Commissioner v. Comcast, 453 Mass. 293, 901 N.E.2d 1185 (2009)

Brief Summary
In-house counsel’s communications with outside accounting firm were not protected by derivative attorney client privilege because accountant did not play a necessary role in facilitating legal advice. Nevertheless, these communications were protected by the work product doctrine because the accountants were retained to aid in a business decision that turned on the possibility and likely outcome of litigation.

Complete Summary
Attorney Andrew Ottinger worked for U.S. West (now Comcast) as state and local tax counsel. In order to guide Comcast through the divestiture of a subsidiary’s stock, Ottinger sought advice from accounting firm Arthur Andersen LLP (“Andersen”). This stock sale led to an audit by the Massachusetts Department of Revenue. The Commissioner of Revenue sought production of the communications between Ottinger and Andersen. Comcast asserted that the relevant documents were protected by the attorney-client privilege and work product doctrine. The Commissioner sought to compel production by filing a complaint in the Superior Court. The court held both protections applied to the documents. The Commissioner appealed, and the Massachusetts Supreme Court, on its own initiative, transferred the case from the appeals court.

The Supreme Court affirmed, but only on the work product holding. The court reversed the trial court’s holding that the derivative attorney-client privilege protected the documents. The derivative privilege protects communications made in the presence of a third party when the third party is necessary to facilitate attorney-client communications (e.g., as a third party translator). Focusing on the “necessary” prong of this test, the high court held “Ottinger’s purpose in consulting Andersen was to obtain advice . . . not to assist Ottinger with comprehending his client’s information.”  Id. at 309.

Regarding work product protection, the court framed the issue as whether the protection extends to documents prepared because of the possibility of litigation or only to documents prepared to assist in litigation. The court adopted the former test because the latter test fails to protect pre-litigation materials — even though such materials could be prepared in anticipation of litigation. Applying the “because of” test to the facts, the court found Ottinger’s retention of Andersen was for the purpose of outlining various tax planning opportunities and their corresponding litigation risks. Thus, Andersen’s advice informed a business decision that turned on the likely outcome of expected litigation.

Significance of Opinion
The court narrowly interpreted the derivative attorney-client privilege and broadly interpreted work product protection. This broad work product interpretation may often protect documents pertaining to business decisions that turn on litigation risk.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

Visit Our Blog ― The Ethical Quandary

Hinshaw & Culbertson LLP has a blog ― The Ethical Quandary ― that serves as a robust forum for matters involving legal ethics. The blog will help users stay current with newly filed cases, recent decisions and helpful practice tips. It also serves as a resource for quick access to relevant statutes, rules and procedures.

The Ethical Quandary is a legal ethics and litigation blog, accessible at http://blog.hinshawlaw.com/theethicalquandary/. The blog is maintained by members of Hinshaw’s Legal Ethics and Professional Responsibility Practice Group. Contributors of the blog include Michael P. Downey (St. Louis-based), David J. Elkanich (Portland, Oregon-based), David A. Sorensen (Chicago-based) and Dayna E. Underhill (Portland, Oregon-based).