July 7, 2006

Attorney-client privilege facing challenges

The increasingly frequent waiver of attorney-client privilege is a big concern among attorneys, according to a recent nationwide study.

The 2005 survey, conducted jointly by the Association of Corporate Counsel and Corpedia Inc., compiled responses from inside counsel at more than 400 corporations. Of those surveyed, 33 percent felt that attorney-client privilege within the context of government investigations no longer exists in any meaningful form. A mere 8 percent think the privilege remains strong.

Attorney-client privilege is one of the legal system’s most fundamental tenets. By protecting communications between attorneys and clients from discovery, the privilege not only allows for appropriate representation, but also encourages the nation’s businesses to thrive.

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“The purpose is to ensure that if you are seeking legal advice from an attorney, you can feel confident talking freely so that you are encouraged to give them the full story,” explained Jeffrey Roberts, an attorney with Faegre & Benson LLP. “If you didn’t have it, clients wouldn’t be forthright, and you wouldn’t be able to remedy a violation before it occurred. It’s believed that you actually foster enforcement and an inclination to follow the law.”

In the wake of massive scandals at companies like Enron and WorldCom and the resulting regulations imposed by the Sarbanes-Oxley Act, most corporations are painfully aware of the need to be above board. However, some in the legal community feel that some government officials, particularly those in the Department of Justice and the Securities and Exchange Commission have overstepped their bounds.

“We’re seeing an increasing amount of discretion and power and leverage being placed in the hands of enforcement officials,´ said Susan Hackett, senior vice president and general counsel of the Association of Corporate Counsel. “It’s an environment where prosecutors sometimes feel they have to win at all costs.”

This so-called erosion of the legal doctrine is troubling for attorneys across the country. Much of their concern comes from a change in the Department of Justice’s corporate charging criteria known as the “Thompson Memo.” In 2003, Deputy Attorney General Larry Thompson identified several factors that prosecutors should use in determining charges against a corporation, naming the attorney-client privilege and the correlative work-product protection specifically.

“Basically, it says that in considering whether to prosecute, they will factor in the degree to which you cooperate and specifically whether you are willing to waive privilege,” Roberts said. “That’s a pretty blunt club to use to hit somebody. There are concerns that the government is being extremely aggressive. Without giving any specifics, we’ve certainly had cases here where the government has tried to force our clients to waive that privilege as a condition of leniency.”

Attorneys say that compelling a corporation to waive its privilege over the charging table rather than in a courtroom seriously compromises its ability to do business.

“What’s happening now in the investigation process is that these meetings are being held long before a court is involved,” Hackett said. “Traditionally, the government had to assemble enough evidence to take a case to court. Now, they can basically go in and demand waiver before there’s ever any proof of allegations.”
A waiver of the privilege can have further repercussions of which a company may not be aware. Once the privilege is waived, any communications between attorneys and their clients are open to discovery in a third-party or civil lawsuit. But in many cases, a company may not realistically have any choice but to waive their privilege.

“Any business that is deemed to be uncooperative is going to be hung from the highest tree and will be out of business in six months,” Hackett observed. “If you’ve been indicted as an entity and deemed to be uncooperative, it’s game over. Your employees start to flee, your financing dries up, your brand is shot and your stock falls. It’s the ultimate goal of any company that receives an allegation against it is to resolve it as quickly as possible. It’s not much of a choice, is it?”

To make matters worse, some executives don’t understand the basic tenets of the protection.

“Even sophisticated corporate clients sometimes think that if a lawyer slaps a memo or a cover letter on top of documents that are not otherwise protected that they’re somehow cloaked with the privilege, which is nonsense,´ said Stephen Masciocchi, an attorney with Holland & Hart.

The general requirements to assert the privilege include that the holder of the privilege is a client and that the attorney’s communication relates to an opinion on potential litigation. It generally only protects the officers of a company and a waiver, even if accidental, destroys the privilege.

“The privilege only protects a very narrow slice of information, which is the request of clients for legal advice and the legal advice provided by the lawyer back to the client,” Hackett explained.

It’s a complex issue, one that corporations and their agents should be aware of long before trouble arises. The most effective defense is consulting with an attorney throughout the course of business.

“People need to be cognizant of the privilege, understand the issues in their case, and be mindful of which jurisdictions may be applicable,´ said Regina Rodriguez, an attorney with Faegre & Benson. “Everything should be marked confidential, and there should always be an attorney involved. You always want to carefully analyze whether you’re going to waive that privilege.”

The Association of Corporate Counsel has lobbied to have references to the Thompson Memo removed from the U.S. sentencing guidelines. Later this summer the organization will ask the Senate Judiciary Committee to increase congressional oversight in these types of cases.

In the meantime, attorneys continue to support the principle of attorney-client privilege and rally to its defense.
“This is the oldest principle in the common-law legal tradition,” Roberts said. “It obviously has stood the test of time and has been through more intensive periods of legal scrutiny than we’ve seen recently without being weakened or jettisoned. Maybe we should think pretty carefully before we criticize it too much in the contemporary era.”

The increasingly frequent waiver of attorney-client privilege is a big concern among attorneys, according to a recent nationwide study.

The 2005 survey, conducted jointly by the Association of Corporate Counsel and Corpedia Inc., compiled responses from inside counsel at more than 400 corporations. Of those surveyed, 33 percent felt that attorney-client privilege within the context of government investigations no longer exists in any meaningful form. A mere 8 percent think the privilege remains strong.

Attorney-client privilege is one of the legal system’s most fundamental tenets. By protecting communications between attorneys and clients from discovery, the privilege not only allows for…

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