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Ethics: That's Offensive! Attacking Privilege on a Global Playing Field

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Ethics: That's Offensive! Attacking Privilege on a Global Playing Field

Ethics: That's Offensive! Attacking Privilege on a Global Playing Field

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  • 1. • CLE Seminar for In-House Counsel October 11, 2013 Washington, DC That’s Offensive! Attacking Privilege on a Global Playing Field John Koski Partner and General Counsel Dentons US LLP john.koski@dentons.com +1 312 876 3161
  • 2. Disclaimer These materials should not be considered as, or as a substitute for, legal advice and they are not intended to nor do they create an attorney-client relationship. Because the materials included here are general, they may not apply to your individual legal or factual circumstances. You should not take (or refrain from taking) any action based on the information you obtain from these materials without first obtaining professional counsel. The views expressed do not necessarily reflect those of the firm, its lawyers, or clients. Always be careful when playing with fire. 2
  • 3. Agenda • Knowing the Rules • Choice of Applicable Ethics Rules • Thinking About Privilege and Related Doctrines • Offense • Attacking Privilege Assertions • Exploiting Ethical Missteps • Defense • Answering the Hypo 3
  • 4. Knowing the Rules: Ethics • Rules of State of Primary Practice • Rules of Other Jurisdictions in Which Attorney Is Licensed • Rules of Applicable Tribunal • Out-of-State Rules • Federal Court Rules • Agency Rules • SEC can bar attorney from practice, based on own findings regarding lawyer’s violation of state ethics rules. Altman v. SEC, 666 F.3d 1322 (D.C. Cir. 2011). 4
  • 5. Knowing the Rules: Ethics • Model Rules of Professional Conduct on Choice of Law • Model Rule 8.5(a): "A lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer's conduct occurs…." • Model Rule 8.5(b): "In any exercise of the disciplinary authority of this jurisdiction, the rules of professional conduct to be applied shall be as follows: (1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and (2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct…." 5
  • 6. Knowing the Rules: Privilege and Related Doctrines  Bases for Withholding Materials:  _____________________________  _____________________________  _____________________________  _____________________________  _____________________________  _____________________________  _____________________________ 6
  • 7. Knowing the Rules: Privilege and Related Doctrines  Bases for Withholding Materials:  Attorney-Client Communication Privilege  Attorney Work Product Doctrine  Self-Critical Analysis Privilege  Common Interest – Joint Defense  Ethical Duty of Confidentiality  Subject Matter Rules: e.g.,       Fifth Amendment Spousal Doctor-Patient Priest-Penitent Deliberative Process State Secret 7
  • 8. Knowing the Rules: Privilege and Related Doctrines AttorneyClient Work Product Self-Critical Confidence Rule of Scope & Penetrability Who "Owns"? 8
  • 9. Knowing the Rules: Privilege and Related Doctrines AttorneyClient Self-Critical Confidence Evidence Civil Pro. FRCP 26(b)(3) Common Law Ethics FRE 501, 502 Rule of Work Product RPC 1.6 U.S. ex rel. Sanders v. Allison Engine Co., Inc., 196 F.R.D. 310 (S.D. Ohio 2000). Statute 215 ILCS 5/155.35 Scope & Penetrability Who "Owns"? 9
  • 10. Knowing the Rules: Privilege and Related Doctrines AttorneyClient Self-Critical Confidence Evidence Civil Pro. FRCP 26(b)(3) Common Law Ethics FRE 501, 502 Rule of Work Product RPC 1.6 U.S. ex rel. Sanders v. Allison Engine Co., Inc., 196 F.R.D. 310 (S.D. Ohio 2000). Statute 215 ILCS 5/155.35 Scope & Penetrability Narrow Broader Narrowest Broadest Difficult Need / Mental Difficult Easiest Who "Owns"? 10
  • 11. Knowing the Rules: Privilege and Related Doctrines AttorneyClient Self-Critical Confidence Evidence Civil Pro. FRCP 26(b)(3) Common Law Ethics FRE 501, 502 Rule of Work Product RPC 1.6 U.S. ex rel. Sanders v. Allison Engine Co., Inc., 196 F.R.D. 310 (S.D. Ohio 2000). Statute 215 ILCS 5/155.35 Scope & Penetrability Who "Owns"? Narrow Broader Narrowest Broadest Difficult Need / Mental Difficult Easiest Client Attorney Client Depends 11
  • 12. Attacking "Privilege" Claims • Foreign Privilege Law • Attacking US v. United Shoe Elements • Control Group States • Waivers • Inadvertent • Dissemination • Selective • Other Waiver Categories • Special Topic: Audit Letter Responses • Consequences of Work Product Claims 12
  • 13. Attacking "Privilege" Claims: Foreign Law • Many countries do not recognize official concept of an "attorneyclient" privilege. • Many foreign jurisdictions do not extend privileges to in-house counsel. • Why? Difference in legal cultures. • Disputes often involve mandatory disclosure of specific documents, not broad requests by parties. • May be no obligation to disclose documents that adversely affect one’s case. • Limited numbers and/or lack of regulation of in-house attorneys. • Although may not have defined privilege, many recognize professional secrecy and confidentiality of correspondence between client and lawyers. 13
  • 14. Attacking "Privilege" Claims: Asia • HONG KONG: •English case law authority •"A solicitor has a duty to hold in strict confidence all information concerning the business and affairs of his client acquired in the course of the professional relationship . . . " (Solicitor’s Guide to Professional Conduct, S8.01) • Applies to in-house counsel’s communications • SINGAPORE: •"No advocate or solicitor shall at any time be permitted, unless with his client’s express consent, to disclose any communication . . . by or on behalf of his client . . ." (Evidence Act, S128) • Not clear on in-house counsel 14
  • 15. Attacking "Privilege" Claims: Asia • CHINA: • Oath: "I volunteer to become a practicing lawyer of the People’s Republic of China and promise to faithfully perform the sacred duties of a socialist-withChinese characteristics legal worker; to be faithful to the motherland and the people; to uphold the leadership of the Chinese Communist Party and the socialist system; to safeguard the dignity of the constitution and the law; to practice on behalf of the people; to be diligent, professional honest, and corruption-free; to protect the legitimate rights and interests of clients, the correct implementation of the law, and social fairness and justice; and diligently strive for the cause of socialism with Chinese characteristics!" • Statutory ethical duty of confidentiality for "clients' private information" and trade secrets, or if client requests, BUT… • If a client's activities would jeopardize national and public security, or if a client's actions could cause someone serious personal or property damage, then a lawyer must inform government authorities of those activities …. 15
  • 16. Attacking "Privilege" Claims: Europe • All member states in the European Union recognize some form of attorney-client privilege. • Application and scope vary among 27 members states • Legal Professional Privilege ("LPP") • Often no civil procedure equivalent to documentary discovery or disclosure. • In-house counsel definitions/rules vary: • Legal professional registered with bar; • Legal professional not registered; • Other rules governing in-house counsel. 16
  • 17. Attacking "Privilege" Claims: Europe • Majority of EU countries recognize confidentiality obligations between a lawyer and client but do not recognize privilege for in-house counsel. These include: • Italy • Austria • Belgium • Finland • France • Greece • Sweden 17
  • 18. Attacking "Privilege" Claims: Europe • Some member states do recognize the privilege for inside counsel: • Germany • UK • Netherlands • Denmark • Spain • Portugal • Romania, Greece and Denmark do not distinguish between inside and outside counsel. • Germany, Netherlands, Portugal and Sweden recognize a limited privilege for inside counsel. 18
  • 19. Attacking "Privilege" Claims: Europe • EU has its own standards for privilege for cases involving the European Commission. • Australian Mining & Smelting Europe Ltd v. Comm. of the European Communities, ECR 1575 (1982) ("AM&S"): •European Court of Justice attempted to establish uniform application of principles of EU privilege. •Held that confidentiality of written communications between lawyers and clients are covered by LPP if: 1) communication is made for the purpose and interests in the "client’s rights of defense"; and 2) exchange must emanate from "independent lawyers." 19
  • 20. Attacking "Privilege" Claims: Europe • AM&S court also implied that the EU does not recognize privilege for attorneys outside of the EU member states: • The privilege is only protected for a lawyer "entitled to practice his profession in one of the member states" but that "such protection may not be extended beyond these limits." • What does this mean for US? 20
  • 21. Attacking "Privilege" Claims: Europe • European Court of Justice affirmed determination that company cannot secure confidentiality protection of communications between in-house lawyer and employees. Case C-550/07-P, Akzo Nobel Chemicals Ltd v. European Commission (September 14, 2010). • Did not matter that communications were in preparation for litigation against the company. • Court applied the holding in AM&S to determine scope of privilege for EU investigations. 21
  • 22. Attacking "Privilege" Claims: Europe • Facts: •EU raid of UK premises of Akzo Nobel in 2003. •Documents seized included emails between in-house counsel and General Manager. •In-house lawyer was member of Netherlands Bar. •Company claimed emails were covered by LPP. •Commission argued that LPP did not apply because under AM&S, communications must both: • be made for purpose of exercising a company’s rights of defense, and • emanate from independent lawyers. 22
  • 23. Attacking "Privilege" Claims: Europe • The lower court (Court of First Instance of the European Committees) rejected LPP claim for correspondence with Akzo’s in-house lawyers. • Akzo appealed to the European Court of Justice: •Supported by various bodies representing the interests of legal counsel (e.g., ACC, International Bar Association, European Company Lawyers Associate); •British, Dutch and Irish governments. 23
  • 24. Attacking "Privilege" Claims: Europe • Holding: • Court affirmed Commission’s argument, stating no reason to extend LPP to inhouse lawyers and company personnel communications. • Applying AM&S rule (communications must emanate from "independent lawyers"), Court reasoned that in-house lawyer cannot be "independent" due to employment relationship: "An in house lawyer, despite his enrollment with a Bar or Law Society and the ethical obligations to which he is, as a result, subject, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm does in relation to his client." (¶ 43) 24
  • 25. Attacking "Privilege" Claims: Europe • Akzo thus does not change or create new law, it merely reaffirms principles laid out in AM&S. • Court made clear ruling does not affect attorney-client privilege under national law. • E.g., if investigation was conducted under a national competition authority, and not the European Commission, the emails may have been protected by LPP. • However, broad interpretation of EU law indicates that it may apply the same rule beyond competition investigations, to any seizure of documents by European Commission. • Many foreign jurisdictions do not recognize privilege for in-house attorneys. 25
  • 26. Attacking "Privilege" Claims: Europe • Since U.S. attorney-client privilege is based on assumption that client has a reasonable expectation of confidentiality, litigants may argue that U.S. companies have no reasonable expectation of confidentiality in communications to and from in-house counsel shared with company personnel in Europe because they are subject to seizure by the European Commission. • Akzo Nobel rejected arguments by American intervenors expressing concern about protecting privilege for U.S. in-house lawyers. 26
  • 27. Attacking "Privilege" Claims: Europe • Akzo Nobel did not resolve issue of whether non-EU external lawyers would be afforded privilege in the course of EU proceedings. • The Advocate General argued that the EU should not recognize other privileges under EU law: • "The [American Corporate Counsel Association] submits that EU law must extend the protection afforded by legal professional privilege even to communications with in-house lawyers who are members of a Bar or Law Society in a third country. . . . That claim must be rejected." (Advocate General Opinion ¶ 189) 27
  • 28. Attacking "Privilege" Claims: Europe • Different treatment under national laws v. EU law creates potential waiver issues. • A party may produce documents to EU officials and then risk waiver under US law. • Different treatment may encourage strategic behavior by authorities of nations where a document would otherwise be privileged. • EU authorities may disclose privileged documents to US or other authorities. 28
  • 29. Attacking "Privilege" Claims: Other Jurisdictions • Australia: "Legal Professional Privilege" or "Client Legal Privilege" generally recognized for both outside and in-house counsel. • Brazil: Attorney-client privilege recognized for both outside and in-house counsel. • Canada: Solicitor-Client Privilege for both outside and in-house counsel. • Egypt: Attorney-Client privilege recognized, for both outside and in-house counsel. • India: In-house counsel communications not recognized. • Mexico: Attorney-Client privilege recognized for both outside and in-house counsel. • Saudi Arabia: Attorney-Client privilege recognized for outside, but not inhouse, counsel. • South Africa: Attorney-Client privilege recognized for outside counsel, but unanswered as to inside counsel Source: http://www.lexmundi.com/lexmundi/InHouseCounsel_AttorneyClientPrivilege_Guide.asp 29
  • 30. Attacking "Privilege" Claims: US Applying Foreign Law • In international disputes, where alleged privileged communications took place in a foreign country or involved foreign attorneys or proceedings, courts defer to the law of the country that has the "predominant" or "most direct and compelling interest." Astra Aktiebolag v. Andrx Pharmaceuticals, Inc., 208 F.R.D. 92, 98 (S.D.N.Y. 2002); Golden Trade, S.r.L. v. Lee Apparel Co., 143 F.R.D. 514, 522 (S.D.N.Y. 1992). • Court notes difficulty in applying foreign country’s privilege rules within US discovery. • Comity requires consideration of context. • Courts will often apply the laws of the country in which the privileged communication took place. 30
  • 31. Attacking "Privilege" Claims: US Applying Foreign Law • Renfield Corp v. E. Remy Martin & Co., 98 F.R.D. 442 (D. Del. 1982) • Court held that if a protection privilege was recognized under either foreign or domestic law, parties were entitled to invoke it. • French in-house counsel’s advice to defendant company was privileged. • Reasoning was based on a "functional equivalence" test that looked to the training, skill, and certification of the attorneys in the foreign country. • Did not matter that the French in-house counsel was not member of the bar. 31
  • 32. Attacking "Privilege" Claims: US Applying Foreign Law • Flip side - documents may not be privileged, even if they would be under U.S. law: • Malletier v. Dooney & Bourke, Inc., 2006 WL 3476735, at *17 (S.D.N.Y. Nov. 30, 2006): No privilege because communications of French in-house counsel were not privileged under French law, and thus, parties engaged in communications had no expectation that they would be confidential. • In re Rivastigmine Patent Litig., 237 F.R.D. 69 (S.D.N.Y. 2006), aff’d in part, remanded in part, 239 F.R.D. 351 (S.D.N.Y. 2006): Court applied Swiss law and found that communications between Swiss patent agent, his clients, and Swiss in-house counsel were not privileged. 32
  • 33. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 33
  • 34. Attacking "Privilege" Claims: Control Group States • In corporations, most jurisdictions follow Upjohn Co. v. U.S., 449 U.S. 383 (1981). • But, in some states (AK, HA, IL, ME, NH, OK, RI, SD) also a "control group" test. • "If the employee making the communication, of whatever rank he may be, is in a position to control or even to take a substantial part in a decision about any action which the corporation may take on the advice of the attorney, or if he is an authorized member of a body or group which has that authority, then … he is (or personifies) the corporation when he makes his disclosure to the lawyer and the privilege would apply." City of Philadelphia v. Westinghouse Electric Corp., 210 F. Supp. 483, 485 (E. D. Pa. 1962) (first adoption of control group test). • Privilege limited to communications with employees "whose advisory role to top management in a particular area is such that a decision would not normally be made without [their] advice or opinion, and whose opinion in fact forms the basis of any final decision by those with actual authority." Consolidation Coal Co. v. Bucyrus-Erie Co., 89 Ill. 2d 103 (1982). 34
  • 35. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 35
  • 36. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 36
  • 37. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of[3]: “With respect to the law or his subordinate and Model Rule 1.0 cmt the bar of a court, an organization, including the government, (b)department ofno question that the members of the department acting as a lawyer; in connection with this communication is there is ordinarily (3)constitute a firm within the meaning of the Rules of Professional Conduct. attorney was informed the communication relates to a fact of which the Here can be uncertainty, however, as the identity of the client. (a)example, it may not be clear whether the law department of a For by his client corporation represents a subsidiary or an affiliate corporation, (b) without thecorporation by whichstrangers as well as the presence of the members of the department of securing primarily either (c) for the purpose are directly employed.” (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 37
  • 38. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of[3]: “With respect to the law or his subordinate and Model Rule 1.0 cmt the bar of a court, an organization, including the government, (b)department ofno question that the members of the department acting as a lawyer; in connection with this communication is there is ordinarily (3)constitute a firm within the meaning of the Rules of Professional Conduct. attorney was informed the communication relates to a fact of which the Here can be uncertainty, however, as the identity of the client. (a)example, it may not be clear whether the law department of a For by his client corporation represents a subsidiary or an affiliate corporation, (b) without thecorporation by whichstrangers as well as the presence of the members of the department of securing primarily either (c) for the purpose are directly employed.” What about subsidiaries, that are not wholly owned? A lawyer (i) an opinion of law or representing such an entity in a transaction of uncertain (ii) legal service or fairness may do so only with the consent of the parent and (iii) assistance in some proceeding, and (d) not for the purpose of the client because ownership of the two entities “is not identical a their interests materially differ committingand crime or tort; and in the proposed transaction.” Restatement (Third) of Law Governing Lawyers sec. 131 cmt. D, illus 2. See also NYC Ethics Op. 2008-2 (addressing in-house lawyer’s representation of corporate affiliate in conflict situations). (4) the privilege has been (a) claimed and (b) not waived by the client. 38
  • 39. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 39
  • 40. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers Gucci America, Inc. (c) for the purpose of securing primarily eitherv. Guess?, Inc., (i) an opinion of law or 2011 WL 9375 (S.D.N.Y. Jan. 3, 2011) (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 40
  • 41. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) The person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 41
  • 42. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) The person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose For some courts, where a clienteithersee an outside lawyer, of securing primarily goes to there may be some kind of “presumption” that legal (i) an opinion of law or advise was sought. Diversified Indus., Inc. Meredith, 572 F.2d 596 (ii) legal service or (8th Cir. 1977). Where communication involves (iii) assistance in some proceeding, and some courts will find privilege an in-house attorney, (d) “only showing that not for the purpose ofupon a clear a professional[in-house counsel] gave committing a crime orcapacity.” tort; and [advice] in legal (4) the privilege has been (a) claimed and (b) not waived by the client. In re Sealed Case, 737 F.2d 94, 99 (D.C. Dir. 1984). 42
  • 43. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 43
  • 44. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; Compare United States v. Stewart, 287 F. Supp. 2d 461 (2) the person 2003) and US the communication was made (S.D.N.Y. to whom v. Wade, 203 F. App’x 920 th Cir. 2006), to Witte v. Witte, 2012 WL 1108539 (Fla. App. April 4, 2012) (10 (a) is a member of the bar of a court, or his subordinate and (presence of a close family member may not, of itself, waive privilege). (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 44
  • 45. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; Compare United States v. Stewart, 287 F. Supp. 2d 461 (2) the person 2003) and US the communication was made (S.D.N.Y. to whom v. Wade, 203 F. App’x 920 th Cir. 2006), to Witte v. Witte, 2012 WL 1108539 (Fla. App. April 4, 2012) (10 (a) is a member of the bar of a court, or his subordinate and (presence of a close family member may not, of itself, waive privilege). (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either Beyond family members, sharing communications with others, even (i) an opinion of law or those working on a matter, can destroy privilege: American Legacy (ii) legal service or Found v. Lorillard Tobacco Co., 2004 Del. Ch. LEXIS 157 (Nov. 3, (iii) assistance in some proceeding, and firm from tobacco client); Stenovitch v. Wachtell, Lipton, 2004) (p.r. 756 NYS2D 367 (N.Y. Supp. Ct. 2003) (d) not for the purpose of committing a crime or tort; and (investment advisor to bank (4) the privilege has been (a) claimed and (b) not waived by the client. client); Asousa P’ship v. Smithfield Foods, Inc., 2005 Bankr. LEXIS 2373 (E.D. Pa. Nov. 17, 2005) (valuation consultant for corporate client). But see In re Flonase Antitrust Litig., 2012 WL 2581040 (E.D. Pa. July 12, 2012) (consultant acted as “functional equivalent” of corporate employee, but each document must be reviewed to see if “created for the purpose of providing or obtaining legal advice”). 45
  • 46. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; Compare United States v. Stewart, 287 F. Supp. 2d 461 (2) the person 2003) and US the communication was made (S.D.N.Y. to whom v. Wade, 203 F. App’x 920 th Cir. 2006), to Witte v. Witte, 2012 WL 1108539 (Fla. App. April 4, 2012) (10 (a) is a member of the bar of a court, or his subordinate and (presence of a close family member may not, of itself, waive privilege). (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed Translators, likely okay. Farahmand v. Jamshidi, 2005 U.S. Dist. LEXIS 2198 (D.D.C. Feb. 11, 2005). (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either Beyond family members, sharing communications with others, even (i) an opinion of law or those working on a matter, can destroy privilege: American Legacy (ii) legal service or Found v. Lorillard Tobacco Co., 2004 Del. Ch. LEXIS 157 (Nov. 3, (iii) assistance in some proceeding, and firm from tobacco client); Stenovitch v. Wachtell, Lipton, 2004) (p.r. 756 NYS2D 367 (N.Y. Supp. Ct. 2003) (d) not for the purpose of committing a crime or tort; and (investment advisor to bank (4) the privilege has been (a) claimed and (b) not waived by the client. client); Asousa P’ship v. Smithfield Foods, Inc., 2005 Bankr. LEXIS 2373 (E.D. Pa. Nov. 17, 2005) (valuation consultant for corporate client). But see In re Flonase Antitrust Litig., 2012 WL 2581040 (E.D. Pa. July 12, 2012) (consultant acted as “functional equivalent” of corporate employee, but each document must be reviewed to see if “created for the purpose of providing or obtaining legal advice”). 46
  • 47. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 47
  • 48. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and US v. Roe, 168 F.3d 69 (2d Cir. 1999) (test: (i) the (b) in connection with this communication is work product was lawyer; communication or acting as a itself in furtherance of the crime or fraud; and (ii) probable cause to (3) the communication relates to a fact believe that the particular communication or work of which the attorney was informed product was intended in some way to facilitate or to (a) by his client conceal the criminal activity). (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 48
  • 49. US v. Stevens 10/15/2013 49
  • 50. US v. Stevens 10/15/2013 50
  • 51. US v. Stevens 10/15/2013 51
  • 52. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 52
  • 53. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made Inadvertent Production (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 53
  • 54. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made Inadvertent Production (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; Excess Dissemination (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 54
  • 55. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made Inadvertent Production (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; Excess Dissemination (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presenceSelective Wavier of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 55
  • 56. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made Inadvertent Production (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; Excess Dissemination (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presenceSelective Wavier of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) Audit Letter Wavier not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. 56
  • 57. Attacking "Privilege" Claims: Majority US Rule U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357 (D. Mass. 1950): (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made Inadvertent Production (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; Excess Dissemination (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presenceSelective Wavier of strangers (c) for the purpose of securing primarily either (i) an opinion of law or (ii) legal service or (iii) assistance in some proceeding, and (d) Audit Letter Wavier not for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client. Other 57
  • 58. Attacking "Privilege" Claims: Inadvertent Waiver • Some courts hold that where there has been a disclosure of privileged communications to third parties, the privilege is lost, even if the disclosure is unintentional or inadvertent. See, e.g., In re Grand Jury Proceedings, 727 F.2d 1352, 1356 (4th Cir. 1984); In re Sealed Cased, 877 F.2d 976, 980 (D.C. Cir. 1989). • Most courts have rejected such a "strict responsibility" rule of waiver and instead look to facts surrounding a particular disclosure. See Alldread v. Grenada, 988 F.2d 1425 (5th Cir. 1993), setting forth five-part test based on circumstances surrounding the disclosure: (1) the reasonableness of precautions taken to prevent disclosure; (2) the amount of time taken to remedy the error; (3) the scope of discovery; (4) the extent of the disclosure; and (5) the overriding issue of fairness. • Keep in mind your duties upon receipt of same. Terraphase Eng’g, Inc. v. Arcadis, U.S., Inc., 3:10-cv-04647 (N.D. Cal. Dec. 17, 2010); Clark v. Superior Court, 196 Cal. App. 4th 37 (2011). 58
  • 59. Attacking "Privilege" Claims: Waiver by Dissemination • Courts recognize that attorney-client advice can be distributed at some degree within an organization. Strougo v. BEA Associates, 199 F.R.D. 515, 519-20 (S.D.N.Y. 2001) ("distribution within a corporation of legal advice received from its counsel does not, by itself, vitiate the privilege"); SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 518 (D. Conn. 1976) (privileged communications will not lose "protection if an executive relays legal advice to another who shares responsibility for the subject matter underlying the consultation"). • Some courts apply a "need to know" test. Wrench LLC v. Taco Bell Corp., 212 F.R.D. 514, 517 (W.D. Mich. 2002) ("privilege extends only to those employees with a 'need to know,' including those employees with general policymaking authority and those with specific authority for the subject matter of the legal advice"); Andritz Sprout-Bauer, Inc. v. Beazer East, Inc., 174 F.R.D. 609, 633 (M.D.Pa. 1997) (privilege lost "when the communications are relayed to those who do not need the information to carry out their work or make effective decisions on the part of the company"). 59
  • 60. Attacking "Privilege" Claims: Waiver by Dissemination • Verschoth v. Time Warner Inc., No. 00CIV1339, 2001 WL 286763, at *2 (S.D.N.Y. Mar. 22, 2001), on how to measure "need to know": (1) the role in the corporation of the employee or agent who receives the communication; and (2) the nature of the communication, that is, whether it necessarily incorporates legal advice. To the extent that the recipient of the information is a policymaker generally or is responsible for the specific subject matter at issue in a way that depends upon legal advice, then the communication is more likely privileged. 60
  • 61. Attacking "Privilege" Claims: Selective Waiver • Majority Rule: Voluntary disclosure of privileged materials to the government waives the privilege; followed in 1st, 2nd, 3rd, 4th, 6th, 7th, 10th, DC, and Fed. Cir. • Minority-of-One Rule: Disclosure to government does not waive privilege in the 8th Circuit: Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1978). • Compromise Approach: A few district courts (N.D. Cal., D. Colo., S.D.N.Y.) have found no waiver where disclosure subject to confidentiality agreement. • "Common Interest" Approach: Court approved selective waiver argument, in part because entity and government had a common interest of "uncovering improper and illegal fund management and obtaining legal redress." Wsol v. Fiduciary Management Associates, 1999 WL 1129100 (N.D. Ill. 1999). • Most recently: In re Pacific Pictures Corp., 679 F.3d 1121 (9th Cir. 2012) (rejecting Diversified, “purported confidentiality agreement,” and “common interest” arguments; and finding production “voluntary” notwithstanding subpoena). 61
  • 62. Attacking "Privilege" Claims: Audit Letter Waiver? • Between 1975 and 2000, only 8 cases addressed the subject. Michael F. Sharp et al., "Audit-Inquiry Responses in the Arena of Discovery: Protected by the Work-Product Doctrine," 56 Business Lawyer 183 (November 2000). • Of those, many compelled the disclosure of audit letter responses or similar documents. See United States v. Gulf Oil Corp., 760 F.2d 292 (Temp. Emer. Ct. App. 1985) (rejecting application of work product doctrine); Independent Petrochemical Corp. v. Aetna Casualty & Surety Co., 117 F.R.D. 292 (D.D.C. 1987) (finding material was designed not to assist in litigation; only to assist in the performance of regular accounting work); United States v. Drexel Burnham Lambert, (Sealed Order, S.D.N.Y. 1988) (compelling disclosure of audit letters in sealed opinion); In re Hillsborough Holdings Corp., 132 B.R. 478 (Bankr. M.D. Fla. 1991) (finding that accountant-client privilege did not protect response; no analysis of attorney-client communication or work product issues as to audit letter responses). 62
  • 63. Attacking "Privilege" Claims: Audit Letter Waiver? • Sharp et al. argued the better rule was in Tronitech, Inc. v. NCR Corp., 108 F.R.D. 655 (S.D. Ind. 1985), holding that an audit letter response "is not prepared in the ordinary course of business but rather arises only in the event of litigation" and "is comprised of the sum total of the attorney’s conclusions and legal theories concerning that litigation." • See also United States v. Under Seal, 33 F.3d 342 (4th Cir. 1994) (affirming order to produce documents but requiring court to conduct in camera review and redact opinion work product); Vanguard Savings and Loan Ass’n v. Banks, 1995 U.S. Dist. LEXIS 13712 (E.D. Pa. 1995) (rejecting Gulf Oil rationale, and requiring redaction of lawyer work product from letters). 63
  • 64. Attacking "Privilege" Claims: Audit Letter Waiver? • Since the Sharp article: • Southern Scrap Metal v. Fleming, 2003 WL 21474516 (E.D. La. 2003) ("work product doctrine clearly applies to the audit letters prepared and sent by" outside counsel to the corporation’s auditors). • In re Honeywell International Securities Litigation, 2003 WL 22722961 (S.D.N.Y. 2003) (upheld assertion of work product for audit letters and litigation reports prepared by internal and external counsel, as well as documents from its auditor memorializing corporation’s opinion work product). • In re Raytheon Securities Litigation, 218 F.R.D. 354 (D. Mass. 2003) (audit letter responses may be privileged, but "[t]o the extent that information in these letters must be disclosed in the public financial statements of the company being audited, it is not entitled to protection"). 64
  • 65. Attacking "Privilege" Claims: Audit Letter Waiver? • Lawrence E. Jaffe Pension Plan v. Household Int’l, Inc., 237 F.R.D. 176 (N.D. IL 2006): • Attorney opinion letters prepared by corporations constituted work-product because they were prepared because of pending or threatened litigation; • Attorney opinion letters were not “dual-purpose documents” that were not entitled to protection under the work-product privilege; • Attorney opinion letters were not routine investigative or evaluative reports prepared in the ordinary course of business that were not entitled to protection under the work-product privilege; • Corporations' disclosure of attorney opinion letters to their outside auditor did not effect a waiver of the work-product privilege; and • Corporations' litigation database and loss reserve information were protected work-product. 65
  • 66. Attacking "Privilege" Claims: Other Waivers • Reliance on Advice of Counsel: Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992) ("The privilege which protects attorneyclient communications may not be used both as a sword and a shield."). • Waiver by Subsequent Privilege Holder, including BK Trustees: CFTC v. Weintraub, 471 U.S. 343 (1985). • Refreshing Recollection: Federal Rule of Evidence 612. • Communications with Testifying Experts: Fed. R. Civ. P. 26. • Tax Shelters: US v. Frederick, 182 F.3d 496 (7th Cir. 1999) ("taxpayer should not be permitted, by using a lawyer in lieu of another form of tax preparer, to obtain greater confidentiality than other taxpayers"). 66
  • 67. Attacking "Privilege" Claims: Consequences of WP • Courts have held duty to preserve documents when attorney asserts work product protection over such documents. • Siani v. State Univ. of NY, 2010 WL 3170664 (E.D.N.Y. Aug. 10, 2010): If litigation was reasonably foreseeable for the purposes of asserting work product protection "it was reasonably foreseeable for all purposes." (Emphasis added) 67
  • 68. Attacking "Privilege" Claims: Exceptions • Unavailability, for work product (not attorney-client privilege). Fed. R. Civ. P. 26. • Crime/Fraud: See US v. Roe, supra. • Joint Clients: Car & General Ins. Corp. v. Goldstein, 179 F. Supp. 888 (S.D. N.Y. 1959). • Fiduciary Duties: Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970). • Open Meeting / Sunshine Laws: NLRB v. Sears, Roebuck & Co., 421 U.S. 132 (1975). 68
  • 69. How to Avoid This Happening to You? 69
  • 70. Defensive Strategies: Protecting Privilege • Form of Communication. Consider the pros and cons of oral versus written communication. It may be greatly more efficient for a team to get together at one meeting to work through an issue, as opposed to an endless exchange of emails. Further, emails make it difficult to limit distribution and preserve the highest degree of confidentiality. • Labels. Label privileged communications "PRIVILEGED AND CONFIDENTIAL," but do so appropriately and judiciously. Where materials are not identified as privileged, a court may be skeptical that the privilege was contemplated at the time of the communication. But, indiscriminately labeling materials as privileged may look suspicious and undercut an argument for privilege protection. • Titles. In writing memos, emails, etc., choose titles that accurately reflect the content, but won’t appear alarming on a privilege log. 70
  • 71. Defensive Strategies: Protecting Privilege • Legal/Business Distinction. Ensure that privilege assertions are made on communications relating to legal advice, not business or other advice. If presentations or other documents contain both legal and business advice, either segregate out or specially label the legal advice. • Limit Distribution. Where practical, limit key attorney-client communications to individuals who would qualify under the "control group" and "subject matter" tests. Distribute information on a "need-toknow" basis. Even in states which analyze the attorney-client communication through the "subject matter" test, excess distribution of privileged information may serve to destroy the privilege. Avoid email, which facilitates over-broad distribution. • Reminders. In circumstances where there could be confusion as to the purpose of the meeting, inside lawyers should remind company personnel that the law department considers the communications privileged. 71
  • 72. Defensive Strategies: Protecting Privilege • Foundations. To the extent practicable, identify the foundational elements of the privilege (e.g., "This memorandum responds to management’s request for legal advice relating to compliance with California law."; "This study was undertaken at the direction of counsel, and is part of an internal compliance audit."). • Mental Impression. In preparing work product, lawyers should include mental impressions and analysis, not a recitation of what people said or did. ("This memorandum memorializes my interview of X. It is not intended as a transcript of verbatim summary of our meeting, and contains my thoughts and mental impressions."). • Waiver. Avoid partial, selective, total, inadvertent, or any other type of waiver -- but recognize that there are no guarantees. 72
  • 73. Thank You! John Koski Partner and General Counsel 233 South Wacker Drive Suite 7800 Chicago, IL 60606-6306 T +1 312 876 3161 john.koski@dentons.com dentons.com © 2013 Dentons. Dentons is an international legal practice providing client services worldwide through its member firms and affiliates. This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Please see dentons.com for Legal Notices. 73

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