Washington Supreme Court Extends Corporate Privilege to Non-Employee Agents

The Washington Supreme Court decided that a corporation's attorney-client privilege may protect communications with independent contractors and other non-employee agents in a recent decision styled Hermanson v. MultiCare Health System, Inc. The Court held that a hospital's corporate privilege covered a treating physician and other healthcare providers who served as the "functional equivalent" of employees, reversing a contrary opinion from Division II of the Court of Appeals (discussed in this advisory).

Hermanson Background

Plaintiff Doug Hermanson alleged that healthcare providers at MultiCare's Tacoma General Hospital improperly disclosed his blood-alcohol level to law enforcement officers, while treating him for injuries from a car accident. In the ensuing litigation, Hermanson argued that communications between MultiCare's attorneys and the treating physician were not protected by the attorney-client privilege because the physician worked at MultiCare's hospital as an independent contractor.

The trial court and Division II of the Court of Appeals held that MultiCare could not have ex parte, privileged communications with the physician because of the physician-patient privilege. That privilege ordinarily prevents defense counsel from engaging in ex parte communications with a plaintiff's treating physician, in light of the relationship of trust and confidence between physician and patient and the importance of open communication between them.¹ However, in Youngs v. Peacehealth, the Washington Supreme Court previously held that where the physician-patient privilege "conflicts with a defendant's corporate attorney-client privilege… it must yield to that privilege."² 

Because the treating physician was not an employee, the trial court and Division II concluded that the Youngs exception to the physician-patient privilege did not apply, and the courts declined to extend MultiCare's corporate privilege to the treating physician.³ 

The Washington Supreme Court's Decision

The Supreme Court reversed, holding that MultiCare's corporate privilege covers nonparty healthcare providers who are the hospital's agents. The physician "still maintains a principal-agent relationship with MultiCare" despite being an independent contractor instead of an employee. The physician follows MultiCare policies and procedures and "'owes duties of loyalty, obedience, and confidentiality' to MultiCare regardless of his status as an independent contractor."⁴ MultiCare controls the physician's conduct as its agent, entitling it to communicate with him regarding the alleged negligent event.

The Court explained that this determination was "in line with persuasive authorities from the federal Eighth and Ninth Circuit Courts of Appeals,"⁵ which hold that non-employees may be the "functional equivalent" of employees where they consistently perform work like employees, with the company supervising their activities. Consistent with the law in these other jurisdictions, the corporate attorney-client privilege covers functionally equivalent workers, even when that privilege is in tension with the physician-patient privilege.

Takeaways from the Hermanson Decision

Although Hermanson pertains to the specific privileges that arise in the healthcare industry, its holding is significant for all corporations who rely on independent contractors and other non-employee agents. The Washington Supreme Court's decision acknowledges that the principles supporting the corporate privilege also apply with respect to workers who are not employees, but who may be a company's agents anyway. While the Court did not explicitly adopt the functional-equivalent doctrine, it relied on persuasive authority from other jurisdictions using that doctrine and embraced its rationale.

After Hermanson, corporate counsel in all industries will have a stronger argument that communications with independent contractors and non-employee agents fall within the umbrella of the corporate attorney-client privilege, where those workers remain the corporation's agents and act as the functional equivalent of employees.

FOOTNOTES

1  Loudon v. Mhyre, 110 Wash. 2d 675, 679 (1988) ("The mere threat that a physician might engage in private interviews with defense counsel would, for some, have a chilling effect on the physician-patient relationship and hinder further treatment.").
2  179 Wn. 2d 645, 671 (2014).
3  The courts permitted ex parte contact with nurses and a social worker under applicable privileges for their professions.
4  Quoting Newman v. Highland Sch. Dist. No. 203, 186 Wn.2d 769, 780 (2016).
5  Citing In re Bieter Co., 16 F.3d 929, 938 (8th Cir. 1994) and United States v. Graf, 610 F.3d 1148, 1159 (9th Cir. 2010).