Corporate Confidentiality Is Only for the"Privileged" Few
by Susan Hackett

Introduction

There’s an old adage in Washington that says everyone hates Congress but loves their Congressman. Likewise, in today’s environment, it wouldn’t be too far from the mark to suggest that lots of people hate the legal profession, but can’t get to their lawyer fast enough when trouble comes a-knockin’. In corporate America, the knocking has been thunderous lately, but lots of folks are a little more concerned than they were just a few short years ago about how advisable it is to run full speed to consult a lawyer when faced with difficult, sensitive, and even innocent questions about corporate legal matters.

How ironic. In spite of Herculean efforts to promote Sarbanes-Oxley’s twin messages of corporate accountability” and “transparency,” we find that corporate employees who are repeatedly encouraged to help prevent and remedy internal failures in their workplaces are less likely than ever to believe they will be rewarded if they take their concerns to the legal counsel who are most likely to help them. Why? Because in their zeal to “get the bad guys,” an array of prosecutors, regulators, auditors, investigators, and plaintiff ’s trial lawyers have decided that the best place to unearth what went wrong in a targeted company is the corporate lawyer’s confidential files. In an era when the stakes for companies are very high, who’s surprised when companies (threatened with the label and consequences of not “cooperating” with an investigation) roll over and disgorge pretty much anything that’s requested by a party whose complaint against the company has entitythreatening ramifications? And when they give up documents, all of those conversations that employees thought were protected by the attorneyclient privilege come tumbling out, subjecting even the most innocent of inquiries to a prosecutorial inquisition if it appears that the employee might know something that could be pivotal to the investigation or the process of making charging decisions.

How did this happen? When did we move from presuming that a talk with the company’s lawyer was good for us all toward an environment that punishes those who approach lawyers to request help in unraveling the complexities of life in the regulation-laden corporate practice environment?

Before we get to the answer, it might be best to start with a review of privilege issues in the corporate context.

A Primer on the Privilege

The attorney-client privilege in the United States is “owned” by the client, not the attorney, and it is based on the notion that a client should be able to fully cooperate with the lawyer responsible for his defense without worrying that anything he tells his lawyer might be used against him. Legal entities, such as corporations, are entitled to the protections of the privilege,¹ even though defining the client as an entity presents some practical, interpretive, and even theoretical problems that don’t exist when the client is an individual person. Most of these problems stem from the reality that, while that lawyer represents the entity and the entity owns the privilege, lawyers work all day with flesh and blood people who are not the client, but who are the entity’s agents. These are the people who will share with the entity’s lawyers the confidences that will become the underlying communications protected by the entity’s privileges.

Why protect the privilege in a corporate context? Because it is a vital tool for promoting corporate compliance. The privilege encourages clients to seek out legal advice by making it “riskfree” to ask questions or discuss problems; the lawyer isn’t presumed likely to rat out the person seeking advice. It thus encourages employees to come forward about even the most sensitive issues and actively engage lawyers in the strategic and daily business processes, rather than suggesting that the safer course is to run for cover or just skip the legal analysis. There are other strong reasons for protecting the privilege in the corporate context: it enhances the efficiency of the legal system by encouraging client candor and thus moving the administration of justice forward by avoiding hide-and-seek behaviors that slow the process down, and it protects clients’ Constitutional rights to effective assistance of counsel in criminal matters.

In an environment in which prosecutors tend to jump on any evidence of wrongdoing with great gusto, it’s not surprising that corporate employees are very concerned about talking to someone confidentially about the possible legal ramifications of corporate activities. While everyone touts the principle of whistleblowing, it still runs against the grain of most managementlevel employees; most would rather discuss something that’s registered on their radar quietly and somewhat “offline” to make sure they understand the issues before taking a public posture that contradicts colleagues’ or superiors’ actions.

Before the privilege can attach to a client’s communication with an attorney, the following requirements must be satisfied:

• The holder of the privilege must be or seek to become a client.
• The person to whom the client’s communication is made must be a member of the bar of a court or a subordinate of such a person.
• The lawyer to whom the communication is made must be acting as a lawyer (and not, for instance, as a business person).
• The communication must be made without non-client and non-essential parties present. (It could be made at a crowded restaurant, but not at a table with five other guests with no other connection to the conversation, and not in a manner that is likely to be overheard.)
• The communication must be made for the purpose of securing legal services or assistance, and not for the purpose of committing a crime or perpetuating a fraud. (This is referred to as the “crime-fraud” exception to the privilege, since lawyers are not allowed to engage in behaviors that facilitate client crimes.)
• The client must claim and not waive the privilege.²

The privilege attaches to almost all communications that satisfy these requirements, but as you can see, the definition of protected communication is narrow. And if challenged, the party claiming the benefit of the privilege has the burden of proving its applicability.³

The privilege prevents an opposing party from discovering what a client and its lawyer said to each other, but it does not otherwise protect any facts raised in those discussions. An opponent remains free to investigate non-privileged sources and to make use of any facts so uncovered. Thus, the idea that assertion of the privilege by a company prevents the government or a third party claiming damages from making their case is simply wrong: it only prevents them from discovering what it is that a lawyer and her client discussed. If there was wrongdoing present, many other avenues of investigation and discovery are still available, including the same paths the attorney herself likely followed in doing her own investigation of the allegations or concerns.

The Work-Product Doctrine

Indeed, some of the most contentious privilege issues concern the protections available for companies’ internal investigations. These internal investigations often are conducted with the involvement, if not the supervision, of company lawyers. As a result, a form of attorney-client privilege, namely the work-product doctrine, attaches to the related interviews and records. These conversations and records thus receive some protection against discovery, but more limited protections than are provided for direct advice conversations between attorney and client. The rationale for the work-product doctrine is that it is unfair for one party to gain access to the thoughts, plans, and legal strategies of the opposing side’s attorney, especially where they could be re-created by the requesting party on its own.

[T]he privilege … is a vital tool for promoting corporate compliance.

The work-product doctrine offers qualified protection for materials prepared by or for an attorney when litigation is anticipated (even if the litigation never arises or ends up assuming a different form). Attorney work-product material can enjoy the same level of protection as attorneyclient privileged materials, but if the work product does not disclose the mental impressions of the attorney, a court may order its production if the requesting party establishes a good cause (for instance, it would be unreasonable or impossible to replicate the work).

Often, the real reason the requesting party wants an internal investigation report is because it is likely to include interviews with employees who talked to the company’s counsel, but who now refuse to talk to (or are more guarded in sharing information with) a prosecutor or regulator considering criminal charges. This may be because employees have “lawyered up,” or because the apprehension and tension inherent in the case makes people less likely to cooperate, or because the relevant employees are now targets of an investigation and wish to exert their Fifth Amendment rights.

The Privilege in the Corporate Criminal Context

With this basic primer under our belts, let’s get back to the erosion of the privilege in recent years in the context of corporate failures. Many trace the beginning of this sea-change back to 1999, pre-Enron, when then-Deputy Attorney General Eric H. Holder Jr. distributed a memorandum to all United States Attorneys and senior lawyers within the Department of Justice addressing the federal prosecution of corporations.⁴ The “Holder Memorandum,” as it came to be known, provides guidance as to what factors should generally inform a prosecutor in deciding whether to charge a corporation with a crime. One factor to be considered is a “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 corporate attorney-client and work product privileges.”⁵ In addition, in “gauging the extent” of a corporation’s cooperation, federal prosecutors may consider the company’s willingness “to disclose the complete results of its internal investigation.”⁶

The Holder Memorandum was succeeded in 2003 by the “Thompson Memorandum,” in which then-Deputy Attorney General Larry Thompson reinforced and reiterated many of the same points.⁷ The Thompson Memoranda lists nine factors that federal prosecutors should consider when charging companies. Again, one is 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 corporate attorney-client and work product protection.”⁸

In practice, the Thompson memorandum established DOJ policies that require companies to identify and hand over damaging documents, disclose the results of internal investigations, furnish the records of interviews with company officers and employees, and agree to waive attorney-client and work-product protections. If a company doesn’t waive its rights to confidential counsel with an attorney, the Justice Department treats this as an indication of guilt, and prosecutors may stop any consideration of settlement options and discussions of more lenient treatment. This effectively turns the privilege from a right into a liability. It presumes that only guilty people consult with lawyers, and that those who do so should not be afforded the confidentiality of that relationship.

Unfortunately, the case law governing waiver in response to government investigations was developed in the context of court-arbitrated motions to compel decided long before government agencies adopted their current practice of using “cooperation credits” to obtain “voluntary” disclosures outside of the courtroom (and indeed, before any court-governed actions apply). Thus, the common law does not take into account the ability of government agents to make coercive waiver requests (such as “cooperate or we’ll put you out of business: but really, it’s your choice”).

If a company doesn’t waive its rights to confidential counsel with an attorney, the Justice Department treats this as an indication of guilt.

In addition to policies disfavoring privilege articulated in the Holder and Thompson Memoranda, the SEC has laid siege to the attorneyclient privilege and work-product immunity by attacking them in ex parte proceedings via crimefraud exceptions,⁹ and by deeming privilege waiver to become the definition of “cooperation” for purposes of avoiding regulatory action or civil penalties.¹⁰ And in early 2004, the United States Sentencing Commission approved new guidelines providing that in some circumstances a corporation may be required to waive the attorney-client privilege and work-product immunity to satisfy the requirements of cooperation that must be present in order for a sentencing judge to consider a more lenient criminal penalty.¹¹ Although this blow to the privilege and work-product immunity has been somewhat softened by a subsequent Supreme Court decision rendering the federal sentencing guidelines advisory rather than mandatory, ¹² corporate counsel remain justifiably concerned about the Guidelines’ effect and judges continue to use the Guidelines as a primary authority in their efforts to ensure consistent and balanced sentencing.¹³

While DOJ officials regularly suggest that waiver is rarely called for in the corporate investigatory, charging, or sentencing process, the extent of the problem is revealed by a recent survey of 700 corporate counsel (more than half of whom were in-house lawyers) conducted by the Association of Corporate Counsel.14 When asked if they had personally (and not just anecdotally) experienced an erosion in their clients’ privilege rights post-Enron, 30% of inside counsel respondents said “yes,” as did 48% of outside counsel respondents. When you consider that a good number of respondents probably had not been subjected to a government investigation recently, it becomes clear that it’s now commonplace for corporations to be confronted with out of court demands they can’t ignore, suggesting that they waive their privilege rights in order to be accorded treatment they would otherwise be entitled to receive as defendants in any courtroom in the country.

Even worse, from what we have observed, few corporations are able to resist the government demands for waiver. Refusing to waive can result in a significantly longer and more expensive legal battle, as well as a large amount of negative publicity (since many will think the company is trying to hide something incriminating if it claims that certain sensitive files are secret and must be protected from outsiders’ scrutiny). The company’s stock price is likely to tumble, its relations with customers and suppliers can be hurt, and the continued viability of the company may even be jeopardized—simply because the company is trying to assert its legal rights.

Certain companies, moreover, are particularly vulnerable to demands for waiver, such as companies that rely on their status as government contractors, or corporations that will lose significant business if they are investigated or convicted of specified crimes because their integrity is a key component of their brand. For these companies, fighting a government request for waiver means risking charges or a senior executive’s conviction that could result in a complete loss of the company’s future contracts for entire segments of its industry. It’s a risk few companies can logically assume.

The irony is that often what is contained in these privileged files has limited relevance to the government investigation, but is incredibly useful to plaintiff ’s counsel who wish to pursue a civil derivative action (conducted under less rigorous standards of proof than the government’s criminal prosecution requires). For example, the sifting of e-mails or other documents is likely to produce material that plaintiff ’s counsel may try to project out of context, which is not the standard of venom that government prosecutors typically employ.

“Civil” Actions?

Events on the civil front have been no more reassuring. Recent corporate scandals have brought lawyers’ confidentiality obligations to the fore in unflattering ways, accompanied by suggestions from various groups that investor and public confidence in the financial markets demand that lawyers favor disclosure over confidentiality when presented with instances of possible client misconduct. The most obvious result of this debate was the promulgation of rules regulating the conduct (and unilateral disclosure options) of attorneys appearing and practicing before the SEC, as mandated by Sarbanes-Oxley Section 307, and now codified in the SEC’s rules found at 17 CFR Part 205.¹⁵ This places lawyers in a role SEC officials call “gatekeeping,” but which many corporate counsel fear will turn them into corporate cops whom no one wishes to confide in or ask advice of.

Legal commentators, and certainly the plaintiff ’s bar, voice increasing concerns about the application of the privilege in cases where lawyerclient communications were provided to the government in an effort to facilitate an investigation, but under the protection of a confidentiality agreement between the government and the targeted corporation. Others suggest it is unfair for corporate clients to create certain kinds of joint defense agreements with other similarly situated companies wherein they agree to share information, but still maintain their privileges against revealing that information to others.

The law recognizes that not all disclosures outside the attorney-client relationship waive the privilege, and that there are circumstances where there is a compelling public interest in allowing clients to make or authorize their lawyers to make such disclosures while still preserving the privilege. Most obviously, it has been recognized that disclosures to agents of the lawyer and to expert consultants retained to assist the lawyer are necessary to enable the lawyer to provide competent advice, advocacy, and other assistance. And courts have agreed that it’s in the public’s interest to have effective representation and promote fair outcomes by allowing a “common interest” or “joint representation” exception to the ordinary concept of waiver.¹⁶

By creating what’s called a “limited waiver,” companies working with another party attempt to protect confidential legal files from disclosure to subsequent third parties, like plaintiffs in civil actions. But the traditional view is that if a client voluntarily divulges privileged information to a second party, such as the government, the privilege covering that information is deemed waived generally. Courts adopting this reasoning suggest that if a client is “indifferent” to maintaining confidentiality as to one party, there is no good justification for maintaining the privileged status of the same information against others.¹⁷

Several courts today support limited waiver agreements between companies and government investigators in order to encourage companies to cooperate in investigating allegations of wrongdoing.

In addition, many courts were skeptical of not just the concept of limited waiver, but also of what a company’s waiver might “open up” in terms of related files: could the waiver be limited to only the particular item that was revealed, or would it be deemed applicable to all related documents in the matter or on that subject, even if these files weren’t “produced” or even referred to in the limited waiver of a defined set of documents? This question often is referred to in privilege analysis as a “selective waiver” problem and has been the cause of increasing concern.¹⁸

Several courts today support limited waiver agreements between companies and government investigators in order to encourage companies to cooperate in investigating allegations of wrongdoing. ¹⁹ A significant number of other courts, however, follow the traditional view that a client’s conversations with its lawyers are no longer confidential once they have been provided to any other party.²⁰ This reasoning had devastating effect on McKesson Corporation when the company was faced with third party suits that relied on documents produced to the government (the SEC, in particular) in an underlying investigation pursuant to a limited waiver agreement. The court decided the government and the company could not unilaterally re-fashion what the court believed were essential elements of selective and limited waiver, and ordered that the civil plaintiffs were entitled to everything the government got, as well as related files, since the company had waived any confidentiality it might have left to protect when it decided to cooperate with the government.²¹

Attacks from Within?

The most recent wave of attacks against the privilege are really the most startling and apply to the full spectrum of companies, both public and private: namely, when the company’s auditor asks for information that is privileged in order to complete the process of signing off on the company’s books. Since auditors’ files are not confidential and since many believe the privilege cannot be extended to their work as an agent of the company because of the independence of the auditor’s position, some commentators and courts suggest that providing materials to auditors is equivalent to a waiver of rights as to other parties in the future.

Lawyers and accountants have traditionally found a balance between the accountants’ need for information necessary to conduct an audit and the attorneys’ desire to protect clients’ privileged materials. The two sides have operated under a compromise for many years²² that, in part, allows an auditor to take an attorney’s word on the relevance or damaging nature of information contained in privileged documents.

In the post-Enron world, however, accountants for both private and public companies have come under pressure to perform tougher and more independent audits. Indeed, new rules regulating auditors for public companies issued by the PCAOB (Public Company Accounting Oversight Board), coupled with a desire to prevent anyone from coming back to the audit and suggesting that stones were left unturned, lead to an increasing likelihood that auditors will demand to see privileged materials in order to complete their audit. Auditors now regularly request, for instance:

• tax opinions prepared by companies’ outside counsel;
• assessments of litigation accruals prepared by both outside and in-house counsel;
• the results of internal investigations (regardless of whether these investigations are ongoing or are likely to affect the audit); and
• materials related to compliance with legal and regulatory requirements.

Auditors run head-on into company counsel who suggest that these materials are privileged. When that confrontation heats up, many auditors declare that unless privileged materials are provided, the audit will not be certified or completed. This is a serious threat indeed. If an auditor announces its withdrawal due to a lack of cooperation by the company, the company likely will face extreme repercussions in the marketplace and in the realm of public opinion. It’s hard to explain, even to the company’s closest invested stakeholders, why the company’s files should not be opened to the public.

[S]ome commentators and courts suggest that providing materials to auditors is equivalent to a waiver of rights as to other parties in the future.

If a company does comply with such an auditor’s request, the company may be deemed to have waived its privilege concerning the materials as to other parties. As one court recently said, “Disclosure of documents to an outside auditor destroys the confidentiality seal required of communications protected by the attorney-client privilege, notwithstanding that the federal securities laws require an independent audit.”²³

Courts are split on the effect of sharing privileged and work-product materials with auditors. On one hand, the court in Medinol, Ltd. v. Boston Scientific Corp. held that confidentiality protections were waived when a company shared the results of an internal investigation with outside auditors who were reviewing the company’s litigation exposures.²⁴ The court reasoned that work-product protection is not waived when protected material is disclosed “to a party sharing common litigation interests,” but found that: “[T]he auditor’s interests are not necessarily aligned with the interests of the company. And, as has become crystal clear in the face of the many accounting scandals that have arisen as of late, in order for auditors to properly do their job, they must not share common interests with the company they audit.”²⁵

On the other hand, a more recent decision, Merrill Lynch & Co. v. Allegheny Energy, Inc., held that work-product protection was not waived when Merrill Lynch provided its auditors with attorneys’ notes and reports of Merrill’s internal investigation of a trader’s theft.²⁶ The court reasoned that work-product protection is not waived by disclosure to third parties with a common interest, but only by disclosure to adversaries or to conduits to potential adversaries. It acknowledged that “an independent auditor could be conceived of as an adversary because of its important public function to independently ensure the accuracy of a company’s financial reports.”²⁷ But it concluded that “any tension between an auditor and a corporation that arises from an auditor’s need to scrutinize and investigate a corporation’s records and book-keeping practices simply is not the equivalent of an adversarial relationship contemplated by the work-product doctrine. . . . A business and its auditor can and should be aligned insofar as they both seek to prevent, detect and root out corporate fraud.”²⁸

Several organizations, including the board of the Association of Corporate Counsel, have endorsed a proposal crafted by a group of general counsel in New York that asks Congress and the PCAOB to help fix the auditor/confidentiality problem. The proposed language would recognize that the production of privileged information to an auditor pursuant to its independent review of the books does not constitute a waiver of privilege as to those documents.²⁹ This proposal has merit, as well as the support of the audit industry (the Big Four’s general counsel all have signed off on it), but it has no effect at this time.

How to Respond

The attorney-client privilege has always been narrowly construed and enforced and it can easily be waived or subject to numerous exceptions. It’s a delicate privilege, as one of ACC’s former Chairmen used to say. But rather than taking pains to shore up its applicability for when a client truly needs its protections, sadly, many lawyers are the privilege’s worst enemy. Too many lawyers too casually assume the over-broad application of the privilege to their work without taking proper precautions to protect what is appropriately withheld from public scrutiny. Further, many lawyers don’t help clients appreciate the ease with which they themselves can waive their rights, or help them understand how the privilege applies and what they need to do to protect it.³⁰

It is against this backdrop that corporate lawyers “suddenly” face concerns in protecting the privilege they assumed would apply when it’s most difficult to assert such rights: when the government comes calling in the wake of a significant corporate failure for which the public rightfully wants justice (and usually a pound of flesh). That’s a bad time for the company to begin to look at how it can or will assert its right to keep pivotal legal files under wraps.

What should savvy corporate counsel do to counter such erosions in the protections traditionally offered by the privilege? First, as noted above, lawyers can easily begin by re-examining what it is that they do, both in terms of protecting the viability of the privilege and in terms of building their own credibility. That will help substantially when an attorney offers assurances that a matter being considered outside of the review of an impartial arbiter (such as a judge) is appropriately removed from document production for privileged treatment.

Second, it is crucial for lawyers to educate their clients. Most corporate clients don’t understand the privilege well, believe it covers much more than it does, and have unrealistic expectations about how it is applied. When faced with a dilemma regarding waiver and the disappointment they are likely to feel when what they thought were protected conversations turn out to be candidates for “most likely to be produced,” they are not in the best position to coolly assess the issues in the midst of negotiations with the government. That’s when they can make ill-informed decisions that lawyers won’t be able to remedy later. They may even make inadvertent waivers of protectable material in their hurry to cooperate. Helping your clients understand the privilege’s application, what they are likely to face as consequences when its waiver is sought, and what their tolerance is for protecting the privilege against all comers is a vital service for you to provide in the cool light of day.

Third, get involved with bar and related initiatives that seek to promote the value of the privilege to the public (which needs to understand the symbiotic—and not exclusive—relationship between transparency and the protection of client confidences).³¹

Fourth, push back when approached by the government or a third party seeking production of privileged material. As this issue has gained greater publicity and as tactics that denigrate the privilege’s protections have been raised for public scrutiny and to the outcry of the bar, many of those who have asked for production as a matter of course for the last few years (and received it) may be more likely curbed by a reminder (or a conversation with someone over their head) that notes that their request is not in line with good public policy, their agency’s presumed policies about when waiver is requested, or the company’s protected rights.

Perhaps most importantly, corporate lawyers must do more to underscore for the public that the privilege gained its status and offers important client protections because it serves significant public policy purposes: in this case, by encouraging corporate compliance and responsibility from the inside out. As business regulation and society’s interests in corporate responsibility increases, the law of doing business the “right way” becomes more and more complex; that makes preventive, integrated, and competent legal advice more and more important. “The social good derived from the proper performance of the functions of lawyers acting for their clients is believed to outweigh the harm that may come from the suppression of the evidence in specific cases.”32 The privilege “is founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skill in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure.”33 Full and frank communication is not an end in itself, but a means to achieve the main purpose of the privilege: “promoting broader public interest in the observance of law and administration of justice.”³⁴

If the public decides the privilege is not worth protecting or is at odds with efforts to promote more responsible and law-abiding corporate behavior, the profession will lose its defining characteristic, and clients will lose an important guarantee that enables them to retain and consult with counsel, both before and after problems arise.

Notes

1. Upjohn Co. v. United States, 449 U.S. 383 (1981).

2. These criteria were laid down in United States v. United Shoe Machinery Co., 89 F. Supp. 357, 358-59 (D. Mass. 1950), and they have set the standard for privilege qualification ever since.

3. Federal Trade Commission v. Lukens Steel Co., 444 F. Supp. 803 (D.D.C. 1977).

4. Memorandum from the Deputy Attorney General of the United States of America, to All Component Heads and United States Attorneys (June 16, 1999), available at <www.usdoj.gov/criminal/fraud/policy/Chargingcorps.html>.

5. Id. at 3.

6. Id. at 6.

7. See Memorandum from the Deputy Attorney General of the United States of America, to All Component Heads and United States Attorneys (Jan. 20, 2003), available at <www.usdoj.gov/dag/cftf/corporate_guidelines.htm>.

8. Id. Section II.

9. Am. College of Trial Lawyers, “The Erosion of the Attorney- Client Privilege and Work Product Doctrine in Federal Criminal Investigations” (Mar. 2002), at 3, available at <www.actl.com/PDFs/Erosion.pdf>.

10. See “SEC Issues Report of Investigation and Statement Setting Forth Framework For Evaluating Cooperation In Exercising Prosecutorial Discretion,” SEC Press Release No. 2001-117 (Oct. 23, 2001), available at <www.sec.gov/news/press/2001-117.txt>. This release discusses a report identifying four broad measures of a company’s cooperation, which caused the SEC to decide against enforcement action related to the company’s “financial statement irregularities.” The company’s cooperation included “providing the Commission staff with all information relevant to the underlying violations and the company’s remedial efforts.” (Emphasis added.)

11. U.S. SENTENCING GUIDELINES MANUAL § 8C2.5 (2004), available at <www.ussc.gov/2004guid/8c2_5.htm>. See also “Sentencing Commission Approves Changes to Guidelines Pertaining to Organizations,” in 20 ABA/BNA LAW. MAN. ON PROF’L CONDUCT 207 (Apr. 21, 2004). ACC members can also read “The New Federal Sentencing Guidelines for Organizations: Great for Prosecutors, Tough on Organizations, Deadly for the Privilege,” Association of Corporate Counsel, March 2002, available at <www.acca.com/protected/article/attyclient/sentencing.pdf>.

12. See United States v. Booker, 125 S. Ct. 738 (2005).

13., See Leonard Post, “Eroding Privilege Hurts Corporate Compliance,” NAT’L L.J., Apr. 25, 2005, at 6 (discussing this issue and related concerns).

14. Survey results are available at <www.acca.com/Surveys/attyclient.pdf>.

15. For an excellent summary of the reasons why lawyers practicing before the SEC should be subject to disclosure obligations, see SEC General Counsel Giovanni P. Prezioso’s speech to the American Bar Association Section of Business Law 2004 Spring Meeting (Apr. 3, 2004), at <www.sec.gov/news/speech/spch040304gpp.htm>. For material outlining the perspectives of the corporate bar in protecting privilege, see any of the material posted on ACC’s Web site at <www.acca.com/legres/corpresponsibility/attorney.php>.

16. Edna Epstein, THE ATTORNEY-CLIENT PRIVILEGE AND THE WORKPRODUCT DOCTRINE (4th ed. 2001), American Bar Association, at 185-219.

17. John William Gergacz, ATTORNEY-CORPORATE CLIENT PRIVILEGE (2d ed. 1990) Shepard’s/McGraw-Hill (1st ed., Garland Publishing Co., 1987), §§ 5.01-5.08, at 5-2 to 5-10.

18. See In re Columbia/HCA Healthcare Corporation Billing Practices Litig., 293 F.3d 289, 303 (6th Cir. 2002). The court ruled that producing a limited number of documents related to an issue waived all documents related to that issue.

19. See, e.g., In re Steinhardt Partners, 9 F.3d 230, 236 (2d Cir. 1993); In re Leslie Fay Companies, Inc. Securities Litig., 161 F.R.D. 274, 284 (S.D.N.Y. 1995).

20. See United States v. Bergonzi, 9th Cir. Case No. 03-10024, Brief of the Securities and Exchange Commission, 2003 WL 22716310 (Apr. 29, 2003), at *3-4; McKesson HBOC, Inc. v. The Superior Court of San Francisco, Brief of the Securities and Exchange Commission (July 17, 2003), available at <www.sec.gov/litigation/briefs/mckesson071703.htm>.

21. See McKesson HBOC, Inc. v. The Superior Court of San Francisco, No. A103055. (Cal. Ct. App. Feb. 20, 2004).

22. See AICPA’s Statement on Auditing Standards No. 12 (Jan. 1976) and the ABA’s Statement of Policy Regarding Lawyers’ Responses to Auditors’ Requests for Information (Dec. 8, 1975). These documents, working together, are often referred to by lawyers who specialize in the auditor relationship as “the Treaty,” and successfully regulated the lawyer/accountant nexis for many years. In the aftermath of new PCAOB rules and heightened liabilities for and scrutiny of the auditor’s role, many accountants are no longer comfortable allowing the Treaty to regulate their need to personally review attorney-client confidential files.

23. In re Pfizer Inc. Sec. Lit., No. 90 Civ. 1260, 1993 U.S. Dist. LEXIS 18215 *22 (S.D.N.Y. 1993).

24. 214 F.R.D. 113, 115 (S.D.N.Y. 2002).

25. Id. at 116 (emphasis in original).

26. No. 02 Civ. 7689, 2004 U.S. Dist. LEXIS 21543 (S.D.N.Y. 2004). See also Laguna Beach Cty. Water Dist. v. Superior Court (Woodhouse), No. 04 C.D.O.S. 11096 (Cal. Ct. App. 2004) (in certain circumstances, work product given to an auditor will remain protected from disclosure to third parties).

27. Merrill Lynch & Co. 2004 U.S. Dist. LEXIS at 19.

28 Id. at 21-22.

29. See The Auditor’s Need For Its Client’s Detailed Information vs. The Client’s Need to Preserve the Attorney-Client Privilege and Work Product Protection: The Debate, The Problems, and Proposed Solutions, Presented by Latham & Watkins LLP on behalf of The Corporate Counsel Consortium, Apr. 15, 2005, available at <www.acca.com/public/article/attyclient/debate.pdf>.

30. See Lugosch v. Congel, 219 F.R.D. 220, 235 (N.D.N.Y. 2003) (explaining that “[c]ontrary to modern and ill-informed perceptions,” the attorney-client privilege is narrowly construed and riddled with exceptions, and that it is a “less than sacrosanct rule” subject to “waivers upon waivers”).

31. The American Bar Association (ABA) is hosting a Presidential Task Force on the Attorney Client Privilege and its protections, which many groups are supporting. Their research, the testimony provided to them, and their proposals are available at <www.abanet.org/buslaw/attorneyclient/home.shtml>. ACC supports their work and encourages you to do the same.

32. United Shoe Mach. Corp., supra note 2, at 358.

33. Hunt v. Blackburn, 128 U.S. 464, 470 (1888).

34. Westinghouse v. Republic of the Phillipines, 951 F.2d 1414, 1423 (3d. Cir. 1991) (quoting Upjohn, 449 U.S. at 389).

About the Author

Susan Hackett (hackett@acca.com) is Senior Vice President and General Counsel, Association of Corporate Counsel (ACC).