Author’s note: this article is not intended to provide legal advice.  Counsel must be consulted to appropriately structure engagements with third-party service providers.

Consultants that support attorneys, such as investigators and public relations experts, play important roles in dispute resolution, high-stakes legal matters, and assisting with managing corporate crises. With counsel, they provide a formidable mix of expertise, supporting clients’ efforts to obtain, understand, and communicate facts to internal and external stakeholders and other interested parties.

The retention of investigative experts can dramatically change the course of an internal investigation by uncovering new evidence, locating important documents, recruiting key witnesses, and independently identifying and reporting the facts of a particular incident or series of events. In addition, the effective use of an outside investigator can frequently be the deciding factor in litigation, success before a regulator or achieving a desired business outcome.

Likewise, crisis management and public relations experts play a critical role in high-profile legal matters. This is particularly true in the era of citizen journalists on social media and the race to publish first, compounding scenarios that have resulted in a perilous operating environment for the white-collar bar, litigators, and corporate counsel, by placing exponentially more eyes on “evolving stories” sooner, and at most times, before the facts are fully known and vetted. The consequence is a narrative that begins to shape public opinion, regulators, and factfinders, before there is sufficient opportunity for parties to a controversy or dispute to tell their respective sides of the story. Once “the story” is out there, it is infinitely more difficult to correct. This dynamic also creates added tension for counsel as they navigate the age-old problem of determining how much to litigate in the court of public opinion, while representing their clients in the court of law.

To effectively manage the frequently competing “court rooms” and to address both legal and public relations considerations that arise during their representation, especially during times of crises or in the face of internal allegations, counsel must be afforded the opportunity to engage investigative consultants and confer with public relations and crisis communications experts to develop strategies under cover of privilege.  However, as there is no specific privilege allotted for such experts, it is critical that their retention be well-considered and properly structured to enhance the chances that communications between counsel and the experts will be protected by privilege. This is foundational to maximizing their utility and most importantly, protecting the confidentiality of their critical work.

This article outlines practical suggestions for structuring engagements with third-party investigators and crisis communication consultants to help maximize the likelihood that their work and communications will be protected under the attorney-client privilege or attorney work-product doctrine.

Privilege and Third-Party Crisis and PR Consultants

One of the earliest cases to recognize a privilege between an attorney and his third-party consultant was United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961), in which the court equated the work of an accountant working for the attorney to a “translator” and that a privilege between the two was “necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit.” The Kovel doctrine extends attorney-client privilege to communications with third-party consultants, but only if their involvement is functionally necessary to the provision of legal advice—not simply helpful or related to the business at hand. Twenty years later and in the most well-known case to address legal privilege, Upjohn Co. v. United States, 449 U.S. 383, 384, 101 S. Ct. 677, 680, 66 L. Ed. 2d 584 (1981), the U.S. Supreme Court rejected a test that limited the privilege to communications in which legal advice was provided, finding that privilege should necessarily include the reverse; the instances in which the client provides information to counsel to enable him or her to provide sound and informed legal advice.

The U.S. District Court for the Southern District of New York (S.D.N.Y.) upheld privileges in two matters involving communications between counsel and public relations consultants handling crisis communications during corporate scandals. In In re Grand Jury Subpoenas Dated January 20, 1998, 995 F. Supp. 332, 340 (E.D.N.Y. 1998), a public relations firm was retained to assist the target of a grand jury investigation with managing his reputation to counter media reports that the target feared would influence prosecutors to bring charges against him. The court determined that the PR firm’s communications were privileged as they were made in confidence for the purpose of eliciting legal advice.  The court held that “confidential communications…between lawyers and public relations consultants hired specifically by the lawyers to assist them in dealing with the media…that are made for the purpose of giving or receiving advice…directed at handling the client’s legal problems…are protected by the attorney-client privilege.”

In the second case, In re Copper Mkt. Antitrust Litig., 200 F.R.D. 213, 218 (S.D.N.Y. 2001), the court applied a “functional equivalent” test to find that communications between a public relations firm brought in to manage communications for the company in anticipation of litigation were privileged because the company was acting as the functional equivalent to the company’s in-house communications department and the retention was made in anticipation of the litigation. The court considered the fact that the PR firm had the authority to make binding decisions on behalf of the company concerning public relations matters; the firm had full-time offices within the company’s headquarters; the firm’s consultants regularly met with the company’s counsel to assist with the preparation of litigation-related materials; and acted as the company’s spokesperson throughout the litigation.

In a more recent case in the S.D.N.Y. with a different outcome, In Re Signet Jewelers Limited Securities Litigation, 332 F.R.D. 131 (S.D.N.Y. 2019), an investor brought a securities fraud action against Signet Jewelers Limited alleging the company misrepresented allegations of a pervasive culture of sexual harassment. During the litigation, the investor sought to compel the production of documents between the company and its public relations firm that had been withheld as privileged. The facts indicate that Signet convened a “strategic communications steering committee” consisting of public relations firms retained by the company, outside counsel, executives of Signet and in-house counsel to assist with the management of media inquiries and managing the PR aspects of the litigation and the investor sought to compel production of documents between the company and its PR consultants. The court held that the communications between the PR consultants and the company were not privileged pursuant to the attorney-client privilege, as the communications did not involve the receipt of legal advice but involved suggestions for how to respond to media inquiries regarding the allegations and for the purposes of the company obtaining talking points.

Privilege and Investigative Consultants

In United States ex rel. Barko v. Halliburton Co., No. 1:05-CV-1276 (D.D.C. slip op. issued March 6, 2014), the U.S. District Court for the District of Columbia emphasized the importance of properly structuring an internal investigation undertaken by non-attorney, third-party investigators, in determining that the work product of the investigators, including witness interview notes, was not protected by the attorney-client privilege or the attorney work product doctrine. The Court found that the purpose and nature of the investigations “were undertaken consistent with regulatory obligations and corporate policy, rather than for the purpose of obtaining legal advice” and therefore not afforded privilege protection. The Court’s decision, however, raises concerns as to the proper methods of retaining, engaging, and directing third-party investigators, particularly when organizations desire to protect the results of internal investigations from disclosure, especially those investigations that are required by law or pursuant to internal compliance rules.

Like many organizations, the defendants, Kellog, Brown & Root (“KBR”) established a Code of Business Conduct (“CBC”) which provides that calls received on the company’s integrity hotline would be routed to the Director of Business Conduct. The Director would decide whether to launch an inquiry, pursuant to the guidelines established in the CBC. If an investigation was commenced, company investigators – who are not lawyers – would interview relevant personnel, review pertinent documents, and prepare reports that would then be sent to KBR’s in-house law department. The plaintiff challenged KBR’s claim of privilege over the internal investigation materials drafted in connection with an internal investigation stemming from a whistleblower complaint to the company’s hotline.

In denying KBR’s claims of work product protection and attorney-client privilege, the Court focused on the primary purpose of the investigation. It found that the investigations were undertaken by KBR’s investigators to determine whether the company had violated government contracting rules, knowing that if found, KBR would be obligated to report such violations to the U.S. Department of Defense (“DoD”). “The investigations were undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice,” said the Court. It asserted that the investigations would have been conducted with or without the need for legal advice, due to the company’s own internal compliance obligations and the government contracting rules posed by its contract with DoD. The Court determined, therefore, that the investigations were done pursuant to a “business, rather than legal purpose,” and the reports prepared in connection with the investigation were essentially business records, as opposed to memoranda for the purposes of seeking legal advice.

The Court cited to a number of factual issues to support its ruling that the attorney-client privilege did not apply to the investigation. For example, it found that employees who were interviewed during the course of the investigation were never informed that the purpose of the investigation was to assist KBR with obtaining legal advice. In addition, the confidentiality agreements that employees signed at the outset of their interviews failed to disclose that the purpose of the interview was to obtain legal advice and instead highlighted business reasons to maintain the confidentiality of matters discussed (i.e.- adverse impact on the company’s appearance or performance). In summary, the Court said that the investigation was “not for the primary purpose of seeking legal advice” and is therefore not entitled to the protection of the attorney client privilege.

In support of its opinion that the attorney work product protection did not apply, the Court found that the investigation was “conducted in the normal course of business, irrespective of the prospect of litigation.” The investigation, according to the Court, would have been undertaken by KBR as both “a responsible business organization investigating allegations of fraud, waste or abuse in its operations” and “due to the regulatory requirements imposed upon it by its government contract.” Lastly, the Court noted that the investigation was conducted by non-attorneys, which makes it more difficult for KBR to claim that the investigative reports and other documents were prepared in anticipation of any litigation.

In In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014), the court granted defendant’s petition for writ of mandamus, in effect, reversing Barko. The court adhered to the “primary purpose” test but rejected the district court’s “but for” approach, stating the test does not “draw a rigid distinction between a legal purpose on the one hand and a business purpose on the other.” (In re Kellogg Brown & Root, Inc., 756 F.3d at 759). The Court acknowledged that communications can have more than one primary purpose. In contrast to the district court’s narrow view, the D.C. Circuit in In re KBR clarified that privilege can still apply even when an investigation serves both legal and business purposes—so long as obtaining legal advice is one of its significant purposes. Thus, a new formulation of the primary purpose test was created: “In the context of an organization’s internal investigation, if one of the significant purposes of the internal investigation was to obtain or provide legal advice, the privilege will apply…” (Id. at 761.)

 Considerations for Retaining Third-Party Consultants

Investigators

The cases above raise a number of concerns for organizations that retain investigative consultants in the context of high-profile, high-stakes, legal matters or undertake internal investigations in response to calls to their integrity hotlines or in connection with fulfilling the mandates of their respective codes of conduct. Foremost is the notion that compliance-related investigations fall outside the realm of legal activities and instead are part of an organization’s business undertakings. This premise, however, ignores the fact that most internal investigations, at least most in the compliance context, are conducted to determine whether there has potentially been a violation of law, which necessarily requires drawing a legal conclusion after legal analysis and sometimes research. However, the opinions make it clear that internal investigations must be structured properly in order to maximize the possibilities of maintaining the privilege of the investigative reports and other materials. In that regard,  the following should be considered:

• Investigators be retained by the organization’s in-house or preferably outside counsel, and the retention or engagement letter specify that the retention is for the purposes of assisting counsel with providing legal advice to the company;
• The tasking memo or directive to the investigators be specific, reference the fact that the investigation is for the purposes of providing legal advice to the organization, and state the fact the investigation is being conducted at the direction of the organization’s counsel;
• Prior to conducting an interview, investigators properly introduce themselves, and among other things state that the fact that they have been retained by counsel for the company, for the purposes of developing facts in order to assist the company’s counsel with providing legal advice to the company;
• Any agreements, waivers or statements signed by employees during the internal investigation must reiterate that counsel is conducting the investigation to assist with providing legal advice to the company;
• All reports, memorandums and correspondence prepared during the course of the internal investigation  be properly labeled – Attorney Client Privileged – Prepared at the Request of Counsel and addressed to counsel. In addition, it is useful to begin each report or memorandum with the following:

Counsel has engaged [investigator] to conduct a confidential investigation into [certain events]. This memorandum was prepared at your request for your exclusive use, to assist you with providing legal advice to [company]. As such, this correspondence is strictly privileged and confidential pursuant to the attorney-client privilege [and/or as relevant, the attorney work-product doctrine].

• Lastly, during the course of the internal investigation, all persons involved  be keenly aware of and avoid issues which may give rise to a waiver of any claim of privilege.

Crisis Communications and PR Consultants

There are similar things to consider when retaining a crisis or PR communications firm in connection with a dispute or legal controversy. For starters, there is no unified standard for whether a privilege will be upheld between a law firm and its retained communications consultant. For that reason, it is important to structure the engagement with the above cases in mind, to offer the best chances of the attorney-client privilege maintained when hiring communications consultant during a crisis:

• Independence: Consider having the company retain a crisis or PR consultant independent of the company (i.e. – not their usual and customary PR firm) and chosen specifically for purposes of managing the communications during the crisis, in advance of any anticipated litigation. The independence and ordering of the engagement in this manner will potentially defeat arguments that the communications firm is not the company’s everyday communications firm, and attorney work product privilege will be easier to sustain if the engagement is made “in anticipation” of litigation.
• Engagement: Engage crisis or PR consultants through outside counsel under an engagement letter that clearly states the consultant’s role is to assist in legal strategy and facilitate attorney-client communications. Mark all documents accordingly (e.g., ‘Attorney-Client Privileged; Work Product; At Request of Counsel’). Ensure counsel remains actively involved in communications to avoid inadvertent waiver.
• Work Product and Communications: All communications with the crisis communications firm should be for purposes of the company obtaining legal advice, and therefore should necessarily include counsel as a recipient of such communications. Be mindful that waiver of the privilege may be readily found if third parties receive the correspondence without counsel. In addition, involve legal, as appropriate, in all engagement with the crisis communications firm. Being able to demonstrate that the provisioning of legal and communications advice are materially intertwined is a strategy for success and make it difficult for opposing counsel to separate the two and thus argue the privilege should be voided.

As the need for rapid, strategic communication in legal crises grows, counsel must take deliberate steps to preserve privilege protections. Proper structuring of third-party engagements—framed explicitly around the provision of legal advice—is no longer optional; it is essential. The analysis involved in determining whether to uphold or negate a privilege involving third-party consultants is highly fact specific. However, taking the appropriate measures at the outset and adhering to an approach that highlights the importance of the consultants’ work to the legal strategy and providing legal advice will increase the chances that such communications and advice will be found to be privileged. The importance of these third-party consultants will only grow, as the race to identify, understand and communicate the facts hastens, in an age of instant online news and citizen journalists.

Adopting practices to ensure that the right story is told and at the appropriate time will provide a pathway to victory in the courts of law and assuaging stakeholders and the general public in the court of public opinion.

To learn more about the benefits of structure engagements that safeguard privilege and support your legal strategy please contact David A. Holley, J.D..

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