Recent New Jersey Case Highlights Several Aspects of the Corporate Attorney-Client Privilege

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In Hedden v. Kean University, the New Jersey Appellate Division ruled that an email sent by the University’s women’s basketball coach to the school’s in-house counsel was privileged even though a copy also was sent to the University’s Executive Vice President of Operations and later disclosed to the NCAA. The opinion, as well as the strong dissent, address several key aspects of the privilege that in-house counsel are well advised to keep in mind.

In Hedden, several members of the Kean University women’s basketball team proposed to take what appeared to be a phony course on the history of Spain – in Spain. To defray the cost of the transatlantic trip, the women’s basketball coach, Michelle Sharp, drafted a fundraising letter she hoped to use to solicit donations, and sent it with a cover email to the University’s General Counsel, Michael Tripodi, cc’ing the University’s EVP of Operations.

After Kean’s athletic director, Glenn Hedden, found out about the Spanish “course,” he began an investigation into the women’s basketball team and reported his findings to the NCAA, which then undertook its own investigation. During the course of that investigation, Sharp provided the NCAA with the email she had sent to Tripodi. While the University did not authorize that disclosure, it also did nothing to try to retrieve the email after learning that Sharp had provided a copy to the NCAA.

Hedden eventually was fired by Kean University, and he sued, claiming that his termination violated New Jersey’s whistle-blower law. As part of his discovery, Hedden sought to obtain a copy of Sharp’s email to Tripodi, but the University objected based on the attorney-client privilege. Hedden argued that the email was not privileged and, even if it was, the privilege was waived by initially copying the EVP of Operations and then disclosing it to the NCAA.  While the lower court agreed with Hedden, the Appellate Division, in a 2-1 decision, overturned the lower court, ruling that the email was privileged and that no waiver had occurred.

Establishment of the Privilege

As I discussed in another post, where the client is a company or other institution, a communication between counsel and an employee (or even a former employee) may be privileged if it is for the purpose of seeking legal advice that will benefit the company/institution. While the New Jersey court acknowledged that the University had the burden of proving that Sharp’s email was for the purpose of seeking legal advice, the court also ruled that this burden was met merely by showing that Tripodi had no involvement in University fundraising other than to provide legal advice. This ruling should provide little comfort to most in-house counsel, however, because the vast majority of in-house counsel often provide legal and business advice on the same subject matter. As such, in-house counsel should let their internal clients know that they should expressly state in emails that the communication is for the purpose of seeking legal advice if they want to better their chances of shielding the communication from disclosure.

Waiver of the Privilege – Copying the Email to the EVP of Operations

In Hedden, the Appellate Division held that copying the email to the EVP of Operations did not waive the privilege.  The key fact in this regard was that the EVP was authorized to act on behalf of the University and had some involvement with the matter. Had the EVP of Operations possessed neither of these characteristics, the privilege would have been waived. Accordingly, in-house counsel also should let company employees know that if they are emailing legal counsel, cc’s should be strictly limited to those who really need to know.

Waiver of the Privilege – Providing the NCAA with a Copy of the Email

Perhaps the most interesting, and surely the most counterintuitive, aspect of Hedden is the way the court dealt with the issue of waiver in the context of the disclosure of the email to the NCAA. As an initial matter, the court ruled that while Sharp had the ability to generate a privileged communication by emailing the University’s in-house counsel, she had no ability to waive that same privilege:

Simply put, the authority to waive the attorney-client privilege does not belong to each and every employee of the corporation, but rather is held by the organizational client, namely the officers and directors of the organization.

Second, the court refused to agree with Hedden’s fall-back argument that the school had, de facto, waived the privilege by doing nothing to retrieve the email after it learned that Sharp had unilaterally decided to disclose the email to the NCAA:

The fact that the University did not voice an objection at the time or take affirmative steps to reverse Sharp’s unilateral action does not defeat [the] assertion of the privilege by its true holder.

While Kean University has dodged a bullet, at least for the time-being, I would not be surprised to see the New Jersey Supreme Court reverse the existing decision if the matter is appealed. As such, rather than rely on the existing decision, if in-house counsel learn of an unauthorized disclosure of a privileged communication, they should make every effort to retrieve it post haste.