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Corporate Privilege and an Individual’s Right to Defend

Susan B. Heyman
85 Geo. Wash. L. Rev. 1112

A recent memo issued by the Department of Justice has shifted federal policy to ensure that individuals responsible for corporate wrongdoing are held accountable. No longer will federal prosecutors be satisfied with sanctions against corporate entities. This shift in focus, however, creates a new challenge which has, so far, received inadequate attention: how to reconcile the employee or officer’s right to present an advice-of-counsel defense and the corporation’s right to assert the attorney-client privilege. Under many federal statutes designed to deter and punish corporate wrongdoing, a prosecutor or plaintiff must demonstrate that the defendant acted with the requisite mens rea. If an employee can establish that she acted on advice of counsel, she may have a defense to liability. But if the corporation can assert attorney-client privilege, precluding her from introducing the content of her attorney-client communications, the employee may be unable to mount an effective defense.

Judicial efforts to resolve the conflict between corporate and employee interests have been inadequate. In the civil context, especially, courts have recently declined to protect employee interests, holding that the employee’s right to present a defense should never trump the corporation’s right to maintain confidentiality. Reform is needed to better protect the interests of officers and employees. Fairness dictates that courts should condition a corporation’s ability to assert privilege on an agreement to indemnify an employee deprived of the right to assert a legitimate advice-of-counsel defense. Although not perfect, this solution best balances the interests of corporations and employees.

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