Catholic Church of the Archdiocese of New Orleans, 2024 WL 87499 (Bankr. E.D. La. 2024).

Introduction

Good morning and welcome to this week’s Case of the Week series brought to you by eDiscovery Assistant in partnership with ACEDS. My name is Kelly Twigger. I am the CEO and founder at eDiscovery Assistant, your GPS for ediscovery knowledge and education. Thanks so much for joining me today.

Each week on the Case of the Week I choose a recent decision in eDiscovery and talk to you about the practical implications that case. This week’s decision discusses the critical issue third party agency and its role in privileged communications.

A couple of announcements. First, eDiscovery Assistant will be at LegalWeek next week in New York City. We are so pumped and we’d love to talk with you about whether the platform can provide value for your practice or organization. Here is a link to schedule time with us at the conference: schedule a meeting or demo at LegalWeek 2024 or you can join us in our suite for coffee on Tuesday or Wednesday morning.

Second, the 11th Annual University of Florida eDiscovery Conference is coming up on February 28th and 29th in Gainesville, Florida. The conference is live streamed for free. I’ll be speaking a couple of times at that conference, and it’s just one we spend a lot of time preparing for, so we’d love to have you attend. Again, it’s free to attend virtually. You can register here.

Now, let’s dive into this week’s case. This week’s decision comes to us from the case titled In re Roman Catholic Church of the Archdiocese of New Orleans. This is a decision from January 5, 2024, written by United States Bankruptcy Judge Meredith Grabill. As always, we add the issues to each decision in our eDiscovery Assistant database, and this week’s issues include failure to produce, attorney-client privilege, protective order, privilege log, attorney work-product, waiver, and in camera review.

Facts

This decision stems from the bankruptcy proceeding for the Archdiocese of New Orleans following years of litigation over sexual abuse allegations against employees and affiliates of the Archdiocese and how such allegations have been addressed by the Archdiocese. It’s no real surprise as these cases have been in the news for many of the Archdioceses of the Catholic church over the last ten years.

In March 2020, the Archdiocese’s bankruptcy counsel engaged a PR agency called The Ehrhardt Group (“TEG”) on behalf of the Archdiocese to be “the sole provider of public relations and crisis communication counsel” for the Archdiocese regarding its potential restructuring. The letter of agreement for professional services between the Archdiocese and TEG was signed by the President of TEG and returned to counsel on March 10, 2020. And although it contained a signature line for counsel, no one signed the agreement on behalf of the Archdiocese. The agreement set out an initial term of six months, which could be renewed upon mutual agreement, and provided that fixed monthly fees would be paid by the Archdiocese directly to TEG. That’s pretty common in dealing with public relations agencies.

Two months later — which is important for purposes of considering anticipation of litigation — on May 1, 2020, the Archdiocese filed a petition for bankruptcy relief in the face of 34 pending lawsuits alleging sexual abuse claims. Shortly thereafter, the Office of the United States Trustee formed the Official Committee of Unsecured Commercial Creditors, which we’ll refer to as “the Committee” for purposes of the decision. That’s the Committee that is, in fact, bringing this motion. The Committee and the Archdiocese conducted discovery pursuant to a protective order issued by the Court, and the Archdiocese produced documents on a rolling basis with a privilege log. We are before the Court here on the Committee’s objections to the Archdiocese’s privilege log produced after those productions were made.

The Archdiocese maintains that 67 documents on the log — which includes 52 emails and 15 attachments to those emails dated between May 5, 2020 and March 18, 2021 — are protected under the attorney-client privilege and attorney work-product doctrine and exempt from discovery. The Committee, on the other hand, contends that the communications are with TEG, the public relations firm, and are not privileged. Counsel for the Archdiocese submitted unredacted versions of the disputed communications to chambers prior to the evidentiary hearing, and the Court reviewed each of the disputed communications in camera. Following that in camera review, the Court made the following findings:

• All of the disputed communications included Sarah McDonald, in-house Director of Communications for the Archdiocese, and William Kearney, the Senior Vice President of TEG, who sent and received emails both from a TEG  email account and from a personal Yahoo email account.
• The Court also found that Malcolm Earhardt, an employee of TEG, was included on nine of the disputed communications.
• Susan Zeringue, in-house counsel for the Archdiocese, was also included on all but one of the communications.
• No outside bankruptcy counsel for the Archdiocese were included on any of the disputed communications.
• Archdiocese employees, such as Archbishop Gregory M. Aymund, as well as individuals who appear to be affiliated with the Archdiocese, including financial advisors and parish operators, were also included on certain disputed communications.

Analysis

With those facts in mind, let’s look at the Court’s analysis on whether these disputed communications were privileged. The Court begins its analysis with an infrequently cited Federal Rule of Evidence, Rule 501, which states that the federal common law of attorney-client privilege applies when federal law determines the substantive rights of the parties. Because this is a federal bankruptcy matter, that is Rule 501 says federal law applies to determine privilege.

The party asserting the attorney-client privilege bears the burden of proof and must show that it: (1) made a confidential communication, (2) to a lawyer or his subordinate, (3) for the primary purpose of securing either a legal opinion or legal services or assistance in some legal proceeding. The Court notes that the application of privilege is a very fact-specific inquiry and that the Court is to determine it in the light of the purpose of the privilege and guided by judicial precedents. The Court also notes that the purpose of the privilege is “to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.”

I’ve cited that to you multiple times on Case of the Week, and it’s not surprising to you that’s the language for attorney-client privilege. The reason why I tell you again today is because it’s really important to keep that language in perspective when we’re talking about a third party and agency claims — to encourage the full and frank communication between attorneys and their clients and thereby promote broader public interest. So, are these communications from or to the public relations agency supporting that purpose? That’s the question we’re answering here. 

Of course, the key component of a privileged communication is that the communication is “made in confidence for the purpose of obtaining legal advice from the lawyer.” Generally, disclosure of communications protected by the attorney-client privilege to a third party constitutes a waiver of the attorney-client privilege. The courts have identified four ways that the attorney-client privilege can be extended to cover communications with third parties:

1. First, you can use the common interest doctrine. The common legal interest extension involves communications between an attorney and a third party who share a common legal interest with the client.
2. Second, you can use the translator extension. The translator extension applies in cases where a third party is essential to improve or facilitate communication between the attorney and the client.
3. Third, you can use the functional equivalent test. The functional equivalent extension involves cases where a third party is deemed the functional equivalent of a corporate client’s employee or principal and thus essentially becomes the client.
4. Finally, the consultant’s extension involves narrow situations where a third party is retained by counsel to assist the lawyer in the rendition of legal services and “to advance the client’s legal position.”

Those are the four options that we have here for extending privilege to the documents that are on the Archdiocese’s privilege log.

The Court here looked to the pleadings testimony and the arguments made at the evidentiary hearing and inferred that the Archdiocese was arguing that each of the disputed communications was privileged under either the translator extension or the functional equivalent extension, and then undertook an analysis of those two exceptions. The Court did not consider either of the other two options here.

Looking first at the translator exception, the Court found that it did not apply. For this exception to apply, TEG must have operated as a translator between the Archdiocese and bankruptcy counsel so as to assist counsel in providing legal services to the client. According to the Court, “Although the term ‘translator’ is used somewhat loosely to refer to an individual who operates as an intermediary between the client and counsel, the extension has been largely limited to actual translators or accountants who are ‘necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit.” According to the Court, for this rule to apply the party asserting the privilege must show: (1) a reasonable expectation of confidentiality under the circumstances, and (2) that the disclosure to the third party was necessary for the client to obtain informed legal advice. Per the Court, the key to remember in applying this extension of privilege is that “the possibility that communications between [a third party] and [counsel] may help the latter to formulate legal advice is not in itself sufficient to implicate the privilege: ‘the privilege protects communications between a client and an attorney, not communications that prove important to an attorney’s legal advice to a client.’”

That’s a very important analysis here by the Court, because it essentially says that’s what TEG was doing —providing information to counsel — but not that it was a part of the legal advice that counsel provided to the client. The Court’s in camera review of the disputed communications revealed that they were made to craft responses to media inquiries, not to assist counsel in providing legal advice to the Archdiocese. Two facts that the Court identified supported that analysis — no counsel was included on any of the emails, and TEG testified that the ultimate purpose of TEG’s public relations advice to the Archdiocese was to benefit the Archdiocese’s reputational and business goals. Based on those facts, the Court found that any requests for TEG’s advice made by in house professionals of the Archdiocese were solely for public relations concerns, not to devise a legal strategy with bankruptcy counsel. So that did not apply.

The Court then looked at the functional equivalent test. The test for the functional equivalent extension applies to otherwise privileged communications and requires a five part test of whether or not the third party:

1. exercised independent decision making on the company’s behalf,
2. possessed information held by no one else at the company,
3. served as a company representative to third parties,
4. maintained an office at the company or otherwise spent a substantial amount of time working for it, and
5. sought legal advice from corporate counsel to guide his or her work for the company.

Looking at those five factors, the Court found that TEG exercised no independent decision making authority on behalf of the Archdiocese and did not serve as the Archdiocese’s sole representative to the media. According to the Court, TEG was retained to provide specialized public relations and communication services for the Archdiocese in spite of the fact that the Archdiocese already had its own in-house media consultant and that TEG possessed no special information or expertise that was not already held by others at the Archdiocese. TEG did not maintain an office within the Archdiocese facilities and no evidence exists that TEG spent a substantial amount of time completing work for the Archdiocese. Rather, the Archdiocese was but one of many of TEG’s clients. Finally, TEG did not seek or receive legal advice via those communications from in-house counsel to guide its work for the Archdiocese. Instead, the disputed communications focused on developing the right public messaging in response to media inquiries and were not legal work.

As such, the Court found that the Archdiocese failed to meet its burden to show that the privilege extended to TEG and ordered them to produce the emails in dispute. The Court also rejected the Archdiocese’s claim that the attachments to the emails were protected by the attorney work-product doctrine, finding that the creation of the documents was not in anticipation of litigation, but rather in furtherance of public relations and ordered production of those documents as well.

Takeaways

What are our takeaways from this case? Well, we’ve talked about third party considerations multiple times on Case of the Week, and specifically with regard to the timing of doing third party discovery. The issue raised in this case is third party agency, and third party agency and privilege is a huge issue in which the law varies from jurisdiction to jurisdiction.

The facts of this decision are not really that meaty when it comes to the privilege analysis because it was pretty clear that these were not privileged. But the issue and the test raised by the Court here are important, and you need to be aware of them and which one is followed in the jurisdiction you’re in or for the matter that you are handling.

Third party discovery is one of the key components of any discovery plan for any size matter, and the applicability of privilege to a third party agency is something that needs to be researched at the outset of a matter so that privilege can be properly applied during review and production. We’ve talked on earlier episodes about how we create a coding panel and plan for privilege and discuss the applicability of third party privilege to specific agencies for our review teams. So it’s really necessary that this research gets done at the outset and the parties are very comfortable with the positions that are being taken with regard to agency for third parties.

Agency relationships are incredibly common in today’s business world, and this is an important issue for counsel to highlight not only early in the ediscovery process, but also in advance of litigation so that clients know whether the communications with an agency will be privileged and how those should be handled effectively to either protect that privilege or to prevent information from being disclosed when those communications become discoverable.

Conclusion

That’s our Case of the Week for this week. Thanks so much for joining me. We will be off next week because our team will be at LegalWeek, so we hope to see you there. We’ll be back the following week with another decision from our eDiscovery Assistant database. As always, if you have suggestions for a case to be covered on the Case of the Week, drop me a line. If you’d like to receive the Case of the Week delivered directly to your inbox via our weekly newsletter, you can sign up on our blog. If you’re interested in doing a free trial of our case law and resource database, you can sign up to get started.

Thanks so much. Have a terrific week. Hope to see you next week in New York.  If not, enjoy your week and we’ll see you in a couple.