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Am I the only one who sees the irony that the prescribed Upjohn warning may be too weak?

April 16, 2009

The theoretical underpinnings of Upjohn have gone awry in practice.

The WSJ law blog recently reported a couple pivotal rulings excluding statements of corporate directors based upon an alchemistic shortfall with the Upjohn warnings. The problem has become toxic enough that even the ABA is recommending revisions to the warnings (see here and here).

In particular, judges excluded statements made by a Qualcomm Director who mistakenly believed he was represented by Irell & Manella and Laura Pendergast-Holt of R. Allen Stanford, who believed she was being personally represented by Thomas Sjoblom of Proskauer Rose when, inter alia, she provided sworn testimony to the SEC with Mr. Sjoblom faithfully by her side.

Upjohn v. United States, 449 U.S. 383 (1981), requires lawyers representing corporations to advise directors and employees that:

(1) The firm represents the company, not the director; (2) the attorney-client privilege is between the company and the firm; and (3) the company can waive the privilege and release all recollected statements the director made at any time and without any notice to the director.

Theoretically, that sounds reasonable. Most people given the foregoing admonishment, particularly the educated type known to be executives at publicly held companies, would simply retain their own attorney before uttering a single word. But they don’t. Why?

Given the age of increasing corporate indictments, it seems timely to recognize that for every scandal, there will be a fall guy, good or bad. And, sadly, investigations are intended to present those fall guys for public consumption. Some rightly so, others not so much. What’s disturbing, however, is that highly educated people have fallen prey to believing that a corporate attorney represents him or her. In other words, the theoretical underpinnings of Upjohn have gone awry in practice.

The WSJ law blog posits the possibility of elevating Upjohn warnings to Miranda status. I tend to agree with their suggestion and here’s why. Corporate lawyers investigating possible criminal activities could be seen as acting as government agents (kind of like the snitch planted in the jail cell; the lawyer’s simply reporting everything he recalls to someone in a nicer suit (ultimately for the likely preparation and presentation to the government conducting a criminal investigation) and then he’s going to submit a bill for a really nice dinner or two (depending on where everything takes place)).

On a more practical level, simply including the following slide from Foley &Lardner’s power point presentation would easily solidify whose interests the attorney is actually interested in protecting (be sure to note the first bullet point with the smaller font):



As a wise man once told me, “more often than not, it’s what you don’t say that’s more important than what you say.” That’s the problem with warnings–they become technicalities that are easy to exploit.

Though Miranda falls within the penumbra of the Fifth Amendment, it is designed to protect to the right to counsel. Before the SEC, for example, the “target”/”witness” is under subpoena. Ms. Pendergast-Holt, testified before the SEC being ethically advised to provide testimony that was mitigating to the corporation without consideration to also providing her own mitigating evidence (or evidence incriminating the corporation). She had a right to counsel at that critical stage of the investigation, and in preparing her testimony for the SEC, she had the right to know–unequivocally–that the attorney with whom she was preparing and testifying was not there to advise or represent her interests.

Some Upjohn scenarios are clearly custodial. A meaningful analysis would most often produce an affirmative answer to the question. Being able to schedule the meeting at a convenient time and place does not voluntariness make. Further complicating the matter is that these investigations are not conducted into criminal matters by law enforcement personnel, but rather by the company firm or in-house counsel, many of whom directors, executives, and high level employees may be accustomed to seeing on the greens or at the local watering hole. It’s only later, as the corporation protects itself and its shareholders that it begins choosing who shall be placed on the silver platter when the government comes knocking.

An analogous concept is recognized in Garrity v. New Jersey, 385 U.S. 493 (1967), where officers subject to IA investigations with criminal exposure must be given specific warnings. There, as in the corporate context, the possibility of losing one’s job for failure to cooperate is enough to warrant extra safeguards. Add to that a director’s fiduciary duty to the corporation and an employee’s desire to keep shoes on his childrens’ feet and dinner on the table and one will find a bevy of loquacious individuals.

Finally, let’s not forget that the Fifth Amendment does not apply to civil proceedings/investigations. (One issue in Stogner v. California, (2003) 539 U.S. 607, was that defendants were being questioned years after the criminal statute of limitations expired and therefore did not/could not assert the Fifth. They were then criminally charged based on their incriminating statements.)

The reality of the issue is so complicated and the waters so murky that, ironically, Upjohn created a baby aspirin to treat a migraine.


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