Communication Between Counsel and Client’s Independent Contractors May Be Privileged
The Eastern District of Pennsylvania recently found that communications generated and documents created by a party’s independent consultant may be entitled to attorney-client privilege protection. In In re Flonase Antitrust Litigation, direct and indirect purchasers of Flonase launched a class action against GlaxoSmithKline PLC (“GSK”) for allegedly delaying market entry of generic Flonase into the market. A dispute arose between GSK and direct purchasers as to whether the attorney-client privilege protects communications between GSK and its independent contractor, Swiftwater, which is a pharmaceutical consulting company. In this case, Swiftwater assisted GSK’s Flonase brand team in three areas: legal and regulatory, business development, and standard business practices. In the legal arena, Swiftwater assisted in the evaluation of legal and regulatory matters, such as evaluating GSK’s patent and intellectual property rights and FDA application to market over-the-counter Flonase.
After conducting an in camera review of the contested documents, the Court found that the documents “do not lose their privileged status solely because Swiftwater is an independent consultant” and that the attorney-client privilege may attach if Swiftwater could be viewed as the functional equivalent of a GSK employee. Noting that there is no legal precedent in the Third Circuit for the functional equivalent test, the Court relied upon precedent in other circuits. In courts that take a narrow approach, to qualify as the functional equivalent of an employee, the consultants must: 1) be incorporated in the staff to perform a corporate function, which is necessary in the context of actual or anticipated litigation; 2) possess information needed by attorneys in rendering legal advice; 3) possess authority to make decisions on behalf of the company; and 4) have been hired because the company lacked sufficient internal resources and/or adequate prior experience within the consultant’s field. However, the Court rejected this test and adopted a more practical approach focused on whether the consultant’s relationship with the company would assist the company’s attorneys in providing legal advice and whether the consultant’s role was similar to that of an employee. Here, the Court concluded that Swiftwater was a functional employee of GSK because of its participation in GSK’s brand maturation team and the fact that documents created by Swiftwater were maintained as confidential and treated as though the attorney-client privilege applied. The Court found that communications between GSK and Swiftwater as well as documents created by Swiftwater may be protected by attorney-client privilege, which should be established on a case-by-case basis.
While communications and documents prepared by a third-party, such as independent consultants, may be protected by the attorney-client privilege, so long as they are sufficiently integrated into the project for which they have been hired, courts are somewhat split on which standard to apply to determine whether such documents are protected under the functional equivalent analysis.