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“In-House Attorney-Client Privilege”

Middle Market Legal Toolbox Blog By Steven V. Hunter

In-house counsel for Illinois companies can now rest a little easier when offering legal advice in the midst of business negotiations. The Illinois Supreme Court recently ruled, in Center Partners, Ltd. v. Growth Head GP, LLC, that disclosures of legal advice during business negotiations does not waive attorney-client privilege over the entire transaction, at least when those disclosures are not subsequently used by the client to gain a tactical advantage in litigation. In Center Partners, multiple co-defendants shared among themselves legal advice each received from its attorneys regarding the structuring of a partnership in which the plaintiffs were limited, minority partners. Plaintiffs filed a motion to compel the production of over 1,500 documents in the defendants’ privilege logs, arguing that the defendants’ disclosures constituted a “subject-matter waiver” of attorney-client privilege, and thus that the additional documents were not privileged (even though never disclosed). The trial court agreed and ordered the documents produced.

The Illinois Supreme Court disagreed, holding that “subject matter waiver does not apply to the extrajudicial disclosure of attorney-client communications not thereafter used by the client to gain an adversarial advantage in litigation.”

Amar Sarwal, chief legal officer for the Association of Corporate Counsel in Washington D.C., cheered the ruling in an interview with CorpCounsel.com on December 7, 2012. “For our members who engage in business negotiations constantly and counsel their clients on contracts, the idea that every piece of legal advice about a contract could be made public would deeply disrupt the negotiations,” Sarwal said.

Originally appeared on Middle Market Legal Toolbox Blog, February 8, 2013.

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