Company’s Internal Investigation of Lawsuit Allegations Is Not Privileged Because No Lawyers Were Involved, New York Court Rules

geralt [Public domain, CC0 1.0 (], via PixabayThe attorney-client privilege, which safeguards communications between an attorney and a client, is a cornerstone of our legal system. Attorneys must maintain a high standard of confidentiality, and the attorney-client privilege builds on this by stating that a lawyer may not be compelled to testify about communications with a client, or to disclose such information in response to a subpoena or other demand. The privilege can apply to almost any sort of legal matter, not just communications related to litigation. Business clients face complicating factors that may not be present for individuals. For example, an employee of a business must be authorized to speak on behalf of the business in a conversation with the business’ attorney for the conversation to be privileged. A New York federal court issued a ruling earlier this year addressing whether documents transmitted by a business to its attorney constituted a privileged attorney-client communication. It held that the documents, which were not prepared by legal counsel for the business, were not privileged. Wultz v. Bank of China Ltd., No. 1:11-cv-01266, opinion and order (S.D.N.Y., Jan. 21, 2015).

The lawsuit’s claims arise from a suicide bombing in Tel Aviv, Israel in 2006. The plaintiffs, whose son died in the bombing, allege that the person responsible was a Bank of China (BOC) customer, and that BOC facilitated the attack by executing millions of dollars in wire transfers for the person. The documents at issue in the court’s recent order reportedly describe an internal investigation by BOC into the lawsuit’s allegations. The plaintiffs’ counsel sent a letter to BOC’s New York branch (BOC-NY) in January 2008, stating an intention to file suit in connection with the bombing and inviting BOC to enter into settlement negotiations. BOC-NY sent the letter to BOC’s head office (BOC-HO) in Beijing. The General Manager of the bank’s Legal Compliance Department in Beijing instructed the Chief Compliance Officer to investigate the plaintiffs’ allegations. According to the court, neither of these individuals were attorneys.

While BOC-HO was conducting an investigation, the Chief Compliance Officer at BOC-NY, who was also not an attorney, was conducting a parallel investigation. The two offices exchanged information and preliminary findings, and the executive at BOC-HO directed the New York office to continue investigating. The bank branch in Guangdong, China (BOC-GD) also conducted an investigation. At some point between January and March 2008, BOC executives discussed retaining outside counsel, but they did not formally do so until the end of March. No one involved in the investigation up to that point was an attorney, nor was any inside counsel for BOC involved in the investigation.

The plaintiffs first filed suit in August 2008. They requested copies of the documents prepared in the course of BOC’s investigation, including documents from BOC-HO, BOC-NY, and BOC-GD. The defendant objected to the request, and the plaintiffs moved to compel the defendant to produce the documents. The court granted the plaintiffs’ motion, ruling that the documents were not an attorney-client communication, nor were they prepared for litigation. It cited federal common law, which states that the attorney-client privilege protects communications between a lawyer and a client, made in confidence, for the purpose of giving or receiving legal advice. BOC’s internal investigation did not meet these criteria, the court held, noting that no attorney directed, or even requested, the investigation.

Business law attorney Samuel C. Berger represents New York and New Jersey entrepreneurs, business owners, and businesses. We offer fixed-fee legal-service packages covering a variety of legal matters. Contact us today online or at (212) 380-8117 to schedule a confidential consultation with an knowledgeable and experienced business advisor.

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Photo credit: geralt [Public domain, CC0 1.0], via Pixabay.