Attorney-Client & Work Product Privileges for In-House Counsel -- Avoiding the Traps

Transcription

1 Attorney-Client & Work Product Privileges for In-House Counsel -- Avoiding the Traps DELVACCA April 3, 2014 Joseph F. O'Dea, Jr., Esq. Chairman, Litigation Department Saul Ewing LLP (215) Saleem S. Saab, Esq. General Counsel - International Victaulic Company (610) Saab@victaulic.com 1

2 Attorney-Client Privilege: The Basics Rooted in public policy: 1) To be effective, lawyers must have full and frank disclosures from clients; 2) Clients will only make full and frank disclosure if communications are confidential. Renders relevant information undiscoverable. Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998); Upjohn Co. v. United States, 449 U.S. 383, 389 (1981) 2

3 Attorney-Client Privilege Defined In diversity actions arising under state law, federal courts will apply the state s privilege law. Montgomery Cnty. v. MicroVote Corp., 175 F.3d 296, 301 (3d Cir. 1999). Caution!! Different definitions by jurisdiction Compare NJ and PA Definitions are comprehensive Key elements - Is legal advice being sought? - Is the communication related to obtaining advice and made in confidence? Does it apply to lawyer, client or both? 3

4 NJ Attorney-Client Privilege Elements of the privilege in NJ are typical, but in NJ the privilege is not absolute. Where an overriding public concern exists, the privilege can be pierced even absent crime/fraud exception. Three elements: a) legitimate need for party to obtain the information; b) evidence must be relevant and material; and c) party could not obtain the evidence from less intrusive means. 4

5 NJ Attorney-Client Privilege If party makes the required showing, the court must balance the gravity of the public s interest in piercing against a client s legitimate expectations of confidentiality. Court will pierce only under circumstances so grave that the privilege must yield to the most fundamental values of our justice system. 5

6 PA Attorney-Client Privilege The attorney-client privilege in Pennsylvania has long been codified by statute, which provides: In a civil matter counsel shall not be competent or permitted to testify to confidential communications made to him by his client, nor shall the client be compelled to disclose the same, unless in either case this privilege is waived upon the trial by the client. 42 Pa.C.S

7 PA Attorney-Client Privilege Under PA law, there is no balancing test that could result in piercing the privilege. Relevance is not the standard for determining whether or not evidence should be protected from disclosure as privileged, and that remains the case even if one might conclude the facts to be disclosed are vital, highly probative, directly relevant, or even go to the heart of the issue. Constand v. Cosby, 232 F.R.D. 494, (E.D. Pa. 2006) (applying PA law). 7

8 PA Law: Nationwide v. Fleming In Fleming, the PA Superior Court faced a difficult issue under PA s attorney-client privilege law. Document 529 was written by a member of Nationwide s General Counsel s office Only disseminated to 15 people, all of whom were Nationwide officers, managers, or attorneys 8

9 PA Law: Nationwide v. Fleming The attorney-client privilege in Pennsylvania has long been codified by statute, which provides: In a civil matter counsel shall not be competent or permitted to testify to confidential communications made to him by his client, nor shall the client be compelled to disclose the same, unless in either case this privilege is waived upon the trial by the client. (42 Pa. C.S.A (emphasis added)) 9

10 PA Law: Nationwide v. Fleming The Superior Court held that the privilege statute applied only to the communications made by the client to the attorney and not the other way around. In sum, under our statutory and decisional law, attorney-client privilege protects from disclosure only those communications made by a client to his or her attorney which are confidential and made in connection with the providing of legal services or advice. Fleming, 924 A.2d at 1264 Document 529 was found to not be privileged because it was written as advice from in-house counsel. Even worse, Fleming was subsequently affirmed by an equally-divided Pennsylvania Supreme Court (Nationwide Mut. Ins. Co. v. Fleming, 992 A.2d 74 (2010)). 10

11 PA Privilege Revisited Gillard In 2011, the Pennsylvania Supreme Court overturned this highly criticized precedent and, in a 4-2 opinion, held that the attorney-client privilege was indeed a two-way street. Gillard v. AIG Ins. Co., 15 A.3d 44 (Pa. 2011). In February 2011, the Pennsylvania Supreme Court confirmed that the attorney-client privilege operates in a two-way fashion to protect confidential client-to-attorney or attorneyto-client communications made for the purpose of obtaining or providing professional legal advice. 11

12 What About Communications With Agents? Communications between an agent of an attorney and the client are protected by the attorney-client privilege where an agent is assisting the attorney in giving advice to the client. Com. v. Noll, 662 A.2d 1123, 1126 (Pa. Super. Ct. 1995). Additionally, the work product doctrine protects materials prepared by agents for the attorney, as well as documents prepared by the attorney herself. Id. The same is true under federal law. See United States v. Nobles, 422 U.S. 225, 240 (1975) (holding that the work product doctrine protects material prepared by agents for the attorney as well as those prepared by the attorney herself). 12

13 Attorney Work Product Privilege Under the Federal Rules of Civil Procedure, the work product doctrine prevents discovery of documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent). Fed. R. Civ. P. 26(b)(3) 13

14 Attorney Work Product Privilege The Third Circuit has stated that a document is created in anticipation of litigation when, in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation. Sullivan v. Warminster Twp., 274 F.R.D. 147, 152 (E.D. Pa. 2011) (citing United States v. Rockwell Int'l, 897 F.2d 1255, 1266 (3d Cir. 1990)). 14

15 Attorney Work Product Privilege However, those materials may be discovered if: (i) they are otherwise discoverable under Rule 26(b)(1); and (ii) the party shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means. Fed. R. Civ. P. 26(b)(4). 15

16 Attorney Work Product Privilege Unlike the attorney-client privilege, which belongs only to the client, the work product privilege is shared between attorney and client and cannot be unilaterally waived. Indeed, the attorney may contest disclosure even in the face of a client s waiver. QBE Ins. Corp. v. Griffin, No. 2:08-cv-949-MEF, 2009 WL , *3 (M.D. Ala. Sept. 4, 2009). 16

17 Attorney Work Product Privilege Pennsylvania Rule Subject to the provisions of Rules and , a party may obtain discovery of any matter discoverable under Rule even though prepared in anticipation of litigation or trial by or for another party or by or for that other party s representative, including his or her attorney, consultant, surety, indemnitor, insurer or agent. The discovery shall not include disclosure of the mental impressions of a party s attorney or his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories. With respect to the representative of a party other than the party s attorney, discovery shall not include disclosure of his or her mental impressions, conclusions or opinions respecting the value or merit of a claim or defense or respecting strategy or tactics. Pa.R.Civ.P

18 Attorney Work Product Privilege Pennsylvania Rule The work product doctrine provides even broader protections than the attorney-client privilege. Comm. v. Noll, 662 A.2d 1123, 1126 (Pa. Super. Ct. 1995). Pennsylvania courts have recognized that the work product doctrine protects material, regardless of whether it is confidential, prepared by an attorney in anticipation of litigation. Nat l R.R. Passenger Corp. v. Fowler, 788 A.2d 1053, 1065 (Pa. Commw. Ct. 2001). 18

19 From PA To The World Foreign jurisdictions can differ markedly in their approach and application of the attorney-client privilege, especially with regard to communications with in-house counsel. Now let s examine the attorney client privilege, in the in-house context, in six different foreign jurisdictions: The European Union; Japan; The People s Republic of China; South Korea; Brazil; and Mexico. 19

20 The European Union At the European Union level, the Attorney-Client privilege, or the Legal Professional Privilege is a judicial creation. Case 155/79, AM&S Europe Ltd. v. Commission, 1982 E.C.R On the E.U. level, the attorney-client privilege exists when two criteria are satisfied: (1) the communication is made for the purpose and in the interest of the client s defense; and (2) the lawyer is independent. 20

21 The European Union The problem of attorney independence : According to the European Court of Justice, an independent lawyer is one who is not bound to his client by reason of employment. The independent lawyer requirement was based on the assumption that, once employed by a corporation, a lawyer no longer has the ability to remain free from improper influence. 21

22 The European Union Under this rationale, in-house attorneys are not independent and their communications do not fall within the scope of the privilege announced in AM&S. The AM&S decision, which was handed down in 1982, was later affirmed in 2010 in Akzo Nobel Chemicals, Ltd v. Commission. Case C-550/07P, Akzo Nobel Chemicals, Ltd v. Commission, at

23 The European Union In Akzo, lawyer independence is defined in both positive and negative terms: Through professional ethical obligations, which create a positive ethical obligation for attorneys; Through the absence of an employment relationship with the client (a negative requirement). 23

24 The European Union The Akzo Court found that an in-house counsel s ability to give independent legal advice to his/her employer is compromised because of the lawyer s economic dependence on the employer. Outside counsel, in contrast, typically advise a large number of clients, and are not dependent on any one client, which makes it easier for outside counsel to withdraw in order to safeguard his/her independence. 24

25 The European Union The AM&S and Akzo decisions are European Union level decisions. Their holdings are applicable in the context of actions brought by the European Commission to enforce violations of the European Union s competition law (i.e., antitrust law). Case C-550/07P, Akzo Nobel Chemicals, Ltd v. Commission, at 102 Thus, the privilege law of each individual E.U. member state continues to control in court actions brought on the E.U. member level. 25

26 The European Union Among the European Union member states, there is a wide variation of national laws recognizing the attorney-client privilege. The scope of the privilege for in-house counsel (if it exists at all) varies from country-to-country. 26

27 Generally, Member countries fall into one of four groups: 1. Countries that treat in-house counsel and outside counsel in a way that is similar to the United States (when applying the privilege). The European Union Examples: United Kingdom; Norway; Portugal; Cyprus; Malta. 2. Countries where only some communications by in-house attorneys may be privileged (for example, communications involving a formal legal opinion). These countries either require that in-house counsel exhibit a degree of independence from the employer for the privilege to apply, or have established a statutory regime governing in-house counsel as a separate profession. Examples: Germany; Belgium; The Netherlands; Greece. 3. Countries that consider in-house counsel to be a separate profession from that of an outside attorney (and generally do not recognize their communications as privileged). Examples: France; Italy; Austria; Luxembourg; Finland; Sweden; Romania. 4. Countries where the state of the law in this area is still uncertain. Examples: Hungary; Bulgaria. 27

28 The European Union The lack of commonality between the privilege law of the European Member countries contributed to how AM&S and Akzo decisions were decided. The ECJ reasoned that it must take into account the principles and concepts common to the members of the European Community. Since many of the member states treat in-house counsel as a profession separate from that of an attorney, these decisions did not extend the privilege to in-house counsel at the European Union level. 28

29 The European Union Foreign Attorneys: In the AM&S decision, the European Court of Justice allowed an Attorney-Client privilege to exist for [w]ritten Communications between Lawyer and Client... [w]ithout distinction to any lawyer entitled to practice his profession in one of the member states, regardless of the member state in which the client lives. Case 155/79, AM&S Europe Ltd. v. Commission, 1982 E.C.R , at 25 (emphasis added). 29

30 The European Union It is not clear whether this distinction would exclude the privilege from applying to attorneys not admitted to the bar of an E.U. member state. In the Akzo case, the Advocate General argued that the E.U. should not extend the legal professional privilege to communications with in-house lawyers who are members of a Bar in a non-e.u. country. (Advocate General Opinion at 189). However, the Akzo Court did not decide this issue. 30

31 Japan Japan has developed statutory and ethical rules that create a limited attorney-client privilege for attorneys admitted to the Japanese bar. Attorneys who are admitted to the Japanese bar are called bengoshi. Bengoshi are subject to an ethics code, called Bengoshi Ho, which grants bengoshi the right and obligation to maintain the confidentiality of information acquired during the course of their duties. 31

32 Japan Japan s Minji Soshoho (or Code of Civil Procedure) requires parties to a litigation to produce all documents relevant to a case, except for documents that contain information the holder received in the line of duty as a professional. The definition of professional includes bengoshi. See Minsohō [Code of Civil Procedure], Act No. 109 of June 26, 1996, art. 197; 220(4). 32

33 Japan Traditionally, the study of law in Japan begins as an undergraduate endeavor, where law is studied as one of the liberal arts. Graduates who then took and passed a test called the Shiho Shiken could continue their legal education and eventually become bengoshi. Prior to reforms undertaken in the Japanese legal system in 2004, only about 2-3% of applicants would actually pass the Shiho Shiken. As a result, there are a large number of non-bengoshi graduates of undergraduate law studies who have not taken (or who could not pass) the Shiho Shiken. 33

34 Japan Japanese law does not prohibit companies from retaining these non-bengoshi as in-house counsel. Although the Japanese Code of Civil Procedure allows for professionals to be exempt from producing documents relevant to a case, non-bengoshi in-house counsel are not included in the definition of professional. See Minsohō [Code of Civil Procedure], Act No. 109 of June 26, 1996, art. 197; 220(4). 34

35 Japan This means that current Japanese law does not protect communications between a corporation and nonbengoshi in-house counsel. However, reforms to the Japanese legal education system after 2004 will likely result in an increased amount of bengoshi working in-house. See Tom Brennan, Japan s Lawyers Heading In-House, THE ASIAN LAWYER, Jan. 25, 2013 (noting that since the 2004 education reforms, Japan added 12,000 new bengoshi, which is equal to the total growth in bengoshi from 1950 to 2001). According to the Japanese Bar Association, 770 bengoshi are now working in-house, compared to only 64 in Id. 35

36 The People s Republic of China Chinese law has historically not recognized a privilege for confidential communications between an attorney and a client. Lawyers in China have been traditionally required to place their allegiance to the state above loyalty to an individual client. See Criminal Procedure Law (P.R.C.), Article 48 ( All those who have information about a case shall have the duty to testify ); Civil Procedure Law (P.R.C.), Article 65 ( The people s court shall have the authority to obtain evidence from the relevant... individuals, and such... individuals may not refuse to provide evidence. ) 36

37 The People s Republic of China The Law of Attorneys of the People s Republic of China ( PRC ) and the PRC Code of Ethics for Attorneys does require attorneys to keep confidential trade secrets obtained from their clients. See Lawyer s Law (P.R.C.), Article 33 ( A lawyer shall keep confidential secrets of the State and commercial secrets of the parties concerned that he comes to know during his practice activities and shall not divulge the private affairs of the parties concerned. ) Chinese law does not appear to distinguish between outside counsel and in-house attorneys. 37

38 South Korea South Korea does not have an express attorney-client privilege. However, Korean statutes do provide some testimonial protections. See South Korea Criminal Act, Article 317 ( A... [l]awyer... [w]ho discloses another s secret which has come to his knowledge in the course of the practice of his profession, shall be punished by imprisonment or imprisonment without prison labor for not more than three years.... ) See South Korea Civil Procedure Act, Article 315 ( A witness may refuse to testify if [the witness is]... a lawyer [and] is examined on matters falling under the secrets of his official functions; and [] [w]hen he is examined on matters falling under his technical or professional secrets. ) 38

39 South Korea South Korean law thus excuses attorneys from the obligation of revealing their client s secrets when the attorney is testifying in court. However, these rights can only be exercised by the attorney, not by the client. See Astra Aktiebolag v. Andrx Pharmaceuticals, Inc., 208 F.R.D. 92, (S.D.N.Y. 2002) South Korean law does not recognize a work product doctrine an attorney may not refuse to disclose tangible materials on the ground that they were prepared in anticipation of litigation. See id. 39

40 South Korea In-house counsel may also receive this statutory protection if the testimony concerns communications the lawyer obtained in the course of his professional duties as an attorney, and not in the performance of a non-legal function. In-house counsel may also receive a separate statutory protection from testifying as to technical or occupational secrets. 40

41 The Brazilian Bar Association Statute, its General Regulations, as well as Brazil s Code of Ethics and Discipline set forth the parameters of the attorney-client privilege in Brazil. Brazil See, e.g., Lei No , de 4 de Julho de 1994 [Bar Association Statute] These provisions are applicable to all attorneys, and thus are applicable to both outside and in-house counsel in Brazil. The Brazilian attorney-client privilege grants attorneys the right to protect (and not disclose) information received from clients. This premise extends to information supplied to the attorney by the client, including written communications. 41

42 Article 5 of the Mexican Constitution requires that each Mexican State enact a Professions Law. The Professions Law of Mexico s Federal District obligates attorneys to keep client matters confidential. Mexico See Constitución Política de los Estados Unidos Mexicanos [Const.], as amended, Article 5, Diario Oficial de la Federación [D.O.]. See also Código Civil Federal [C.C.F] [Federal Civil Code], Article 2290 (providing for an attorney s liability for civil damages and criminal penalties for the disclosure of the client s confidential information to the adversary party in litigation). 42

43 Mexico Mexico s Federal Criminal Code also criminalizes the act of revealing client secrets or confidential information. See Código Penal Federal [C.P.F] [Federal Criminal Code], Article 210. Mexico does not differentiate between outside counsel and in-house attorneys. Mexican law does not appear to contain an independent privilege for in-house counsel. Generally, the law governing the attorney-client privilege (and the law governing the practice of law) is not well developed in Mexico. 43

44 Attorney-Client Privilege for Corporations Who is the client? Who may speak to lawyer in confidence? - No bright line rule 1) Was the information necessary to impart legal advice? 2) Could the information have been obtained from someone else? 3) Was the employee talking about matters within the scope of his/her employment? 4) Was the employee aware he/she was providing information to the company s counsel for legal advice? 5) Were the communications considered confidential when made and kept confidential thereafter? 44

45 What Is The Effect Of In-House Counsel s Dual Role In-House counsel can be both a business person and legal counsel How do you tell which hat is being worn? Giving legal advice Giving business advice Doing both 45

46 The Dual Role Tests for deciding if counsel is consulting with his/her client : Control group test Subject matter test Neither / both / or a mix of the two 46

47 Presumptions Outside counsel Rebuttable presumption that lawyers are providing legal advice In-House counsel Must be a clear showing that communications were for the purpose of obtaining legal advice * Build documented record of clear and convincing evidence 47

48 Are Communications with Privileged? Board member? Auditor? Executive? Manager? Non-Managerial Employee Consultant? 48

49 Are these documents/communications privileged? Board minutes? Tape recording of board meeting? Skype meeting? General storage? Audit papers? Report to parent company? 49

50 Five W s and an H Who Control with whom you communicate, and who is present What Control what is discussed Where Control the location of communications and documentation When Control timing Why Make request for advice explicit How Insist on appropriate process 50

51 Keeping It Once You Have It Waiver Disclosure to third parties Who can waive - Management - Apparent authority Failure to assert in timely manner 51

52 Keeping It Once You Have It Extent of Waiver Complete subject matter vs. waiver only as far as what was disclosed Fairness The rule in Pennsylvania is that voluntary disclosure of confidential information to gain a tactical advantage waives attorney-client privilege for all communications involving same subject matter. See Nationwide II, 924 A.2d at 1269 (emphasis added). 52

53 Keeping It Once You Have It To resolve allegations of waiver, courts must employ a two-part inquiry pronounced by the Pennsylvania Supreme Court. Investigating Grand Jury of Phila. Cnty. No , 593 A.2d 402, (Pa. 1991). Under this two-part test, a court must determine: whether attorney-client privilege applies to the particular communication in question; and if so, whether an exception or waiver applies, thereby overcoming the privilege and permitting disclosure. Id. 53

54 Keeping It Once You Have It The party who has asserted attorney-client privilege must initially set forth facts showing that the privilege has been properly invoked. Then, the burden shifts to the party seeking disclosure to set forth facts showing that disclosure will not violate the attorney-client privilege, e.g., because the privilege has been waived or because some exception applies. Investigating Grand Jury of Phila. Cnty. No , 593 A.2d 402, (Pa. 1991). 54

55 Keeping It Once You Have It If a court determines that a particular disclosure effectuated a waiver, it may then turn to the question of scope, i.e., how far the waiver extends. It is possible that a waiver may automatically extend to all other communications covering the same subject matter. See Minatronics Corp., 23 Pa. D. & C.4th at 15. In this egregious instance, however, at least one Pennsylvania court has held that a waiver may not automatically reach confidential communications involving the same subject matter made after the waiver. See id. at

56 Keys To Avoid Waiving Privilege Know the law of your jurisdiction Identify the client Document the relationship and process Eliminate possibilities for waiver Most courts conduct a choice of law analysis to determine which state s privilege law will apply to communications taking place outside the forum 56

57 Federal Rule of Evidence 502 Federal Rule of Evidence 502 was amended in 2008 to address waiver of attorney-client and work product privileges and establish some exceptions to waiver, but does not purport to supplant applicable waiver doctrine generally. Fed. R. Evid. 502, Advisory Committee Notes. An attempt to reset default rules on disclosures Presumption shifts to limited disclosure Review still turns on fairness Inadvertent production less likely to lead to blanket waiver - claw back under Fed.R.Civ.P. 26(b)(5)(B) 57

58 Preserving the Privilege Documenting the purpose of the communication Documenting the legal aspects of the communication Do not use a non-legal title (V.P.) in legal communications Do not mix legal and non-legal communications Be careful who receives legal communications Do not assume everything sent to counsel is privileged 58

59 Questions 59