Businesses Should Engage Counsel for Company Investigations

By Chadd Colin, Esq. and Ron Lefebvre, Esq.

When confronted with a lawsuit, a company’s first reaction is oftentimes to immediately commence an investigation into the underlying facts to assess the merits of the claims. While such a reaction is natural for any concerned corporate entity, conducting an internal investigation without guidance and protection from outside counsel can lead to unintended consequences down the road.

First and foremost, it is likely that the information obtained in connection with the initial, internal investigation would be discoverable in Pennsylvania. Without question, the information (including documents and interviews with relevant company personnel) are not protected by the attorney-client privilege, or any other doctrine that would allow them to remain confidential and concealed from the opposing party in a lawsuit. In Pennsylvania, a party may obtain discovery of “any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature, content, custody, condition and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter.” See: Pennsylvania Rule of Civil Procedure 4003.1(a).

Once outside counsel is involved, however, the protections of the attorney-client privilege and the “work product doctrine” attach broadly, assuming adherence to applicable formalities. That means that once you hire an outside attorney to have a role in your preparations and investigations relating to a lawsuit, your preparation, investigation, and any records related to the same, can be protected as confidential and undiscoverable by the opposing party.

Take, for example, investigative interviews between outside counsel and employees of the company, regardless of whether the employees are senior executives or lower-level rank-and-file staff. Pennsylvania’s Superior Court reviewed the issue of communications between middle and lower-level employees, as well as former employees, in Newsuan v. Republic Services, Inc. 213 A.3d 279 (Pa Super. 2019). In doing so, it applied the US Supreme Court’s decision in Upjohn Co. v. U.S., 449 U.S. 383 (1981). The Superior Court stated as followed:

Upjohn held that the attorney-client privilege applied to communications made by Upjohn Corporation’s middle and lower-level employees to corporate counsel in response to counsel-drafted questionnaires designed to assist counsel in advising Upjohn in legal matters. Narrowing the scope of the privilege to protect only “control group employee” communications to corporate counsel, the High Court reasoned, would frustrate the purposes of the privilege.

Such purposes include not only enabling “corporate attorneys to formulate sound advice when their client is faced with a specific legal problem” but also promoting “the valuable efforts of corporate counsel to ensure their client’s compliance with the law.” Id. There may be instances, the Court emphasized, where middle, or even lower, level corporate employees alone have information vital to counsel’s mission to provide the corporation with legal advice. Id.

Newsuan at 286. (emphasis added).

In addition to protecting attorney interviews with current employees, regardless of rank, the Superior Court suggested that interviews with former employees may be includable within the protections of the attorney-client privilege. While the Newsuan court did not elaborate or focus specifically on former employees, it nevertheless included former employees in its analysis that communications as between corporate counsel and middle and lower-level employees were protected by attorney-client privilege. The court explained that when “corporate counsel obtained statements from the 16 current and former employees with the singular purpose of providing legal advice to Republic Services with respect to the present litigation,” it did so with the protection of attorney-client privilege. Id at 287. It noted that “in consideration of the purpose underlying the privilege, we deem the relevant decisional law equally applicable to communications from both current and former employees in this matter.” Id at fn. 6. It further stated that “adopting a broader scope for the privilege in this regard is consistent with the broader scope applied in other aspects.” Id.

The Pennsylvania Superior Court relies exclusively on Upjohn in arriving at this conclusion; however, the issue is not as well-settled in the federal courts as it appears to be in Pennsylvania. Upjohn, too, did not focus specifically on the application of this analysis to former employees, as such issue was not addressed in the lower courts. Id at fn 3. However, in a concurring opinion, Justice Berger stated as follows:

Because of the great importance of the issue, in my view the Court should make clear now that, as a general rule, a communication is privileged at least when, as here, an employee or former employee speaks at the direction of the management with an attorney regarding conduct or proposed conduct within the scope of employment. The attorney must be one authorized by the management to inquire into the subject and must be seeking information to assist counsel in performing any of the following functions: (a) evaluating whether the employee’s conduct has bound or would bind the corporation; (b) assessing the legal consequences, if any, of that conduct; or (c) formulating appropriate legal responses to actions that have been or may be taken by others with regard to that conduct.

Upjohn at 402-403.

In conclusion, while Pennsylvania law continues to develop on this issue, and the federal courts have not formally held one way or the other – it is clear that the law generally favors protection over disclosure, and the Superior Court’s recent decision on this issue certainly indicates that these communications should be protected.

In order to protect your company’s investigation into a lawsuit, engage outside counsel right away.

YMFZ provides full service business representation to companies of all sizes and structures and is well-equipped to assist them in matters such as this and others. Contact us today for more information.

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Notice: This article is for informational purposes only. None of the information contained in the article constitutes legal advice. No reader should act on such information without first seeking legal advice from an attorney.