Corporate Attorney-Client Privilege: Who Represents the Corporation?

Baum Ido
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Baum Ido: Hamburg University

Review of Law & Economics, 2007, vol. 3, issue 1, 61-81

Abstract: The corporate lawyer-client privilege is increasingly controversial. Courts assert that the privilege promotes corporate compliance with the law as long as it is restricted to communications in furtherance of legal advice. This article assumes the privilege increases the probability that a corporation will escape liability. Courts can apply various tests to determine whether the agent who communicated with the corporate attorney can be defined as a representative of the corporation. The most restrictive test, the “control group” test, has been rejected by most American jurisdictions, but it has recently re-emerged in the United Kingdom. The author proposes that this test motivates corporations to restructure their optimal internal decision-making processes in order to “squeeze” into the privilege. When plaintiffs are uninformed about the internal organization of a corporate defendant, even corporations that cannot squeeze into the test have an incentive to mimic the behavior of privileged corporations, and consequently pursue socially harmful actions. These findings are supported by case law from control group jurisdictions.

Date: 2007
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DOI: 10.2202/1555-5879.1081

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