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The attorney-client privilege is the oldest of the privileges recognized at common law. “Its purpose is to encourage full and frank communication between attorneys and their clients, thereby promoting broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends on the lawyer’s being fully informed by the client.” Upjohn Co. v. United States, 449 U.S. 383 (1981) Imagine the reaction of legal advocacy groups, the criminal defense bar and civil libertarians if prosecutors suddenly began demanding that criminal defendants waive the attorney-client privilege as a prerequisite of negotiating a reasonable plea agreement. Imagine further the hue and cry that would arise if the U.S. Department of Justice formalized this practice by announcing that the benefits typically afforded to defendants willing to resolve cases against them by cooperating with the government — benefits such as a lenient or probationary sentence or avoiding indictment altogether — would not be available unless the defendant agreed to abandon the confidentiality of his or her communications with their lawyers. Startling as it may seem, this is precisely what is occurring in situations in which the defendants (and potential defendants) are corporations. Curiously, the situation has received remarkably little attention, and corporate America and its lawyers seem to be accepting these peculiar demands without much objection. The attorney-client privilege as applied to corporations is of relatively recent vintage. HIGH COURT’S UPJOHNRULING ON CORPORATE PRIVILEGE It was only 20 years ago, in Upjohn, that the Supreme Court clarified the scope of the privilege available to corporate entities. Before Upjohn, most courts evaluating the availability of the privilege were confounded by the fact that the privilege was being asserted by an inanimate creature of the law, as opposed to a natural person. Confronted by the complexity raised by a corporation asserting the privilege, many courts attempted to divine who among corporate officers and employees possessed an identity sufficiently analogous to the corporation itself to justify treatment as the “client” for purposes of the privilege. Indeed, courts developed a variety of tests to assist in determining the validity of a corporation’s assertion of the privilege. Most notably, several courts adopted a “control group” test, which limited the privilege’s availability to communications between individuals in a position to control the corporation. If a corporate officer was capable of controlling the corporation or making decisions on behalf of the corporation, then that officer was entitled to consult with corporate counsel on a confidential basis. Communications between corporate counsel and low- or mid-level employees were not privileged because, according to courts propounding the control group test, those employees did not have the ability to direct corporate actions and thus did not need to rely on advice of counsel. In Upjohn, the Supreme Court was called on to address the validity of the control group test and found it lacking. Unlike the lower courts, the Supreme Court took a broad view of the role of corporate counsel. The lower courts understood the privilege as a means by which counsel was able to provide advice and guidance to those controlling corporations, but the high court recognized that the privilege exists to protect not only the giving of professional advice to those who can act on it, but also the collection of information by lawyers to enable them to formulate sound and informed advice. Indeed, the court noted that “the first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the legally relevant” and that it is frequently mid- and low-level employees who possess the information needed by the corporation’s lawyers to provide meaningful advice. Thus, Upjohnembraced the principle that the privilege must protect an attorney’s ability to ascertain the facts necessary to render legal advice as well as protect the giving of that advice. In the wake of Upjohn, it was possible for corporations to conduct investigations into possible corporate misdeeds secure in the knowledge that those investigations, at least when conducted by attorneys, would be privileged. Whether prompted by an internal inquiry or the receipt of a grand jury or Securities and Exchange Commission subpoena, such investigations have become the most effective tool for ferreting out potential regulatory and criminal troubles in a corporation. In large part, such investigations are predicated on an understanding that internal interviews, fact-finding activities and discussions among corporate officers and the attorney/investigators are, and will remain, privileged. In other words, corporations have come to rely on the Supreme Court’s recognition of the sanctity and significance of a broad attorney-client privilege. DOJ’S NEW POSITION IS UNFORTUNATE However, the Justice Department and federal prosecutors seem to have lost sight of the values embraced by Upjohnand its progeny. In recent years, and with increasing frequency, prosecutors have demanded that corporations waive the attorney-client privilege as a necessary prerequisite to resolving criminal cases. The practice of demanding such waivers had been utilized on an ad hoc basis, but about six months ago, it was revealed that DOJ had drafted a policy statement titled Guidelines on the Prosecution of Corporations. The guidelines — 12 in all — indicate that they are not mandatory or outcome-determinative. Rather, they purportedly are to serve as informative directives that prosecutors may employ at their own discretion when deciding whether to bring and how to resolve charges against a corporate target. Among other things, the guidelines suggest that prosecutors should consider “the corporation’s timely and voluntary disclosure of wrongdoing, and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of the attorney-client and work product privilege.” The guidelines go on to state that “in gauging the…cooperation [of a corporation], the prosecutor may consider the corporation’s willingness to…disclose the complete results of its internal investigation, and to waive the attorney-client privilege and work product privileges.” Several significant drawbacks exist to the scheme of routine corporate waivers envisioned by the guidelines. Most notably, the guidelines fail to heed, and in fact undermine, the truths recognized in Upjohn. As a practical matter, attorneys conducting internal corporate investigations need to operate in a world in which they are capable of ascertaining the relevant facts. The guidelines, however, will no doubt discourage the communication of relevant information by employees to attorneys endeavoring to render legal advice to the corporation. They also will create an environment in which it is never clear whether the privilege will remain intact or a waiver will be demanded. The American Corporate Counsel Association (ACCA), one of the few vocal critics of the guidelines, made these precise points in a recent letter to DOJ. ACCA pointed out that “[k]nowing that sensitive and confidential conversations with their lawyers will be used as bargaining chips by the government, clients [that is, corporations and their employees] may be reluctant to create such chips for the government’s use. They’ll simply stop talking with their lawyers. Lawyers who are still privy to confidences will stop keeping any written record or paper trails of their work.” Of course, ACCA is right and is simply restating the principles enunciated by the Upjohncourt, albeit in a slightly different context. IS DOJ UNDERMINING ATTORNEY-CLIENT PRIVILEGE? In determining that the privilege must essentially extend to communications between counsel and all employees, the Upjohncourt stressed that a critical purpose of the privilege is to permit attorneys to ascertain the factual background so that they can give informed legal advice. Moreover, the Supreme Court noted that “if the purpose of the attorney-client privilege is to be served, the attorney and the client must be able to predict with some degree of certainty whether particular communications will be protected. An uncertain privilege, or one which purports to be certain [but is not], is little better than no privilege.” Admittedly, the situation recognized by the DOJ guidelines is one in which the client voluntarily elects to waive its privilege. However, does a corporation really have any alternative to waiving the privilege if failure to do so will in all likelihood result in costly legal proceedings and the risk of being found criminally liable? Moreover, the fact that a waiver is voluntary will do nothing to alter the long-term effects of the guidelines. No doubt, it will be (and to an extent already is) understood by many members of the corporate community that you speak with your lawyers at your own risk and that what you say can and will be used against you. This is hardly a climate that fosters candid communication between lawyer and client. ACCA also rightly notes that the DOJ guidelines will lead to the ironic situation that corporations attempting to cooperate with the government to redress noncompliance will face greater civil liability as a result. As ACCA points out, “Once the privilege has been waived, all third parties, not just the government, will have access to those sensitive and candid [communications].” Such communications will be available for use by plaintiffs’ counsel in ensuing civil lawsuits against the company. Even more troubling to members of the bar is the subtle statement that DOJ seems to be making about the reliability and integrity of corporate counsel. It must be understood that in the usual situation in which a corporation is attempting to resolve an investigation and cooperate with the government, the corporation willingly proffers to the government the facts it has uncovered and offers to make available for interview all of the relevant witnesses who are under the control of the corporation. In some instances, the facts disclosed and information made available to the government will necessarily require a waiver of the privilege. It is hard to envision, for example, that if employees embroiled in illegal activity received contemporaneous legal advice from corporate counsel, the prosecutor would not demand, and rightly, to know the nature of the advice. However, in most instances there is simply no reason to demand a waiver, especially if the attorney provides a detailed proffer and the corporation makes its employees available. Under these circumstances, it is hard to believe that demanding a waiver is anything but a vote of no confidence in the attorney and a means of policing attorney conduct to determine whether the lawyer has accurately presented the findings of his or her investigation. In other words, the demand for a waiver is a means of determining whether the lawyer is engaged in a form of obstruction of justice. FOR WHOM ARE CORPORATE LAWYERS WORKING? Finally, the practice of routinely demanding attorney-client waivers leads inevitably to a situation in which corporate lawyers are essentially being enlisted to conduct investigations on behalf of the government. If corporate counsel come to expect that their fact findings, interviews and legal memorandums ultimately will be produced to the government, they will be placed in a particularly bizarre situation. Their ultimate client will be the government, and their investigation will be undertaken with an understanding that their work product will be used not as a basis for providing informed legal advice, but by prosecutors to evaluate the activities of the corporation and its employees. This situation will obviously have an adverse effect on the way lawyers do their job and how lawyers are viewed by their corporate clients. Indeed, corporations may begin to question what value is gained by including lawyers as members of an internal investigative team. Meanwhile, both corporations and attorneys need to be more attuned to the impact of DOJ’s guidelines and practices. If the attorney-client privilege is under attack, it is attorneys and their corporate clients who will suffer. Steven M. Cohen, a partner at New York’s Kronish Lieb Weiner & Hellman L.L.P., specializes in white-collar criminal defense and securities litigation. Joanna L. Bergmann is a summer associate.

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