Satisfying the “Attorney” Requirement of the Attorney Client Privilege of the Attorney-Client Privilege General Rule: If an in-house counsel is acting in her capacity as an attorney, the attorney-client privilege applies. Where, however, counsel is acting as a business advisor or has only limited involvement , the privilege does not apply. "[T]he privilege is limited to confidential communications with an attorney acting in his professional legal capacity for the express purpose of securing legal advice As his professional legal capacity for the express purpose of securing legal advice. As a general rule, an attorney who serves a client in a business capacity may not assert the attorney-client privilege because of the lack of a confidential relationship. Thus, ordinary business advice is not protected." Teltron, Inc. v. Alexander, 132 F.R.D. 394 (E.D. Pa. 1990). See also N.C. Elec. Membership Corp. v. Carolina Power & Light Co ., 110 F.R.D. 511, 514 (M.D.N.C. 1986). 20
Satisfying the “Attorney” Requirement of the Attorney Client Privilege of the Attorney-Client Privilege Does not depend on whether the in-house lawyer’s license is “active”. per Judge Shira Scheindlin of the Southern District of New York in Gucci/Guess litigation (although the lawyer was apparently fired by Gucci at about that time) see Good News for In-House Counsel: Privilege Prevails in Showdown at Gucci Gulch , f g “http://abovethelaw.com/2011/01/good-news-for-in-house-counsel-privilege-prevails-in-showdown” 21
There is no Silver Bullet No single factor is No single factor is dispositive in every case case. See N.C. Elec. Membership Corp. v. Carolina Power & Light Co ., 110 F.R.D. 511, 516 (M.D.N.C. 1986) 22
Examples of Potentially “Non-Legal” Functions Performed by In-House Counsel Functions Performed by In House Counsel – Conducting investigations Conducting investigations – Fact-gathering regarding issues that may later be the subject of litigation j g – Regulatory compliance issues – Matters concerning the functioning of the entity Matters concerning the functioning of the entity See e.g. Giffin v. Smith , 688 S.W.2d 112 (Tex. 1985) (General counsel's communications found not to be privileged despite his role in corporate investigation because there found not to be privileged despite his role in corporate investigation because there was no evidence that the communication was confidential). 23
Dual Capacities In-house counsel routinely handle mixed business and legal functions, sometimes with dual titles such as – Corporate Secretary – Vice President – Board Member Board Member These are sometimes perceived to be capacities separate from their legal functions Apparently, an even higher standard is sometimes applied where such is the case: “[I]n a situation where the author or recipient of allegedly privileged “[I] i i h h h i i f ll dl i il d documents functions as a corporate manager as well as an attorney, efforts must include clear designation of those communications sent or received in his capacity as a legal advisor ” or received in his capacity as a legal advisor. Hardy v. New York News, Inc., 114 F.R.D. 633, 644 (S.D.N.Y. 1987) 24
How Does an In-House Attorney Meet this Burden? Meet this Burden? Court's finding in Hardy g y “Although some of the documents [were] addressed to Although some of the documents [were] addressed to [in-house counsel], there was nothing to indicate that [he] requested or received any of the documents at [he] requested or received any of the documents at issue, or the information contained in them, in the capacity of a legal advisor and solely for the purpose capacity of a legal advisor and solely for the purpose of rendering advice to the corporation.” H Hardy v. New York News, Inc., 114 F.R.D. 633, 644 (S.D.N.Y. 1987). d N Y k N I 114 F R D 633 644 (S D N Y 1987) 25
Applicable Test pp The client’s communication must be for the primary or dominant purpose of soliciting legal, rather than business, advice. See N.C. Elec. Membership Corp. v. Carolina Power & Light Co ., 110 F.R.D. 511, 514 (M.D.N.C. 1986); Teltron, Inc. v. Alexander, 132 F.R.D. 394, 396 (E.D. Pa. 1990) ("[must be able to] clearly demonstrate that the advice to be protected was given in a professional legal capacity."); U.S Postal Serv. V. Phelps Dodge Ref. Corp., 852 F. Supp. 156 (E.D.N.Y. 1994). 26
Factors to be Considered • Is the subject “ordinary business activities”? • Is the subject ordinary business activities ? Whether the subject matter of the document is primarily business-oriented, such as documents discussing cost information technical data contract negotiations delivery information, technical data, contract negotiations, delivery problems or lobbying efforts. See Coleman v. Am. Broad. Cos ., 106 F.R.D. 201, 205 (D.C. Cir. 1985) (concluding that communications between an , , ( ) ( g attorney and another individual which relate to business, rather than legal matters, do not fall within the protection of the privilege.); N.C. Elec. Membership Corp. v. Carolina Power & Light Co ., 110 F.R.D. 511, 514 (M.D.N.C. 1986). Stated differently, would the document have been prepared whether or not the attorney was sent a copy ? U S P U.S Postal Serv. V. Phelps Dodge Ref. Corp., 852 F. Supp. 156, 163 (E.D.N.Y. 1994). l S V Ph l D d R f C 8 2 F S 1 6 163 (E D N Y 199 ) 27
Factors to be Considered • Do the documents specifically request legal • Do the documents specifically request legal advice or, if generated by counsel, reference the request for legal advice? q g See N.C. Elec. Membership Corp. v. Carolina Power & Light Co ., 110 F.R.D. 511, 516 (M.D.N.C. 1986) 28
Factors to be Considered Factors to be Considered • Was the communication confidential? Wh h Whether the document in h d i question is simply marked “Memorandum” with no Memorandum with no notation of confidentiality See N.C. Elec. Membership Corp. v. Carolina Power & Light Co ., 110 F.R.D. 511, 516 (M.D.N.C. 1986) 29
This is not just a question of labeling. Does the communication itself reveal any y confidential information? See N.C. Elec. Membership Corp. v. Carolina Power & Light Co ., 110 F.R.D. 511, 514 (M D N C 1986 (M.D.N.C. 1986 30
Can you overuse your “P i il “Privileged” stamp? d” t ? No case so finding, but perhaps. 31
Factors to be Considered Factors to be Considered Did the attorney have only “Limited Involvement” in the Matter? • Whether the document is addressed to a number of individuals, only one of whom is in-house counsel • “Copying the Lawyer” does not create a privileged document. An entity cannot shield its business transactions from discovery simply by funneling its communications through an attorney. See U.S Postal Serv. V. Phelps Dodge Ref. Corp., 852 F. Supp. 156 (E.D.N.Y. 1994); Teltron, Inc. v. Alexander 132 F.R.D. 394, 396 (E.D. Pa. 1990); Hardy v. New York News, Inc., 114 F.R.D. 633 (S.D.N.Y. 1987) 32
"Limited Involvement" (Cont ) Limited Involvement (Cont.) • Whether the document is addressed to counsel vs. “cc” and whether Whether the document is addressed to counsel vs. cc and whether many others, outside of the legal function, were addressees • Wh th • Whether the document refers to her as “counsel” th d t f t h “ l” • Whether the documents were segregated from other, non-privileged g g , p g documents. • Whether the document was marked as “Privileged” and/or g “Confidential” See Hardy v. New York News, Inc., 114 F.R.D. 633,644 (S.D.N.Y. 1987); U.S Postal Serv. V. Phelps Dodge Ref. Corp., 852 F. Supp. 156 (E.D.N.Y. 1994) . 33
The In-House Privilege in the Context g of I Internal Investigations l I i i 34
Rule 1.13 of the ABA Model Rules of Professional Conduct of Professional Conduct (a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents… (f) In dealing with an organization’s directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization’s interests are adverse to those of the constituents with hom the lawyer is dealing. Comment 10: …Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged the lawyer for the organization and the individual may not be privileged . ABA Model Rules of Prof’l Conduct (1983) (emphasis added) 35
Case Study: Broadcom Option Backdating Investigation Backdating Investigation • Broadcom’s board hired lawyers to conduct an internal investigation regarding its alleged practice of backdating stock options Shortly thereafter civil suits were alleged practice of backdating stock options. Shortly thereafter, civil suits were filed against the company and several of its executives. • The lawyers conducted an interview of the CFO, but never disclosed to him that they represented only Broadcom and that whatever he told them could later be they represented only Broadcom and that whatever he told them could later be disclosed at Broadcom’s discretion. • The SEC and US Attorney’s Office then commenced an investigation of several Broadcom executives relating to the company’s option granting practices and Broadcom executives relating to the company s option granting practices and Broadcom agreed to allow interviews of its attorneys regarding the internal investigation, including information concerning the CFO’s interview. • • The CFO was indicted but claimed that the information from the meetings was The CFO was indicted, but claimed that the information from the meetings was privileged. The lawyers claimed that, at the beginning of the interview, they had provided the CFO with an Upjohn or Corporate Miranda warning, but the CFO denied receiving such a warning. 36
Case Study: Broadcom Option Backdating Investigation Backdating Investigation • The district court held that: “an oral warning, as opposed to a g pp written waiver of the clear conflict presented by [the law firm’s] representation of both Broadcom and [the CFO], is simply not sufficient to suspend or dissolve an existing p y p g attorney-client relationship and to waive the privilege.” • Ultimate outcome: – Ninth Circuit reversed based upon the CFO’s knowledge that the Ninth Circuit reversed based upon the CFO s knowledge that the investigation was to be turned over to the company’s auditors and probably the government. – The district court referred the law firm to the California State Bar for disciplinary action. See United States v. Ruehle , 583 F.3d 600 (9 th Cir. 2009); United States v. Nicholas , 606 F.Supp. 2d 1109 (C.D. Cal. 2009). United States v. Nicholas , 606 F.Supp. 2d 1109 (C.D. Cal. 2009). 37
The Proper Upjohn or Corporate Miranda Warning Miranda Warning • Disclosures (before the interview begins): – Th l The lawyer represents the company and not the individual personally. t th d t th i di id l ll – The interview is part of an investigation being conducted for the purpose of providing legal advice to the company. – The interview is protected by the attorney-client privilege that belongs solely to the company and not the individual. company and not the individual. – The privilege is subject to waiver at any time by the company without the individual’s consent or knowledge. – The substance of the interview is to be kept confidential, including as to other employees. – The individual may want to retain outside counsel to represent his interests. p • Make a written record of the disclosures – Additionally, Upjohn Waivers are sometimes utilized at the time of hiring or at the inception of an investigation. See also, Upjohn Warnings: Recommended Best Practices When Corporate Counsel Interacts with Corporate Employees , American Bar Association (http:meetings.abanet.org/webupload/commupload/CR301000/newsletterpubs/ ABAUpjohnTaskForceReport.pdf ) ) 38
The In House Privilege in the Context The In-House Privilege in the Context of “At Issue” Waivers relating to External Investigations & Corporate External Investigations & Corporate Litigation 39
Case Study: B of A’s Proxy Statement re: Merrill Lynch Acquisition re: Merrill Lynch Acquisition • Regarding investigations conducted by the SEC and the NY Attorney General’s office concerning possible misleading statements in B of A’s proxy statement which office concerning possible misleading statements in B of A s proxy statement which solicited approval for the acquisition of Merrill Lynch, B of A claimed that the the statements were not misleading and that the bank’s lawyers determined what to disclose, but was not willing to waive the A/C privilege so that the lawyers’ involvement could be investigated. g • B of A claimed that it had not put the subject matter of legal advice “at issue” because it had not asserted reliance of legal advice as a justification for any inadequate or wrongful disclosures; but rather, that the disclosures complied with all applicable g ; , p pp laws. • B of A claimed that a regulator cannot create a basis for waiver of the A/C privilege by compelling answers to questions that might provoke answers concerning y p g q g p g privileged communications. The holder of the privilege alone must affirmatively place the advice he received from his attorney “at issue” in the case. • B of A’s ultimate agreement to waive the privilege and settle with the SEC did not g p g resolve the question as to the NY AG’s investigation, which is ongoing. See Securities and Exchange Commission v. Bank of America Corp ., 653 F.Supp.2d 507, 508 (S.D.N.Y. 2009) 40
Case Study: B of A’s Proxy Statement re: Merrill Lynch Acquisition re: Merrill Lynch Acquisition Question: If B of A had not chosen to waive the privilege, would both investigations have been thwarted ld b th i ti ti h b th t d due to lack of evidence regarding reliance on l legal advice? l d i ? 41
The In-House Privilege in the Context of of Board Presentations 42
Case Study: Maxim Option Back Dating Case Maxim Option Back-Dating Case • Facts: A special committee formed by Maxim’s board of directors shared the report of its outside counsel’s special directors shared the report of its outside counsel s special investigation with the full board, which included individual board members who were under investigation for alleged wrongdoing, g g • Trial Court Decision – Maxim waived any claim to privilege regarding communications with d l l d h outside counsel because board members who were individual defendants were present at the meeting that the relationship between the individual defendant board members and the special committee was “adversarial in p nature,” and that the privilege did not therefore survive. d h h i il did h f i – The board presentations waived privilege not merely as to the report itself, but to all communications relating to the subject matter of the investigation investigation. Ryan v. Gifford , Civ. Action No. 2213-CC (Del. Ch. Nov. 30, 2007), [unpublished opinion] 43
Case Study: Maxim Option Back Dating Case Maxim Option Back-Dating Case • Subsequent Denial of Interlocutory Review q y – “The decision was the result only of the application of well-settled precedent to a set of particular and specific facts.... [T]he relevant factual circumstances here include the receipt of purportedly privileged information by the director defendants in their individual capacities information by the director defendants in their individual capacities from the Special Committee. The decision would not apply to a situation (unlike that presented in this case) in which board members are found to be acting in their fiduciary capacity, where their personal lawyers are not present, and where the board members do not use the lawyers are not present, and where the board members do not use the privileged information to exculpate themselves. Similarly, the decision would not affect the privileges of a Special Litigation Committee formed under Zapata, or any other kind of committee that (unlike the Special Committee here) has the power to take actions without the Special Committee here) has the power to take actions without approval of other board members . Ryan v. Gifford , 2008 Del. Ch. LEXIS 2 (Del. Ch. Jan. 2, 2008) 44
The In House Privilege in the Context The In-House Privilege in the Context of Asset Acquisitions 45
Who Owns the Attorney/Client Privilege After an Asset Acquisition? Privilege After an Asset Acquisition? • The answer apparently varies by jurisdiction pp y y j • New York: – The seller retains the privilege as to communications with its counsel concerning the transaction and as to assets/liabilities not included in the sale. – The buyer acquires the privilege as to pre-closing issues – The buyer acquires the privilege as to pre-closing issues pertaining to post-closing operations See Tekni-Plex, Inc. v. Meyner & Landis, 674 N.E.2d 663 (N.Y. 1996); Postorivo v. AG Paintball Holdings, Inc., Del. Ch., C.A. No. 2991, VC Parsons (2/7/08) (applying New York law) 46
Who Owns the Attorney/Client Privilege After an Asset Acquisition? Privilege After an Asset Acquisition? • Illinois: – The buyer generally acquires the privilege as a whole, in l din including assets/liabilities not included in the sale t /li biliti n t in l d d in th l See American Int’l Specialty Lines Ins. Co. v. NWI-I, Inc., 240 F.R.D. 401 (N.D. Ill 2007) 47
The Impact of Business Globalization on the In-House Privilege 48
Akzo Nobel Case: No Privilege for In House Counsel Communications No Privilege for In-House Counsel Communications On September 14, 2010, the European Court of Justice issued its O S b 14 2010 h E C f J i i d i final opinion excluding communications between in-house counsel and the entity’s employees from the protection of the y p y p European Union’s counterpart to the attorney-client privilege (“the legal professional privilege”). 49
From Akzo Nobel Opinion: “An in house lawyer despite his enrolment with a Bar or Law An in-house lawyer, despite his enrolment with a Bar or Law Society and the professional obligations to which he is, as a result, subject, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm from his employer as a lawyer working in an external law firm does in relation to his client. Consequently, an in-house lawyer is less able to deal effectively with any conflicts between his professional obligations and the aims of his client.” Also cited as a basis for the decision: The court’s concern over the fact that in-house counsel are “dual-purpose” lawyers in that they perform functions in addition to legal representation of the company. 50
Akzo Nobel Case: Possible Implications Possible Implications • Although in the context of an investigation into alleged anti- competitive activities, the language of the opinion seems to indicate broader application by the ECJ to a broader context. b d li i b h ECJ b d • Communications with in-house counsel in the United States that • Communications with in-house counsel in the United States that would be clearly privileged must be scrutinized in any company operating in the EU or routinely conducting business there. Note : The Association of Corporate Counsel (“ACC”) intervened in the case and h f l ( ) d h d filed an amicus brief. 51
Akzo Nobel Case: Possible Implications Possible Implications Questions: Q – If part of an EU investigation (or perhaps any EU proceeding), will the origin of the communication determine whether a communication is privileged? Or the location of the proceeding? – May information seized by an EU investigation containing attorney- f d b client communications be shared with its U.S. counterparts? – Does information contained in digital form exist anywhere it can be accessed by computer? accessed by computer? – If a U.S. court determines that an entity had no expectation that the communication would be privileged because of its significant business in the EU, will that conceivably affect a domestic privilege determination? the EU, will that conceivably affect a domestic privilege determination? – If a U.S. court is asked to determine whether such communications are privileged that would otherwise not be privileged in the EU, what would be the outcome? 52
Pennsylvania Supreme Court Confirms that the Privilege Operates in a “two-way” fashion the Privilege Operates in a two-way fashion • Nationwide Mutual Ins. Co v. Fleming , 924 A.2d 1259 (Pa. Super. 2007): 2007): The attorney-client privilege applies only to communications from a client to the attorney and not from the attorney to the client. • Upon review of this case, the Supreme Court was unable to reach a majority on this issue in 2010. reach a majority on this issue in 2010. • Gillard v. AIG Insurance Company , 15 A.3d 44 (Feb. 23, 2011): “We hold that, in Pennsylvania, the attorney-client privilege operates in a two-way fashion to protect confidential client-to- attorney or attorney-to-client communications made for the y y purpose of obtaining or providing professional legal advice.” 53
Suggested Best Practices • Make strategic decisions regarding which types of documents to protect • Reconsider dual titles and perhaps dual functions, where possible • • Make a practice of specificall referencing the “req est for legal ad ice” or of the Make a practice of specifically referencing the request for legal advice or of the “legal advice” being provided • Address communications to counsel rather than using “cc” g • Label documents to be protected as “Attorney-Client Privileged” and “Confidential” • In addition to in-house counsel themselves, non-lawyers who interact with in- house lawyers must be educated on privilege parameters. 54
Suggested Best Practices (cont.) • Separate factual recitations and business considerations from actual legal advice as much as possible i e “here is what the law is” or “here is my legal advice” possible, i.e. here is what the law is or here is my legal advice • Create a new e-mail rather than hitting the “Reply” option as an initial e-mail may affect whether the Reply is privileged. See Vioxx Products Liability Litigation , 501 F.Supp.2d 789 (E D La 2007) (E.D. La. 2007) • Understand whether data/communications are being stored on a server in the European Union or other jurisdiction where privilege may not be recognized. • Create appropriate Upjohn/Corporate Miranda warning documents for investigation interviews. • Consider the information to be disclosed at board meetings and attendees. • Except where absolutely necessary, assume the privilege does not exist • Where absolutely critical to protect privilege, involve outside counsel 55
In-House Counsel and the Attorney-Client Privilege l l _____________________ CLE Program Materials Prepared by: Michael Hayes Montgomery, McCracken, Walker & Rhoads, LLP 123 South Broad Street Phil d l hi Philadelphia, PA 19109 PA 19109 (215) 772-7211 mhayes@mmwr.com Wednesday, August 31, 2011
Facts Versus Privileged Communications g • • The attorney-client privilege offers protection against the forced disclosure The attorney-client privilege offers protection against the forced disclosure of confidential communications between client and lawyer. • The privilege does not, however, extend to protect against disclosure of the The privilege does not, however, extend to protect against disclosure of the facts discussed in otherwise confidential attorney-client communications. 57
Facts Versus Privileged Communications A fact is one thing and a communication concerning that fact is an entirely different thing. The client cannot be compelled to answer the question, ‘What did you say or write to the attorney?’ but may not refuse to disclose any relevant fact i h ?’ b f di l l f within his knowledge merely because he incorporated a statement of such fact into his communication with the attorney. Upjohn v. United States , 449 U.S. 383, 395-96 (1981). Facts are discoverable, the legal conclusions regarding those facts are not. A , g g g litigant cannot shield from discovery the knowledge it possessed by claiming it has been communicated to a lawyer; nor can a litigant refuse to disclose facts simply because the information came from a lawyer. Rhone-Poulenc Rorer, Inc. v. Home Indem. Co. , 32 F.3d 851, 864 (3d Cir. 1994). 58
Documents and the Privilege • Documents which would not be privileged if they remained in the client’s hands do not acquire protection merely because they are transferred to a lawyer. See United States v. Robinson, 121 F.3d 971, 975 (5th Cir. 1997); Gould, Inc. v. Mitsui Min. & Smelting Co., Ltd. , 825 F.2d 676, 679-80 (2d Cir. 1987); see also Zelaya v. UNICO Service Co ., 682 F. Supp. 2d 28 (D.D.C. 2010); New York Marine & General Ins. Co. v. Tradeline (L.L.C.) , 186 F.R.D. 317 (S.D.N.Y. 1999); Smith v. Texaco, Inc., 186 F.R.D. 354 (E.D. Tex. 1999). • Nor does the mere fact that a document acknowledges the existence of an attorney- client communication imbue the document with privilege protection. See Burton v. R.J. Reynolds Tobacco Co. , 177 F.R.D. 491 (D. Kan. 1997) (ordering production of redacted portion of document concerning scientific studies conducted for defendant relating that a draft work statement was g g submitted to in-house counsel for legal input). • However, documents need not be authored by or addressed to an attorney in order to obtain attorney-client privileged status obtain attorney-client privileged status. See SEPTA v. Caremark PCS Health, L.P. , 254 F.R.D. 253, 258 (E.D. Pa. 2008) (“[T]he privilege may also extend to certain documents, that while not involving employees assisting counsel, still reflect confidential communications between client and counsel . . . .”). 59
Documents and the Privilege • In addition, non-attorney employees can share privileged documents with appropriate personnel in order to relay information requested by counsel or to properly inform the corporation of legal advice without waiving the privilege. See Smithkline Beecham Corp. v. Apotex Corp. , 232 F.R.D. 467, 477 (E.D. Pa. 2005). • Drafts or memorializations of the client’s confidential communications with counsel are protected by the attorney client privilege are protected by the attorney-client privilege. See WebXchange v. Dell, Inc. , 264 F.R.D. 123 (D. Del. 2010) (client’s notes memorializing privileged communications with counsel are protected by the privilege); see also Laethem Equip. Co. v. Deere & Co. , 261 F.R.D. 127, 142 (E.D. Mich. 2009) (“drafts of a [confidential] communication to an attorney are privileged.”); Adamowicz v. I.R.S. , 672 F. Supp. 2d 454 (S.D. N.Y. 2009). • Moreover, drafts of documents, including contracts, that are prepared by counsel or circulated to counsel for comments on legal issues may be privileged to the extent that they contain information or comments not included in the final version of the document document. See Andritz Sprout-Bauer, Inc. v. Beazer East, Inc. , 174 F.R.D. 609, 633 (M.D. Pa. 1997); see also Muller v. Walt Disney Prods. , 871 F. Supp. 678, 682 (S.D.N.Y. 1994) (“Preliminary drafts of contracts are generally protected by attorney/client privilege, since they may reflect not only client confidences, but also legal advice and opinions of attorneys.”). 60
What About Facts Compiled or Analyzed at the Request of Counsel? • Internally-generated corporate reports and analyses may be protected from disclosure depending on the nature of the documents and the circumstances surrounding their creation. See Holt v. KMI-Continental, Inc. , 95 F.3d 123 (2d Cir. 1996) (internal report reviewing employer’s potential exposure for Equal Pay Act violations was protected by the attorney-client privilege as it sought legal advice in connection with employment discrimination action). • • Factual information contained in internal reports commissioned by in house counsel Factual information contained in internal reports commissioned by in-house counsel generally are not protected by the attorney-client privilege (but may constitute work product assuming the primary motivation in creating the report was to aid in possible future litigation ). See Smith v. Texaco, Inc. , 186 F.R.D. 354, 357 (E.D. Tex. 1999) (rejecting claim of privilege in connection with data drawn from employee records recompiled in an internal report commissioned by in-house counsel subject to discovery). • • However interpretive material and analyses contained in such reports may constitute However, interpretive material and analyses contained in such reports may constitute confidential communications from client to counsel and therefore fall within the privilege. See id. (finding “interpretive material comprised of tables, lists, statistical analyses, and graphical representations” contained in report commissioned by in house counsel were covered by the attorney client privilege) contained in report commissioned by in-house counsel were covered by the attorney-client privilege). 61
Preparing for Deposition as In-House Counsel p g p • Assuming all efforts to oppose the taking of your deposition fail, your first step should be to retain outside counsel to help prepare you and represent p p p p y p you for purposes of the deposition. • Thorough preparation – with your outside counsel – is absolutely critical to protecting the privilege at your deposition. • Whether or not your deposition includes attendant requests for documents, you will need to identify and stake out the company’s position regarding all ill d t id tif d t k t th ’ iti di ll of your potentially privileged communications well ahead of the deposition. • • At the same time you must be mindful of your own ethical obligations At the same time, you must be mindful of your own ethical obligations. 62
Survey the Landscape – Get Comfortable in the Batters’ Box y • Consider (but don’t dwell on) the possible reasons why you are being deposed: – are you in unique possession of relevant facts or information? – is opposing counsel attempting to do make an end-run around adverse discovery rulings on privilege or other issues? – worse yet is the deposition a harassment tactic? worse yet, is the deposition a harassment tactic? • Understand the specific subject matter and/or other limitations on your deposition: – is there an order limiting the type(s) of information that counsel for the opposing party is permitted to question you on? – have the parties otherwise agreed to limit the scope of your deposition to one or more topics? more topics? – how have the courts in the relevant jurisdiction dealt with issues surrounding the taking of discovery from opposing and/or in-house counsel? 63
Know the Rules and Understand the Potential Outcomes of a Privilege Dispute in Your Jurisdiction of a Privilege Dispute in Your Jurisdiction • Thoroughly re-acquaint yourself with the contours of the attorney-client privilege, the work-product doctrine, the joint-defense privilege and any other potentially applicable limitations on discovery (i.e., trade secrets, privacy concerns, self-critical analysis, li i i di (i d i lf i i l l i etc.). – An understanding of general principles is not sufficient; you need to know the g g p p ; y current state of the law in the relevant jurisdiction(s). – Make sure that your understanding of the law is consistent with that of your outside counsel outside counsel. – Closely review any prior privilege or other discovery orders in your action, as well as any other significant privilege decisions previously published by the judge. 64
Prepare for Potential Waiver Issues • To properly protect the privilege, you need to know what is considered a waiver and how the scope of waiver is determined in the relevant jurisdiction(s): – Although the privilege belongs to the company, even the inadvertent disclosure of privileged communications in discovery can lead to a finding of waiver. – Using the privilege as a sword doesn’t work – selective waiver is almost always a bad idea in litigation, and especially so if the waiver is made “on the fly” during a deposition. – As a general principle, waiver of the privilege extends to all other privileged communications regarding the same subject matter – and can go further depending on the circumstances. – Again, preparation is key. Work with your outside counsel to identify areas of anticipated questioning likely to implicate potentially privileged communications and/or work-product issues. 65
Assess Your Roles and Responsibilities – and Their Potential Impact on Your Privilege Determinations Potential Impact on Your Privilege Determinations • Consider your roles and responsibilities as in-house counsel and how they might impact your deposition testimony, including your ability to identify and protect potentially privileged communications: – Do you have legal and business roles and responsibilities? – Have your roles and responsibilities been clearly defined? – Have your roles and responsibilities evolved during the relevant time period? – Do you have a written job description? – Have you always made clear in what role you are providing advice, information and input to your colleagues? d i t t ll ? – Do your colleagues respect the distinct nature of your roles when they seek your advice and input regarding legal or business matters? 66
Consider Confidentiality Concerns y • In order to properly identify and assess your potentially privileged communications, you must consider whether your legal advice was sought and provided in confidence: – Have the participants in / audience to your privileged communications been appropriately limited? – Has the confidential nature of your privileged communications been respected and maintained? – D Does your company have any policies or procedures concerning how legal h li i d i h l l advice is to be requested, provided, and disseminated? Have they been consistently followed? 67
Preparation is the Key • To effectively protect the company’s privilege at deposition, you must first dedicate sufficient time and resources to thoroughly prepare for the deposition with your outside counsel. • Depositions of in-house counsel are considered extraordinary events by outside counsel – your should treat them as such and prepare yourself for what could be a very tense, pressure-filled atmosphere at your deposition. y , p p y p • Consider conducting a mock deposition with your outside counsel to help prepare for anticipated areas of questioning and ensure that you and your outside counsel share a mutual understanding of what privileged communications you’ve had and any work- g p g y y product issues that may be implicated. • Talk with your outside counsel about how he/she intends to object when privilege issues arise during the deposition and how you intend to communicate with counsel g p y when you believe that a privilege issue may be implicated by a question. 68
“Oh Lord, its Hard to be Humble . . .” * • As you prepare for your deposition, consider the possibility that we, as lawyers, may not make the best witnesses. Why not? Well, for example: y , p We . . . hate to admit that we do not know the answer to something (really anything); after all, that’s what we’re paid for, knowing the answer. This urge is especially strong among in-house counsel who are involved in almost every aspect of the company’s business. Their clients rely on them to know the inner workings of the business and to keep them on the straight and narrow. To them to know the inner workings of the business and to keep them on the straight and narrow To admit that they don’t know some detail often feels to them like an admission that they haven’t done their job, even if it’s not accurate. . . . Depositions are about real world events; they require witnesses to acknowledge imperfect facts and imperfect decisions. Hard line advocacy makes the witness look foolish at best and disingenuous at worst. Albert Vreeland and Jennifer Howard, The Care and Feeding of In-House Counsel ; The Alabama Lawyer 340 (September 2006). * Mac Davis @ the Muppets ( http://www.youtube.com/watch?v=-07_2DWfEmQ ) 69
Consistent Respect for the Privilege Helps Ensure its Protection g • To successfully protect its attorney-client privileged communications against discovery, it has to be respected on an everyday, ongoing basis. y p y y g g At a deposition, the smart deposing lawyer . . . will not merely ask the in-house counsel to repeat communications made to him by upper management and hope that she momentarily forgets the privilege and answers the question. Rather, the lawyer will attempt, through rigorous questioning, p ege a d a s e s t e quest o at e , t e a ye atte pt, t oug go ous quest o g, to lay a foundation for the argument that the communications are not actually privileged or, alternatively, that the privilege has been waived. For example, the lawyer will ask the in-house lawyer to name all recipients of the subject communication to see if any third parties received the information which, if so, would constitute a waiver of the privilege. Or, the lawyer will question the in house attorney about all the measures taken to ensure that the communication remained in-house attorney about all the measures taken to ensure that the communication remained confidential and not subject to disclosure, again hoping to later argue that a waiver has occurred. The equally smart in-house lawyer, therefore, will take the necessary steps - long before receiving a deposition subpoena - to ensure that the privilege is not only established at the time of the communication, but also maintained thereafter. Todd Presnell, Depositions of In-House Counsel – Protecting the Attorney-Client Privilege ; In-House Def. Q. 50 (Winter 2007) (emphasis added). 70
The Attorney-Client Privilege in the C Corporate Setting t S tti Brian Martin General Counsel KLA T KLA-Tencor, Corp. C Brian.Martin@kla-tencor.com
Knowledge Gap Knowledge Gap The best evidence of this knowledge gap is The best evidence of this knowledge gap is recent case law where courts have been forced to remind us of the following fundamental points: Conversations are not privileged simply because a lawyer is in the meetings. l i i th ti E-mails are not privileged because a lawyer is copied on the e-mail. on the e mail. Communications are not privileged when a lawyer serves as a conduit for the communication. 72
Who is the Client? Who is the Client? Two principal tests have been used to Two principal tests have been used to determine whether corporate communications fell within the attorney- communications fell within the attorney client privilege: (1) Control group test and (2) Subject matter test (2) Subject matter test. 73
The Control Group Test The Control Group Test A corporate employee communicating with A corporate employee communicating with the company's lawyer has to be a member of management with authority to take part of management with authority to take part in decisions on the matter in question for the privilege to apply In re Grand Jury the privilege to apply. In re Grand Jury Investigation, 599 F.2d 1224, 1235 (3rd Cir 1979) Cir. 1979). 74
The Control Group Test The Control Group Test The control group test essentially requires that the employee with whom an attorney communicates be a l ith h tt i t b member of senior management for the communication to be privileged. Management is the “client.” The control group test has been severely criticized because: because: it has a chilling effect on corporate communications; it frustrates the very purpose of the privilege by discouraging subordinate employees from communicating important subordinate employees from communicating important information to corporate counsel; it makes it difficult for corporate counsel to properly advise their clients and to ensure their clients' compliance with the law; and it yields unpredictable results. 75
The Subject Matter Test The Subject Matter Test The privilege extends to communications The privilege extends to communications made by any corporate employee so long as the communication is both made at the as the communication is both made at the direction of his superiors and relates to the performance of the employee's duties the performance of the employee s duties. Diversified Indus., v. Meredith, 572 F.2d 596 (8th Cir 1978) 596 (8th Cir. 1978). 76
The Upjohn case The Upjohn case Facts Facts Independent auditor uncovered potentially illegal payments by foreign subsidiaries to foreign gov't officials to secure government business. General Counsel retains outside counsel and confers with chairman Initiates investigation by sending with chairman. Initiates investigation by sending questionnaires to management and requesting "full information" concerning any such payments. Managers were instructed to treat the process as highly confidential. 77
The Upjohn case The Upjohn case Upjohn Facts continued Upjo acts co t ued The GC and outside counsel interviewed 33 employees. The company disclosed the questionable payments on The company disclosed the questionable payments on the company's Form 8-K and a copy of the Form was submitted to the IRS who began investigations regarding the potential tax implications of the di th t ti l t i li ti f th payments. The IRS sought the production of the questionnaires and the GC's files. Upjohn declined production based upon the attorney-client privilege. The IRS instituted an action seeking enforcement of the IRS summons. 78
Upjohn Upjohn Control group test rejected by Supreme Court Control group test rejected by Supreme Court Lower level employees can embroil the corporation in serous legal difficulties and thus will have relevant information needed by corporate counsel if he/she is to perform his/her mission of counseling the corporation regarding these issues. o po a o ga d g u Privilege protects employee communications and thereby enables the attorney to counsel the corporation. ti 79
Upjohn Upjohn The Supreme Court's holding: The Supreme Court s holding: Sound legal advice serves the public interest and full disclosure from the client insures that and full disclosure from the client insures that the lawyer is fully informed. 80
The Upjohn Factors The Upjohn Factors The Supreme Court set down five factors to The Supreme Court set down five factors to guide courts in determining the validity of attorney-client privilege claims for communications between legal counsel and lower-echelon corporate employees: 1.The information is necessary to supply the basis for legal advice to the corporation or was ordered to be communicated by superior officers; y p ; 2.The information was not available from "control group" management; 81
The Upjohn Factors ( (continued) ) 3. The communications concerned matters 3. The communications concerned matters within the scope of the employees' duties; 4. The employees were aware that they were 4. The employees were aware that they were being questioned in order for the corporation to secure legal advice; and 5. The communications were considered confidential when made and kept confidential. f d l 82
The Upjohn Factors (continued) ( ) When each of these elements is met, a lower- When each of these elements is met, a lower echelon employee is considered a client under the attorney-client privilege, and the employee's communications with corporate counsel are privileged. Bruce v. Christian, 113 F.R.D. 554, 560 (S.D.N.Y. 1986) (privilege extends to 560 (S D N Y 1986) ( i il t d t employee communications on matters within the scope of their employment and when the scope of their employment and when the employee is being questioned in confidence in order for an employer to obtain legal advice). p y g ) 83
Clarify the Relationship Clarify the Relationship Some courts place the burden on the corporate counsel p p to clarify the nature of the relationship with the employee. In those jurisdictions, if a lawyer fails to clarify that she is solely representing the organization, y y p g g , then the employee can assert the privilege if the employee reasonably believed that the lawyer represented the employee. United States v. Hart, No. p p y , Crim. A. 92-219, 1992 WL 348425 (E.D. La. Nov. 16, 1992) (employees reasonably believed that corporate counsel was representing them individually and therefore p g y could invoke privilege). 84
Communications Confidential ti i C
"Confidential Communications" Confidential Communications To remain privileged a communication must be o e a p eged a co u cat o ust be made in confidence and kept confidential. The test is (1) whether the communicator, at the time the communication was made intended for time the communication was made, intended for the information to remain secret from non- privileged persons, and (2) whether the parties p g p , ( ) p involved maintained the secrecy of the communication. See Haines v. Liggett Group, Inc Inc., 975 F.2d 81 (3d Cir. 1992) (privilege 975 F 2d 81 (3d Cir 1992) (privilege protects verbal and written communications conveyed in confidence for purpose of legal advice). 86
Confidential Communications Confidential Communications For organizational clients the courts have For organizational clients, the courts have permitted "need-to-know" agents to have access to privileged documents without access to privileged documents without destroying confidentiality and relinquishing the privilege. See Coastal relinquishing the privilege See Coastal States Gas Corp. v. Department of Energy 617 F 2d 854 863 (D C Cir Energy, 617 F.2d 854, 863 (D.C. Cir. 1980); Diversified Indus., Inc. v. Meredith 572 F 2d 596 (8th Cir 1977) Meredith, 572 F.2d 596 (8th Cir. 1977). 87
Confidential Communications Confidential Communications The group of "need-to-know" agents is The group of need to know agents is comprised of employees of the organization who reasonably need to g y know of the communication in order to act in the interest of the corporation. Coastal States Gas Corp. v. Department C t l St t G C D t t of Energy, 617 F.2d 854, 863 (D.C. Cir. 1980) (applying a "need to know" test to 1980) (applying a need-to-know test to find that indiscriminate circulation of a memorandum constituted disclosure) memorandum constituted disclosure). 88
Confidential Communications Confidential Communications Exxon and the "Broome Letter" o a d t e oo e ette In-house counsel rendered legal opinion on whether Exxon was required to make royalty payments to the state of Alabama. h f Al b Memo was circulated to senior management Counsel was not involved with mgmt decision Counsel was not involved with mgmt. decision State sues and lower court orders production of Broome Letter. Content and circulation list Result: $87m direct damages; $3.42b punitive damages damages 89
Confidential Communications Confidential Communications Exxon and the "Broome Letter" Exxon and the Broome Letter (continued) Alabama Supreme Court reverses Alabama Supreme Court reverses Content: non-confidential facts contained in letter but predominant purpose was a legal opinion p p p g p letter. Circulation: lawyer testified why each person needed to review the memo and "no mere needed to review the memo and "no mere spectators or 'fyi' recipients." 90
Legal Advice l Ad i L
"Legal Advice" Legal Advice For the privilege to apply the For the privilege to apply, the communication must be made for the purpose of securing legal advice or purpose of securing legal advice or assistance. See In re Six Grand Jury Witnesses 979 F 2d 939 (2d Cir 1992) Witnesses, 979 F.2d 939 (2d Cir. 1992) (privilege protects communications made in confidence to lawyer to obtain legal in confidence to lawyer to obtain legal counsel). 92
"Legal Advice" Legal Advice Business Advice is excluded Business Advice is excluded A communication is not privileged simply because it is made by or to a person who because it is made by or to a person who happens to be an attorney. When the attorney-client privilege is invoked When the attorney client privilege is invoked with regard to communications with in-house counsel, the court will look particularly closely at whether the counsel was providing business advice, rather than legal advice. 93
Mixed Advice Mixed Advice Cases of Mixed Purpose: For the privilege to Cases o ed u pose o t e p ege to apply in such cases, the communication between client and lawyer must be primarily for the purpose of providing legal assistance and not for purpose of providing legal assistance and not for another purpose. As long as the client's purpose was to gain some advantage from the lawyer's g g y legal skills and training, the services will be considered legal in nature, despite the fact the client may also get other benefits such as client may also get other benefits such as business advice or friendship. United States v. Bornstein, 977 F.2d 112 (4th Cir. 1992). 94
Mixed Advice Mixed Advice But see: Kramer v. Raymond Corp., No. 90- y p , 5026, 1992 U.S. Dist. LEXIS 7418 at * 3-4 (E.D. Pa. May 29, 1992). ( "The attorney-client privilege is construed narrowly. This is privilege is construed narrowly. This is especially so when a corporate entity seeks to invoke the privilege to protect communications to in-house counsel. Because in-house counsel to in house counsel. Because in house counsel may play a dual role of legal advisor and business advisor, the privilege will apply only if the communication in question was made for the the communication in question was made for the express purpose of securing legal not business advice." ). 95
Preventative Measures Require written request for legal advice on any sensitive measures Keep privileged communications confidential Counsel should direct investigations Use of “Upjohn letters” Where experts are used to assist counsel, there must be a contemporaneous record of the privileged nature of the engagement i il d t f th t In-house counsel should obtain information from the most senior source available the most senior source available 96
Pre entati e Meas res Preventative Measures Assertion of privilege must be particularized Assertion of privilege must be particularized Resist indiscriminate use of privilege label Use legal titles in correspondence Use legal titles in correspondence Assume non-lawyers neither understand nor respect the privilege respect the privilege Documents setting forth legal advice should relate only to legal subjects relate only to legal subjects Control distribution Develop procedures to protect confidentiality Develop procedures to protect confidentiality 97
5 Strategies for Managing the Privilege Call your team to action. y 1. Too many in-house lawyers are unacceptably operating under their law-school-vintage understanding of the privilege. g g Ask one of your team members to take responsibility for refreshing the group on the law. One of your law firms would be happy to take responsibility f for this training. thi t i i Create a “ privileged or not ” game Jenner and Block publishes a handy compendium of cases relating to the privilege relating to the privilege. www.jenner.com/news/news_item.asp?id= 000013872224 . 98
5 Strategies for Managing the Privilege Educate your business teams Educate your business teams 2 2. Watch your language; use of the term “ client ” client One approach to educating the business teams is to publish a brief white paper teams is to publish a brief white paper explaining the privilege to non-lawyers. www. calstate .edu/Gc/Docs/ Attorney - Client_ Privilege .doc 99
5 Strategies for Managing the Privilege Develop and implement a standard Develop and implement a standard 3 3. internal investigation process. The effectiveness of an internal investigation The effectiveness of an internal investigation is dependent upon the actions and decisions made in the first 48 hours. ade t e st 8 ou s 100
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