Internal investigations have become a relatively normal part of doing business, but that does not mean the fruits of those investigations are discoverable even if they have a “business purpose.” The U.S. Court of Appeals for the Sixth Circuit clarified this point earlier this month in an opinion granting a stay of the lower court’s production order in a securities class action.
FirstEnergy Corporation had undertaken two internal investigations, led by Jones Day and Squire Patton Boggs respectively, following an Ohio representative’s indictment that allegedly implicated the company in a bribery scheme. FirstEnergy’s shareholders sought the fruits of the two investigations in discovery in the civil litigation that followed. The District Court ordered production of the documents on the basis that even though FirstEnergy conducted its investigations in the context of multiple government investigations, federal regulatory actions, and civil lawsuits, FirstEnergy used the advice gained through the investigations for business purposes.
In evaluating FirstEnergy’s request to stay that order pending the company’s petition for a writ of mandamus, the Sixth Circuit rejected the District Court’s reasoning and confirmed that, under UpJohn, “[w]hat matters for attorney-client privilege is not what a company does with its legal advice, but simply whether a company seeks legal advice.” The Court cautioned that the “backwards” reasoning employed by the District Court made little sense because a corporation would always have some business purpose in expending resources on an internal investigation. That purpose, though, is not enough to take an investigation out of the protection of privilege when the company sought legal advice as part of an internal investigation. The Sixth Circuit also found that the products of the investigations were likely protected as work product given the litigation and regulatory actions that prompted the investigations. According to the Sixth Circuit, the District Court’s conclusion that the investigations were not performed in anticipation of litigation made little sense in the context of the “onslaught of civil and criminal investigations while pursuing internal investigations.”
The Sixth Circuit also noted the strong public interest in preserving the attorney-client privilege and work-product doctrine in such investigations, as indicated by the 50 amicus briefs filed in support of FirstEnergy’s request for a stay.
Although the mandamus petition remains to be decided, the Sixth Circuit’s strong rebuke of the District Court and firm protection of the privileges in this context may provide comfort that properly conceived internal investigations will remain privileged and protected by the work-product doctrine. To that end, companies should take the following steps to maximize application of the privilege and work-product doctrine:
1. Counsel, whether in-house or external, should conduct the investigation. If third parties, such as forensic accountants are required, those third parties should be retained and overseen by counsel.
2. Draft a clear investigation plan. An initial investigation plan identifying the risks faced by the company (e.g., pending or threatened government investigations, civil suits, etc.) and the purpose of the investigation can provide support that the investigation had a legal, as opposed to merely business, purpose.
3. Give Upjohn warnings at the outset of a witness interview. The warnings should be documented in the attorney’s written notes of the interview. Additionally, any notes or memorandum of the interview should contain counsel’s interpretations, mental impressions, thoughts and analysis, as opposed to a verbatim recitation of the interview.
4. Give thought as to the end product of an internal investigation. Given the risk of improper dissemination of written materials (and therefore a potential waiver of privilege), consider an oral report at the end of the investigation. If a written report is required, emphasize the report’s purpose as to provide legal advice and limit the distribution of that report only to those who need it.
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