Page 265 - The TEFRA Partnership Audit Rules Repeal:

ALI CLE Live Video Webcast / “The TEFRA Partnership Audit Rules Repeal: Partnership and Partner Impacts” June 7, 2016, Jerald David August and Terence Floyd Cuff
b. Parent-Subsidiary Corporation Context.
In this situation, intercorporate communicates should be treated as falling within the scope of the attorney-client privilege provided the particular employee(s) with whom the privileged communications take place is the natural spokesperson for the subsidiary on the subject matter for which legal advice is being rendered.147
(7th Cir. 1997). Generally speaking, the scope of this doctrine is limited to a common legal interest to which the parties formed a common strategy. Communications covered by this doctrine can take several forms. For example, “the common interest doctrine applies when two or more parties consult or retain an attorney concerning a legal matter in which they share a common interest.” Hanson v. United States Agency for International Development, 372 F.3d 286, 292 (4th Cir. 2004); see also Cavallaro, 284 F.3d at 249-50; In re Lindsey, 158 F.3d 1263, 1282 (D.C.Cir.1998); B.E. Meyers & Co., Inc. v. United States, 41 Fed. Cl. 729, 732 (1998). Similarly, the “‘privilege applies to communications made by the client or the client’s lawyer to a lawyer representing another in a matter of common interest.’” See also Schaeffler, et al v. United States, 806 F.3d 34 (2nd Cir. 2015), rev’g 22 F. Supp. 3d 319 (S.D.N.Y. 2015).
For application to of attorney-client privilege to corporations generally, see Upjohn v. United States, 449 U.S. 383 (1981) (adoption of the “Subject Matter” Test over the “Control Group Test”). District Court’s test, of availability of attorney–client privilege, was objectionable as it restricted availability of privilege to those corporate officers who played “substantial role” in deciding and directing corporation’s legal response; where communications at issue were made by corporate employees to counsel for corporation acting as such, at direction of corporate superiors in order to secure legal advice from counsel, and employees were aware that they were being questioned so that corporation could obtain advice, such communications were protected; and where notes and memoranda sought by government were work products based on oral statements of witnesses, they were, if they revealed communications, protected by privilege, and to extent they did not reveal communications, they revealed attorney’s mental processes in evaluating the communications and disclosure would not be required simply on showing of substantial need and inability to obtain equivalent without undue hardship.
147 United States v. Mobil Oil Corp., 71 AFTR 2d 93-1875,(N.D. Tex. 1993) (summons issued as part of I.R.C. § 482 audit seeking documents and communications from taxpayer’s counsel; letter from tax counsel for subsidiary to tax counsel for parent was protected from disclosure by attorney-client and work-product privileges. Letter, which related to tax consequences of certain actions involving activities between parent and subsidiaries, consisted of information constituting mental impressions, conclusions, opinions, and legal theories of attorneys representing subsidiary in administrative proceedings before foreign taxing authority); Guy v. United Healthcare Corp., 154 F.R.D. 172, 1993 WL 614621, 177-178 (S.D. Ohio 1993) (disclosure of otherwise privileged materials to a parent by a wholly owned subsidiary does not waive attorney-client privilege); United States v. American Telephone & Telegraph Co., 86 F.R.D. 603, 1980-2 CCH Trade Cases ¶63568, 1980-81 CCH Trade Cases ¶63696, 1980-81 CCH Trade Cases ¶63705, 616 (D.D.C., 1979); Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 81 L. Ed. 2d 628 (1984) (parent corporations and their wholly owned subsidiaries always have a complete unity of interest); Miller v. International Business Machines, 2006 WL 1141090 (N.D. Cal., 2006) (no waiver of privilege on exchange of information between IBM and its subsidiaries). Duplan Corp. v. Deering Milliken, Inc., 397 F. Supp. 1146, 1184 (D.S.C., 1974) (communications among formally different corporate entities that are under common ownership or control held, under facts of the case, to treat such communications the same as intracorporate communications).
© Terence Floyd Cuff and Jerald David August, 2016
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