A recent case out of the Eastern District of New York serves as a helpful reminder to employers that not all communications with outside counsel will remain privileged as part of future employment litigation. In Koumoulis, et al. v. Independent Financial Marketing Group, Inc. (E.D. NY November 1, 2013), four current and former employees sued the defendant employers alleging that they discriminated against them on the basis of religion, ancestry, disability, and age; subjected them to a hostile work environment; and, retaliated against them for their complaints of unlawful discrimination. The dispute concerned the plaintiffs’ demands for the production of documents listed by the defendants on their privilege log and withheld as being subject to the attorney-client privilege.
The plaintiffs argued certain categories of those documents were discoverable including those concerning employee complaints, investigations into those complaints, and communications related to the plaintiffs’ EEOC charges. Plaintiffs also alleged that the defendants had waived any attorney-client and/or work product privilege they may have had with respect to those communications with outside counsel by raising the affirmative defense of the adequacy of their own investigation to correct the alleged discriminatory behavior.
After a review of a portion of the disputed communications, the magistrate judge compelled the production of communications between the defendant employers and their outside counsel relating to the pre-litigation internal investigation of the Plaintiffs’ internal complaints of discrimination and retaliation. The court also compelled a deposition of defendants’ outside counsel relating to that investigation.
Interestingly enough, the court found that the outside attorney had provided human resources and business advice rather than confidential legal advice and consequently, the defendant employer was not entitled to claim attorney-client and/or attorney work-product privilege to certain communications with that attorney. The court’s decision centered on the role of outside counsel in that she had helped supervise and direct the internal investigations. Specifically, the attorney instructed the defendants’ HR personnel on what actions (including disciplinary actions) should be taken, when to take those actions, who should perform them and she also advised the defendants on what and how to document the investigation. The attorney also drafted written communications to employees responding to their complaints, and drafted scripts for the employers’ conversations with employees about their complaints.
The court noted that while it was difficult to distinguish business and legal advice, because the outside counsel’s advice rarely involved “the interpretation and application of legal principles to guide future conduct or to assess past conduct,” and did not explicitly consider future litigation, the status as an attorney did not transform what would otherwise be HR and business communications into legal communications. With respect to communications about plaintiffs’ pending EEOC charges, however, the court found that those should be deemed privileged and were protected from production because they contained counsel’s “mental impressions, conclusions, opinions or legal theories.”
The court’s rationale in Koumoulis, while questionable on legal grounds, serves as an important reminder that not all communications with outside counsel will remain privileged in future litigation, particularly if outside counsel is asked to provide direction on how to conduct an internal investigation that the employer may want to rely on as an affirmative defense in any later employment litigation.
In order to ensure that communications with outside counsel remain privileged, employers should make clear to outside counsel that they are seeking legal advice, not merely guidance on how to conduct essential human resources functions, and be explicit where legal advice is being sought in anticipation of potential ligation. Outside counsel has an obligation to cover that same issue.