Courts understand. Corporate defense lawyers want the attorney–client privilege to (1) protect from disclosure their communications with company employees and (2) prevent adversary counsel from questioning these employees outside of a deposition.
Courts understand. Adversary lawyers want to interview—ex parte—company employees who possess relevant information so defense counsel’s presence does not inhibit the employees’ candor.
So, how do lawyers reconcile these competing interests in a way that complies with ethical requirements and secures the most privilege protection? Should company counsel also represent the employee—personally—so adversary counsel cannot conduct ex parte interviews? Is an attorney–client relationship with the employee necessary to secure privilege protection? May corporate counsel form an attorney–client relationship to prevent ex parte interviews without violating Model Rule 3.4, which prevents a lawyer from obstructing another party’s access to evidence?
One court has answered. In Newsuan v. Republic Servs., Inc., 2019 WL 2528793 (Pa. Super. Ct. June 20, 2019), the court ruled that, absent a conflict waiver, a company’s lawyer may not personally represent the company’s employees. And absent personal representation, adversary counsel may interview employees ex parte; otherwise, the representation unethically obstructs adversary counsel’s access to evidence.
The company’s privilege, however, is sufficient to protect the lawyer’s employee interviews. Read the opinion here. Actually, read it twice.
Personal Representation of Corporate Employees
A front-end loader crushed Karen Newsaun’s leg in an accident at a recycling center. She sued Republic Services and asked Republic to disclose the name of 16 employees who were at the worksite when the accident occurred. Republic refused.
Republic’s lawyers announced that they also represented the employees, and that this representation and Model Rule 4.2 prevented Newsaun’s lawyer from interviewing them ex parte. But the lawyers did not inform the employees of a potential conflict of interest in representing them and their employer. Under Model Rule 1.7, lawyers must disclose a conflict associated with concurrent representation and obtain a waiver before proceeding with the representation.
The Newsaun Court rejected this interview-blocking attempt, stating that—
[O]nly upon the employee’s informed consent to retain counsel despite the risk of conflict, which consent is accomplished through the employee’s completion of a waiver form clearly notifying him or her of the conflict, is a valid attorney–client relationship formed.
The Court refused to recognize any attorney–client relationship between the company’s lawyer and the company employees.
Corporate Attorney–Client Privilege
The Court held, however, that the lack of a specific attorney–client relationship did not destroy the privilege. Applying the corporate attorney–client privilege adopted in Upjohn Co. v. United States, 449 U.S. 383 (1981), the court held that the privilege protects company counsel’s communications with employees. It is the company’s privilege that applies, not the employee’s privilege. Indeed, the employees had no reason to seek legal advice about Newsaun’s injury.
Some of these employees/witnesses were now former employees. But no matter, the court said. It held that the privilege still applies, contrary to a Washington Supreme Court’s opposite ruling, which you may review here.
Upjohn Warnings Required?
The court noted that company counsel’s failure to give the employees Upjohn warnings before interviewing them did not destroy the privilege. Relying on the Commonwealth v. Schultz, 133 A.3d 294 (Pa. Super. Ct. 2016), a decision analyzed here, the court held that Upjohn warnings were unnecessary because the employees “neither sought legal advice, consulted with corporate counsel regarding personal legal matters, nor had any apparent need for legal representation.”
Company counsel, according to the court, “muddled the relevant attorney–client scheme somewhat by ending the interviews with an offer to represent the employees in their capacities as witnesses.” The totality of circumstances, however, revealed that the employees had sufficient notice that their discussions with company counsel were solely for Republic’s use.
Ex Parte Interviews
Even though the privilege applies, the court held that adversary counsel may conduct ex parte interviews because it invalidated company counsel’s purported attorney–client relationship with the employees.
The privilege protects from disclosure the company lawyer’s interview with a company employee. It is the company’s privilege. It is not necessary to enter an attorney–client relationship with the employee to establish and secure privilege protection. Note, however, that the privilege does not prevent adversary counsel from talking—ex parte—with the employee.
If company counsel wants to form an attorney–client relationship with the employee, a potential conflict of interest arises and the relationship may go forward only if the employee waives the conflict through informed consent. If the relationship properly forms, then adversary counsel may not conduct ex parte interviews with the employee.
A California federal court handed 7-Eleven a privilege victory for emails between an HR Rep and in-house and outside counsel regarding the company’s background check disclosure. The victory’s lesson is that companies must have their non-lawyer employees ready to answer the “legal advice” vs. “business advice” questions. Munoz v. 7-Eleven, Inc., 2019 WL 2610955 (C.D. Cal. May 1, 2019). You may read this short opinion here.
7-Eleven’s employment application announces that it will obtain a consumer report on the applicant or, later, the employee and provides certain FCRA notices. You may read the pertinent portions here.
7-Eleven’s HR Rep, Kristin Cope, obtained a draft form from a consultant, but then sent it to the company’s in-house lawyer for review and comment. The in-house counsel, in turn, sought legal advice from outside counsel. Together, they revised the consultant’s form. These lawyers and Cope exchanged many emails over the revisions.
In a later FCRA class action, the class plaintiffs sought production of these email exchanges, asserting—in conclusory fashion—that they pertained to routine business discussion, and not legal advice.
But did counsel recall the HR Rep’s deposition.
HR Rep Deposition
When asked about the emails during her deposition, which you may read in full here, Cope said this—
Q. When you were working on this disclosure form and you were talking to [in-house counsel], were you seeking [her] legal advice?
Q. And when you guys were communicating with [outside counsel], were you seeking [his] legal advice?
Q. Is it your testimony that the edits made to the form [were] a legal decision as opposed to a business decision?
The Court’s privilege analysis turned on the business-advice versus legal-advice distinction. It noted that “the fact that a person is a lawyer does not make all communications with that person privileged,” and that the privilege “does not attach to requests for business advice.” Indeed, “in-house counsel may be involved intimately in the corporation’s day to day business activities and frequently serve as integral players in business decisions.”
But not here, the Court ruled, because Cope’s deposition testimony slammed the door on the business-advice argument. The Court also reviewed the putatively privileged emails, and found each of them related to legal—not business—advice. The Court upheld the privilege and rejected the class plaintiff’s attempt to compel them.
The Court clearly made the correct ruling, but it is the lawyers’ underlying work that deserves attention. 7-Eleven’s counsel had its HR Rep ready to answer class counsel’s “legal advice” questions. When asked if she communicated with in-house counsel to obtain legal advice, she answered “yes” without hesitation or equivocation.
So many times non-lawyer employees are unprepared for these basic privilege-related questions. Convoluted or “I don’t know” answers may result in courts finding that the company forfeited the privilege because the employees and lawyers communicated for business, not legal, reasons.
To be sure, the Court’s review of the emails solidified its privilege ruling, but the HR Rep’s unequivocal “legal advice” testimony provided the foundation.
Is your employee witness ready?
The breaking news of Jeffrey Epstein’s long-time-coming arrest on sex-trafficking charges reminds us of an epic Epstein privilege loss. As reported in the Wall Street Journal, federal authorities arrested Epstein on July 6, 2019, and intend to charge him with one count of sex-trafficking and one count of conspiracy.
SDNY prosecutors formally charged Epstein on July 8, 2019 (read the indictment here.
Less than four months ago, a federal judge in Miami ruled that that U.S. prosecutors, led by then U.S. Attorney and now Labor Secretary Alexander Acosta, violated the Crime Victims’ Rights Act (CVRA) when it entered into a Non-Prosecution Agreement (read here) with Epstein. You may read the Court’s opinion here, the Journal’s report here, and a Miami Herald investigative report here.
Acosta formally resigned his Labor Secretary position on July 12, 2019 following the Epstein arrest and federal charges. Read the NYT story here.
In that case, Epstein and his attorney, Roy Black, intervened to preclude Epstein’s sex victims from discovering Epstein’s plea negotiations with the U.S. Attorney’s office. Epstein argued that a so-called “plea-negotiations privilege” protected those discussions from discovery.
Ultimately, the 11th Circuit rejected any such privilege, forcing the federal government to disclose those communications. The Court ruled that neither Fed. R. Evid. 410 (precluding admissibility of plea negotiations) nor common law warranted any such privilege protection.
And the later disclosed back-and-forth communications between Epstein’s attorneys and federal prosecutors became evidence in the Court’s ruling that the government violated the victims’ rights under the CVRA.
For more detail, read my blog post 11th Cir. Rejects Plea-Negotiations Privilege for Jeffrey Epstein’s Sex-Offense Plea Discussions.
And I’m sure some privilege issues will arise in the new federal prosecution, and we’ll be here waiting.