Upjohn's independent accountants discovered that a foreign subsidiary had made payments to foreign officials to secure business. Upjohn's general counsel, after consulting with management and outside counsel, conducted an internal investigation by sending questionnaires to foreign managers and interviewing employees about the payments. Upjohn disclosed preliminary information to the SEC and the IRS began investigating the tax consequences. When the IRS issued a summons for the questionnaires and interview notes, Upjohn refused, claiming attorney-client privilege and work-product protection.
Does the attorney-client privilege protect communications between corporate counsel and lower- or middle-level employees made during an internal investigation, and does the work-product doctrine apply against an IRS summons in a tax investigation?
The attorney-client privilege protects confidential communications by corporate employees to corporate counsel when made at the direction of corporate superiors so the corporation can obtain legal advice, and the privilege is not limited to a corporation's 'control group.' The work-product doctrine applies in IRS summons enforcement proceedings, and opinion work product receives especially strong protection.
Yes. The Court rejected the control-group test and held that the employee communications in Upjohn's internal investigation were privileged. It also held that the work-product doctrine applies to IRS summons enforcement and that the interview notes and memoranda were not subject to compelled disclosure on this record.
The control-group test undermined the purpose of the attorney-client privilege because corporate counsel often must gather facts from employees outside top management in order to give informed legal advice. The communications here were made to counsel acting as such, at the direction of superiors, concerned matters within the employees' duties, and were understood to be for obtaining legal advice for the company. The Court also concluded that Hickman v. Taylor's work-product protection extends to summons enforcement proceedings because forcing disclosure of attorneys' notes and mental impressions would chill preparation for potential litigation. The IRS had not shown the substantial necessity required to overcome that protection, particularly as to counsel's mental impressions and legal theories.
Upjohn is the leading Supreme Court case on corporate attorney-client privilege. It rejected the narrow control-group test and established a functional approach protecting employee communications made to enable counsel to advise the corporation, a foundation for modern internal investigations and corporate compliance practice. It also confirmed strong work-product protection in investigative settings under Hickman v. Taylor, 329 U.S. 495 (1947), and built on the privilege principles discussed in Fisher v. United States, 425 U.S. 391 (1976), and Trammel v. United States, 445 U.S. 40 (1980).
Hickman v. Taylor, 329 U.S. 495 (1947) |
Abstain |
Fisher v. United States, 425 U.S. 391 (1976) |
Abstain |
Trammel v. United States, 445 U.S. 40 (1980) |
Abstain |
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