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  • 1. Use of Attorney-Client and Other Privileges in Investigations and Court Elena Grigera, Esq. Hogan & Hartson, LLP Mortgage Bankers Association’s Legal Issues and Regulatory Compliance Conference May 1, 2006
  • 2. When
    • Litigation – actual or potential
    • Government action
    • Report of non-compliance
    • Internal policy review
  • 3. Possible Benefits of an Internal Investigation
    • Meet fiduciary duty of exercising due diligence
    • Important tool in emphasizing corporate culture
    • Comply with legal obligations to investigate in certain highly-regulated industries
    • Identify legal and other exposure early
    • Remediate problem – mitigate damages
    • Ease public and government concerns
    • Gain control of situation
    • Obtain credit with government agencies for complete investigation and effective remediation – in current environment, agencies expect internal investigation and self reporting
  • 4. Possible Disadvantages
    • Government learns things never would or could have learned
    • If investigation not complete, loss of credibility with government agencies
    • May increase exposure if investigation inadequate and remedial action not taken
    • Adverse publicity and employment issues
    • Roadmap for private litigants - waiver
  • 5. KEY QUESTIONS
    • ATTORNEY-CLIENT PRIVILEGE :
    • Will the attorney-client privilege be waived if a corporation discloses an internal investigative report to individuals within the corporation ?
    • Will the attorney-client privilege be waived if a corporation discloses an internal investigative report to the government ?
  • 6.
    • WORK PRODUCT PROTECTION :
    • (3) Will the work product protection be waived if a corporation discloses an internal investigative report to the government ?
  • 7. ATTORNEY-CLIENT PRIVILEGE
    • Definition: (1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived
  • 8. I. Scope of the attorney-client privilege in the “corporate context”
    • When does the privilege extend to communications between an employee and/or agent of a corporation and the corporation’s attorney?
    • (1) “control group” test : limits the privilege to members of the corporation who are authorized to seek and act upon advice from corporate counsel
    • (2) “subject matter” test : extends the privilege to an employee where the employee communicates to corporate counsel at the direction of superiors and the subject matter upon which the attorney’s advice is sought by the corporation is the performance of the employees job duties
  • 9.
    • Who within a corporation has the power to waive the privilege ?
    • A corporation’s management holds the attorney-client privilege (officers and directors)
    • Some courts have taken exception to this standard in recognizing that all employees, whether management or not, with access to confidential communications, have the power to destroy that confidentiality by disclosing communications to inappropriate third parties
  • 10. II. Dissemination of and access to confidential communications
    • Disclosure should be restricted
    • Burden is on the corporation to demonstrate that the confidential information was distributed on a “need to know” basis or to employees that were “authorized to speak or act” for the corporation (whose duties relate to the contents of the information)
    • Steps a corporation takes to preserve confidentiality:
    • limited access
    • filing - not commingling with other broadly available corporate records
    • record keeping - not deviating from standard techniques of protecting confidentiality
  • 11.
    • Selective Waiver of the Attorney-Client Privilege
    • A corporation who voluntarily disclosed privileged information to one person now asserts the privilege against another person who wants the information
  • 12. Three approaches among the federal circuit courts:
    • Selective waiver is permissible;
    • Selective waiver is not permissible under any circumstances; and
    • Selective waiver is permissible when the disclosing party [corporation] has entered into a confidentiality agreement at the time of disclosure
  • 13. (1) Selective waiver is permissible
    • Diversified Industries, Inc. v. Meredith , 572 F.2d 596 (8 th Cir. 1977) (en banc).
    • “To hold otherwise may have the effect of thwarting the developing procedure of corporations to employ independent outside counsel to investigate and advise them in order to protect stockholders, potential stockholders, and customers” ( Id . at 611).
  • 14. (2) Selective waiver is not permissible
    • In re Columbia/HCA Healthcare Corp. Billing Practices Litig., 293 F.3d 289 (6 th Cir. 2002);
    • U.S. v. MIT, 129 F.3d 681 (1 st Cir. 1997);
    • Westinghouse Electric Corp. v. Republic of the Philippines , 951 F.2d 1414 (3 rd Cir. 1991); and
    • Permian Corp. v. U.S. , 665 F.2d 1214 (D.C. Cir. 1981).
  • 15. Key language :
    • DC Circuit :
    • While “[v]oluntary cooperation with government investigations is a laudable activity . . . such conduct has little to do with the purpose of the attorney-client privilege [which] is to encourage confidential communications between attorney and client” ( Permian, 665 F.2d at 1220-21).
    • “ [C]lient cannot pick and choose among his opponents” ( Id . at 1221).
  • 16.
    • Third Circuit :
    • “ [S]elective waiver does not serve the purpose of encouraging full disclosure to one’s attorney in order to obtain informed legal assistance; it merely encourages voluntary disclosure to government agencies, thereby extending the privilege beyond its intended purpose” ( Westinghouse , 951 F.2d at 1425) .
  • 17.
    • First Circuit :
    • “ [A]nyone who chooses to disclose a privileged document to a third party, or does so pursuant to a prior agreement or understanding, has an incentive to do so, whether for gain or to avoid disadvantage” ( MIT, 129 F.3d at 686).
  • 18.
    • Sixth Circuit :
    • Reiterated the prevailing view that “[o]nce a client waives the privilege to one party, the privilege is waived en toto” ( In re Columbia/HCA , 293 F.3d at 294).
    • Any form of selective waiver, even one which stems from a confidentiality agreement, transforms the privilege into a manipulative tool used by attorneys to achieve tactical or strategic benefits by choosing which adversaries are privy to privileged information ( Id . at 302-03).
  • 19. (3) Selective waiver is permissible with a confidentiality agreement
    • Teachers Insurance & Annuity Association of America v. Shamrock Broadcasting Co. , 521 F.Supp. 638, 644-45 (S.D.N.Y. 1981) - “[D]isclosure to the SEC should be deemed to be a complete waiver of the attorney-client privilege unless the right to assert the privilege in subsequent proceedings is specifically reserved at the time the disclosure is made”
    • Dellwood Farms, Inc. v. Cargill, Inc. , 128 F.3d 1122 (7 th Cir. 1997) (en banc) – Judge Posner’s decision dealing with investigatory privilege
    • In re Steinhardt Partners, L.P. , 9 F.3d 230 (2 nd Cir. 1993) – in the context of work product doctrine
  • 20. Summary of selective waiver
    • Weighing the benefit of disclosure against the potential risk of waiver
    • Unsettled law – varying levels of risk depending on where the third party lawsuit arises
    • Confidentiality agreement at time of disclosure
    • Disclosure to an adversary vs. non-adversarial party
    • Voluntary vs. compulsory disclosure
  • 21. Work Product Protection
    • Compared to attorney-client privilege :
    • Broader because extends beyond confidential communications to protect any material prepared by the attorney in anticipation of litigation
    • Narrower because only applies to material prepared in anticipation of litigation
  • 22. Two kinds of work product:
    • Opinion work product – absolutely protected from disclosure
    • Fact work product – qualified protection and discoverable by an adversary upon a showing of good cause and substantial need
  • 23. Key issues that determine work product protection:
    • Must be “prepared in anticipation of litigation” – remote possibility of future litigation does not trigger protection
    • Waiver is more likely when disclosure is made to an adversary (as opposed to disclosure in the context of joint litigation where parties share a common legal interest, non-adversaries)
    • Confidentiality agreement prior to disclosure may lessen risk of waiver (unsettled law)
    • Voluntary disclosure or the result of compulsory legal process

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