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Attorney-Client Privilege in Litigation, Internal Investigations, and Regulatory Investigations Series – An Overview of the Position in the United States

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management

14-04-2021

Privilege is an important legal protection that a client may acquire through engaging an attorney. In general, privilege protects from disclosure communications between attorney and client. Other professionals (e.g., accountants), experts, consultants and agents engaged directly by client—rather than at the direction of counsel—typically will not be able to create privilege. Handled incorrectly, the attorney-client privilege may be waived, resulting in privileged, and potentially prejudicial, materials later being used by opponents in litigation, by regulators, and by enforcement agencies to the detriment of the client. Strategizing in advance is therefore important to gain maximum protection.

Since different jurisdictions will have slightly different rules and principles on privilege, the issue of privilege needs to be carefully analysed in cross-border matters. Our team of international lawyers who have vast experience in handling major cross-border investigations, and many of whom have previously worked for various national financial regulators, will take turn to discuss privilege in all major financial centres, starting with the United States.

The application of attorney-client privilege in litigation, internal investigations, and regulatory investigations in the United States is a complex area of the law. This article provides a high-level overview. Note that while state jurisdictions may differ slightly, this article examines the law generally applicable to all US state jurisdictions.

What Is Covered by the Attorney-Client Privilege?

Documents or communications between a lawyer and a client involving the request for or provision of legal advice are generally considered privileged. The privilege can be waived if the communication is not kept confidential between the lawyer and client (e.g., by including a third party in the communication contemporaneously or subsequently).

A wrinkle is added if the documents or communications involve lawyers who work within an organization as opposed to in private practice. If the communication is uniquely legal advice, the in-house lawyer would qualify to invoke the privilege. There may be a question raised about whether the lawyer is involved in business management or other non-legal matters that would not be privileged, but the privilege is highly respected when the communication is directly between the lawyer and client.

Attorney-Client Privilege in Litigation

Parties to litigation are required to disclose documents and relevant information through a process called discovery. The process is governed by the Federal Rules of Civil Procedure which is detailed and well developed. Although state jurisdictions may differ somewhat, they are generally consistent with the federal process. Some documents and information are required to be produced automatically under the Federal Rules of Civil Procedure. The bulk of documents and information produced in litigation—including electronically stored information (“ESI”)—are responsive to a Request for Production propounded by the opposing party. The responding party usually must produce the requested documents or information within 30 days after receiving the request, subject to objections and some limited exceptions.

Certain documents, however, can be withheld from disclosure during the discovery process. There is a complex set of rules that govern when documents can be withheld. Most notably, all “privileged” documents are exempt from production. This includes attorney-client privilege and possibly other privileges. Parties may have other specific additional rights to withhold documents, although this is a very complicated question because many factors must be weighed. There is no single legal test. Some examples may be: attorney work product; documents prepared in anticipation of litigation; documents prepared by a nontestifying consultant; possibly even documents that lack relevance in the right type of case where production would be unduly burdensome in comparison to the issues.

But the right to withhold a document can be lost if a party has or is deemed to have waived the privilege. Because of the huge proliferation of data and ESI, parties commonly enter into non-waiver agreements and “clawback” agreements to protect against waiver. Parties’ counsel also have an ethical obligation to notify opposing counsel of receipt of any potentially privileged material inadvertently produced.

Attorney-Client Privilege in Internal Investigations

The contours of attorney-client privilege in corporate internal investigations add further layers of complexity. In any type of internal investigation, regardless of the subject matter or size, the company’s legal team must understand the rules governing legal privilege of investigations and the materials they create. For the privilege to apply, providing legal advice to the company should be a primary purpose of the investigation, including with respect to non-lawyers working at counsel’s direction. Thus, the privilege may not apply to investigations conducted in the ordinary course of business or those required by company policy or regulation. To maximize the ability to claim privilege or work product protection, it is important to contemporaneously document the scope and purpose of the investigation. Finally, companies and their counsel should take care not to waive the privilege (i) by allowing investigatory team members to answer substantive questions at depositions, (ii) by placing the investigation itself at issue in litigation, or (iii) by sharing privileged materials with non-necessary third parties.

Attorney-Client Privilege in Regulatory Investigations

Similar to parties in litigation, US regulators and investigative bodies recognize the concept of privilege and usually do not seek privileged information. A corporation that declines to provide privileged materials may still receive credit for cooperating with an investigation if it discloses all known facts.

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