In-house counsel know that attorney-client privilege and work product protections are important rights of their corporate clients and fundamental components that ensure fairness and the clients' right to counsel in our judicial system. But, these basic principles are increasingly under attack, and in-house counsel must be more diligent than ever in ensuring that attorney-client privilege protection properly attaches to their client communications (and that work product protections are afforded to their defense and counseling strategies, when appropriate).
A tremendous amount of press coverage has focused on the investigatory and prosecutorial abuses that have created these privilege erosion problems. (The Association of Corporate Counsel produced many of these media materials to document abuses that must be corrected.)
Here are some do's and don'ts that we've collected from our members' best practices to assist in navigating the twists and turns on the privilege path as in-house counsel render legal advice to their corporate clients. (The URL at the conclusion of this article will allow you to access ACC's full library of privilege materials, including a new whitepaper on just this topic that explores in far greater detail the practical solutions at work in scores of other legal departments and that may be worth your consideration.)
1. Don't place the "attorney-client privileged" imprimatur on every e-mail, fax cover sheet, letter and document, as if labeling alone will create a privilege that might not otherwise exist. It won't. Over-asserting privilege will actually weaken your ability to assert that truly privileged documents should be excluded from the other side's production requests.
2. When writing, document that the client requested the legal advice by writing words such as: "In response to your request for legal counsel on this issue..." Also, ensure the distribution of the privileged work is limited solely to those parties intended to receive it in the client group. This suggests careful dissemination tactics, such as adding a header to each page that states something like: "Do not distribute this document to anyone other than those listed as recipients without permission of the legal department."
3. Segregate the "facts" (e.g., results of your internal investigation) from documents that contain attorney work product (e.g., an outline of legal strategies, legal inferences or conclusions, and so on), before a document is created. The attorney-client privilege doesn't protect facts from being produced, and most lawyers and their clients want to cooperate with auditors or investigators. Since only lawyer-client communications or lawyer impressions and work product in anticipation of litigation are protected, segregate these in a separate place that allows you to produce factual reports without waiving privilege. Also, think before writing at all. While we don't suggest that you never write anything down, remember that what is not memorialized cannot be produced (unless the attorney is called as a witness, which is less likely).
4. Take a hands-on, proactive approach to client education about the privilege, what it protects and how it is likely to be used, waived or lost within today's investigation, prosecutorial or audit context. Be upfront in the cool light of day about the extent to which an attorney can (or can't) offset employee concerns that sensitive conversations with counsel will be used against them personally in the future. This hands-on approach will often help bolster the confidence of employees about what they can do to preserve privilege themselves, as well as what they should expect privilege to protect (or not).
5. Maintain confidences and report up the company chain-of-command (and potentially out) when allegations of wrongdoing surface. Lawyers representing organizations have always owed their professional loyalties to the entity and must report problems that are not resolved up the line of management, including reporting to the board when management is not responsive. Remember that the scrutiny of in-house counsel actions and decisions, as well as the increasing likelihood of becoming a target for prosecution in the event of a failure, is far greater today than it was five or ten years ago.
Privilege and confidentiality concerns differ. Confidentiality is the lawyer's obligation to the client, and exceptions to this rule are outlined in the corporate context in ABA Model Rules 1.6 and 1.13 and each state's counterpart ethics rules; privilege is an evidentiary right that resides with the client, and courts assess its applicability (or exceptions to its applicability) based on common law and even the equities of the case. Don't confuse your obligations (wherein a failure can lead to your professional liability) and your client's rights (which you are the caretaker of) when navigating this issue.
6. Learn how to give the so-called "Corporate Miranda " (aka Upjohn warnings), and talk with executive management about how they wish to plan to treat employees who are accused or suspected of wrongdoing. Corporate counsel is not the lawyer for any individual employee interviewed about a company failure or problem, but the employee is owed that reminder, and perhaps more: if the actions were not inappropriate or a determination of wrongdoing has not been made, the employee remains a part of the client group you represent. Even if you are obligated to remind non-cooperative employees that uncooperative behavior could lead to discipline or termination, employees have rights that you must respect (such as their Fifth Amendment Rights or employment or contractual rights that could include such things as attorney's fees and so on).
7. Consider the best involvement of non-lawyer or lawyer (not practicing law) employees who work in company compliance, internal audit, risk management and reporting functions. Non-lawyers who are asked to assist in-house counsel can be seen as agents of lawyers for purposes of protecting privilege, but they can also perform tasks that are undertaken without agency: namely, those tasks consistent with their corporate offices and that could become public should their work be requested in the future. If they are not working under your agency, you may be able to produce their findings without waiving privilege and satisfy your opponent's request for facts; if they are working under your agency, it may be possible to claim privilege to insulate their work from discovery.
8. Avoid executing affidavits that contradict accusations against the company; otherwise, corporate counsel may become a fact witness and any hope of asserting privilege may disappear. Counsel may also find that such actions as signing the company's Sarbox 404 reports can be seen as a verification of company assertions and can lead to a finding of waiver.
9. When faced with a demand for privileged material, try to negotiate some kind of protection from future third-party discovery; also try to limit waiver to certain categories of information to avoid entire subject matter waivers. The jurisdictions are split on whether to recognize so-called limited waiver agreements (the majority have held that such agreements are not enforceable). These efforts may not succeed, but it is the only chance of insurance against future third-party claims that counsel may have if forced to waive to the government.
10. Think pro-actively about how to protect the client's rights to confidential counsel, and do not simply acquiesce when a client's privilege rights are contested. Given recent attention to this issue and the momentum of the reforms ACC has been pushing, it is no longer considered suicidal for a company to protest waiver demands; it is increasingly considered acceptable to push back.
By following these steps, in-house counsel can help protect one of their client's fundamental rights. Learn more about ACC's and the bars' efforts and find additional resource material on corporate counsel privilege issues at www. acca.com/php/cms/index.php?id=84.
Published January 1, 2007.