4 Attorney-Client Privilege Decisions You Need To Know
Law360, New York (September 13, 2017, 5:09 PM EDT) — The case law on attorney-client privilege and the work-product doctrine, and what might trigger a loss of those protections, is always expanding, and keeping up with every decision is a nearly impossible task.
But recently courts in the U.S. and the U.K. have issued some important opinions delving into tricky areas like the crime-fraud exception in a grand jury proceeding and the line between fact-finding and legal advice. In June, a New York federal judge also weighed the desire for cooperation with Volkswagen diesel emissions investigators against waiver rules, and found in favor of protected disclosures.
“That’s a decision that should encourage corporate attorneys working with government enforcement agencies to negotiate their own nondisclosure agreements, because it looks like your chances of avoiding a waiver are going to be greater with that agreement in hand,” said Todd Presnell of Bradley Arant Boult Cummings LLP, who writes frequently about privilege decisions.
Here are four recent privilege decisions to know.
The Volkswagen Privilege Pact
Jones Day took on a Herculean task in fall 2015 when it agreed to conduct an internal investigation for Volkswagen AG of a massive diesel emissions-cheating scandal.
In addition to featuring a highly unusual raid on the firm’s Munich office, the firm’s investigation has the attention of a group of plaintiffs hoping to use the findings in a German litigation.
In June, a New York federal judge issued a notable decision related to privilege waivers and Jones Day’s cooperation with the U.S. Department of Justice.
In denying a subpoena request for “all documents and communications” related to the firm’s investigation, U.S. District Judge Deborah Batts said disclosures made to criminal investigators didn’t constitute a privilege waiver in light of a deal struck between the firm and the agency.
Under the terms of that deal, both sides had agreed Jones Day would “preserve VW’s claims of attorney-client privilege and work product protection” in the course of providing the agency “oral briefings” on its investigation, and through handovers of otherwise privileged documents, according to the order.
Judge Batts noted that the Second Circuit has not adopted a “rigid rule” on waivers in situations in which a government agency and the disclosing party have made an explicit agreement on confidentiality. She was also not persuaded by the plaintiffs’ argument that a provision giving the DOJ leeway to use the information “in furtherance of [its] discharge of its duties and responsibilities or is otherwise required by law” supported a waiver.
“While the agreement gives DOJ discretion, that discretion is cabined by the requirement that any disclosure would be in furtherance of its duties or otherwise required by law,” the judge’s order said. She also gave the plaintiffs leave to reargue a narrower document request later.
The case is In re: Ex parte application of Financialright GmbH, Katharina Prinzessin zu Hohenlohe, Hartmut Baumer and Walter Weiss, case number 1:17-mc-00105, in the U.S. District Court for the Southern District of New York.
Crime-Fraud and Grand Jury Confidentiality
Possible exceptions to the attorney-client privilege are many, including in situations where there is evidence that a lawyer helped facilitate or cover up a crime. Last year, the Fourth Circuit addressed the crime-fraud exception in the context of a lawyer’s communication with a private regulator looking at possible insider trading and a grand jury investigation.
The court’s unpublished opinion sprang from a probe in 2010 by an unidentified regulator who sought to interview two bank-employed traders about possible trade “front running.”
The bank hired a lawyer for the pair, who later made a written submission asserting various defenses about suspect trades, according to the opinion. The submission also included denials from the traders that they’d made trades based on advance knowledge of customer block orders, and noted that “each trader gave clear, consistent and undeniable explanations of why such trading was not even feasible.”
A later government investigation triggered a subpoena to the lawyer seeking the notes on client interviews and the submission. The traders initially prevailed, but a district court ultimately ruled for the government, holding that the crime-fraud exception applied because the traders’ communications with the lawyer were made to further a “criminal scheme.” The traders appealed.
A unanimous Fourth Circuit panel said the traders were “tilting at windmills” by arguing that the lack of evidence available to them in the confidential proceeding weighed in favor of privilege. Instead, the panel employed a “deferential” attitude toward the district court, and drew on its own review of evidence that had been presented.
In situations where evidence and even the nature of the alleged crime are presented ex parte or is otherwise confidential, “the party asserting privilege may thus be forced to make a best guess as to the crime and evidence it must counter,” the panel said.
The decision is In re: Grand Jury Subpoena v. U.S., case number 15-4080, in the U.S. Court of Appeals for the Fourth Circuit.
Law Firm as Prosecutor
This year a California appellate court overturned a ruling against a law firm that could have forced it to reveal otherwise privileged client communications.
A lower court had ruled that Valla & Associates Inc. had played the part of a criminal prosecutor of former IAR Systems Software Inc. executive Nadim Shehayed and was subject to discovery, but the California Court of Appeal said the firm’s investigation on Shehayed was on behalf of IAR and not directed by the district attorney.
IAR, represented by Valla, filed suit against Shehayed in 2012, alleging he’d paid personal debts from company funds and paid a salary and retirement benefits to his wife, who did not work for IAR. Before the case was scheduled for trial, the district attorney’s office also brought an embezzlement case against Shehayed.
In discovery in the criminal case, Shehayed sought documents from Valla and argued that the firm had essentially collaborated with prosecutors, including by hiring a forensic accountant for prosecutors and doing legal research at the prosecutors’ behest.
A trial judge agreed.
But the appeals court said that while Valla may have shared research and a deposition with portions underlined, there was insufficient evidence to show anything was prepared specifically for the district attorney’s office. Without ruling specifically on the question of attorney-client privilege or work-product doctrine, the panel did note that crime victims and their lawyers have “unique rights” to confer with prosecutors.
The trial court erred “in imposing a duty under Brady to disclose material, exculpatory evidence directly on Valla, as opposed to on the prosecution, and, second, in finding Valla to be part of the prosecution team,” the panel said.
The case is IAR Systems Software Inc. et al. v. Superior Court of San Mateo, case number A149087, in the Court of Appeal of the State of California, First Appellate District.
U.K. Fraud Office Breaks Through Miner Privilege Wall
The rejection by London’s High Court in May of privilege claims made by an international mining firm over investigation documents about bribery and corruption allegations sent shock waves through the U.K. legal system.
While the decision may still face an appeal, the court opened the door for the Serious Fraud Office to reach far into a trove of internal information, including forensic accounting data, as part of a high-profile criminal investigation into Eurasian Natural Resources Corp. Ltd.
The SFO had held talks with the company in August 2011 in regard to allegedly corrupt activities in Africa and Kazakhstan, and it opened an official investigation in 2013.
In the tribunal’s first decision looking at the issue of litigation privilege in the context of what was seen as a criminal, as opposed to civil, investigation, the High Court concluded that documents generated as part of a presentation from ENRC’s then-legal team at Dechert LLP to the board of directors in March 2013 were privileged because they included legal advice.
But the court took the opposite view for most of the other materials sought by the SRO, including reviews of accounting books covering London, Zurich, Kazakhstan and Africa from May 2011 to January 2013. Those materials were not protected, the court said, because ENRC hadn’t established that litigation was a “real likelihood” at the time those materials were generated.
The case is the Director of the Serious Fraud Office versus Eurasian Natural Resources Corp. Ltd., case number HQ16X00363, in the Queen’s Bench Division of the High Court of Justice of England and Wales.
–Additional reporting by Linda Chiem, Alex Davis and Emma Cueto. Editing by Brian Baresch and Breda Lund.