On January 13, 1981, the Supreme Court decided Upjohn Co. v. United States. Thirty-seven years later, it’s hard to think of a judicial decision that has had a more significant effect on internal investigations. The Court’s opinion made no mention of any particular warning procedure, instead focusing on the application of the attorney–client privilege to corporate clients. But it prompted the near-universal practice of lawyers who are conducting internal investigations advising corporate employees that they represent the company, rather than the employee, and that the company may waive the privilege at any time. There are countless articles highlighting the importance of providing the Upjohn warning while conducting internal investigations. I won’t rehash those points here. Instead I want to introduce a few fun factoids about the case itself, and the players involved in litigating it.
Upjohn was a pharmaceutical company. One of its foreign subsidiaries made some fishy payments to foreign government officials to secure business (we’ll undoubtedly explore issues related to the Foreign Corrupt Practices Act in future posts). When the company’s general counsel found out, he and some outside lawyers investigated by—among other things—sending a questionnaire to employees seeking mostly factual information, and also interviewing those employees. After Upjohn voluntarily reported the suspicious payments, the IRS launched an investigation and sought production of the questionnaires and of the attorneys’ interview notes. Upjohn claimed that those documents were privileged and refused to produce them, prompting the litigation. The Sixth Circuit ruled against Upjohn, following the then-majority rule that only the communications between lawyers and the “control group”—a small number of senior leaders responsible for directing the company’s actions in response to legal advice—were privileged.
Both sides were well represented before the Supreme Court. The late Daniel Gribbon, then a partner at Covington & Burling, argued on behalf of Upjohn. A veteran of numerous Supreme Court arguments and a former law clerk to the legendary Learned Hand, Gribbon had a distinguished career. His daughter, Diana Gribbon Motz, is currently a judge on the U.S. Court of Appeals for the Fourth Circuit.
On the other side was a fellow Covington alum, Lawrence Wallace. A long-time member of the U.S. Solicitor General’s office, Upjohn was one of 157 arguments Wallace made before the Supreme Court, putting him on par with the likes of John W. Davis and Edwin Kneedler as among the country’s most experienced Supreme Court advocates since 1900. According to a 1994 profile, Wallace spent decades arguing before the Court wearing a morning coat—the traditional attire of members of the Solicitor General’s office—he had purchased secondhand for $13. I can’t help but admire his thrift.
Despite Wallace’s skill, it was Gribbon who carried the day, winning via unanimous opinion authored by then-Associate Justice Rehnquist. A significant focus of the Justices’ questions for Gribbon was the largely factual nature of the Upjohn attorneys’ inquiry. Couldn’t anyone ask those same factual questions? If so, why should the lawyers’ notes and questionnaires be privileged? Gribbon repeatedly emphasized that the purpose of the investigation was to render legal advice, and that no responsible lawyer could give sound advice without understanding the facts. He also suggested that a lawyer may be able to ask different questions than a non-attorney could—a potentially dubious proposition, but one that the Justices, all lawyers themselves, were receptive to. When Gribbon said that a trained lawyer could bring to bear some insight in the investigation that others may not, Justice Thurgood Marshall said that he was “glad to see somebody else recognize the difference between a lawyer and a member of the bar.”
Ultimately, the Court rejected the control group test and instead adopted a more functional test that turned on the purpose of the communications between a corporation’s lawyer and the corporation’s employees. Frequently, the Court reasoned, the people from whom a corporation’s lawyer must gather the necessary information to give legal advice will be outside the control group. Also, the people who will be most directly responsible for carrying out the company’s decision—based on the legal advice given—will also be outside the narrow control group. Lawyers need to have full and frank discussions with those other employees to do their jobs and represent their client.
Upjohn has now been cited by more than 4,000 other judicial decisions, a testament to its importance. Moreover, judicial citations alone don’t account for the innumerable investigations that, though never litigated, were conducted pursuant to the principles that Upjohn established. It’s a worthy choice for our first look back at a day in white collar history.