USA v. Heppner: How AI Use Can Destroy Legal Privilege

Managing Director Chris Spillman analyses the recent US decision in USA v. Heppner and what it means for technology companies and executives using generative AI. 

A recent U.S. federal court decision has sent a clear message to executives and founders experimenting with generative AI: if you handle legal work yourself, you may be giving up attorney-client privilege without realising it.

In USA v. Heppner, a judge ruled that documents an executive prepared using AI were not protected by the attorney-client privilege. Even more concerning, the executive’s act of entering his lawyer’s advice into an AI chat tool was treated as sharing that advice with a third party: effectively destroying privilege over it.

The ruling is likely to be scrutinised and potentially appealed. But regardless of where it ultimately lands, it highlights a critical point for modern businesses: the protections that matter most only exist when you’re actually working with counsel.

Here’s what happened, and what it means for you.

We’ll cover:

• The case: USA v. Heppner
• What this means for your business
• When privilege actually protects you
• Why this case is about more than privilege
• Practical guidance

The Case: USA v. Heppner

In a $150 million fraud case against Beneficient CEO Bradley Heppner, Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York ruled that materials Heppner created using generative AI were not covered by attorney-client privilege.

This was the case even though:

• Heppner based the materials on advice from his attorneys; and
• He later sent the AI-generated output to his lawyers.

Why weren’t the documents privileged?

According to the government’s brief (accepted by the court):

• Heppner used Claude to prepare the documents himself.
• The preparation was done without his lawyers’ knowledge or direction.
• By entering his attorneys’ advice into Claude, he shared that advice with a third party, destroying privilege in the process.

The court also found the materials “do not reflect the legal strategy” of Heppner’s defence team. Judge Rakoff was blunt on the matter: “I’m not seeing remotely any basis for any claim of attorney-client privilege.”

What This Means for Your Business

This case isn’t really about one executive. It’s about how businesses are now using AI tools to draft, analyse and problem-solve, including on legal and compliance issues.

When you handle legal or regulatory work yourself, even with sophisticated AI tools, you can lose critical protections.

No Privilege Protection

• Materials you create without counsel aren’t privileged.
• If litigation arises, those materials can be discoverable.
• Your thought process, strategy and concerns may become visible to opponents, even if they relate to the litigation itself and are later shared with your lawyers.
• Sending materials to lawyers after the fact does not retroactively create privilege.

The “Work Product” Problem

The court also rejected arguments that the AI-generated documents were protected as “work product”. Why?

• Heppner prepared them independently.
• They weren’t created at counsel’s direction.
• They didn’t reflect attorney strategy or mental impressions.

Work product protection is strongest when documents are created in anticipation of litigation and under a lawyer’s supervision. Put simply: DIY drafts don’t carry the same weight.

AI Makes It More Complex

Generative AI adds another layer of risk:

• You may be generating more discoverable material than you realise.
• AI drafts, and your prompts, can reveal strategic thinking.
• Those materials may become evidence if disputes arise.
• Courts are now explicitly saying: DIY AI work does not equal privilege.

In short, powerful tools don’t come with legal protection attached.

The Attorney Advantage: When Privilege Actually Protects You

Now compare that to working directly with counsel from the outset.

Communications Protected from the Start

• Emails, calls and meetings with counsel are privileged.
• Documents created at counsel’s direction are privileged work product.
• Strategic discussions remain confidential.
• Analysis and recommendations stay protected.

Stronger Work Product Protection

• A lawyer’s analysis and mental impressions receive heightened protection.
• Documents prepared in anticipation of litigation are treated differently by courts.
• If litigation arises, your legal strategy is far less likely to be exposed.

Strategic Use of Technology

Using AI isn’t the issue here: using it outside a protected legal framework is.

When counsel uses AI tools in providing legal advice, that work remains within the attorney-client relationship. Lawyers understand how to structure communications and workflows to preserve privilege, and when to avoid certain tools altogether.

The protection attaches to the relationship, not the software.

Why this case is about more than privilege

Privilege is critical. But it’s only one reason to involve lawyers early.

• Expertise and Experience: Lawyers have handled similar situations hundreds of times. We know the pitfalls, shortcuts and best practices. Legal expertise doesn’t just reduce risk: it often leads to faster, more commercially sensible outcomes.
• Mistake prevention: Legal errors can be expensive. Sometimes catastrophically so. Fixing problems after they arise costs far more than preventing them. And some mistakes simply can’t be undone.
• Peace of Mind: You can focus on running your business while we manage the legal risk. When issues become complex (and they always do), you have experienced guidance in your corner.
• Efficiency: Despite the perceived cost, experienced counsel often saves time and money. We know how to navigate regulatory frameworks, negotiate effectively and avoid dead ends that DIY approaches stumble into.

Attorney-client privilege exists to encourage open, candid communication between clients and their lawyers. But it only works if you actually involve counsel.

The Heppner decision underscores a fundamental principle: if you try to handle legal matters yourself, even with cutting-edge AI, you risk losing the protections designed to protect you.

In the AI era, the value of experienced counsel hasn’t diminished. In fact? As this case demonstrates, it has increased. Technology is powerful. But it is most powerful when used inside the right legal framework.

Practical Guidance

Before tackling legal or compliance work yourself:

• Call us first. A short conversation can clarify whether formal legal involvement is needed.
• Preserve privilege. If legal advice may be required, involve counsel from the outset.
• Communicate strategically. We’ll guide you on how to structure communications to maintain protection.
• Think long-term. Consider not just immediate costs, but future exposure.

If you’ve already created materials independently:

• Don’t assume they’re protected.
• Seek advice on your specific situation.
• Develop a strategy now to reduce future risk.

Work With Counsel, Not Around It

At Biztech Lawyers, we work with founders, executives and technology businesses operating at the edge of innovation. We understand how AI tools are being used in real business environments, and how courts are beginning to respond.

If you’re unsure whether your current approach adequately protects you, or how AI fits into your legal and compliance processes, we should talk. A brief conversation today can prevent significant exposure tomorrow.