United States v. Ackert
169 F.3d 136 (1999)
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Rule of Law:
The attorney-client privilege does not protect communications between a client's attorney and a third party who is providing information the client does not have, even if that information is necessary for the attorney to provide legal advice. The privilege only extends to third parties who act as a 'translator' or 'interpreter' of communications between the client and the attorney.
Facts:
- Goldman, Sachs, and Co., an investment banking firm, pitched an investment proposal to Paramount Corporation intended to reduce Paramount's federal income tax liability.
- David A. Ackert was an employee of Goldman, Sachs involved in presenting the proposal to Paramount.
- Following the initial meeting, Paramount's senior vice president and tax counsel, Eugene I. Meyers, began analyzing the proposal to advise Paramount on its tax implications.
- To better understand the details and potential consequences of the transaction, Meyers initiated several follow-up conversations with Ackert.
- Meyers's purpose in speaking with Ackert was to obtain information about the proposal that Paramount itself did not have, in order to advise his client.
- Paramount ultimately proceeded with the investment using another firm but paid Goldman, Sachs a $1.5 million fee for its services.
Procedural Posture:
- The Internal Revenue Service (IRS), during an audit of Paramount, issued a summons to David A. Ackert seeking his testimony.
- Paramount asserted the attorney-client privilege regarding conversations between Ackert and its counsel, Eugene Meyers.
- The United States filed a petition in U.S. District Court to enforce the summons.
- The parties consented to refer the matter to a Magistrate Judge, and Paramount intervened in the action.
- The Magistrate Judge granted the petition to enforce the summons but ruled in favor of Paramount on the privilege issue after an in-camera interview with Ackert, barring the IRS from questioning him about his conversations with Meyers.
- The United States appealed the Magistrate Judge's ruling on the privilege to the U.S. Court of Appeals for the Second Circuit.
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Issue:
Does the attorney-client privilege extend to communications between a company's counsel and a third-party investment banker when the purpose of the communications is for the counsel to gather information needed to provide legal advice to the company?
Opinions:
Majority - Leval, Circuit Judge
No. The attorney-client privilege does not extend to these communications. The privilege's purpose is to protect communications between a client and an attorney, not all communications that prove important to an attorney’s legal advice to a client. The court distinguished this case from United States v. Kovel, where a third party (an accountant) was protected because his role was analogous to an interpreter, helping the attorney understand the client's own communications. Here, Ackert was not translating or interpreting information from the client, Paramount, for the attorney, Meyers. Instead, Ackert was providing new information that the client did not possess. Because Ackert's role was as an information source rather than a translator of client communications, the privilege does not apply.
Analysis:
This decision narrowly interprets the Kovel doctrine, which allows attorney-client privilege to cover communications with third parties who are necessary to facilitate attorney-client communication. The court clarifies that a third party must function as a 'translator' of the client's information, rather than being an independent source of new information, for the privilege to apply. This ruling limits the ability of corporations to shield communications with outside consultants, like investment bankers or financial advisors, under the guise of attorney-client privilege, even when those consultations are essential for rendering legal advice. It reinforces the principle that the privilege protects the communicative link between attorney and client, not the attorney's general fact-gathering process.
