Preserving the privilege in an internal investigation.
From time to time, a company’s executives will hear an allegation of serious wrongdoing within the organization. Perhaps the global sales director is accused of orchestrating bribes to local officials, or a foreperson is accused of dumping factory sludge into a storm drain. In such cases, the company may decide to respond by conducting an internal investigation.
Allegations serious enough to merit a formal investigation usually raise the prospect of future litigation. And the fruits of the company’s investigation—interview memos, technical analyses, summary reports, and so on—can be a treasure trove for courtroom adversaries. So, the company has good reason to ensure that these valuable materials are protected by the attorney-client privilege.
But that is not so easily done; recent court decisions have taken a hard line on assertions of privilege over investigatory materials.[1] Such decisions further embolden regulators and private litigants to aggressively pursue ostensibly privileged materials, and put companies on notice of the care needed to ensure that the privilege attaches to, and survives, their internal investigations.
To that end, we offer five suggestions.
1. Purpose. Whether the privilege attaches often depends on the company’s purpose. The attorney-client privilege only protects confidential communications made for the purpose of giving or receiving legal advice, while the related work-product privilege protects only materials prepared in anticipation of litigation. A company planning to assert privilege over investigatory materials must consistently speak and act in ways that reflect its desire to obtain confidential legal advice and prepare for potential litigation.
2. Leadership. Some executives presented with an allegation of misconduct will just start making phone calls, wanting to get to the bottom of things themselves. These impromptu “investigations” are almost certainly not privileged, since they are not tied to a request for legal advice or (it would seem) to a looming litigation. Job one for the company, then, is to halt any ad hoc factfinding.
That done, it will have to decide who will lead the investigation. Tapping inhouse counsel is an option, and in some cases is the best option. But inhouse counsel’s dual role is a liability, as litigants can later argue that counsel was acting as a business advisor, not a legal advisor, when she sent this email or interviewed that witness. To maximally protect the privilege, a company launching an internal investigation should retain outside counsel.
3. Documentation. Ritualistic invocations of privilege do not create protection where none existed before. Thus, an investigation conducted for business or regulatory purposes cannot be inoculated against future discovery demands by copying a lawyer on every email or writing “work product” on every memo. That said, observing certain formalities memorializes the company’s intent in ways that can be crucial to sustaining later assertions of privilege.
Engagement letters are a prime example. A company’s engagement letter with outside counsel is a chance to document not just the fact that counsel is being hired to provide legal advice, but also why counsel’s investigation is integral to rendering that legal advice. If litigation is anticipated, the letter should say that too, and should also explain why counsel’s investigation is geared toward the impending legal battle, not regulatory or business interests.[2]
Much the same can be said of communications about the investigation’s progress and results. Letters and emails that identify the legal advice to which they pertain, and stick to that topic only, are more likely to be recognized as privileged. Marking these communications “privileged” may help as well, so long as the label is not used indiscriminately.[3]
4. Dissemination. As noted above, the privilege does not attach to attorney-client communications, even communications with a clear legal purpose, if the communications are not confidential. Thus, distributing legal advice outside the privileged relationship amounts to a waiver.
When the client is an individual, the zone of privilege typically covers the client, the lawyer, and third parties helping the lawyer render legal advice. When the client is a business organization, however, it can be tricky to determine just how widely the attorney’s advice may be disseminated without risking a waiver. Before commencing an investigation, counsel must determine the rule prevailing in the relevant jurisdiction, identify the people who fall within the applicable zone of privilege, and warn them against circulating communications to a wider audience.
5. Interviews. Interviewing witnesses is crucial to most any internal investigation. To protect records of witness interviews against compelled disclosure, care is needed both in conducting the interview and in memorializing it.
At the beginning of each interview, counsel confronts a familiar dilemma—how do I deliver the warnings needed to preserve the privilege (known as Upjohn warnings) without creating a prosecutorial atmosphere that chills open dialogue? A friendly, compliant introduction might go something like this:
Good morning, my name is Sonya Hernandez. I’m an attorney representing ABC Corp. I’m talking to everyone who might have information about certain billing procedures, so I can give legal advice to ABC and protect it during any lawsuits that might come up. Are you comfortable speaking with me today? As I said, I represent ABC, the company, not you personally. Even so, this conversation is protected by the attorney-client privilege as long as it remains confidential. Can you agree not to discuss our conversation with anyone else? I can’t properly represent ABC unless I have complete and accurate information, so can you also agree that our discussion today will be open and honest? Let me also tell you that the privilege protecting our conversation is ABC’s privilege. That means that ABC can decide to waive the privilege down the road, for example in its discussions with regulators or law enforcement. Does that all make sense to you? Do you have any questions about what I’ve just said before we begin?
Once the interview is complete, counsel usually writes a memorandum summarizing the witness’s information. That memo should begin by tying the interview to the request for legal advice and the potential litigation underlying counsel’s retention. It should also explain that the memo is interspersed with the author’s thoughts, opinions, and mental impressions, and it should document the Upjohn warnings that counsel delivered, along with the witness’s affirmations of understanding and consent.
Businesses often confront situations where proper legal advice and litigation preparedness require thorough fact-gathering. Following the five recommendations laid out above will help ensure that the fruits of those investigations remain confidential.
[1] See, e.g., In re Capital One Consumer Data Security Breach Litigation, No. 19-MD-2915, 2020 WL 3470261, at *6 (E.D. Va. June 25, 2020) (holding that a data-security report created for counsel conducting an internal investigation was not entitled to work-product protection because it was “substantially the same in substance or scope” as the report that would have been created for business or regulatory purposes); Guo Wengui v. Clark Hill, PLC, No. 19-CV-3195, 2021 WL 106417, at *5-6 (D.D.C. Jan. 12, 2021) (similar).
[2] This advice applies equally to counsel’s engagement of any professionals or vendors needed to assist in the investigation.
[3] Proper labeling will also aid counsel in segregating privileged material if law enforcement ever seizes information related to the company’s investigation.