Hot Topics and Recent Decisions on the Application of the Attorney- client Privilege and the Work- product Doctrine in the Corporate Arena Mary Blatch Mark Hopson Stephen Marzen Agenda Privilege Basics Internal Investigations Waiver of Privilege and Exceptions International Privilege Rules Privilege Basics Basic Elements of Privilege Although federal and state laws have minor differences, generally privilege requires proof of the five Cs: A Communication of Confidential information between a Client and Counsel for the purpose of seeking or providing legal Counsel 4 Basic Elements of Privilege Privilege runs both ways: protects clients provision of information to lawyer for the purpose of obtaining legal advice and lawyers rendering of legal advice to client 5 Ethics Rules MR 1.6 ABA Rule 1.6: Confidentiality of Information Generally, prohibits disclosure without informed consent Broader than the privilege; applies to all information relating to a client Permissive disclosure in limited situations, e.g., to prevent substantial bodily harm or financial injury to others 6 Ethics Rules MR 1.13 ABA Rule 1.13: Organization as Client Organization not management or shareholders is the client Up the ladder reporting obligation for legal violations likely to substantially injure the corporation before permissive disclosure A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents subject to the [conflict of law] provisions of Rule 1.7 To avoid the conflict and disqualification issues, in-house attorneys who perform legal services for individual directors or officers should insist on written waiver agreements 7 Which Lawyers Are Entitled to the Privilege? For privilege to attach, attorneys must be authorized to practice law. Gucci America, Inc. v. Guess?, Inc., 2011 WL 9375 (S.D.N.Y. Jan. 3, 2011) Authorization generally requires the that lawyer be a licensed member of the bar. See Anwar v. Fairfield Greenwich Ltd., 982 F.Supp.2d 260 (S.D.N.Y. 2013) 8 Privilege in the Corporate Context U.S. Supreme Court held in Upjohn v. U.S., 449 U.S. 383 (1981), that privilege applies to corporations and to in-house as well as outside counsel The purpose of the privilege is to encourage full and frank communication between attorneys and their clients (Upjohn, 449 U.S. at 389) Applying privilege in the corporate area enables corporations to obtain more effective legal assistance and to comply with the law 9 Who is the Client? Upjohn rejected the control group theory, which limited privilege to communications by high-level corporate managers and attorneys Control group test frustrates the very purpose of the privilege by discouraging the communication of relevant information by employees necessary for attorneys to render effective legal advice to the corporation (Upjohn, 449 U.S. at 392) Upjohn adopted a functional approach that examines whether the communications were made by employees with information necessary for the corporation to secure legal advice; or to employees who had a need to know the legal advice 10 11 Who Is the Client? Privilege applies so long as the communication [was] not disseminated beyond those persons who, because of the corporate structure, need to know its contents (Diversified Indus. Inc. v. Meredith, 572 F.2d 596, 609 (8th Cir. 1977)) Waiver may occur if the communication is disclosed to employees who are not in a position to act or rely on the legal advice contained in the communication 12 Power To Assert/Waive the Privilege Resides in the corporations management (Commodity Futures Trading Commn v. Weintraub, 471 U.S. 343, 348 (1985)) [W]hen control of a corporation passes to new management, the authority to assert and waive the corporations attorney- client privilege passes as well(id. at 349) New managers installed as a result of a takeover, merger, loss of confidence of shareholders, or simply normal succession may waive the attorney-client privilege with respect to communications made by former officers and directors (id.) Internal Investigations Upjohn Co. v. U.S. 449 U.S. 383 (1981) Privilege applies to communications between company attorneys and company employees if: they concern conduct within the scope of employees corporate duties and employee was aware questioning was to obtain information in order to provide legal advice 14 Upjohn Co. v. U.S. In an internal investigation, communications conducted for a legal purpose are protected by the attorney-client privilege Protects communications; not underlying facts Attorney-client privilege is applicable outside of litigation context, especially where the purpose is promoting compliance with the law Recognizes tension between legal advice/purpose vs. business advice/purpose 15 Standard Investigation Protocol Conducting Interviews: Give and document Upjohn warnings Purpose of interview is to obtain information in order to provide legal advice to the company Counsel represents the company and not the employee Interview is protected by the attorney-client privilege Privilege belongs to the company and not the employee Company may choose to disclose information obtained during interview to third parties, including the government 16 Standard Investigation Protocol Investigation Findings and Report: Deliver in writing? Written report or bullet points? What is the target audience? But: also consider conducting a non-privileged investigation and report Appropriate for discrete issues Where disclosure is certain and facts understood Avoids waiver arguments Maintains privilege on related communications 17 In re Kellogg Brown & Root [KBR] Inc. 37 F. Supp. 3d 1 (D.D.C. Mar. 6, 2014) FCA Relator served discovery requests for documents created as part of a routine Code of Business Conduct internal compliance investigation required under DOD regulations District Court ruled documents not privileged unless KBR proved that the communication would not have been made but for the fact that legal advice was sought District court held that did not meet the but for standard because internal investigation was undertaken pursuant to regulatory law and corporate policy and not primarily to obtain legal advice 18 In re Kellogg Brown & Root [KBR] Inc. 756 F.3d 754 (D.C. Cir. 2014) D.C. Circuit rejected but for standard Legal advice need not be the primary purpose Correct standard: Was obtaining or providing legal advice a primary purpose of the communicationmeaning one of the significant purposes of the communication? Helping a corporation comply with a statute or regulation although required by lawdoes not transform quintessentially legal advice into business advice 19 In re Kellogg Brown & Root [KBR] Inc. 756 F.3d 754 (D.C. Cir. 2014) Fact that investigation conducted by in-house counsel without consultation with outside lawyers does not dilute the privilege Fact that interviews conducted by non-attorneys not dispositive (communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected) Fact that KBR employees were not expressly informed that the purpose of the interview was to assist the company in obtaining legal advice is not dispositive (no magic words) 20 In re General Motors LLC Ignition Switch Litigation, 14-MD-2543 (JMF) (S.D.N.Y. Jan. 15, 2015) GM retained outside counsel to conduct an internal investigation into ignition switch defect Notes made of interviews were not transcribed Report submitted to Congress, DOJ and other agencies Plaintiffs sought discovery of underlying interview notes District court followed KBR: So long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation 21 Paterno v. NCAA/Penn State Plaintiffs seeking documents from outside counsels investigation into Sandusky scandal State trial court held that engagement letter did not reference securing either an opinion of law, legal services or assistance in a legal matter Also held that disclosure to NCAA and Big Ten caused subject matter waiver of any privilege that did exist On appeal, ACC filed amicus brief asking Superior Court of Pennsylvania to reverse ruling Argues that holding discourages universities, corporations, and non-profits from conducting investigations into alleged misconduct 22 Practice Pointers The burden is on the party claiming privilege Best practice is to expressly state when an investigation or communication is for the purpose of seeking legal advice Dont label all documents Privileged and Confidential Dont assume labeling as Privileged and Confidential is dispositive Dont assume that including in-house counsel (cc) on a communication will establish privilege Limit distribution. Watch out for Reply All 23 Practice Pointers When practical, segregate business from legal advice in separate documents or separate sections of documents Document that internal investigations are conducted under direction of legal counsel Follow investigation protocol of documenting Upjohn warnings Decide format and content of deliverables before investigation begins (e.g., do we really need to prepare interview memoranda?) 24 Choice of Law Rules for Privilege In federal cases, analysis starts with Federal Rule of Evidence 501 Generally, federal common law governs privilege In civil cases, state law governs privilege for claims under state law Court applies its state choice of law rules to determine what states substantive privilege law governs 25 Know What Law Applies KBRs one of the significant purposes test is not applied uniformly in all jurisdictions Jurisdictions disagree about standard for determining whether communications are for the primary purpose of seeking legal advice Jurisdictions construe privilege narrowly and require that legal advice be the sole purpose of the communication or the primary purpose 26 Waiver Based on Disclosure to Government Agencies Voluntary Disclosure Voluntary disclosure may have benefits in criminal and civil cases Federal Sentencing Guidelines SEC Antitrust immunity/leniency Avoiding intervention in qui tam litigation Voluntary disclosure also may be beneficial in maintaining regulatory relationships, minimizing ancillary litigation and cost, and protecting reputation 28 Voluntary Disclosure Benefits are difficult to quantify and often do not lead to a positive outcome May require extensive (and expensive) development and analysis of evidence that government might not be able to duplicate Often requires difficult disciplinary decisions including termination May require waiver of the attorney-client privilege 29 Waiver Agreements Elements of a waiver agreement: Scope Detailed subject matter of waiver and particular type of work product and communications waived Limitations Specify types of work product and communications for which privilege is not waived (e.g., interview memos) Use Specify use of privileged information, including sharing with other government agencies 30 No Selective Waiver Selective Waiver permitted in Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1977) Voluntary disclosure of privileged material to an agency does not waive privilege as to private litigants Not followed in other courts See In re Steinhardt, 9 F.3d 230 (2d Cir. 1993) Steinhardt provided Wells submission to SEC which included privileged communications marked FOIA CONFIDENTIAL TREATMENT REQUESTED Civil plaintiffs brought motion to compel production of Wells submission Order compelling Wells submission affirmed. Privilege is waived by voluntary submission to SEC in connection with investigation 31 DOJ Waiver Rules Filip Memorandum 2008 Issued in response to concerns that DOJ used the threat of criminal indictment and prosecution... to coerce corporations to waive privilege or work product protection against their will Cooperation will be measured by the extent to which a corporation discloses relevant facts and evidence, not its waiver of privileges Policy prohibits federal prosecutors from demanding privilege waivers 32 SEC Waiver Rules 2001 Seaboard Report Characterizes complete cooperation including fact that company did not invoke the attorney-client privilege, work product protection or other privileges or protections with respect to any facts uncovered in the investigation 2013 Enforcement Manual Voluntary disclosure of information need not include a waiver of privilege to be an effective form of cooperation and a partys decision to assert a legitimate claim of privilege will not negatively affect their claim to credit for cooperation However, a privilege waiver may be a means (where necessary) to provide relevant and sometimes critical information to the staff 33 Supervisory Audit Waiver Rules CFPB 2012 Bulletin:[B]ecause entities must comply with the Bureaus supervisory requests for information, the provision of privileged information to the Bureau would not be considered voluntary and would thus not waive any privilege that attached to such information 12 U.S.C. 1828(x): Submission of privileged materials to bank regulators in context of supervisory audit does not waive privilege Section 1828(x) does not apply in enforcement context CFPB rule (12 CFR Part 1070) says this policy applies to work product, but the statute does not discuss work product 34 Subject-Matter and Selective Waiver of Privilege Federal Rules of Evidence Fed. R. Civ. P. 502 (a): In the event of an intentional waiver in federal court or to a federal office or agency, the waiver extends to an undisclosed communication or information if the communications concern the same subject matter and if fairness so requires When does fairness require? [T]o prevent a selective and misleading presentation of evidence to the disadvantage of the adversary Federal courts may issue binding orders limiting waiver Not intended to otherwise alter existing privilege rules Does not change rules on selective waiver. Advisory Committee Notes 36 Application of Rule 502 Gruss v. Zwirn, 2013 WL (S.D.N.Y. July 10, 2013) (waiver occurred where company deliberately, voluntarily, and selectively presented privileged information to SEC despite confidentiality agreement with SEC) US v. Treacy, 2009 WL (S.D.N.Y. Mar. 24, 2009) (relies on FRE 502 to uphold partial waiver of certain interview memoranda) Criminal defendant obtained all interview memoranda shared with DOJ Undisclosed memoranda did not concern the same subject No evidence of selective or misleading disclosure 37 In re General Motors LLC Ignition Switch Litigation, 14-MD-2543 (JMF) (S.D.N.Y. Jan. 15, 2015) GMs agreement to make final report public and share it with Congress and various agencies did not waive privilege for underlying interview memoranda Counsels delivery of Upjohn warnings proves GM intended to maintain privilege of communications in interview memos Holds that KBR is consistent with Second Circuit standard: legal advice was one of the significant purposes of the internal investigation Privilege is not lost because nonlegal considerations are included in a communication that includes legal advice 38 Paterno v. NCAA/Penn State Disclosure of independent report by outside counsel waived attorney-client privilege as to underlying documents ACC amicus brief urged Superior Court to reject that argument There are often good reasons for privilege holders to disclose the conclusions of an investigation to the government or other third parties, e.g., to report violations of the law, facilitate settlement, and/or obtain reduced sanctions. If companies know that disclosure of an investigation report will automatically waive all materials and communications relating to the report, they will be less likely to release reports, thereby disserving the companies' stakeholders as well as the public 39 At-Issue Waiver of Privilege At-Issue Waiver Privilege may be waived if a party puts the privileged communication at issue by relying on it to support a claim or defense. In re Cnty. of Erie, 546 F.3d 222, (2d Cir. 2008) The doctrine of at-issue waiver recognizes that attorney-client communications cannot be used as both a sword and a shield [E]ven if a party does not attempt to make use of a privileged communication, he may waive the privilege if he asserts a factual claim the truth of which can only be assessed by examination of a privileged communication. Bowne of New York City, Inc. v. AmBase Corp., 150 F.R.D. 465, 488 (S.D.N.Y. 1993) 41 Scott v. Chipotle Mexican Grill, 2014 WL (S.D.N.Y. Dec. 18, 2014) In FLSA case, magistrate judge held that Chipotle was required to produce privileged communications because its affirmative defenses under 29 USC 259 and 260 put them at issue Section 259 provides an affirmative defense if employer was acting in good faith reliance on a regulation, order or ruling of Labor Department Section 260 limits liquidated damages if the violation was based on good faith, objectively reasonable grounds to believe classification of employees was consistent with FLSA standards Chipotle did not plead reliance on advice of counsel and, in fact, specifically disclaimed reliance on advise of counsel 42 Scott v. Chipotle Mexican Grill, 2014 WL (S.D.N.Y. Dec. 18, 2014) Court holds that defenses necessarily put good faith at issue and that defendant cannot plead around evidence of its state of mind Depositions and discovery responses prove that Chipotle did receive advice of counsel Privilege waived because evidence of legal advice may well demonstrate the falsity of [companys] claims of good faith belief. Plaintiffs are entitled to know if defendant ignored counsels advice Chipotle may amend its answer to eliminate good faith defenses 43 Scott v. Chipotle Mexican Grill, 2014 WL (S.D.N.Y. Dec. 18, 2014) In effect, plaintiffs successfully forced disclosure of legal advice in order to disprove good faith even though company is not relying on legal advice to prove good faith May be limited to Fair Labor Standards Act? But see 19 U.S.C. 1592 (In penalty case, if Customs proves importer made false statement or omission, the defendant must affirmatively demonstrate that it exercised reasonable care under the circumstances) U.S. Customs and Border Protection (CBP) guidance provides reasonable care may be established by consulting a customs expert, such as an attorney or a customs broker or consultant 44 In re Kellogg Brown & Root [KBR] Inc. Part II (D.C. Cir. August 11, 2015) On remand, District Court finds waiver because Required under FRE 612 because in-house counsel reviewed investigation report in preparation for deposition at which privilege was claimed KBR waived privilege under at issue doctrine. KBR sought an inference that the privileged investigation uncovered no misconduct by this chain of reasoning: (1) an investigation of alleged misconduct was conducted, (2) any misconduct was required to be reported to DOJ and (3) no report was made to DOJ in this case 45 In re Kellogg Brown & Root [KBR] Inc. Part II (D.C. Cir. August 11, 2015) Held: District Courts balancing test under 612 was inappropriate and, in any event, accorded insufficient weight to privilege Plaintiff noticed the 30(b)(6) to inquire about the privileged investigation Counsel had no choice but to review privileged material to prepare Simply reviewing privileged communications prior to testimony does not constitute using a writing to refresh recollection under In re Kellogg Brown & Root [KBR] Inc. Part II (D.C. Cir. August 11, 2015) Held: No at issue waiver because KBR did not actively seek a positive inference from the privileged investigation Statements were only in the recitation of facts and not in the argument section Statement was only in a footnote (court does not indulge in cursory arguments made in a footnote) Parties were on summary judgment and any inference from statements had to have been drawn against KBR Cannot be reconciled with Chipotle 47 Crime-Fraud Exception Applies where there is a reasonable basis to suspect that the privilege holder was committing or intending to commit a crime or fraud and that the attorney-client communications or attorney work product were used in furtherance of the alleged crime or fraud. In re Grand Jury Subpoena, 705 F.3d 133, 153 (3d Cir. 2012) If the attorney merely informs the client of the criminality of a proposed action [or lack thereof], the crime-fraud exception does not apply since that advice alone cannot be used in furtherance of a crime. In re Grand Jury Subpoena, 745 F.3d 681, (3d Cir. 2014) (3d Cir. 2014) (exception applied where client used attorneys advice in furtherance of the crime) 49 Co-Client and Common-Interest Exceptions to Waiver Co-Client Exception Requires Consent and No Conflict Counsel can serve multiple clients on same matter, consistent with rules of professional conduct, if all clients consent and no substantial risk of the lawyer being unable to fulfill her duties to them all Restatement (Third) of the Law Governing Lawyers Co-Client Exception Avoids Waiver, but No Privilege between Co-Clients Communications between co-clients and their attorney are protected against third parties No unilateral waiver (except probably for clients own communications concerning only itself) But communications in joint representation are not privileged in litigation between co-clients In re Teleglobe Communications Corp., 493 F.3d 345, 366 (3d Cir. 2007) 52 Common-Interest Exception Distinguished Applies where clients pursue common legal interest through separate counsel. See United States v. Schwimmer, 892 F.2d 237 (2d Cir. 1989) No need for actual litigation [to be] in progress for the common interest doctrine to apply (Schwimmer at 244), but [t]he common interest must be a legal rather than a commercial or financial interest (Blanchard v. EdgeMark Fin. Corp., 192 F.R.D. 233, 237 (N.D. Ill. 2000)) 53 Common-Interest Default Rules Protects privilege only of communications in furtherance of common interest Confidentiality owed to co-defendants cannot use joint defense information against co-defendants To clarify rules, and preserve options to disclose and cross-examine, best practice is to agree on rules, often in written common legal interest or joint defense agreement (JDA) 54 Parent/Subsidiary/Affiliate Issues In re Teleglobe Communications Corp., 493 F.3d 345 (3d Cir. 2007) Bell Canada Enterprises acquired Teleglobe and Teleglobes subsidiaries BCE in-house counsel jointly represented BCE and Teleglobe on securities filings both public companies BCE ceased further funding and Teleglobe and its subsidiaries filed for bankruptcy Teleglobes U.S. subsidiaries as debtors in bankruptcy sued BCE and demanded privileged communications 56 Teleglobe Appellate Decision Joint representation of BCE and Teleglobe did not include the Debtors adverse litigation proviso to the co-client exception did not apply Funneling documents through supposedly conflicted in-house counsel did not deprive parent BCE of its privilege: Eureka principle Remand for evidentiary hearing on Garner fiduciary exception to attorney-client privilege 493 F.3d at (3d Cir. 2007) 57 58 Eureka: Client Retains Privilege Even if Counsel Had Conflict Attorney jointly represented insurer and insured in litigation, which insured settled without insurers consent Both insurer and insured thought they had retained the same attorney for bad-faith refusal to consent to settlement Insurer moved to compel confidences to support affirmative defense of non-cooperation Held: [C]ounsels failure to avoid a conflict of interest should not deprive the client of the privilege (Wigmore; Restatement Third) Policy: openness and cooperation between joint clients... does not apply to matters known at the time of the communication not to be in the common interest of the attorneys two clients Eureka Inv. Corp. v. Chicago Title Ins. Co., 743 F.2d 932 (D.C. Cir. 1984) (per curiam) 59 Red Flags for In-House Conflicts Parent begins to consider exiting certain businesses (potential sale) Parent begins to consider divesting certain subsidiaries (potential spin off) Subsidiary begins to encounter substantial operating, financial, or legal problems, such that bankruptcy becomes a real possibility (potential insolvency) Solutions Impractical or Ineffective Apparent Solutions Separate in-house counsel for parent and subsidiary In-house counsel for parent and separate outside counsel for subsidiary Contract provisions or waivers Potential Pitfalls Impractical: Teleglobe courts suggestion, but matter segregation difficult with central function or small staff Impractical: requires JDA with outside counsel and $ Likely ineffective: some courts have rejected (especially in bankruptcy) 60 61 Risk-Based Approach to Avoid In-House Conflicts Be alert to parent consideration of subsidiarys potential sale, spin off, or insolvency Have subsidiary retain separate outside counsel to represent it on matters in which it may become adverse to the parent Identify and document respective lawyers clients and the scope of their representations Enter into common legal interest agreement Teleglobe Remand: Garner Fiduciary Exception The exception: where the corporation is in suit against its stockholders on charges of acting inimically to stockholder interests, protection of those interests as well as those of the corporation and of the public require that the availability of the privilege be subject to the right of the stockholders to show cause why it should not be invoked in the particular instance. Garner v. Wolfinbarger, 430 F.2d 1093, (5th Cir. 1970) The (good) cause standard: eight factor ad hoc balancing test including the seriousness of the alleged corporate wrongdoing, the need for the requested documents, and their unavailability through other means 62 Garners Mixed Rationales Commentators have described the fiduciary exception as applying to internal warfare or almost clients Fifth Circuit relied on Common law trust rule: when a trustee obtain[s] legal advice relating to his administration of the trust, and not in anticipation of adversarial legal proceedings against him, the beneficiaries of the trust ha[ve] the right to the production of that advice. Wachtel v. Health Net, Inc., 482 F.3d 225, 231 (3d Cir. 2007) Co-client exception: persons who shared lawyer cant assert privilege against each other in subsequent litigation Crime-fraud exception to the attorney-privilege Statutory rights to books and records 63 Garner Codification Garners fiduciary exception is codified in 85 of the Restatement (Third) of the Law Governing Lawyers with 10 factors Restatement 85 relies on [t]wo policy considerations: Directors and officers duty to inform shareholders and Risk that, in litigation against their constituents, the question of waiver may not be decided objectively Garner applied the fiduciary exception to a shareholder derivative suit, but the decision does not turn on whether that claim is in the case or out (430 F.2d at 1097 n.11) Subsequent courts have generally but not always applied the exception to other claims of fiduciary malfeasance (e.g., non- derivative shareholder suits, trust actions, partnership disputes) 64 Wal-Mart v. Indiana Elec. Workers Delaware Supreme Court recognizes fiduciary exception (Garner had been applied by Court of Chancery before) Stockholder sought information regarding the handling of the WalMex Investigation, whether a cover up took place, and what details were shared with the Wal-Mart Board, all of which were necessary to investigating the alleged fiduciary breaches. Delaware Supreme Court ordered Wal-Mart to produce privileged documents on handling of internal FCPA investigation Wal-Mart Stores Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, No WL (Del. July 23, 2014) 65 De Vries v. Diamante Del Mar Master in Delaware Court of Chancery emphasized three of Garners eight factors: Colorable claim (3) Unavailability from other sources (4) and Specificity of request (no fishing expedition) (7) In plenary actions, fiduciary exception is narrow, exacting and intended to be very difficult to satisfy But lower standard applies in Delaware action to inspect records credible basis to infer wrongdoing De Vries v. Diamante Del Mar, L.L.C., 2015 WL (Del. Ch. June 3, 2015) 66 Garner Application: Asserted Internal Law Firm Privilege Garner considerations apply if law firm has underlying work conflict Counsel has fiduciary duty to corporate client, including duties not to withhold information and affirmative ethical duty (MRPC 1.4) to provide information bearing on representation Underlying work conflict may materially limit counsels ability to represent corporate client Garner internal warfare rationale applies to law firm partner, but less well to outside counsel to law firm Commentators suggest a balance: no privilege for advice by lawyers on matter, but allow privileged communications with outside counsel and perhaps dedicated in-house counsel (Hazard & Hodes, The Law of Lawyering at 9-29 (Supp. 2012) 67 In-House Traps: Client-to-Client Talk Not Privileged [T]he communication must be shared with an attorney of the member of the community of interest.... [S]eparate attorneys share information (and not the clients themselves).... (Teleglobe, 493 F.3d at 364) Communications between the clients (absent a lawyer) are not privileged, which is why the lawyers should tell their clients not to discuss the matter among themselves. (Professor Stephen Gillers, Regulation of Lawyers 285 (8th ed. 2009)) Example: client-to-client communications held not privileged in Hoffman-LaRoche, Inc. v. Roxanne Laboratories, Inc., 2011 WL (D.N.J. May 11, 2011) Privileged If information that is otherwise privileged is shared between parties that have a common legal interest, the privilege is not forfeited even though no attorney either creates or receives that communication. Gucci America, Inc. v. Gucci, 2008 WL , *1 (S.D.N.Y. 2008) These documents contain discussions of counsels opinions. Being communications between parties with a community of interest, they are each privileged under the attorney-client privilege. Heidelberg Harris, Inc. v. Mitsubishi Heavy Indus., Ltd., 1996 WL , *2 (N.D. Ill. 1996) Teleglobe limitation largely lost in contemporary jurisprudence (Paul R. Rice et al., Attorney-Client Privilege in the United States 4:35, at 529 (2014)) 68 In-House Traps: Confidences Between Co-Clients No Secrets Duty/power to inform Restatement (Third) of the Law Governing Lawyers 60 cmt. k Johnson v. Superior Court (Cal. Ct. App.) Professor Stephen Gillers, Regulation of Lawyers 286 (8th ed. 2009) Secrets Kept Duty of loyalty ABA Opinion (2008) (which Professor Gillers characterizes as a poorly drafted analysis) 69 In-House Traps: Unilateral Waiver Waiver Restatement Third Co-clients and common- interest clients can waive the privilege to their own communications, absent contrary agreement Waiver of privilege in document containing communications by more than one client requires agreement, unless the non-waiving clients communications can be redacted No Waiver California [A] waiver of the right of a particular joint holder of the privilege to claim the privilege does not affect the right of another joint holder to claim the privilege California Evidence Code 912(b) 70 In-House Traps: Common Interest Identical or Similar Identical A community of interest exists among different persons or separate corporations where they have an identical legal interest with respect to the subject matter of a communication between an attorney and a client concerning legal advice.... The key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial. Duplan Corp. v. Deering Milliken, Inc., 397 F. Supp. 1146, 1172 (D.S.C. 1974) This... standard... coined in Duplan... has been widely followed. Paul R. Rice et al., Attorney-Client Privilege in the United States 4:36 Similar "[T]he common interest... may be either legal, factual, or strategic in character. The interests of the separately represented clients need not be entirely congruent." Restatement (Third) of the Law Governing Lawyers 76 cmt. e. 71 International Privilege Rules/ Cross-Border Privilege Issues Attorney-Client Privilege Abroad Privilege in United States applies to in-house counsel A few countries outside the United States do not treat communications with counsel as privileged Many countries outside the United States (especially civil law countries) do not treat communications with in-house counsel as privileged (e.g., in-house and outside counsel in France are different professions) 73 Choice of Privilege Law U.S. Courts Privilege law chosen based on country with which the communications touch base. Anwar v. Fairfield Greenwich Ltd., No. 09 Civ. 118(VM)(FM), 2013 WL , at *1 (S.D.N.Y. Jul. 8, 2013), affd, 982 F.Supp.2d 260 (S.D.N.Y. Nov 08, 2013) Touching base analysis considers Where relationship was entered into Place relationship centered at time of communication Jurisdiction where advice pertains U.S. privilege law typically applies to [c]ommunications relating to legal proceedings in the United States, or that reflect the provision of advice regarding American law... even though the communication may involve foreign attorneys or a foreign proceeding. (Gucci America, Inc. v. Guess?, Inc., 271 F.R.D. 58 (S.D.N.Y. 2010)) 74 EU and BRIC Privilege Table No Legal Professional Privilege LPP only for Outside Counsel LPP for In-House and Outside Counsel ChinaAustria Bulgaria Czech Republic Finland France Greece India Italy Poland Russia Sweden Belgium Brazil Canada Denmark Germany Israel Netherlands Portugal Spain South Africa UK 75 EU: Belgium, Germany, UK Belgium Expressly rejects Akzo Nobel But LPP protects in-house attorneys only if they are members of the Belgian Institute for Company Lawyers Germany LPP applies to attorneys enrolled at the German Bar and other EU-member states But not likely foreign lawyers United Kingdom In-house counsel communications must meet dominant purpose test Client narrowly defined employees and officers tasked with obtaining legal advice from outside and in-house counsel Does not extend to many classes of employees or to in-house counsels communications with third parties 76 European Union Legal Professional Privilege (LPP) European equivalent to U.S. attorney-client privilege Each EU member state has national and EU privilege rules EU regulatory investigations under European Commission do not treat in-house counsel as legal professionals for purpose of LPP (Akzo Nobel) LPP only if Communications made for purposes, and interests of, clients right to defense; and Emanate from an independent lawyer (in-house counsel is not independent) who is entitled to practice in EU 77 Akzo Nobel v. European Commission (Sept. 2010) Facts: EC seized documents in antitrust investigation, includings with in-house counsel and company Held: communications with in-house counsel not privileged Reasoning: in-house counsel lacks ability to exercise professional independence because: Economically dependent on client, and Cannot ignore commercial strategies pursued by employer Limitations: Applies to EU law and action EU member states are not bound by decision in framing privilege rules in their own jurisdictions 78 Implications of Akzo Nobel 1. Risk for U.S.-based in-house counsel During EC investigations, communications from U.S. in-house counsel are likely not privileged 2. Risk for U.S.-based outside counsel Outside counsel likely must qualify to practice law within EU (e.g. AM&S Europe Ltd. v. Commission) Therefore, U.S.-based outside counsel communications would not be privileged 3. Risk of inadvertent waivers of U.S. privilege Valid U.S. privileges can be waived if party voluntarily compromises confidentiality of relevant documents Turnover of documents to EC could be deemed waiver 79 80 Denying In-House Counsel LPP Disserves the Purposes of the Privilege Frustrates compliance by cutting in-house lawyers out of sensitive planning discussions where they can prevent problems: an uncertain privilege is the same as no privilege at all (Upjohn) Extending LPP to in-house counsel would not lose material evidence, because without LPP the communications will likely not occur Protecting LPP Cross-Border Spot the issue Dont assume similar evidentiary and discovery rules Become familiar with variations in scope of LPP where company does business Encourage in-house lawyers to be licensed in jurisdictions in which they reside to obtain LPP on matters of national (not EU competition) law Communicate critical advice Through local outside counsel (vast majority recognize LPP for outside counsel) Orally Contractually avoid litigation in unfavorable forums: licensing, distributor, vendor, employment, and other contracts may provide an opportunity to prevent future privilege issues 81 In-House Tips Remind Internal Clientsis for facts, not feelings Sending a courtesy copy to in-house counsel does not make theprivileged, even in the United States, and certainly not outside For sensitive form documents, revise the form to collect privileged communications in one section and document the privileged nature of the section for ready redaction Limit distribution of legal advice to those who genuinely need to know For In-House Counsel Who is your client? Act appropriately if they are almost clients or not clients Potential waiver or conflict issues with almost clients Upjohn or Miranda warnings may be appropriate with non-clients Are you providing legal or business advice? If its important that the legal advice remain privileged, consider saying that its legal advice and marking it accordingly PRIVILEGE JEOPARDY! These federal rules dont require internal investigations per se, but have played a substantial role in encouraging companies to undertake investigations when appropriate. Internal Investigations - $200 In conducting an internal investigation, it may be advisable for in-house counsel to consult with these individuals for assistance. Internal Investigations - $400 The warning typically given to employees before they participate in an internal investigation being conducted at the request of their employer. Internal Investigations - $600 When members of this corporate department or division undertake an internal investigation, it should be made clear that a purpose of the investigation is to secure legal advice. Internal Investigations - $800 The KBR court rejected the narrow but-for test for attorney- client privilege in favor of this test. Internal Investigations - $1000 The protection from disclosure given to documents prepared in anticipation of litigation. Potpourri - $200 This party bears the burden of establishing a particular communication is privileged. Potpourri - $400 Unlike the common law, this type of legal system often does not recognize attorney-client privilege in the corporate context. Potpourri - $600 DAILY DOUBLE In a federal case, this law controls the application of the attorney- client privilege. Potpourri - $800 This decision out of the European Union held that communications with in-house counsel are not privileged. Potpourri - $1000 This applies when communications are used in furtherance of an alleged crime or fraud. Waiver and Exceptions - $200 DAILY DOUBLE Voluntary disclosure of a potential violation of law to federal officials may sometimes require waiver of this. Waiver and Exceptions - $400 If you incorporate the advice of counsel as a defense, you may have to reveal that privileged advice under this legal theory. Waiver and Exceptions - $600 This type of privilege waiver may occur when privileged communications on a particular topic are intentionally disclosed to third parties. Waiver and Exceptions - $800 This exception to attorney-client privilege waiver may apply when clients with a shared legal issue work together with counsel and exchange privileged information. Waiver and Exceptions - $1000 This model rule of professional conduct states that a lawyer employed by an organization represents the organization acting through its duly authorized constituents. Whos the Client? - $200 When an in-house attorney is advising both a parent corporation and its subsidiaries, this entity generally holds the privilege. Whos the Client? - $400 In a corporate setting, this type of problem can arise when an in-house attorney advises both the business and an individual employee. Whos the Client? - $600 A 2015 DOJ memo announced new policies prioritizing this in corporate investigations and prosecutions. Whos the Client? - $800 This group of corporate fiduciaries may sometimes need legal counsel independent of the companys in-house attorneys. Whos the Client? - $1000