Recently in Attorney-Client Privilege Category

November 8, 2012

Internal Investigations and Attorney-Client Privilege: CAVEAT SPEAKER

592542_businessman_walking.jpgJoseph M. Elles, Carter's Inc.'s former Vice President of Sales, is facing federal criminal charges alleging that he aided Carter's in misstating its income in various Securities and Exchange Commission filings. The case is United States v. Elles, No. 1:11-CR-445 (N.D. Ga). Elles has objected to the government's attempts to introduce into evidence statements that he made to attorneys conducting an internal investigation for Carter's. (See U.S. v. Elles Response in Opposition to Motion to Admit Defendant's Statements.pdf) The government contends that Elles admitted his guilt during the course of a seven hour interview with counsel that conducted the internal investigation. Elles disagrees, arguing that his statements are "a far cry from the elements necessary to prove guilt beyond a reasonable doubt as alleged."

Elles raises several arguments why his statements should not be admitted. First, he claims that his cooperation with the internal investigation was coerced because Carter's said it would withhold his severance payments if he did not participate. He also attacked counsel's motives, calling them "former SEC and AUSA attorneys [who] were working hand in glove with prosecutors." As proof of this collusion, Elles pointed out that Carter's immediately waived privilege and turned over his interview to the FBI and the United States Attorney's Office the day after the interview was conducted. Elles also argues that if the portion of the interview that the government seeks to introduce is allowed, that he should be allowed to introduce other portions of his interview (which was summarized by counsel in a 33 page memorandum) and to cross examine the attorneys who conducted the interview to explain the context of his statements and to demonstrate that, as Vice President of Sales, he was not responsible for deciding how "accounting issues" were to be reported on financial statements.

Mr. Elles' co-defendant, Carter's former President, Joseph Pacifica, has similarly objected to the admission of statements he made to counsel during Carter's internal investigation.

This case highlights a critical dynamic concerning internal corporate investigations. Corporate employees who cooperate in such investigations do so at their own peril. The corporation will ultimately decide whether to assert or to waive privilege. And where, as here, the corporation decides to waive privilege, an individual employee who is incriminated by information over which privilege is waived has little recourse or ability to stop the damage. Our rule, therefore, for corporate employees deciding whether to participate in an internal investigation is caveat speaker.

September 6, 2012

Handle With Care: Level Of Protection Afforded To Communications Between Attorneys And Their Experts Is Still Up In The Air

334225_press_conference.jpgThe Pennsylvania Supreme Court will determine the scope of the work product protection afforded to communications between a party's attorney and trial expert witnesses. By order dated August 31, 2012, the Court granted the petition of Sodexho Management, Inc., Sodexho Operations, LLC and Linda J. Lawrence to review the Superior Court's en banc decision in Barrick v. Holy Spirit Hospital of the Sisters of Christian Charity to determine the following specific issue: "Whether the Superior Court's interpretation of Pa. R.C.P. No. 4003.3 improperly provides absolute work product protection to all communications between a party's counsel and their trial expert?"

The Supreme Court's decision to grant review in Barrick follows on the heels of the decision by a nine-judge en banc panel of the Superior Court to reverse both the trial court and a Superior Court three-judge panel finding that such communications were discoverable. The Superior Court's en banc held, in part, that any mental impressions or legal analyses contained within correspondence between a hospital patient's counsel and the patient's expert witness physician fell within the attorney work-product doctrine and, accordingly, were not discoverable.

Interestingly, although the Superior Court's en banc decision held that the correspondence at issue was not discoverable under the Pennsylvania Rules of Civil Procedure pursuant to both Pa. R.C.P. 4003.3 and Pa. R.C.P. 4003.5, the Supreme Court limited the issue to be decided to the scope of work product protection under Pa. R.C.P. 4003.3. Pa R.C.P. 4003.3 provides work product protections to "the mental impressions of a party's attorney or his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories." The rule also addresses the work product protections afforded to a party's representative who is not the party's attorney providing that "discovery shall not include disclosure of his or her mental impressions, conclusions or opinions respecting the value or merit of a claim or defense or respecting strategy or tactics."

As Judge Bowes correctly pointed out in his concurring and dissenting opinion in the Superior Court's en banc decision, Pa. R.C.P. 4003.3 does not provide a blanket prohibition against the disclosure of an attorney's correspondence generally, or communication with an expert specifically. Consequently, it seems likely that the Pennsylvania Supreme Court will find that there is no absolute work product protection to all such communications. It remains to be seen, however, whether the Court will carve out specifically defined categories of communications, thereby providing concrete guidance for attorneys and their experts.

Until the Pennsylvania Supreme Court issues its decision in Barrick and provides further guidance on the scope of the attorney work product, parties, their attorneys, and retained experts are well served by operating under the assumption that the work product does not protect all of their communications.

August 21, 2012

Lessons Learned from Penn State--Part II: Avoid Potential Conflicts Early, Know Who Your Client Is, and Make Sure Others Know It Too

1012552_business_world_4.jpgThe Penn State scandal was, in many ways, the perfect storm that any organization dreads. What could organization counsel have done differently as the scandal unfolded? In this installment we focus on avoiding conflicts early, knowing who your client is, and making sure others in the organization know too.

The Freeh report alleged that the University's general counsel, Cynthia Baldwin, advised the Board of Trustees against conducting an internal investigation and accompanied the two University administrators who were indicted for failing to report what they knew about Jerry Sandusky's conduct, Vice President Gary Schultz and Athletic Director Tim Curley, to the grand jury. The report also alleges that both Schultz and Curley believed that Baldwin represented them personally during their grand jury testimony, and that Baldwin failed to clarify that she represented only the University.

Counsel for any organization has a legal and ethical duty to make clear to "constituents" of the organization--directors, officers, employees, members, shareholders--that he or she represents only the organization, and not the constituent, when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the constituent. In Pennsylvania, this duty is set forth at Rule 1.13 of the Rules of Professional Conduct. Organization counsel needs to make this distinction clear to all constituents early in the investigation.

If you think about it, most people in the situation that Schultz and Curley found themselves in would assume that the organization's counsel represented both the organization and them--unlike lawyers, most are not familiar with how conflicts of interest in such situations may arise, and don't think these things through. It is incumbent upon organization counsel to explain this distinction.

This post continues after the jump.

Continue reading "Lessons Learned from Penn State--Part II: Avoid Potential Conflicts Early, Know Who Your Client Is, and Make Sure Others Know It Too" »

May 31, 2012

PRIVILEGE'S KRYPTONITE: Disclosing Documents to the Government Waives Privilege

910114_crystals.jpgThe Ninth Circuit recently joined every circuit - save the Eighth - in finding that the attorney-client privilege is waived by voluntarily disclosing privileged documents to the federal government. In In re: Pacific Pictures Corp., 2012 U.S. App. Lexis 9691 (9th Cir. May 10, 2012), the heirs of Superman's creator's estate and D.C. comics were in a dispute concerning Superman's royalties. An attorney from the law firm representing the heirs copied several documents from his employer's files and unsuccessfully attempted to solicit business from the heirs. He then proceeded to send the documents to D.C. Comics. Rather than exploit the stolen documents, D.C. Comics sent the documents to an outside attorney and sought to obtain the documents through discovery.

The heir's law firm notified the U.S. Attorney's Office of the theft. After being notified of the theft, the U.S. Attorney's Office subpoenaed the law firm for a copy of the documents stolen from the law firm. In order to assuage any concerns from disclosing the documents, the U.S. Attorney's Office sent a letter to the law firm promising that it would not provide the documents to non-governmental third parties unless required by law or ordered by a court. After receiving this letter, the law firm disclosed all the requested documents, making no attempt to redact anything from the documents. D.C. Comics then requested all the documents disclosed to the U.S. Attorney, claiming that by sending the documents to a third-party, in this case, the federal government, the law firm waived all privilege as to these documents. The Ninth Circuit agreed.

Only the Eighth Circuit allows a party to disclose documents to the government and still maintain privilege to the world at large (also known as "selective waiver"). The Ninth Circuit found that because the purpose of the attorney-client privilege is to encourage full disclosure of documents between the attorney and client, as opposed to the client and the government, allowing the privilege to apply to documents disclosed to the government would impermissibly extend the attorney-client privilege. Instead the Ninth Circuit recommended redacting any privileged information when responding to a government subpoena.

This case is a good reminder to be careful when disclosing documents in response to a government subpoena. Unless you are in the Eighth Circuit, disclosing documents to the government waives any privilege you may otherwise be able to assert with respect to those documents. Therefore, it is important to make sure that any privileged documents in your production to the government are properly redacted.