#186 - AI & Legal Privilege

Companies

[00:00] Everyone's talking to an AI chatbot today, but few people realize that they may be creating
[00:11] a discoverable record that can be used in future litigation.
[00:15] How does attorney client privilege change in an era of AI?
[00:19] Welcome to the Law of Code.
[00:20] I'm your host Jacob Robinson.
[00:22] This is the podcast about the legal layer of emerging technology.
[00:26] In this episode, I'm joined by Mike Katz, a partner at Manats Financial Services Group, and we dive into legal privilege.
[00:32] What it is, how it's established, how it's lost, what courts in the US and the UK have decided about AI use and privilege.
[00:40] And what else you should know before feeding sensitive information into an LLM chatbot like Cloud, Chad GpT, or Gemini?
[00:46] Now, to prepare for this podcast, I've poured through a lot of your articles, lawsuits, court orders, spoke to top legal experts.
[00:52] I read the terms and conditions for services like cloud.
[00:55] That plus the interview that Mike can I do and the editing that I all do myself took me
[00:59] about 15 non-billable hours. I loved every second of it.
[01:03] And I'm so glad I'm able to do that.
[01:05] Thanks to the sponsor of this episode, day one law.
[01:07] There are boutique corporate law firms that works with web three innovators, founders, and startups.
[01:12] They believe in the importance of high quality legal work, and thankfully for me, this podcast.
[01:17] I'm really grateful to Nick Pullman and his team there.
[01:20] If you do reach out to them, let them know that I say hi.
[01:23] Now with that said, let's get into the episode on Legal Privilege and AI.
[01:27] Anything mentioned in this episode by Jacob Robinson or his guest is not Legal Advice
[01:30] or Investment Advice.
[01:32] All opinions are Jacob's and his guest alone.
[01:34] Nothing discussed today should be relied upon for legal or investment decisions.
[01:37] This show is solely for information and entertainment purposes only.
[01:41] Jacob and his guests are not your lawyers.
[01:42] Nor are they investment advisors.
[01:44] Please work directly with a lawyer or investment professionals.
[01:47] Let's start with Legal Privilege.
[01:49] me through like what legal privilege is. It's one of those things that everybody's heard of,
[01:55] but not many people know actually what means. So privilege is the reason you can tell your lawyer,
[02:01] whatever you've done, what you're thinking and that it can stay in the room and it can stay
[02:06] protected and it's between you and your lawyer and without it clients shade backs lie and lawyers
[02:13] then get that advice because they're not operating on the full truth and the full record. And so the
[02:18] the system would break down without legal privilege.
[02:20] And so the Supreme Court in the famous case of Upp John,
[02:24] which is the defining case around privilege,
[02:27] framed it as encouraging, full and frank disclosure.
[02:31] So lawyers can give canned and advice
[02:34] and effective representation, right?
[02:35] Like that's sort of the baseline of what lawyers want to do,
[02:38] should be doing, are needed to do for the system to work,
[02:41] but courts still can screw privilege now.
[02:44] Hey guys, it's Jacob.
[02:45] Just jumping in for a second.
[02:47] Mike makes a really important point about courts
[02:48] considering privilege narrowly.
[02:50] That's something we want.
[02:51] We want that as a policy goal, because if you don't,
[02:54] what you're essentially doing is giving terminals
[02:56] a way to protect themselves from intramulating evidence,
[02:59] where they may be searching Google,
[03:00] they may be using other tools,
[03:02] they may be writing notes about impending cases,
[03:04] and Mike's going to give some great stories about where this has happened.
[03:07] But I think it's important to keep in mind
[03:09] that privilege isn't something you want to overextend
[03:11] because now you're giving immunity,
[03:13] essentially to people who may have done some things
[03:16] that they shouldn't. We'll go back to the episode where Mike is about to explain the details of the
[03:21] upshot case, which is one of the most important cases when it comes to privilege in the United
[03:25] States and principles from this case have been imported to jurisdictions across the world.
[03:29] Back to my work. So in that case, there was a pharmaceutical company, their general counsel,
[03:35] discovered that they may have been driving foreign officials and he did the right thing.
[03:39] Did DC, he did an internal investigation. He spoke to employees. He asked them questions. He took notes.
[03:44] the IRS was investigating the company and subpoenaed all those numbers and said these are not
[03:49] privileged for which doesn't apply here. The GCBC was talking to us on the ground employees. That's
[03:54] not what privileged is. And they're a Supreme Court, disagree. They wrote the opinion saying
[03:58] privileged covers, communications between corporate council and any employee, not just the control
[04:04] group, the management to see sweet at the direction of management for the purpose of securing legal advice.
[04:09] So, up John is the reason corporate internal investigations work the way they do today.
[04:14] it's why you get it up John Warning for people who haven't heard that. I gave a lot of those
[04:18] when I was in house where if you're talking to an employee to discuss a sense of the issue,
[04:22] you have to say I represent the company, you, the company holds the privilege they can lead it,
[04:28] but the fact that the company has the privilege at all and can do this and operate this ways because
[04:33] that case. And there's two types of privilege when it comes to legal privilege. There's the attorney
[04:37] client privilege which is communications between you and your lawyer. Also the work product
[04:41] of the product doctrine, which is something that matters in the case involving cloud code.
[04:45] And then one will talk about in a minute, where if an attorney is using some note taking
[04:50] app or something to prepare for a case to conduct maybe an investigation that isn't directly
[04:54] tied to something yet, that can also be protected by privilege as well.
[04:58] And those are important points that we'll cover in detail.
[05:01] But I want to sort of step back at second and say, OK, well, privilege is important.
[05:06] But number one, how do you establish privilege?
[05:08] because privilege isn't guaranteed even if the conversation is involving a lawyer,
[05:12] because you could be scheduling a meeting, that might not be privileged.
[05:14] So walk me through how we stabler.
[05:16] Proveless.
[05:17] I mean, I'm a lawyer.
[05:18] I had conversations with people every day.
[05:20] And they are not all privileged, obviously.
[05:23] So in order to establish privilege, you need three elements.
[05:26] So the first is communication with an actual attorney.
[05:29] So attorney means a licensed lawyer or someone functioning as a lawyer's agent.
[05:35] your accountant doesn't count, your buddy
[05:37] who took a negotiations class in undergrad doesn't count,
[05:41] the author from suits doesn't count,
[05:43] you have to be an actual lawyer.
[05:45] And again, most relevant to our combo today,
[05:48] a chatbot, a consumer chatbot,
[05:50] Claude in general, chatGPT,
[05:51] Gemini in whoever doesn't count.
[05:53] I will know, and this is something, you know,
[05:56] is worth noting, that if you have a reasonable expectation
[05:59] that someone is a lawyer, that may count
[06:02] in certain instances.
[06:03] But again, it almost always has to be a absolute license.
[06:08] The interrupts on that point quickly, like I think in the HEPNR case we're going to talk about
[06:12] the government actually went in and asked Claude whether or not it can give legal advice
[06:16] and it explicitly exclaims that it is not legal advice, it is not a lawyer.
[06:20] All the consumer chat bots will say this and if you go in and you say, Mark up this contract,
[06:25] I'll say, you know, but please check with legal counsel, I'm not a lawyer, I can not provide legal advice, et cetera.
[06:30] Yeah, so element one actual communication with an attorney,
[06:33] element two confidentiality.
[06:35] The communication has to stay between you and the council.
[06:38] If you loop in a third party, who isn't part of the team,
[06:41] you're going to blow it.
[06:42] If you forward an email or a memo that was privileged to your business partner,
[06:47] who is not a lawyer, you've blown privilege.
[06:49] If you discuss your lawyers' advice on a group's left channel, you've blown it.
[06:54] And again, with the chat bots, if they're saying they're training it,
[06:57] they're storing it, they can share it.
[06:59] That's not confidential.
[07:01] And it's just to jump on that point too.
[07:04] That's often very obviously to just look at the terms of service.
[07:08] And there's different terms of service between enterprise contracts, which may not train the LLMs on what you're uploading that compared to the personal ones that most people are using, which often say that we will share this information with government authorities and other people who ask.
[07:23] Exactly. There's there's a reason why like consumer Google consumer AI chat bots and any of these things like the terms of service
[07:30] They are quite clear like they save them they record it. They train it. They sell it. They use the data and they will share data with you know
[07:37] Plaintiffs or under subpoena or with the government so you have element one communication with the license to turn you an element to confidentiality
[07:44] And then you have the third element which is it needs to be for the purpose of obtaining legal advice if you're talking to your lawyer
[07:50] about a business decision, it has nothing to do with legal. That's not privileged. If you're
[07:55] talking to your lawyer about the next game, that's not privileged. If you're talking to your
[07:59] lawyer and seeking legal advice, yes, that could be privileged if it needs all three elements.
[08:04] So it needs to be a genuine discussion where the primary purpose was legal counsel.
[08:09] And work product is a bit different, right? That requires that the material is prepared by or at
[08:14] the direction of counsel. And that's a very important point that comes up in the heppener case where
[08:19] someone uploaded things to Claude, not at the direction of council but just because they wanted to know.
[08:24] And they actually said that they were uploading these documents to Claude, so that they can work with council.
[08:29] That's very different than doing it at the behest of council and that's an important distinction that comes up here too.
[08:34] So now we've got sort of how we establish privilege. What happens when you lose for?
[08:39] Yeah, when you lose privilege, a counterparty whether you know a plaintiff, someone you're in a lawsuit with,
[08:45] if someone you're in a dispute with, a government or regulatory body that is investigating
[08:50] you, whether that's the SEC or the Department of Justice or the IRS, you know, it could
[08:54] be any of these.
[08:55] Anyone with subpoena power, right?
[08:57] They can get the documents, the communications that you were seeking to protect.
[09:01] So, if you have a legal regulatory memo on why your token is not a security, and that is a legal
[09:09] work product that was prepared by your lawyers and is a attorney client privileged and the
[09:13] communications around an attorney client privilege and you send it to a crypto exchange to explain why
[09:19] and you think that they should list your token, you just blown privilege on that memo.
[09:23] Maybe you're fine with that, maybe you made a strategic decision to do so.
[09:27] But that would lose privilege. So in a lawsuit and this is what happened by the way in many of
[09:32] the Gensler error lawsuits against parties. They gave coinbase or they gave any of these platforms
[09:37] a memo about their token and their how-in analysis. Those memos were no longer privileged and
[09:42] and the SEC could get them and use them in lawsuit.
[09:46] Lawyers are very candid in those memos
[09:48] because they understand how the business works
[09:50] and they're using the facts of the business.
[09:51] But losing privileges different from not having privilege
[09:54] and you don't have privilege with a friend
[09:56] or a business colleague.
[09:58] There is privilege between.
[10:00] doctors, psychotherapists, your spouse, and some cases, some members of the clergy,
[10:04] but non-provelled communication can't become privilege just because you share with a lawyer later.
[10:10] It can only work one way. I'd say that losing privilege is real on that happens. People
[10:15] forward privilege documents to non-provelled parties. That's the most common. There's also a
[10:19] sort and shield problem where if you're trying to use parts of the advice that you've gotten
[10:25] publicly. So if you take some of a law firm's privilege device,
[10:28] and you want to use it aggressively as a sword,
[10:31] you can't then have the shield of privilege to hide the rest of it.
[10:34] So that would always privilege potentially,
[10:36] and there's the crime and fraud exception, of course, where, you know,
[10:39] and this is important. You can't just go to your lawyer and be like,
[10:41] here's the plan to rob this bank, and I want you to be my getaway driver,
[10:44] and then the whole thing will be privileged, and our map that we print out will be a
[10:48] attorney-fine work product, and, you know, obviously, that doesn't work.
[10:51] It's in further answer for all of our crime, it's not privileged.
[10:54] But those are, those are, you know, let's say relatively common,
[10:57] But the much more common issue is not having privilege at all,
[11:01] and thinking it is, or operating as though you're creating privilege when you're not.
[11:05] So I was in house for several years, I ran legal at a large digital asset fund.
[11:10] And this was the issue that came up a lot.
[11:13] We're had to sort of explain to people.
[11:15] People have a common issue.
[11:16] I'm like a Harry Potter problem.
[11:17] Like they believe they could say the magic words, wave the wand, and privilege applied.
[11:21] And that is very much as we've already gone through, not how it works, right?
[11:24] So I would get CCed on emails between two business folks at a company and there was no legal advice.
[11:29] So I wasn't even addressed in the email and the header would say privilege and confidential and it wasn't. Obviously.
[11:35] And I would have to explain to my friends and colleagues like guys, this is not privilege.
[11:39] But if you want legal advice, here's how we structured, here's how we do it, but this is not privilege.
[11:44] Just throwing a header privilege and confidential on an email, which is what a lot of people do.
[11:48] like that's the same legal force as writing over 21 on your far-hand and walking into a bar.
[11:55] It doesn't do much, ultimately.
[11:57] So courts are going to look at the substance, and if no lawyer was involved in providing legal
[12:01] advice, the label is decorative and potentially counterproductive.
[12:05] So that's what it ties into my second anecdote, which is that a lot of people try to like
[12:10] just add the lawyer trick where there's a 40 message deep email thread on something, and then
[12:15] you see in a lawyer and you think that everything that's come before hand is privileged.
[12:20] Now, that even matters if you've see seen in the lawyer to, as far as specifically legal advice,
[12:25] which would be privileged. So maybe the emails going forward are privileged, but you cannot
[12:30] retroactively turn 40 emails where there was no legal advice and no lawyer involved into
[12:34] privileged communications or attorney-climbing work product simply by adding a lawyer. You can't
[12:40] like tag someone. It doesn't work like that, right? And then a story that is potentially
[12:46] the best example of what can go wrong when you really don't understand privilege. And this
[12:52] one still keeps me up at night, honestly. So I'm going to be careful here because it's genuinely
[12:56] a true story. And so I'm going to anonymize this. But a C-suite executive at a company who
[13:02] should have known better was a total minutes about attorney client privilege and attorney work product.
[13:08] He had a habit of labeling pretty much every document he created, a turning client privileged, every email,
[13:16] every spreadsheet, and I'm talking about like finance spreadsheets, operations spreadsheet, you know, like this
[13:23] It's a nothing to do at Trinity Pine Privilege.
[13:25] And then most dangerously, he would put every memo to self.
[13:30] He wrote a lot of memos to self.
[13:32] And it was like a dear diary of all his fears and worst case scenarios and straw men arguments
[13:39] and he would write the Trinity Pine Privilege.
[13:42] And it was literally a memo to self.
[13:45] And I wanted to sit him down and look at him and be like, this attorney client privilege that
[13:50] and keep invoking is he in the room with us right now?
[13:53] Because are you aware that you're writing them
[13:55] as to self you're not a lawyer and you're tagging
[13:57] in a attorney-fine privilege like this is a problem.
[13:59] If you think that these are our privilege
[14:01] because they are not.
[14:01] Weirdly he was obsessed with avoiding documents being produced
[14:06] obviously in a lawsuit scenario.
[14:08] That's why he kept doing this.
[14:09] And yet it was almost a self-pilling prophecy
[14:12] because a lawsuit did come down the road.
[14:14] And everything that he put together,
[14:18] which was in the privilege law,
[14:19] because he tagged it that way, the other side disputed it.
[14:22] And because if you absolutely look at it, none of it is privileged.
[14:25] It was all produced.
[14:26] It was a golden gift to the other side.
[14:29] It was they couldn't have written the narrative better than
[14:32] themselves and all of it ended up in the lawsuit.
[14:35] Like literally he was the star of the lawsuit.
[14:37] So think that there's a real lesson to take there on what
[14:41] happens when you think you have privilege and really, really
[14:44] dope.
[14:45] good example of the dangers of privilege.
[14:48] Because if you think you have it and you operate that way
[14:51] and you share this information that had you known,
[14:54] you weren't going to get it.
[14:55] You never would have written those dear diary entries.
[14:58] Now you're at such a disadvantage if anything ever happens
[15:01] in the future.
[15:02] And so I think the best way to operate is always
[15:04] is if you're going to have everything publicly disclosed
[15:07] that you're producing on that.
[15:08] Is anywhere, even those at home,
[15:10] I mean, we're going to talk about the happiness
[15:11] in our case in a second.
[15:12] I think that our in-your-house can be disclosed as well,
[15:15] obviously. And that's where these conversations around AI chat bots are so important because
[15:19] it feels like you're having an intimate conversation, no one else can read it, it's private,
[15:23] it's personal. And sometimes especially for non-loyers, if you're not comfortable with what's
[15:27] happening, you need to know, hey, what should I ask my lawyer? I could understandably see people using
[15:32] cloud and other tools to understand the process better. That's objective to some harm down the road.
[15:39] So I wrote this article about what I called Vibloid.
[15:43] It's akin to the Vibcoding idea of you use Cloud Code,
[15:48] you're building an app for your group chat, and you don't really understand the code,
[15:52] you don't really read all of it, but you're shipping it to a small friend group.
[15:56] So who cares, all of you, right? Whereas if you were developing a product as part of a big company,
[16:01] and you were Vibcoding, that wouldn't be best practice. And with Vibloid,
[16:05] It's a similar frame and the consequences are way worse because you're creating a discoverable record of potential liability
[16:11] and regulatory risk and all these things that could be used against you in a way that would be really damaging.
[16:17] Interestingly, AI, the technology, yes, is new and it's powerful and it's cool and it's interesting and there's a ton of potential.
[16:23] But the issues that it invokes with privilege are not new, they're old.
[16:26] And whether it's Google Search Results, whether it's Telephones, whether it's the Telegraph.
[16:31] the telegraph. You can go back and you can find like the case law on all of these issues and how
[16:35] we go the vision work product applies. Why I wrote this article was it really is something I'm seeing
[16:42] a ton. I'm seeing this come up constantly where someone has a legal problem or a legal question or
[16:48] a potential dispute or a regulatory risk analysis and instead of calling their lawyer, they open
[16:55] an upcloth or chatGTT or Gemini or what have you.
[16:58] They type in all the facts and sometimes those facts include things that are damaging to them.
[17:02] And then they ask for legal analysis.
[17:04] And while the consumer chat thoughts will tell you they're not a lawyer, they will give you back something
[17:09] that reads like a legal man, that feels, smells, tastes like legal advice.
[17:16] And these people feel like they feel like legal advice and feel like they got legal counsel.
[17:20] And they very much did not.
[17:22] And instead what they have done is they have created a very specific,
[17:27] probably more specific than they would using Google or other tools,
[17:31] written record of their potentially Google exposure
[17:34] on a third party servers that could be discoverable and produced
[17:37] in a lawsuit or regulatory investigation.
[17:40] So I framed it as like people are going to get in trouble
[17:43] because they don't realize this.
[17:44] They really, really don't.
[17:45] And so like I gave a few specific examples.
[17:48] for anyone who is in an employment dispute and put details about it into your chat GPT and asked it to
[17:54] draft a separation agreement. And if you're in the scope of a dispute where things could lead to a
[17:59] lawsuit or end in a lawsuit or be part of a settlement or an arbitration or what have you,
[18:03] you can have created a record that if it does go to a lawsuit and there is discovery,
[18:07] that's discoverable and that's not very good for you. I had a client that fed Claude and I know this
[18:14] this because they then forwarded it to me.
[18:16] But they fed clawed the facts of a regular tour only risky plan and asked it to work some
[18:21] loopholes.
[18:22] And then forwarded it to me and had to explain to them, listen, just you know, this is not
[18:26] privilege.
[18:27] In a world where the SEC sued you on this, they would be able to get access to this.
[18:30] So we're going to cut this off and we're going to, here's the new plan for how we're going
[18:34] to work on this so that we can create a privileged attorney client work product.
[18:39] So I think that these are examples that keep popping up
[18:43] and it's only going to get worse
[18:44] because I'd say I'm not sure what you've seen Jacob
[18:47] but like in my view in the last month,
[18:50] the level of usage of AI for legal work
[18:54] for binon lawyers has skyrocketed.
[18:57] So this is gonna be something that's really, really popping up.
[19:01] The hypnope case in which we're gonna talk about
[19:03] was viewed as a case of first impression nationwide.
[19:06] That's not gonna be the case very long.
[19:07] I think we're gonna see a lot of that stuff.
[19:09] If you're having an AI draft a first version of a contract, for example, not that I'd
[19:12] recommend that.
[19:13] But if you're doing that, that's very different than if you're asking it about a certain
[19:16] situation, you're putting some facts in there.
[19:18] That brings us to the happiness in our case, which I want to talk about now, because it's
[19:21] a great example of the dangers of doing that.
[19:23] So at a high level, happiness, the CEO of a company that had a sister company that he sort
[19:28] of said was that arms length, then that he could control turns out he could influence it,
[19:32] at least he's accused of being able to interact with it.
[19:34] Yeah, allegedly.
[19:35] Allegedly, applies everywhere throughout here.
[19:37] But $300 million was sort of taken from the sister company.
[19:40] Peppener allegedly had 150 million of it.
[19:43] 40 million was spent to upgrade his mansion.
[19:45] And Dallas, 10 million was for personal credit card expenses.
[19:48] Must have been a couple nice shopping trips allegedly.
[19:52] And then what happened was in November of 2025,
[19:55] the FBI rated his house.
[19:56] He was arrested.
[19:57] They took electronics, which I seem to be.
[20:00] is laptop or personal computer, those were taken.
[20:02] And his defense counsel, his lawyer said, well,
[20:05] there's items on that computer, which
[20:07] are attorney client privilege and are privilege
[20:09] applies to, particularly, these 31 documents generated
[20:12] by Claude and the inputs that went into them.
[20:15] They wanted to protect those because what
[20:16] heptor had done is said, OK, this is what's
[20:19] happened.
[20:19] Here's the facts.
[20:20] What can I do to protect myself?
[20:21] Asking Claude rather than, as you said, calling his attorney.
[20:24] OK, OK, Jacob here.
[20:26] I just got to pause the podcast for one second,
[20:27] because what I wanted to do was punch into Claude,
[20:30] hey, maintain legal privilege over this conversation.
[20:33] And like you might assume Claude tells me,
[20:35] I can't do that.
[20:36] Rends through a host of reasons,
[20:37] like we've already talked about when privilege exists,
[20:39] why it doesn't exist in this case.
[20:41] The problem is that when you use something like Google,
[20:44] it doesn't ask you a follow-up question.
[20:45] When you use Google Doc,
[20:46] it's not prompting you for more information.
[20:48] Listen to what Claude said,
[20:50] at the end of this long explanation,
[20:52] it says, what's going on that prompted the question?
[20:57] That's huge, right?
[21:00] Because what that's doing is that's prodding me for more information.
[21:03] And if there's a lawsuit that could be coming up that I know is coming up, there's a
[21:07] subpoena, there's some reason for me to believe litigation's happening.
[21:10] I'm now maybe going to give the facts of this case.
[21:14] Hey, what prompted the situation?
[21:15] Well, this security is next-change commission is investigating me.
[21:18] That's dangerous.
[21:19] And that's something that's very unique to AI.
[21:21] We didn't have that before chat box.
[21:23] And so I'm curious to see whether maybe in throttle pictures, some of these companies could be
[21:27] reliable for what their chat bots are doing because that's essentially the chatbot prompting
[21:31] me for more information. Now that being said, I'm someone who thinks everyone should take
[21:35] personal responsibility for things that they do. So if you're someone who's pumping in,
[21:38] sensitive subject matter into these chat bots, you should assume you're going to have to disclose
[21:43] that at some point. But you know, they probably should be tweaked. So you're not asking a question.
[21:48] After someone says, can you maintain legal privilege over this conversation and you say,
[21:52] oh, no, but tell me why? That's a really dangerous situation. So I just wanted to highlight that
[21:57] quickly back to the podcast. Now I know I just said we were going to go back to the podcast, but
[22:03] think of this like inception we're doing an insert within an insert because I mentioned whether
[22:08] not athropic or any of these companies that produce these LLMs could get in trouble for that.
[22:13] And I mean we've seen an example where a company was held liable for their actions of an agent.
[22:18] Since 2024 the British Columbia Civil Resolution Tribunal found air Canada liable for negligent
[22:24] misrepresentation after its AI chatbot provided incorrect bereavement fair information to a passenger.
[22:30] Someone had asked to pay if I take a flight, can I submit a bereavement request or information
[22:36] after the flight and get reimbursed? And they said yes, that was in the case you had to do it prior.
[22:40] And so Eric Kennedy was found liable for the actions of its agent. It's chatbot in that situation.
[22:46] So I wonder if maybe there's a line here. All right. Now we're going to go back to the episode where
[22:50] Mike and I are going to finish explaining the heppener case.
[22:52] Remember, this is the case a judge called a case of first impression on AI and legal privilege in the United States.
[22:58] There were so many details.
[22:59] I think the details are pretty fascinating because it tells us where courts are sort of lining up on this and where they might change if we have different facts in the future.
[23:07] So maybe we could walk through those three elements.
[23:09] Why judge Rackoff had said that attorney client privilege did not apply.
[23:13] In this case, and neither did the work product doctor.
[23:15] This case is kind of crazy because it's obviously a lot of money was involved.
[23:20] This guy hired a very real law firm, Quinn and annual.
[23:24] Those are real heavy hitters and very well established law firm.
[23:29] He wasn't not going to pay lawyers.
[23:31] He hired lawyers and this is a criminal case.
[23:33] So it's a lot more on the line than drafting a contractory than an employment dispute, let's
[23:38] say.
[23:39] And yet, he went in the interim between receiving a grand jury sippiness.
[23:43] knew like the writing was on the wall, but before his arrest he went into claw, did a bunch of
[23:48] stuff created these documents and then as you said when they FBI rated the mansion, they
[23:53] took those documents or they took the electronics and they wanted those documents and
[23:57] drug breakoff found in February. He ruled from the bench, breakoff's very, you know, opinionated,
[24:02] passionate, well-known judge and he's in the S.D.M.Y. it's a very important
[24:07] a district court jurisdiction in the United States, and it's opinions tend to carry some weight.
[24:12] And he called it, like I said, a question of first impressions. So this is going to shape,
[24:17] I think a lot of what's to come. I'll be it. I'm sure we will get some different results in different
[24:21] districts. But he said that the privilege failed on at least two and probably all three of the three
[24:28] elements I mentioned. So number one, Claude is not in the attorney. You can't form an attorney
[24:33] client relationship with it. It has no fiduciary duty to you. It has no law license. It has
[24:38] not subject to professional discipline. And it tells you that it's not. The second element,
[24:42] no confidentiality, the anthropic privacy policy for cloud permits collection, training,
[24:48] grocery regulators, sharing, all that. Happner consented to that when he signed up and when he
[24:53] used the platform to generate the third one documents. And then the third is the purpose of
[24:58] obtaining legal advice. And so the question was whether he intended to get legal advice from
[25:03] Claude, not like in general, and Claude itself can't provide legal advice because it is not a lawyer.
[25:09] So in in Raycoff's view, Judge Raycoff's view, you fail on that third piece as well,
[25:15] because if you go to your barber and ask him for his advice on your legal case, even though yes,
[25:20] you were seeking legal advice, not going to be a privileged conversation because you don't
[25:24] you don't reasonably believe your barber is a lawyer. And so it's the same thing here with
[25:28] Claude. And then it's also relevant that like, and this ties to sort of what we discussed
[25:33] earlier, he then forwarded those third-year-old documents to his lawyers. And again, we talked about
[25:38] this in like the examples of what doesn't create privilege. You can't create privilege by forwarding
[25:43] non-privileged documents to your lawyers. Like, once Quinn and Amy were seen then, yeah, they can create
[25:48] privilege and a turning-clank work product after the fact with certain things. But like,
[25:53] like those documents are not then attorney client work product or
[25:57] preferent.
[25:58] And another point that was interesting that the lawyer didn't direct
[26:02] happen to use Claude to maybe help him understand the fact so he could
[26:06] communicate to the lawyer.
[26:07] The Claude wasn't acting as an agent for the lawyer and the court
[26:10] specifically said that had that happen.
[26:12] It might have been a different result here.
[26:14] But in this case, this was happen on his own volition who
[26:18] shouldn't have thought he was getting legal advice from Claude going
[26:21] know and using this and so that can be a big distinction in the future too.
[26:25] Yeah, I mean, so what you're referencing is known as like covaled doctrine and so basically,
[26:32] this is a 1961 case that it pregates the up-john case where basically there was an account
[26:39] in who had worked at a law firm for 20 years. One of the clients of the law firm was investigated
[26:45] the IRS and IRS subpoenaed,
[26:49] covalve the law firms account,
[26:51] I'm saying that his work within the law firm was not for them.
[26:54] And the second circuit found that it was,
[26:56] because basically lawyers can't do their job alone.
[26:59] They may need tools or people to help them their job,
[27:02] whether that's an interpreter,
[27:04] if you're client speak Spanish and you only speak English,
[27:06] or an accountant who can translate the tax matters to you.
[27:09] Similarly, this has been held to include other types of tools
[27:12] that lawyers use to get their job done.
[27:15] And so Rakeoff left the door open to this where if his lawyers' equipment had directed
[27:20] happiness to use, then maybe Claude was an agent of the lawyer and functioned as the lawyers
[27:26] agent and within the protection of attorney client privilege and the documents created at the
[27:31] direction of violence, all would have been attorney client work product and then you would have been
[27:34] in a different scenario. But that isn't what happened and it's also not what most people do,
[27:39] right? Like that means you're working with your lawyers to go figure out the right approach.
[27:43] When we're talking about and we're a lot of these problems lies that people are just doing this on their own with consumer chat bots
[27:49] Not involving their lawyers and that is very much discoverable produce of all not covered by
[27:55] That's why when we talked earlier about the three elements that you need to establish a turning client privilege
[27:59] It's important that all three need to be present right even if the attorney just said okay, you can use cloud
[28:04] If there's no expectation of privacy or confidentiality there and there's not a communication involving lawyer that still is not going to be protected
[28:12] it and it's still going to be discoverable in court.
[28:14] It's such a good point.
[28:15] I mean, it's like the how it has.
[28:16] You need all four elements.
[28:18] You need all three elements or it's not privilege it.
[28:21] Anyone of them is well, you're well, I'm right.
[28:24] I think in your, I can't remember exactly if you had this in your thread, but I believe
[28:28] it was something about in cognito mode or deleting chats, right?
[28:31] And a lot of people think, okay, well, I deleted the chat.
[28:33] It doesn't exist anymore.
[28:34] Obviously, that's not always the case.
[28:36] There can actually be a danger to you when it comes to the duty to preserve and
[28:39] population like your deleting evidence. If you do know that there is going to be some litigation
[28:44] happening. So there's some dangers with deleting chats. Walk me through with some of those.
[28:47] Thanks for raising that actually because it was one of the most common responses I got to the article
[28:52] was it was basically like LOL. I'll just not income needo by lawyer and forever and that is wrong.
[28:59] Inconneedo mode does not change. It doesn't solve the problem and in a way creates a few new problems.
[29:06] So first of all, the terms of service don't change,
[29:08] even with the incognito modes.
[29:10] We have found that, yes, like,
[29:13] maybe it's less predictable, maybe they get rid of it,
[29:16] but it's not entirely clear what these platforms
[29:19] are doing with incognito mode chats.
[29:20] And, or what they're doing with deleted chats.
[29:22] And in the New York Times, open an IK,
[29:24] it's about like the copyright issues,
[29:27] the court demanded that open an IK
[29:29] of all deleted chat logs,
[29:30] as part of like the discovery and evidentiary process.
[29:34] And it turned out that they had certain deleted chats that they could save and produce for this lawsuit.
[29:40] So it's not entirely clear that you would be protected and that the platforms won't be able to produce it.
[29:46] Secondly, unless you have a photographic memory, what did you produce in an incognito?
[29:51] Did you print it? Did you email it? Did you print in a Slack?
[29:54] Did you screenshot it? You presumably did something with being cognito advice.
[29:59] And then...
[30:00] that record and those documents still exist, they are not privileged and they would be
[30:05] for no one. And then to your point about the duty to preserve, once you're in the
[30:09] ambit of where a litigation is reasonably anticipated, you're legally obligated to preserve relevant
[30:15] evidence. You'll know about this if you work at a company and you receive a litigation hold
[30:19] about documents and communications where you are obligated not to delete them. If you fail to
[30:26] implement a litigation hold when you two ad courts have found that that's gross negligence.
[30:30] It can lead to adverse inference in an lawsuit where Dury's are instructed that, you destroy
[30:36] evidence, there could be monetary penalties, there could be default judgments in certain extreme
[30:40] cases. So if you get rid of your communications, whether that's deleting signal or chat messages,
[30:46] or telegram messages, or whether you're deleting your AI chat logs, that's that's going to be a
[30:51] problem for you. So number one, it doesn't solve the privilege issue. And number two, you're then
[30:55] opening up the door to other problems if you're trying to delete.
[30:59] There was a really good article about the happiness and
[31:01] case and sort of the policy implications of this that I wanted to just touch on with you
[31:05] quickly because I think, you know, one thing that Judge Rackoff looks like looks at is is
[31:10] Claude and attorney. But as we said in the coval case, Claude doesn't need to be at an attorney
[31:16] Claude can be a tool that an attorney is using and then the confidentiality aspect, you can do
[31:21] things to preserve more privacy within your communications with these LLMs.
[31:25] And then the third factor, you could be using it to communicate with your lawyer, but so in the future,
[31:29] if we have lawyers who say every time that they engage with a client as part of the retainer is like,
[31:34] you can use cloud to improve your ability to communicate with me. And maybe here's a prompt that you can
[31:39] inject in there. Where do you stand on that mic? How do you see this evolving in the future? Because
[31:44] we all use Gmail, we all use Google Docs, like we all use Microsoft for. There's a lot of tools that we use
[31:50] today that could be subject to disclosure. There's a lot of things in there that don't sort of meet
[31:55] those three elements of attorney client privilege yet this remains so.
[31:58] I read that Harvard Law Review critique and I think that it's interesting because,
[32:06] yeah, if you're using Google Docs to create a memo for your lawyers at their direction,
[32:12] then that's probably privilege in a variety of ways as like an agent of the lawyer at the
[32:16] direction of the lawyer expectation of confidentiality all those things. That said, if you type into
[32:22] Google search, this is a little darker, but this story just came out.
[32:28] Like the Gilgogi serial killer who just fled guilty in Long Island.
[32:32] Like he had typed into Google, like, why can the police not trace the long Island serial
[32:38] killer's calls and like he'd had a bunch of self-incriminating Google searches that were
[32:42] part that were not privileged and that were part of the record against him.
[32:45] So, you know, this technology or these technology issues have been around for a while now
[32:49] with the internet. I think that you're going to see courts across the country come out in a different
[32:55] in different ways on some of these questions. I think a true case where you're just
[33:00] vibe-loaring, not working with a lawyer, no expectation of privacy, there's no attorney involved.
[33:05] It's not confidential. Yes, you're seeking legal advice, but you're seeking it from
[33:09] clogged, which is not a lawyer. I don't think that that's going to be privileged based on
[33:14] the way that privilege works. But if it's different, if it is like, as you said, if you have a relationship with your law firm and the law firm gives you guidance on how to use the tool and it's in connection with your legal advice and your legal relationship and under the direction of counsel, I do think there's going to be a lot of ways where you can leverage the AI tools within the ambit of attorney client privilege. And by the way, I use AI tools all the time for my clients. I want them to benefit from the cost efficiencies and the effectiveness and the advances that that all of these
[33:44] tools have, I operate within the, you know, the bounds of my law firms AI policy, which is designed in order to protect attorney crime privilege and protect confidentiality and protect data security and all these things.
[33:56] So I think that's where we're going to go more likely.
[34:00] Yeah, it's interesting because when you look at Google Slack, Apple, they all have similar privacy policies that permit disclosure and connection with litigation.
[34:08] So there's a whole host of things that have been in existence for a long time.
[34:14] We're seeing it in a new medium with AI.
[34:17] And this is a case of first impression.
[34:18] There's going to be a lot more as you've said that come out in the future.
[34:22] And so where courts tend to go on that will be interesting.
[34:25] Do you expect the whole change the way they look at it?
[34:29] I mean, to me, one part I found interesting in this case, like,
[34:32] okay, even if the lawyer said, yeah, you can use Claude to do that.
[34:37] there shouldn't be an expectation of privacy.
[34:38] And that's probably where the courts will just get more granular
[34:41] in terms of what they're looking at
[34:43] and are requiring from the evidence
[34:45] over whether or not you click the off that privacy setting
[34:49] and you didn't want them to train based on the data you're uploading.
[34:52] And that's where people will have to get more mindful.
[34:54] But from a policy perspective,
[34:56] I mean, it does seem a bit dangerous
[34:58] that people are unintentionally disclosing
[35:01] what they assume to be private information
[35:03] that might have stayed private.
[35:05] had they not access to tool that is helping them,
[35:08] prepare for a lawsuit, is helping them
[35:12] to communicate more with a lawyer?
[35:14] I do find a bit of an issue with that.
[35:17] But I guess the positive is that there has to be a line
[35:20] in the sand in this sort of maintains that line.
[35:23] I think it's a fair point.
[35:25] And it's a supercharged version of the way
[35:30] to technology has historically made doing these kinds of things
[35:33] a lot easier.
[35:33] like using Google, using email, using Twitter, any of these sites
[35:38] like in a way that makes it easier to inadvertently create a record
[35:43] or a trail or data around who you are, what you're interested in,
[35:46] what you're doing, what may be involved in a lawsuit
[35:49] or a criminal investigation or a regulatory investigation.
[35:53] But I think here, it's super charged to your point.
[35:57] It really is a tool that looks and feels and smells like a lawyer.
[36:02] and people are operating and acting as though it is.
[36:06] And listen, some of that you have to people
[36:08] have to, it's like buyer beware a little bit.
[36:11] Chape, it's self will tell you, I'm not aware,
[36:13] consult with your lawyer, but maybe some of these terms
[36:16] and some of these things whether it's medical advice,
[36:17] whether it's legal advice, whether it's tax advice,
[36:19] whether it's financial advice, to be there
[36:21] needs to be stronger warnings or more clear guardrails
[36:24] in some of the consumer products.
[36:26] But in terms of what underlies the privileged doctrine,
[36:31] a lot, and this really hasn't changed very much for 50, 80 years, even while the technology
[36:36] has changed dramatically. And the whole policy reason behind privilege, as we just sort
[36:40] of wrap things up and go back to where we started, the whole policy reason is so that clients
[36:45] have someone that they can get full and frank disclosure to, so that someone can vigorously
[36:50] defend them. Someone knows all the facts, and they're not worried about those facts being presented
[36:55] to the other party. Sort of the policy position. Now, ABD answer is to have better safeguards
[37:00] in AI chat bots that say, hey, you know, you might want to stop this, you might want to talk to
[37:04] lawyer at this point. There was an interesting article in the Atlantic a few weeks ago,
[37:09] I think there's an authority about, are you, are you, are you a coal or are you a horse? And the idea
[37:14] being when steam engines, I've got more efficient demand for coal went up, not down. So it's sort of,
[37:20] it's the Japanese power. And so you actually needed more coal in order to to feed what was a result of
[37:27] like making things more efficient in the first place with steam engines.
[37:30] Whereas horses, on the other hand, they didn't make things more efficient for tractors or cars,
[37:36] they just got replaced.
[37:37] So are you the coal where you create more demand for what you actually need or are you the horse?
[37:43] And I would say, lawyers who use AI the right way.
[37:46] Figure out how to use these tools, protect it, turn your client privilege, but also get more efficient,
[37:50] more valuable, more useful.
[37:53] I think you're going to give clients more value.
[37:56] I think you're going to solve more problems.
[37:57] I think your work is going to be better.
[37:59] And I think demand could go up in the right way.
[38:01] Whereas lawyers who don't use AI properly, or at all,
[38:04] which are some, they're the horses.
[38:06] And then I guess the people who just use consumer chat bots
[38:10] are without properly go guidance or to continue to mix animal
[38:14] metaphor maybe like lands to the slaughter.
[38:16] But really like my hope is that we in the legal practice,
[38:20] we're going to get better, smarter, more valuable to clients.
[38:23] And there's a reason why lawyers are trained
[38:25] and how that's produced and do all these things,
[38:27] they can help you and protect your ways
[38:29] that even using a very smart AI,
[38:32] can't necessarily, because it's what you put in,
[38:34] you get out.
[38:35] And that's where to the one thing that I think lawyers
[38:38] will always do better than AI is,
[38:41] and not all lawyers, of course,
[38:43] some are horses, like you said, some are cool,
[38:45] but it's get a better understanding of the facts,
[38:47] and understand what's happening when it comes
[38:49] to the client situation.
[38:50] A client could look up on an element,
[38:52] what the laws might be.
[38:54] And maybe it's sites, a law of the article that isn't correct, and maybe didn't site the statuary
[38:59] creditor, maybe cited a case that wasn't was overturned at some point.
[39:02] And you can't just go after the LLM in that case. They've disclamed that attorney
[39:06] clotting for like, you can go after the lawyer. There is there is a duty that lawyers have to
[39:10] their client, and that is a benefit to the clients, right? Just as much as you're sure
[39:13] and it's a benefit to the lawyers, but there's an important duty there that fiduciary duty that
[39:18] these LLMs don't have. I totally agree. I think we're going to see cases that
[39:24] expand how privileges understood even within the up-John and co-vile
[39:29] doctrines that have existed for many decades now.
[39:32] And we're going to get some interesting decisions.
[39:34] I'll make sure you close.
[39:34] But I think by and large, it's going to fit within this construct
[39:38] that we've spent today discussing.
[39:40] And then the question becomes, OK, so how do you use AI in the right way?
[39:44] Because it is a powerful tool.
[39:45] And it is important.
[39:46] And lawyers should be using it.
[39:48] They should be using it the right way for you, for your benefit,
[39:50] to provide better work and better value to different.
[39:53] And I think that's the direction.
[39:55] Yeah, I completely agree.
[39:56] And it would give you rewind to say 1995 the early...
[40:00] there were lawyers who weren't using the internet at that time, right?
[40:03] They didn't trust it.
[40:04] They went to the library still.
[40:05] They took hours, sometimes days to find a certain case.
[40:08] Those two days were reduced to two minutes.
[40:09] And now with AI, it seems that two minutes has been reduced to two seconds.
[40:13] And so there's a lot of efficiencies that are happening that are beneficial to everyone.
[40:17] So long as people are using the technology correctly.
[40:19] And I think having conversations like this and explaining to people like you did with your
[40:23] thread, which did so well, is important because a lot of people don't realize what's at stake.
[40:28] Exactly.
[40:29] flying and things are moving very quickly, but it's so early.
[40:32] And I think it's just important for everyone to be aware of the state of play and how
[40:37] these things work and how they should be thinking about it and how to be smart about running
[40:42] your business, building your business, investing in businesses, all of that.
[40:45] A.I. is kind of like Pandora's Box, but the government, the opposition and the civil
[40:51] suit they can find out what's in the box.
[40:53] Mike, thanks so much for joining me.
[40:54] And that was a great discussion.
[40:56] My pleasure.
[40:57] Thanks for having me.
[40:58] really enjoy the conversation. Now, I'm obsessed with making this podcast the number one legal
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[41:08] you can give me some feedback on X at Jacob Robinson, JD. It would really mean a lot to me. My goal
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[41:32] Thanks again for joining me.
[41:33] We'll see you next time.