Protecting Confidentiality in Environmental Due Diligence

In real estate transactions, maintaining confidentiality during environmental due diligence, particularly when dealing with Phase II Environmental Site Assessments is very important. Understanding how attorney/client privilege and work product doctrine apply can significantly impact the protection of sensitive information.
Attorney/Client Privilege

Attorney/client privilege protects confidential communications between a client and their attorney made for the purpose of obtaining legal advice. This privilege can extend to communications involving consultants retained by the attorney to assist in providing legal advice.

To ensure that the privilege applies, the consultant should be retained by the attorney, not directly by the client. This arrangement helps demonstrate that the consultant’s work is part of the legal advice provided by the attorney. However, it is important to note that the privilege may be limited when it comes to scientific data, such as soil samples, which are considered factual data rather than confidential communications.

Work Product Doctrine

The work product doctrine protects materials prepared by or for an attorney in anticipation of litigation. This protection can apply to reports and other documents created by environmental consultants if they are prepared with the expectation of potential legal disputes.

To strengthen the case for work product protection, it is essential to demonstrate that the consultant’s work was conducted in anticipation of litigation. This is more straightforward when dealing with existing court proceedings or administrative orders. However, in transactional contexts, such as property acquisitions, courts may be less likely to extend work product protection, as these engagements often begin before litigation is anticipated.

Phase I and Phase II Environmental Site Assessments

Phase I Environmental Site Assessments are the initial step in identifying potential environmental concerns. These assessments, performed according to ASTM E1527-13 standards, involve reviewing historical property uses and conducting a site inspection without invasive testing. While Phase I assessments are crucial for due diligence, they do not typically include recommendations for further study unless requested.
If a Phase I assessment identifies potential contamination, a Phase II Environmental Site Assessment may be necessary. Phase II assessments often involve invasive investigations, including soil and groundwater sampling, to determine the extent of contamination.

Protecting Confidentiality in Reports

To maintain confidentiality, it is essential to review all reports prepared by environmental consultants before they are shared with regulatory agencies or other third parties. Sharing reports outside the attorney-client relationship can waive attorney/client privilege and work product protection.

When reviewing reports, attorneys should ensure that the language used does not inadvertently create legal issues. For example, terms like “contamination” can have negative connotations and may be better replaced with terms like “impact.” Additionally, attorneys should verify that the consultant’s conclusions are factually justified and do not trigger new regulatory requirements.

Practical Steps for Protecting Privilege
Retain the Consultant Through the Attorney:

By having the attorney retain the environmental consultant, the work performed can be more easily protected under attorney/client privilege and work product doctrine. This arrangement helps demonstrate that the consultant’s work is part of the legal advice provided by the attorney.

Draft Clear Contracts:

Ensure that the contract between the attorney and the consultant clearly outlines the scope of work, fees and liability limitations. This contract should also specify that the consultant’s work is being conducted in anticipation of litigation, if applicable.

Review Reports Thoroughly:

Before any reports are shared with regulatory agencies or other third parties, they should be reviewed by the attorney. This review helps ensure that the language used does not inadvertently create legal issues and that the consultant’s conclusions are factually justified.

Maintain Confidentiality:

Keep all communications and documents related to the environmental assessment confidential. Avoid sharing reports outside the attorney-client relationship to prevent waiving attorney/client privilege and work product protection.

Educate Clients and Consultants:

Ensure that both clients and consultants understand the importance of maintaining confidentiality and the legal protections available. This understanding helps prevent inadvertent disclosures that could compromise the protection of sensitive information.

Conclusion:

By carefully managing the retention of environmental consultants and reviewing their work, we can protect sensitive information under attorney/client privilege and work product doctrine. This approach helps safeguard your interests and ensures compliance with regulatory requirements.