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Outside counsel acted as adjunct to HR team; much advice not privileged

By Kathleen Kapusta, J.D.

Finding that an employer’s outside counsel provided predominantly HR and business advice — rather than legal advice — during the company’s internal investigation into an employee’s discrimination and retaliation complaints, a federal magistrate judge in New York granted in part the employee’s motion to compel the production of documents listed on the employer’s privilege log (Koumoulis v Independent Financial Marketing Group, Inc, November 1, 2013, Scanlon, V). Moreover, even assuming that the communications at issue were protected by either attorney-client privilege or work-product privilege, the court found that the employer waived the privilege by relying on the reasonableness of its investigatory policies and procedures as a defense.

The plaintiffs, four current and former employees, sued the defendant employers alleging that they discriminated against them on the basis of their Greek Orthodox religion, their Greek ancestry, disability, and age; subjected them to a hostile work environment; and retaliated against them for their complaints of unlawful discrimination. The dispute here concerned the production of documents listed by the defendants on their privilege log.

The plaintiffs identified five categories of documents they contended were discoverable. Those documents concerned the employee’s complaints, investigations of the employee, and documents related to his EEOC charges. They specified 28 documents that appeared to be related to these five categories but noted that it was difficult to access them based on the defendants’ vague descriptions. They also contended that notwithstanding any claim of privilege the defendants should be ordered to produce documents related to the internal investigations. Finally, they argued that the defendants waived any privilege by relying on the internal investigations as a defense. The defendants countered that the privilege remained intact because their affirmative defense relied on the sufficiency of their internal investigations, not on their communications with outside counsel. They also contended that because the attorney-client communications post-dated the plaintiffs’ EEOC charges, they were inherently part of its litigation preparation and were therefore privileged.

Privilege log. As to documents that it had not previously reviewed in camera, the court found that it could not determine, based on the log, whether they were protected by privilege. Here, the court found that the log provided insufficient information as to whether the communications’ predominant purpose was to obtain or provide legal advice. In addition, noting that most of the documents were sent from a non-attorney, the court observed the defendants failed to explain why their writings should be considered attorney work-product. As to documents written or partially written by an attorney, there was insufficient information to determine whether the documents were created because of litigation. Finding sufficient information to deny the claim of privilege, the court, in an abundance of caution, allowed the defendants to amend their privilege log to include the required information for those documents not reviewed in camera.

Attorney-client privilege. Turning to the documents reviewed in camera, the court found that they revealed that the outside counsel was not a consultant on legal issues; instead, she helped supervise and direct the internal investigations primarily as an adjunct member to the defendants’ HR team. Specifically, she instructed the defendants’ HR personnel on what actions (including disciplinary actions) should be taken, when to take those actions, and who should perform them; told defendants what should be documented and how it should be documented; drafted written communications to the employee responding to his complaints; and drafted scripts for conversations with him about his complaints. In their emails to outside counsel, the defendants reported the outcome of actions she directed; asked her what they should do next; and updated her on new developments. Thus, many of the communications concerned advice on HR resources issues, summaries of fact-related communications, and instructions from outside counsel on conducting the internal investigations.

Though it noted that determining whether her advice was predominantly legal- or business-related was made more difficult by the overlapping nature of legal advice and HR advice, the court noted that her advice rarely involved “the interpretation and application of legal principles to guide future conduct or to assess past conduct,” and rarely explicitly considered future litigation. To the contrary, she wrote that her advice would advance business goals such as improving business relationships, avoiding damage to the employers’ reputation, or assisting management in their supervisory role. Her status as an attorney did not transform what would otherwise be HR and business communications into legal communications, the court stated.

The court, however, did find that a few of the withheld documents related in whole or in part to the plaintiffs’ EEOC charges. In addition, some contained requests for, or provisions of, legal advice. In the limited instances where outside counsel provided legal advice or legal impressions, those portions of the communications concerned anticipated litigation. Thus, those documents were privileged and did not have to be produced.

Work-product privilege. Turning to the claimed work-product privilege of the documents reviewed in camera, the court found that the defendants failed to show that any of them were created because of litigation rather than simply in the course of an HR investigation. Instead, the court observed, advice related to anticipated litigation was occasionally included as an aside in communications that were predominantly related to human-resources issues. Thus, these documents weren’t privileged.

Waiver. Even assuming the communications were privileged, the court found the defendants would have waived the privilege by asserting, as an affirmative defense, both the reasonableness of their efforts to “prevent and correct promptly any discriminatory behavior” and the reasonableness of their “policies and procedures for investigating and preventing discrimination.” Contrary to the plaintiffs’ contentions, the court found that the defendants’ pleading adequately asserted the Faragher/Ellerth defense. “Defendants would need to choose whether to assert the affirmative defense or the privilege, but could not preserve both by electively omitting certain communications,” the court stated.

Plaintiffs’ failure to produce a privilege log. The defendants contended that the plaintiffs had to produce a privilege log concerning any advice they received from their attorney “in connection with internal complaints about the Company’s investigation.” Granting the motion in part, the court required the plaintiffs to provide information concerning any allegedly privileged communications. However, the plaintiffs did not have to file a privilege log; rather, they could instead file a declaration as specified by the court.