Correspondence from Bradford Reynolds to Brock

    AFTER .UPJOHN, : THE UNCERTAIN CONFIDENTIALITY

OF NTERNAL IGATIVE N-EEEFEEOIDER ACTIONS

T.

Dennis J. BIock
Elorence M. Fass* $r

Introduction "Corporate Accountabilitv" and the RoIe

A. As a result of the rising emphasis on "corporate
accountability" during the Past decade, public
corporations and their increasingly independent
boaids of directors have become more sensitive to
potential civil and criminal Iiabilities which
*.y result from the existence and nondisclosure
of such Practices as foreign Payments, domestic
politicai contributions, commercial bribery and
other illegal conduct.

B. Liability arises in several contexts:

1. Foreign Corrupt Practices Act, Pub' L' No'
g5-2'li , 9 1 stlt . 1494 (1977 \ , cod if ied in
part as section 13(b)(2) of the Securities
ixchange Act of 1934 (the "Exchange Act"),
15 U.s.C. S78m(b) (2) -

The "voluntary disclosure" program of the
Securities nxihange Commission (the "SEC")
and public disclosure requirements' ry
Repoit of the SecuriEg-E--gnd Exchanse Commis-
sion on Quest

Sess ' ,
6=i3-@ns lo(b), 13(a),
13(b)(2) and 14(a) of the Exchange Act,
15 U.s.C. S578j(b), 78m(a), 78(m)(b)(2) and
78n(a). See alio SEC v. Joseph Schlitz
Brewing co., ffi -suPPffis'1978) ifrofaing that corPoration's nondis-
closure of qu6stionable pa'ments consti.tuted
material omission from issuer's financial and
registration statements and Prgly solici-
iiiio" materials). see gener?1Iv Block and
eirton, @istrati@s to Enforce
the Foreiqn Co

2.

*Denni s
associate,

J. Block is
at the firm

a partner, and Florence M. Fass an
of WeiI, Gotshal & tilanges, New York'

i-

L2L



3.

c.

U. S.

D.

F

Fiduciary dut'y of corPorate of f icers and di-
rectors to manage corPorate affairs and
ascertain nature and scoPe of questionable
.oipotut" behavior. See Burks v' Lasker, 441

u.s. 471 (1s7s) | q-eL]. "- ffi, 418-ffi,9PP'
508 (s.o.N.Y. i iza-tgrarr!@ Arris-charmers
Manuf acturins Co. r'ir-EffCn. @
ffi"directors are entitred to
."iy on the honesty and integrity of their
sub6rdinates until something occurs to put
them on susPicion that something is wrong'
If such occurs and goes unheeded, then lia-
Uifity of the directors might welI follow')

The public corporation confronted with t'his
;;;piicated ariay of regulation, legislation and

.o*ioot 1aw liabifity necessarily seeks Iegal
advice on the issue of compliance, particular}y
,n"i" compliance is hardly an "instinctive

iiiiaa-6tuI"="r. -;;iiea' si.iei cvpsumT6'ffi'
ffi-at

Bothin.houseandoutsidecounse},therefore,
h.r. assumed increasing resPonsibilit'y for the
conduct of special, iniernal investigations when

circumstances indicating Past or potential
iil;;atieties on the pait-of the corporation or
it; eirployees come t'o the attention of senior
managemenl and/or the board of directors'

The subsequent disclosure of counsel's inv6stiga-
iir" finditgs or the mere awareness of the
conduct of iuch an investigation is often the
Ui=i= of various Iit.igations, incl-uding share-
holder class and derivative actions t ctiminal
fioi."utions, and sEc enforcement proceedings.
3"" qenerally Herlihy and Levine, Corpgr?te
ffisiffie-tverseas Pavment Problem, 8 Law &

i6l i Biock
and Blrton, Adminillra'llve Proceedings to Enforce
the Foreiqn C

matter." Upjohn Cq. v. United States' 
-, r6ffiszz,

L22



F. counserrs investigat-ive qeport and its underryingdocumentation not only ofr'ei !1," privite--ritigantor governmentar agency a detailed road-map of theunderlying transaitiois, but such inrormi[i;; ;;;also serve as a so.urce of po:sible ;;b;;;;"smenr,or gvel physical danger, to individuals-iJenti-fied therein. See Diesser fndustries, Inc. v.unig4*.!sg, f-F -7T-7ET-lffig r, sEc@'Tir"r"ta c"-gp.','404 F. supp. 651 
-ro.ffi

G- Therefore, maintaining the confidentiarity ofmateri3ls generated i; the conduct of in-internarinvestigation (or during rouiir," consultation withcounsel concerning corporate conduct) is ofparamount concern to both counser and the corporatecrient- Although investigative materials may besubjecr ro a craim of att6rney-crienr pii"i.r"g"and/or the work-product doctrine, there remainsan uneven and often contradictory application ofthese principles wirhin the settinf';f-;;;;orarelitigation. See Block and Barton, Internal
St" _try.qEig"t ion=' r'{u iniiin ifft#ton-

"- s,

rr. IT"Ff! "f 'upiohn co. v. united states' on confiden-

A. fn recent years, difficult problems have arisen
f?. investigative counsel concerning if," applica_tion of the attorney-crient privileie* and work-product doctrine*" within th; .orpoiit" context.Compare In re Grand Jury Investiqition tSrn Co.-isEilF.=a . Hoqan,

:11:^::!?:"9{:.1ienr.privi1:g" arises where rhere is (1 )LE .P \ I

: ::H::t:i:t?: :?) ,T.g: i: :?.IiEence-(jl l;-;; Jtio,n.y bya person who is or is about to become a c1 ient ( 4 ) for the
ffi::":-:f-:p.:il_in? l"ear. advice rrom-tn.t-"itJri.i r u I
:li:l_ n "=,,:?: ?.:l _ 

e*p'.si_lt 
. "; 

- i";;;;,ili,i rv 
-;;i;:i li' .n"

Supp. gSzmffii"= "l,o3rlr(ttcNaughton rev. l gGl ).
**The work-product doctrine protects materials prepared'in anticioarioi oi-iiligJti"n" iro*-Jiscrosure, absenr ashowing of "substantial ieea, or "unaue hardship, by anopposing party. See Section II, E, infra.

L23



B.

c.

ffi:T962), cert. genreo

L24

3s2 F. 2d 686 ( 1 oth cir. 1?!P ) , -gitl ?i"EE:'tl:P
v. 

-neieaitn, 5ffi .ffT^j:tnffi, ,
ffi;?li*ffi=;.li;;i;lu;a ';"', 

4oo u's' 34

However, in uprohP co' v' unitgd-9!-g!gs.' t'he

s upr eme co u rt -ffima j or 
,-6p-GErilr 

e so r v i ng

certain "onatoi"i=i"" 
i" this lrea when it

;;;;;;t rii u 6roaa aPPrication of the attornev-
client privirEg" i" tire corporate context and

adopted an "*pi"=1"" 
constrlction of the work-

product doctrine'
tuoiohn'Facts

1. When the general counsel for Upjohn was

inf ormed il;i-ont 
-or its f oreign subsidi-

iii"" naa-maae questionable payments to
foreign e";"i"*d"t officials in order to
secure government business' a voluntary'
internal ir""itigation of such payments

was initiated' As Part of this investiga-
;i;", upiohn's geneial counsel --in cooPer-

ation with outside counsel--compiled and sent

I-g";=iionnaire Eo alI foreign managers

seeking i.[iii.a informarion concerning such

Payments, and the resPonses were returned to
the g"n"t.i counsel' -in" general :?":::l-:"u
outside co"'sef also interviewed the rec:'p-
ients"f-tnt-!t.."=tionnaireandothercompany
officers and emPloYees'

2. Subsequently, based on an 8-K rePort submit-
ted to the SEC by Upjohn disclosing the
g""=tioniUfe payirenls' the Internal Revenue

service irns )- b-egan an investigation to

rrhe avairabirity of . 
the -Pri:11",g,:. ::^t::.:::n::':::?v. Louis-

sE cri".t-i" .yili::?i:::i;lea',.?"i.ffi, "tffir; naffiT
?ti, !' l'I ! " 

ii' fi : . li i it:i 
-:: 

: 
I 

^'. 
::.Y ;ffiS' l : )l Rad I an t

Burners, rnc. v' o*"t,'"g,,=#==oi=":l*ii?Er.l)'- t 'ib ffinffi"Ii. erl



I

I

I

3.

4.

5.

determine the tax conseguences of such
payments. The IRS issued a summons pursuant
to 26 U.S.C. S7602 demanding production of,
inter aIia, the questionnaires and the
memoranda and notes of the interviews.
Upjohn refused to produce the documents
on the grounds that they were protected
from disclosure by the attorney-client
privilege and constituted the work-product of
attorneys, prepared in anticipation of
1 it igat ion.

The Government then filed a petition in
Federal District Court seeking enforce-
ment of the summons. That court adopted
the I'lagistrate's recommendation that the
summons should be enforced. The Magistrate
had concluded, inter aIia, that the attorney-
client privilege had been waived and that the
Government had made a sufficient showing of
substantial need or undue hardship to over-
come the protection of the work-product
doctrine.

The Court of Appeals for the Sixth Cir-
cuit rejected the Magistraters finding of
a waiver of the attorney-client privilege,
but held that under the so-ca1led
"control group" test, the privilege did
not apply "ttlo the extent the communi-
cations $rere made by off icers and agents
not responsible for directing [Upjohnrsl
actions in response to lega1 advice
for the simple reason that the communica-
tions were not the 'client's. '' 500 F.2d
at 1255. That court also held that the
work-product doctrine did not aPply to IRS
summonses.

The Supreme Court rejected the "control
group" approach and found no requisite need
or hardship for overcoming the work product
claim. The Court thereby took a major steP
toward resolving the controversy over the
scope of the attorney-client privilege and
significantly extended the work-product
doctine as applied in the corporate context.

125



D. Defini the Sco of of the Attorne Iient Privil

cr.

Prior to Upiohn, there existed a conflict
among tne-ffiits as to which communications
were properly subject to a claim of privilege
by a corPoration.

Under the "control group" test applied by
the Third and Sixth Circuits, the corPora-
tion could claim the privilege only when
the corPorate agent making the communica-
tion to counsel $ras a member of management
with authority to make decisions on the
matter in question. In re Grand Jury
Investieation, 599 F.2d 1224 (3d Cir.
@ v. t]lited st+!e9l-690
F. 3d t 2ffi cIr. 197 9) , rev'd 1 o 1 s.
677 (1981).*

3. The "subject matter" test applied by the
Seventh lnd Eighth Circuits extended the
privilege to communications made by a-corporate employee when such communications
*ere made at tha direction of the employee's
superiors, and where the subject matter re-
Iated to the performance of the employee's
duties. Harper & Row Publ-lshs!erlc'
". 

--oE.x" o l,
af f 'ffiFcuriam by an eoually divided

fn-au-elfige, Inc. v. Mere9ith ! 572 F'2d
ffi978) -(gg banc).

Although the Supreme Court expressly
rejected the "control groug" test, it

"p6.ifically 
declined to "draft a set of

*This approach was aptly criticized as inhibiting oPen
communications between corpoiate PerSonnel and counsel, since
it excluded from the ambit of privilege any communication
from employees who might have essential information on a

matter under inquiry, but who nevertheless were not decision-
makers. Weinsclielr-Corporatg EmPIoYeg Intgrview9 ald th*-^
l-I'i"i"."-cii""i Pil" :Rev' 873
(1970).

1.

2.

4.

126



ns
9e

rules! to govern the application of Lheprivilese in alt _inst;;;;;. However,while the Court fail"d a; explicitlv
I:!"r t? .u.y express "resr;;-;;;'iil.or"stressed by the-Court inJicate an implicit
:::::::'':l:-"f .1. *-?.9 iiuerar-;;";;5;;tmatter" test.* See Weinstei"-."a-;;i;;r,

i ri;i9 t- so.i_ ( ;;; ;;."
supra. .

in.

*:.;:rl-:f?^3Ill.?lv_"1ienr privilese may
:::"::-:BP1-i"?br: r'' "-;i;;; i;;;;::;'ffi:I":I_pl?g::._9::rrine *it ;;";;;;;i;;; jiE".o

::^:::I:-5Ga ?Y counseri; ;;;-;;;;"5'5f
B::p:::rion_for possibre litigaii;;:;Hickman v. TaylTayLor, 329 u.s. qi5, 505 (.1 947 ) .

l.

2. The protection offered under the work-productdoctrine is substantiati;-i;=="ir.,Ii'i;:.
afforded under the uttoii"y_client privilege,since the claim. of *uo.1-fioduct can beovercome by a-show-ing of ',substantiai neea"or "undue hardlhip" 6n the part of an opposingparty. See F9d. R. civ. p. 2eiuligI".ia Fed.R. crim.E 16(u)(2): --

The, Upiohn decision broadened the work-productdoctrine in rwo respects. rir"l', i[.^c5;;;"..recognized that the doctrine may be applied

3.

lSIi;,:l: !:,::_l:u?f. u privilese exisred where rhe::y::il::i:: :, :1, *: ":: i I l*-; ;:_ ;i9 
s 

- 
uv 

^;;; 1n ;:;;'.;Sioyee s;:: iil"l');;:::i::?. ;:" :;:1, Ii in"'iIE.i,.j"S.:Bl:"1";Tir:I;i:"for the corporationi t (2!vr LrrE serporacl0n" i (2 ) had been made "at trr.-JiiJction ofcorporate superiors"; (3 ) ,con<-err..' i ^--J:#5as^ --.! !L r . .:.j:1,--":,:::::,rle, marters *i tr,i.-iil"=Iip.
31. :: " 

" 
;[E l:I:::, .,'::r: ":: - F ii:: t;: ( i;';;:;.*: ::,1'";ii";:::

":::: :xlf':;':":1r-::?a: - 
;;,;-i!;; ;";;' ox'ii5"n;::i'5l3j"{i?;::: :H:,j!:":"in::ti:":^:::11_:?!ii; il;:i ffi;::?l"3.u'n,r,

*:;1".::; ;;::l i:,' l-l; iii :::i : g:. i ;;i: .'"il :: "*";::' :;; 

" 

ili. lkept conf idenr i ar uv 
- tr,i Jompany. ,, , o 

.' '31".[]"il 
;SB .

-- However, the Court gavetaetors must be satisfied in
no indication as toorder to invoke the

whether aII
privilege.

t.
,IJ
,t*

L27



I

1n
1S

circumstances where'anticipated Iitigation"
no more than a remote PossibilitY.

The Uplohn investigation was conducted at
a tifre-*En no litigation or governmental
investigation 'rras pendi.g, nor did th9
company have reason to believe that the
government or any other private litigant
was aware of the facts which would Pro-
vide the basis for future litigation.

The Court thus may have felt that t'he
prosPect of litigation was inevitable in
iny nquestionable payments" investigation,
paitiCularly where close governmental

(i)

(ii)

(iii)

icrutiny of- such corPorate practices was

at

Since this issue was not raised by the
Government in Upiohn*, that opinion
should not Ue c ered the definitive
interpretation of the "in anticipation
of litigation" question.

9 F.

4. Second' the Upiohn opinion expanded the protec-
tion of tfre Gffiroduct doctrine by strength-
ening the requirements of "substant'iaI need"
and iundue hirdship" necessary to overcome the
doctr ine.

The Uprohn materials included documen-
tation gathered from the parent cor-
poratioi's international offices and
'suUsidiaries. The Government thus argued

(i)

*The Government did not argue that the materials had not
been prepared-in anticipation oi Iitigation, rather it argued
that if the materials constituted work-product, the Government
had made a sufficient showing of "need' to overcome the
qualified protection under the doctrine'

raFTurv -nvestiqation (Sun
99 F.2d at 1224.

L28

ena
;Inre



Er

that it could not obtain the equivalent
information wit.hout "undue hardship."
Nevertheless, the Supreme Court held
that a greater demonstration of need and
hardship would be required in order to
compel production.

(ii) The Upiohn Court did not sPecifically
indicate what showing of need would
be required; nevertheless, it did decide
that 'a far stronger showing of neces-
sity and unavailability" than that found
by the Magistrate below would be re-
qu ired. *

5. The effects of the Upjohn decision on the
work-product doctrine thus can be seen
as both expanding the scoPe of the doctrine
(i.e., to incl-ude materials generated during
investigations conducted without immediate
anticipation of litigation) and strengthening
the showing of need and hardship necessary to
overcome the protection offered.

Related Issues

1.
s

'-t

#
H
ffi

li':
+l

h
r
F
[r

*.

r

Although the Upjohn decision commenced with
an unusual disclaimer that might be viewed by
some as supporting a narrow interpretation of
that opinionr** Upjohn nevertheless must be
viewed as a decision of significant impact
not only in the area it sPecifically addressed

*Moreover, the Court noted that some
that no showing of need or hardship would
the dGtrine when based on oral statements
citing In re Grand Jury Proceedings, 473 F
1973) and In re Grand Jury Investiqation,
(E.D.Pa.m

courts have concluded
suffice to overcome
from witnesses,

.2d 840 (Bth Cir.
4'12 F. Supp. 943

**Thus, Justice William Rehnquist cautioned,

"[W]e sit to decide concrete cases and not abstract
propositions of law. We decline to lay down a
broad rule or series of rules to govern all
conceivable future questions in this area [of the
attorney-client privilege and work-product doctrinel
even were we able to do so.'101 S. Ct. at 681.

L29

II{

i
I



2.

(i.e., the scope of the privilege), but also
in other related areas (i.e., the role of
in-house and outside counsel; communications
with former employees; and, waiver of the
privilege ) .

The Role of In-house and Outside Counsel

a. The investigation in Up'iohn was
conducted by both in-house and
outside counsel. Nevertheless, the
Court found all communications at,
issue 'were maa-e by [corporate]
employees to Icorporate] counse]...
acting as such.. . in order to secure
lega1 advice...'* 101 S. Ct. at 585.

In the past, privilege problems have
arisen where in-house, rather than
outside, counsel have either initiated
an internal investigation or cooperated
with outside counsel in the conduct
of that investigation. Compare, In
re Grand Jurv Subpoena (John Doe, Inc. )
599 F.2d 504 (2d Cir. 1979)i In re
Franklin National Bank SecuriEGF

.N.Y.

b.

1978), with Diversified Industries, Inc.
v. t'tered'IEE', )(et b.*).**.
Since the Court
without analysis

in Upjohn accepted
the lower court's

*The Court's observation reiterates the well-established
principle that communications between client and counsel will
be privileged only where the attorney is acting in a legal
capacity, and not where counsel functions as a factual
investigator or businessman. See cenerally McCormick, Evi-
dence, S88 (2d ed. 1972).

**Problems also arise where special counsel is appointed
in conjunction with a consent decree. SEC v. Canadian Javeli11,
Ltd., 451 F. Supp. 594 (D.D.C. 1978); q=qerq"SX@
E?lustries, 79 r.n.p. 47 (N.D. Ga. 197f

130



d.

finding that Upjohn's in-house counsel
eras _acting in a. Iega1 capacity whil;--conducting the investigalionr-it did notaddress the salient isiue of what factorsare to be weighed in determining if th;underlying purpose of the invesfigiti"nis to procure 1egaI rather than bisinessadvice. Therefore, it can be anticipiteathat courts wilI continue to upprou.i,this issue on a case-by-case Uaiis. See
E. q. , Burlinqton Indgslries v. a;;;. :''
corp. r lglff
Nevertheless, Upjohn can be read toconfirm the ali@-generally acceptedprinciple that communicationl with in-house counsel, who serves the .o.!oi.tionin both a legaI and management calacity(*L., general counsel ana vice-pieiijlntlwiI] be privileged where that utio.ney-isacting as such.* See e.g., In re
lTV =segu5i! 

ies r,i tfG'cl oiT iEEErerulnderl Fed. Sec. L. Rep. (CCH) 1 97,969at 90,984 (N.D. Tex. t gBt ); eurlinqton
l4ys!rl-, s.E, 5s F.R.D.-ffi,-
CTGE-fr,o" @, g8, Be F.

v. Radiocgrp. 9f ameri@sz, M(D. DeI. 195A) t Natta v. Hg.qan,, 392 F.2d685 (1Oth Cir. 19'6El , nerffi, rnc. v.g#gl_qorp.-, 434 F. suffir.
t9tl); ttjrsso v. Retail Credit Co., 5gF.R.D.W(e.D.ffi

*Moreover, although the Upjohn decision did not address the
::=::., ?f _th:!l:r comiunicat:. rom-;;;;;"i-;"";;.-;ii;;;,as well as communications from tE'ilfIenuuuurlrcdrrons f rom Ene cI lent to counsel, are
?1:9 protected by rhe privTi$eldiE[*- in rhe upiohn ooi, dictumJn the Upjohn opinion

:"y"n*:::-i?". fr?Tr os ,err as ro, 
"ouni"i 

-;;;'p;i;iresed.
, 
-."t -"irI' ir,i ^iiiii"

Cf tlrafoceinn-'t i,l".i ^^ L^ !L^-- --L - .i"-"ffithe giving of ntormatlon to ts..E y^v.rry (rr r.rrr.,rrnaE,ron E,o tne lawyer...,' (Emphasisadded). 101 S. ct. ar 683._-!sg o"r,Liif f r, z'weinsteiD. LE. aE. ouJ. See generallyr 2 Weinstein,sEvidence 11 5-3(b) t031, pp. soF0-gti-dtases cited therein

131

ted therein.

,f

t
{
.N

t

4,

t,

t
1;

ii



3.

cl .

b.

c.

4. Waiver

a.

Communicatio4s with Former_Emp@,

The Up'iohn decision noted, but did not
decide, the issue of whether the attorney-
client privilege also applies to communi-
cations with former corporate employees,
concerning act-ivities which arose during
their employment. 101 S. Ct. at 586 n.6.

However, Chief Justice Burgerrs concur-
ring opinion in Upiohn would seem to
indicate that communications with former
employees are also covered by the privi-
lege.

'[A] communication is privileged at least
whenr dS herer BD employee or former
emplovee speais at tlre directi6ffitne
managenrent with an attorney regarding
conduct or proposed conduct within the
scope of employment.' (EmPhasis added)
101 S. Ct. at 689. See also United
Srares v. Lipsky t19TF2rex@(ccn)
!t9-62E; p. 86,218 (N.D. rex. 1979); Duplan
Corp. v. Deerinq Milliken, I[r9., 397 F.
Supp. 1146;116s-57 (D.S.c. 1974).

ttoreover, logic dictates that former
employees are just as aPt as current
employees to possess information neces-
saiy to adequately advise the corporation
on matters which arose during the term of
prior employment.

GeneralIy, any disclosure of otherwise
confidential communications constitutes
a waiver not only of that communication,
but of aII communications relating to
the same subject matter. See qenerallv
8 Wigmore, gvidence 52327 ;T-cc6rmfEk,-
Evidence S93. Moreover, disclosure to
one a party will generally warrant

L32



i
I

r
-lre

it
,a.',

F.
E\
m

i;
D*l
I}.

ffi

b.

disclosure to any other third Party
seeking the confidential material.*

The law is unclear on whet.her a cor-
poration's voluntary disclosure of other-
wise confidential material to a govern-
ment agency will constitute a waiver of
all related communications for alI
purposes, including parallel and subse-
quent private damage actions.

Some courts have recently recogn :-zed that
a corporation's cooperative disclosures
to a governmental agency should not con-
stituie a general waiver of all communi-
cations wi[fr respect to a 9iI6 subject,
since a finding of waiver would necessa-
rily discourage cooperation between the
corporation and the governmental agency.
See Diversified Industries, Inc- v.
f"r" (holding
Effit corpoEEfon's voluntary disclosure
to SEC oi internal rePort on questionable
payments did not constitute waiver when
ieport was sought by third-party Iitigants)
aclord Fyrnes v. IDS B99ltv-Trustl 85.
Fffi m9re.D.N.Y.-- 980; rn re Grand
Jurv Subpoena (lti]I9r Beer), 47 I F. SuPP'
368-lE .D. wi s. 1 e7 9 ) .

I

I
I

i

I

,l
I

:i
I

;i
ii

!

I

,l

,l

I

.I

*The Freedom of Information Act ( "FOIA" ) also enables
third parties to obtain disclosure of records obtained
by a governmental agency from investigative targets, unless
sirch iecords fall withi-n one of nine sPecified exemPtions'
5 U.S.c. s 552 eL Seq. (1974). However, agencies in. certain
instances may dEclG even exempt materials. Chrvsler Corp'
v. Brown, 441 U.S.281 (1979).

several agencies have attempted to balance the public
interest in op6r,t,"=s under the fOfa with a corPoration's
interest in miittuining the confidentiality of investigative
files. see 4O C.F.R. Sz.tt9 (Environmental Protection
egency)tT C.F.R. S20.82 (Food and Drug Administrat-ion); FTC

rirproiements Act of 1980, Pub. L. 96-252i s= 31:o :ECprlposed Rule 24a-1 (Release No. 33-6295), 46 Fed. Reg.
15,176 (March 4, 1 981 ).

133



However, other courts have concluded that
any prospective decline in the leve1 of
voluntary cooperation with governmental
authorities was alone 'an inadequate
basis for a court to break new legal
ground against the overwhelming weight
of authority" by holding the waiver of
the privilege to be limited. In re
Penn Central Commercial Paper I. Gat,ion,

see also In re Weiss, 596 F.2d 1185 (4th
ffi. -Tfr9T-fETaTr--waiver of privilege
before governmental agency constituted
waiver of same material sought in subse-
quent grand jury investigation).*

Although the Upiohn opinion did not
specifically EEEress the waiver question,
that issue vras clearly raised by the
Government. By refusing to accept, the
Government's strongly asserted position
that Upjohn's disclosures to the SEC and
IRS*r tonstituted a general waiver of
all comrnunications on the subject, the
Court may be viewed as endorsing, sub
silentio, the more Iiberal approach to
IFffier issue in cases of voluntarY

*Of course, the corporation is free to waive the privi-
Iege where it determines that such waiver is in the best
in[,erests of the corporation. In those instances where
directors of the corporation are accused of wrongdoing, an
assessment of the Uest interests of the corporation can be
made by a group of independent directors. see Block and
Barton, tnternil Corporate t nve?! +gat +on:: -ffiintaininq !h9
Confiaen cations.witngl' It is

t the privilegg belongs to the corPor-
ate entity and not to any individual officer, director or
employee. Therefore, only the entity may invoke or waive the
privilege.

**upjohn discl0sed to the sEc and the IRS, not only the
factual iinaings of the internal investigation, Put also
the identities of the corporate PerSonnel interviewed.

d.

a

134

l

rltri



disclosure. *
col. 3.

See Pittr supEdr at p. 21,

+

G. fntention of tU ohnr to Eliminate Uncertaint
1. Whatever uncertainty may exist as to theextent to which the Uoi_"hn, decision may beapelied to related i#ues within the contextof the atrorney-client privilege ;;; work_product doctriner** theie is n5 doubt thatthg explicit intent of the Supreme iourt inUpiohn was to provide corporate counsel andtheir clients with some d6gree of certaintythat materi.als generated drlring i"""=tiga_'tions for the_purpose of seekiig-l-efar advicewill be privileged prospectivelf. '

"_tTlf the purpose of the attorney-client privilege is to be servedl theattorney and client must be able topredict with some degree of certaintywhether particular discussions wifi 6eprotected. An uncertain privileqe, or
"in 6utresults !n wiaet ns

Evidence s 93. -5oo F.2d at 1227, n.12.
**See Glekel, t

Client-Eivileqe'ai

courts, is 1lttle bettEE-Ean no

ohnr Effect on Application of Attornework-product poffi

*The court.of Appeals for the sixth circuit found thatthe corporation t s voluntary disclosur"" t" the sEc amountedto a waiver of th: prlvirege only with respecr to the factsactually discloseg, ..i!i.g-unitei sJ.tes-vI-e..; E; F.2d 142(8th cir' 1972)i united sI@, 322 F.2d 460, 46rI?!n^!i''.:?!?r, ; io; ;:;; ii:, 63e(2d cir. 1e62t, ffielrffii,-iigi:ii i", v.F-Eb: 1g_ (o.-o"i. i geel i 
-r,ricffii;k,

Tli". orn =5"ri'eJ-irul, " i.nlrffi, P. 1, coI. 2;-T1tt, e 'Upiohn' Decision:
, Feb.

tTo
!
T

fl
FI

f;
E
g

,I
H

it'

I
I

rtvtreqe at al.]. "
101 s. ct:-;E--6tI.

imi;ffi

135

ot Washington, Jan. 26,



The Court founded its decision on t'he

il;p;;;-"r-tt"-iIl"ii"g".'to encourase furr
and frank "o*iu-nicatioi 

bet'ween attorneys and

their clients.':-:; 101 s'ct' at 682' rt
re'iected the icontrol groupn !9:t Uec1111^it
;;i;;;;;t;;; this PurPose bY "discour3?"9
the colnmuni""ii"n '"f ieteva-nt informacion by

"^pf"V""" 
of the client to attorneys" '

101 s: ct. at 684.

The Court also concluded that a narrow
i".ai"g of th; privilege would discourage a

corporate "riI"[;= ""*p]iance 
with the Iaw'

:;;II-;;;";;i';-advice- is "rrequentrv ' " '
more significant to noncontrol grouP members

than to tnose-wtro-of f iciallv sanction the

advice, and ifre'-controf gtoi'g test-mak3s it'
more diffi"uii-tJ-conrey'furi and frank legal
advice to tr,e-emproy".=.who will PY! into
effect the .ii""l-c6rporation's policy'"
101 S. Ct. at 684'

Finallyr the Court found that since members

of the ""ontrJi-gioup" can vary according to
the issue before the "otpotuti6n' 

aPPIicat'ion
of the standird is extremely.unp5edictable
and subject l"-"a-n"t determination only
af ter litigatiofr-iETommenced' It was this
very ,r,..t."i;t; inlt. the court sought to
eliminate "=-ui'i"ninition 

on the full and

free interchange between ittotnty and counsel'

2.

3.

4.

1n
III.

A. rhe certainty created bv the lipjq!!^u::tsion
is }argelv irr;;;;t,-si-nce otffie privileged
conmunications between counsel and their corporate

clients contii,,I-';-il aiscovErea by third parties
within the .otI""[-"f shareholder actions' even

after UP'iohn.

rn rhe readins case of-9?rner v' q?lfllotti"Il-430
ilzJ- iogr (sti ;i;: i"ffi ;t? E3'
*,;ir

B.

r36