Ethical Issues Facing In-House Counsel in Cross-Border EnvironmentsJune 18, 2015Who we are

Karl DialEli BurrisCasey MoorePresenters:

3Attorney-Client PrivilegePrivilege in the United StatesPrivileges exist to encourage the disclosure of information without fear that it will be used against you unfairlyTwo primary privilegesAttorney-client privilegeWork product

5Privilege in the United StatesAttorney-Client PrivilegeOldest privilege for confidential communications known to the common lawKey elements:CommunicationWhere a primary purpose of the communication is in furtherance of legal advice of assistanceExpectation of confidentiality with confidentiality preserved.Client holds the privilegeSomewhere between mere presence of legal issue and sole purpose: The mere presence of a legal issue relating to the communication is insufficient to render the communication privileged, but legal advice also does not have to be the sole purpose of the communication

6Work Product Doctrine7PROTECTS DISCLOSURE OF LAWYERS WORK AND MENTAL IMPRESSIONS IN ANTICIPATION OF LITIGATIONPROTECTS MATERIALS PREPARED BY CLIENT AT LAWYERS DIRECTIONCAN PROTECT INTERNAL INVESTIGATIONSWORK PRODUCT DOCTRINE PROTECTS DISCUSSION WITH CERTAIN AGENTS, SUCH AS EXPERTS, ACCOUNTANTS, ETC. IN CERTAIN CIRCUMSTANCESWork Product DoctrineWork Product DoctrineBroader protection than attorney-client privilege, but more easily piercedProtects documents prepared in anticipation of litigationProtects the mental processes of the attorneyWas the document prepared or obtained because of the prospect of litigation by or for a party, or by or for the partys representative? Beware:Courts will determine when litigation reasonably could have been anticipatedOften that date triggers the obligation to institute a legal hold8Attorney-Client Privilege Around the World

Attorney-client privilege for outside and in-house counselNo attorney-client privilege for in-house counselNo or very limited attorney-client privilege9Attorney-Client: EUAll member states in the EU recognize some form of attorney-client privilege, but more often Legal Professional Privilege (LPP)Belgium, Cyprus, Greece, Ireland, Malta, Netherlands, Norway, Portugal and the UK are the only specific EU jurisdictions where in-house counsel is routinely protected

10Select EU Member States11China and JapanChinaNo privilege under the laws of the PRC.There is no attorney work-product protection and there is no protection of communications between lawyers and clients on the basis of legal professional privilege in China

JapanConfidentiality is a basic obligation of lawyersLawyers may refuse to answer questions or produce documents the lawyer come to know or possess in the course of the work for the client.Concept applies to in-house counselU.S. courts frequently recognize the privilege

12Choice of Law US courts apply the touch base testIf a communication originates in a foreign country and attachment of the privilege depends on the laws of that country, the foreign countrys law appliesIf communications touch base with the United States, U.S. privilege law appliesTouch base test:Courts consider several factors in determining whether communications that touch base with the United States are protected by the attorney-client privilegeOne critical factor is that the privilege has been claimed and not waivedWillemijn Houdstermaatschaapij Bv v. Apollo Computer, Inc., 707 F. Supp.1429, 1448 (D. Del. 1989).

13International Discovery IssuesInternational Discovery for U.S. Litigation . . . Consider:U.S. document preservation rules v. EU data protection rulesChallenges of cross border discoveryFrench Blocking Statute / Hague Convention How they affect evidence gathering for U.S. litigation Practical suggestions for collecting, reviewing and disclosing EU data in U.S. litigationDiscovery includes all manner of electronically stored information (ESI)

15International Discovery for U.S. LitigationU.S. litigants may request data that exists outside the U.S.U.S. courts frequently order discovery of information located outside the U.S.Disclosure may be prohibited by the laws of another countryNeed to understand implication of non-U.S. Data protection laws, employment law, privacy rights, blocking statutes and international treatiesCan place a multi-national organization between a rock and a hard place

16What about the Cloud?Answer: No single answercontinues to changeIn cloud, data locations are not necessarily known; servers may be in many locationsData are often in many places simultaneously; many countries may claim their laws applyOlder agreements may be obsolete

17Discovery for U.S. Litigation Involving EU DataIn 1995, the European Parliament passed Directive 95/46/EC on the Protection of Individuals with Regard to the Processing of Personal Data and on the Free Movement of Such Data (the Directive or the Privacy Directive).In 2012, the General Data Protection Regulation was proposed, taking into consideration globalization and cloud computing (to be adopted in 20152016)Also applies to organizations based outside the EU if they process personal data of EU residents

18Proposed Solutions: The Sedona ConferenceSedona Conference Three-prong approach:Provide safeguards to protected data by stipulations and court orders Permit a reasonable timetable to ensure adequate processing and transfer of protected data, andEstablish a reasonable methodology to be applied for the processing and transfer of protected data

The Sedona Conference Framework for Analysis of Cross-Border Discovery Conflicts (2008) (available at www.thesedonaconference.org)Sedona Conference: International Principles on Discovery, Disclosure & Data Protection: Best Practices, Recommendations & Principles for Addressing the Preservation Discovery of Protected Data in U.S. Litigation (EU Edition) (12/2011)

19Recent International Discovery NewsVera v. Republic of CubaSpanish bank ordered to inquire about account information for all branches, within and without New York State, Relevant to a third-partys execution on judgments against the Republic of CubaCourt held that registering with/obtaining license from New York Department of Financial Services = consent to general jurisdiction in New York However, it may be the exception for a New York branch of a foreign financial institution to have direct electronic access to overseas account information

DLA Piper Insights 29 APR 2015 https://www.dlapiper.com/en/us/insights/publications/2015/04/new-york-court-orders-worldwide-discovery/Vera v. Republic of Cuba, 40 F. Supp. 3d 367, 369 (S.D.N.Y. 2014)

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Proactive Steps: Pre-LitigationBroad policy addressing employee privacy expectationssuch as: Work e-mail may be subject to preservation/collection in litigation Personal communications prohibited on work e-mailAccess to personal email prohibited on work computerDocument retention policies limiting time for retaining ESILimit access to certain foreign data not needed by U.S. entities Coordination between EU employees handling privacy obligations and legal department overseeing U.S. litigation21Internal InvestigationsWhy an internal investigation?Fiduciary duty to monitor and correct criminal misconductAvoid indictments or reduce sanctionsGovernment views of internal investigations as cooperationMay be required (e.g., Sarbanes-Oxley Act)Compliance functionObtain facts for threatened litigationIndependent internal investigations may be more successful

23What to Do Possibility of ImproprietyPrimary duty make a reasonable inquiry to determine if a credible basis for the allegation existsBegin by talking with the whistleblower (if known)Notify internal auditor, outside auditor, CEO, audit committeeDoes the investigation have a valid purpose (not politics)Decide whether to use in-house or outside counsel to investigateIf committee formed remind members that they may retain their own counsel

24Texas Rules of Professional Conduct1.06 Conflict of Interest cannot be materially and directly adverse to a client if it involves a substantially related matter OR if it reasonably appears representation will be adversely limited1.12 Organization as Client represent the entityMust take reasonable remedial actions when a person associated with the organization has violated legal obligation to the organization4.01 Truthfulness in Statements to Others No false statement or fail to disclose material fact4.03 Dealing with Unrepresented Persons Lawyer shall not state/imply that he/she is disinterestedSEC Rule 205.3(a) Lawyer owes duty to organizationAdvising D&Os/employees in course of representing issuer does not make them clients

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Upjohn Warning (Corporate Miranda Warning)Attorney represents the company, not any employeeThe A-C privilege applies to the interviews and the company reserves the right to decide what to revealThe fact that the conversation is privileged does not mean that what was said/done is protectedThe company wants the employee to keep the interview confidentialExcept not from regulators/SEC26

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Common Employee QuestionsBe Prepared to Answer these common questions:What are the consequences if I do not participate?Can I have another employee/union rep attend? Do I need my own lawyer?Where can I find a lawyer? Can I have time to find a lawyer?Will the company pay for my lawyer?

Sarah Helene Duggin, Internal Corporate Investigations: Legal Ethics, Professionalism and the Employee Interview, 2003 Colum. Bus. L. Rev. 859 (2003). 28Maintaining Privilege in InvestigationsUpjohn employee questionnaires sent to counsel + notes of contents were attorney-client privilegedKBR/Halliburton investigators interviews with employees & report to counsel:DC Cir.: privilege applies if a significant purpose of investigation was to obtain legal adviceDist. Ct. on remand: Investigators factual summaries are not attorney-client privilegedWork product: Rule 26(b) allows discovery of fact work product if substantial need shown Ordered substantial portions of the report produced

Upjohn Co v. United States 449 US 383, 397 (1981); In re Kellogg Brown & Root, Inc., 756 F.3d 754 (DC Cir. 2014); United States ex rel. Barko v. Halliburton Co., 2014 WL 7212881 (D.D.C. 2014). 29

Internal Investigations: Ethical IssuesGeneral Motors ignition investigation:Facing potential litigation, GM hired an outside law firm to investigate and make a reportCourt: sole purpose of report was to provide legal advice Relying on Upjohn, subject to attorney-client privilegeWhat this meansCounsel conducting investigation can better maintain attorney-client privilegeTry to avoid work product discoveryIn Re: General Motors LLC, 14-MD-2543 (JMF), NYLJ 1202715543917, at *1 (SDNY, Decided January 15, 2015)30KBR (April 1, 2015) SECs 1st enforcement action for confidentiality agreements that could stifle whistleblowing processRequired employees to sign confidentiality agreements prohibiting communications with outside partiesKBR agreed to pay $130,000 to settle the whistleblower protection caseAndrew Ceresney, the SEC's enforcement director, said the agreements "potentially discouraged employees from reporting securities violations

No Agreements To Preclude Disclosure to Regulatorshttp://www.sec.gov/news/pressrelease/2015-54.html

31Merci, Gratzie, Danke, Gracias, Cacua, Thank You!32DLA Piper Team

Karl Dialkarl.dial@dlapiper.comT +1 214 743 4555Eli BurrissEli.Burriss@dlapiper.comT +1 214 743 4514Casey MooreCasey.Moore@dlapiper.comT +1 214 743 4556Experienced trial lawyer and CPA with 45 trials of complex commercial cases over 30+ years.Focuses on bet-the-company business litigation, trade secret claims, securities and director/officer litigation, class actions, and professional malpractice.www.dlapiper.com/karl_dial

www.dlapiper.com/eli_burriss

www.dlapiper.com/casey_moore

Has participated in representation of numerous national and international companies, both as plaintiff and defendant, in a diverse array of litigation matters.Advised a major pharmaceutical manufacturer on products in international markets.Has represented national and international clients in industries including securities, financial services, oil and gas, health care, insurance, pharmaceuticals and medical devices. Experience litigating in federal and state court and before arbitration panels, including FINRA and AAA.33