January 30, 2017 Articles

The Confidentiality of Pre-Suit Investigations

By Kat Carrington

In the realm of product design and manufacture, a product is conceptualized, developed, and ultimately transformed into a final, tangible product for user consumption. But what if a company wants to re-conceptualize and re-develop its product into a newer, better final product—"Product 2.0"? While improvement should be celebrated, in the legal realm companies are often severely scrutinized for improvement efforts, particularly when Product 2.0 is created because Product 1.0 may have caused an injury. In most states, although evidentiary rules protect improvement efforts from disclosure, the confidentiality that companies expect to attach to improvement efforts for discovery often does not. But shouldn't companies be afforded that protection? Enter the self-critical analysis privilege.  

The self-critical analysis privilege (SCAP) "is a qualified privilege designed to protect an entity's internal reviews and investigations from disclosure based on the policy of encouraging companies to assess their compliance with regulations and laws and make any necessary changes without fear of reprisal in any future litigation." Elisabeth M. McOmber, "Self-Critical Analysis Privilege: Does It Protect Manufacturers Seeking to Review and Improve Internal Practices and Procedures?," Products Liability, Vol. 25, No. 2 (Summer 2014). From a public policy perspective, the SCAP makes sense because it promotes company proactivity in curing problems with products that companies would otherwise be hesitant to discover before an injury occurs. Ludwig v. Pilkington N. Am., Inc., No. 03 C 1086, 2004 WL 1898238, at *1 (N.D. Ill. Aug. 13, 2004).

Notwithstanding its benefits, the SCAP is neither widely accepted nor uniformly applied. See Amy M. Pepke, "In-House Counsel and the Internal Investigation: What Have You Got to Lose?," 1 Pro Te: Solutio 6, 9 (July 2008). As one court explained, "courts have been somewhat hesitant to embrace the [SCAP] and have often qualified their uses of the privilege [because] its application will lead to the exclusion of extremely relevant and persuasive evidence." Ludwig, 2004 WL 1898238, at *1. This is apparent despite the relatively high threshold for the privilege, which generally requires consideration of these factors:

  • the information must result from a critical self-analysis undertaken by the party seeking protection;
  • the public must have a strong interest in preserving the free flow of the type of information sought;
  • the information must be of the type whose flow would be curtailed if discovery were allowed; and
  • no document will be accorded a privilege unless it was prepared with the expectation that it would be kept confidential and has in fact been kept confidential.

Dowling v. Am. Haw. Cruises, Inc., 971 F.2d 423, 426 (9th Cir. 1992).

In addition, some courts have limited the privilege to materials prepared for mandatory government reports, while others have applied varying balancing tests to assess whether the privilege is overcome. See, e.g., Harding v. Dana Transp., Inc., 914 F. Supp. 1084, 1100 (D.N.J. 1996); Roberts v. Carrier Corp., 107 F.R.D. 678 (N.D. Ind. 1985).

For products liability, application of the SCAP is primarily state-law dependent because products liability itself is state-law dependent. McOmber, supra. Indeed, state courts that reject the application of the privilege often do so because there is no state statute or court rule establishing the privilege. But even if the privilege is recognized in a jurisdiction, it, like most privileges, is qualified to the extent it can be overcome if the party seeking the information demonstrates that the need for and relevance of the information outweigh the public policy concerns of maintaining the privilege.

So how does a company protect what should be confidential pre-suit investigations or product improvements? First, the company will need to determine whether the jurisdiction either has or likely would accept the SCAP. Second, it should apply the following measures when ready to engage in a self-critical analysis:

  • Prepare a thorough engagement letter identifying the purpose of seeking legal advice related to possible litigation (it is best to conduct litigation-driven investigations through outside counsel).
  • Clearly identify the internal investigating team, including only those necessary for a comprehensive investigation (smaller is better).
  • Ensure that all communications and responsibilities are channeled through counsel, including requests for information gathered for or by third parties for the investigation.
  • Clearly label all attorney-client communications and confidential exchanges.
  • Minimize written communications and email, and provide strict instructions for any distribution of them.
  • Minimize drafts and clearly label drafts.

Pepke, supra, at 10–11.

If litigation occurs in a jurisdiction that has either outright rejected the SCAP or will likely reject it, companies can take some refuge in the attorney-client privilege and work-product doctrine, so long as the above parameters are employed and maintained. Certain concepts should be remembered too. Foremost, the attorney-client privilege will not protect business advice or underlying facts simply because an attorney was involved in the communication. If the advice is of both a legal and a business nature, only the legal advice—and documents reflecting it—will receive protection under the privilege. On work product, the majority of jurisdictions apply the privilege where litigation is not imminent if the "primary motivating purpose behind the creation of the document is to aid in possible future litigation."

It remains difficult for companies to engage in self-critical analysis efforts without assuming the risk of those efforts becoming discoverable. Although the rules of evidence may protect these efforts from disclosure at trial, they do not protect them from disclosure during discovery. Any protection requires strict compliance with privilege rules. In jurisdictions that accept the SCAP, this privilege provides the most protection for companies engaging in self-critical analysis efforts because it provides more leeway than the attorney-client and work-product privileges. Unfortunately, however, its acceptance is limited. The attorney-client and work-product privileges can, nevertheless, provide protections if the appropriate parameters are put in place and are maintained.

Keywords: litigation, products liability, self-critical analysis privilege, attorney-client privilege, work-product protection

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