The Yates Memo, Corporate Cooperation and Attorney-Client Privilege

Over the past 17 years, the Deputy Attorneys General have issued memoranda to provide guidance on the DOJ's policies for corporate investigations. In 1999, then-Deputy Attorney General Eric Holder's memorandum identified factors for prosecutors to consider in mitigating corporate liability, including the company's decision to waive the attorney-client privilege or work-product protection. (Deputy Atty Gen. Holder Memorandum, p. 3 (June 16, 1999)). In 2003, former Deputy Attorney General Larry D. Thompson issued a memo, in the wake of the Enron and WorldCom scandals, that made the Holder Memo guidelines mandatory on federal prosecutors. The Thompson Memo said that waiver of attorney-client privilege and work product is not an “absolute requirement.” (Deputy Atty Gen. Thompson Memorandum, p. 7 (Jan. 20, 2003)) (“Thompson Memo”).

However, the Thompson Memo included several controversial provisions. It instructed that a “corporation's promise of support to culpable employees ' may be [negatively] considered by the prosecutor in weighing the extent and value of a corporation's cooperation.” Thompson Memo, pg 7. This provision was invalidated by United States v. Stein, 541 F.3d 130 (2d Cir. 2008), when the U.S. court of Appeals for the Second Circuit affirmed that the Government violated the Fifth and Sixth Amendments by pressuring a company to refuse advancement of officer and director legal fees. The 2006 Attorney-Client Privilege Act, though it never became law, attempted to roll back the portion of the Thompson Memo regarding privilege waivers.

Three years later, Deputy Attorney General Paul McNulty's Memo announced that waiver of the privilege was not required for cooperation credit. (Deputy Atty Gen. McNulty Memorandum, p. 8 (Dec. 12, 2006)). Further, prosecutors requesting waiver had to show a “legitimate need” for the privileged information. The McNulty Memo described two categories of information that could qualify for waiver: 1) “purely factual” information, which may or may not be privileged, relating to the underlying misconduct” or 2) “[o]nly if the purely factual information provides an incomplete basis to conduct a thorough investigation should prosecutors then request that the corporation provide attorney-client communications or non-factual attorney work product.” Before seeking a waiver for “purely factual” information, a prosecutor would have to request written authorization from a U.S. Attorney. Information in the second category could be sought only in “rare circumstances,” with written authorization by the Deputy Attorney General.

In 2008, then-Deputy Attorney General Mark Filip's Memorandum confirmed this position. It recognized that “[t]he value of promoting a corporation's ability to seek frank and comprehensive legal advice is particularly important in the contemporary global business environment.” (Deputy Atty Gen. Filip Memorandum, p. 8 (Aug. 28, 2008)). The Filip Memo said that “waiving the attorney-client and work product protections has never been a prerequisite under the Department's prosecution guidelines for a corporation to be viewed as cooperative.” Id. Now, eight years later, the DOJ appears to be retreating from this position.

Chipping Away at the Attorney-Client Privilege

Deputy Attorney General Yates's speech suggests that a company's decision not to waive the privilege could be viewed by the DOJ as a lack of cooperation. The Yates Memo imposes what appears to be mandated disclosure ' requiring companies to disclose all facts, regardless of where those facts come from, even if they are learned in privileged communications between the company attorneys and company employees.

The attorney-client privilege protects “communications” with a client in order to foster “full and frank” discussions. “[S]ound legal advice or advocacy” cannot be given unless the lawyer is “fully informed by the client.” United States v. Upjohn, 449 U.S. 383, 388-90 (1981). The applicability of the attorney-client privilege for internal investigations is well established as long as “obtaining or providing legal advice was one of the significant purposes” of the communication. In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014) (“KBR”). As in Upjohn, the KBR court found that the company's privilege claim applied to those facts gathered in an internal investigation for the file. KBR at 757. Thus, the privilege protects the giving of professional advice, as well as the factual information obtained from the client that is the basis of the legal advice. See Upjohn, 449 U.S. at 391 (quoting the ABA Code of Professional Responsibility: “A lawyer should be fully informed of all the facts ' “).

In other words, corporations have an attorney-client privilege that exists to protect not only the legal advice, “but also the giving of information to the lawyer to enable him to give sound and informed advice.” Id. at 390. While telling factual information to an attorney does not change otherwise non-privileged information to privileged, the Yates Memo overlooks the well-settled principle that attorney-client privilege protects the entire flow of communication, including facts, between the attorney and the client. Once it is determined that giving or receiving legal advice is the “predominant purpose” of the communication, “other 'considerations and caveats' are not severable and the entire communication is privileged.” Fox News Network, LLC v. United States Dep't of the Treasury, 911 F. Supp. 2d 261, 271 (S.D.N.Y. 2012) (FOIA case); see also Upjohn, 449 U.S. at 396.

Courts stress that the source of the facts and context of the communication are critical to determining whether factual information in the communication is privileged. In Gen. Elec. Co. v. United States, No. 3:14-cv-00190 (D.Conn. 2015), the court ruled on a motion to compel that nearly all 9,000 disputed documents were privileged, rejecting the government's claim that only confidential or secret facts may be subject to privilege. See Prudential Ins. Co. v. Massaro, 2000 U.S. Dist. LEXIS 11985, at *25 (D.N.J. Aug. 14, 2000) (finding that an in-house attorney had violated attorney-client privilege by disclosing factual information he had learned because of his privileged status as a member of the legal staff); Gunther v. United States, 230 F.2d 222, 223 (D.C. 1956) (prohibiting a lawyer from testifying to the competency of the defendant because he would “necessarily” be asked for “factual data upon which he premised his opinion”).

In contrast, the Yates Memo “chips away” at the privilege by: 1) not considering the context in which facts may become known to counsel; and 2) apparently conflating the attorney-client privilege and work-product doctrine. The Yates Memo seemingly provides only a “qualified” privilege that equates the attorney-client privilege with the work-product doctrine. Unlike the attorney-client privilege, the work-product privilege provides only a “qualified immunity” for documents or materials prepared in “anticipation of litigation.” Factual work-product is discoverable with a showing of “substantial need” and inability to obtain the information elsewhere without undue hardship. This is not true for the attorney-client privilege.

Notably, the DOJ has not adhered to the non-privileged status of facts when its own attorney-client communications are the target of a disclosure. In February 2015, the DOJ opposed the disclosure of two internal memos drafted in the Office of Legal Counsel (OLC) in response to a Freedom of Information Act (FOIA) request. Samahon v. United States, 2015 U.S. Dist. LEXIS 23813 (E.D. Pa. Feb. 27, 2015). One memo was sent to President Obama and the other maintained in a file at the OLC. A DOJ declaration argued that “the attorney-privilege also applies to the limited factual material contained in the [memo not sent to President Obama],” because the “limited factual material” in the memo was provided to OLC for “purposes of obtaining confidential legal advice” and “[h]aving been asked to provide legal advice, OLC attorneys stood in a special relationship of trust with the President.” To disclose client confidences would “seriously disrupt the relationship of trust so critical” between attorneys and clients. The court agreed with the DOJ. The same principle should equally protect communications that exist because of the “special relationship of trust” between a private party and its lawyer.

Conclusion

While we will need to see how the DOJ applies this new guidance, the Yates Memo signals a resurgence of DOJ challenges to the attorney-client privilege in internal investigations. Companies should be aware of the potential consequences of the government's steps toward intrusion into the attorney-client privilege. In-house counsel communications in particular will face heightened scrutiny by the government. To help mitigate the risk of communications being interpreted as business advice and outside the scope of privilege, outside counsel should be engaged as early in the investigation process as possible. In-house counsel should also consider more deliberately documenting steps to preserve the privilege, to provide legal, and not just business, advice, and to conduct investigations for the purpose of providing legal advice to the company.

The suggestion that companies may abuse the privilege by shielding non-privileged information from investigators is questionable. (Deputy Attorney General Sally Q. Yates, Remarks at American Banking Association and American Bar Association Money Laundering Enforcement Conference (Nov. 16, 2015)). Companies have legitimate reasons not to provide privileged information, especially since once the privilege is waived during a government investigation, the underlying communications are no longer protected in subsequent civil litigation. Pac. Pictures Corp. v. United States Dist. Cour, No. 11-71844, 2012 U.S. App. LEXIS 7643, at *12 (9th Cir. Apr. 17, 2012). Moreover, the large number of disclosures to DOJ underscores that there is no reason to redefine the scope of the attorney-client privilege. When needed, DOJ has many other avenues to address this concern, ranging from a dialogue with defense counsel to judicial review. For those companies that try to conceal the full scope of illegal conduct, DOJ has the necessary tools available to it without undermining the attorney-client privilege.

Jonathan S. Feld ([email protected]), a member of this newsletter's Board of Editors, is a Partner at Dykema Gossett PLLC, where he focuses on civil and criminal enforcement matters. He previously served as an Associate Deputy Attorney General at the U.S. Department of Justice. Kara B. Murphy and Julia K. Kadish are associates in the Business Litigation Group.