More Lessons Learned From Theranos: Ensuring Privilege Protection – Litigation, Mediation & Arbitration
United States: More Lessons From Theranos: Ensuring Privilege Protection
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The lawsuit of Elizabeth Holmes, founder of the infamous healthcare and life sciences company, Theranos, Inc., has garnered media attention across the country. Just months before the trial began, Holmes recently lost his pre-trial battle over whether attorney-client privilege prevents the introduction of certain emails with a lawyer. While the emails in question remain sealed from public view, records and related hearings indicate that Holmes and lawyers for Boies Schiller Flexner LLP (“BSF”) attempted to prevent the Wall Street Journal from exposing the impending collapse of the startup.
According to Holmes, BSF represented her jointly with Theranos, as of 2011. She argued that the joint representation continued for half a decade and covered a wide variety of topics, including her interactions with the media. As a result, Holmes argued that the emails are subject to his solicitor-client privilege. On the other hand, the government took the position that there was no joint representation, so emails are only subject to corporate privilege, which has already been deleted.
Magistrate judge Nathaneal M. Cousins ââagreed with the government, saying Holmes had failed to establish joint representation. The court applied the Graf test, a common test used to determine whether a corporate lawyer represented an executive in a personal capacity, as opposed to representing the company itself. In particular, the Graf The test placed the onus on Holmes to show that she had established in communications that she was seeking legal advice personally, rather than as a Theranos executive. Among the factors considered by the court, Holmes could not point to any financial documents showing payments to BSF from his personal accounts. Additionally, Holmes was unable to prove that communications with BSF’s attorneys were strictly confidential, as other senior Theranos employees and in-house attorneys were copied to the email channels. It seems, moreover, that the fatal flaw for Holmes was the absence of a letter of engagement relating to the alleged representation by BSF of the ex-CEO in a personal capacity.
This finding serves as an important reminder of how lines of privilege can become blurred when business disputes arise involving corporate executives. In order to avoid those blurry lines and similar issues for you or your business, we recommend that clear and well-written engagement letters be a top priority when hiring a lawyer. Likewise, firms can – and should – provide their clients with separate engagement letters as the representation extends to multiple unrelated matters. As Holmes probably learned, defining exactly who the client is and the extent of representation up front can avoid major pitfalls later.
More Lessons From Theranos: Ensuring Privilege Protection
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