LEGAL AND ETHICAL ISSUES OF PRIVILEGE IN THE CONTEXT OF INTERNAL INVESTIGATIONS ACC BACK TO SCHOOL CLE SYMPOSIUM AUGUST 20, 2015

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1 LEGAL AND ETHICAL ISSUES OF PRIVILEGE IN THE CONTEXT OF INTERNAL INVESTIGATIONS ACC BACK TO SCHOOL CLE SYMPOSIUM AUGUST 20,

2 Privilege: Remember the Backdrop Attorney-Client Privilege Protects confidential communications between client and agents if significant purpose is receiving legal advice Communications by agents of client at the behest of attorney during internal investigation are protected to the same extent as though conducted by the attorney Communications that do not involve both attorney and client are unprotected Attorney Work Product Protects documents/tangible things prepared in anticipation of litigation, unless: Otherwise discoverable Party shows substantial need for materials Factual material receives less protection than attorney opinions and mental impressions 2

3 Rule 1.6 Confidentiality of Information A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent. A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary in certain limited circumstances. A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client. 3

4 Rule 1.6 Confidentiality of Information Under which of the following circumstances may a lawyer reveal information relating to a client: 1. To prevent reasonably certain death or substantial bodily harm. 2. To prevent the client from committing a crime or fraud. 3. To comply with other law or a court order. 4. To prevent, mitigate or rectify substantial injury to the financial interests or property of another. 5. All of the above. 4

5 Rule 1.13 Organization as a Client A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. 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 whom the lawyer is dealing. 5

6 Rule 2.1 Role of Lawyer - Advisor In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation. 6

7 Rule 3.4 Fairness to Opposing Party & Counsel A lawyer shall not: Unlawfully obstruct another party' s access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value. Falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law. Knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists. 7

8 Rule 3.4 Fairness to Opposing Party & Counsel A lawyer may request a person other than a client to refrain from voluntarily giving relevant information to another party if: 1. The person is the client s relative, employee or agent. 2. Any person if the lawyer reasonably believes that the person's interests will not be adversely affected by refraining from giving such information. 3. Not true. A lawyer may never request a person other than the client to refrain from voluntarily giving relevant information. 8

9 Key Points from U.S. v. Upjohn Communications between company counsel and employees are privileged Privilege extends to any employee regardless of position, assuming privileged subject matter and employee awareness of purpose Agents of attorneys may be protected by the privilege Privilege belongs to the company, not the individual employee, and company may waive the privilege Because of the risk to employees, counsel must explain to interviewees role, representation, and potential disclosure 9

10 Recent Case Law Regarding Privilege Recent Court decisions offer mixed results, but reinforce challenges of single, privileged investigation In re KBR (D.C. Cir. June 27, 2014) Privilege upheld for legal analysis, but not for litigation hold or factual recitation Obtaining legal advice was a primary or significant purpose of investigation Subsequent references in litigation (e.g., deposition notices) do not waive privilege Frickey v. Kobelco (E.D. La. Mar. 5, 2015) Privilege denied for single investigation pursuant to company practice, with attorney participation Failed to show legal, rather than business or technical, advice 10

11 When Is a Privileged Investigation Appropriate? Focus on examining potential areas of liability based on nonprivileged findings, providing legal advice, and evaluating potential exposure Advantages include: Protecting findings from discovery Fostering increased candor during investigation Where legal risk appears more significant, recommended approach may be dual track investigations Privileged and Non-Privileged Where legal risk is less significant, may choose to conduct a nonprivileged RCA with legal support as needed 11

12 Lessons for Privileged Investigations Not seeking to duplicate the work of non-privileged investigations Bigger picture issues examined by privileged team in anticipation of litigation and enforcement; more time & resources to dig deeper Facts are not privileged, but analysis may be Client engagement necessary for ethical reasons and to ensure clear understanding of purpose and goals Corrective actions may eventually be fed back into non-privileged operational process; sharing lessons learned but not analysis Structure & Staffing Lawyer may prepare investigation guidelines or charter making clear purpose in anticipation of litigation and for purpose of evaluating legal exposure Team led by lawyer(s), supported by internal and consultant subject matter experts 12

13 Ethical Considerations Investigation truly conducted by attorneys must include appropriate admonitions regarding legal role/responsibility Corporate Miranda, Upjohn warnings Attenuation of attorney involvement may reduce effectiveness of warning Interviewers may seek to avoid confrontational language Tension between ethical requirements and protection of privilege Obligation to protect confidentiality (Model Rule 1.6) Obligations to organization as client (Model Rule 1.13) and fairness to opposing party and counsel (Model Rule 3.4) Tendency may be to downplay the involvement of attorneys in order to avoid disruption to operations 13

14 Case Study 1 Employee complaint submitted through HR website portal alleges that over-valued assets are purchased based on kickbacks from specific vendor companies Internal investigation initiated under company s business ethics policy; also required by Department of Interior No action filed against company, although company has been previously fined by government agencies and settled with DOJ for operation of related assets Executive Management would like a privileged investigation staffed by HR employees and directed by Financial Security specialist 14

15 Case Study 1: Question 1 What is the primary purpose of the investigation? 1. Provide legal advice 2. Based on government mandate 3. Anticipation of litigation 4. Satisfy internal policy 5. Prevent recurrence 15

16 Case Study 1: Question 2 If two investigations are conducted as non-privileged and privileged dual track, what issue should the privileged investigation focus on? 1. Corrective actions to prevent employees from engaging in repeat misconduct 2. Legal analysis of whether a crime has potentially been committed 3. Factual investigation of misconduct 4. Examination of potential systemic problems enterprise-wide 5. Development of legal defenses in the event the company is sued or fined 16

17 Case Study 1: Question 3 What is counsel s position with respect to the staffing model proposed by company leadership? 1. It is appropriate, assuming counsel explains to the other team members the legal purpose of the investigation 2. It undermines the company s claim of privilege 3. It requires that non-lawyers provide Corporate Miranda warnings to all employees interviewed 4. It would likely be treated as privileged if a legal charter makes clear that it is conducted in anticipation of litigation 5. It will require that counsel be included on all communications in order to protect the claim of privilege 17

18 Case Study 1: Question 4 How should counsel address ethical considerations with multiple non-lawyers on privileged investigation team? 1. Train team members to ensure that employees interviewed understand what is required under Upjohn 2. Avoid having non-legal professionals acting as agents of attorneys 3. Prepare written scripts for interviewers to demonstrate proper admonitions 4. Avoid providing specifics about the investigation in order to protect confidentiality and witness involvement 5. Have interviewees read and sign confidentiality statements 18

19 Case Study 1: Question 5 Counsel determines during the course of her investigation that certain employees, while not engaged in bribery, actively manipulate air emissions equipment. What should she do? 1. Report to the relevant government agency or criminal enforcement as soon as she suspects a law has been broken 2. Alert other counsel first, in order to assess the situation and avoid the possibility of waiving the company s privilege 3. Bring her findings to the highest ranking corporate officer until the problem is addressed 4. Confront the individuals with her findings 5. Continue her investigation until she is confident she has all the facts 19

20 Case Study 2 Equipment fire results in serious employee and contractor injuries, as well as damage to manufacturing facility Company procedure mandates internal investigation based on these consequences General Counsel tasks you to investigate incident Company would like technical analysis and corrective actions developed by favored third-party consultant Personal injury lawsuit and TRO filed three days later Multiple regulatory agencies investigating OSHA and CSB have already requested company s internal root cause analysis 20

21 Case Study 2: Question 1 What is the primary purpose of the investigation? 1. Provide legal advice regarding company s compliance with safety regulations 2. Comply with internal incident investigation procedure 3. Comply with request from regulatory agency 4. Analyze potential affirmative defenses to regulatory fine 5. Develop legal strategy in anticipation of personal injury suit 21

22 Case Study 2: Question 2 What effect does the agency s request for the investigation report have on the company s claim of privilege over the document? 1. If the agency is entitled to the report, privilege will be waived because its contents will be disclosed to a third party 2. None - one party s claim of privilege exists without respect to another party s request for that information 3. The company should redact all privileged analysis in the report, leaving factual information un-redacted 4. The agency s request (assuming it is statutorily entitled to receive the report) means that privilege never attached 5. If the court determines the agency s request is the driving factor in developing the report, privilege is waived 22

23 Case Study 2: Question 3 How should the company treat its contractor during its privileged investigation of the incident? 1. Submit a written request from Legal to contractor for any needed information without providing legal analysis 2. Avoid any engagement with third party in order to avoid waiver 3. Interview contractor employees, if allowed, but avoid disclosing the purpose of the investigation 4. Engage the contractor in a joint investigation subject to common confidentiality and privilege 5. Have business points of contact within company ask for any needed information as they would in ordinary course 23

24 Case Study 2: Question 4 Is a litigation hold required, and what are the implications with respect to privilege? 1. The company should avoid a litigation hold until the court issues a discovery order 2. A litigation hold, labeled privileged, should be issued describing the incident and privileged investigation 3. Counsel should issue one litigation hold as swiftly as possible, covering all categories of information relevant to the incident 4. The company should wait until a document request is received from an opposing party to issue a hold 5. Legal should issue an initial hold and update as necessary 24

25 Case Study 2: Question 5 Should the third party consultant be retained, and if so, how should the engagement be structured? 1. Through the company s Operations group, which is best suited to lead the consultant s technical work 2. By outside counsel, in order to clearly establish its work as privileged 3. By the company s Legal department, in order to direct the work in conjunction with the privileged review 4. Pursuant to a call out in the ordinary course of business 5. By the investigation team leader personally, in order to ensure full understanding of how the information will be used 25

26 Final Thoughts 26

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