In-House Counsel’s Dual Role: The Primary Pitfall
In “In-House Counsel’s Compass: Navigating Privilege, Immunity and Risk in Texas and Beyond”, Trey Cox and Alan Dabdoub explore the challenges and pitfalls for in-house lawyers navigating privilege today. This is an exclusive excerpt highlighting the dual and often conflicting roles for today’s corporate legal departments and how they impact protecting privilege.
In-House Counsel’s Dual Role: The Primary Pitfall
The most common privilege dispute facing general counsel is not whether a document exists, but whether the lawyer was acting in a legal capacity at its creation. Unlike outside counsel, in-house lawyers participate in strategic business and operational decision-making. Occupying this dual role can blur the line between legal advice and business advice.
For Texas general counsel, attorney-client privilege is more than a legal doctrine—it is a strategic asset. It protects candor, enables sound legal advice, and shields the company in litigation. But precision, consistency, and foresight are necessary to guard privilege.
The best general counsel treat privilege not as a given technicality but with organizational discipline.
Hypothetical 1: The Pricing Strategy Email
A CEO emails the general counsel: “What do you think of raising prices 10% in Q3?”
Counsel responds: “If we raise prices, we risk antitrust scrutiny, especially given our market share. From a legal perspective, we should document a legitimate business justification.”
The first sentence of the response—economic opinion about pricing—is business advice, thus making it not privileged. The second sentence—antitrust risk assessment—is legal advice and therefore privileged. The danger arises when legal and business advice intertwine. Opposing counsel will argue there is no privilege because the “primary purpose” of the email was business strategy, not legal advice.
Mitigation Strategies
Label Communications: Always mark emails and memos with “PRIVILEGED AND CONFIDENTIAL: ATTORNEY-CLIENT COMMUNICATION.” While not dispositive, courts give weight to consistent labeling.
Segregate Advice: Separate legal analysis from business commentary. Provide business input in one channel (e.g., board presentations) and legal risk assessments in another.
Educate Executives: Train business teams to involve you only when legal advice is necessary. Over-inclusion can dilute privilege.
This discipline is not about formalism. It is about ensuring that when the privilege disputes come, you have a clear record showing the communication’s primary purpose was legal advice.
Corporate Client Identification
Who is “the client” in the corporate setting? The Supreme Court’s decision in Upjohn Co. v. United States rejected the narrow “control group test” in favor of a broader subject matter standard. 449 U.S. 383, 393 (1981). Texas Rule 503 reflects this modern approach. See In re Monsanto Co., 998 S.W.2d 917, 922 (Tex. App.—Waco 1999, no pet.)
Under the subject matter test, privilege covers communications by employees who are:
Acting at the direction of corporate superiors;
Communicating about matters within the scope of employment; or
For the purpose of securing legal advice for the corporation.
This is critical for internal investigations. Privilege covers a mid-level employee who discloses operational facts to counsel, even if they have no decision-making authority. But exercise caution in multi-state litigation; other states may still apply the narrower control group test, thereby limiting coverage to only top executives.
Waiver of Privilege: The Greatest Risk
Privilege is fragile. Courts emphasize that attorney-client privilege can be lost far more easily than it is created. For Texas general counsel, waiver is the greatest risk to privilege.
Voluntary Disclosure
When clients disclose confidential information to third parties outside the attorney-client relationship, the confidential information loses privilege. Consultants, auditors, and PR firms are common third-party culprits. Unless retained directly by counsel with clear documentation that the third parties are assisting in providing legal advice, their inclusion typically destroys privilege.
Offensive Use Waiver
Another way privilege becomes waived is when the corporation puts its legal advice at issue. If a company asserts an “advice-of-counsel” defense—say, to rebut a fraud claim—the privilege is lost not only for that advice but for the entire subject matter. This is an all-in gamble: once raised, opposing counsel gains discovery into every related communication.
Inadvertent Disclosure
Perhaps the most common waiver arises from human error. In large-scale document productions, privileged materials can slip through. Texas Rule of Civil Procedure 193.3(d) provides a “snap-back” mechanism, which allows parties to claw back inadvertently produced privileged materials if they assert privilege immediately upon discovery.
But “immediately” means just that—days, not weeks.
Every general counsel should maintain a rapid-response team to investigate, assert, and recover inadvertently disclosed documents.
Training the Organization: Embedding Privilege Discipline
Privilege protection cannot be the sole responsibility of the legal department. When business leaders, managers, and staff must understand the rules of the road, it minimizes lost privilege risks. The most effective general counsel embeds privilege discipline into corporate culture through:
Privilege Policies: Written guidelines on when to copy legal, how to label communications, and when to avoid email altogether.
Executive Training: Regular sessions for senior leaders emphasizing the distinction between legal and business advice.
Privilege Champions: Designating a business liaison in each department to reinforce best practices.
Incorporating discipline at every level reduces the risk that privilege becomes lost due to ignorance or carelessness.
The Real-World Cost of Losing Privilege
When privilege is lost, the consequences can be devastating. Imagine a company facing a whistleblower lawsuit suit alleging fraud. Discovery reveals that privilege doesn’t cover internal emails between the general counsel and the CFO since they blended business and legal advice. The emails, now exhibits at trial, are read aloud to the jury. The company’s defenses crumble, and the general counsel’s credibility shatters.
This is not abstract, far-reaching scenario. Courts are increasingly skeptical of overbroad privilege claims.
See Attorney General v. Facebook, Inc., 164 N.E.3d 873, 886 (Mass. 2021). Opposing counsel are aggressive in challenging them. The stakes—billions in liability, reputational damage, and personal risk—could not be higher.
Privilege as a Strategic Asset
For Texas general counsel, attorney-client privilege is more than a legal doctrine—it is a strategic asset. It protects candor, enables sound legal advice, and shields the company in litigation. But precision, consistency, and foresight are necessary to guard privilege.
The best general counsel treat privilege not as a given technicality but with organizational discipline. They train their teams, structure their communications, and enforce their protocols with rigor.
Because in the crucible of litigation, privilege is not tested in the abstract. It is tested in the heat of discovery, with every word, email, and memo scrutinized for cracks.
Protect it, and you protect your company. Lose it, and the consequences may be irreversible.