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.

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3 Responses

  1. Jon May says:

    I believe that a better and more effective approach might be to simply have each employee sign the following statement:


    I have been informed that Mr. ____ is an attorney for my employer XYZ Inc. _____(initial).
    I understand that Mr. ____ is not my attorney. _____(initial).
    I understand that this means that Mr. _____ is not here to assist me as my lawyer. _____(initial)
    I understand that Mr. _____ will be asking me questions about XYZ, its operations, and the actions of various persons. ____(initial).
    I understand that Mr. ______’s assistant will be taking notes of this interview._____(initial).
    I understand that at some point in the future, my answers to these questions will be disclosed to others in the company and that the company could, at its sole discretion, and without any notice to me, disclose my answers to outside regulatory or law enforcement agencies. _____(initial).
    I understand that I do not have to answer any questions but that if I refuse to answer questions, my position with XYZ could be jeopardized and I could be fired.___________(initials).

    The only people that will refuse to sign are those directly involved in wrongdoing and this will enable you to identify them as well.

  2. Realistic says:

    I would have to disagree, introducing such a form invites the high probability of employees seeking their own counsel prior to executing such a one-sided detrimental document that, on the face of it looks harmless although upon legal analysis could be damaging for both sides. The second line in particular introduces the concept of employees engaging their own counsel, great if you are looking at expanding your practice in this area, more investigations, more employees interviewed, more money. The major problem with investigating counsel is that they have never sat on the other side in such circumstances and have no idea what is going through the “victims” mind. The last 2 statements are horrendous, the employee agrees that those who they are reporting will have knowledge of the information disclosed and the wrongdoers, more than likely management or the board can fire me and i agree that they can fire me. Needless to say, the challenge to such a declaration at a later stage in relation to execution under duress and threat and the application of local employment laws as well as the potential for employees to hold bak vital information due to the extreme nature of the statements contained within the proposed “agreement” to be fired. I welcome the introduction of such a signed declaration as it will definitely provide a boost to certain areas of practice.

  1. November 18, 2011

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