I. Overview of the Attorney-Client Privilege and the Work Product Doctrine
Most attorneys are familiar with the basics of the attorney-client privilege, the attorney work product doctrine and attorney ethics rules to maintain client confidentiality. Although these precepts are governed by the law of the jurisdiction, the general protections are similar regardless of the jurisdiction. The attorney-client privilege protects communications between a client and an attorney when the communication was made for the purpose of the client obtaining legal advice.[1] The work product doctrine generally prohibits discovering documents and other tangible items that were prepared in anticipation.[2] Attorney ethics rules require lawyers to keep confidential communications with their clients.[3]
It is particularly crucial to identify and protect these privileges when a client is under investigation by the government whether that investigation is a criminal or regulatory matter or a congressional investigation. Privilege is treated differently in the context of congressional investigations. Recent developments illustrate the importance of being aware of privilege considerations at every stage of an investigation. With the change of power in the U.S. House of Representatives after the 2018 midterm elections, congressional investigations and oversight hearings likely will thrive – requiring corporate counsel to focus on the applicability of privilege in congressional investigations. Either way, it is important for both internal and external corporate counsel to be aware of and maintain these protections.
II. Government Investigations – Recent Developments
Recent court decisions and governmental guidance continue to shape the parameters of privilege in government investigations, and the considerations outside counsel should make and discuss with clients before and during investigations. First, a recent decision in a United States Securities and Exchange Commission (“SEC”) investigation found waiver of work product privilege where information was shared with the government during the course of an investigation.[4]
In 2012, General Cable Corporation (“GCC”) retained Morgan Lewis & Bockius (“Morgan Lewis”) to advise on accounting issues. Morgan Lewis conducted an internal investigation, and informed the SEC of the investigation. As part of the SEC discussions, Morgan Lewis gave an oral briefing of witness interviews it conducted during the internal investigation. GCC settled with the SEC in December 2016 and shortly thereafter, the SEC filed suit against three former GCC directors. These directors attempted to subpoena Morgan Lewis documents relating to the internal investigation. Morgan Lewis declined to produce the materials, stating they were protected by work product. A court decision found that the “oral download” of the interviews to the SEC constituted a waiver of work product protection.[5]
The court in Herrera stated that the waiver issue turned on whether the oral briefing to the SEC constituted a “sufficiently detailed” summary such that it was effectively the “functional equivalent” of the interview memoranda. The court stated that Morgan Lewis’ work product argument would be stronger if it had provided only “vague references,” “detail-free conclusions” or “general impressions” to the SEC staff.[6]
Second, recent government guidance, including the Department of Justice’s Yates memo,[7] gave rise to new concerns for the corporate client when it faces a government investigation. The Yates memo in particular, requires companies to disclose ‘‘all relevant facts about individual misconduct’’ to receive ‘‘any consideration for cooperation.[8]’’ Furthermore, corporations must actively investigate wrongdoing to receive cooperation credit.[9] As a result, the corporate client may be in conflict with its executives or employees who the corporation has identified as engaging in the misconduct. This will impact how the corporate client assesses the decision to cooperate with the government and the decision to participate in a joint defense or common-interest agreement.
III. Congressional Investigations – Recent Developments
Congressional investigations are distinct from other government investigations in meaningful ways. A key distinguishing factor is the treatment of the attorney-client privilege, a common law privilege that Congress generally does not recognize.
Congress maintains that it is not obligated to recognize common law privileges established by courts, such as the attorney-client privilege, work product doctrine, or other non-constitutional privileges.[10] Congress bases this assertion on (1) the separation of powers, dictating that Congress is not bound by courts’ common law practices and (2) Congress’s inherent legislative right to investigate. Congress has nearly limitless powers to investigate anything within the “legitimate legislative sphere.”[11]
Yet, Congress often respects the right of private parties to maintain the confidentiality of legal advice, and rarely compels the production of clearly privileged documents. Congressional investigators typically use the threat of compelled production of privileged documents as leverage to extract other things from the corporation under investigation, such as an agreement to make witnesses available or to pursue far-ranging e-discovery.
Courts have never directly addressed the scope of attorney-client privilege in congressional investigations. And, Congress has little desire to see the point tested, corporations often lack the will to test it, and courts often dodge resolving the question.
The most recent court challenge involving an assertion of privilege in a congressional investigation was in 2017 by Backpage CEO Carl Ferrer. The D.C. Circuit dismissed Ferrer’s challenge to a subpoena issued by the United States Senate’s Permanent Subcommittee on Investigations (“PSI”) for mootness, and vacated a series of district court rulings in the case that seemed to open the door to an adjudication of Congress’s ability to compel privileged documents.[12]
Backpage withheld several documents from its production to PSI, citing attorney-client privilege. The Committee contended that the company had not explicitly asserted attorney-client privilege until late in the investigation, and the district court agreed, finding that Backpage waived its ability to object on privilege grounds. PSI’s argument that Backpage asserted privilege too late opened potentially dangerous ground. In finding that Ferrer had waived privilege, the court’s ruling seemed to suggest that attorney-client privilege existed before Congress.
But while the litigation and appeal developed, PSI completed its investigation into Backpage and subsequently informed the D.C. Circuit that it would not certify its continued interest in enforcing the subpoena. The court dismissed the case for mootness and vacated the lower courts’ decisions.[13] The Backpage case essentially restores the status quo ante, in which congressional investigation committees and those under investigation will bargain around Congress’s position on the attorney-client privilege without much guidance from a controlling court decision.
IV. Key Considerations When Advising the Corporate Client on Protecting Privilege and Work Product
Given these recent developments, external and internal counsel should take certain steps when advising the corporate client on these protections.
First, counsel should brief corporate clients on the operation and importance of attorney-client and work product privilege as quickly as possible once the client is alerted to a government investigation. In addition to explaining to the corporate client how both the privilege and work-product work and why these protections exist, counsel should be sure to advise clients that neither the privilege or work product is sacrosanct. There are many scenarios, often not fathomable at the beginning of an investigation, that may lead to a later disclosure and the loss of privilege, such as disclosure to cooperate in a government investigation, to preserve the reputation of the company, a change in control at the client, or later conduct that waives the privilege.
Second, lawyers should work to develop a communication structure to ensure that privileges and work product are protected. One area that should be clearly resolved when determining the communication structure is the role of a client’s general counsel or other internal counsel. In-house counsel often wear two hats, leaving privilege at risk. In the corporate context, the privilege applies to employee communications with corporate counsel “concern[ing] matters within the scope of the employees’ corporate duties,” where the employees are “aware that they were being questioned in order that the corporation could obtain legal advice.[14]” If corporate counsel also discusses business matters with employees, privilege claims may be weaker.
Further, as part of this communication structure, lawyers should work with clients to establish a centralized communication structure at the beginning of an investigation, with outside counsel included on all key communications to ensure the efficacy of the privileges.
Third, as is often the case in government investigations, lawyers must involve third parties such as auditors, experts, or public relations consultants. Whether information and documents shared with these third parties will retain privilege or be afforded work-product protections depends on the circumstances. The best practice in these situations is to execute a written common interest agreement between the third-party and outside counsel that clearly sets out, at a minimum, (1) the scope of the engagement; (2) the existence of a common interest; (3) the lawyer’s need for services in delivery of specified legal advice to client; (4) an agreement that the third-party will maintain confidentiality, including by safeguarding and marking records; and (5) an agreement that the third-party will direct substantive communications to the lawyer.
Similarly, lobbyists can be another tricky issue with respect to attorney-client privilege. Many lobbyists were dual hats, as both lobbyists and lawyers. Whether communications between a lawyer-lobbyist and a client are protected by the attorney-client privilege depends on a fact-specific inquiry of whether “legal advice” is being given.[15]
Attorney-client privilege protects communications in which the lawyer-lobbyist is “acting as a lawyer.”[16] The types of communications that likely would be protected include the legal analysis of legislation,[17] such as the interpretation and application of legislation to factual scenarios; legal advice on pending legislation;[18] and legal advice on how to proceed with lobbying efforts.[19] Conversely, the attorney-client privilege does not protect communications with lawyer-lobbyists that do not provide legal advice.[20] Examples of communications that likely would not be protected include summaries of legislative meetings;[21] updates on legislative or lobbying activity; and updates on the progress of certain legislation.[22]
As a result, when corporate clients work with lobbyists, it is important to define the scope of work, particularly in what capacity the lobbyist will be advising the client. A well-defined statement of work with a lawyer-lobbyist may faciliate protecting attorney-client communications in the instance that the lawyer-lobbyist is providing legal analysis on legislation. However, if the lobbyist is not providing legal counsel, then, the engagement letter should be clear on that as well.
Fourth, when the government, whether prosecutors, regulators, or Congress request information that requires the client to waive its protections, outside counsel should carefully consider government requests for information balanced against the risk of waiver. Usually, counsel can work with the government to negotiate waiver concerns; neither the United States Department of Justice nor the SEC require a privilege waiver in connection with cooperation credit. To the extent a client decides to share information, keep it as high-level as possible.
Fifth, counsel should advise clients to proceed cautiously with joint defense and common-interest agreements. Joint defense or common-interest agreements allow parties to mount a common defense in civil or criminal matters while maintaining privilege over communications.[23] These can be with other investigated parties (e.g., other suspected co-conspirators), other co-investigators (e.g., Audit Committee or an outside audit firm), or client constituents (e.g., officers or employees). Lawyers should work with corporate clients to assess balancing the benefits of joint defense and common-interest agreements against potential loss of cooperation credit. If a client enters into any such agreement, counsel should reinforce for the client that privilege is vulnerable to attack, and anything shared as a result of the shared defense could end up in the government’s hands.
As these examples illustrate, privilege and work product considerations may conflict with a client’s ability to fully defend itself in the face of a government investigation. It is important to discuss privilege issues with clients regularly, assess potential concerns at each stage of a government investigation, and develop both strategic and tactical approaches to either maintaining these protections or strategically determining to waive them.
[1] See eg. Upjohn Co. v. United States, 449 U.S. 383 (1981).
[2] Fed. Rules Civ. Pro. R. 26(b)(3)(a).
[3] See eg. ABA Model Rule 1.6.
[4] Order on Defendants’ Motion to Compel Production from Non-Party Law Firm, SEC v. Herrera, et al., No. 17- 20301 (S.D. Fl. Dec. 5, 2017)
[5] Order on Defendants’ Motion to Compel Production from Non-Party Law Firm, SEC v. Herrera, et al., No. 17- 20301 (S.D. Fl. Dec. 5, 2017)
[7] Memorandum from Sally Quillian Yates, Deputy Attorney General, U.S. Dep’t of Justice (Sept. 9, 2015) (‘‘Yates Memo’’), available at http://www.justice.gov/dag/file/769036/download
[10] D. Jean Veta & Brian D. Smith, Congressional Investigations: Bank of America and Recent Developments in Attorney-Client Privilege, Bloomberg Law Reports (Nov. 6, 2010).
[11] Eastland v. United States Servicemen's Fund, 421 U.S. 491 (1975).
[12] Senate Permanent Subcomm. on Investigations v. Ferrer, 856 F.3d 1080 (D.C. Cir. 2017).
[14] Upjohn Co. v. United States, 449 U.S. 383 (1981).
[15] In re Grand Jury Subpoenas dated March 9, 2001, 179 F. Supp. 2d 270, 285 (S.D.N.Y. 2001); U.S. Postal Serv. v. Phelps Dodge Refining Corp., 852 F. Supp. 156, 164 (E.D.N.Y. 1994); Todd Presnell, The In-House Attorney-Client Privilege, 9 No. 1 In-House Def. Q. 6 (2014).
[16] Todd Presnell, The In-House Attorney-Client Privilege, 9 No. 1 In-House Def. Q. 6 (2014); In re Grand Jury Subpoenas, 179 F. Supp. 2d at 285.
[17] Robinson v. Texas Auto. Dealers Ass’n, 214 F.R.D. 432, 446 (E.D. Tex. 2003); vacated in other part, No. 03–10860, 2003 WL 21911333, at *1 (5th Cir. July 25, 2003).
[18] Weissman v. Fruchtman, No. 83 Civ. 8958(PKL), 1986 WL 15669, at *15 (S.D.N.Y. Oct. 31, 1986).
[19] Black v. Southwestern Water Conservation Dist., 74 P. 3d 462, 468-69 (Colo. App. 2003).
[20] Presnell, supra 15; In Re Grand Jury Subpoenas, 179 F. Supp. 2d, 285 (S.D.N.Y. 2001).
[21] North Carolina Elec. Membership Corp. v. Carolina Power & Light Co., 110 F.R.D. 511, 517 (M.D.N.C. 1986); Todd Presnell, supra 15.
[23] “The rule . . . is that where two or more persons who are subject to possible indictment in connection with the same transactions make confidential statements to their attorneys, these statements, even though they are exchanged between attorneys, should be privileged to the extent that they concern common issues and are intended to facilitate representation in possible subsequent proceedings.’’ Hunydee v. United States, 355 F.2d 183, 185 (9th Cir. 1965)