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The Metropolitan

Corporate Counsel ®

S Compliance/Insurance/Risk Management N
HIGHLIGHTS Erosion Of The Attorney-Client
Law Firms
Corporate Compliance: Big Solutions For
Privilege And Work Product Doctrine:
Big Issues Page 28
Paul Smith, Eversheds LLP
Enterprise Risk Management – The New
The ABA And Other Groups Seek
Frontier Page 29
Interview: Lori Nugent, Cozen O’Connor
LLP Reversal Of Government Waiver Policies
Corporate Governance: Best Practices
Become Mainstream Page 30 By R. William Ide, III
Interview: Alyce C. Halchak, Gibbons, Del
Deo, Dolan, Griffinger & Vecchione
The American Bar Association has
The Positive Use Of Independent Investiga-
tions To Lower Risk And Create A More
joined forces with a broad and diverse
Effective Business Model Page 32 coalition of legal and business groups and
R. William Ide, III and Thomas Wardell, others in an effort to protect the attorney-
McKenna Long & Aldridge LLP client privilege and work product doctrine
Whistleblowing Under Sarbanes-Oxley: and roll back various federal governmental
The Mist Begins To Clear Page 35 policies and practices that have seriously
Interview: Connie N. Bertram, Winston &
Strawn LLP eroded these fundamental rights. Despite
Suit Limitation Issues In Insurance Cover- some recent success, the ABA and the
age Litigation Are Not Always Simple coalition are gearing up for a sustained
Page 40 campaign to restore and protect federal
Charles Allen Yuen, Pitney Hardin LLP recognition of the privilege and the doc-
D&O Coverage – What You Should Know trine.
In This Compliance-Oriented And Litiga-
tion-Intensive Environment Page 41 The Importance Of The Attorney-
Interview: John P. Kincade and Donald F. Client Privilege
Campbell, Winstead Sechrest & Minick The attorney-client privilege enables
both individual and organizational clients
Risk Management For Prospective Outside
Directors Page 42
to communicate with their lawyers in con-
fidence, and it encourages clients to seek
Robert McL. Boote, Justin P. Klein and
John C. Grugan, Ballard Spahr Andrews & out and obtain guidance in how to conform
Ingersoll, LLP their conduct to the law. The privilege
Legal Service Providers facilitates self-investigation into past con-
SEC Responds To Concerns Over Imple-
duct to identify shortcomings and remedy
mentation Of Sarbanes-Oxley Section 404 problems, to the benefit of corporate insti-
Page 26 tutions, the investing community and soci-
Neil Goldenberg, Eisner LLP ety-at-large. The work product doctrine
The Pharmaceutical Supply Chain: A Key underpins our adversarial justice system
To Corporate Profits And Public Protection and allows attorneys to prepare for litiga-
Page 33
Jerry Wald, Ernst & Young tion without fear that their work product
Achieving Compliance Objectives Page 34
and mental impressions will be revealed to
Interview: Alice Lawrence, Jordan adversaries. R. William Ide, III
Lawrence, and Therese Paul, Fifth Third
Bank Federal Government Policies That waiver has increased dramatically during the country, many of which may impose
Better Internal Controls For Compliance:
Erode The Attorney-Client Privilege the past several years. The problem of only token restraints on the ability of
Registered E-Mail = Legal Proof Page 36 Unfortunately, a number of federal gov- government-coerced waiver was exacer- federal prosecutors to demand waiver.
Interview: Zafar Khan, RPost® ernmental agencies – including the Depart- bated in November 2004 when the Com- More importantly, it fails to acknowl-
Partnering Adds Value To Compliance ment of Justice, the U.S. Sentencing mission added language to the edge and address the many problems
Training Page 37 Commission, and others – have adopted
Interview: John M. Spinnato, sanofi-aventis
Commentary to Section 8C2.5 of the Fed- arising from government-coerced
USA LLC, and Steven A. Lauer, Integrity policies in recent years that weaken the eral Sentencing Guidelines that, like the waiver.
Interactive Corporation attorney-client privilege and the work Justice Department’s policy, authorizes
product doctrine in the corporate context and encourages prosecutors to seek privi- Unintended Consequences Of
How The New Federal Rules Will Likely
Change eDiscovery Practice Page 38 by encouraging federal prosecutors to rou- lege waiver as a condition for coopera- Federal Government Waiver Policies
John Patzakis, Guidance Software, Inc. tinely pressure companies and other orga- tion.2 Substantial new evidence has demon-
Alternative Dispute Resolution And Its Use nizations to waive these legal protections In an attempt to address the growing strated that these policies adopted by the
In Commercial Insurance Disputes Page 43 as a condition of receiving credit for coop- Justice Department and the Sentencing
Robert Matlin, American Arbitration Asso-
concerns being expressed about govern-
ciation eration during investigations. While the ment-coerced waiver, then-Acting Deputy Commission have resulted in the routine
A New Product: A “Security And Privacy
Department’s policy was formally estab- Attorney General Robert McCallum sent a compelled waiver of attorney-client
Policy” Page 44 lished by the so-called 1999 “Holder memorandum to all U.S. Attorneys and privilege and work product protections.
Interview: Nick Economidis, American Memorandum” and 2003 “Thompson Department Heads in October 2005 According to a new survey of over 1,200
International Group, Inc. Memorandum,”1 the incidence of coerced instructing each of them to adopt “a writ- in-house and outside corporate counsel
Corporate Counsel ten waiver review process for your district that was completed by the Association of
Experts Identify The Characteristics Of R. William Ide, III is a Senior Partner with or component,” and local U.S. Attorneys Corporate Counsel, the National Associ-
Well Run Compliance Programs Page 45 McKenna, Long & Aldridge LLP in Atlanta are now in the process of implementing ation of Criminal Defense Lawyers, and
Interview: Gilen Chan, Citigroup Inc., and this directive.3 Though well-intentioned, the ABA in March 2006,4 almost 75% of
Doug Lankler, Pfizer Inc.
and is Chair of the ABA Task Force on
Attorney-Client Privilege. Mr. Ide is also a the McCallum Memorandum does not corporate counsel respondents believe
Some Of The Above Law Firms former president of the American Bar establish any minimum standards for, or that a “culture of waiver” has evolved in
And Legal Service Providers
Partner With Corporate Counsel Association and the former senior vice require national uniformity regarding, which governmental agencies believe
By Providing Us With Financial Aid president, general counsel, and secretary privilege waiver demands by prosecutors. that it is reasonable and appropriate for
And Editorial Support of the Monsanto Corporation. He can be As a result, it is likely to result in numer-
reached at ous different waiver policies throughout Please turn to page 63
June 2006 The Metropolitan Corporate Counsel Page 63

Partners Notes Attorney-Client included in the package of amendments

that the Commission sends to Congress
on May 1, 2006. Unless Congress acts to
Proskauer Rose Seminar Explores The Challenges Continued from page 27
modify or reverse the change, it will
Of E-Discovery In Employment Litigation them to expect a company under investi- become effective on November 1, 2006.
gation to broadly waive attorney-client or While the Commission’s vote to
A May 11th breakfast seminar hosted work product protections. In addition, remove the privilege waiver language
by the Labor and Employment Law 52% of in-house respondents and 59% of from the Guidelines is a very positive and
Department of Proskauer Rose LLP con- outside respondents have indicated that encouraging development, the Justice
sidered a variety of challenges raised by e- there has been a marked increase in Department has not yet taken steps to
discovery in employment litigation. The waiver requests as a condition of cooper- reexamine and remedy its role in the
well-attended program, which accorded ation in recent years. Corporate counsel growing problem of government-coerced
CLE credits, was held at the Manhattan also indicated that when prosecutors give waiver. As a result, many federal prosecu-
Ballroom of the Grand Hyatt New York at a reason for requesting privilege waiver, tors continue to routinely demand that
Grand Central Station, New York. The the Thompson/Holder/McCallum Memo- companies waive their privileges as a
speakers were Kathleen M. McKenna, Kathleen M. Lloyd B. randa and the amendment to the Sentenc- condition for receiving cooperation
Partner in Proskauer’s Labor and Employ- McKenna Chinn ing Guidelines were among the reasons credit. In addition, the McCallum Memo-
ment Law Department, and Lloyd B. most frequently cited. randum, which requires all 93 U.S. Attor-
be the default form of production required
Chinn, Senior Counsel in the Department. These government policies weaken neys around the country to adopt their
by the amended FRCP (even though pro-
Ms. McKenna introduced this rela- the attorney-client privilege and work own local privilege waiver review proce-
duction in native format raises several dif-
tively new and increasingly important product doctrine and undermine compa- dures, will further complicate this prob-
ficult issues, including the production of
area of law by noting the principal chal- nies’ internal compliance programs. By lem.
proprietary or privileged information).
lenges it poses for the profession: its mul- requiring routine waiver of the privilege, In an effort to address the problems
Mr. Chinn next addressed the crucial
tidisciplinary complexity; the costs these policies discourage entities from created by the Justice Department’s
issue of cost of production and cost-shift-
associated with it, which are asymmetrical consulting with their lawyers, thereby waiver policies, ABA President Michael
ing between the parties. After a review of
in terms of being borne principally by the the factors underlying the tests utilized in impeding the lawyers’ ability to effec- Greco sent a letter to Attorney General
employer; and the potential for sanctions Rowe and Zubulake, he noted that some tively counsel compliance with the law. Alberto Gonzales on May 2, 2006. In that
– which she characterized as the cost of state courts had chosen to rely on state In addition, by requiring waiver of the letter, available online at
getting it wrong. statutes rather than any of the formula- work product doctrine, the policies dis-
She went on to point out the absolute tions utilized by federal courts. He also courage entities from conducting internal 5206.pdf, Greco expressed the ABA’s
necessity for every organization to formu- pointed out that the FRCP amendments do investigations designed to quickly detect concerns over the Department’s privilege
late and implement an official retention not expressly adopt either the Rowe or and remedy misconduct. Therefore, these waiver policy and urged it to adopt spe-
policy for its records, including those Zubulake tests, so this too will be an area policies undermine, rather than promote, cific revisions to the Holder/Thomp-
stored in an electronic form. She noted of further litigation. good corporate compliance practices. son/McCallum Memoranda that were
that, in the event of litigation, the exis- Following a brief discussion on privi- prepared by the ABA Task Force and the
tence of such a policy would go a long The ABA’s Response To The Privilege coalition. These suggested revisions
lege and attorney work product – and what Waiver Problem
way in refuting any suggestion that the to do in the event of inadvertent disclosure would remedy the problem of govern-
employer had destroyed information for The ABA is working to protect the ment-coerced waiver while preserving
– Ms. McKenna and Mr. Chinn presented
the purpose of advancing its interests in attorney-client privilege and work prod- the ability of prosecutors to obtain the
an e-discovery hypothetical which
the litigation. Among the points to be cov- uct doctrine in a number of ways. In important factual information they need
touched upon most of the issues they had
ered by such a policy, she said, were the 2004, the association established a Task to effectively enforce the law by (1) pre-
raised during the program. Their presenta-
designation of a point person responsible Force on Attorney-Client Privilege to venting prosecutors from seeking privi-
tion was lively, informative and, given the
for its implementation and for compliance study and address the policies and prac- lege waiver during investigations, (2)
fact that this is an emerging area of the
at all levels of the organization; the exten- tices of various federal agencies that have specifying the types of factual, non-privi-
law where there are more questions than
sion of the policy to all forms of electronic eroded attorney-client and work product leged information that prosecutors may
answers, very thought provoking. The pre-
data; and provision for routine deletion of protections. The ABA Task Force, which request from companies as a sign of coop-
sentation included some very practical
unnecessary data pursuant to a specified words of advice as well: “Where you have I have had the privilege to chair, held a eration, and (3) clarifying that any volun-
schedule. inadvertently produced some privileged e- series of public hearings on the privilege tary waiver of privilege shall not be
Mr. Chinn spoke about when the oblig- mails to the other side, move as quickly as waiver issue and received testimony from considered when assessing whether the
ation to preserve data is triggered, with possible to recover them once the error is numerous legal, business, and public pol- entity provided effective cooperation.
particularly reference to the Zubalake discovered. The more time that passes icy groups. The Task Force also crafted This new language would strike the
decisions. He pointed out that the duty to before you attempt to recover the e-mails, new ABA policy – unanimously adopted proper balance between effective law
preserve arises on notice of litigation, and the more likely it is that the court is going by our House of Delegates last August – enforcement and the preservation of
that that includes constructive notice – to think you have been too cavalier in supporting the privilege and opposing essential attorney-client and work prod-
when the defendant knew or ought to have what you turned over in the first place, and government policies that erode the privi- uct protections.
known that litigation looms. “Once a party that argues for a waiver of the privilege.” lege. The new ABA policy and other use-
ful resources on this topic are available Outreach To State And Local Bars
reasonably anticipates litigation,” he said, Or, in response to a question from the
“it must suspend its routine destruction on our Task Force website at In recognition of the nationwide impli-
audience: “Suppose there is no backup
policy through the imposition of a ‘litiga- cations of the privilege waiver problem,
tape, and e-mails are only saved locally,
tion hold.’” He went on to discuss the The ABA and its Task Force on Attor- the ABA has also reached out to state and
on computer hard drives. On notice of lit-
amendments to the Federal Rules of Civil ney-Client Privilege also have been local bar associations and other organiza-
igation, routine destruction must be sus-
Procedure that will likely become effec- working with a broad and diverse coali- tions throughout the country on this issue.
pended, and that means that individual
tive on December 1st of this year, noting tion of influential legal and business On January 31 and again on May 2, 2006,
employees must be alerted not to destroy
that the current rules already cover elec- groups – ranging from the U.S. Chamber ABA President Greco sent a letter to hun-
their e-mails. They, however, may be the
tronic data. A key point here is that under of Commerce and the Association of Cor- dreds of state and local bar leaders across
very people who have a direct interest in
new FRCP 26(b)(2)(B), a party is not porate Counsel to the American Civil the country urging them to take the fol-
seeing that those e-mails never see the
required to provide electronically stored Liberties Union and the National Associ- lowing steps:
light of day. What to do? You may be well
information that it identifies as from ation of Criminal Defense Lawyers – in Establish Their Own Committees.
advised to surreptitiously photograph
an effort to modify both the Justice Several state and local bars – including
sources not reasonably accessible because what is on their hard drives before alerting
Department’s waiver policy and the 2004 the New York, California, Arkansas, Con-
of the undue burden of cost. In such event, them to the litigation.”
privilege waiver amendment to the Sen- necticut and Boston bars – already have
the burden shifts to the requesting party, The one criticism this reporter can
make concerning the seminar is that an tencing Guidelines to clarify that waiver established committees to educate them-
which is required to show good cause that
hour and a half is too brief a time to do of attorney-client and work product pro- selves on the issue and to assure that the
the need for discovery outweighs the cost.
anything but scratch the surface of this tections should not be a factor in deter- privilege is protected. The ABA is urging
Predictably, “good cause” will be the sub-
important and timely subject. The Metro- mining cooperation.5 Materials relating to the bars to establish committees or task
ject of further litigation.
politan Corporate Counsel proposes to at the work of the ABA and the coalition are forces and then coordinate their efforts
The form of production received con-
least attempt to rectify this state of affairs available at with those of the ABA Task Force.
siderable attention from Mr. Chinn. After
by interviewing these extremely capable acprivilege.htm. Contact Local U.S. Attorneys and the
a review of a variety of formats, he noted
practitioners in the near future. Please stay After receiving extensive written com- Justice Department. Just as the ABA
that “native format” – which includes
tuned. ments and testimony from the ABA, the wrote to Attorney General Gonzales, it is
metadata and embedded data – may well
coalition, numerous former senior Justice also urging state and local bars to write to
Department officials – including three their U.S. Attorneys urging them to adopt
former attorneys general from both par- waiver review procedures that do not
Coming in July: allow any requests, direct or indirect, for
ties – and other organizations, the Sen-
Project: Homeland Security tencing Commission voted unanimously waiver of the privilege and work product.
on April 5, 2006, to reverse the 2004 priv- Bar groups are also being encouraged to
And Crisis Management
ilege waiver amendment to the Sentenc-
ing Guidelines.6 The change will be Please turn to page 64