Boiling Down the Attorney-Client Privilege Issue

privilegeIf you want to inflame a discussion between general counsels and chief compliance officers, just try to develop a consensus on the importance of attorney-client privilege. A GC and a CCO will mouth the right words – of course, there are situations where we need to preserve the attorney-client privilege. We all agree on that.  As always, the devil is in the details.

Let’s start with some basic assumptions. An effective ethics and compliance program depends on transparency, accountability, and communications. This translates into internal disclosures of information that bring sunlight onto the company’s culture, metrics for the company ethics and compliance program, and internal public relations or marketing of the compliance program.

A General Counsel operates with a different mandate. The GC has to protect the company from legal risks. This translates into use of the attorney-client privilege as a means to promote internal reporting, advice seeking, and ultimately fact-finding needed to provide advice and counsel on serious issues. The attorney-client privilege provides an important cloak for a company to investigate possible wrongdoing, determine how to respond, and remedy the problem without disclosing such actions and advice. When it comes to a serious internal investigation, the attorney-client privilege can be the most important means to ensure the survival of the company.

CCOs recognize the importance of the privilege in this situation as well.

The situation becomes more difficult when there are possible violations that are non-serious but not trivial either. In most cases, the better rule is to maintain the privilege until the company can make a more informed decision.

The controversy over the attorney-client privilege and the responsibilities of a CCO has been largely the result of the “over-assertion” of the attorney-client privilege. For example, in the context of False Claims Act litigation involving hospitals and medical providers, defense counsel have been asserting broad claims of attorney-client privilege, stretching to even hotline call records, in an attempt to avoid disclosure of sensitive compliance-generated information.privilege2

The courts have responded with real antagonism to this over-assertion, or slap-happy, privilege claims. The courts are frustrated when they look behind these broad claims and find no basis whatsoever for a privilege claim, especially when it comes to compliance-generated information. Defense counsel also have routinely claimed privilege over emails which have an attorney cc’d but the purpose of the communications had nothing to do with seeking legal advice. As can be seen from a number of important trial judge decisions, defense counsel are losing credibility rapidly with their broad privilege claims.

CCOs have an interest in this battle. They do not want routine compliance documents labeled with privilege claims.  To the extent these documents are needed for internal communications purposes or to promote ethics and compliance, CCOs will be prevented from using them as part of their compliance program.

Some communications within a company, even when a lawyer is a recipient, or is cc’d, have nothing to do with seeking or providing legal advice. In fact, the CCO wants to disclose information that promotes the company’s compliance mission, whether it is a sanitized list of disciplinary actions (without any identifying information to prevent a privacy violation), or a list of ongoing investigations provided to the board, or a list of entertainment expenses involving company employees and foreign officials.

Transparency is vital to the ultimate success of a compliance program. Similarly, protecting the privilege for appropriate serious matters is critical to the company’s response to a potential serious legal violation, especially where the government is investigating or could investigate the company.

privilege3An overbroad assertion of the privilege can hamper a company’s ability to decide whether to waive the privilege, if necessary, to cooperate with a government investigation. If the assertion is too broad, the collateral consequences of such a waiver may be too much for the company to handle in private litigation.

GCs and CCOs have to work out an understanding of how to navigate this difficult issue. It requires cooperation and coordination with the development of protocols as a way to guide the parties through the appropriate analysis with consideration of the different legal and compliance mandates.

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