EMPLOYMENT LAW ISSUES AND THE ATTORNEY CLIENT PRIVILEGE: PRACTICAL TIPS FOR IN-HOUSE COUNSEL

1. EMPLOYMENT LAW ISSUES AND THE ATTORNEY CLIENT PRIVILEGE: PRACTICAL TIPS FOR IN-HOUSE COUNSEL Presented on April 8, 2014 by:

2. Elizabeth L. Lewis – Cooley LLP Elizabeth Lewis is a partner in the Employment & Labor practice at Cooley LLP. Her practice focuses on labor and employment law, civil rights law and litigation. In her employment practice she works with clients to find cost-effective business solutions to employment problems. She works on a broad spectrum of employment issues in a wide variety of industries. An experienced litigator, Ms. Lewis handles employment, contract and civil rights lawsuits, including jury trials and class actions, at the trial and appellate level. Ms. Lewis is named annually in the Chambers USA list of America's Leading Lawyers for Labor & Employment and in The Best Lawyers in America. She is an author of the Virginia Employers Guide to Labor Law with Michael F. Marino, Stephen W. Robinson and Clifford R. Oviatti, Jr., Virginia Chamber of Commerce (1989). She is a Director of the Greater Washington Board of Trade, a member of the Economic Club of Washington and the organizing Board of MindShare, and is an active member of the Women's Advisory Board of the Girl Scout Council of the National Capital Area. She is a past Chair of the Alexandria (VA) Chamber of Commerce. Ms. Lewis received her law degree from the University of Virginia, Order of the Coif and her AB, cum laude in American Studies from Smith College.

3. SozeenMondlin– The MITRE Corporation SozeenMondlin is Associate General Counsel and Director of Compliance for The MITRE Corporation ("MITRE").  MITRE is a systems engineering and information technology company that works in the public interest on defense and intelligence, aviation, civil systems, homeland security, and the judiciary and healthcare. Ms. Mondlin created and directs MITRE's ethics and compliance program.  She also is responsible for advising management on employment law and employee relations and for oversight of the company's litigation.    Ms. Mondlin is a graduate of Wellesley College and Stanford Law School.

4. The Attorney-Client Privilege Is Important • It allows clients to discuss candidly difficult employment issues, find solutions and work through drafts of documents without such communications being subject to disclosure in a legal proceeding. • Preserving the privilege isn’t easy: if the correct steps aren’t taken to preserve the privilege, it will not attach.

5. Objectives of this Presentation • Understand the scope of attorney-client privilege and how to use it effectively • Application of privilege to corporations • Distinction between privileged communications and information communicated to lawyer that is not privileged • Understand how to document, distribute and retain privileged communications • Understand how privilege applies to in-house counsel • Understand how privilege applies to investigations • Understand waiver of the privilege

6. Elements of the Attorney-Client Privilege • The attorney-client privilege protects communications between a client and that client’s attorney when the communications are made: • in confidence • for the purpose of seeking, obtaining or providing legal advice. • Communications cloaked with the attorney-client privilege are subject to protection from disclosure. • The client (not the attorney) owns the privilege.

7. Debunking Misperceptions About Privilege • “Privilege” does not protect facts communicated to counsel • “Privilege” does not cover everyone in the corporation or everyone working with the corporation • Generally, no privilege: • If communication has primarily non-legal objective • If communication is personal musing rather than request for advice • Copying attorney does not automatically make a communication privileged • Confidential information that is not generally available to the public CAN be required to be produced in litigation unless it is privileged.

8. Maintaining the Privilege • The attorney-client privilege protects communications made in confidence • Method of communication must be intended to be confidential • Ensure that the communication is not overheard • Restricted access to the communication • Treat the communication as privileged at the time of creation • The privilege cannot be asserted after the fact

9. Corporation as a Client • The privilege only extends to communications made betweenthe client and that person or entity’s attorney • When the client is a corporation, whose communications with counsel are privileged?

10. Corporation as a Client • A corporate entity can only act through individuals. . . • but the attorney-client privilege does NOT cover: • Everyone in the corporation • Everyone working “with” the corporation • Everything an attorney says or writes

11. Corporation as a Client There are two ways courts have determined which company employees can have privileged discussions with legal counsel: • First method: the privilege applies to communication with a company employee if the communication: • was made at the direction of corporate supervisors to secure legal advice from counsel • concerned matters within the scope of the employees’ corporate duties • Second method: the privilege applies to a communication between a company employee and counsel if the employee, regardless of title and job duties, • is in a position to control or even to take a substantial part in a decision about any action that company may take upon the advice of counsel, or • is an authorized member of a body or group that has that authority

12. Corporation as a Client: Scope of the Privilege • If employee has privileged conversation with counsel about company business: • Can that advice be shared with other employees without losing the privilege? • Can the advice be discussed with others without losing the privilege? • How far does the privilege extend?

13. Hypothetical #1Corporation as a Client • Company is going to terminate an employee and is considering offering a severance package. The Head of Human Resources emails In House Counsel and Cooley to assess the risks and severance options. After consultation with In House Counsel, Cooley lawyer respond to HR via email. • HR forwards the Cooley email to CEO copying Cooley and saying: “See email from Cooley below. Let me know your thoughts.” • Privileged? • Yes. • CEO forwards email to COO copying HR and states: “I’m fine telling counsel 3 months of severance and COBRA, but not acceleration. What do you think?” • Privileged? • Yes.

14. Hypothetical #1Corporation as a Client • COO responds to CEO and states: “I agree but I’m concerned that she could cause a lot of turmoil and dig up some other skeletons if she sues so I’d be flexible on acceleration.” • Privileged? • Maybe. • What if COO emails CEO and states: “What a joke. The squeaky wheel always gets the grease.” • Privileged? • Likely Not.

15. Corporation as a Client: Scope of the Privilege • Sharing legal advice and discussing it within the company retains the privilege if distribution is limited and communications are directly related to the rendering or seeking of legal advice. • Conversations and written/electronic communications may lose the privilege if widely distributed or intermixed with purely business considerations or personal musings.

16. Inter-Corporate Communications • Parent – Subsidiary • Who is the client? • Who does the lawyer represent? • The lawyer may not represent all of the related entities

17. How Does the Privilege Apply to Communications with Third Parties? • The attorney-client privilege attaches to communications with legal counsel including representatives of the lawyer such as: • Paralegals • Investigators • Patent Agents • The majority of courts find NO privilege attaches to communications, even if they are related to legal matters, between an individual who is not a lawyer and any of the following: • Accountants • Investment bankers • Financial advisers • Reorganization consultants • PR firms

18. Hypothetical #2 A/C Privilege and Third Parties A terminated employee has alleged discrimination. The company hires an IT consultant to image the computers of the former employee and his boss. A week later, the IT consultant sends a report to the company labeled “Confidential & Privileged.” The report states that the boss spends a lot of time accessing pornographic internet sites and further reports that the former employee’s boss made a profane, offensive reference about the former employee’s sexual orientation. • Is the report protected by attorney/client privilege? • No. • Problematic if report reveals damaging information and/or communication. • Other examples: • HR prepares independent analysis of wage and hour classifications. • Accounting prepares calculation of unpaid overtime.

19. Hypothetical #2 (Analysis)A/C Privilege and Third Parties • What could the Company have done to preserve the privilege? • Use counsel to protect the investigation • Where lawyers takes charge of process, it can be protected • Lawyer’s communications to third parties may be privileged • Communication must be “reasonably necessary” for the purpose of transmitting information or furthering client’s interest • Compare: Lawyer’s communications to client’s agents and employees generally privileged

20. Hypothetical #2 (Analysis)A/C Privilege and Third Parties • Typical Scenarios • Imaging computers • Forensic investigators/accountants • Private investigators • Pictures taken of plaintiff and sent to attorney? • No A/C privilege, see Suezaki v. Sup. Ct. (1962) 58 Cal.2d 166, 173-177. • USPS v. Phelps Dodge Refining Corp., 852 F.Supp. 156, 161 (E.D.N.Y.1994). • No privilege applied to communications made by environmental consultants to company where consultants had been retained by company to conduct environmental studies in response to request from a state agency and were not employed by counsel specifically to assist them in rendering legal advice.

21. Communications vs. Information The attorney-client privilege protects communications, not information • The communication can take any form; written, verbal, electronic. • The distinction between communications and information is critical to the proper application of the privilege to pre-existing documents. • If the client supplies to the attorney documents that were not created for the purpose of communicating with the attorney, those documents do not acquire a privilege status merely because of their conveyance or communication to the attorney. • Only the fact that the documents were sent to the attorney and any communication to the attorney about the documents is privileged.

22. Communications vs. InformationPre-Existing Documents • Labeling an email to an attorney “confidential” will not protect it if its contents do not meet the test for privileged communications. • Notes made by the client for the purpose of eliciting legal advice or obtaining legal assistance are privileged, even if they were prepared before counsel was retained and weren’t requested to be prepared by counsel. • Documents used in the normal course of business that are later shared with the attorney are NOT covered under the attorney-client privilege. • An e-mail sent to a broad distribution list and copied to the attorney does not become “cloaked” with the attorney-client privilege by copying the attorney.  • Documents that were privileged prior to the communication retain their privilege when sent to other counsel.

23. Hypothetical #3Communication vs. Information Company received a cease and desist letter from Competitor, claiming that newly hired VP of Sales has violated non-disclosure and non-solicitation agreement obligations to Competitor. Company gathers relevant documents for counsel and labels them as “Confidential: Attorney-Client Privileged Communication.” Company also prepares a timeline of events that occurred. Company sends email to Company counsel, providing background information and setting up call. Attached to email are the letter from Competitor, the “evidence” the Company collected and the timeline. Question: Is any of the “evidence” that Company collected privileged? Answer: No. Question: Is the timeline Company prepared privileged? Answer: Yes. Question: Is the email that Company sent to Counsel privileged? Answer: Yes.

24. Privilege Only Applies to Communicationfor Purposes of Legal Advice • What is the “Primary purpose” of the document ? • Does it request or contain a lawyer’s analysis or assessment of legal risks or strategies? • Was it requested by or for the attorney? • Was it sent it to legal counsel to inform or assist counsel to provide legal advice?

25. For Purposes of Legal AdviceLegal Review of Drafts • The privilege can protect drafts of documents • Drafts circulated to counsel for comments on legal issues may be privileged if they are prepared or circulated for the purpose of obtaining legal advice • Best practice -- Mark the drafts “Attorney-Client Privileged Communication” • Remove the privilege legend when the document is put in final form • Examples include: disciplinary memos, communications with employees about leave, performance plans, communications with terminated employees.

26. Hypothetical #4Legal Review of Drafts Employee’s performance is deteriorating. Employee’s manager seeks counsel’s assistance to prepare the counseling memo. Question: Can drafts of the counseling memo be protected by the attorney-client privilege? Answer: Yes. Analysis: Drafts exchanged between clients and their attorneys amount to a dialogue, some of which can deserve privileged protection. Roth v. Aon Corporation, Case No. 04 C 6835 (N.D. Ill. Jan. 8, 2009) • Email and its attached memo sent internally from CFO to other executives, including the general counsel asking recipients to comment on the language of the draft of a portion of Aon’s Form 10-K to be filed with SEC. Aon later filed the 10-K in final form with the SEC but excluded some information that had been in the draft. • Held: email was requesting legal advice and privileged by attorney/client privilege, even though final SEC document was made public and email did not specifically state that legal advice was sought.

27. Hypothetical #5Maintaining the Privilege The company is working with counsel to manage an employee (Ceci) who is underperforming. The company and its counsel assess different approaches. Following a meeting with the employee, the company puts the following note in the employee’s personnel file: I met with Ceci today. I followed the script that company counsel and I had prepared last week. Counsel and I discussed offering Ceci a transfer to a different sales team so she can have a fresh start. We also discussed addressing Ceci’s performance issues, which Ceci was not happy to hear and immediately became defensive. Counsel and I had discussed how to handle Ceci’s reaction and steer her back to the point where we could have a productive dialogue. I tried but could not get Ceci to engaged in a constructive discussion about her performance issues. As recommended by company counsel, I gave Ceci a copy of the company’s retaliation policy and told her that the company does not tolerate retaliation and that she should report any indication that she is being retaliated against to me. Question: Are there any issues with the company’s putting the note in Ceci’s personnel file? Answer: Yes, it could result in a waiver of the attorney-client privilege.

28. Hypothetical #5 (Analysis)Maintaining the Privilege Why is putting the note in Ceci’s file a bad idea? • Many State laws (e.g. California, Massachusetts) allow employees to review their personnel files and/or obtain a copy. • Personnel file may be accessed by other employees who were not involved in the legal matter for which counsel was sought and therefore are not within the scope of the privilege. McGee v. Parker Hannifin, No. 07-12373 (E.D. Mich. 2007). • After McGee was fired, she requested and received a copy of her personnel file, which contained 2 emails between HR and legal counsel regarding McGee’s FMLA leave. McGee sued the company and attached copies of the emails to her lawsuit. • The company asserted that the emails were privileged asked that they be returned but the court refused, reasoning that if HR was careless enough to leave the emails in the file, then the company gave up its right to rely on the privilege.

29. Hypothetical #5Maintaining the Privilege Assume that the note was not placed in Ceci’s file so the privilege has not been waived. Ceci decides to sue the Company and files an action in state court in NY for violation of the NY Human Rights Law, which does not require exhaustion of administrative remedies. The Company wants to use the note in the litigation to show it acted appropriately and did not discriminate. Is there a problem with using the note in court? Answer: Yes, producing the note will waive the attorney client privilege and the waiver may permit Ceci’s counsel to call company counsel to testify and obtain copies of communications with counsel other than the note.

30. Hypothetical #5Maintaining the Privilege The privilege can be maintained if the note is produced with the legal advice redacted. How will this note be received at trial? Redacted Note I met with Ceci today. ------------------------------------------------------------------------------------REDACTED------------------------------------------------------------------------------------------------------------ which Ceci was not happy to hear and immediately became defensive. ---------------------------------------------------------------REDACTED--------------------------------------------------------------------------------------------------I tried but could not get Ceci to engage in a constructive discussion about her performance issues. ---------------------------------REDACTED------------I gave Ceci a copy of the company’s retaliation policy and told her that the company does not tolerate retaliation and that she should report any indication that she is being retaliated against to me.

31. Hypothetical #5Maintaining the Privilege • How can the redacted note problem be avoided? • Do not co-mingle legal advice with notes about an employee that support and document appropriate handling of employment matters. • Do not place documents containing privileged communications in employee’s personnel files. • Follow best practices for email communications with counsel (more to follow).

32. Maintaining the Privilege - BestPractices to Avoid Waiver of Privilege If the document is asking for legal advice, provides information to counsel or was prepared at the request of counsel: Mark it “Privileged & Confidential.” Emails – include in header along with subject If an attachment contains privileged communications, label it too Date it! Documents that refer to privileged communications should reflect the date, the participants (e.g., author, recipients, cc:, bcc:, attendees and the fact that legal advice was being sought and/or provided).

33. Maintaining the Privilege - BestPractices to Avoid Waiver of Privilege • Limit distribution within the company • Once privileged information discussed in an email thread • Cut the thread or start a new email • Never disclose to anyone outside the company, even as a bcc • Remind others to not forward or share • Cannot share privileged communication on social networking sites, press releases, or SEC filings • Limit disclosure of metadata from electronic documents

34. A/C Privilege and ERISA Plan Fiduciary Exception Fiduciary exception is based on two justifications: • Fiduciary as proxy for the plan beneficiary "When an attorney advises a fiduciary about a matter dealing with the administration of an employees' benefit plan, the attorney's client is not the fiduciary personally but, rather, the trust's beneficiaries." Washington-Baltimore Newspaper Guild v. Washington Star Co., 543 F. Supp. 906, 909 (D.D.C. 1982) • Fiduciary’s duty to disclose information related to plan administration “An ERISA fiduciary has an obligation to provide full and accurate information to the plan beneficiaries regarding the administration of the plan. …Thus, an employer acting in the capacity of ERISA fiduciary is disabled from asserting the attorney-client privilege against plan beneficiaries on matters of plan administration” In re Long Island Lighting Co., 129 F.3d 268, 272 (2d Cir. 1997)

35. A/C Privilege and ERISA PlanWho Is a Fiduciary? When a lawyer advises an ERISA fiduciary on matters of plan administration the communication is not privileged. A fiduciary under ERISA is a person who: (1) exercises discretionary authority or discretionary control over an employee benefit plan or over the management and disposition of a plan’s assets, (2) provides investment advice for a fee or other compensation, or has the authority or responsibility to do so, or (3) has discretionary administrative authority or responsibility over the plan. 

36. ERISA Plan Fiduciary Exception - When Is Employer Acting as Fiduciary? Communications with counsel may not be privileged if they involve: • Benefits claims administration—Communications prior to final administrative determination (e.g., denial of benefits) • Plan administration • Preparing draft communications regarding changes to plan benefits • Management and investment of plan assets • Advice regarding responses to participant inquiries When the communication with counsel is related to Plan sponsor functions, or personal liability the communication is privileged. • Plan sponsor (“settlor”) functions include plan design, amendments or termination • Personal liability—seeking legal advice in anticipation of or to defend against a lawsuit Helpful Hint: When counsel is being paid from the plan—as opposed to payment by the plan sponsor—the fiduciary exception will most likely apply

37. A/C Privilege and In-House Counsel • In general, in the United States, the privilege attaches to a business entity’s communications with in-house counsel in the same manner as outside counsel. • However, in-house counsel often wears “two hats”: • Attorney for entity employer • Business role with non-legal duties • Primary purpose of communication must be legal advice • Watch out for messages that relate to both legal and business advice • An employee’s communications with in-house counsel must be within the scope of the employee’s responsibility.

38. Hypothetical #6 A/C Privilege and In-House Counsel • Company is acquiring a small competitor. The General Counsel (“GC”) helps negotiate the deal, assists in drafting the pertinent documents and communicates with the CEO on deal issues. She also advises regarding changes in employment practices and fields questions from store managers regarding these changes. • Is an email from the GC to the CEO discussing pricing of the deal privileged? • No.

39. Hypothetical #6 (cont’d) A/C Privilege and In-House Counsel • What about an email from GC to CEO regarding the deal pricing as well as the manner in which the payment term and payment structure affect the timing of legal disclosures? • Maybe. • What should the GC do to make this cleaner? • Are the GC’s communications to the CEO regarding employment practices privileged? • Yes. • Are the GC’s communications to the store managers privileged? • Yes.

40. Hypothetical #6 (cont’d) A/C Privilege and In-House Counsel • In re Avandia Marketing, Sales Practices and Products Liability Litigation, MDL No. 1871 (E.D. Pa. Dec. 7, 2009) • Rejected privilege claims on various emails sent to a group of person where one or more was an attorney but there was no confidential information or request for advice. • “[T]he corporation asserting the privilege must demonstrate that the communication was made for the express purpose of securing legal and not business advice.”

41. Investigations • Determine whether to conduct a privileged or discoverable investigation. • Because employers are required by law to conduct investigations of harassment to avoid liability, these investigations generally should not be privileged. • If there is no legal duty to investigate, and the results of the investigation may be something the company does not wish to make public, conduct a privileged investigation. Note that a privileged investigation may be followed by a discoverable investigation if helpful. • For a privileged investigation, begin by memorializing management’s request for legal advice. • Segregate privileged documents compiled during the investigation • Conduct all communications privately (no third parties)

42. Investigations • If the investigation itself is not privileged are attorney-client communications related to the investigation privileged? • UNCLEAR • McKenna v. Nestle Purina PetCare Co. No. 2:05-cv-0976, 2007 WL 433291 (S.D. Ohio Feb. 5, 2007) : Communications to client providing advice about the investigative process and resulting decisions by attorney consulted about investigation who did not conduct interviews, make disciplinary decisions or otherwise participate in the investigation itself was privileged.

43. Investigations • If the investigation itself is not privileged are attorney-client communications related to the investigation privileged? • Waugh v. Pathmark Stores, Inc. 191 F.R.D. 427 (D. N.J. 2000): communications with attorney following an employment discrimination investigation about the results of investigation and remediation were privileged. • Koss v. Palmer Water Dept. et. al. Civil Action No. 12-30170-MAP (D Mass. Oct. 7, 2013): ongoing active participation in investigation by law firm in the form of guidance, advice and direction to outside counsel (from separate firm) conducting the investigation made firm’s communications not privileged.

44. Investigations • Tips for maintaining privilege for communications with counsel where the investigation is not privileged: • Advice by In House Counsel who provide the Company with both business and legal advice is at significant risk of being considered NOT privileged – this is a good time to use Outside Counsel. • Where the investigation is conducted by Company employees make sure that Outside Counsel’s role does not bleed into participation in the investigation. • Where the investigation is conducted by Outside Counsel choose a different firm from the firm providing advice and allow the investigating firm to operate independently.

45. Investigations • When do documents from a privileged investigation lose their protection? • Ryan v. Gifford, 2007 WL 4259557 (Del. Ch. Nov. 30, 2007) (unpublished opinion) (special committee of company’s board of directors shared outside counsel’s special investigation report with full board, including individual board members under investigation, waiving privilege) • SEC v. Schroeder, 2009 WL 1125579 (N.D. Cal. 2009) (attorney interview notes from internal investigation privileged and not waived by production of the final memorandum regarding interviews)

46. Investigatory Reports and Work Product • Information underlying an investigatory report may be protected by attorney work product. • Even where an investigatory report by counsel becomes public, notes made by counsel in the course of the investigation may still be protected as attorney work product. • See, In re Vioxx Products Liability Litigation, 2007 WL 854251 (E.D. La. Mar. 6, 2007) where outside counsel’s report to Special Committee created by Board was published, but in a lawsuit that followed, notes and materials prepared by the attorneys but not themselves part of the final report were protected from disclosure as attorney work product. The court noted that the documents reviewed by the attorneys could be obtained through discovery and the witnesses interviewed by the attorneys could be deposed.

47. The Privilege – Corporate Officers Privilege is owned by company. A corporate officer claiming a personalattorney-client relationship with corporate counsel must meet the following test: • Officer approached corporate counsel for the purpose of seeking legal advice; • He made it clear that he was seeking legal advice in his individual capacity; • Counsel communicated with officer in his individual capacity (consider possible conflict with representation of company); • The conversations with counsel were confidential; and • Substance of the communications with counsel did not concern matters within the company or the general affairs of the company. See United States v. Norris, No. 10-4658 (3d Cir. Mar. 23, 2011).

48. Hypothetical #7 • ABC Corporation receives an inquiry from the federal government regarding alleged price fixing activities. In response to the inquiry, ABC Corporation engages legal counsel, Vicky Willwin, to conduct an investigation on behalf of the company. Vicky has several conversations with the CEO to gather facts for the investigation. The government indicts the CEO for conspiracy to fix prices and obstruction of the U.S. grand jury investigation. • Vicky Willwin is asked to testify at trial. The CEO objects, claiming an attorney-client privilege with Vicky Willwin. Question: Can the CEO prevent Vicky from testifying? Answer: No. The privilege belongs to ABC Corporation.

49. Privilege Outside the USDifferences from US Law • Privilege as a rule of evidence or a professional rule of secrecy • Who is the “client” • Treatment of in-house counsel • Non-attorneys functioning in ways similar to US attorneys

50. In House Counsel and Privilege Outside the US • More narrow outside the US • Often privilege does not apply to communications with in house counsel at all • If it exists, it is based on “professional secret” approach • in other words, it is about confidentiality, not about whether government or other litigants can learn the information • TIPS • increase likelihood of privilege attaching by increasing US connection • involve in house and external lawyers from the US • retainer letters or document defining the nature of the attorney-client relationship should refer to potential US investigations or litigation