Since the 1981 Supreme Court decision in Upjohn Co. v. United States, it has been common practice for counsel conducting internal investigations to provide witnesses, including company employees, with "Upjohn warnings" or "Corporate Miranda warnings" to ensure that the witnesses understand no attorney-client privilege exists between the witnesses and the interviewing attorney. 449 U.S. 383 (1981). In United States v. Nicholas, No. Cr. 08-00139 (C.D. Cal. Apr. 1, 2009), the court found statements made by Broadcom's (the Corporation) chief financial officer (CFO) to outside counsel (the Firm) during the course of the internal investigation could not be used by the government in the CFO's subsequent criminal trial, because the CFO had a reasonable belief that he had an attorney-client relationship with the Firm.
The Firm was retained simultaneously to conduct an internal investigation and to represent the Corporation's CFO in connection with two related shareholder lawsuits. During the internal investigation, the Firm interviewed the CFO but failed to provide all Upjohn warnings and obtain his informed consent to its dual representation of the CFO and the Corporation. The Corporation decided it was in its best interest to cooperate with the government and instructed the Firm to disclose the CFO's statements. The CFO did not consent to the disclosure and objected to the use by the government on the grounds that his statements were privileged attorney-client communications.
The court had "serious doubts whether any Upjohn warning was given" since the CFO could not remember having received one, no warning was referenced in the Firm's notes, and no written record of the warning existed. In addition, even if an Upjohn warning were provided, the substance of the warning supposedly given was "woefully inadequate under the circumstances."
In a proper Upjohn warning, interviewing counsel should clearly inform the witness that counsel represents the corporation and not the witness; no attorney-client privilege exists with the witness; and the witness' statements may be communicated to third parties, including the government, if disclosure is in the best interest of the corporation. Recently, a Stanford Financial Group officer filed suit against one of the company's outside attorneys for legal malpractice and breach of fiduciary duty after the attorney allegedly failed to provide the officer with a proper Upjohn warning. However, even a proper Upjohn warning may be insufficient, as in this case, where the employee had a separate, then-current attorney-client relationship with the counsel, "to suspend or dissolve an existing attorney-client relationship and to waive the privilege." Providers should be aware of attorney-client privilege issues when conducting internal investigations and the risk of malpractice, breach of fiduciary duty and ethics rules violations by attorneys, including in-house counsel.