American litigators expect to claim the attorney-client communication privilege to shield from discovery information obtained from their clients or, in the representation of a corporation, from interviews of the company’s executives. Litigators also expect to claim the work-product protection over the records they create in the course of preparing their clients for litigation.
But as firm as those expectations may be, they are not universally shared, especially abroad, but sometimes at home too.
First, challenges to the work-product protection are widespread. Consider the forced discovery of interview memoranda in the United Kingdom in the context of Serious Fraud Office investigations of corporations. See Sunil Harjani’s article in the Fall 2018 issue of Litigation, “Privilege and Interview Notes in Cross-Border Investigations.” Harjani described investigation counsel’s preference in maintaining both the attorney-client communication privilege and the work-product protection over “all information obtained” and challenges to the protection in the context of internal investigations, but the same can now be said in the context of cross-border criminal and regulatory investigations.
Second, challenges to the attorney-client communications privilege abound. The most striking example comes from searches and seizures directed at individuals that take place at company or law firm offices. Those run parallel to the U.S. Department of Justice’s (DOJ’s) most recent challenges to the attorney-client privilege in criminal matters through the crime-fraud exception. The DOJ has used filter teams, also sometimes called “taint teams,” to review evidence over which criminal defendants had claimed privilege.
U.S. prosecutors appear prone to do so even more in the future, as the DOJ announced in May 2020 the creation of a Special Matters Unit within the fraud section dedicated to filtering privileged documents. As reported by the Global Investigations Review, the chief of that new unit will “advise prosecutors throughout the fraud section on ways to identify and handle issues related to ‘evidence collection’ and privilege at all stages of criminal investigations and litigation.”
In France, investigators have gone even further. In the context of a tax fraud investigation into members of the Wildenstein family, a famed art appraisal and collection dynasty, French investigators raided the offices of a law firm and seized handwritten notes that were later introduced as evidence at trial. The justification for those methods in both the United States and France is the accusation of the lawyer as co-conspirator to the underlying criminal behavior. But the stage of an investigation at which the searches are conducted makes that justification questionable.
In the Wildenstein matter, French lawyer Olivier Riffaud even spent time in jail, unable to make bail. Lawyer and tax advisor Robert Panhard was charged as a tax fraud accomplice for his work in preparing inheritance records for the Wildenstein family. Handwritten notes from meetings he had with his clients reflecting concerns he had with certain trust setups, and identifying the risks he anticipated, were introduced as evidence of his knowledge of the tax risks undertaken by his clients and of his own criminal mens rea. Judges used what would be considered by U.S. litigators as the attorney’s own work product to show that a step too far had been taken. The lawyer went from advisor to an accomplice.
A February 2016 decision by France’s highest criminal court, the Cour de cassation, describes the limitations imposed on such searches at a lawyer’s home or office, applying the European Convention on Human Rights (ECHR). The decision expands the conditions necessary for a valid authorization to search the home or office of a French lawyer, by reinforcing an obligation to state the reasons for the search. Previously, such a search required a reasoned written decision by the magistrate who conducted the search, in the presence of the targeted lawyer and of the head of the local bar. Relying on the ECHR’s Article 8 concerning privacy, the 2016 decision requires that detailed written reasoning be provided in advance, including enumerating the criminal offenses targeted and the necessity for the search, to allow the head of the local bar to object to the search to protect the defendant lawyer’s rights and the privilege. If a search decision, or warrant, does not include sufficient justification, then it may be invalidated under the court’s decision and the ECHR, regardless of any harm to the lawyer or any grievance the lawyer would claim.
In Germany, the most remarkable example of such searches comes from the early December 2019 raid at Volkswagen’s headquarters. Already, the offices of Volkswagen’s subsidiary Porsche had been raided by prosecutors in April 2019, following the raids of the offices of Audi, another Volkswagen subsidiary, in March 2017, and the raid of the Volkswagen headquarters in October 2015. In the context of the same broad investigation of the automaker, German authorities even raided the offices of international law firm Jones Day in Munich, to obtain documents related to the law firm’s representation of Volkswagen.
Jones Day had been hired to conduct an internal investigation into the automaker and its subsidiaries’ 2015 emissions testing. Germany’s highest court ruled that prosecutors could review the seized Jones Day materials because no attorney-client relationship existed between Volkswagen subsidiary Audi and the lawyers of the firm. Munich prosecutors claimed that Volkswagen itself was not the target of the raids conducted at the law firm. Under German law, the privilege did not cover the communications between Volkswagen and Jones Day.
The German court further held that Volkswagen could not object to the seizures, because they were conducted on premises that belonged not to the company but to the law firm. In a helpful aside, the court did hold that the attorney-client privilege would otherwise protect communications conducted under an internal investigation, even if the company was not yet formally under investigation by prosecutors, as long as the internal investigation was undertaken specifically to prepare a defense.
In the Volkswagen case, the company had retained Jones Day to conduct internal investigations specifically because of criminal investigations initiated against the company in the United States. Still, reliance on the U.S. privilege was not possible. Identifying the scope of representation and the entities covered by the attorney-client relationship could prove helpful in similar situations with defense anticipated in multijurisdictional criminal investigations.
It is quite striking to look at Italy where—similar to France or Finland, for example—the attorney-client communication privilege, while it exists, generally does not apply to internal counsel. The reason underlining the distinction in certain European jurisdictions between external counsel and internal counsel comes from the perceived lack of independence of counsel operating within a company. The bar does not reconcile ethical obligations, and the independence that is necessary for the application of privilege, with the employer-employee relationship that characterizes internal counsel’s position vis-à-vis the client.
The Italian Guardia di Finanza, a military force that investigates financial crimes, uses forthwith subpoenas allowing its officers to seize and review records without first conducting a privilege review. Those searches can include searches at the offices of internal counsel, which can be in the scope of the warrants issued by magistrates in charge of criminal investigations.
That practice is extremely common and has even recently involved the Vatican police, which conducted dawn raids of the offices of the Vatican secretary of state and of its financial information authority—the AIF. The seizures in October 2019 included documents and electronic devices, as part of an investigation of suspected financial irregularities.
If material privileged under U.S. law were to be seized in Italy, U.S. counsel would be smart to vigorously oppose its disclosure. A 2006 decision out of the Southern District of New York, In re Parmalat Securities Litigation, 2006 U.S. Dist. LEXIS 88629 (S.D.N.Y. Dec. 1, 2006), held that documents seized by the Guardia di Finanza in Italy retained their privilege in civil litigation in the United States because the disclosure had been involuntary and because the party from whom the records were seized took a reasonable course of action to preserve its privilege over them.
There, the defendant showed that under U.S. rules the disclosure of confidential information was compelled, thus satisfying a first requirement to find there was no waiver, and promptly asserted its claim of privilege before use of the seized documents by the plaintiff in depositions. The court held that in the case of an involuntary disclosure, such as a Guardia di Finanza raid, a waiver of the privilege could still result if the party “fails to take steps ‘reasonably designed’ to protect and preserve the privilege.”
The court in Parmalat relied on a 1992 Ninth Circuit decision, United States v. De la Jara, 973 F.2d 746, citing Transamerica Computer Co., Inc. v. International Business Machines Corp., 573 F.2d 646 (9th Cir. 1978), itself well known to U.S. litigators for its detailed description of the steps taken to avoid disclosure of privileged material in hard-copy productions.
Litigators must remember that U.S. courts need not always apply the exclusionary rule to evidence obtained abroad by foreign law enforcement in the course of parallel investigations, even under circumstances that one would expect to easily justify such exclusion. A 2013 decision from the Second Circuit allows the DOJ to request, obtain, and rely on evidence obtained in raids from foreign law enforcement under certain circumstances.
In United States v. Getto, 729 F.3d 221 (2d Cir. 2013), the court held on appeal that evidence seized by Israeli law enforcement and received by the DOJ through mutual legal assistance treaties could be used, even if the seizure was conducted under circumstances that would violate the U.S. Constitution’s Fourth Amendment. In Getto, the evidence received had been seized at the impetus of the Federal Bureau of Investigation (FBI), while U.S. law enforcement agents watched the illegal search and seizure performed in a live broadcast.
The court held that, although the FBI had requested assistance with its investigation and shared the results of its own preliminary investigation with the foreign law enforcement agency, Israeli investigators had still conducted their own independent parallel investigation. For that reason, the FBI shared but did not participate in law enforcement actions abroad that would have been considered illegal in the United States, and the evidence obtained could be used in U.S. proceedings.
All legal systems operate with their own internal logic and operating principles. U.S. litigators must not be fearful of the risk presented by information and evidence obtained abroad, but they must be well armed to ensure they can preserve it and use it.
