United States: Protecting The Attorney-Client Privilege And Work Product Doctrine In Internal Investigations

Ralf Rodriguez contributed an article to the ACC South Florida Winter Newsletter discussing the key points in-house counsel should consider when conducting an internal investigation to establish and maintain its privileged status.

To read the full article, click here.

In-house counsel are rightly focused on the confidentiality of materials and communications from an internal investigation. To protect investigative materials and  communications from disclosure, counsel  must thoroughly understand how both  the attorney-client privilege and the work  product doctrine apply in this context.  These privileges are limited, and counsel  who do not know the limits risk an inadvertent waiver. This article provides an  overview of the key points in-house counsel should bear in mind when conducting  an internal investigation to establish and  maintain its privileged status.

Investigative Purpose

At the outset of an internal investigation,  in-house counsel should candidly assess  whether its purpose is to provide the  company with legal advice, or if it has a  business purpose. In the former case, a  court will usually treat the investigation as  privileged. In the latter case, the materials  will typically be discoverable. The distinction between an investigation conducted  to provide legal advice to the company as  opposed to an investigation completed "in  the ordinary course of business" serves as  the linchpin for determining whether the  privilege applies. See e.g. In re County of  Erie, 473 F. 3d 413, 420 n. 7 (2d Cir. 2007).

Thus, at the outset of an investigation, inhouse counsel should clearly document its  scope and purpose. Identify the key legal  issues for which the company is seeking  legal advice, being mindful that this documentation could be reviewed in camera in  the event of a governmental or third-party  inquiry. Therefore, in-house counsel should  clearly outline the legal advice being sought  without revealing all the details.

Retention of Outside Counsel

Another factor the courts emphasize  when analyzing assertions of privilege  is whether the company retains outside  counsel to provide legal advice and lead  the investigation. Involvement of outside  counsel helps establish that the investigation was initiated for the specific  purpose of obtaining legal advice,  that an attorney-client relationship  attaches to the investigation, and that the  company reasonably anticipated litigation. Each of these elements supports an  assertion of privilege, and outside counsel's notes and questions constitute the  mental impressions and opinions of legal  counsel, thereby qualifying for protection  under the work product doctrine. See e.g.,  Hickman v. Taylor, 329 U.S. 495 (1947).

It is important to understand, however,  that involvement of outside counsel does  not offer blanket protection. For example,  any recordings or transcripts taken of an  interview with any adverse party are subject  to discovery pursuant to Fed. R. Civ. P.  26 (b)(3)(C). This rule allows a party to  obtain another party's previous statements,  including "contemporaneous stenographic,  mechanical, electrical, or other recording –  or a transcription of it – that recites substantially verbatim the person's oral statement."  Id. Another vulnerability to bear in mind  is that even if outside counsel is retained to  interview an employee who has made an  allegation against the company, the attorneyclient privilege may not apply to communications exchanged during that interview  given the adversarial nature of the relationship. The work product doctrine, however,  should still apply to prevent disclosure of  outside counsel's notes and observations.

Waiver

Privilege can be waived inadvertently  in several ways. First, when preparing  a privilege log identifying privileged  materials obtained during the course of an  internal investigation, be sure to include  materials in the possession of outside  counsel. Failure to do so could lead a court  to determine the company waived the  privilege with respect to those documents.  Likewise, the privilege applying to any  investigative communications or materials could be waived by having a witnesses  testify about them. Similarly, if a company  refers to information obtained as part of its  internal investigation to support  its claims or defenses in a case, a court is  likely to find a waiver of any privilege relating to such information. Finally, cases are  legion finding the attorney-client privilege  is waived when the confidential communication is disclosed to a third-party. As  such, if in-house counsel must share privileged investigative information with a third  party, it should be in the context of a documented need for legal advice. For example,  the privilege is not typically waived if  the third party is necessary or useful for  effective communication and consultation  between outside counsel and the company.  See e.g., United States v. Kovel, 296 F.2d 918,  922 (2d Cir. 1961) (recognizing exemption  to waiver rule when the third party, such  as an accountant, is necessary or useful  for the effective consultation between the  attorney and the client).

Conducting an internal investigation can  be a high-stakes and extremely sensitive  endeavor. Companies understandably want  internal investigations to remain just that:  internal. Proceeding in line with the points  presented above will help ensure that the  attorney-client privilege and/or work product doctrine attaches to a company's investigative materials and communications.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.