A case recently decided in the United States District Court for the Southern District of New York has an internal investigations ramification for companies employing unlicensed attorneys in their law departments and compliance functions. All those intent on maintaining privilege should be cognizant of the import of this case and takes steps to avoid the unintentional waiver of this protection.
Recently, The FCPA Blog in “In-house privilege shrinks again” noted the decision in Anwar v. Fairfield Greenwich Ltd., No. 09 Civ. 118 (S.D.N.Y. July 8, 2013) as an instance of the further constriction of in-house attorney-client privilege and gave the nod to a client alert from Jenner Block that briefed the case.
In Anwar, the court granted plaintiffs’ motion to compel an unlicensed Dutch in-house lawyer to give answers in a deposition over defendants’ privilege objections.
The client alert reported:
“The defendants argued that, under U.S. law and relying on Gucci America, Inc. v. Guess?, Inc., their communications with the Dutch in-house lawyer were privileged even though he was not licensed because they had a reasonable belief that he was their attorney. In Gucci America, Inc., the company’s communications with its in-house counsel, an inactive member of the California bar, were privileged because Gucci proved that it had a reasonable belief the in-house counsel was a licensed attorney. No. 09 Civ. 4373 (S.D.N.Y. Jan. 3, 2011).
The Anwar court rejected defendants’ argument and distinguished the Gucci case:
1. The Dutch in-house lawyer had never been licensed in any jurisdiction, whereas Gucci’s counsel previously was an active member of the California bar.
2. Defendants provided no proof that the lawyer ever held himself out as a licensed attorney or performed tasks, such as appearing in court, that would have suggested he was licensed. Gucci’s counsel routinely appeared in court and before administrative agencies, and Gucci had paid the in-house counsel’s California bar membership fees throughout his tenure.
The court also found important the fact that Dutch in-house lawyers are frequently unlicensed. Dutch law requires the employer of a licensed in-house lawyer to sign a professional charter committing to honor the attorney’s independence. Because defendant never signed the professional charter, defendant could not credibly argue it was reasonably mistaken as to his licensure status. As a result, plaintiff was entitled to discover communications between the defendant’s employees and the Dutch in-house lawyer.”
The import of this to internal investigations is obvious, assuming – and there is no reason not to do so – that the same rule would be applied in the probe context. Internal investigation materials or status reports made to, or filtered through, unlicensed in-house counsel would likely constitute a waiver of that protection and result in unfettered access to the same by enforcement agencies and private party litigants.
The two possible solutions to this problem are equally obvious. An organization can build the proverbial “Chinese wall” around unlicensed in-house counsel, or it can ensure that he or she works at all times under the direction and control of a licensed attorney in order to advance an agency theory for the extension of attorney-client privilege that passes the giggle test.