PharmAthene, Inc. v. SIGA Technologies, Inc., No. 2627-VCP, (Del. Ch., July 10, 2009), read letter decision here. Read summary of prior opinion of the Chancery Court in this case here.
This ruling addressed two issues: (i) under what circumstances is an attorney/client relationship created; and (ii) whether the attorney/client privilege applies to in-house counsel whose communications might include business advice in addition to legal advice.
The first issue focused on whether communications between in-house counsel for MacAndrews & Forbes Holdings, Inc. (MAF) and the defendant, SIGA, were privileged. In making its initial analysis, the Court discussed the factors considered to determine when an attorney/client relationship exists. The money quote follows:
… in determining whether an attorney-client relationship exists, “courts look at the contacts between the potential client and its potential lawyers to determine whether it would have been reasonable for the ‘client’ to believe that the attorney was acting on its behalf as counsel.” (citing 3Benchmark Capital Partners IV, L.P. v. Vague, 2002 WL 31057462, at *3 (Del. Ch. Sept. 3, 2002)).
Regarding the first issue, the Court concluded that:
… communications between attorneys employed by MAF and representatives of SIGA may qualify as privileged. Under Rule 502(b)(3) of the Delaware Rules of Evidence:
A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client . . . by the client or the client’s representative or the client’s lawyer or a representative of the lawyer to a lawyer or a representative of a lawyer representing another in a matter of common interest.
The Court observed the MAF was a substantial but not controlling shareholder of SIGA, thought they had a "common interest" in the success of SIGA, and MAF attorneys often provided legal advice to SIGA. Thus the ruling was that the communications between MAF attorneys and SIGA representatives on matters of common interest would be privileged.
The second issue focused on the standard for determining what types of communications should be protected by the attorney/client privilege. The Court emphasized that the attorney/client privilege protects legal advice as opposed to business or personal advice. (see case cited at footnote 4). Therefore, a communicaiton by an attorney that included business advice would not be privileged. (fn 5). To the extent a communication is inseparably inclusive of different categories of advice, it "may" be privileged. (fns 6-8).
The Court reviewed in camera certain documents identified in a privilege log because it was asked to determine if they included discoverable facts about business advice involving a transaction at issue in the case. After reviewing the documents in issue, one by one, the Court made a ruling on each document’s "status".