Upjohn Co. v. United States

"only employees who exercised direct control over the managerial decisions of the company were eligible to have their communications with corporate lawyers protected."

"...The Supreme Court held that the communications of lower ranking employees were protected by attorney–client privilege when protection was necessary to defend against litigation."

"(1) District Court's test, of availability of attorney–client privilege, was objectionable as it restricted availability of privilege to those corporate officers who played “substantial role” in deciding and directing corporation's legal response; (2) where communications at issue were made by corporate employees to counsel for corporation acting as such, at direction of corporate superiors in order to secure legal advice from counsel,

and employees were aware that they were being questioned so that corporation could obtain advice, such communications were protected;

and (3) where notes and memoranda sought by government were work products based on oral statements of witnesses, they were, if they revealed communications, protected by privilege, and to extent they did not reveal communications, they revealed attorney's mental processes in evaluating the communications and disclosure would not be required simply on showing of substantial need and inability to obtain equivalent without undue hardship."

"...the work-product doctrine protects materials prepared in anticipation of litigation from discovery by opposing counsel.

"tangible material or its intangible equivalent" that is collected or prepared in anticipation of litigation is not discoverable, and may be shielded from discovery by a Protective Order, unless the party seeking discovery can demonstrate that the sought facts can only be obtained through discovery and that those facts are indispensable for impeaching or substantiating a claim. That is, the party unable to obtain the information has no other means of obtaining the information without undue hardship.

...the work-product doctrine is also less powerful than the attorney–client privilege, and therefore may be overcome by a showing of necessity, as described above."

"...in a recent qui tam False Claims Act (FCA) action, the district court rejected a company’s claim that certain documents created during its internal investigation were privileged and protected from disclosure.

The district court, relying on the Supreme Court’s decision in Upjohn, determined that the privilege did not apply based on the whistleblower’s arguments that the investigation was conducted by in-house counsel without consultation of outside counsel;

many employees were interviewed by non-lawyers;

the employees interviewed were not advised that the interviews were for the purpose of obtaining legal advice;

and the investigation was done to ensure compliance with government regulations.

On appeal, the circuit court overruled the district court’s decision based, in part, on the determination that it had incorrectly applied the Upjohn decision and improperly used the “but for” test instead of the “significant purpose” test to assess privilege.

...Privilege has always played a vital role in internal investigations.

...The main challenge companies face when trying to establish privilege is making sure they meet the threshold test regardless of which jurisdiction a case arises. In certain jurisdictions, such as those that look at whether the “significant purpose” of the communication was for legal advice, privilege may be easy to establish. However, in other jurisdictions, such as those that look at whether the “primary purpose” of the communication was to obtain legal advice or whether the communication would not have been made “but for” the need for legal advice, establishing privilege can be much more difficult.

When a whistleblower is thrown into this calculation, establishing and maintaining privilege presents new challenges because whistleblowers have “insider” knowledge regarding the company’s internal investigation and investigative practices. For example, whistleblowers may have knowledge about whether external counsel was involved, who conducted the witness interviews, the legal warnings given (or not given) during witness interviews,

and the stated purpose of the internal investigation.

Thus, companies defending actions brought by or initiated by whistleblowers may face tougher privilege challenges based on factual allegations regarding the manner in which the internal investigation was conducted.

Keeping the internal investigation confidential

...as was recently affirmed by Judge Furman in the S.D.N.Y., companies should remember that the disclosure of facts relating to an internal investigation does not necessarily mean that privilege or confidentially has been waived.

Privilege and employee rights

Preserving privilege in internal investigations can become even more complicated if the whistleblower raises a retaliation claim based on their whistleblowing activities. This is because whistleblower retaliation claims create a unique tension with respect to privilege. Many times employment lawyers do not want their investigation of whistleblower retaliation claims to be privileged so that they can establish that there was a valid reason for the adverse employment action taken. But, companies want the investigation of the substantive claims made by the whistleblower to be protected by privilege to prevent disclosure in potential actions brought against them. Often times these two objectives can become intertwined and destroy privilege claims if the investigations are conducted together or by the same group of people.

...Seek direction from outside counsel: The presence of outside counsel, whether in a consulting role or directly conducting the investigation, can help create a presumption of privilege.
Make the role of in-house counsel clear: In-house internal investigations should be conducted by or at the direction and under the supervision of in-house legal counsel. The use of non-attorneys should be limited.

Be prepared to litigate privilege in any jurisdiction: Since the burden of establishing privilege varies by jurisdiction, it should be clearly documented, as well as articulated during witness interviews, that the purpose of the investigation is for the provision of legal advice.

Make sure investigative practices do not “chill” whistleblower rights: Ensure that confidentiality agreements and warnings do not contain restrictions which could be construed as discouraging employees from speaking with government regulators. Investigative practices should make it clear that employees are not prohibited from communicating underlying facts to federal regulators, but that they are prohibited from disclosing communications with counsel.

Conduct separate investigations: Companies should separate their investigation into whistleblowers fraud claims (handled by legal or other appropriate department) from their employee performance evaluation (handled by HR). Keeping the investigations separate will help companies better rebut a retaliation claim and still maintain privilege over its internal fraud investigation.


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