New policies announced by the Department of Justice (DOJ) may undermine a key tool that corporate counsel have used for years when confronted with allegations of wrongdoing: joint defense agreements. Joint defense agreements have been and can still be an effective means for employers and employees to work together when their interests align; but, in light of the new policies, all counsel should proceed with caution and follow a few simple tips to ensure that privileged communications stay privileged.
Joint Defense Agreements and Waiver of Privilege
When responding to allegations of misconduct, joint defense agreements facilitate a company’s internal investigations and fact finding. For decades, corporate employers and individual employees have entered into joint defense agreements when responding to internal whistle-blowers or government investigations. These agreements allow a company’s lawyers to work with individual counsel to pool resources, coordinate strategy, and avoid duplication of work, all without waiving privilege over attorney-client communications or attorney work product.
Typically, the attorney-client privilege, covering the confidential communication of information from a client to his or her attorney for the purpose of seeking legal advice, is waived when that information is revealed to a third party. The judicial recognition of joint defense agreements created an exception to this rule. Privileged information can be provided to another party to a joint defense agreement—without waiver—as long as both parties share a common interest in the present proceeding or investigation.
Joint defense agreements are powerful tools for defense attorneys who represent clients that share a common interest in defending against a government investigation. In disputes with the government, corporate defendants often aggressively defend information and documents covered by the joint defense privilege. For example, in pending litigation with the DOJ, PG&E recently successfully quashed the government’s attempt to subpoena billing time entries for 28 individual employees’ counsel on the grounds that the entries were protected by the joint defense privilege. Order re Applications for Rule 17(c) Subpoenas, United States v. Pac. Gas & Elec. Co., No. 14-cr-00175-THE-1 (N.D. Cal. Mar. 28, 2016) (ECF No. 408). From the government’s perspective, joint defense agreements may allow some wrongdoing companies and individuals to hide bad facts and to get their stories straight, all under the umbrella of the attorney-client privilege.
The Yates Memo: New Policies
Last fall, the DOJ announced new policies on corporate plea agreements and the credit available to corporations that cooperate with government investigations. The guidelines, which will directly affect joint defense agreements, were formally released in a memo written by Deputy Attorney General Sally Quillian Yates (referred to within legal circles as the Yates Memo). The Yates Memo signaled a new commitment by the DOJ to investigate and bring cases, both criminal and civil, against individual employees of corporations.
Relevant to the continued use of joint defense agreements by corporate counsel, the Yates Memo set forth a requirement that companies must disclose “all relevant facts about individual misconduct” to receive “any consideration for cooperation.” Prior to the memo, the government awarded credit to corporations on a sliding scale, based on the degree of cooperation. Some cooperation resulted in some credit. Now, to receive cooperation credit, companies must “identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide . . . all facts relating to that misconduct.”
The Yates Memo makes joint defense agreements between companies and their employees more difficult in two ways. First, companies obligated to disclose all relevant facts to the government to earn any cooperation credit may feel pressure not to enter into joint defense agreements that can tie their hands, making individuals less willing to cooperate with corporate investigations and, ironically, companies less likely to learn all relevant facts about the misconduct. Second, if a company refuses to provide such information to the government, prosecutors may seek to force the company to do so by arguing that the divergent goals of companies and their employees (maximum cooperation credit for companies and no criminal prosecution for individuals) negate the parties’ common interest, which is required for a court to recognize joint defense agreement protections.
A logical question is whether companies can earn cooperation credit if they are prohibited by joint defense agreements from disclosing relevant facts about misconduct and, if so, whether such agreements between companies and employees can survive. The short answer is this: We don’t yet know, and counsel should proceed carefully until we do.
Until we have more clarity about the government’s and the courts’ positions on the Yates Memo’s effect on joint defense agreements between companies and employees, it is best to proceed with caution. Specifically, counsel should consider the following:
- Get ahead of the problem. Early in an investigation, company counsel in cooperation mode can ask government attorneys for their thoughts on entering into joint defense agreements with individual employees and what effect, if any, such agreements will have on a company’s application for cooperation credit in the event of a plea or deferred prosecution agreement.
- Limit individual representations. Joint defense agreements can only exist between a company and its employees if those employees have individual counsel. Company counsel should be judicious when choosing whether and which employees require separate representation.
- Be careful what you allow individuals to share. Until there is clarity on the government’s position on joint defense agreements between companies and employees, an individual should assume that all information he or she provides to company counsel under a joint defense agreement may eventually wind up in the hands of the government. At some point, the government may seek to pierce the agreement by arguing that the parties do not share a common interest.
- Get it in writing. Before the Yates Memo, counsel often entered into oral joint defense agreements, especially at the beginning of interviews or conference calls, out of convenience. Furthermore, there was, and still is, the risk that reducing an agreement to writing would later allow a party or the government to more easily find ways to undermine it. However, the risks created by the Yates Memo require counsel to seriously consider moving to written joint defense agreements that lay out parties’ specific common interests and the terms for withdrawal and post-withdrawal sharing of information.
Joint defense agreements have served corporate and individual defense counsel for decades, and they should not be abandoned without a fight. But as the government moves to more aggressive prosecution of individuals and attempts to turn companies under investigation against their own employees and executives, counsel should proceed with caution before entering into a joint defense agreement or sharing information pursuant to one.
Keywords: litigation, corporate counsel, Yates Memo, joint defense agreements, privileged communications, cooperation credit
William Drake is an associate with Steptoe & Johnson LLP in Washington, D.C.