Hey, That's My Privilege! | Practical Law

Hey, That's My Privilege! | Practical Law

What happens when an employee wants to assert an advice-of-counsel defense that would be a complete defense to the claims against him but would also result in disclosure of privileged communications belonging to his employer? A court in the Southern District of New York recently determined that if the employer refuses to waive the privilege, the employee is out of luck.

Hey, That's My Privilege!

Practical Law Legal Update w-000-6514 (Approx. 3 pages)

Hey, That's My Privilege!

by Practical Law Litigation
Published on 13 Oct 2015 • USA (National/Federal)
What happens when an employee wants to assert an advice-of-counsel defense that would be a complete defense to the claims against him but would also result in disclosure of privileged communications belonging to his employer? A court in the Southern District of New York recently determined that if the employer refuses to waive the privilege, the employee is out of luck.
Sometimes two principles of law, designed to protect the rights of individuals and the interests of the public, come into conflict. A situation of that kind recently arose in US v. Wells Fargo Bank, N.A., where the US brought claims against Wells Fargo and its employee, Kurt Lofrano, for alleged violations of the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act (No. 12-cv-7527, , at *1 (S.D.N.Y. Sept. 22, 2015)).
Lofrano sought to defend himself by claiming that he relied on the advice of Wells Fargo's counsel when he engaged in the alleged misconduct. If successful, this defense would be a complete defense to the claims against Lofrano. However, it also would waive the attorney-client privilege protecting these communications, a privilege owned by Wells Fargo.
After noting that it was a case of first impression within the Second Circuit, a district court in the Southern District of New York held that Lofrano was precluded from raising the advice-of-counsel defense over Wells Fargo's objection. The court reasoned that allowing an employee to waive a corporate entity's privilege would:
  • Inject uncertainty into the privilege, undermining its purpose.
  • Convert the attorney-client privilege into a qualified privilege that could be overcome given a sufficient showing.
  • Expose parties to a litigation strategy in which plaintiffs assert claims against individual employees in an effort to effect a waiver of the corporation's privilege.
The court acknowledged that precluding Lofrano from asserting his proposed defense was a harsh result but concluded that it was "a necessary consequence of [a] commitment to the important polices and values underlying the attorney-client privilege." (, at *7.)
Practical Law has numerous resources designed to assist attorneys in understanding the contours of the attorney-client privilege, including: