How to Handle Upjohn Warnings
As I have said on many occasions, there are many risks when in-house or outside counsel conducts an internal investigation. Just to give you one nightmare scenario, the failure to give proper Upjohn warnings can be catastrophic to a company and individuals who are interviewed.
The internal investigation is conducted on behalf of a corporation. The interests of the corporation can be different from those of corporate actors — directors, officers and employees. In order to make it clear about the different interests, counsel needs to provide Upjohn warnings at the beginning of every interview. In addition, counsel needs to document exactly what warnings were provided to the witness when the interview was conducted.
It is the moment when everyone in the room holds their breath and waits for the individual to respond. Counsel has to inform the individual in detail that counsel represents the corporation and does not represent the individual.
How should counsel advise the witness? Honestly and without hesitation. There is no reason to play fast and loose on this issue or to cut corners. If counsel does try and do that, counsel is threatening the integrity of the investigation itself.
The Supreme Court’s 1981 decision in Upjohn focused on the application of the attorney-client privilege in communications between corporate counsel and individual corporate actors. The Upjohn decision rejected prior attorney-client privilege tests which focused on whether an employee or officer was a member of a “control group” within a company. The Court, in Upjohn, adopted a test focused on the need to encourage candid privileged communications between counsel and corporate actors. In order to apply the privilege to such communications, the Court ruled that employees and officers needed to be informed that they were being questioned to assist the corporation in providing legal advice. At the same time, the Court recognized that the corporation itself could waive the privilege and individuals needed to be informed of that possibility and the possible or existing divergence of the individual’s and the corporation’s respective interests.
The failure to provide Upjohn warnings can be an error of major proportion. The Ninth Circuit ruled in Ruehle in 2009 583 F.3d 600 (9th Cir. Cal. 2009), that counsel’s failure to provide Upjohn warnings to the CFO was an error a came close to suppressing the government’s use of the CFO’s statement made during an internal investigation.
The facts in Ruhle have wide applicability to internal investigations. A counsel represented the company and its CFO in civil securities litigation while conducting an internal investigation of the company. Counsel interviewed the CFO during the internal investigation. Counsel was not able to prove that he or she provided the CFO with Upjohn warnings. The company turned over the CFO’s statement to the SEC and the Justice Department. The CFO was indicted.
The CFO moved to suppress the statement claiming that he reasonably believed at the time of the interview that counsel represented the company and him as an individual. He claimed that counsel never advised him that he was only only representing the company.
The lower court suppressed the statement and referred the counsel and his firm to the California bar for disciplinary action. The Ninth Circuit reversed the suppression decision as an extreme remedy but cited counsel for failure to act appropriately.
Counsel should have a checklist for each interview which should include:
1. The text of the Upjohn warning;
2. Proof that the warning was given (contemporaneous memo is sufficient); and
3. Conflict check for prior representation
The text of the warning should be fulsome and open. If the witness asks questions, the answers should be clear and the conversation memorialized. Cutting corners can only lead to problems and severe consequences.