Tips for Preventing or Limiting In-House Counsel Depositions 2

Deposing in-house lawyers was once considered taboo, but has now become a litigation trend.  And these depositions are not limited to an in-house corporate lawyer in business litigation over a deal gone bad; trial lawyers increasingly seek to depose in-house litigation managers as well.  When these deposition requests arise, lawyers should appropriately consider the significant attorney-client privilege issues that will inevitably become center stage.

Several questions arise in this situation.Business man pledging  Is there anything in-house and outside counsel can do to prevent the deposition from occurring?  How should counsel handle the privilege-related issues if the deposition goes forward? How can in-house counsel avoid becoming a deposition target in the first place?

Federal and state courts provide divergent views on the subject.  Some follow the so-called Shelton rule, originating in Shelton v. American Motors Co., 805 F.2d 1323 (8th Cir. 1986), which permits a protective order preventing in-house counsel depositions unless the party seeking the deposition shows (1) that no other means exist to obtain the information; (2) the information sought is relevant and non-privileged; and (3)  the information is crucial to the party’s case preparation.

Many courts, notably the Second Circuit, decline to follow Shelton and prefer to review all relevant facts and circumstances before deciding whether to permit a deposition, such as the deposition need, the lawyer’s role in the matter on which discovery is sought, and the risk of encountering privilege and work-product issues. In re Subpoena Issued to Dennis Friedman, 350 F.3d 65 (2d Cir. 2003).

In my recent article, Preventing or Limiting In-House Depositions, published by Inside Counsel, I explore the still-developing law on this important issue.  I also provide tips on how in-house counsel can lessen their chances of becoming a deposition target, how to address the privilege-related issues, and whether the in-house lawyer needs separate counsel.

You may access the article at this link.   My thanks to Inside Counsel for publishing the article and allowing access through this post.

Is Mediation Privilege Absolute or Qualified? 1

Many incorrectly assume that all evidentiary privileges are absolute, meaning that a party seeking privileged information may not override the privilege despite the level of need.  But several evidentiary privileges are qualified, meaning that a party may obtain privileged information upon a sufficient showing of need.  For example, the attorney-client privilege is absolute and inviolable once established.  But the work-product doctrine is qualified, and a party may obtain the protected information upon a showing of substantial need and an inability to obtain the material elsewhere.

What about the mediation privilege?  mediationThe Uniform Mediation Act, published by the National Conference of Commissioners on Uniform State Laws and accessible here, includes a qualified mediation privilege.  This uniform act provides that a mediation communication is privileged from discovery unless the party seeking discovery shows that the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality, and that the mediation communication is sought or offered in a criminal proceeding or in a proceeding to rescind or reform or a defense to avoid liability on a contract arising out of the mediation. Unif. Med. Act § 6(b).  Some states have adopted the Uniform Mediation Act, including its qualified privilege, while others have adopted it with some modifications.  Other states forego the uniform act in favor of their own mediation rules or statutes.  And in these states, the privilege may arise by statute or in the common law, and may be absolute or qualified.

A recent Indiana Supreme Court decision highlights this distinction.  In Horner v. Carter, 981 N.E.2d 1210 (Ind. 2013), copy available here, a husband sought to modify a divorce settlement agreement and attempted to offer his mediation statements as evidence.  In rejecting evidence of mediation statements, the Court followed the Indiana Alternative Dispute Resolution Rules, accessible here, which include an absolute mediation privilege. Rule 2.11 provides:

Mediators shall not be subject to process requiring the disclosure of any matter discussed during the mediation, but rather, such matter shall be considered confidential and privileged in nature. The confidentiality requirement may not be waived by the parties, and an objection to the obtaining of testimony or physical evidence from mediation may be made by any party or by the mediators.

Interestingly, the Court noted the distinction between Indiana’s absolute privilege and the Uniform Mediation Act’s qualified privilege, and expressly “decline[d] to follow [the uniform act’s] approach to mediation confidentiality at this time.”  Perhaps Indiana will amend its mediation privilege rule to make it a qualified privilege, but at this time the privilege remains absolute.  Practitioners should note this decision, avoid assumptions of an absolute mediation privilege, and know where your state falls on the absolute vs. qualified issue.

Court Refuses to Recognize “Compliance Officer Privilege” in Qui Tam Action

The growing number of corporate compliance officers, most with law degrees and housed in the corporate legal department, will increasingly raise the issue whether some evidentiary privilege protects from compelled disclosure corporate communications with the CCO.  A Texas federal court, interpreting a Texas state statute, refused to find a statutory “compliance officer privilege” that protectscomplianceofficer a CCO’s communications.  U.S. v. Austin Radiological Associates, Inc., 2013 WL 113668 (W.D. Tex. Mar. 18, 2013).

In Austin Radiological, a former employee of Austin Radiological Associates (ARA) brought a qui tam action under the False Claims Act alleging ARA retained Medicare overpayments, wrongfully billed Medicare, and wrongful discharge.  She sought discovery from ARA’s compliance officer, but ARA objected asserting a “compliance officer privilege” under Texas Health & Safety Code § 161.032(e).  This statute provides, in part, that

The records, information, and reports received or maintained by a compliance officer retain the protection provided by this section only if the records, information, or reports are received, created, or maintained in the exercise of a proper function of the compliance officer . . .

The question whether this statutory section created an evidentiary privilege depended upon the court’s statutory interpretation.  Upon review, the court determined that this section incorporated another section (Texas Gov’t Code § 552.005) stating that the “protection provided by this section” did not “create new privileges from discovery.”  The court therefore rejected a statutory “compliance officer privilege” and ordered the CCO’s documents produced.

PoP Analysis.  This decision raises several issues for in-house lawyers and corporate compliance officers.  First, the court and parties applied Texas state law even though the presence of a federal claim could have provided an opportunity to argue for a common law compliance privilege.  Second, the case is silent regarding whether the compliance officer was a lawyer working in ARA’s legal department.  If so, then perhaps an argument that the corporate attorney-client privilege protected the compliance officer’s communications would have proved more successful.  While a few cases address a compliance officer’s privilege in the attorney-client privilege context, the cases are fact-specific and rely on a traditional analysis whether the compliance officer was acting in a legal versus a business capacity.  See, e.g., Leazure v. Apria Healthcare, Inc., 2010 WL 3397685 (E.D. Tenn. Aug. 26, 2010); U.S. ex rel. Parikh v. Premera Blue Cross, 2006 WL 3733783 (W.D. Wash. Dec. 15, 2006).

And finally, this case reminds us that statutory confidentiality rules are not the equivalent of evidentiary privileges.  As courts note, “[c]onfidential does not necessarily mean privileged,” In re Grand Jury Subpoena Dated Dec. 17, 1996, 148 F.3d 487, 492 (5th Cir. 1998), and “confidentiality and privilege are two separate, albeit overlapping, legal concepts.”  Gaumond v. Trinity Repertory Co., 909 A.2d 512, 518-19 (R.I. 2006).