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Elaine Dorsett, Corporate CounselKristina Pacovsky, Corporate Counsel

February 21, 2017

Attorney-Client Privilege and

Leading Practices for Investigations

1The views expressed herein are the authors’, and do not necessarily reflect the views of MISO.

Presenters

I reduce legal risk by helping clients navigate a growing maze of laws and regulations. I also assist with keeping the legal and ethical integrity of MISO intact through internal policy enforcement, strategic thought partnership, and process improvement initiatives. My work currently focuses on the areas of regulatory audits, corporate level policies and processes, tariff lifecycle compliance as well as emerging involvement in Human Resource matters. I joined MISO with a 360 degree understanding of controls and risk supported by 14 years of professional experience in several heavily regulated industries, higher education (MBA and JD), and five professional certifications (CPA, CIA, CFE, CRMA, and CCEP). My husband also works for MISO as an in-house attorney. We are the parents of a cat named Ellie, short for Electric. In our free time, we enjoy looking for antiques, listening to live music, and exploring new places.

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Elaine Vullmahn Dorsett, Corporate Counsel

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Presenter

I bring six years of utility regulatory experience, both as in-house counsel and in enforcement at a NERC Regional Entity. My current focus at MISO is tariff and NERC compliance for MISO’s operations and planning functions and serving as a legal liaison for external stakeholder groups. I optimize my client’s position by serving as a strategic business partner who provides expertise in FERC and NERC compliance and risk assessment. Using skills gained from an earlier professional background in technical communication, I bridge the gap between technical experts and leadership to generate effective, efficient, big-picture solutions. I hold a Bachelor of Science degree in Scientific and Technical Communication from Michigan Technological University and a Juris Doctor degree from Case Western Reserve University.

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Kristina Pacovsky, Corporate Counsel

Agenda1. Attorney-Client Privilege and Attorney Work Produce Doctrine

2. Case Law and FERC Context

3. Do’s and Don'ts

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Attorney-Client Privilege and Attorney Work Product Doctrine

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In-House Privilege Basics• Attorney-Client Privilege

– Confidential attorney-client communications

– Limited evidentiary privilege developed by common law and recognized by Federal and state statutes

• Federal Rules of Evidence, Rule 502

• Federal Rules of Civil Procedure, Rule 26

– ABA and State Rules of Professional Conduct • Rule 1.6, Confidentiality of Information

• Rule 1.3, Organization as Client

• Work-Product Doctrine – Materials prepared in anticipation of litigation or for trial.

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Requirements and Purpose• Attorney-client privilege requires:

– A communication

– Between counsel and client

– Made confidentially

– For the purpose of rendering legal advice• In re: Teleglobe Communications Corp., 493 F.3d 345, 359 (3d Cir. 2007)

• Attorney-client privilege is “meant to encourage full and frank discussions that promote observance of the law and the administration of justice.”

• Upjohn Co. v. U.S., 449 U.S. 383, 389 (1981)

• Extends to communications and NOT to underlying facts• Cannot be compelled to answer: “What did you say or write to the attorney?”

• Party cannot conceal a fact merely by revealing it to his lawyer.

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Privilege in the Corporate Setting• Courts have stated attorney-client privilege applies equally to

both in-house and outside counsel.

• But, in-house counsel are often held to a higher standard.

“Communications between corporate client and outside counsel are cloaked with a presumption of privilege. Communications between corporate client and corporate counsel – on the other hand – involve a much different dynamic and require the proponent to satisfy a ‘purpose and intent’ threshold test.”

Baklid-Kunz v. Halifax Hospital Medical Center, 2012 US. Dist. LEXIS 158944 (M.D. Fla. Nov. 6, 2012)

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What’s Changed?• Role and Involvement of In-House Counsel

– Increasing complexity of laws and regulations have caused general counsel to be involved in more business operations

– Shifting from legal advisor to business advisor, with significant responsibility for business strategy, risk management, compliance, and governance

– Scrutiny of legal counsel role in business decisions related to recent scandals

• Dual capacities of in-house counsel is still the most frequently cited factor as a basis for denying privilege.

– “[M]odern corporate counsel have become involved in all facets of the enterprises for which they work. As a consequence, in-house legal counsel participates in and renders decision about business, technical, scientific, public relations, and advertising issues, as well as purely legal issues.”

• In re Vioxx, 501 F. Supp. 2d 789 (E.D. La. 2007)

• What is the breadth of service provided by your Legal team?

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Case Law and FERC Context

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FERC Proceedings

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Photo credit: Federal Energy Regulatory Commission HQ at Washington, DC. from Flickr/Branderguard

FERC ProceedingsPrivilege — 1) In general.

(i) In the absence of controlling Commission precedent, privileges will be determined in accordance with decisions of the Federal Courts with due consideration to the Commission’s need to obtain information necessary to discharge its regulatory responsibilities. 18 C.F.R. 385.410(d)

(ii) A presiding officer may not quash a subpoena or otherwise deny or limit discovery on the ground of privilege unless the presiding officer expressly finds that the privilege claimed is applicable. If a presiding officer finds that a qualified privilege has been established, the participant seeking discovery must make a showing sufficient to warrant discovery despite the qualified privilege.

(iii) A presiding officer may issue a protective order under Rule 410(c) to deny or limit discovery in order to preserve a privilege of a participant, person, or governmental agency. 18 C.F.R. 385.410(d)

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FERC Investigations/AuditsFormal Investigation:

“If any subpoenaed documents in an investigation are withheld because of a claim of the attorney-client privilege, the subpoenaed party shall submit a list of such documents which shall, for each document, identify the attorney involved, the client involved, the date of the document, the person(s) shown on the document to have prepared and/or sent the document, and the person(s) shown on the document to have received copies of the document.”

18 C.F.R. § 1b.14(c)

Informal Investigations and Audits:

•Privilege is recognized in these contexts

•FERC provides a framework for developing a privilege log

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MISO ExampleIssue Presented: Implementing leading practices for attorney-client privilege in MISO’s internal investigation framework

• Ongoing effort to ensure privilege is preserved in a business-sensitive manner for compliance investigations

• General approach is applicable to all in-house counsel scenarios

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Legal Team Characteristics

• MISO’s Legal Department is comprised of 16 attorneys

… of diverse backgrounds

… operating in specialized practice areas

… serving many clients

… and supporting multiple offices

• Your team is probably similar

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MISO Example

Three-phased approach

1. Refresh training on A/C privilege and work product concepts

2. Research applicable case law and perform a risk assessment

3. Fine-tune policies, processes, and procedures

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Phase 1:

Training• Consider training:

• Attorneys

• Legal support staff

• Compliance personnel

• Many organizational layers

• Formal or informal

• Customize to audience

• Not a once-and-done effort

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Phase 2:

Risk Assessment• Consider your environment

• Using outside counsel?

• How many hats do in-house counsel wear?

• Regulatory considerations

• Application of privilege to in-house counsel is not fully settled

• Determine the level of risk/exposure your organization has if privilege is waived

• Sensitivity of potentially privileged material

• What’s at stake? Emails, reports, meeting minutes

• Likelihood of invoking privilege

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Phase 2:

Case LawUpjohn Co. v. United States, 449 U.S. 383 (1981)

In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014)

In re GM Ignition Switch Litig., 80 F. Supp. 3d 521 (S.D.N.Y. 2015)

Chevron Midstream Pipelines v. SettoonTowing LLC, U.S. Dist. LEXIS 179284 (E.D. La. 2015)

Wultz v. Bank of China Ltd., 304 F.R.D. 384 (S.D.N.Y. 2015)

In re Target Corporation Customer Data Security Breach Litigation, No. 0:14-md-02522 (D. Minn. 2015)

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Phase 3:

Take Action• Develop options

• Present a range of options that consider costs, political effects, risk appetite, etc.

• Present to leadership to get buy-in from stakeholders appropriate to corporate culture

• Based on leadership’s selected approach:

• Review and update all relevant policies, procedures

• Ensure that investigation roles and responsibilities are clear

• Provide an “escape” from workflows as needed for sensitive matters

• Consider full scope of privileged materials, i.e. document creation, storage, and retention

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Do’s and Don’ts

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Do’s and Don’ts1. Notification of Issue2. Directing the Legal Investigation3. “Need to Know” Basis4. Standard Subject Line / Reference Naming

Convention5. To: Attorney6. Signature Block7. Investigation Materials8. Saving Investigation Materials

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Notification of Issue• Notification in a timely manner of a potential issue

– Involvement of attorneys [in an investigation] will assist the company in successfully asserting that the documents generated in the course of the investigation are protected under the attorney-client privilege and the work-product privilege from discovery by the U.S. government and/or by plaintiffs' counsel in the United States.

• Upjohn Co. v. United States, 449 U.S. 383, 101 S. Ct. 677 (1981)

– Forwarding existing documents to attorney for review does not make it privileged.

• Phillips v. C.R. Bard, Inc., 290 F.R.D. 615, 632 (D. Nev. 2013).

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Directing the Legal Investigation• Attorney-Client privilege may be preserved in an internal investigation

conducted by non-attorneys so long as the investigation is at the direction of an attorney.

In re Kellogg Brown & Root, Inc., 756 F.3d 754, 758 (D.C. Cir. 2014).

– Kick-Off Meeting• Initial meeting to discuss the potential issue and to determine whether further

investigation is needed.

– Framing the Issue• Determination of the scope of the investigation, based on the issues discussed in

the Kick-off Meeting.

– Participant List• Listing of who should be interviewed in the course of the investigation.

– Check-In Schedule• Based on the importance and/or time-sensitive nature of the issue.

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“Need to Know” Basis• Communications about the investigation should only be sent to

people who are directly participating in the investigation.

– This group is composed of:

1. The attorney(s) directing the investigation,

2. The employee(s) conducting the investigation,

3. The employees listed on the Participant List.

– E-mails containing legal advice should not be forwarded to anyone outside of this group.

– A court would NOT find that a communication, such as an e-mail, should remain privileged if that e-mail was sent to many people who are not required to be involved in the investigation as directed by the lead attorney.

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Standard Subject Line / Reference Naming Convention

• Enables all parties involved to easily identify a chain of e-mails or documents as pertaining to a particular investigation.

• Will assist the attorneys in quickly identifying which e-mails are privileged, because the naming convention will be included in the subject line of all e-mails.

• For consistency it might be wise to adopt something like:

YEAR - REGULATION/POLICY – SEQUENTIAL ID could indicate:• The year the issue arose

• The regulation or policy potentially violated

• The unique identification number

Example: 2017-Tariff-001

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To: Attorney• E-mails discussing an investigation should be sent directly to an

attorney, or at the very least, should direct a legal question to an attorney who is CC’d on the e-mail.

– Simply copying attorneys on an email chain in order to keep them abreast. . .does not transform the emails into an attorney investigation with a built-in expectation of legal services to be rendered which would qualify for attorney-client privilege.

• Hamdan v. Indiana University Health North, LLC, U.S. District Court, S.D. Indiana WL 2881551 (2014).

– It is NOT sufficient that a lawyer was simply copied on correspondence, whether formal letters, memoranda, or e-mails. It must be established that those copies are reviewed and evaluated in light of the other legal services being provided by the attorney.

• Gucci America, Inc. v. Guess?, Inc., 271 F.R.D. 58 (S.D. N.Y. 2010).

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Signature Block• Attorney.

– Include “Privileged and Confidential Attorney-Client Communication” at beginning of each e-mail.”

– Use it judiciously

• Non-attorney agents. – Should also create a “Privileged and Confidential Attorney-Client

Communication” signature to place at the beginning of e-mails pertaining to the investigation.

– Place a statement in e-mails to attorneys with language that makes it clear the e-mail and documents are being sent relating to a legal matter.

• “The attached documents are in furtherance of the investigation you are handling on our behalf.”

• “Attached are the documents you requested that I gather for you relating to the pending investigation.”

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Investigation Materials

• Digital Investigation Materials– Word Document:

• Include a header on each page that says PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION. This may also apply to PDFs.

– Excel Spreadsheet: • Place PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT

COMMUNICATION in the first row of the spreadsheet. – PowerPoint:

• Place PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION in a text box on each slide.

• Oral Interview– If handwritten notes are taken during an interview, these should also

be provided to the attorney(s) directing the investigation.

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Saving Investigation Materials

• Investigation materials should be saved in a restricted access folder.

- Only the directing attorney, the agent conducting the investigation, and potentially the employees on the investigation list should have access.

• Each investigation should have its own folder so different restrictions/access may be set for each folder.

• Keep documented attorney impressions in a secure location and labeled as “Attorney Work Product”

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Thank you.

Questions?