Ethical Issues Facing In-House Counsel in Cross-Border Environments June 18, 2015

Who we are Karl Dial Eli Burris Casey Moore Presenters:

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Attorney-Client Privilege

Privilege in the United States  Privileges exist to encourage the disclosure of information without fear that it will be used against you unfairly  Two primary privileges  Attorney-client privilege  Work product 5

Privilege in the United States  Attorney-Client Privilege  Oldest privilege for confidential communications known to the common law  Key elements:  Communication  Where a primary purpose of the communication is in furtherance of legal advice of assistance  Expectation of confidentiality with confidentiality preserved.  Client holds the privilege  Somewhere 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 6

Work Product Doctrine 7 PROTECTS DISCLOSURE OF LAWYER’S WORK AND MENTAL IMPRESSIONS IN ANTICIPATION OF LITIGATION PROTECTS MATERIALS PREPARED BY CLIENT AT LAWYER’S DIRECTION CAN PROTECT INTERNAL INVESTIGATIONS WORK PRODUCT DOCTRINE PROTECTS DISCUSSION WITH CERTAIN AGENTS, SUCH AS EXPERTS, ACCOUNTANTS, ETC. IN CERTAIN CIRCUMSTANCES

Work Product Doctrine  Work Product Doctrine  Broader protection than attorney-client privilege, but more easily pierced  Protects documents prepared in “anticipation of litigation”  Protects the mental processes of the attorney  Was the document prepared or obtained because of the prospect of litigation by or for a party, or by or for the party’s representative?  Beware:  Courts will determine when litigation reasonably could have been anticipated  Often that date triggers the obligation to institute a legal hold 8

Attorney-Client Privilege Around the World Attorney-client privilege for outside and in-house counsel No attorney-client privilege for in-house counsel No or very limited attorney-client privilege 9

Attorney-Client: EU  All 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 10

Select EU Member States England & Wales Wide protection: legal advice privilege and litigation privilege Communications with in-house counsel are protected; France Obligation of professional secrecy protects all legal correspondence between client and lawyer Communications with in-house counsel are not protected Germany German qualified lawyers have a professional secrecy obligation in litigation, arbitration and regulatory investigations Communications with in-house counsel are not protected 11

China and Japan  China  No 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  Japan  Confidentiality is a basic obligation of lawyers  Lawyers 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 counsel  U.S. courts frequently recognize the privilege 12

Choice of Law  US courts apply the “touch base” test  If a communication originates in a foreign country and attachment of the privilege depends on the laws of that country, the foreign country’s law applies  If communications “touch base” with the United States, U.S. privilege law applies  Touch base test:  Courts consider several factors in determining whether communications that touch base with the United States are protected by the attorney-client privilege  One critical factor is that the privilege has been claimed and not waived Willemijn Houdstermaatschaapij Bv v. Apollo Computer, Inc., 707 F. Supp.1429, 1448 (D. Del. 1989). 13

International Discovery Issues

International Discovery for U.S. Litigation... Consider:  U.S. document preservation rules v. EU data protection rules  Challenges of cross border discovery  French 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. litigation  Discovery includes all manner of electronically stored information (“ESI”) 15

International Discovery for U.S. Litigation  U.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 country  Need to understand implication of non-U.S.  Data protection laws, employment law, privacy rights, blocking statutes and international treaties  Can place a multi-national organization “between a rock and a hard place” 16

What about the Cloud?  Answer: No single answer—continues to change  In cloud, data locations are not necessarily known; servers may be in many locations  Data are often in many places simultaneously; many countries may claim their laws apply  Older agreements may be obsolete 17

Discovery for U.S. Litigation Involving EU Data  In 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 2015–2016)  Also applies to organizations based outside the EU if they process personal data of EU residents 18

Proposed Solutions: The Sedona Conference®  Sedona 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, and  Establish 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 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) 19

Recent International Discovery News Vera v. Republic of Cuba  Spanish bank ordered to inquire about account information for “all branches, within and without New York State,”  Relevant to a third-party’s execution on judgments against the Republic of Cuba  Court 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 Vera v. Republic of Cuba, 40 F. Supp. 3d 367, 369 (S.D.N.Y. 2014) 20

Proactive Steps: Pre-Litigation  Broad policy addressing employee privacy expectations— such as:  Work may be subject to preservation/collection in litigation  Personal communications prohibited on work  Access to personal prohibited on work computer  Document retention policies limiting time for retaining ESI  Limit access to certain foreign data not needed by U.S. entities  Coordination between EU employees handling privacy obligations and legal department overseeing U.S. litigation 21

Internal Investigations

Why an internal investigation?  Fiduciary duty to monitor and correct criminal misconduct  Avoid indictments or reduce sanctions  Government views of internal investigations as cooperation  May be required (e.g., Sarbanes-Oxley Act)  Compliance function  Obtain facts for threatened litigation  Independent internal investigations may be more successful 23

What to Do – Possibility of Impropriety  Primary duty – make a reasonable inquiry to determine if a credible basis for the allegation exists  Begin by talking with the whistleblower (if known)  Notify internal auditor, outside auditor, CEO, audit committee  Does the investigation have a valid purpose (not politics)  Decide whether to use in-house or outside counsel to investigate  If committee formed – remind members that they may retain their own counsel 24

Texas Rules of Professional Conduct  1.06 – 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 limited”  1.12 – Organization as Client – represent the entity  Must take “reasonable remedial actions” when a person associated with the organization has violated legal obligation to the organization  4.01 – Truthfulness in Statements to Others – No false statement or fail to disclose material fact  4.03 – Dealing with Unrepresented Persons – Lawyer shall not state/imply that he/she is disinterested  SEC Rule 205.3(a) – Lawyer owes duty to organization  Advising D&O’s/employees in course of representing issuer does not make them clients 25

“Upjohn Warning” (“Corporate Miranda Warning”)  Attorney represents the company, not any employee  The A-C privilege applies to the interviews and the company reserves the right to decide what to reveal  The fact that the conversation is privileged does not mean that what was said/done is protected  The company wants the employee to keep the interview confidential Except not from regulators/SEC 26

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Common Employee Questions Be Prepared to Answer these common questions: 1.What are the consequences if I do not participate? 2.Can I have another employee/union rep attend? 3.Do I need my own lawyer? 4.Where can I find a lawyer? 5.Can I have time to find a lawyer? 6.Will the company pay for my lawyer? Sarah Helene Duggin, Internal Corporate Investigations: Legal Ethics, Professionalism and the Employee Interview, 2003 C OLUM. B US. L. R EV. 859 (2003). 28

Maintaining Privilege in Investigations  Upjohn – employee questionnaires sent to counsel + notes of contents were attorney-client privileged  KBR/Halliburton – investigator’s interviews with employees & report to counsel:  DC Cir.: privilege applies if a significant purpose of investigation was to obtain legal advice  Dist. Ct. on remand:  Investigator’s factual summaries are not attorney-client privileged  Work 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 (D.D.C. 2014). 29

Internal Investigations: Ethical Issues  General Motors ignition investigation:  Facing potential litigation, GM hired an outside law firm to investigate and make a report  Court: sole purpose of report was to provide legal advice  Relying on Upjohn, subject to attorney-client privilege  What this means  Counsel conducting investigation can better maintain attorney-client privilege  Try to avoid work product discovery In Re: General Motors LLC, 14-MD-2543 (JMF), NYLJ , at *1 (SDNY, Decided January 15, 2015) 30

 KBR (April 1, 2015) – SEC’s 1 st enforcement action for confidentiality agreements that could stifle whistleblowing process  Required employees to sign confidentiality agreements prohibiting communications with outside parties  KBR agreed to pay $130,000 to settle the whistleblower protection case  Andrew Ceresney, the SEC's enforcement director, said the agreements "potentially discouraged employees from reporting securities violations…” No Agreements To Preclude Disclosure to Regulators 31

Merci, Gratzie, Danke, Gracias, Cпacuьa, Thank You ! 32

DLA Piper Team Karl Dial T Eli Burriss T Casey Moore T  Experienced 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.  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