Challenging privilege in internal investigations

Challenging privilege in internal investigations
Around the issue of privilege, companies must decide what the ultimate purpose of the report is going to be, says Michelle Henry.
When it comes to the protection of privilege around internal investigations, in-house counsel need to stickhandle the issue carefully especially in light of some recent cases on both sides of the border.

“You need to set out enough detail that a judge or master can make a real decision as to whether there is a basis for privilege, or whether it’s just being used as a cloak,” says Jeremy Devereux, a partner at Norton Rose Fulbright Canada LLP.

It also depends on what is being asked to be produced, says Devereux.

In the case of Howard v. London (City), involving an action for wrongful dismissal, a motion was put forward last fall for production of all documentation related to the investigation undertaken by the investigator, John McNair, a lawyer with McKenzie Lake Lawyers, including the investigation report over which the City of London claimed privilege.

In his decision, Master Donald E. Short wrote: “Litigation privilege cannot protect the Investigation from production in these proceedings as there is no evidence that litigation of any kind was contemplated against Ms. Howard at the time Mr. McNair conducted his Investigation.”

That decision is being appealed and will be heard May 5.

“One of the things [Cindy] Howard was trying to get access to was material that she said. I think the master was scratching his head on that one,” says Devereux.

“The interesting thing for me in Howard is to read the discussion around when it’s a lawyer doing the investigation, what the mandate is, and whether you’re hired to do a purely factual investigation, or hired to provide legal advice to the client and in order to do that you have to do a factual investigation.

“Master Short was trying to draw a distinction between those two things.”

In many cases, there is both a solicitor-client privilege and a litigation privilege claim over the documentation and it can be complicated to “unpack” those, Devereux adds.

“The test for each is different. Sometimes it’s only after you get the legal advice that you see that you might get sued,” says Devereux. “If the purpose was to get legal advice then it’s going to be solicitor-client privilege, but on the other hand, was it a factual investigation in contemplation of litigation? If so is it protected on that ground?”

The issue is hot for corporate counsel, he says, “because a lot of the time these investigations are being done it’s large corporations that are asking them to be conducted and they want certainty as to how it’s going to work.”

Privilege around internal investigations has always been a hot topic but in terms of practical consideration for companies, they have to decide what the ultimate purpose of the report is going to be, says Michelle Henry, a labour and employment partner at Borden Ladner Gervais LLP who up until two years ago was in an in-house role.

“If, at the end of the investigation, they don’t want to have to disclose everything they have to think strategically about how to separate the facts from the opinion of the in-house counsel,” she says.

Henry says the two considerations are litigation privilege and solicitor-client privilege. The test at the time the investigation is being conducted is whether litigation has started or reasonably contemplated, and what is the dominant purpose of the report — is it because of the litigation?

“In the City of London case when it was started they said it was for human resources purposes and kept telling her [Howard] ‘your job is not on the line, it’s not about you,’” says Henry.

“The easiest is when you can claim litigation privilege and the investigation happens afterwards and you can say you’re trying to figure out what the exposure is and the dominant purpose would be for the litigation,” says Henry.

“The tougher ones were when the investigation was being done for the company to figure out what they would do next and if you’re relying on that investigation to make the ultimate decision whether an employee or not, you can’t expect that report to be fully privileged.”

Henry says it has been an issue quite often in the unionized context.

“When I was in-house, my practice was to say ‘give me the facts and summary of interview notes and I will make an assessment as to what the next step is.’”

The general advice, says Henry, is if someone internally is conducting an investigation you have to think about the timing of when the investigation is being done.

“If you’re going to rely on the investigation to advise the company on a decision to terminate an employee, you really have to assume it may not be protected — maybe your advice to the company is solicitor-client privilege but the report will not be protected in terms of anticipation of litigation,” she says.

And even if you can claim privilege on something you have to make sure you haven’t waived privilege by copying everyone on the information.

Last week, the Association of Corporate Counsel filed an amicus curiae brief in the Superior Court of Pennsylvania urging the state to reverse a trial court’s decision to disclose privileged communications obtained during Pennsylvania State University’s internal investigation into the alleged misconduct of then-football coach Jerry Sandusky.

In November, the Court of Common Pleas of Centre County, Pennsylvania ruled in Estate of Joseph Paterno v. National Collegiate Athletic Association that the investigation into the Sandusky allegations by the law firm of former FBI director Louis Freeh was not protected by attorney-client privilege despite the fact the firm was retained by Penn State to investigate allegations against Sandusky.

The ACC states the need for “robust privilege protections” between an organization’s employees and its in-house counsel noting that corporations, universities, and non-profits rely on candid communications to conduct internal investigations into alleged misconduct. It further contends that disclosure of protected communications would impact future investigations of alleged employee wrongdoings and that the lower court’s conclusion was “manifestly wrong.”

“Internal investigations are at the heart of what in-house counsel manage,” says Amar Sarwal, vice president and chief legal strategist at ACC. “It’s one of the core value propositions of in-house in companies. All of these complex enterprises need a legal function that can make sure that when there are problems festering, there can be appropriate opportunities to determine what’s happened and to root out that misconduct.”

When it comes to investigations, especially high-profile ones, it’s important that employees who will be spoken to during the investigation are encouraged to be candid and it’s a lot easier to be candid with the protection of privilege.

“These protections, ensure that employees, although they don’t own the privilege protection, they feel the company is taking the sensitivity of the underlying conduct into account,” says Sarwal. “You’ll see that across the board around the world when internal investigations are conducted they are conducted confidentially.”

Sarwal says the ACC tries to educate members on what is privileged and what is not and to not conduct internal investigations to cover things up.

“People who put ‘privilege’ on their Chipotle [Mexican Grill] order — that’s not privilege,” says Sarwal. “Are there bad actors in the world? Absolutely. Are there bad actors covering up things? Absolutely. But we’re thinking about continued and enhanced compliance for companies and we’re trying to figure out how good actors should respond to these kinds of situations. You have to be very thoughtful in how you protect documents. Courts get very incensed when they see that sort of thing.”

In addition to the Penn State case, Sarwal also points to the General Motors investigation that was also challenged to be disclosed, but so far the courts have not allowed it.

Sarwal says the CBC investigation and report released last Thursday regarding former Q radio host Jian Ghomeshi is “actually instructive” in that early on CBC saw how its investigation was going to be publicized differently than any other.

“Stakeholders put pressure on the CBC to make sure it was more public at the end of the day,” he says. “When the report is put out it’s not that they are trying to gain leverage on their particular adversary, it’s because they are trying to inform their broader stakeholders about what they’re doing in the company.”

Devereux agrees, saying the CBC approach was completely different from the City of London case.

“The privilege question never comes up in that case because it’s clear from the outset they never intended to claim it,” he says.

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