Spectrum Dynamics Medical Limited v. General Electric Company

Background

Spectrum notified General Electric Company (GE) that it intended to claw back 42 documents covered by the court’s protective order. GE moved to compel production of five communications, arguing that disclosure to Hobart Holding Ltd., and by extension to Guy Wollman and Miki Eden, waived attorney-client privilege. Spectrum later withdrew its request for one document, leaving four emails for the court to review.

The four emails concerned a 2005 name change and restructuring involving Spectrum’s predecessor companies. Spectrum asserted that Hobart and Spectrum were under common ownership and control, shared counsel, and had a close business relationship. Spectrum also asserted that Wollman and Eden provided financial consulting services because Spectrum did not have an internal financial manager. According to Spectrum, they acted as de facto employees or agents, maintained confidentiality, and supplied information needed by attorney Yesha Primes in connection with the restructuring.

GE did not dispute that the communications’ substance was privileged or that the documents had been produced inadvertently. Instead, GE argued that sharing the communications with Hobart waived the privilege because Spectrum had not shown a common legal interest, demonstrated that Hobart was essential to obtaining legal advice, or established that Wollman and Eden were functional equivalents of corporate employees. GE also challenged the sufficiency of Spectrum’s privilege log and argued that Spectrum had used privilege selectively to gain a litigation advantage.

Legal standards

Attorney-client privilege generally protects confidential communications between a client and an attorney made to obtain or provide legal advice. Disclosure to a third party ordinarily waives the privilege, but the court identified three potentially relevant exceptions: the essential third-party consultant exception, the common-interest exception, and the functional-equivalent doctrine.

The essential third-party consultant exception can protect communications when the third party’s participation is necessary or highly useful for effective consultation between the client and attorney, particularly when the third party improves the attorney’s understanding of the client’s situation. The common-interest exception can protect confidential communications made as part of a joint legal strategy or common enterprise. The functional-equivalent doctrine may protect communications shared with a consultant who effectively performs a necessary corporate function, although the court noted that the Second Circuit had not recognized that doctrine.

Analysis

The court found that Spectrum’s declaration and its services agreement with Hobart adequately explained the companies’ common interest and close relationship. The agreement stated that Hobart personnel acted as Spectrum employees and treated Spectrum’s confidential and privileged information as they would treat information of employees.

The court concluded that Wollman and Eden were essential consultants to Spectrum’s predecessor in connection with the restructuring. Their financial knowledge helped the attorney understand the financial issues underlying the transaction, and their involvement improved communication between the attorney and client. The court therefore rejected GE’s argument that they were not essential to providing legal advice.

The court also stated that, to the extent the functional-equivalent doctrine applied, Wollman and Eden were acting as de facto Spectrum employees because they performed a necessary corporate function. Finally, after reviewing the emails in camera and considering other allegedly privileged emails that had been produced, the court found no basis to conclude that Spectrum had selectively disclosed communications for a litigation advantage.

Disposition

The court concluded that the four emails remained protected by attorney-client privilege and did not constitute a waiver. It denied GE’s motion to compel.