Avoiding Common Privilege Pitfalls in Workplace Investigations

Investigations conducted by attorneys receive attorney-client privilege and work product doctrine protection under California law—in most cases. However, these protections have requirements and exceptions that can open them up to attack, and defense counsel may find themselves battling discovery requests for privileged investigation files or even opposing motions to compel. As such, in-house counsel, defense counsel, and investigators should be aware of common “privilege pitfalls” to assure such protections remain until voluntarily waived.

Pitfall #1: Inadequate Engagement Letters

The seminal case on this subject clarifies that attorney-client and work product privileges apply to investigations conducted by attorneys providing legal services. In City of Petaluma v. Superior Court^[1], the Court of Appeal expressly held that an outside counsel’s investigation constituted legal services to a client, so the attorney-client and work product privileges applied. While the plaintiff argued that the investigator was not providing legal advice, the court held that attorney-client and work product privileges apply where a lawyer is providing a “legal service or advice.” Here, the attorney was not simply acting as a fact-finder but also providing legal services, as she was “expected to use her legal expertise to identify the pertinent facts, synthesize the evidence, and come to a conclusion as to what actually happened.” ^[2]

As such, courts often look to the facts surrounding the investigator’s engagement and/or the engagement letter itself to determine whether attorney-client privilege applies.

Unpublished cases show a recent trend of privilege challenges and how judges are receiving such challenges. For example, in Amgwerd v. Department of Justice^[3], a plaintiff claimed an investigator was not acting as an attorney because she was not giving legal advice “in anticipation of litigation.” The court, citing to City of Petaluma, held that preparation for litigation is not required for the attorney-client privilege to apply. Because the investigator’s report was meant to answer factual and legal questions regarding the plaintiff’s discrimination and retaliation allegations, the court concluded that “the communication was a legal consultation, regardless of whether litigation was contemplated.” ^[4]

Following the example set in City of Petaluma, investigators and clients should ensure their engagement letters clearly establish an attorney-client relationship, as well as specify that the investigator will provide professional legal services using the investigator’s employment law expertise. Adding that the purpose of the investigation is for regular counsel to provide legal advice to the client may strengthen future privilege claims. Clearly identifying reports and other documents in the investigation file as privileged and confidential attorney work product can also help reiterate the parties’ intention for attorney-client protections to apply.

Pitfall #2: Failing to Plan Litigation and Discovery Strategy Early

The defenses asserted early in litigation can result in a waiver of the attorney-client privilege covering investigations, even without explicitly stating so. In Wellpoint Health Networks, Inc. v. Superior Court, the Court of Appeal noted that a defendant’s attorney-client privilege over its investigation could be waived if the defendant used the investigation’s adequacy as a defense, thus putting the investigation at issue. ^[5]

Courts have since maintained that invoking the adequacy of the investigation in litigation waives the privilege. For example, in Paknad v. Superior Court, the Court of Appeal held that the defendant-employer waived the attorney-client privilege when it responded to form interrogatories that it had “thoroughly investigated every allegation” by hiring an outside investigator. In line with the ruling in Wellpoint, the court found the company had confirmed that its investigation would be a defense through its discovery response, so it had waived attorney-client privilege. ^[6]

However, whether a waiver has occurred and how much was waived is fact dependent. Shortly after the California Court of Appeal decided Wellpoint, it issued Kaiser Foundation Hospitals v. Superior Court. The Kaiser court specifically held that “Wellpoint did not make a blanket holding that the attorney-client privilege and the work product doctrine are waived in every case that an employer puts the adequacy of its prelitigation investigation at issue.”^[7] Specifically, in Kaiser, the employer had produced an investigation file, except for the (non-attorney) investigator’s communications with counsel, citing privilege. The plaintiff moved to compel the communications, stating that the adequacy of the investigation was at issue. However, the court held that those communications were not required to evaluate the investigation’s adequacy, so they remained privileged.

Other factors can allow the investigation to remain privileged. For example, courts may require a direct connection between the employer’s defense and the investigation’s adequacy to find a waiver of privilege. ^[8] In City of Petaluma, decided after Wellpoint, the court held that raising an avoidable consequences doctrine does not waive privilege for an investigation conducted after the employee left employment. Because the avoidable consequences defense relates to what the employee and employer did (or did not do) during the plaintiff’s employment, the adequacy of a post-employment investigation would not be at issue. Similarly, privilege has been upheld when the employer solely acknowledges the fact that an investigation occurred, without relying on the investigation’s results. The claims at issue in the lawsuit must also be related to the claims in the investigation to constitute waiver.

As such, it is important for in-house and defense counsel to keep in mind how certain actions may lead to a privilege waiver when developing their litigation strategy. Counsel should also have discussions with their clients early in the litigation process to discuss the pros and cons of waiving privilege as to an investigation.

Pitfall #3: Not Knowing What Documents Are Subject to Waiver

Even if attorney-client and/or work product privileges are waived, voluntarily or involuntarily, counsel should remember that not all documents necessarily lose privilege. Counsel should still analyze each document before producing it to evaluate whether some protections may remain. For example, communications with employees, or parts of investigation reports that include an attorney’s mental impressions and conclusions regarding plaintiff’s claims, may still retain some work product protection.

Communications with counsel—in-house or defense—should be considered on a case-by-case basis as well. Most likely, privilege would only be waived on documents that pertain to the investigation’s adequacy, so mere status updates from an investigator to counsel would likely not lose their protection.

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By keeping these cases and trends in mind from the very outset of an investigation or litigation, investigators and counsel can better avoid inadvertently waiving attorney-client privilege and work product protection over investigations. Practitioners can also use these principles to limit the reach of such waivers, when they do apply.