Corporate officers may assert their personal attorney-client privilege over matters discussed with corporate counsel not related to their role as officers of the corporation. In some instances, however, the personal legal problems of employees are inextricably intertwined with those of the corporation. The case of United States v. Norris, 722 F. Supp. 2d 632, 637 (E.D. Pa. 2010), affirmed, 2011 WL 1035723 (3rd Cir. Mar. 23, 2011) is the latest example of the importance of knowing who counsel actually represents and the consequences of getting it wrong.
Ian P. Norris was the one-time CEO of Morgan Crucible Company plc (“Morgan”), a British carbon and ceramic products manufacturer. In April 1999, a United States subsidiary of Morgan, Morganite, came under investigation by the United States Department of Justice Antitrust Division (“DOJ”) for allegedly participating in a price-fixing conspiracy. During the course of the DOJ’s investigation, Morganite was served with a federal grand jury subpoena. Morgan retained an outside law firm to handle the response to the subpoena and to conduct an internal investigation. The firm assigned a partner (Keany) to work on the grand jury matter.
During interviews with Norris and other Morgan executives, Keany discovered that Norris’s subordinates had drafted meeting notes concerning the alleged “price-fixing meetings” with business competitors. Although Morgan had no duty to produce foreign-based documents, Keany recommended producing the notes to the DOJ because they supported Morgan’s position that any such meetings were convened for lawful reasons. Norris agreed, and Keany produced the meeting summaries with Morgan’s blessing in December 2000.
Four years later, a federal grand jury indicted Norris for “concoct[ing] an elaborate scheme to mislead and obstruct [the DOJ’s] investigation.” Following his extradition to the United States to stand trial, the government moved in limine for an order permitting Keany to testify against Norris. The government argued that Morgan had waived its attorney-client privilege as to communications with Keany regarding his previous representation of the company. Norris claimed that Keany had represented him individually, and that Norris therefore had a personal claim of privilege regarding his communications with Keany.
To determine whether Norris could assert the attorney-client privilege, the United States District Court for the Eastern District of Pennsylvania applied the five-part test adopted In the Matter of Bevill, Bresler & Schulman Asset Mgmt. Corp., 805 F.2d 120 (3d Cir. 1986). In Bevill, the Third Circuit held that
a corporate officer must satisfy the following test to assert a personal claim of attorney-client privilege as to communications with corporate counsel: First, they must show they approached [counsel] for the purpose of seeking legal advice. Second, they must demonstrate that when they approached [counsel] they made it clear that they were seeking legal advice in their individual rather than in their representative capacities. Third, they must demonstrate that the [counsel] saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise. Fourth, they must prove that their conversations with [counsel] were confidential. And, fifth, they must show that the substance of their conversations with [counsel] did not concern matters within the company or the general affairs of the company.
Bevill, 805 F.2d at 123.
After holding an evidentiary hearing, the court found that Norris had failed to satisfy the Bevill factors. The court reasoned that (1) Morgan had retained Keany to represent it (not Norris) during the grand jury investigation; (2) Keany never believed he was representing Norris individually and had even advised Norris to get his own counsel; and (3) all of Keany’s communications with Norris concerned his role as Morgan’s CEO as well as Morgan’s conduct and exposure in the grand jury investigation. Accordingly, the court granted the government’s motion and allowed Keany to testify.
After a seven-day trial, a jury convicted Norris of conspiracy to obstruct justice. Norris appealed his conviction to the Third Circuit. In affirming the conviction, the court of appeals swiftly rejected Norris’s privilege claim. In one paragraph, the court concluded “that Norris failed to meet his burden in asserting his privilege pursuant to the [Bevill] test,” and that there was “no clear error in the District Court’s holding based on the facts elicited in the evidentiary hearing.” Norris is currently serving 18 months in the CI Rivers Correctional Institution in Winton, North Carolina.
Norris may have a chilling effect on communications between executives and counsel during internal investigations. Corporate officers are likely to become more circumspect in their discussions with counsel regarding some matters for fear that disclosure would eviscerate any individual claim of attorney-client privilege they might have as to others. This will be problematic for companies going forward, especially where, as in Norris, we see government regulators more aggressively policing fraud and anticompetitive behavior in the private sector.