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Privilege Place
Whistleblowing to In-House Counsel
By Todd Presnell
Just like human resource managers, ombudsmen and compliance officers, in-house lawyers often find themselves the go-to corporate representative for whistleblower employee complaints. But unlike their non-lawyer counterparts, an employee’s whistleblowing discussions with in-house counsel raises several thorny privilege issues.
For instance, one should question whether the attorney–client privilege applies to the conversation. Other questions raise a lawyer’s anxiety level. What should the in-house lawyer do if the employee announces that she has an attorney, and ups the stakes by requesting her lawyer’s presence? How does one handle the ensuing complaint asserting a retaliation claim that contains the in-house lawyer’s comments? And just to make it interesting, what if the whistleblower is another in-house lawyer?
The in-house lawyer listening to a whistleblower employee must determine in the first instance whether the corporate attorney–client privilege protects the conversation from future discovery attempts. The privilege protects communications that are confidential when made, intended to remain confidential thereafter, and made for purposes of the lawyer rendering legal advice to the corporate client. Courts generally presume that a corporate employee’s communications with the company’s outside counsel are for legal advice purposes. But because courts understand that in-house lawyers often provide both business and legal advice, they do not apply the same legal advice presumption to in-house counsel.
When a whistleblower enters the in-house lawyer’s office, the threshold question is whether the employee is communicating so that the lawyer can provide legal advice to the company management or the employee (in a nonpersonal capacity). This is often difficult. On the one hand, the in-house lawyer must address the employee’s complaint through an investigative or reporting process, which sounds more like a business process than a legal one. On the other hand, the conversation could certainly lead to the lawyer’s providing legal advice to her client. Or both.
The privilege issue likely will not ripen until the whistleblower employee files a lawsuit, such as one for retaliation if the company terminates the employee post-whistleblowing. And if the employee made her complaints to the in-house lawyer, she could regurgitate that putatively privileged conversation in the body of the complaint. One court recently addressed this issue and provided some guidance.
In that case, a human resources manager visited her employer’s in-house lawyer to complain about alleged wage and hour violations. She also asked the lawyer for her interpretations of related corporate policies. The next day, she was fired.
In her subsequent retaliation complaint, the now-former employee repeated her conversation with the in-house lawyer, including that her supervisor violated state law and failed to follow employer policies. Other allegations included that she asked for “clarity” of certain policies and the in-house lawyer’s response. Even if the employee’s discussion with the in-house lawyer triggered her next day firing, the employer faced a dilemma: Did the privilege cover the employee-lawyer conversation and, if so, what could the employer do to extract privileged communications from the complaint?
The employer filed a Rule 12(f) motion to strike, asking the court to order the employee to refile the complaint omitting the allegations containing privileged information. Rule 12(f) allows a court to strike allegations that are “redundant, immaterial, impertinent or scandalous matter.” This is a good tactic because courts have stricken as “immaterial” allegations that are “inadmissible due to privilege.”
Here, the court found that most of the conversation with the in-house lawyer fell outside the scope of the attorney–client privilege. The critically missing piece was that the employee was reporting misconduct rather than communicating so the attorney could render legal advice. The employee’s conversations were classic whistleblowing on what she perceived as legal violations. And the court ruled that the privilege does not cover communications that trigger retaliatory conduct.
Other allegations in the complaint, however, presented a closer privilege call. The employee’s allegations that she asked the in-house attorney for “clarity” on interpretations of corporate policies appeared to be asking for legal advice. And further allegations relaying the in-house attorney’s plans to obtain additional information seemed related to legal.
Many whistleblowing employees consult a personal attorney before lodging whistleblowing complaints internally. And if the whistleblowing conversation turns into an interview, which often occurs, additional privilege and ethical questions arise if the whistleblower employee announces that she has an attorney. A recent decision from an Ohio appellate court in an analogous situation illustrates the privilege and ethical quandaries.
The court, however, was reluctant to strike these paragraphs without more context. Instead, the court’s remedy was to seal the original complaint and order the employee to file a new complaint with the close-call privilege allegations redacted. So, in sum, the employer could not show that the privilege covered the whistleblowing part of the discussion, but the part of the conversation going beyond whistleblowing likely garnered privilege coverage warranting at least redaction.
In that case, an employee complained to the human resources manager about a supervisor’s alleged sexual harassment. The company retained outside counsel, and the lawyer’s first act was to interview the complaining employee. After the interview began, the employee excused herself, contacted her lawyer, returned to the meeting, and informed the company’s lawyer that she was represented by counsel. The interview continued for an hour with a tape recorder running. And the company fired her shortly thereafter.
In the employee’s subsequent sexualharassment and retaliation lawsuit, she sought production of her recorded interview. The company claimed that the privilege protected the recording from discovery because it involved a communication between a company employee and a company lawyer.
The court rejected this privilege assertion. Although she was an employee at the time of her interview, the employer knew before the interview began that she could file suit and that she had retained counsel. For these reasons, the court found that the employer could not reasonably expect that the substance of the interview, whistleblowing, would have the character of a confidential communication with a lawyer. Indeed, the court found that a de facto adversarial relationship existed between the employee and her employer and, as such, there was no privilege.
But larger issues permeated the situation. Model Professional Conduct Rule 4.2 prohibits a lawyer from talking with an individual about the subject of the representation when the lawyer knows that the individual has an attorney. The exception is that an interview may proceed if the lawyer obtains consent from interviewee’s lawyer. Here, the company’s lawyer did not stop the interview and contact the interviewee’s lawyer for permission. While the court sidestepped a ruling, it strongly hinted that the lawyer’s conduct raised serious ethical concerns.
Even trickier privilege issues arise if the whistleblower is another in-house lawyer. A federal court case provides an illustration. In that case, an in-house lawyer reported conduct that allegedly violated the Foreign Corrupt Practices Act to the audit committee. His company later fired him, and he filed suit asserting retaliatory discharge claims under the Sarbanes-Oxley and Dodd–Frank acts.
The company later sought a dismissal on the grounds that he could not prove his retaliation case without disclosing the company’s privileged information. The privilege, of course, belongs to the company. And it asserted that, without waiver, the former in-house attorney could not use privileged communications to which he was a part in order to prove his case. Applying federal law, the court held that with appropriate protections the in-house lawyer as plaintiff may rely on privileged communications that he believes necessary to prove his case.
Ethical rules again come into play. Here, the state’s ethical rules of confidentiality, which governed the in-house lawyer, prohibit a lawyer from revealing client confidences unless the lawyer reasonably believes disclosure is necessary to prevent a criminal act that would cause death or substantial bodily harm. Model Rule 1.6, by contrast, permits a lawyer to reveal client confidences necessary to establish a claim or defense in a controversy between the lawyer and the client. The court ruled that the more lenient model rule is the appropriate standard under federal common law and found that the state’s ethical obligations did not preclude the in-house attorney from introducing privileged information.
So, what privilege and ethical issues should an in-house lawyer consider when a whistleblower walks into her office?
First, define and document the purpose of the meeting. If the employee arrives with a pure whistleblowing agenda, then it is unlikely that the privilege will cover the discussion, and the lawyer’s comments may find their way into a court-filed complaint. If the conversation evolves into the employee seeking legal advice, such as how to comply with legal or regulatory rules, then the privilege arguably applies.
Second, the in-house lawyer should attempt to take two sets of notes — one recording the whistleblowing and one recording the privileged discussion. If that effort is only plausible in a utopian world, then at minimum she should designate the notes separately when the meeting concludes. When the discovery request arises, having separately designated notes will help to preclude privileged discussions.
Finally, keep in mind that two privilege issues may be in play if the whistleblower is another in-house lawyer. The whistleblowing conversation itself presents issues identical to one made by a non-attorney whistleblower. But the in-house lawyer receiving the complaint should inquire whether the whistleblower lawyer is relying on other privileged conversations. If the latter, the in-house lawyer receiving the information should refrain from commingling the whistleblower’s relied-upon privileged communications with the interview notes. While a court may permit the whistleblower lawyer to introduce the privileged communications at trial, the receiving lawyer can maintain privilege protection over her separate notes.
And the obvious. When a whistleblower announces that she has counsel — and particularly if she asks for her lawyer’s presence — stop the interview and obtain permission from counsel before proceeding. It is one thing to lose a privilege argument, it is quite another to lose one about ethics.
Todd Presnell is a trial lawyer in Bradley’s Nashville office. He is the creator and author of the legal blog Presnell on Privileges, presnellonprivileges.com, and provides internal investigation and privilege consulting services to in-house legal departments. tpresnell@bradley.com