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Corporate Counsel Section Newsletter | Summer 2014

by Jennifer Brask | Jul 09, 2014

MSBA CORPORATE COUNSEL SECTION E-NEWSLETTER
 Summer 2014


Crazy, Useful Information included in the email:
 
 Maintaining the Attorney-Client and Work-Product Privileges in an Internal Investigation
 Chris Madel
Robins, Kaplan, Miller & Ciresi L.L.P.

Are You Ready to Hire an In-House Attorney?
Lacee Bjork Anderson, Esq., Principal
Quaero Group

Dear Abet:
Help!  I am overwhelmed with my volume of work.  How can I manage my workload more effectively?
Sincerely, Drowning
[See Abet’s response below…]

 
AnchorMaintaining the Attorney-Client and Work-Product Privileges in an Internal Investigation
 
Chris Madel
Robins, Kaplan, Miller & Ciresi L.L.P.

 
Internal investigations conducted without outside counsel risk not being protected by the attorney-client or work-product privileges.  On March 6, 2014, the District Court for the District of Columbia ordered production of documents related to an internal investigation directed by Kellogg, Brown and Root’s (“KBR”) internal law department, rejecting the company’s claims of attorney-client and work product privilege over the materials.  United States ex rel. Barko v. Halliburton Co. et al., No. 1:05-CV-1276 (D.D.C.)
 
In concluding that the investigation was not primarily designed to obtain legal advice and, thus, not protected by either privilege, the court highlighted the fact that KBR’s in-house counsel did not consult with outside counsel on whether to perform the investigation.  According to the court, this distinguished KBR’s investigation from traditional Upjohn investigations, as the investigation failed the “but for” test – i.e., whether it would have been performed “but for” the desire to obtain legal advice.
 
The Barko Decision
 
In 2005, Henry Barko, Jr. filed suit under the qui tam provision of the False Claims Act against KBR and its former parent, Halliburton, alleging that KBR passed on to the United States government inflated construction and services costs in support of military operations in Iraq.  The complaint remained under seal until 2009.
 
Independent of the suit, KBR implemented a Code of Business Conduct (“COBC”) program to investigate allegations of improper conduct in connection with its various war-zone contracts.  The COBC was administered by the company’s Law Department.  The program allowed KBR employees to report allegations either directly to the Law Department or through other channels.  However reported, these tips were directed to an in-house attorney who would determine whether an investigation should be opened.  Such investigations were conducted by non-attorney investigators working under the direction of KBR’s Law Department.  Witness statements and reports generated in a COBC investigation were marked “attorney-client privilege” and were provided to the Law Department, which was tasked with deciding whether further action, including a possible self-disclosure to the government, was necessary.
 
Barko moved to compel production of documents related to KBR’s internal investigation of conduct tied to the contract at issue in his case.  KBR claimed attorney-client privilege over the materials, arguing that the investigations were performed at the direction of counsel with the intent of facilitating legal advice.  The company also maintained the documents were protected as work product since the investigations were conducted with a reasonable anticipation of litigation, noting that KBR had been sued 22 times for purported violations of war-zone contracts.
 
On March 6, 2014, the Honorable James S. Gwin, sitting by designation for the U.S. District Court for the District of Columbia, delivered his ruling.[1]  Judge Gwin was unpersuaded by KBR’s arguments and ordered the production of the documents.
 
Judge Gwin’s Memorandum and Order contains a careful review of the facts.  He reviewed KBR’s internal files and called them “eye-openers” because of the volume of fraud claims they contained.  In delivering his ruling, he held that the attorney-client privilege did not apply because KBR performed the investigations “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice,” and he concluded that COBC policies “merely implement” the Defense Department’s regulatory requirements for contractor compliance programs.
 
Importantly, the court distinguished KBR’s investigations from a traditional Upjohn investigation on the basis that KBR’s in-house attorneys did not confer with outside counsel on whether and how to conduct the investigation.  Accordingly, the court concluded, the investigations “would have been conducted regardless of whether legal advice were sought” and, thus, were not performed “primarily” for the purpose of obtaining legal advice.
 
The court found further support for its conclusion in the fact that witnesses interviewed in the investigation were not told that the purpose of the interview was to assist KBR in obtaining legal advice and that the confidentiality agreements they signed warned of possible business impact from disclosure of the investigation.  In addition, the court highlighted the fact that the investigators were not attorneys and, thus, employees could not have inferred the “legal nature of the inquiry[.]”
 
In rejecting KBR’s claim of work product protection, the court cited the same rationale, but also noted the fact that the investigation was conducted prior to the unsealing of the complaint as inconsistent with a claim that the work was performed in anticipation of litigation.
 
Barko Is Not Alone
 
Barko joins a growing chorus of decisions in which courts have required disclosure of internal investigation materials, despite the role of in-house counsel. In Allied Irish Banks v. Bank of Am., N.A., the court for the Southern District of New York concluded that attorney-client privilege did not apply to in-house counsel’s investigation because counsel would have produced investigative materials in essentially the same form to address non-litigation purposes. 03-CV- 3748 (DAB) (GWG) (S.D.N.Y. Mar. 26, 2008).  In United States v. ISS Marine, No. 12-481 (D.D.C. Nov. 12, 2012), the District Court for the District of Columbia refused to find an internal investigation report created by in-house counsel privileged where it relied upon interviews performed by a non-lawyer auditor. In In re County of Erie, 473 F.3d 413 (2d Cir. 2007), the Second Circuit applied the so-called “predominant purpose” test to parse in-house government counsel email, upholding privilege for some, while disregarding privilege for others based upon the content of the email.
 
Aside from the waiver of privilege, employers may also be subject to sanctions for failing to turn over in-house counsel's investigation notes. In EEOC v. Spitzer, the District Court for the Northern District of Ohio ordered a mistrial after it learned that the investigating in-house attorney failed to turn over notes related to the employee’s complaints of discrimination. Nos. 1:06-CV-2337, 1:08-CV-1326, 1:08-CV-1542 (N.D. Ohio May 22, 2013). In its decision to sanction the employer over $300,000 in fees, the court referenced the conflict of interest inherent when an employer uses in-house counsel to conduct such an investigation.
 
KBR filed an emergency motion on March 7 to seal Judge Gwin’s decision.  But even if KBR is ultimately successful on appeal, it is becoming increasingly clear that investigations conducted purely by in-house counsel increase the risk of courts disregarding the application of the attorney-client privilege.
 
Lessons from Barko in Conducting Internal Investigations
 
Whether or not Barko survives on appeal, it is an important reminder of the steps companies should consider taking in order to increase the chances that a court will uphold their claim of attorney-client privilege over materials relating to internal investigations. 
 
Companies should be clear that they are conducting such investigations for the primary purpose of obtaining legal advice.  Towards that end, companies should consider consulting with outside counsel about the purpose and scope of an investigation before initiating the investigation and involving outside counsel in the investigation itself. It should be clear to all those involved in an investigation, including the investigators and the witnesses, that the company is seeking the information to assist its lawyers in providing legal advice on any further actions the company should take.  Companies should consider the direct involvement of attorneys in conducting witness interviews – particularly interviews of the most important witnesses.  In addition, materials produced in the investigation, including witness statements and investigative reports, should not only be marked “attorney-client privilege,” but should be treated as the company would treat any other privileged materials, ensuring their confidentiality and preventing disclosure to third parties.
 
      
 
AnchorAre You Ready to Hire an In-House Attorney?
Lacee Bjork Anderson, Esq., Principal
Quaero Group

 
Your company is prospering, as you expected it would, and you now are looking to continue to build your team and the idea has crossed your mind of hiring an attorney.  How do you decide what legal experience you need? Where do you start?
 
Attorneys are well educated and most are extremely hard working, knowledgeable, efficient employees.  They can offer sound advice and can help executives navigate a decision making process, when advice and counsel is need. Additionally, the best attorneys will not only show your companies its risks but they should also facilitate your processes and procedures that help you generate revenue.  Imagine that, attorneys help your company generate revenue? Yep, help your sales team sell!!  In-house attorneys, as you know, view their employer as their client.  That means, they should be protective, engaged, and wholly vested in the success of the company.
But is the time right to use your precious dollars to hire an in-house attorney for your company? 
 
Consider the following questions:

  • Did your company have over $250,000 in legal fees, over the course of the last year?
  • Do you have over 200 employees in your company?
  • Is your industry highly regulated or are their changes coming on your industry’s legal landscape?
  • Do you have consistent legal challenges?
  • Do you deal with a high volume of contracts that is eating away at your team that could be focused on more revenue generating activities?
  • Do you find yourself calling your attorney on a regular basis to get business advice?

If you’d answered yes to any of the questions above, adding an attorney would save your company money and likely increase your company’s productivity, efficiency, and profitability.
The value provided by sufficient in-house counsel is the provision of proactive legal services, as opposed to reactive legal services. You essentially have in-house business partners helping the company be successful by guiding it through the legal ramifications to prevent them instead of just react to them.
 
If you decide that you would like to hire an attorney, here are some benefits:

  • They are excellent, trusted business advisors
  • They reduce your legal fees while facilitating your revenue generating process
  • They help reduce your legal exposures while providing sound advice.

Take the time to consider the possibilities and then help the decision-makers at your company understand the benefit of additional in-house legal resources. 
 

Power [In] House!
 
The Barko decision has recently [and thankfully] been reversed!  The Court of Appeals for the District of Columbia Circuit recently concluded the lower court erred in its conclusion which otherwise strips in-house counsel of attorney-client privilege in many settings where it is logically appropriate .  The lower court decision left only a shred of protection for those relying on and deferring to the sage advice of their in-house counsel.  The Court of Appeals has restored balance.
 
Interesting points in the decision:
 
Lower Court:  Distinguished Barko from Upjohn stating that in Upjohn, the in-house counsel first consulted with outside attorneys.
Court of Appeals:  Disagreed on this point acknowledging that corporate attorneys are equally empowered to invoke privilege.
 
Lower Court: Distinguished Barko from Upjohn stating that, in Upjohn, the interviews were conducted by attorneys whereas in Barko, non-attorneys conducted the interviews.
Court of Appeals:  Disagreed because the non-attorney interviews were conducted at the direction of the corporate law department.
 
Lower Court: Distinguished Barko from Upjohn stating that, in Upjohn, it was expressly stated that the point of the interview was to obtain legal advice.
Court of Appeals:  Disagreed in that there are not “magic words” required and that in Barko, the employees knew the investigation was being conducted by the corporate legal department and the information would be protected accordingly.
 
Lower Court:  Distinguished Barko from Upjohn stating that Barko was focused on complying with Regulatory issues not for the sole purpose of seeking legal advice.
Court of Appeals:  Indicated that there is nothing requiring a sole or primary purpose of obtaining legal advice be in play in order to protect privilege.  There can be other motivators in addition to legal advice in play.
 
Long story, short – “the test boils down to whether obtaining or providing legal advice was one of the significant purposes of the attorney-client privilege.”
 
Please feel free to peruse the decision at: http://www.cadc.uscourts.gov/internet/opinions.nsf/701A3512988256CD85257D04004F78AA/$file/14-5055-1499662.pdf

Anchor

 

Ask Abet!

 
Dear Abet:  
Help!  I am overwhelmed with my volume of work.  How can I manage my workload more effectively?
Sincerely, Drowning

 

Dear Drowning,
There are several things that in–house lawyers can do to help streamline the work flow.  However, the idea of streamlining workloads can be lost as we do not have the time to actually implement time-savers.  So the short answer to your question is the “The smallest act of efficiency is worth more than the grandest intention.”  [Apologies to Oscar Wilde for the misquote.]
Some longer answers to your question are as follows:

  • Issue:  Do you find yourself repeatedly answering the same question? 

Action:  If you find that you have to constantly repeat yourself to different departments, people or anyone other than your children, then one sure-fire way to eliminate the repetition and ensure consistency in responding is to set up your frequently provided responses as a “signature” in your Outlook.  In the future, when that same question rears its ugly head, you simply have to click “Reply”, “Signature” select the proper answer and “Send”.  
Benefit: This ensures timely responses that are always consistent.

  • [To set up a signature:  Open a new email in Outlook.  Click on the “Signature” icon.  Select “Signatures”.  Click “New”.  Type a Name for the new signature (e.g. “Standard Indemnity”, “Diversity Statement”, “Lunch Order”, etc.).  Populate the text that is commonly repeated in the text box provided. Save.] 
  • Issue:  Do you find yourself being asked questions of which you do not know the answer? 

Action:  No one wants to look stupid, especially lawyers, so we often take on the burden of bird-dogging internal corporate questions that may not be squarely suited in the Legal realm.  The requestor may sit in limbo while the lawyer forwards the question to a third party and waits for a reply only to send the response back to the original requestor.  Cut out the middle man.  Reply to the requestor and copy the person who would know the answer.  Clarify that you are copying the person who can best answer the question to help facilitate resolution. 
Benefit:   You will be perceived as an excellent resource and can lose the bottle-neck stigma that often follows the corporate lawyers.  An added benefit is that if there is a delay in obtaining the response, the pressure will be shifted rightfully to the shoulders of the person with the actual knowledge. 

  • Issue:  Do you find yourself attending futile meetings?  Have you ever had to tell someone that you weren’t able to get any work done because you were in meetings? 

Action:  Change your approach to meetings.  If you are invited to meet, send a notice to the meeting’s requestor which states something along the lines of “I have received your meeting notice.  Please update the meeting request to include 1) a statement of precisely what you require from me (i.e. – the issue) and 2) all documents that will be necessary for the meeting.”  [Ideally, you would have set this message up as a “Signature”, buying you even more time!]
Benefit:   By having the requestor state the issue up front, you force the requestor to put some thought into why the lawyer needs to attend and you minimize the superfluous discussions that may prolong an otherwise simple discussion. (This will not work for all meetings but it should have a meaningful impact.)   You will be able to ascertain, early on, whether additional parties or documents would be required.  You empower yourself to resolve the issue right away versus requiring additional meetings. You will actually be able to get work done.

  • Issue:  Do you have a high quantity of small matters that require attention?   Sometimes we can have so many mosquitos swarming about that we can’t swat them all. 

Action:  Categorize your mosquitos and strike one, large blow.  Perhaps you have numerous contracts from various areas of your business that require review.    Sort your contracts by area (e.g. Sourcing, Consignment, Sales, Human Resources, etc.).  Schedule a meeting for yourself on one category only. 
Benefit:   By reviewing contracts of the same category, you develop an economy of scale and can improve your own turnaround time.  If you set up this self-meeting to reoccur weekly, then the business can have predictable expectations as to your deliverables!
Granted, there will always be fire-drills and complex matters that will pull you under but, hopefully, these tips can help you come up for air!
 
Regards,
Abet

How to reach Abet
 
If you would like to submit a question to be answered in the next “Ask Abet”, please send your questions to:jbrask@mnbar.org


 


[1]               Nominated by President Clinton in 1997, Judge Gwin normally presides in the Northern District of Ohio.  See http://www.ohnd.uscourts.gov/home/judges/judge-james-gwin/.  He took over the KBR litigation by designation from his court in Cleveland.  See Judge Chucks Protective Order for Halliburton, Courthouse News Service (July 10, 2013) (found at <http://www.courthousenews.com/2013/07/10/59247.htm>).

 
 
************************************************************************
If you are interested in submitting an article, please contact Candice Ciresi at Candice.Ciresi@covidien.com 
 
If you do not wish to receive this E-Newsletter, send your request to be removed from the mailing list to Jenn Brask at jbrask@mnbar.org.

Annual Report

MSBA Corporate Counsel Section
Annual Report
2016-17

 

Section Membership

As of June 29, 2017 the Section has 590 members.

Financial Status

The Section had an account balance of $25,316.29 as of April 30, 2017.

CLEs & Events

The Section hosted 8 CLE programs in fiscal year 2016-17.   

Program Title

Date

Event Code

CLE Credits

Number of Attendees

Summer Social

8/10/16

 

 

42

The Ethics and Causes of Wrongful Convictions

11/15/16

228055

1.5 Ethics

31

Antitrust Basics for In-House Counsel

12/7/16

231921

1.5 Standard

46

The History of Indian Law and Practicing Transactional Law on Tribal Land Today

12/14/16

228644

1.0 EOB
1.0 Standard

33

Winter Social

1/25/17

 

 

48

3rd Annual Corporate Counsel Institute

2/10/17

234367

6.0 Standard
1.0 EOB

76

Top 5 International Tax Mistakes Regularly Made by Business

2/23/17

234302

1.0 Standard

19

Gain the Edge! Negotiation Strategies for Transactional Lawyers

6/1/17

239509

3.25 Standard

61

  

Annual Meeting and Election Results

The Section’s Annual Meeting was held on June 20, 2017. 

The following council members were elected to serve on the Section’s Governing Council:

Gretta Hanson (2017-2020)
Stephen Ringquist (2017-2019)

The following officers were elected to serve on the Section’s Governing Council from July 1, 2017 to June 30, 2018:

Chair:  Jonathon Heinonen
Vice-Chair/Secretary:  Rosa Summers
Treasurer:  Frederick Dawe


Diversity and Inclusion 
Two council members attended MSBA sponsored diversity training
Supported MSBA efforts encouraging section members to complete profile information 


Other Section Accomplishments
Increased section membership by nearly 2%  

Submitted By:
Mary Dean, Section Chair
Date: June 28, 2017