In re Grand Jury Subpoena: Under Seal
415 F.3d 333 (2005)
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Rule of Law:
For an employee's communication with corporate counsel during an internal investigation to be protected by a personal attorney-client privilege, the employee's subjective belief that counsel represented them personally must be objectively reasonable. Such a belief is generally unreasonable when counsel explicitly states they represent the corporation and that the corporation exclusively controls the privilege.
Facts:
- In March 2001, AOL Time Warner ('AOL') initiated an internal investigation into its business relationship with PurchasePro, Inc., retaining the law firm Wilmer, Cutler & Pickering ('Wilmer Cutler') to assist.
- AOL's general counsel and Wilmer Cutler attorneys interviewed several AOL employees, including Kent Wakeford, John Doe 1, and John Doe 2.
- During the interviews, the attorneys informed the employees: 'We represent the company. These conversations are privileged, but the privilege belongs to the company and the company decides whether to waive it.'
- The attorneys also told the employees they 'could' represent them 'as long as no conflict appeared' or 'until such time as there appears to be a conflict of interest.'
- Attorneys advised Wakeford that he could retain personal counsel at company expense and told John Doe 1 he was free to consult with his own lawyer.
- In November 2001, after the interviews were conducted, the Securities and Exchange Commission ('SEC') began investigating AOL's relationship with PurchasePro.
- In December 2001, AOL and Wakeford, who had by then retained his own counsel, entered into an oral 'common interest agreement' to share information, which they memorialized in writing in January 2002.
Procedural Posture:
- A federal grand jury in the Eastern District of Virginia issued a subpoena to AOL, ordering it to produce memoranda from its internal investigation interviews with the appellants.
- AOL agreed to waive its attorney-client privilege and comply with the subpoena.
- The appellants (Kent Wakeford, John Doe 1, and John Doe 2) filed motions to quash the subpoena in the U.S. District Court, asserting they had individual attorney-client relationships with the investigating attorneys.
- The district court denied the motions for John Doe 1 and John Doe 2, finding they failed to prove they were clients.
- The district court initially granted Wakeford's motion, but on a motion for reconsideration, reversed its decision, finding his common interest agreement was formed after the interviews and he had also failed to establish a personal attorney-client relationship.
- The appellants appealed the district court's denial of their motions to the U.S. Court of Appeals for the Fourth Circuit.
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Issue:
Does an employee establish a personal attorney-client relationship with corporate counsel during an internal investigation, thereby protecting their communications from disclosure, when counsel states they represent the company, that the company controls the privilege, but also that they 'could' represent the employee?
Opinions:
Majority - Judge Wilson
No. An employee does not establish a personal attorney-client relationship with corporate counsel under these circumstances because there is no objectively reasonable basis for the employee to believe they are being personally represented. The court reasoned that the employees' subjective beliefs were not sufficient, as they must be objectively reasonable. Here, several factors made any such belief unreasonable: 1) the attorneys explicitly stated they represented AOL, not the employees; 2) the attorneys clearly warned that the privilege belonged solely to AOL and could be waived by AOL at any time; and 3) the conditional statement that counsel 'can' or 'could' represent the employees is distinct from an affirmative statement that they 'do' represent them. Furthermore, the employees did not seek personal legal advice, nor did counsel provide any. Because no personal attorney-client relationship was formed, the employees could not assert the privilege to prevent AOL from disclosing the interview memoranda.
Analysis:
This case establishes a critical precedent for corporate internal investigations, reinforcing the principle that the attorney-client privilege presumptively belongs to the corporation, not the employee. It highlights the significance of corporate counsel providing clear 'Upjohn warnings' to employees, explicitly stating who the client is and who controls the privilege. The decision makes it significantly harder for employees to later claim a personal privilege to block a corporation's decision to cooperate with government investigators. The court's commentary on the 'watered-down' warnings also serves as a caution to corporate counsel to be unambiguous to avoid creating potential ethical conflicts or grounds for a privilege claim.
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