ACC filed an amicus with the US Supreme Court on January 27, 2010 in the Textron case. This is the third brief we've filed in this matter as it's cut a tortuous path through the appeals and circuit courts; the press release we issued recounts it all for those inclined to read it.
The case is about whether the attorney work product doctrine extends to the protections of an in-house lawyers' internal analysis and notes regarding a proposed tax position the company was considering and that the IRS eventually challenged. This case, and I've done many of them for ACC, makes me so hoppin' mad that I decided I needed to share my pain with all of you. (You're welcome.)
Let's remember that attorney-client privilege protects the client's right to confidentiality of communications with their lawyers. It protects the conversation, the request for advice, and the delivery of the advice by the lawyer. Work product doctrine is an offshoot of privilege, but not the same thing: it protects the attorney's mental impressions and analysis, and is limited to protecting that which the attorney works on that was prepared in anticipation of litigation.
Way back in the dark ages when the US Supreme Court defined the concept of work product protections in Hickman, the concept of "in anticipation of litigation" was perhaps narrower. Most companies didn't have in-house legal staffs and not much work was done in the field of preventive law or compliance practice by firms or departments, in part because there wasn't so much regulation to comply with, and in part because companies didn't need to call a lawyer until someone sued them. But courts from the Supremes on down have broadened the parameters of work product protection as the complexity of corporate legal practice has expanded: recognizing the important role that lawyers play in helping their clients navigate regulation and a litigious world, and knowing that companies should make decisions on a daily basis with litigation and risk avoidance in mind, courts in every circuit have issued opinions recognizing that lawyers not only do, but should be working 24/7 in anticipation of litigation, even if the case has not yet or hopefully may never be filed.
In today's world, pretty much everything an in-house counsel does is in preparation for real or potential litigation.
So for the First Circuit opinion to suggest that an in-house lawyer analyzing the risk and best practices his client must consider when adopting this or that tax position isn't acting in anticipation of litigation but rather is just some kind of business-not-legal number-cruncher is just silly. It ignores reality. And the public policy implications for lawyers and clients (as well as the stakeholders who rely on the company's legal health) are dire. Read the brief if you don't understand why. And for those of you who already get it: time to get mad.
Can anyone out there honestly believe that this case would have been so decided or would have made it to the US Supreme Court as an ongoing debate if the lawyer providing that analysis was an outside counsel and not the in-house lawyer? Do you think that the IRS would have subpoenaed the XYZ AmLaw 50 New York firm partner to produce his files containing his legal and risk analysis of the tax position being considered by his client at Textron? Of course not. The IRS issued document requests for the company, and the in-house lawyers files were examined as part of that process: that which could be produced was, and that which was lawyer-client privileged or attorney work product protected was not. The court's decision to discount any protection for the in-house lawyer's work product shows that they are laboring under the misguided belief that in-house lawyers somehow aren't really lawyers, but some kind of non-objective, non-professional, quasi-business functionaries who don't quite qualify for the same status and protection we would afford to outside counsel at firms.
While I recognize that many in-house counsel are extremely business savvy and have provided increased value to their clients by approaching their legal practice with an institutional and deep knowledge of the company and business which is their client, and that indeed, some in-house lawyers carry responsibilities in their job that aren't legal, that’s not what’s relevant here when discussing these attorneys' legal work papers and analysis. The fact that they deeply understand their client doesn't mean that in-house counsel are not lawyers or that their work product isn't just as clearly worth protecting as the work product of lawyers in outside firms. Most outside counsel I know spend a lot of time and energy trying to assure everyone who will listen that they are business savvy and able to help their clients fulfill business needs as an "institutional" member of the client company team. This is simply a surreal conversation to be having if you're an in-house lawyer in the 21st century.
Many of you have (been unfortunate enough to have) heard me deliver my "privilege is under attack" speech or have read my previous diatribes; maybe you've followed and recognized ACC's highly focused and very successful efforts at pushing back abuses by prosecutors and regulators of corporate rights to assert the privilege when under investigation; perhaps you recently joined us in demanding protections for the risk analysis that lawyers provide to their finance folks in setting litigation reserves, which is under attack by the FASB folks looking to revise FAS 5: all of those efforts, crucial as they are, pale next to the implications of this case. This is an attack on the most fundamental premises of a lawyer's value and work product: the ability of a lawyer to analyze the facts and the law to develop the guidance that clients need to do the right thing. And if this doesn't get fixed, your work product is about to become Exhibit A in your adversary's brief. Get on board, corporate legal community, and get involved! Your rights as a lawyer, your client's rights to confidential counsel, and the very underpinnings of value in your client relationships are at stake.
Contact me at hackett@acc.com
