Post-<i>Yates</i> Privilege Protection for In-House Counsel

The Filip Memo's changes remained undisturbed until Sept. 9, 2015, when Deputy Attorney General Yates issued a new memorandum revising the DOJ's policy in corporate investigations. The Yates Memo set out “six key steps” intended to enhance the DOJ's effort to identify culpable individuals in corporate cases, specifically: 1) To qualify for any cooperation credit, a company must disclose all relevant facts about culpable individuals; 2) Criminal and civil investigations will focus on individuals from the start; 3) Criminal and civil investigators should routinely communicate; 4) Absent extraordinary circumstances, the DOJ will not release individuals from liability as part of a corporate resolution; 5) Corporate cases should not be resolved unless individual cases can be resolved before the statute of limitations; and 6) In civil cases, attorneys should focus on individuals and determine whether to bring suit regardless of ability to pay.
The first step has received the most attention because it now makes full disclosure of all relevant facts a threshold for any credit, rather than just one of several factors. Likewise, the sixth step constitutes an aggressive counterpart to the first step, establishing that inability to pay will not insulate individuals from civil enforcement. Several of the other steps do not mark a change in DOJ policy and appear to be directed internally to DOJ lawyers.

The Yates Memo is silent regarding privilege, and ostensibly does not alter DOJ's policy toward privilege waiver. The only mention of privilege is an indirect reference that companies seeking cooperation credit must cooperate completely “within the bounds of the law and legal privileges.” Yates Memo, § 1.

Two months after release of the policy, Yates addressed privilege issues more specifically in a speech, noting that “there is nothing in the new policy that requires companies to waive attorney-client privilege or in any way rolls back protections that were built into the prior factors.” Remarks by Sally Yates to American Banking Association and American Bar Association Money Laundering Enforcement Conference, Nov. 16, 2015, Washington, DC. (“11/16/15 Yates Speech”). She continued: “Facts are not [privileged]. If a law firm interviews a corporate employee during an investigation, the notes and memos generated from that interview may be protected, at least in part, by attorney-client privilege or as attorney work product.”

In that situation, Yates noted that a company need not turn over the protected material with an important caveat: “[T]o earn cooperation credit, the corporation does need to produce all relevant facts — including the facts learned through those interviews — unless identical information has already been provided.” 11/16/15 Yates Speech.

Yates' remarks and privilege analysis did little to allay concerns that the Yates Memo may be encouraging, if not requiring, waivers indirectly just as the prior policies did so directly.

Status of the Privilege Now

Despite assurances that the DOJ is not altering its stance toward privilege waiver, the Yates Memo and Ms. Yates' public remarks raise several thorny, unanswered questions:

1. Can you provide all relevant facts without a privilege waiver? The decision on whether a company should cooperate is now more complicated. Given the “all-or-nothing” policy in the first step, companies must consider carefully whether they can meet that standard. It is not clear, for example, how this policy would affect a company that turns over what it believes are all of the relevant facts, but has a good-faith disagreement with the DOJ over an individual's culpability. If, based on that disagreement, the company does not accede to the DOJ's view of the case, will it still be eligible for cooperation credit?

The breadth of required disclosure also implicates the privilege. Put simply, the DOJ's “facts are not privileged” statement is overly simplistic and does not solve the matter. Indeed, while the Yates Memo focuses solely on non-privileged information, it is easy to envision how a disagreement over privilege could jeopardize a company's ability to receive cooperation credit.

2. What are the implications for potential partial or selective waiver? It appears that the DOJ now takes a rather formalistic view toward privilege waiver, one that courts may not follow in collateral matters that put cooperating companies at risk. For example, it appears the DOJ would expect that, after privileged employee interviews, a company would segregate in some way the “pure facts” from other information obtained and disclose the former. But even if that were done, the privilege still protects the underlying communication from which the company obtained those facts, and separating pure facts from employees' communications to corporate counsel is, at best, difficult.

As a result, it appears that the Yates Memo effectively requires a de-facto waiver. While one may characterize that waiver as partial (waiving it for purposes of just one particular subject), such waivers create an inherently slippery slope and the scope of the waiver can be subject to various and potentially damaging interpretations. Likewise, to the extent the waiver is selective (waiving for purposes of just one party, the DOJ), this characterization is of little help, as the majority of courts do not recognize selective waiver.

3. How does the new approach affect Upjohn warnings and the provision of counsel to individual employees? One clear effect of the Yates Memo is that in-house counsel must give even greater thought to their Upjohn warnings and when to secure separate counsel for individual employees. Given the policy's focus on individuals, many employees may want separate representation before deciding whether to cooperate with an internal investigation.
In turn, investigations will be slowed, and company counsel may be limited in what they can learn absent a joint-defense agreement, which could prove difficult to obtain. Moreover, while the contours of an Upjohn warning remain unchanged, those warnings will take on enhanced meaning. Counsel usually try to balance an appropriately robust Upjohn warning with a facilitating approach that does not chill an employee from providing information. A more conservative, formal approach to the content of the Upjohn warning and interviewing employees may be required, which in turn could result in less information obtained.

*****
Ty E. Howard is a partner in the Nashville office of Bradley Arant Boult Cummings LLP and the chair of the firm's Government Enforcement practice group. He can be reached at [email protected]. Todd Presnell is a partner resident in the same office. He maintains a blog on evidentiary privileges at http://www.presnellonprivileges.com. Reach him at [email protected].

Part Two of a Two-Part Article

Editor's note: In last month's newsletter, the authors put forward the proposition that attorney-client privilege issues, which can arise during internal investigations, have become even more complicated following the issuance of the Department of Justice's (DOJ) “Yates Memorandum.” The memo, which takes its name from Deputy Attorney General Sally Yates, is an update to the DOJ's Principles of Federal Prosecution of Business Organization, found within the United States Attorney's Manual (USAM). To set the stage, the authors went back 17 years to review the history of DOJ policy announcements concerning the prosecution of business organizations, from 1999's Holder Memo through to the 2008's Filip Memo. They conclude their discussion herein.

The Yates Memo (2015)

The Filip Memo's changes remained undisturbed until Sept. 9, 2015, when Deputy Attorney General Yates issued a new memorandum revising the DOJ's policy in corporate investigations. The Yates Memo set out “six key steps” intended to enhance the DOJ's effort to identify culpable individuals in corporate cases, specifically: 1) To qualify for any cooperation credit, a company must disclose all relevant facts about culpable individuals; 2) Criminal and civil investigations will focus on individuals from the start; 3) Criminal and civil investigators should routinely communicate; 4) Absent extraordinary circumstances, the DOJ will not release individuals from liability as part of a corporate resolution; 5) Corporate cases should not be resolved unless individual cases can be resolved before the statute of limitations; and 6) In civil cases, attorneys should focus on individuals and determine whether to bring suit regardless of ability to pay.
The first step has received the most attention because it now makes full disclosure of all relevant facts a threshold for any credit, rather than just one of several factors. Likewise, the sixth step constitutes an aggressive counterpart to the first step, establishing that inability to pay will not insulate individuals from civil enforcement. Several of the other steps do not mark a change in DOJ policy and appear to be directed internally to DOJ lawyers.

The Yates Memo is silent regarding privilege, and ostensibly does not alter DOJ's policy toward privilege waiver. The only mention of privilege is an indirect reference that companies seeking cooperation credit must cooperate completely “within the bounds of the law and legal privileges.” Yates Memo, § 1.

Two months after release of the policy, Yates addressed privilege issues more specifically in a speech, noting that “there is nothing in the new policy that requires companies to waive attorney-client privilege or in any way rolls back protections that were built into the prior factors.” Remarks by Sally Yates to American Banking Association and American Bar Association Money Laundering Enforcement Conference, Nov. 16, 2015, Washington, DC. (“11/16/15 Yates Speech”). She continued: “Facts are not [privileged]. If a law firm interviews a corporate employee during an investigation, the notes and memos generated from that interview may be protected, at least in part, by attorney-client privilege or as attorney work product.”

In that situation, Yates noted that a company need not turn over the protected material with an important caveat: “[T]o earn cooperation credit, the corporation does need to produce all relevant facts — including the facts learned through those interviews — unless identical information has already been provided.” 11/16/15 Yates Speech.

Yates' remarks and privilege analysis did little to allay concerns that the Yates Memo may be encouraging, if not requiring, waivers indirectly just as the prior policies did so directly.

Status of the Privilege Now

Despite assurances that the DOJ is not altering its stance toward privilege waiver, the Yates Memo and Ms. Yates' public remarks raise several thorny, unanswered questions:

1. Can you provide all relevant facts without a privilege waiver? The decision on whether a company should cooperate is now more complicated. Given the “all-or-nothing” policy in the first step, companies must consider carefully whether they can meet that standard. It is not clear, for example, how this policy would affect a company that turns over what it believes are all of the relevant facts, but has a good-faith disagreement with the DOJ over an individual's culpability. If, based on that disagreement, the company does not accede to the DOJ's view of the case, will it still be eligible for cooperation credit?

The breadth of required disclosure also implicates the privilege. Put simply, the DOJ's “facts are not privileged” statement is overly simplistic and does not solve the matter. Indeed, while the Yates Memo focuses solely on non-privileged information, it is easy to envision how a disagreement over privilege could jeopardize a company's ability to receive cooperation credit.

2. What are the implications for potential partial or selective waiver? It appears that the DOJ now takes a rather formalistic view toward privilege waiver, one that courts may not follow in collateral matters that put cooperating companies at risk. For example, it appears the DOJ would expect that, after privileged employee interviews, a company would segregate in some way the “pure facts” from other information obtained and disclose the former. But even if that were done, the privilege still protects the underlying communication from which the company obtained those facts, and separating pure facts from employees' communications to corporate counsel is, at best, difficult.

As a result, it appears that the Yates Memo effectively requires a de-facto waiver. While one may characterize that waiver as partial (waiving it for purposes of just one particular subject), such waivers create an inherently slippery slope and the scope of the waiver can be subject to various and potentially damaging interpretations. Likewise, to the extent the waiver is selective (waiving for purposes of just one party, the DOJ), this characterization is of little help, as the majority of courts do not recognize selective waiver.

3. How does the new approach affect Upjohn warnings and the provision of counsel to individual employees? One clear effect of the Yates Memo is that in-house counsel must give even greater thought to their Upjohn warnings and when to secure separate counsel for individual employees. Given the policy's focus on individuals, many employees may want separate representation before deciding whether to cooperate with an internal investigation.
In turn, investigations will be slowed, and company counsel may be limited in what they can learn absent a joint-defense agreement, which could prove difficult to obtain. Moreover, while the contours of an Upjohn warning remain unchanged, those warnings will take on enhanced meaning. Counsel usually try to balance an appropriately robust Upjohn warning with a facilitating approach that does not chill an employee from providing information. A more conservative, formal approach to the content of the Upjohn warning and interviewing employees may be required, which in turn could result in less information obtained.

*****
Ty E. Howard is a partner in the Nashville office of Bradley Arant Boult Cummings LLP and the chair of the firm's Government Enforcement practice group. He can be reached at [email protected]. Todd Presnell is a partner resident in the same office. He maintains a blog on evidentiary privileges at http://www.presnellonprivileges.com. Reach him at [email protected].