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130 Nevi.Advance Opinion
. 61
IN THE SUPREME COURT OF THE STATE OF NEVADA
LAS VEGAS SANDS CORP., A NEVADA No. 63444
CORPORATION; AND SANDS CHINA
LTD., A CAYMAN ISLANDS
CORPORATION,
FILED
Petitioners, AUG 0 7 2014
vs. K. LINIZMAN
THE EIGHTH JUDICIAL DISTRICT CLETKLfl
RIA
BY
COURT OF THE STATE OF NEVADA,
IN AND FOR THE COUNTY OF
CLARK; AND THE HONORABLE
ELIZABETH GOFF GONZALEZ,
DISTRICT JUDGE,
Respondents,
and
STEVEN C. JACOBS,
Real Party in Interest.
Original petition for a writ of prohibition or mandamus
challenging a district court order authorizing the use of purportedly
privileged documents.
Petition granted in part.
Morris Law Group and Steve L. Morris and Rosa Solis-Rainey, Las Vegas;
Kemp, Jones & Coulthard, LLP, and J. Randall Jones and Mark M. Jones,
Las Vegas; Holland & Hart LLP and J. Stephen Peek and Robert J.
Cassity, Las Vegas,
for Petitioners.
Pisanelli Bice, PLLC, and Todd L. Bice, James J. Pisanelli, Debra L.
Spinelli, and Eric T. Aldrian, Las Vegas,
for Real Party in Interest.
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BEFORE THE COURT EN BANC.'
OPINION
By the Court, GIBBONS, C.J.:
In this opinion, we consider whether a former chief executive
officer of a corporation, who is now suing his former employer, is within a
"class of persons" entitled to access the corporation's privileged documents
for use in the litigation. We conclude that a corporation's current
management is the sole holder of its attorney-client privilege, and thus,
Nevada law does not allow for a judicially created class of persons
exception to attorney-client privilege. Accordingly, we grant petitioners'
request for a writ of prohibition in part to prevent real party in interest
from using the purportedly privileged documents in the underlying
litigation.
FACTS AND PROCEDURAL HISTORY
This matter arises out of real party in interest Steven C.
Jacobs's termination as president and chief executive officer of Sands
China Ltd. On or near the same day he was terminated, Jacobs gathered
approximately 40 gigabytes of documents in the form of e-mails and other
communications (the documents), which Jacobs continues to possess.
Approximately three months after his termination, Jacobs
filed a complaint against petitioners Las Vegas Sands Corp. (LVSC) and
Sands China Ltd., as well as nonparty to this writ petition, Sheldon
Adelson, the chief executive officer of LVSC (collectively, Sands). In the
complaint, Jacobs alleged that Sands breached his employment contract
by refusing to award him promised stock options, among other things.
'The Honorable Kristina Pickering and the Honorable Ron
Parraguirre, Justices, voluntarily recused themselves from participation
in the decision of this matter.
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Almost nine months after filing his complaint, Jacobs
disclosed, as an update on the status of document production, that he
possessed the documents at issue in this writ petition. Shortly thereafter,
the parties met and conferred regarding the documents, and Sands
asserted that the material may be subject to Sands's attorney-client
privilege and demanded that Jacobs return the documents. Jacobs,
however, refused to return the documents.
LVSC files a motion for a protective order and for return of the documents
Approximately one month after Jacobs disclosed that he
possessed the documents, LVSC filed a motion for a protective order and
for return of the documents. 2 Among LVSC's several arguments was that,
after he was terminated, Jacobs had no right to possess documents that
were subject to LVSC's attorney-client privilege.
The district court expressed concern that it could not consider
LVSC's motion in light of the stay that this court had imposed on the
underlying litigation in connection with a previous writ petition that
Sands China filed in this court. 3 LVSC communicated to the district court
that if the district court believed that entertaining the motion would
Sands China did not join in the motion in order to avoid seeking
affirmative relief from the district court and thereby• subject itself to the
court's jurisdiction.
3 0n August 26, 2011, this court granted Sands China's petition for a
writ of mandamus, which challenged the district court's order denying
Sands China's motion to dismiss it from the underlying action for lack of
personal jurisdiction. See Sands China Ltd. v. Eighth Judicial Dist.
Court, Docket No. 58294 (Order Granting Petition for Writ of Mandamus,
August 26, 2011). As a result, this court directed the district court to stay
the underlying action until the district court held an evidentiary hearing
on whether Sands China is subject to personal jurisdiction in Nevada. The
underlying action is still stayed because the parties have not yet concluded
jurisdictional discovery in preparation for the ordered evidentiary hearing.
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violate the stay, then LVSC would withdraw the motion and instead file a
second action challenging Jacobs's possession and use of the documents.
LVSC files a second action in district court in an attempt to obtain a ruling
on Jacobs's possession of the purportedly privileged documents
Subsequently, LVSC filed a complaint (the second action)
against Jacobs in the district court claiming theft/conversion of the
documents and seeking preliminary and permanent injunctive relief.
LVSC simultaneously filed a motion in the second action for a temporary
restraining order and preliminary injunction or, in the alternative, for a
protective order, again arguing that Jacobs took company documents
containing attorney-client privileged communications without the
authority to do so. The district court granted injunctive relief, prohibiting
Jacobs from disseminating the documents to third parties for 14 days, in
order, to allow. Sands to return to the original action and file an emergency
writ petition with this court requesting a "carve out" from the underlying
stay. 4 Neither party challenged this decision before this court.
Six days after the hearing in the second action, LVSC filed an
emergency writ petition with this court requesting a limited lift of the stay
in order to pursue a protective order barring the use of the privileged
documents and requiring their return. This court denied LVSC's
emergency writ petition.
At a subsequent hearing in the second action, the district
court made the determination that the subject matter was purely a
jurisdictional discovery dispute that could be resolved in this case.
Therefore, the district court dismissed the second action without
4 Thedistrict court labeled its order an "Interim Order," prohibiting
Jacobs from disseminating the documents to any third party for 14 days.
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prejudice, 5 indicating that Sands must pursue its discovery claims in this
case. Thereafter, LVSC stopped pursuing its complaint in the second
action, and that action has been statistically closed.
The district court subsequently ordered the parties to
establish an electronically stored information (ESI) protocol in the instant
action that (1) directed Jacobs to turn over copies of the documents to an
independent ESI vendor, 5 (2) allowed Jacobs and Sands to review the
documents and assert any privilege, and (3) provided that the district
court would then conduct an in-camera review to resolve any privilege
disputes.
After providing the documents to a court-ordered ESI vendor pursuant to
an ESI protocol, Jacobs files a motion to return the documents
After extensive motion practice, the district court entered a
formal ESI protocol in which it appointed an independent ESI vendor, and
ordered Jacobs to provide the ESI vendor a full mirror image of the
documents. Pursuant to the ESI protocol, Sands received the documents
from the independent ESI vendor, reviewed the documents for privileges,
and completed a privilege log. Shortly after receiving Sands's privilege
log, Jacobs filed a motion for the return of the documents from the
independent ESI vendor. Jacobs argued that Sands's privilege log was
deficient and asserted several improper privileges. Additionally, Jacobs
argued that the "collective corporate client" approach to the attorney-client
5 The district court did not enter a written order dismissing the
second action.
6An ESI vendor is a neutral third party who stores potentially
discoverable electronic information such that the parties can search,
collect, and produce relevant documents and withhold privileged
documents. See Jason Fliegel & Robert Entwisle, Electronic Discovery in
Large Organizations, 15 Rich. J.L. & Tech. 7, 2009, at 25-27.
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privilege applied, such that Sands could not "deprive Jacobs of access to
the proof, particularly when he was a participant in its creation."
Essentially, Jacobs argued that he was "the client" when he was directly
involved in running Sands China, and therefore had a right to access and
use any privileged documents that had been created while he was CEO of
Sands China.
In opposition, Sands argued that pursuant to NRS 49.045 and
49.095, Sands was the sole holder of the attorney-client privilege, and it
had not waived that privilege.
The district court grants Jacobs's motion, ruling that Jacobs is
among the "class of persons" legally entitled to view and use
privileged documents that pertain to his tenure at Sands China
The district court granted Jacobs's motion to return the
documents from the independent ESI vendor based on the legal conclusion
that Jacobs was within a class of persons legally allowed to view and use
the purportedly privileged documents. The district court order stated that
it did not need to address "whether any of the particular documents
identified by [Sands] are subject to some privilege ... , whether Jacobs has
the power to assert or waive any particular privileges that may belong to
[Sands] . . . or whether [Sands] waived the privilege." Rather, the district
court ruled:
the question presently before this [c]ourt is
whether Jacobs, as a former executive who is
currently in possession, custody and control of the
documents and was before his termination, is
among the class of persons legally allowed to view
those documents and use them in the prosecution
of his claims and to rebut [Sands's] affirmative
defenses and counterclaim, as these were
documents that the former executive authored,
received and/or possessed, both during and after
his tenure.
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Based on this "class of persons" exception, the district court granted
Jacobs's motion to return the remaining documents from the independent
ESI vendor. Two days later, Sands filed this original petition for writ of
prohibition or mandamus, asking that this court direct the district court to
vacate its order permitting Jacobs to use the documents in the underlying
litigation. 7
DISCUSSION
As a preliminary matter, Jacobs argues that writ relief is
unavailable because Sands failed to appeal the district court's ruling in
the second action. Jacobs argues that a district court's refusal to grant an
injunction is immediately appealable and that "writ relief is not available
to correct an untimely notice of appeal." Pan v. Eighth Judicial Dist.
Court, 120 Nev. 222, 224-25, 88 P.3d 840, 841 (2004); see also Bradford v.
Eighth Judicial Dist. Court, 129 Nev. „ 308 P.3d 122, 123 (2013).
While this is generally a correct statement, in this case, the
district court's interim order actually granted relief by prohibiting Jacobs
from disseminating the documents to third parties for 14 days. This
afforded Sands the time to use the ESI protocol in the underlying action to
review the documents and assert any applicable privileges. In addition,
the district court's ruling in the second action did not reach the merits of
the "class of persons" exception to the corporate attorney-client privilege
issue raised in this writ petition; it instead ruled that Sands needed to
pursue its privileges in this case. Thus, any appeal of the district court's
ruling in the second action would not preclude this current writ petition.
As a result, we are not persuaded by Jacobs's argument that Sands should
be estopped from filing this writ petition.
7 Thiscourt previously granted Sands's emergency motion to stay the
district court order under NRAP 8(c) pending resolution of this petition.
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Additionally, even if we were to construe the district court's
order as adverse to Sands, the district court had not consolidated the
motion for a temporary restraining order and preliminary injunction with
the trial on the merits pursuant to NRCP 65(a)(2), and when it dismissed
the second action, it did so without prejudice. 9 Under these
circumstances, LVSC could still obtain the permanent injunction
requested in its complaint in the second action. NRCP 65; cf. Cal. State
Univ., Hayward v. NCAA, 121 Cal, Rptr. 85, 92 (Ct. App. 1975); Art
Movers, Inc. v. Ni W., Inc., 4 Cal. Rptr. 2d 689, 696 (Ct. App. 1992). In our
view, Sands made a strategic decision to assert its privileges in this case—
a decision that coincided with the directions of the district court. 9
Therefore, we conclude that Sands's writ petition is proper in this
instance.
We exercise our discretion to consider Sands's petition for a writ of
prohibition
"A writ of prohibition may issue to arrest the proceedings of a
district court exercising its judicial functions when such proceedings are in
9 Thedistrict court stated that it was dismissing the complaint "for
[Sands] to pursue it as a discovery dispute related to the jurisdictional
evidentiary hearing issue" in the instant case.
9Although Jacobs argues that Sands's failure to timely object to his
possession of the documents should constitute a waiver of any privilege
that Sands may be able to assert, the district court did not rule on this
issue and made no findings of fact to this effect. The record before this
court is unclear regarding the steps taken by Sands to preserve any
privileges. We therefore decline to consider Jacobs's waiver-related
arguments in opposition to this writ petition. See Ryan's Express Transp.
Servs., Inc. v. Amador Stage Lines, Inc., 128 Nev. „ 279 P.3d 166,
172 (2012) ("An appellate court is not particularly well-suited to make
factual determinations in the first instance."). To the extent necessary to
address Jacobs's waiver-related arguments, we direct the district court to
make findings of fact and resolve whether Sands waived any privileges.
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excess of the jurisdiction of the district court." Club Vista Fin, Servs.,
L.L.C. v. Eighth Judicial Dist. Court, 128 Nev. , & n.6, 276 P.3d
246, 249 & n.6 (2012) (explaining that discovery excesses are more
appropriately remedied by a writ of prohibition than mandamus).
Although this court will generally decline to review issues involving
discovery disputes, this court has elected to intervene in discovery matters
when (1) the trial court issues a blanket discovery order without regard to
relevance, or (2) a discovery order requires disclosure of privileged
information. Valley Health Sys., L.L.C. v. Eighth Judicial Dist. Court, 127
Nev. „ 252 P.3d 676, 679 (2011).
Although Jacobs already possesses the purportedly privileged
documents, this case nevertheless presents a situation where, if Jacobs
were improperly permitted to use the documents in litigation, "the
assertedly privileged information would irretrievably lose its confidential
and privileged quality and petitioners would have no effective remedy,
even by a later appeal." Wardleigh v. Second Judicial Dist. Court, 111
Nev. 345, 350-51, 891 P.2d 1180, 1183-84 (1995). Thus, we choose to
exercise our discretion to consider this writ petition because the district
court order at issue permits adverse use of purportedly privileged
information. See Valley Health, 127 Nev. at , 252 P.3d at 679; see also
Aspen Fin. Servs., Inc. v. Eighth Judicial Dist. Court, 128 Nev. ,
289 P.3d 201, 204 (2012) ("Writ relief may be available when it is
necessary to prevent discovery that would cause privileged information to
irretrievably lose its confidential nature and thereby render a later appeal
ineffective."). Accordingly, we now turn to the merits of Sands's petition.
Standard of review
Generally, discovery issues "are within the district court's
sound discretion, and [this court] will not disturb a district court's ruling
regarding discovery unless the court has clearly abused its discretion."
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Club Vista, 128 Nev. at , 276 P.3d at 249. But here, the parties dispute
the proper scope of the attorney-client privilege, which, in Nevada, is
governed primarily by statute. See NRS 49.035-.115. Statutory
interpretation is a question of law subject to our de novo review, even
when arising in a writ proceeding. Int'l Game Tech., Inc. v. Second
Judicial Dist. Court, 124 Nev. 193, 198, 179 P.3d 556, 559 (2008); see also
United States v. Richey, 632 F.3d 559, 563 (9th Cir. 2011) ("We review de
novo the district court's rulings on the scope of the attorney-client
privilege."). Therefore, our analysis surrounding the proper scope of the
attorney-client privilege is subject to de novo review.
The district court erred when it ruled that Jacobs may use Sands's
assertedly privileged documents in litigation on the grounds that Jacobs
was within a class of persons entitled to review Sands's privileged
information
Nevada privilege law grants the attorney-client privilege to the client
corporation's current management
"Generally, when a statute's language is plain and its meaning
clear, the courts will apply that plain language" Leven v. Frey, 123 Nev.
399, 403, 168 P.3d 712, 715 (2007). But when a statute is susceptible to
more than one reasonable interpretation, it is ambiguous, and this court
must resolve that ambiguity by looking to legislative history and
"construing the statute in a manner that conforms to reason and public
policy." Great Basin Water Network v. Taylor, 126 Nev. 187, 196, 234 P.3d
912, 918 (2010).
Here, Sands argues that the plain language of NRS 49.095
unambiguously guarantees a client the right "to prevent any other person
from disclosing" privileged communications. Thus, Sands argues that
given the broad language used in the statute, Nevada law does not allow
for a "class of persons," other than the client itself, to use or disclose
privileged documents over a client's assertion of privilege. While we agree
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that NRS 49.095 unambiguously guarantees a client the right "to prevent
any other person from disclosing" privileged communications, we note that
this right belongs to the client—a term defined by NRS 49.045.
NRS 49.045 defines "client" as "a person, including a public
officer, corporation, association or other organization or entity, either
public or private, who is rendered professional legal services by a lawyer,
or who consults a lawyer with a view to obtaining professional legal
services from the lawyer." (Emphasis added.) In a corporate context, a
client corporation is not a living entity that can make decisions
independently—people have to make decisions on its behalf. Thus, the
issue we are faced with is the appropriate scope of persons who have the
authority to assert a corporation's privilege and whether an exception
should exist when a corporation's current management attempts to assert
the attorney-client privilege against a former officer or director. Other
courts have addressed this issue, with varying results.
We decline to adopt an exception to the attorney-client privilege based
on a litigant's status as a former officer or director of a corporation
Sands argues that the district court erred because the
attorney-client privilege belongs exclusively to the client corporation's
current management, and thus Jacobs's status as former CEO alone does
not entitle him to access and use Sands's privileged communications in
litigation. See Commodity Futures Trading Comm'n v. Weintraub, 471
U.S. 343, 348-49 (1985); Montgomery v. eTreppid Techs., L.L.C., 548 F.
Supp. 2d 1175, 1187 (D. Nev. 2008). Sands contends that the district
court's order is inconsistent with the purpose of attorney-client privilege
because allowing former employees to use the company's privileged
documents against it in litigation would chill officers' and directors'
willingness to communicate candidly with counsel. See Upjohn Co. v.
United States, 449 U.S. 383, 389 (1981); Dexia Credit Local v. Rogan, 231
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F.R.D. 268, 277 (N.D. Ill. 2004) ("To rule otherwise would defeat that
expectation, and could chill the willingness of control group members to
speak candidly on paper (or, these days, in electronic media) about
privileged matters, knowing that some day one of their number may leave
the control group and become adverse (whether through litigation or
business activity) to the corporation.").
The "collective corporate client" or "joint client" exception to
corporate attorney-client privilege
The collective corporate client exception to corporate attorney-
client privilege is based on the idea that there is one collective corporate
client that includes the corporation itself as well as each individual
member of the board of directors, rather than just the corporation alone.
See Lane v. Sharp Packaging Sys., Inc., 640 N.W.2d 788, 815-16 (Wis.
2002) (Abrahamson, C.J., dissenting); Montgomery, 548 F. Supp. 2d at
1183, 1185. The theory is that "directors are collectively responsible for
the management of a corporation and a corporation is an inanimate entity
that cannot act without humans"; therefore "it is consistent with a
director's role and duties that the director be treated as a 'joint client."
Montgomery, 548 F. Supp. 2d at 1183. Thus, similar to the way in which
parties with a common interest who retain a single attorney may not
assert the attorney-client privilege against each other if they later become
adverse, Livingston v. Wagner, 23 Nev. 53, 58, 42 P. 290, 292 (1895), the
collective corporate client approach creates an exception to a corporation's
attorney-client privilege by precluding a corporation from asserting its
attorney-client privilege against a former director or officer. See Gottlieb
v. Wiles, 143 F.R.D. 241, 247 (D. Colo. 1992).
Jacobs argues that the district court's decision is amply
supported by caselaw adopting the collective corporate client exception to
corporate attorney-client privilege. Jacobs primarily relies on People v.
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Greenberg, 851 N.Y.S. 2d 196, 200-02 (App. Div. 2008). In Greenberg, the
New York Attorney General's office filed a complaint against MG and its
former CEO and CFO for their involvement in alleged sham insurance
transactions. The former CEO and CFO served document requests on AIG
seeking documents created during their tenure as officers and directors of
AIG for use in their defense. Id. at 197-98. In evaluating the issue, the
court separated attorney-client communications into "two categories:
general business matters and the four transactions at the heart of this
action." Id. at 200. The court found that while the corporation's current
board of directors controlled the attorney-client privilege regarding
"general business matters," a former director may inspect records that are
"necessary to protect their personal responsibility interests." Id. at 201.
Thus, the court found that former executives were "within the circle of
persons entitled to view privileged materials without causing a waiver of
the attorney-client privilege" because they were "privy to, and on many
occasions actively participated in, legal consultations regarding the four
subject transactions . Id. at 201-02; see also Kirby v. Kirby, 1987 WL
"While the district court did not directly cite to Greenberg in its
order, it appears that its order is primarily based on the analysis in
Greenberg. In Greenberg, the court held that former corporate officers had
a "qualified right" to access privileged corporate documents because those
documents were needed by the officers to defend• themselves against
allegations of malfeasance. Id. at 201-02 (emphasis omitted). Here, the
only issue upon which discovery is being conducted is whether Sands
China is subject to personal jurisdiction. In light of this fact, it is unclear
how the Greenberg court's analysis led to the district court's conclusion
that Jacobs is entitled to use any documents that he "authored, received
and/or possessed, both during and after his tenure," in establishing
personal jurisdiction over Sands China. To the extent that Sands may
have placed any documents "at-issue," this court's analysis of at-issue
waiver in Wardleigh v. Second Judicial District Court, 111 Nev. 345, 891
P.2d 1180 (1995), provides the appropriate framework for resolving those
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issues. But at this point, it would be inappropriate for this court to
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13
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14862, at *7 (Del. Ch. July 29, 1987) (holding that the directors of a closely
held corporation, collectively, were the client and that joint clients may not
assert the attorney-client privilege against one another);" Gottlieb, 143
F.R.D. at 247 (concluding that because the plaintiff was a chairman of the
board and CEO when the documents were created, he was "squarely
within the class of persons who could receive communications" from the
corporation's counsel "without adversely impacting the privileged or
confidential nature of such material").
"The entity is the client" approach
Sands primarily cites two cases for its proposition that the
corporation's current management is the sole holder of the attorney-client
privilege: Weintraub, 471 U.S. 343, and Montgomery, 548 F. Supp. 2d
1175. In Weintraub, the Supreme Court considered whether managers of
a bankrupt corporation could assert the attorney-client privilege on behalf
of the corporation or if, instead, the right to assert and waive the privilege
passed to the bankruptcy trustee. 471 U.S. at 349. The Court framed the
issue before it as "which corporate actors are empowered to waive the
corporation's privilege." 12 Id. at 348. The Court explained that for solvent
...continued
address such a fact-intensive issue that would hinge on the content of
individual• documents, and whether Sands placed such a document at
issue. See Ryan's Express Transp. Servs., Inc. v. Amador Stage Lines, Inc.,
128 Nev. , 279 P.3d 166, 172 (2012).
"While this is an unpublished disposition, many courts across the
country have cited to this case. See, e.g., Milroy v. Hanson, 875 F. Supp.
646, 648 (D. Neb. 1995).
12 Weintraub specifically addressed which party has the power to
control attorney-client privilege during the pendency of a bankruptcy. 471
U.S. at 349. However, its analysis of corporate attorney-client privilege
has been cited outside the context of bankruptcy. See Montgomery, 548 F.
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Supp. 2d at 1183; Milroy, 875 F. Supp. at 649-50 (citing Weintraub for the
OF continued on next page...
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corporations, the power to waive attorney-client privilege rests with the
corporation's officers and directors. 13 Id. "The managers, of course, must
exercise the privilege in a manner consistent with their fiduciary duty to
act in the best interests of the corporation and not of themselves as
individuals." Id. at 348-49. The Court reasoned that "when control of a
corporation passes to new management, the authority to assert and waive
the corporation's attorney-client privilege passes as well." Id. at 349.
Thus, the Court concluded that "[d]isplaced managers may not assert the
privilege over the wishes of current managers, even as to statements that
the [displaced managers] might have made to counsel concerning matters
within the scope of their corporate duties." Id. As a result, a former
officer and director "who is now neither an officer nor a director. . . retains
no control over the corporation's privilege." Id. at 349 n.5.
Similarly, in Montgomery, the federal district court for the
district of Nevada found that a former officer may not access his former
employer's privileged communications for use in his lawsuit against his
former employer. 548 F. Supp. 2d at 1187. Dennis Montgomery, the
plaintiff, who was a member 14 and former manager for eTreppid,
...continued
proposition that "[a] dissident director is by definition not 'management'
and, accordingly, has no authority to pierce or otherwise frustrate the
attorney-client privilege when such action conflicts with the will of
[current] 'management").
1 More accurately, the Court noted that the parties agreed that the
-3
power to waive attorney-client privilege rests with the corporation's
officers and directors. See Weintraub, 471 U.S. at 348-49. But it appears
that the Court implicitly supported these conclusions because it cited to
additional legal authority to support them. Id.
mThe respondent in that case, eTreppid, is an LLC, not a
corporation. 548 F. Supp. 2d at 1177. However, the court determined that
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eTreppid's structure was most similar to that of a corporate structure, and
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requested discovery, in response to which eTreppid asserted the attorney-
client privilege. Id. at 1177. Montgomery claimed that as a member and
former manager, he was a "joint client," and as such, eTreppid could not
assert the attorney-client privilege against him with respect to privileged
communications created during his tenure as a manager. Id. The
Montgomery court analyzed a number of cases on each side of the issue,
and concluded that
[T]he Milroy [15] [and Weintraub] line of cases are
more persuasive. It makes sense that the
corporation is the sole client. While the
corporation can only communicate with its
attorneys through human representatives, those
representatives are communicating on behalf of
the corporation, not on behalf of themselves as
corporate managers or directors. Moreover, the
court finds very convincing the language in
...continued
therefore treated it as a corporation for the purposes of its privilege
analysis. Id. at 1183.
15 InMilroy, the plaintiff Michael Milroy, an active member of the
board of directors and minority stockholder of a corporation, sued several
other directors and majority stockholders based on claims related to
alleged violations of their fiduciary duty. 875 F. Supp. at 647. Milroy
requested discovery, which the corporation—via a majority vote of the
other directors—refused based on attorney-client privilege. Id. Milroy
asked the federal court to adopt the collective corporate client exception to
corporate attorney-client privilege because he was an active director and
thus belonged to the entity that controls the corporation. Id. at 648. The
court found that no exception should apply to the normal rule that "since
the majority decision of the board of directors of a Nebraska corporation
'controls' the corporation. .. an individual director is bound by the
majority decision and cannot unilaterally waive or otherwise frustrate the
corporation's attorney-client privilege if such an action conflicts with the
majority decision of the board of directors." Id. Thus, "[a] dissident
director is by definition not 'management' and, accordingly, has no
authority to pierce or otherwise frustrate the attorney-client privilege
when such action conflicts with the will of 'management." Id. at 649-50.
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Weintraub, which states that the privilege belongs
to the corporation, can be asserted or waived only
by management, and that this power transfers
when control of the corporation is transferred to
new management.
Also important to the court's decision is the
fact that Montgomery, like the former director
in Milroy, is not suing on behalf of eTreppid or in
his capacity as a former manager or officer.
Rather, Montgomery is suing to benefit himself
individually—a perfectly acceptable position, but
not one which should entitle him to eTreppid's
attorney-client privileged communications. Like
the "dissident" director in Milroy, Montgomery
is now adverse to eTreppid and may not
obtain privileged documents over the objection of
current management. Moreover, even though
Montgomery would have had access to such
documents during his time at eTreppid, he still
would have been duty-bound to keep such
information confidential.
Id. at 1187.
We decline to adopt an exception to the attorney-client privilege based
on a litigant's status as a former officer or director of a corporation
It appears that the modern trend in caselaw follows the
Weintraub, Milroy, and Montgomery line of cases. See Montgomery, 548 F.
Supp. 2d at 1186 (noting that "many more courts have rejected the
reasoning in Gottlieb than in Milroy"); Nunan v. Midwest, Inc., No.
2004/00280, 2006 WL 344550, at *7 (N.Y. Sup. Ct. January 10, 2006)
("Although there is discredited authority to the contrary. . . most of the
more recent cases embrace the view that, when a former officer or director
is suing the company for his or her own personal gain, the privilege
belongs to the corporation and if asserted is effective to prevent disclosure
to the former officer or director." (internal citations omitted)).
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More importantly, we• are persuaded by the policy behind the
Weintraub, Milroy, and Montgomery lineS of cases and conclude that it is
consistent with Nevada privilege law. Allowing a former fiduciary of a
corporation to access and use privileged information after he or she
becomes adverse to the corporation solely based on his or her former
fiduciary role is entirely inconsistent with the purpose of the attorney-
client privilege. 16 We believe such a situation would have a perverse
chilling effect on candid communications between corporate managers and
counsel. Cf. Whitehead v. Nev. Comm'n on Judicial Discipline, 110 Nev.
380, 410, 873 .P.2d 946, 965 (1994) (recognizing that the attorney-client
privilege's purpose "is to protect confidential communications between
attorney and client"). We therefore decline to recognize the collective
corporate client exception to a corporation's attorney-client privilege and
conclude that Jacobs may not use Sands's privileged documents in
litigation over Sands's current management's assertion of the attorney-
client privilege.
Thus, we conclude that the district court erred when it applied
the collective corporate client approach to find that Jacobs was within a
class of persons legally allowed to use Sands's purportedly privileged
documents in the prosecution of his claims. We therefore grant Sands's
petition for a writ of prohibition in part and direct the district court to
vacate its June 19, 2013, order granting the return of the documents from
16 0ther courts have expressed similar concerns. See, e.g.,
Montgomery, 548 F. Supp. 2d at 1187; Davis v. PMA Cos., Inc., No. CIV-
11-359-C, 2012 WL 3922967, at *6 (W.D. Okla. Sept. 7, 2012) ("It seems
paradoxical to allow a party to access information previously available to
that individual only because of his or her role as a fiduciary once that
party is adverse to the corporation and no longer required to act in the
corporation's best interests.").
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the independent ESI vendor. We note that the district court has yet to
make a determination as to whether Sands's assertions of privilege are
proper. As it previously indicated that it would do, the district court
should resolve any disputes regarding Sands's privilege log by conducting
an in-camera review of the purportedly privileged documents to determine
which documents are actually protected by a privilege. 17
CONCLUSION
We conclude that a corporation's current management controls
the privilege "to refuse to disclose, and to prevent any other person from
disclosing, confidential communications." This precludes a finding that
there is a class of persons outside the corporation's current officers and
directors who are entitled to access the client's confidential or privileged
information over the client's objection for use in litigation. Therefore, we
conclude that the district court erred when it employed the collective
corporate client exception to corporate attorney-client privilege in ruling
that Jacobs, solely based on his former executive position with Sands
17 Because the district court resolved the underlying motion without
addressing Jacobs's objections to various assertions of privilege, the
district court should evaluate each of Jacobs's objections and determine
the factual and legal validity of Sands's assertions of privilege. We note
that documents that were not sent to legal counsel for the purpose of
rendering legal advice, such as instances in which legal counsel was
merely copied, are not protected by the attorney-client privilege. See
Lindley v. Life Investors Ins. Co. of Am., 267 F.R.D. 382, 390 (N.D. Okla.
2010); ABB Kent-Taylor, Inc. v. Stallings & Co., Inc., 172 F.R.D. 53, 57
(W.D.N.Y. 1996). Similarly, as noted above, to the extent that Sands may
have placed any documents "at-issue," this court's analysis of at-issue
waiver in Wardleigh v. Second Judicial District Court, 111 Nev. 345, 891
P.2d 1180 (1995), provides the appropriate framework for resolving those
issues.
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China, was legally allowed to use the purportedly privileged documents
over of Sands's claim of privilege.
We therefore grant Sands's writ petition in part and direct the
clerk of this court to issue a writ of prohibition ordering the district court
to halt the return to Jacobs of the pur7 edly privileged documents. 18
2..
C.J.
Gibbons
We concur:
R---- tali-Ask \
Lt J.
Hardesty
J.
Douglas
J.
J.
isSands's alterative request for a writ of mandamus is denied. In
light of our resolution of this writ petition, we vacate the stay imposed by
our October 1, 2013, order.
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