Soup to Nuts: the Inception and Destruction of the Attorney-Client Privilege and Attorney Work Product Protections Hennepin County Bar Association Professionalism and Ethics Section April 10, 2015 George Serdar Messerli & Kramer Chris Grgurich Lindquist & Vennum Overview I) Attorney Client Privilege and Work Product Protection II) III) Waiver of Attorney Client Privilege and Work Product Protection Common Waiver Issues Surrounding Privilege and Work Product Principles 1
595.02 Testimony of Witnesses (b) An attorney cannot, without the consent of the attorney s client, be examined as to any communication made by the client to the attorney or the attorney s advice given thereon in the course of professional duty; nor can any employee of the attorney be examined as to the communication or advice, without the client s consent. Elements of Attorney Client Privilege Client Communication Confidentiality Attorney Legal Advice 2
ARTICLE 5. PRIVILEGES RULE 501. GENERAL RULE Nothing in these rules shall be deemed to modify, or supersede existing law relating to the privilege of a witness, person, government, state or political subdivision. Adopted April 1, 1977, eff. July 1, 1977. Attorney Work Product Elements Documents and tangible things otherwise discoverable (i.e., responsive to another party's discovery request and not protected by the attorney client privilege) Prepared in anticipation of litigation or for trial By or for another party or that party's representative Exceptions Witness statements Experts (non testifying and testifying) Surveillance tapes Attorney's conduct in issue Crime/fraud 3
Protecting Client Confidences General Rule (1) Where legal advice of any kind is sought (2) from a professional legal adviser in capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at client's instance permanently protected (7) from disclosure by client or by the legal adviser, (8) except the protection be waived. Kobluk v. Univ. of Minnesota, 574 N.W.2d 436, 440 (Minn. 1998) Purpose encourage client to confide openly and fully in attorney without fear communications will be divulged and to enable the attorney to act more effectively on behalf of client. National Texture Corp. v. Hymes, 282 N.W.2d 890, 896 (Minn.1979) Obligation to maintain "information relating to the representation of a client," including Attorney Client privileged communications, attorney work product, and other Client confidences Rule 1.6 of the MN Rules of Professional Conduct Waiver Of Attorney Client Privilege And Work Product Protection Waiver constitutes Purposeful or voluntary disclosure Partial disclosure Involuntary or compelled disclosure Failure to object to disclosure Inadvertent disclosure (three schools of thought to effect of inadvertent disclosure: (1) the "lenient" approach; (2) strict liability; (3) the balancing test 4
Waiver Cont'd Disclosure within corporation implicating waiver of corporate attorneyclient privilege The U.S. Supreme Court in Upjohn, and other courts, suggested a "need to know" limitation on sharing privileged information with employees who are not necessary to carrying out the attorney's advice (communications between in house counsel for hospital and nurse are not privileged because the nurse was not within the control group for purposes of seeking legal advice on the matter under litigation. Valenti v. Rigolin, 2002 WL 31415770 (N.D. Ill., Oct. 25, 2002) Waiver Cont'd Disclosure between affiliated corporations Privilege is in jeopardy if court concludes disclosure of privileged communication between/among affiliated corporations not subject to "common interest" test, which would be unusual, but not beyond the realm of possibility. Example: Where sister entities engage in transactions the terms of which, under applicable regulatory provisions, must be "arms length." 5
FEDERAL RULES OF EVIDENCE RULE 502. ATTORNEY CLIENT PRIVILEGE AND WORK PRODUCT; LIMITATIONS ON WAIVER The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorneyclient privilege or work product protection. (a) Disclosure Made in a Federal Proceeding or to a Federal Office or Agency; Scope of a Waiver. When the disclosure is made in a federal proceeding or to a federal office or agency and waives the attorney client privilege or workproduct protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if: (1) the waiver is intentional; (2) the disclosed and undisclosed communications or information concern the same subject matter; and (3) they ought in fairness to be considered together. FEDERAL RULES OF EVIDENCE RULE 502. ATTORNEY CLIENT PRIVILEGE AND WORK PRODUCT; LIMITATIONS ON WAIVER (b) Inadvertent Disclosure. When made in a federal proceeding or to a federal office or agency, the disclosure does not operate as a waiver in a federal or state proceeding if: (1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rules of Civil Procedure 26(b)(5)(B). 6
FEDERAL RULES OF EVIDENCE RULE 502. ATTORNEY CLIENT PRIVILEGE AND WORK PRODUCT; LIMITATIONS ON WAIVER (c) Disclosure Made in a State Proceeding. When the disclosure is made in a state proceeding and is not the subject of a statecourt order concerning waiver, the disclosure does not operate as a waiver in a federal proceeding if the disclosure: (1) would not be a waiver under this rule if it had been made in a federal proceeding; or (2) it is not a waiver under the law of the state where the disclosure occurred. FEDERAL RULES OF EVIDENCE (d) (e) (f) Controlling Effect or a Court Order. A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court in which event the disclosure is also not a waiver in any other federal or state proceeding. Controlling Effect of a Party Agreement. An agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order. Controlling Effect of this Rule. Notwithstanding Rules 101 and 1101, this rule applies to state proceedings and to federal courtannexed and federal court mandated arbitration proceedings, in the circumstances set out in the rule. And notwithstanding Rule 501, this rule applies even if state law provides the rule of decision. 7
FEDERAL RULES OF EVIDENCE (g) Definitions. In this rule: (1) attorney client privilege means the protection that applicable law provides for confidential attorney client communications; and (2) work product protection means the protection that applicable law provides for tangible material (or its intangible equivalent) prepared in anticipation of litigation or for trial. (Pub.L. 110 322, 1(a), Sept. 19, 2008, 122 Stat. 3537; Apr. 26, 2011, eff. Dec. 1, 2011.) Disclosure of privileged information by current employee or officer during internal investigation. Corporate Miranda Corporate lawyers do not represent individual employee; Anything said by the employee to the lawyers will be protected by the company s a/c privilege subject to waiver in the sole discretion of the company; The individual may wish to consult with his own attorneys if he has any concerns about his personal legal exposure 8
Disclosure of privileged information by current employee or officer during internal investigation. MRPC 1.13(e): must disclose client when lawyer knows or should know constituent s interests are adverse. MRPC 4.3(a) (d) Disclosure of privileged information by current employee or officer during internal investigation. U.S. v. Nicholas, 606 F. Supp.2d 1109 Court finds as fact no Miranda given Court finds lawyers breached duty of loyalty U.S. v. Ruehle, 583 F.3d 600 We explore here the treacherous path corporate counsel must tread under the a/c privilege when conducting internal investigation. Privilege waived b/c company intended to share results of investigation with auditor. 9
Placing Privilege Or Work Product In Jeopardy Of Waiver Attorney-Client Privilege In Internal Investigations Dearth of MN case law creates uncertainty Furlev, 325 N.W.2d 20 Presence of non-managerial employee on phone call btw counsel and officer waived privilege In re Bieter, 16 F.3d 929 (federal law) Fact representative was consultant did not destroy privilege b/c he was key managerial rep. of company Common Question - Does accountant destroy privilege? It depends on purpose and function Example if tax or shareholder lit. based on fraudulent accounting of co. s financials, court likely to uphold privilege. But if issue is preparation of corporation financial statements, could likely find privilege waived. Government Investigations DOJ "Filip Memorandum" focuses on the relevant facts, mandating that a cooperation credit be based not on the waiver of privilege, but on disclosure of the relevant facts. The Filip Memorandum prohibits prosecutors from explicitly requesting waiver of core attorney client or work product material or from crediting corporations that do waive the privilege with respect to this type of information. The Filip Memorandum encourages corporate counsel who feel pressured to waive the privilege in violation of the memorandum s guidance to take their concerns up the ladder in the DOJ. Bank Regulators Bank regulators take the position during an examination that they are entitled to all documents privileged or not privileged necessary to evaluate the financial condition of the institution and the institution s compliance with applicable laws and regulations. In 2006, Congress enacted 12 U.S.C. 1828(x), which provides that an institution is not deemed to have waived any applicable common law privilege, including the attorney client privilege, by providing privileged materials to an Agency. SEC No equivalent to 12 U.S.C. 1828(x), which is limited to banking examiners. Accordingly, any disclosure of privileged material to the SEC runs the risk of waiving the privilege as against third parties. The SEC s Enforcement Manual stresses that significant cooperation may be provided by voluntarily disclosing relevant information and that voluntary disclosure need not include a waiver of privilege to be effective. By way of example, the Manual stresses that while an attorney s notes from a protected interview need not be produced, the staff may request, and cooperation requires, the disclosure of relevant factual information acquired through those interviews. 10
Selective Waiver Most circuits have rejected doctrine, which would permit a corporation to produce documents to government agencies under a confidentiality agreement but still assert the attorney client and work product protections to those same documents in subsequent legal actions. See In re Steinhardt Partners, 9 F.3d. 230 (2d Cir. 1993); United States v. Mass. Inst. Of Tech., 129 F.3d 681 (1st Cir. 1997); In re Pacific Pictures Corp., 679 F.3d 1121 (9th Cir. 2012). Eighth Circuit has recognized selective waiver. Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1977): "As Diversified disclosed these documents in a separate and nonpublic SEC investigation, we conclude that only a limited waiver of the privilege occurred." Law Firms: Intra Firm Attorney Client Privilege 1) The firm designates a lawyer, or lawyers within the firm, to serve as an in house counsel or ethics counsel. 2) Where a current client threatens litigation against the firm, the in house counsel must not have worked on the underlying matter. 3) The time or activity spent in communication with in house counsel may not be billed to the client. 4) The communication must remain confidential. RFF Family Partnership, LP v. Burns & Levenson, LLP, 991 N.E.2d 1066 (Mass. 2013). 11
The "multiple hats" issue Internal Counsel or Outside Counsel Where internal counsel wears "multiple hats" acts in one capacity as the entity's counsel, but also has business or compliance functions issues related to privilege can be raised based on what "hat" the counsel was wearing at the time of each communication. Some communications may be privileged, others may not be When an internal investigation is prompted by a formal investigation or criminal complaint from the government, outside counsel is likely the best choice to lead the internal investigation. When outside counsel s role is defined by the scope of the investigation, communications are privileged, whereas communications with in house counsel may not be. See, e.g., Grimes v. LCC Int l Inc., 1999 WL 252381 (Del. Ch. 1999); In re Grand Jury Proceedings, 786 F.2d 3 (1st Cir. 1986). Jeopardy Of Waiver Cont'd Beware of Eavesdroppers Schwartz v. Wenger,124 N.W.2d 489 (Minn. 1963) [W]here the attorney and client have chosen a public place in which to discuss matters pertaining to their professional relationship, and a third person overhears their conversation without resorting to surreptitious methods, they are deemed to have waived the privilege they might otherwise have enjoyed insofar as the testimony of the third person is concerned. Inapplicability or Loss of Attorney-Client Protection "CC'ing or "bcc'ing" a privileged email to a recipient who is not a "privileged" or authorized person Failing to reasonably secure or adequately safeguard email files from being accessed by unauthorized persons Forwarding privileged emails by authorized recipients to unauthorized recipients 12
The dangers of using "Reply All" function True story: Lawyer 1 represents Bank in loan enforcement/receivership action against Borrower, represented by Lawyer 2. Lawyer 2 sends Lawyer 1 an email regarding Bank's refusal to permit Borrower to remove fixtures, personal property that Bank contends is secured collateral from premises under receivership. Lawyer 2 bcc's Borrower on email to Lawyer 1. Within an hour, Borrower responds to Lawyer 2, but hits "Reply All." Borrower's reply email informs Lawyer 2 (and, without realizing it, Lawyer 1) of Borrower's plans to enter premises after business hours and remove Bank's collateral. Upon realizing his client's error, Lawyer 2 tries to put Genie back in the bottle, without success. Dangers of the auto complete function Like any time saving device, there are risks. You must take care to confirm that the name of the person you thought you were typing into one of the recipient fields of an email is the one that actually appears in that field before you hit the "send" button. If you type in "M*e*g" thinking the auto complete tool will fill in the address of your boss, Megan Moniker, you might be surprised to discover the recipient selected by the autocomplete function is Megan Malevolent, the evil attorney representing your adversary adverse party in bitterly contested, high stakes lawsuit against your company 13
Computer Usage: Increased Waiver Risks The dangers of using the bcc function See anecdote re: "Reply All." The dangers of accessing emails from remote locations, including hotels computers, public Wi Fi networks, and other locations where security is problematic The employee who uses employer (including law firm) computers to conduct personal business See article Can Employers Review Electronic Messages at: http://www.law.com/jsp/lawtechnologynews/pubarticleltn.jsp?id=1 202471935042 14