Privileged Communications: An Overview and
Description: Privileged Communications: An Overview and Practical Guide Prepared for the Association of Corporate Counsel, Dallas-Fort Worth By Clifford Thau and Marisa Antos-Fallon July 2020 Presentation Summary Overview Introduction to Attorney-Client
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slide1. Privileged Communications: An Overview and Practical Guide Prepared for the Association of Corporate Counsel, Dallas-Fort Worth
By Clifford Thau and Marisa Antos-Fallon July 2020<br>
slide2. Presentation Summary Overview Introduction to Attorney-Client Privilege
The Special Role of In-House Counsel
Waivers of Attorney-Client Privilege
Best Practices for Preserving Privilege
Guidance for In-House Counsel
Guidance for Other Employees
Real Life Situations
Internal Investigations
Negotiating Transactions
Sharing Information Outside the Company
Communications with Affiliates<br>
slide3. What is Covered by Attorney-Client Privilege? Introduction The Attorney-Client privilege covers:
Communications,
Made between privileged persons (i.e., attorney and client),
In confidence,
For the purpose of obtaining or providing legal advice.<br>
slide4. Why is the Attorney-Client Privilege Important? Introduction Privilege exists to encourage complete and honest communications between an attorney and client in the most sensitive and difficult situations.
The Attorney-Client privilege enables these communications to remain confidential. If the privilege does not attach, or is waived:
Such communications can be used in litigation by an adversary or in an investigation by the government.
A litigation adversary or the government may call the author or recipients to give testimony regarding the communication in a deposition, witness interview, or at trial.
The communications could be published in the press or otherwise made public.<br>
slide5. What Does Attorney-Client Privilege Protect? Introduction Limited to legal (as opposed to business) advice.
Communications must be primarily or predominantly of a legal (rather than a business or personal) character.
Application of the privilege is limited to communications and does not protect the underlying facts.
There should be an expectation that the advice will not be disclosed to others.<br>
slide6. The Special Role of In-House Counsel Introduction In theory, the attorney-client privilege and work product doctrine apply without distinction to in-house counsel.
However, in-house counsel often provides advice that contains legal and business elements, and often wear multiple hats.
In-house counsel, in practice, may face a tougher burden of showing that their advice was legal in nature rather than purely business-related.<br>
slide7. The Special Role of In-House Counsel Introduction Distinguishing legal advice from business advice sounds more straightforward than it is in practice.
Factors to consider:
The attorney’s role – i.e., how and why did in-house counsel become involved?
To negotiate a business transaction?
Because litigation is anticipated?
What other offices does in-house counsel hold?
Did in-house counsel conduct or convey any legal analysis or strategy?
What will not suffice:
The mere physical presence of in-house counsel during a conversation.
Merely copying in-house counsel when sending an email or circulating a memorandum.<br>
slide8. The Special Role of In-House Counsel Introduction Keeping in mind fact-specific nature of the inquiry . . .
Legal functions may include:
Advising company on existing law
Undertaking and reporting legal research
Analyzing conduct for conformity with law or judgments
Advising on imminent litigation
Opining on applicable law
Business functions may include:
Negotiating terms of a contract
Attending business meetings
Soliciting advice from outside professionals
Performing duties of another office – e.g., corporate secretary
Acting as a scribe<br>
slide9. How is Privilege Waived? Waivers Even if a communication is originally privileged, Attorney-Client privilege can be waived:
By disclosing the substance of the legal advice or privileged communication;
By sharing the privileged information with a third party (government, potential investors, data room, certain consultants, insurers)
Waiver can be intentional or unintentional.<br>
slide10. How to Avoid Waiving Privilege Waivers The privilege is not waived:
By disclosing that you have a lawyer or received advice on a particular issue.
By disclosing the mere fact of a communication’s occurrence or existence, the parties to a communication, or its date (i.e. “I asked my lawyer about the contract on Tuesday).
To avoid waiver from inadvertent disclosure,
Party asserting the privilege must show
They intended to maintain confidentiality and took reasonable steps to prevent disclosure.
Then promptly sought to remedy the situation once learning of disclosure.<br>
slide11. For In-House Counsel Best Practices Whenever possible, separate legal and business advice.
For example, maintain separate email chains (or start a new email chain) and edit the list of recipients for each chain.
When serving in both legal and non-legal roles:
Use titles as appropriate (e.g., in email signature block)
Segregate legal files from non-legal files
Maintain a written record of the legal aspects of a communication
Identify legal advice as privileged and confidential.
Important to use labels / designations consistently and correctly – do not overuse when clearly providing only business advice.<br>
slide12. For In-House Counsel Best Practices When attending meetings or conference calls:
In-house or outside counsel leads discussion of legal issues.
When attending board meetings for the purpose of discussing legal matters, the minutes should indicate clearly that:
In-house counsel attended in his / her role as legal advisor.
Discussions were for the purpose of providing legal advice.
Those discussions were confidential, intended to be privileged.
Note meeting participants and exclude those who may waive privilege.<br>
slide13. Guidance for Employees Best Practices If the communication is privileged, you should keep it confidential:
Do not forward emails.
Do not provide copies.
Do not openly discuss with others.
If you don’t know whether the communication is privileged, you should keep it confidential until you have had an opportunity to consult with counsel.
Communications are not privileged merely because in-house counsel is physically present or copied on the communication.<br>
slide14. Guidance for Employees Best Practices When emailing:
Write “privileged and confidential” in the subject line and header of the email.
Remind recipients: “Do not forward”
Include in-house counsel in the to: or cc: line, depending on circumstances
Where including in-house counsel in an email is not appropriate, make sure communications are labeled “at the direction of counsel”
Start a new email chain where appropriate.
Properly identifying privileged communications and other protected materials will help both maintain the privilege or protection and reduce expenses.<br>
slide15. Guidance for Employees Best Practices Be mindful who participates in discussions that potentially may be protected by the privilege.
Exclude non-employees who are not necessary for the discussion.
Take care when including non-employees who are not counsel, such as investment bankers and auditors.
When in doubt, the best practice is to exclude advisors, consultants, and other third parties from the discussion.
Always ask in-house counsel before communicating with any third party.
Whenever in doubt, contact in-house counsel as a first step.<br>
slide16. Internal and Government Investigations Real Life Situations Involve counsel at the outset for the purpose of obtaining legal advice and document appropriately.
In-house counsel (where appropriate, with the assistance of outside counsel) should manage all investigations.
Communications made by and to non-attorney employees serving as agents of attorneys in internal investigations are protected by the attorney-client privilege.
Under most circumstances, production of information to the Government waives privilege as to that information in subsequent civil suits.
When an investigation is conducted by an audit committee or special committee, the committee is a client separate and apart from the company for the purposes of the attorney-client privilege.
Any investigative report shared with the company board or others at the company is potentially discoverable.<br>
slide17. Internal and Government Investigations Real Life Situations When interviewing employees as part of formal and informal investigations, memorialize that:
The information sought was within the scope of the employee’s duties and is not available from more senior employees.
Communications with lower-level employees were directed by the employee’s supervisor.
The employee understands that the purpose of the communication is for the company to obtain legal advice (i.e., that an Upjohn warning was issued).
Upjohn warnings should include the following:
The attorney represents the corporation — not the employee;
The conversation with the attorney is covered by the attorney-client privilege; and
The corporation has sole discretion to waive privilege and to determine how information may be used.
Restrict discussions with employees to matters that are within the scope of their employment.<br>
slide18. Negotiating Transactions Real Life Situations Drafts of Agreements/Documents are privileged if:
Draft was created by/for or at the direction of attorneys, and
Only shared between attorney and client.
Once a draft is shared with a counterparty to a transaction, the attorney-client privilege is waived.
Consider the impact of an acquisition on the attorney-client privilege.
If new management is attempting to run the pre-existing business entity and manage its affairs, new management stands in the shoes of prior management and should control the attorney-client privilege with respect to the company’s operations.
If, for example, only a discrete set of assets has been transferred, and the acquirer is not attempting to manage or run the pre-existing business, the attorney-client privilege is unlikely to pass to the acquirer.<br>
slide19. Sharing Information Outside the Company Real Life Situations Communications with Public Relations Firms/Consultants:
Likely not privileged unless the communication is necessary to obtain informed legal advice.
Consult with counsel first to determine the scope of a particular PR firm’s engagement, and whether privileged information can be shared.
Certain communications can be privileged if the consultant is hired to “translate” complicated concepts for counsel.
Communications with Insurers or Auditors:
Generally not privileged. Consult with counsel to determine whether non-privileged information can be isolated to satisfy insurer request.<br>
slide20. Sharing Information with Affiliates Real Life Situations The law is not well developed, but whether communications among affiliated entities, portfolio companies, or joint venture partners will be privileged generally depends on whether the entities are sufficiently interrelated and share legal interests.
Courts have held that corporate entities under common ownership and control have a shared legal interest such that privileged communications can be shared without waiver.
When two different companies jointly control an entity or project, communications about the entity or project should be protected.
A shared legal interest is always key - when interests are not aligned, communications between affiliated companies and joint venture partners may not be privileged.
Always use greater caution when communicating about sensitive issues outside of the Company, and when in doubt about sharing information with an affiliated entity, portfolio company or joint venture partner, consult with counsel.<br>
slide21. Final Takeaways
Privilege questions are fact-specific inquiries.
Properly identifying privileged materials will both protect the privilege and reduce expenses.
Measures taken to keep information confidential will protect against a claim of waiver.
If in doubt, the best practice is to exclude advisors, consultants, etc., from discussions.
Don’t be afraid to pick up the phone.
Questions??<br>
slide22. Clifford Thau New York │ +1.212.237.0012 │ cthau@velaw.com Commercial & Business Litigation Cliff’s main area of practice is commercial litigation with a focus on securities litigation and regulatory and internal investigations. He represents issuers, underwriters, and officers and directors in class action lawsuits; securities and private equity firms and senior management in federal and state regulatory proceedings; and Audit and Special Committees in internal investigations and SEC investigations. Cliff also represents corporations in commercial litigation and accounting firms in malpractice actions and bankruptcy court proceedings.
Cliff is the Co-Managing Partner of the New York office. See full bio. Experience Highlights Represented firms and individuals in non-public regulatory investigations into violations of federal securities laws
Successfully represented a major oil company in connection with an SEC inquiry concerning the company’s analysis of the requirements for establishing reserves and disclosures of its contingent liabilities arising out of a major oil spill; the SEC concluded its inquiry without any enforcement action
Successfully represented an independent exploration and production company in an SEC investigation in connection with activities involving shale gas plays; the SEC concluded its investigation without any enforcement action Successfully represented and currently represent a major international financial firm in connection with regulatory inquiries brought by the SEC, FINRA, and state law enforcement agencies, including inquiries into the firm’s investments in energy projects
Successfully represented a private equity firm in the bankruptcy of a portfolio company, a midstream oil and gas company, including court-appointed Examiner’s investigation, regulatory inquiries, and securities class action
Successfully represented an exploration and production company in connection with a 10b-5 class action, an SEC investigation, and derivative suits; the SEC discontinued its inquiry without recommending any enforcement action Partner<br>
slide23. Marisa Antos-Fallon New York │ +1.212.237.0151 │ mantos-fallon@velaw.com Commercial & Business Litigation Marisa’s practice focuses on commercial and securities litigation in federal and state court, as well as internal investigations. She also represents clients in connection with regulatory investigations and inquiries by the SEC, FINRA, and other agencies. See full bio. Experience Highlights Represented an audit committee in connection with an internal investigation regarding Foreign Corrupt Practices Act issues and related investigations by the Department of Justice and Securities and Exchange Commission
Obtained summary judgment on behalf of financial firm, including affirmance by the U.S. Court of Appeals for the Second Circuit, resulting in dismissal of fraudulent transfer claims brought by bankruptcy trustee
Obtained complete dismissal of putative class action securities fraud claims against media measurement and analytics company following motion to dismiss Obtained complete dismissal of putative class action fraud and consumer protection claims on behalf of professional sports team following motion to dismiss
Successfully represented a broker-dealer and its officers in lawsuits commenced by the SIPC Trustee and private investors arising from the Madoff Ponzi scheme
Successfully represented data provider in dispute regarding alleged breach of license agreement, including in proceedings for a temporary restraining order and preliminary injunction
Successfully represented restaurant chain in contract dispute with internet services provider Counsel<br>
slide24. THANK YOU This content is intended for educational and informational purposes only and does not constitute legal advice or services by the speakers or by Vinson & Elkins LLP. 1114 Avenue of the Americas, 32nd Floor, New York, NY 10036 +1.212.237.0000 velaw.com<br>
By Clifford Thau and Marisa Antos-Fallon July 2020<br>
slide2. Presentation Summary Overview Introduction to Attorney-Client Privilege
The Special Role of In-House Counsel
Waivers of Attorney-Client Privilege
Best Practices for Preserving Privilege
Guidance for In-House Counsel
Guidance for Other Employees
Real Life Situations
Internal Investigations
Negotiating Transactions
Sharing Information Outside the Company
Communications with Affiliates<br>
slide3. What is Covered by Attorney-Client Privilege? Introduction The Attorney-Client privilege covers:
Communications,
Made between privileged persons (i.e., attorney and client),
In confidence,
For the purpose of obtaining or providing legal advice.<br>
slide4. Why is the Attorney-Client Privilege Important? Introduction Privilege exists to encourage complete and honest communications between an attorney and client in the most sensitive and difficult situations.
The Attorney-Client privilege enables these communications to remain confidential. If the privilege does not attach, or is waived:
Such communications can be used in litigation by an adversary or in an investigation by the government.
A litigation adversary or the government may call the author or recipients to give testimony regarding the communication in a deposition, witness interview, or at trial.
The communications could be published in the press or otherwise made public.<br>
slide5. What Does Attorney-Client Privilege Protect? Introduction Limited to legal (as opposed to business) advice.
Communications must be primarily or predominantly of a legal (rather than a business or personal) character.
Application of the privilege is limited to communications and does not protect the underlying facts.
There should be an expectation that the advice will not be disclosed to others.<br>
slide6. The Special Role of In-House Counsel Introduction In theory, the attorney-client privilege and work product doctrine apply without distinction to in-house counsel.
However, in-house counsel often provides advice that contains legal and business elements, and often wear multiple hats.
In-house counsel, in practice, may face a tougher burden of showing that their advice was legal in nature rather than purely business-related.<br>
slide7. The Special Role of In-House Counsel Introduction Distinguishing legal advice from business advice sounds more straightforward than it is in practice.
Factors to consider:
The attorney’s role – i.e., how and why did in-house counsel become involved?
To negotiate a business transaction?
Because litigation is anticipated?
What other offices does in-house counsel hold?
Did in-house counsel conduct or convey any legal analysis or strategy?
What will not suffice:
The mere physical presence of in-house counsel during a conversation.
Merely copying in-house counsel when sending an email or circulating a memorandum.<br>
slide8. The Special Role of In-House Counsel Introduction Keeping in mind fact-specific nature of the inquiry . . .
Legal functions may include:
Advising company on existing law
Undertaking and reporting legal research
Analyzing conduct for conformity with law or judgments
Advising on imminent litigation
Opining on applicable law
Business functions may include:
Negotiating terms of a contract
Attending business meetings
Soliciting advice from outside professionals
Performing duties of another office – e.g., corporate secretary
Acting as a scribe<br>
slide9. How is Privilege Waived? Waivers Even if a communication is originally privileged, Attorney-Client privilege can be waived:
By disclosing the substance of the legal advice or privileged communication;
By sharing the privileged information with a third party (government, potential investors, data room, certain consultants, insurers)
Waiver can be intentional or unintentional.<br>
slide10. How to Avoid Waiving Privilege Waivers The privilege is not waived:
By disclosing that you have a lawyer or received advice on a particular issue.
By disclosing the mere fact of a communication’s occurrence or existence, the parties to a communication, or its date (i.e. “I asked my lawyer about the contract on Tuesday).
To avoid waiver from inadvertent disclosure,
Party asserting the privilege must show
They intended to maintain confidentiality and took reasonable steps to prevent disclosure.
Then promptly sought to remedy the situation once learning of disclosure.<br>
slide11. For In-House Counsel Best Practices Whenever possible, separate legal and business advice.
For example, maintain separate email chains (or start a new email chain) and edit the list of recipients for each chain.
When serving in both legal and non-legal roles:
Use titles as appropriate (e.g., in email signature block)
Segregate legal files from non-legal files
Maintain a written record of the legal aspects of a communication
Identify legal advice as privileged and confidential.
Important to use labels / designations consistently and correctly – do not overuse when clearly providing only business advice.<br>
slide12. For In-House Counsel Best Practices When attending meetings or conference calls:
In-house or outside counsel leads discussion of legal issues.
When attending board meetings for the purpose of discussing legal matters, the minutes should indicate clearly that:
In-house counsel attended in his / her role as legal advisor.
Discussions were for the purpose of providing legal advice.
Those discussions were confidential, intended to be privileged.
Note meeting participants and exclude those who may waive privilege.<br>
slide13. Guidance for Employees Best Practices If the communication is privileged, you should keep it confidential:
Do not forward emails.
Do not provide copies.
Do not openly discuss with others.
If you don’t know whether the communication is privileged, you should keep it confidential until you have had an opportunity to consult with counsel.
Communications are not privileged merely because in-house counsel is physically present or copied on the communication.<br>
slide14. Guidance for Employees Best Practices When emailing:
Write “privileged and confidential” in the subject line and header of the email.
Remind recipients: “Do not forward”
Include in-house counsel in the to: or cc: line, depending on circumstances
Where including in-house counsel in an email is not appropriate, make sure communications are labeled “at the direction of counsel”
Start a new email chain where appropriate.
Properly identifying privileged communications and other protected materials will help both maintain the privilege or protection and reduce expenses.<br>
slide15. Guidance for Employees Best Practices Be mindful who participates in discussions that potentially may be protected by the privilege.
Exclude non-employees who are not necessary for the discussion.
Take care when including non-employees who are not counsel, such as investment bankers and auditors.
When in doubt, the best practice is to exclude advisors, consultants, and other third parties from the discussion.
Always ask in-house counsel before communicating with any third party.
Whenever in doubt, contact in-house counsel as a first step.<br>
slide16. Internal and Government Investigations Real Life Situations Involve counsel at the outset for the purpose of obtaining legal advice and document appropriately.
In-house counsel (where appropriate, with the assistance of outside counsel) should manage all investigations.
Communications made by and to non-attorney employees serving as agents of attorneys in internal investigations are protected by the attorney-client privilege.
Under most circumstances, production of information to the Government waives privilege as to that information in subsequent civil suits.
When an investigation is conducted by an audit committee or special committee, the committee is a client separate and apart from the company for the purposes of the attorney-client privilege.
Any investigative report shared with the company board or others at the company is potentially discoverable.<br>
slide17. Internal and Government Investigations Real Life Situations When interviewing employees as part of formal and informal investigations, memorialize that:
The information sought was within the scope of the employee’s duties and is not available from more senior employees.
Communications with lower-level employees were directed by the employee’s supervisor.
The employee understands that the purpose of the communication is for the company to obtain legal advice (i.e., that an Upjohn warning was issued).
Upjohn warnings should include the following:
The attorney represents the corporation — not the employee;
The conversation with the attorney is covered by the attorney-client privilege; and
The corporation has sole discretion to waive privilege and to determine how information may be used.
Restrict discussions with employees to matters that are within the scope of their employment.<br>
slide18. Negotiating Transactions Real Life Situations Drafts of Agreements/Documents are privileged if:
Draft was created by/for or at the direction of attorneys, and
Only shared between attorney and client.
Once a draft is shared with a counterparty to a transaction, the attorney-client privilege is waived.
Consider the impact of an acquisition on the attorney-client privilege.
If new management is attempting to run the pre-existing business entity and manage its affairs, new management stands in the shoes of prior management and should control the attorney-client privilege with respect to the company’s operations.
If, for example, only a discrete set of assets has been transferred, and the acquirer is not attempting to manage or run the pre-existing business, the attorney-client privilege is unlikely to pass to the acquirer.<br>
slide19. Sharing Information Outside the Company Real Life Situations Communications with Public Relations Firms/Consultants:
Likely not privileged unless the communication is necessary to obtain informed legal advice.
Consult with counsel first to determine the scope of a particular PR firm’s engagement, and whether privileged information can be shared.
Certain communications can be privileged if the consultant is hired to “translate” complicated concepts for counsel.
Communications with Insurers or Auditors:
Generally not privileged. Consult with counsel to determine whether non-privileged information can be isolated to satisfy insurer request.<br>
slide20. Sharing Information with Affiliates Real Life Situations The law is not well developed, but whether communications among affiliated entities, portfolio companies, or joint venture partners will be privileged generally depends on whether the entities are sufficiently interrelated and share legal interests.
Courts have held that corporate entities under common ownership and control have a shared legal interest such that privileged communications can be shared without waiver.
When two different companies jointly control an entity or project, communications about the entity or project should be protected.
A shared legal interest is always key - when interests are not aligned, communications between affiliated companies and joint venture partners may not be privileged.
Always use greater caution when communicating about sensitive issues outside of the Company, and when in doubt about sharing information with an affiliated entity, portfolio company or joint venture partner, consult with counsel.<br>
slide21. Final Takeaways
Privilege questions are fact-specific inquiries.
Properly identifying privileged materials will both protect the privilege and reduce expenses.
Measures taken to keep information confidential will protect against a claim of waiver.
If in doubt, the best practice is to exclude advisors, consultants, etc., from discussions.
Don’t be afraid to pick up the phone.
Questions??<br>
slide22. Clifford Thau New York │ +1.212.237.0012 │ cthau@velaw.com Commercial & Business Litigation Cliff’s main area of practice is commercial litigation with a focus on securities litigation and regulatory and internal investigations. He represents issuers, underwriters, and officers and directors in class action lawsuits; securities and private equity firms and senior management in federal and state regulatory proceedings; and Audit and Special Committees in internal investigations and SEC investigations. Cliff also represents corporations in commercial litigation and accounting firms in malpractice actions and bankruptcy court proceedings.
Cliff is the Co-Managing Partner of the New York office. See full bio. Experience Highlights Represented firms and individuals in non-public regulatory investigations into violations of federal securities laws
Successfully represented a major oil company in connection with an SEC inquiry concerning the company’s analysis of the requirements for establishing reserves and disclosures of its contingent liabilities arising out of a major oil spill; the SEC concluded its inquiry without any enforcement action
Successfully represented an independent exploration and production company in an SEC investigation in connection with activities involving shale gas plays; the SEC concluded its investigation without any enforcement action Successfully represented and currently represent a major international financial firm in connection with regulatory inquiries brought by the SEC, FINRA, and state law enforcement agencies, including inquiries into the firm’s investments in energy projects
Successfully represented a private equity firm in the bankruptcy of a portfolio company, a midstream oil and gas company, including court-appointed Examiner’s investigation, regulatory inquiries, and securities class action
Successfully represented an exploration and production company in connection with a 10b-5 class action, an SEC investigation, and derivative suits; the SEC discontinued its inquiry without recommending any enforcement action Partner<br>
slide23. Marisa Antos-Fallon New York │ +1.212.237.0151 │ mantos-fallon@velaw.com Commercial & Business Litigation Marisa’s practice focuses on commercial and securities litigation in federal and state court, as well as internal investigations. She also represents clients in connection with regulatory investigations and inquiries by the SEC, FINRA, and other agencies. See full bio. Experience Highlights Represented an audit committee in connection with an internal investigation regarding Foreign Corrupt Practices Act issues and related investigations by the Department of Justice and Securities and Exchange Commission
Obtained summary judgment on behalf of financial firm, including affirmance by the U.S. Court of Appeals for the Second Circuit, resulting in dismissal of fraudulent transfer claims brought by bankruptcy trustee
Obtained complete dismissal of putative class action securities fraud claims against media measurement and analytics company following motion to dismiss Obtained complete dismissal of putative class action fraud and consumer protection claims on behalf of professional sports team following motion to dismiss
Successfully represented a broker-dealer and its officers in lawsuits commenced by the SIPC Trustee and private investors arising from the Madoff Ponzi scheme
Successfully represented data provider in dispute regarding alleged breach of license agreement, including in proceedings for a temporary restraining order and preliminary injunction
Successfully represented restaurant chain in contract dispute with internet services provider Counsel<br>
slide24. THANK YOU This content is intended for educational and informational purposes only and does not constitute legal advice or services by the speakers or by Vinson & Elkins LLP. 1114 Avenue of the Americas, 32nd Floor, New York, NY 10036 +1.212.237.0000 velaw.com<br>