The U.S. Court of Appeals for the Seventh Circuit ruled March 30 that attorney notes and memoranda generated during the course of an internal investigation are protected from disclosure by the attorney-client privilege and work-product doctrine. The decision by the court in Sandra T.E. v. South Berwyn School District 100, --- F.3d ---, 2010 WL 1191170 (Docket No. 08-3344) , has significant implications (and practical guidance) for organizations seeking to protect the information and results of internal investigations. The opinion confirms that privilege issues need to be considered at the very inception of an internal investigation, and that the protocol used in conducting interviews and communicating the results of an investigation can also shape the scope of available protections in fundamental ways.

In Sandra T.E., a school district retained an outside law firm to conduct an internal investigation in the wake of a teacher's arrest for sexual abuse of students and the filing of a civil lawsuit against the school district by some of the victims. As part of the internal investigation, attorneys interviewed numerous school district employees, both current and former, as well as third parties. The interviews were not recorded, but attorneys took handwritten notes and later prepared written memoranda memorializing the interviews. When attorneys for the civil litigants subpoenaed the notes and memoranda of the law firm, the district court ruled that the law firm had been hired to provide investigative services rather than legal services and that the subpoenaed files were therefore discoverable. On appeal, the Seventh Circuit reversed and held that the attorneys hired to conduct the investigation were acting—at least in part—in their capacities as attorneys and therefore both the attorney-client privilege and the work-product doctrine protected the disclosure of the communications and documents generated during the investigation.

Attorney-Client Privilege

The court found it significant that under the engagement letter, which "should have been the most important piece of evidence" on the issue, the attorneys were hired to "investigate the response of the school administration" and "provide legal services in connection with the specific representation." The court found that the engagement letter therefore brought the case squarely within the Supreme Court's decision in Upjohn v. United States, 449 U.S. 383 (1981), and while the engagement letter itself could not reclassify nonprivileged communications as privileged, the conduct of the attorneys during the investigation confirmed that they were acting in their capacities as attorneys.

In particular, the court emphasized that during the confidential interviews conducted as part of the internal investigation: (i) interviewees were given so-called "Upjohn warnings" which emphasized that the interviewers represented the school board and not the interviewee and that the school board had control over whether the conversations remained privileged; (ii) no third parties attended the interviews; and (iii) the results of the internal investigation were disclosed to the school board in private and privileged settings. The school board had initially received an oral report of the law firm's findings during an executive session and a written executive summary was later provided to the board but marked "Privileged and Confidential," "Attorney-Client Communication" and "Attorney Work Product."

Work-Product Doctrine

Significantly, the court found that the work-product doctrine provided additional protections and an independent source of protection for materials related to the interviews of third parties. The Seventh Circuit held that the witness-interview notes and memoranda were prepared not merely "in anticipation of likely litigation," but "in response to the actual filing of" the civil lawsuit. The opinion also reflects the court's reluctance to allow litigants to circumvent work-product protections of witness interviews and related documents under claims of "substantial need" and the exception set forth in Federal Rule of Civil Procedure 26(b)(3)(A)(ii).

From a practical standpoint, the opinion advises that, depending on the circumstances, the following steps may help increase the likelihood of successfully withstanding a challenge to the applicability of the attorney-client privilege and/or work-product doctrine in the context of internal investigations:

  • Any engagement letter should provide that the representation will involve legal services in conjunction with any investigation;
  • Outside counsel should give Upjohn warnings at the outset of every interview;
  • The interview process should not involve third parties; and
  • Results of the investigation should be disclosed in private and in confidence.

The Seventh Circuit decision is generally consistent with how similar issues have been addressed by other courts, see, e.g., In re Allen, 106 F.3d 582 (4th Cir. 1997) (finding that privilege applied because investigation for which attorney was retained "clearly" was related to the rendition of legal services), although this opinion may prove to be persuasive authority in other jurisdictions because these issues do not always give rise to published appellate opinions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.