Counsel to Counsel Article: Attorney-Client Privilege Issues Are Thornier Than Ever

by Mike Mintz on January 5, 2012 · 0 comments

in Corporate counsel issues

From the latest issue of Counsel to Counsel (Volume 1 Issue 9)

December 2011

The attorney-client privilege is a powerful tool in facilitating clear and honest communication among a company’s executives and operatives. It also presents some of the most nuanced challenges in-house counsel face. All too often, companies fail to consider the full implications of privilege issues, for example, the decision of when and why to waive it.

Beginning in 1999, over the course of nearly a decade, a series of U.S. Department of Justice memos established a formal policy encouraging companies to waive privilege in exchange for more lenient treatment during a government investigation or prosecution. That policy was since reversed, but the practice of waiving privilege as a bargaining chip has taken root nonetheless. For many counsel, it remains reflexive.

“While it’s no longer the stated rule, in-house counsel along with their outside counsel too often waive the privilege prematurely, without giving full thought to the ramifications of doing so,” says Robert J. Anello, a principal at Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C. “Once you waive the privilege, you can’t put the genie back in the bottle.”

On the other hand are situations where not waiving privilege can create problems for a company—or more to the point, problems for its employees.

“One tricky situation arising more frequently involves the question of how individuals can protect themselves if the corporation refuses to waive the privilege,” Anello says.

Companies often negotiate settlements with the government to avert criminal liability that leave implicated employees to fend for themselves. Recent case law indicates courts generally hold that the privilege belongs to the company, not the individual. Still, it’s entirely reasonable for individuals to argue that they were acting on advice of counsel.

“That eliminates the criminal state of mind—if you do something on the advice of lawyers, you don’t have criminal intent,” Anello says. “But the only way you can prove that is by having what was communicated between you and the lawyer made clear.”

If the corporation isn’t willing to waive privilege—perhaps out of fear of civil lawsuits—a kind of standoff ensues. “There haven’t been a lot of cases on this yet,” Anello says, “but you’re going to see them more and more.”

Privilege issues can be even more complex abroad, and can have a grave impact on critical matters such as Foreign Corrupt Practices Act investigations. Without proper precaution, privilege in an internal investigation can be hazy whenever interviews are conducted without outside counsel present, and those concerns are amplified in foreign jurisdictions.

“While it may be helpful, and tempting, to conduct employee interviews at an early stage, inside counsel should be mindful that such interviews may not be privileged,” says Lisa A. Prager, a principal at Morvillo Abramowitz. “Inside counsel should establish a protocol to cloak as much of the investigation as possible in the attorney-client privilege.”

That generally requires the assistance of local counsel. “In my experience, local counsel is usually engaged early on in the investigation on data privacy issues and can efficiently address privilege issues at that point,” Prager says. Companies may also consider appointing an in-house lawyer to track privilege issues in key jurisdictions.

“International privilege is not an area where companies will ever know all the rules, but they certainly should select the countries where they do the most business and prepare a privilege policy for each jurisdiction,” Anello says. “It’s very difficult when U.S. lawyers have to scramble to understand these issues at the last minute, and it usually doesn’t lead to the best result.”

In any context, companies are best served to consider privilege issues well in advance, to maximize the advantage of a right that too often simply slips away.

Read the Entire Issue Here

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