If the AI is a third party, the privilege analysis changes fast.
The Case: United States v. Heppner
In February 2026, Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York ruled that a criminal defendant’s interactions with the AI platform Claude were not protected by attorney-client privilege or the work-product doctrine.
What happened: Bradley Heppner, a financial services executive charged with securities fraud, used Claude to research legal questions after receiving a grand jury subpoena. He fed information he had learned from his defense counsel into the AI tool, generated 31 documents of prompts and responses, and later transmitted those documents to his lawyers. When the FBI seized the documents, his attorneys asserted privilege. The government moved to compel production. The court sided with the government.
Why the privilege failed:
- Claude is not an attorney. Communications between two non-lawyers about legal issues are not privileged.
- The communications were not confidential. The platform’s privacy policy explicitly stated that user inputs and outputs could be used to train Claude’s AI model and shared with third parties. Disclosure to a third-party AI platform is functionally the same as sharing the information with any other third party—privilege is lost.
- Heppner acted on his own initiative. His defense counsel did not direct him to use the tool. The court noted that even if Heppner later shared the AI outputs with counsel, that does not retroactively create privilege.
The Key Principle: Third-Party Disclosure Kills Privilege
Privilege requires confidentiality. If you voluntarily disclose information to a third party (including a consumer AI platform), you waive privilege—unless that third party is an agent of your attorney, operating under a confidentiality agreement, and acting on your lawyer’s behalf.
In Heppner, Claude was none of those things. The platform’s terms said inputs were not confidential. Heppner used the tool on his own, not at his lawyer’s direction. The privilege elements were missing.
The Broader Lesson
This is not just a criminal defense problem. The same logic applies to:
- Contract negotiations: “Can I share our negotiation strategy with a chatbot to draft a counteroffer?”
- Regulatory inquiries: “Can I ask an AI to help me draft a response to a regulatory notice?”
- Internal investigations: “Can I use AI to summarize witness interview notes?”
If the AI platform is a third party, and its terms say user inputs are not confidential, then privilege is at risk. If you share sensitive facts, legal strategy, or privileged communications into that tool, you may be disclosing those facts to a third party—and privilege does not cover voluntary third-party disclosure.
What Boards Should Ask
- What AI platforms are our executives and legal teams using? Are they consumer tools or enterprise tools with confidentiality protections?
- Do our AI platform contracts protect confidentiality? Do the terms say user inputs are private, not used for training, and not shared with third parties?
- Do we have a policy on AI and privilege? Does it say: no privileged facts, no client names, no litigation strategy into consumer tools unless approved?
- Are we treating AI prompts like sensitive business records? If an AI prompt contains strategy, risk assessments, or legal analysis, it may be discoverable in litigation or investigations.
Are your teams treating AI prompts like sensitive business records? I deliver board-level courses and consult on AI governance, legal risk, and privilege issues. Contact me.
Relevant Sources
- United States v. Heppner, No. 1:25-cr-00503-JSR, Order (S.D.N.Y. Feb. 17, 2026) — U.S. District Court, Southern District of New York — https://jlellis.net/wp-content/uploads/2026/02/USA-v-Heppner-Order-2026-02-17-AI-Not-Privileged.pdf
- The Intersection of AI and Attorney-Client Privilege—A Cautionary Tale — Ogletree Deakins — https://ogletree.com/insights-resources/blog-posts/the-intersection-of-ai-and-attorney-client-privilege-a-cautionary-tale/
- Your AI Conversations Are Not Privileged: What a New SDNY Ruling Means for Every Lawyer and Client — Jones Walker LLP — https://www.joneswalker.com/en/insights/blogs/ai-law-blog/your-ai-conversations-are-not-privileged-what-a-new-sdny-ruling-means-for-every.html
- AI, Privilege, and the Heppner Ruling: What the Court Actually Held—And How to Structure AI Use Safely — Venable LLP — https://www.venable.com/insights/publications/2026/02/ai-privilege-and-the-heppner-ruling-what-the-court
- Use of Generative AI in the Law: Lessons from Two Federal Cases — American Bar Association — https://www.americanbar.org/groups/litigation/resources/newsletters/privacy-data-security/generative-ai-in-the-law/