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
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
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
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
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:
filing - not commingling with other broadly available corporate records
record keeping - not deviating from standard techniques of protecting confidentiality
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).
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).
“ [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) .
“ [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).
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).
(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