Privilege issues in internal investigations can be difficult to navigate, so the 6th Circuit’s recent decision in In re: First Energy Corporation overruling a district court decision holding that the attorney-client and work product privileges didn’t apply when the investigation was initiated for business advice is welcome news for public companies and their advisors.  Here’s an excerpt from Wachtell’s memo on the decision:

In FirstEnergy, shareholders brought a securities fraud class action suit against FirstEnergy and sought in discovery documents from FirstEnergy’s internal investigations related to a bribery scheme. The district court ordered broad production of the company’s internal investigation files, reasoning that privilege and work-product protection did not apply because the company “initiated the investigations for business advice, not legal advice” and “later used the fruits of the investigations for business decisions.”

The Sixth Circuit took the rare step of granting mandamus and vacating the lower court’s order compelling the production of the internal investigation materials. The Sixth Circuit held that there is “no way to affirm the district court’s ruling without abandoning nearly a half century . . . of jurisprudence concerning the scope of the attorney-client privilege and work-product doctrine or without discouraging full and frank communication between companies and their attorneys when investigating their own wrongdoing.”

The memo notes that the Court also held that limited disclosures to the government in connection with a deferred prosecution agreement and providing documents to the company’s auditors didn’t waive applicable privileges. The Court based that conclusion on the fact that the material disclosed “was not privileged, was already discoverable, or consisted of ‘bare conclusions from the investigation,’ not ‘the substance of the[] attorney’s advice.'”

– John Jenkins