Who’s the client when a business is involved?

By Jonathan Schmidt / Guest Column

Attorney-client privilege is one of the most important protections afforded to litigants in a lawsuit. This privilege protects all communications that occur between an attorney and a client for purposes of seeking or receiving legal advice. This means that clients and their attorneys can talk without restraint or worry about how their comments might be interpreted were the other party to see them.

Attorney-client privilege only applies to communications that are solely between a client and his or her attorney. If the client brings a random friend to a meeting, or discusses a conversation that took place with an attorney with a stranger, then the privilege is eliminated because the conversation has been disclosed to a third party. Accordingly, conversations between clients and attorneys must be kept confidential and closely guarded.

When attorneys are dealing with individual clients, it’s relatively easy to determine when the attorney-client privilege applies to communications and to make sure that those communications are protected. When communications begin to involve businesses, however, applying the privilege gets much more complicated.

Attorney-client privilege is difficult for businesses because usually no one individual represents the company. An attorney may need to speak with the CEO about major business decisions, the CFO about finances, and the COO about company operations. With so many different potential contacts and employees within a company, it can be difficult to determine how and when privilege should apply.

Fortunately, in 1981 the U.S. Supreme Court issued an important legal opinion on this exact issue. Known as the Upjohn case, the opinion set forth some general standards for determining when communications between a business employee and an attorney are protected for purposes of attorney-client communication.

Under Upjohn, an employee’s communications with a corporation’s attorney are considered privileged if they meet these criteria:

  • The communications were made for the purpose of giving or receiving legal advice
  • The substance of the communications relate to the employee’s work duties
  • The employee knows that they are providing information for the purposes of legal advice
  • The communications were made confidentially and kept confidential


One of the important distinctions, according to Upjohn, is whether an attorney is acting in a legal role or a business role when the communications occur. For example, many general counsel or outside counsel may offer business advice in addition to their legal services, and this advice may not be privileged. When they provide legal advice, however, this should fall within the scope of privilege.

While Upjohn is the law of the land in federal court, this does not mean that it is applied equally by every state. Only recently did Iowa clarify which test it uses, and several of Iowa’s neighbors continue to use different tests.

Control and subject matter tests

While federal courts in Iowa have adopted the Upjohn test or tests similar to it, the Supreme Court of Iowa only recently clarified that it has also adopted the Upjohn test. In 2009, the Supreme Court of Iowa confirmed that it would follow the federal courts in Keefe v. Bernard, 774 N.W.2d 663 (Iowa 2009). In that case, the Supreme Court of Iowa adopted the same approach articulated in Upjohn.

Lawyers and companies operating in the Midwest must be aware, however, that Upjohn has not been adopted by all of Iowa’s neighbors. For example, Illinois remains a strong proponent of the control group test. This test considers whether the employee who is making or receiving communications from an attorney is in a position to take control or make decisions as a result of the advice received. If so, privilege does extend to the communication. If not, privilege does not extend. This test essentially creates a “control group” of higher-level officials who an attorney can speak to while retaining privilege, but does not extend privilege to communications with lower-level employees.

Other states, like Kansas, have not adopted a specific approach at all. Rather, they evaluate attorney-client privilege for corporations on a case-by-case basis. This means that corporations should familiarize themselves with the various types of tests that may be applied when evaluating privilege.

How to protect your communications

In light of these various tests and conflicting directions, many business owners may feel confused or overwhelmed about how to ensure that communications between their attorneys and employees are protected.

The first, and most important thing, to recognize is that attorney-client privilege between corporate attorneys and employees is limited, and must relate to legal advice and the employee’s actual duties at the company. Any employee who speaks with an attorney should be aware of these limitations.

Second, attorney-client privilege is strictly construed in Iowa, so corporations may wish to take protections to help ensure that their communications meet most of the potentially applicable tests. This includes limiting communications to the scope of an employee’s work-related duties and making sure that they are related to legal matters. These steps will help to minimize any potential exposure or unnecessary revealing of privilege.

Third, if the corporation has a presence in or significant contact with multiple states, and therefore may be sued in multiple states, the situation becomes even more complex. The corporation must be doubly-sure that it is following all applicable standards for all of the applicable states.

When setting up a relationship with outside counsel or considering how to navigate communications with general counsel within your company, you should consider consulting with a business litigation attorney. Due to the lack of certainty in this area of the law, standards and recommendations may shift, and new law is always being created.

Johnathan Schmidt is an attorney and partner with Nazette, Marner, Nathanson & Shea LLP. He practices in areas of business and litigation. He can be contacted at jschmidt@nazettelaw.com or www.jschmidtlaw.com