Upjohn v. United States

Brief Fact Summary.

The Internal Revenue Service (IRS) (Plaintiff) served summonses on Upjohn (Defendant) requiring production of questionnaires that had been completed by Defendant’s employees at the request of Defendant’s in-house counsel, and of Defendant’s counsel’s notes of interviews of people who had responded to the questionnaire

Synopsis of Rule of Law.

The attorney-client privilege protects corporate employees from having to disclose communications between themselves and in-house counsel regarding matters within the scope of the employee’s corporate duties

Facts.

Upjohn (Defendant), a manufacturer and seller of pharmaceuticals, learned during an audit of one of its foreign subsidiaries that certain payments had been made to foreign government officials in order to secure government business.  Defendant decided to perform an internal investigation.  As part of this investigation, Defendant attorneys prepared a letter including a questionnaire, which was sent to all of Defendant’s foreign “managers.â€Â  This letter indicated that Defendant’s chairman of the board had asked its general counsel to investigate the existence, nature, and magnitude of any payments Defendant made to any foreign employee or foreign government official.  Managers were instructed to keep the investigation confidential and discuss it only with other Upjohn (Defendant) employees on a “need-to-know†basis.  The responses were to be sent directly to Defendant’s general counsel.  As part of the investigation, counsel interviewed the questionnaire recipients in addition to other Defendant employees.  After Defendant filed an 8-K with the SEC detailing certain questionable payments, a copy of which was sent to the IRS (Plaintiff), special agents for the IRS (Plaintiff) began to investigate the tax consequences of the payments.  As part of the IRS (Plaintiff) investigation, Plaintiff issued and served Defendant with a summons that required production of all files related to Defendant’s internal investigation.  Defendant refused to produce its questionnaires and responses, and also its counsel’s notes and memos from their interviews, based on attorney-client and work product privileges.  The district court agreed with Defendant and denied enforcement of the summons.  However, the court of appeals reversed on the grounds that the work product privilege was never available in tax enforcement proceedings and that the attorney-client privilege extended only to communications between corporate counsel and the corporation’s “control group.† A writ of certiorari was issued by the Supreme Court

Issue.

Does the attorney-client privilege protect corporate employees from having to disclose communications between themselves and in-house counsel regarding matters within the scope of the employee’s corporate duties?

Held.

(Rehnquist, J.)  Yes.  The attorney-client privilege does protect corporate employees from having to disclose communications between themselves and in-house counsel regarding matters within the scope of the employee’s corporate duties.  The purpose of the attorney-client privilege is to encourage complete and honest communication between attorneys and their clients.  The protection of the privilege does not apply only to communications between in-house counsel and a corporation’s “control group.â€Â  It rather exists to protect the giving of professional advice to those who can act on it as well as the giving of information to the attorney in order for the attorney to provide sound and knowledgeable advice.  In this case, information was provided by Upjohn’s (Defendant) employees to Defendant’s in-house counsel in order to formulate legal advice about compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation.  The attorney-client privilege therefore protects these communications from compelled disclosure.  In addition, Defendant’s notes and memos of its counsel’s meetings with employees regarding the foreign payoffs were also protected by the attorney work product doctrine.  Under Federal Rule of Civil Procedure 26, the work product doctrine prohibits disclosure, without a strong showing of necessity and unavailability, of the mental impressions, conclusions, and opinions or legal theories of attorneys.  In this case, Upjohn’s (Defendant) counsel’s notes did contain its impressions and conclusions, and the IRS (Plaintiff) could not show sufficient necessity to overcome the privilege because it remained free to interview Defendant employees itself and to obtain the same facts Defendant’s attorneys had recorded in their writings.  Reversed and remanded.

Dissent.

(Burger, C.J.)  The Court should clarify that, as a general rule, a communication is privileged at least when, as in this case, an employee or former employee speaks with an attorney at management’s direction regarding conduct within the scope of employment.  This Court should articulate a standard to govern similar cases and provide guidance to corporations, counsel advising them, and federal courts

Concurrence.

(Burger, C.J.)  The Court should clarify that, as a general rule, a communication is privileged at least when, as in this case, an employee or former employee speaks with an attorney at management’s direction regarding conduct within the scope of employment.  This Court should articulate a standard to govern similar cases and provide guidance to corporations, counsel advising them, and federal courts

Discussion.

The purpose of the attorney-client privilege is to protect the giving of professional advice as well as the giving of information to the attorney to enable the attorney to provide sound and knowledgeable advice.  In the case of an individual client, the provider of information and the person whose actions follow the lawyer’s advice are the same person.  In the corporate context, however, it can be employees at all levels who could have relevant information needed by corporate counsel in order to adequately advise the client.  These communications must be protected from compelled disclosure so as to satisfy the underlying purposes of the attorney-client privilege.  In this case, the work product doctrine also protects counsel’s notes, Federal Rule of Procedure 26.