Sarah Gregory
Executive Editor
Loyola University Chicago School of Law, J.D. 2018

 

Compliance programs rely heavily on internal investigations. Yet unlike their counterparts in the in-house counsel’s office, compliance professionals rarely give notice when they are conducting such investigations. Whether compliance professionals have duty to notify individual directors, officers and employees of an internal investigation remains unclear. This lack of clarity leads to confusion with employees and officers regarding the limits of confidentiality, and the compliance officer’s duty of loyalty. A robust ethics and compliance program should therefore take a proactive stance and integrate Upjohn warnings—a standard of corporate counsel, but modified to fit the compliance function—into the internal investigation process.

Upjohn Warnings

The so-called “Upjohn warning” takes its name from the seminal Supreme Court case, Upjohn Co. v. United States. Prior to Upjohn, circuits were split on whether employee communication with corporate counsel qualified as attorney-client exchanges. Upjohn held that such communication was protected where the information was gathered for the purposes of rendering legal advice. Communication with counsel was privileged as long as (1) employees were only questioned about matters within the scope of their corporate duties, and (2) they were notified of the legal and investigatory context.

However, Upjohn also placed control of this privilege in the corporation’s hands. Therefore, only the company, not the individual employees, could decide to maintain or waive the attorney-client privilege covering their communications. Typically, corporations waive this attorney-client privilege in order to fully cooperate with federal investigation—an even more pressing obligation in the wake of the Yates Memo.)

The Upjohn ruling gave corporate counsel increased capability to conduct internal investigations. Where counsel properly notifies employees an investigation is taking place, interviews and other fact-finding discussion can remain confidential and protected by privilege. Upjohn warnings are an integral part of maintaining that privilege—serving as important notice to the employee of the investigation and the limitations of attorney-client exchanges.

Upjohn warnings are typically furnished to an employee prior to an interview or other communication with counsel. In general, an Upjohn warning should address that:

• The lawyer is collecting facts for the purpose of providing legal advice to the company.
• The lawyer represents the company, not the employee personally.
• Employee-counsel communication is protected by the attorney-client privilege, which is controlled exclusively by the company, not the employee.
• The company can choose to waive the privilege and disclose their communication to a third-party, including the government.
• The employee must keep the communication confidential, meaning that it cannot be disclosed to any third party other than the employee’s own attorney.

Additionally, counsel should document that the Upjohn warning was given and the employee consented to the interview.

Outside the Realm of Legal Advice

Not all internal investigations are privileged by Upjohn—only those conducted for the clear purpose of obtaining legal advice. The privilege and confidentiality of the counsel’s office is separated by a bright line from the regulatory and business activities of the compliance department.

For instance, in United States ex rel. Barko v. Halliburton, the plaintiff moved to compel production of records regarding internal investigations conducted by the defendants’ internal compliance program.  The defendants objected on grounds of attorney-client privilege as well as work product protection.

The court determined that the investigations “were undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.” The resultant reports were not protected under Upjohn’s articulation of the attorney-client relationship. In reaching this conclusion, the court considered the fact that the interviewed employees were not notified that the purpose of the interview was to obtain legal advice and that the confidentiality agreements did not reference any legal purpose; nor were the interviews conducted by lawyers.

Barka and cases like it—e.g. Wikel v. Wal-Mart Stores, Inc., Foret v. Transocean Offshore, In re Kellogg Brown & Root, Inc.—establish that corporate privilege truly only attaches where an internal investigation is carried out in anticipation of litigation. Internal investigations conducted as part of the compliance program’s ordinary course of business are not protected by the same privilege under the attorney-client relationship or as work-product.

Still, across that bright line of legal advice, Barka leaves compliance officers and offices in a grey area of duty and confidentiality. Further complicating this issue is the fact that today, one in five compliance professionals is also a licensed attorney. As such, it is not clear whether these professionals are attorneys with a duty of loyalty to the corporation—and when they should be informing employees of that duty.

Developing a Modified Upjohn

Abandoning giving notice during an internal compliance investigation is not the solution. While courts draw a bright line between legal advice and business activity, an employee sitting across the table from an interviewer will not draw this distinction. If the purpose of an Upjohn warning is to clarify for the employee the limits of privilege, loyalty, and confidentiality, then that goal is agnostic—and just as applicable in a compliance context as in a legal one.

Therefore, a proactive compliance program should consider developing a modified Upjohn warning, which it can integrate into its internal investigative process. This allows compliance professionals to inform the employee in question:

• why the information is being collected (for compliance, regulatory, or other business purposes);
• that the compliance professional, even if an attorney, does not represent the employee; and
• that their communication is not privileged and may only be confidential insofar as established by the company or compliance program’s policies.

Having separate notice for a compliance investigation also allows the company to consider the context in which an interview or communication should take place and to document that consideration. When litigation arises, a significant number of discovery motions arise from drawing the line between counsel’s office and the compliance department. Of course, no amount of stamping a document “privileged” will ensure that a court agrees. However, demonstrating that a company deliberately provided an employee with its traditional Upjohn warning and not the modified notice, can clarify just what the company had in mind at the time of the investigation.