In the continuing fallout from the reprehensible Jerry Sandusky scandal, a PA appellate court rejected Penn Stateâs attorneyâclient privilege claim over documents that Louis Freehâs law firm generated during its internal investigation. The reason?
The court found that there was no attorneyâclient relationship between Penn State and Freehâs law firm, and, without this relationship, the privilege did not cover communications between Penn State Board of Trustees and Freehâs firm. The court made this finding even though the Board Chair signed the engagement letter and the Board paid Freehâs fees. Estate of Paterno v. NCAA, 168 A.3d 187 (Pa. Super. Ct. 2017). You may read the decision here.
The Forgotten Privilege Element
Regular readers of this blog know that the party asserting the attorneyâclient privilege must show three primary elements: a (1) confidential (2) communication made for (3) legal-advice purposes. We too often, though, presumeâand forget aboutâa threshold element: a lawyerâclient relationship.
Who was the Client?
On Nov. 4, 2011, the Commonwealth of Pennsylvania charged Sandusky with committing serial sexual offenses against minor boys while on the Penn State campus. Penn State created a âSpecial Investigations Task Force,â composed of Penn State trustees, faculty, alumni, and students, to investigate the Universityâs handling of the scandal.
On Nov. 18, 2011, the Penn State Board of Trustees signed an engagement letter with Freehâs law firm, which you may read here. The engagement letter stated that the Board of Trustees was engaging Freeh to represent the Task Force. The scope of engagement centered on the Freeh firm serving as independent, external legal counsel to the Task Force and performing an âindependent, full, and complete investigationâ into the Sandusky scandal.
The Universityâs insurance carrier was to pay Freehâs fees, but if not, then the Trustees assumed responsibility for payment. The Universityâs Board of Trustees Chair signed the engagement letter, as did the Task Forceâs Chair.
In the Paterno case, Joe Paternoâs Estate and others sued the NCAA for defamation and other torts claiming that the NCAA improperly relied upon the resulting and (allegedly) unreliable Freeh Report when issuing sanctions. The plaintiffs subpoenaed Freehâs files relating to its preparation of the Freeh Report, and Freeh and Penn State objected on privilege grounds.
Ruling
Like the trial court, the appellate court focused its analysis on whether the Freeh firm represented Penn. State in conducting its investigation. If not, then Penn State could not assert the attorneyâclient privilege. To make this determination, the court reviewed the engagement letter âin detail.â
The court found that Penn State retainedâand paidâthe Freeh firm, but to represent the Task Force. The letter stated that the Freeh firm was âexternal legal counsel to the Task Force,â would provide âwork and adviceâ to the Task Force, provide âlegal services for the Task Forceâs benefit,â and send its report to the Task Force.
The Universityâs Board Chair signed the engagement letter, but no matterâit did so because it was paying the fees, and paying legal fees does not necessarily create an attorneyâclient relationship. The Task Forceâs signature was more persuasive, because â[i]f Penn State was the client, and if the Task Force had no identity distinct from Penn State, [the Chairâs] signature would be superfluous.â
The Court therefore upheld the trial courtâs order requiring production of the Freeh firmâs communications with the Penn State Board of Trustees and with Penn Stateâs lawyers.
POP Analysis
Courts have rarely addressed the attorneyâclient relationship issue in internal investigations, likely because lawyers opposing a privilege claim fail to recognize this issue, or courts assume that a special committeeâs retention of a law firm necessarily means the firm also represents the corporate entity.
The Paterno case provides caution and guidance for corporations and other organizational entities retaining outside firms to investigate potential wrongdoing. It is important to ensure the confidentiality and legal-advice elements to maintain the privilege, but letâs not forget the threshold privilege issueâensure you have the correct lawyerâclient relationship.