How Does Attorney-Client Privilege Work in Internal Investigations?

Preserving the Attorney-Client Privilege Can Be Critical for Mitigating Companies’ Legal Risk in Connection with Internal Investigations

When conducting an internal investigation, it is vital to protect as much information as possible. While companies cannot necessarily protect records and knowledge existing prior to an investigation (except to the extent the company can assert defenses in discovery or the Fifth Amendment privilege against self-incrimination may apply), companies generally can—and should—protect the investigative process itself. This is done by ensuring that the investigation is subject to the attorney-client privilege.

The applicability of the attorney-client privilege to internal investigations is a complex topic surrounded by a substantial body of case law. Federal courts have held that the privilege both protects and doesn’t protect records and communications generated during internal investigations under varying circumstances—and one federal appellate court has referred to securing the attorney-client privilege during internal investigations as a “treacherous path.” But, there are some clear guiding principles; and, with a strategic and informed approach, outside counsel can build a strong case for the privilege protecting all aspects of an internal investigation.

Understanding the Scope (and Limits) of the Attorney-Client Privilege in the Internal Investigation Context

Asserting the attorney-client privilege with regard to internal audit investigations starts with understanding the privilege’s scope and limits. Fundamentally, the attorney-client privilege is designed to ensure that clients are able to communicate freely with their legal counsel. The privilege ensures that all communications between clients and their counsel will remain confidential—unless (i) certain exceptions apply (i.e., a client discloses its intent to commit a crime); (ii) counsel fails to take adequate steps to establish the privilege; or, (iii) the client waives the privilege, either intentionally or inadvertently.

The attorney-client privilege is often conflated with the work product doctrine. However, these are two separate and distinct legal protections. In broad strokes, the attorney-client privilege protects communications related to counsel’s legal assistance, while the work product doctrine protects documents prepared in anticipation of litigation.

If you are thinking that it sounds like these overlap, you are right. This is especially true in the context of an internal investigation. But, serious questions can arise, particularly with regard to the requirement that work product be prepared in anticipation of litigation. Is an internal investigation conducted in anticipation of litigation? Sometimes yes, but not necessarily. This is critical to keep in mind, and counsel must take appropriate steps to ensure that any records generated during or after an internal investigation qualify as “communications” for purposes of securing the privilege’s protections (assuming such protections are desired).

What Does the Attorney-Client Privilege Protect During an Internal Investigation?

Beyond being limited to communications, the attorney-client privilege is subject to certain other limitations as well. Most significantly, the privilege applies only to communications transmitted for purposes of obtaining or providing legal advice. The simple fact that one party to a communication is a member of the company’s legal team (whether in-house or at an outside law firm) does not mean that the attorney-client privilege automatically applies.

Some examples of communications that should generally be protected under the attorney-client privilege during internal investigations include:

• Requests for Legal Advice Regarding the Need to Conduct an Internal Investigation – If a company executive seeks legal advice regarding the need to conduct an internal investigation, this communication should generally qualify as privileged.
• Advice Regarding the Company’s Legal Risks and the Benefits of Conducting an Investigation – Any legal advice provided in connection with an internal investigation should generally qualify as privileged as well, provided that the advice falls within the scope of legal counsel’s engagement.
• Advice Regarding the Legal Implications of Information Uncovered During an Investigation – Likewise, any legal advice provided regarding the implications of information uncovered during an investigation should generally qualify as privileged as long as this advice is covered under legal counsel’s engagement.

Conversely, some examples of communications that may not qualify as privileged during an internal investigation include:

• Business Advice Regarding the Risk of Negative Publicity – The attorney-client privilege protects legal advice only. While the line between legal and business advice will often be blurred, any communications focusing solely on business-related issues risk falling outside of the privilege’s protections.
• Communications Sent to Individuals Not Involved in the Company’s Legal Engagement – During internal investigations, company representatives and their counsel must be careful to avoid copying too many individuals on emails or forwarding emails to individuals who are not involved in the company’s legal engagement.
• Communications Outside of the Scope of Counsel’s Engagement – Communications with a company’s legal counsel that fall outside of the scope of counsel’s engagement also risk falling outside of the attorney-client privilege.

Here, too, there is the potential for significant overlap. For example, in a single email, an attorney could easily discuss both the company’s legal risks and the attendant business risks of facing negative publicity due to litigation or enforcement action. Would this business advice render the email non-privileged? Not necessarily, but this is a concern that requires careful consideration. Ultimately, if a private litigant or government agency disputes a company’s privilege claim, the court will examine the overall nature of the communication in question to determine whether (and to what extent) the privilege applies.

Put our highly experienced team on your side

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

Steps Companies (and Their Counsel) Can Take To Secure the Privilege During an Internal Investigation

With these considerations in mind, there are several steps that companies and their counsel can—and generally should—take to secure the protections of the attorney-client privilege during an internal investigation. Some examples of these steps include:

1. Make Clear that the Investigation is Being Undertaken at the Direction of Legal Counsel

Prior to initiating an investigation, it should be made clear (in writing) that the investigation is being undertaken on the advice and at the direction of legal counsel. This written communication should also confirm that the company has specifically engaged counsel to provide legal advice regarding the need for an investigation and to advise throughout the investigative process as necessary.

2. Document the Purpose and Scope of Legal Counsel’s Engagement

Along with documenting the purpose of legal counsel’s involvement in the internal investigation, the parties should also review their engagement agreement and determine whether any supplemental documentation is necessary. For example, if the company has previously only engaged the firm for compliance, the parties will likely want to amend their engagement agreement (or enter into a new engagement agreement) that specifically covers the legal services to be provided in connection with the internal investigation.

3. Identify the Internal Personnel Who Will Communicate with Outside Counsel

Only select internal personnel should be authorized to communicate with the company’s outside counsel, and these individuals should receive training regarding the attorney-client privilege. These authorized personnel should also be careful to avoid broadly disseminating privileged communications.

4. Clearly Identify Requests for Legal Advice and Legal Advice Provided

Any requests for legal advice should be identified as such. Likewise, legal counsel should clearly identify any communications that contain legal advice. Rather than indiscriminately identifying all communications as containing legal advice, counsel should consciously identify communications to which the attorney-client privilege applies.

5. Label Privileged Materials and Limit Access Appropriately

All privileged materials should be labeled as “Attorney-Client Privileged” (though, here too, companies and their counsel must be careful to avoid blanket privilege claims). Additionally, privileged legal communications should be stored separately from ordinary business records, and both the company and the firm should take adequate steps to limit access internally and externally.

FAQs: Securing the Attorney-Client Privilege During a Corporate Internal Investigation

Contact the Corporate Internal Investigation Lawyers at Oberheiden P.C.

Our lawyers represent companies of all sizes in corporate internal investigations involving federal matters. If you have questions about conducting an internal investigation, we invite you to call 888-680-1745 or contact us online for a complimentary consultation.