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Pitfalls of Inner Investigations: Supreme Court docket Enchantment Highlights Perils of Reliance on Consulting Companies | Snell & Wilmer

With the ever-increasingly advanced regulatory setting in america, making certain company compliance is neither cheap nor simple. Given these difficulties, when the necessity to conduct an inside investigation arises, it’s tempting to view consulting companies as a protected and financially sound choice. Though consulting companies do present experience in area of interest space, america Supreme Court docket has just lately indicated selecting the financially expedient choice can result in untenably dangerous publicity. Whereas most legal professional communications happen underneath the safety of attorney-client privilege or an legal professional’s investigation underneath the work product privilege, communications with consultants don’t get pleasure from any related protections from disclosure.

It has lengthy been black-letter legislation that communications with firm attorneys throughout inside investigations are shielded from disclosure by attorney-client privilege.1 However what about “dual-use data”—paperwork and communications made for causes not strictly restricted to authorized recommendation? Whether or not such data are protected by the privilege lies on the coronary heart of the attraction just lately taken up by the Supreme Court docket in In re Grand Jury.two On this dispute, grand jury subpoenas have been issued to an organization and a legislation agency looking for data that contained each authorized and tax recommendation.3

The targets of the subpoena withheld among the requested data on the idea of privilege, however the Ninth Circuit Court docket of Appeals in the end rejected these assertions.4 The Court docket defined {that a} “Major Function” check is used to research whether or not dual-use data are privileged.5 That’s, dual-use data will probably be shielded from manufacturing if “the first objective of the communication is to present or obtain authorized recommendation” versus merely enterprise recommendation.6 Once more, that is separate from the legal professional work product privilege, which permits attorneys to analyze a matter with out their deliberations (eg, the scope of “who, what, and why” as part of the investigation) having to be disclosed.

In re Grand Jury marks a stark departure from prior appellate instances addressing assertions of privilege for dual-purpose data. Beforehand, in In re Kellogg Brown & Root, Inc., the District of Columbia Circuit Court docket of Appeals held that dual-purpose data are privileged if acquiring or offering authorized recommendation was “one of many vital functions of the communication.”7 Underneath this check, District of Columbia Circuit courts inquire whether or not one of many functions of the file was to offer authorized recommendation. In distinction to the Ninth Circuit check, whether or not data have been created for a selected main objective is just not related to an assertion of privilege.8

At first blush, these instances may appear to be nothing greater than authorized minutia far afield from day-to-day operations or company compliance. On nearer examination, nonetheless, they reveal an vital lesson. Within the present regulatory setting, the road between authorized and enterprise recommendation can blur. As these instances reveal, paperwork containing an legal professional’s authorized recommendation are protected against disclosure and so they may get pleasure from safety even when they embody different issues.

However absent legal professional involvement, communications with outdoors consultants (besides in assist and underneath the supervision of an legal professional) by no means benefit from the protections of the privilege no matter their objective. Certainly, In re Kellogg explicitly famous that communications by and to non-attorneys could also be protected, however solely when working on the course of attorneys.9 Whether or not or not it’s for inside investigations or for another secondary objective, these instances are a warning signal of the perils of non-attorney led compliance issues.

With financial uncertainties on the horizon, it’s tempting to show to consultants for a inexpensive choice on the subject of advising on, or investigating, compliance obligations. However, there’s an inherent danger of counting on consulting companies alone an non-disclosure agreements don’t present safety. With out an legal professional’s involvement, the data generated by a guide is probably not privileged and end in publicity to critical legal responsibility and (attainable) embarrassment. Accordingly, earlier than appearing on the idea that consultants are the financially expedient choice, contemplate the doubtless critical publicity it might result in and the long-term goal of the evaluate of investigation. Particularly when the unintended destructive determinations usually are not topic to the attorney-client privilege to permit the corporate the chance to handle the issue with sound authorized recommendation.


  1. See Upjohn Co. v. United States, 449 US 383, 395, (1981).

  2. See In re Grand Jury, 23 F.4th 1088, 1091 (ninth Cir. 2021), cert. granted sub nom. In re Jury, 21-1397, 2022 WL 4651237 (US Oct. 3, 2022)

  3. See id. at 1090.

  4. See id. at 1094.

  5. See id.

  6. See id. at 1091.

  7. See In Re Kellogg Brown & Root, Inc., 756 F.3d 754, 759–60 (DC Cir. 2014)

  8. The Seventh Circuit Court docket of Appeals additionally weighed in on this subject and held that dual-purpose data are by no means protected by the privilege. United States v. Frederick, 182 F.3d 496, 501 (seventh Cir. 1999).

  9. See In Re Kellogg, 756 F.3d at 757.

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