Background and Significance
When conducting a corporate internal investigation, it is important to ensure that an attorney-client relationship is not established between the investigating attorney and the employee being interviewed. Doing so will protect the corporation’s ability to control the privilege, as well as its ability to waive it when necessary or desirable. Where an attorney-client relationship is created with an employee, however, the corporation may not waive the privilege without the employee’s consent. This could have an impact on the ultimate disposition of an investigation or prosecution of the corporation and may be interpreted as a failure to cooperate.
The Supreme Court has held that attorney-client privilege was established to protect “confidential disclosures to an attorney made in order to obtain legal assistance.” This privilege arises where the “client” reasonably believes that an attorney-client relationship exists. Thus, regardless of the investigating attorney’s intentions or beliefs, the attorney-client privilege may inadvertently attach to the information supplied by the employee. In order to avoid this unintended result, the investigating attorney is wise to give the employees an "Upjohn warning" prior to conducting the interview.
Upjohn warnings were derived for the Supreme Court’s ruling in Upjohn Co. v. U.S., 449 U.S. 383 (1981) and serve two main purposes. First, the warnings aid the investigating attorney in discharging his or her ethical duty not to mislead the employee. Second, the warnings reserve the attorney-client privilege solely for the corporation. As discussed above, without the warnings, the privilege may be held by both the corporation and the employee, which could lead to a conflict.
There are three (3) warnings that should be given by the investigating attorney at the outset of the interview. First, counsel should unambiguously indicate that he or she represents the corporation, not the individual. Next, the investigating attorney should indicate that while the interview is covered by the attorney-client privilege, the privilege belongs to, and is controlled solely by, the corporation. Finally, the employee should be warned that the company may decide to waive the privilege in the future and may disclose certain information obtained from the employee in the interview to third parties and/or government investigators or prosecutors.
Application of Privilege in New York
In New York, the attorney-client privilege covers communications by corporations to their counsel, as well as communications by counsel to their corporate clients. This is true regardless of whether the attorney is employed by the corporation as staff counsel or where an outside attorney is retained by the corporation. In Rossi v. Blue Cross & Blue Shield of Greater New York, 73 N.Y.2d 588 (1989), the Court of Appeals held that an internal memorandum from a corporate staff attorney to a corporate officer communicating advice in connection with an imminent lawsuit was protected from disclosure. In that action, plaintiff sought disclosure of the internal memorandum that was identified but withheld based upon privilege. The trial court reviewed the communication in camera and directed disclosure. On appeal, the Appellate Division reversed, determining that the memorandum was privileged. Ultimately, the Court of Appeals affirmed the Appellate Division, noting the need to apply the attorney-client privilege cautiously and narrowly in the case of communications with corporate staff counsel “lest the mere participation of an attorney be used to seal off disclosure.” Id. at 593. For the privilege to apply when the communication is made from the client to the attorney, the communication “must be made for the purpose of obtaining legal advice and directed to an attorney who has been consulted for that purpose.” Id. For the privilege to apply when the communication is made from attorney to client, it “must be made for the purpose of facilitating the rendition of legal advice or services, in the course of the professional relationship.” Id.
The Court’s decision in Rossi was re-examined two years later in Spectrum Sys. Int’l Corp. v. Chemical Bank, 78 N.Y.2d 371 (1991). There, outside counsel was retained to conduct an internal investigation and render legal advice regarding possible fraud on the client/bank. Plaintiff sought production of the report prepared by the outside counsel. Supreme Court ordered that the report be produced because, in its opinion, an independent investigation could not obtain privileged status merely because it was communicated by an attorney. The Appellate Division modified Supreme Court’s order to require in camera inspection in order to determine materiality, and granted leave to appeal to the Court of Appeals. After reciting the principles set out in Rossi, the Court of Appeals determined that the report was privileged. The fact that the report did not focus on imminent litigation; reflected no legal research; and made no conclusion regarding the parties’ legal positions was immaterial. “The critical inquiry is whether, viewing the lawyer’s communication in its full content and context, it was made in order to render legal advice or services to the client.” Id. at 379. Because the report’s purpose was to convey legal advice to the client, it was privileged.
Sean C. McPhee, Esq.