Earlier this month, the U.S. Court of Appeals for the Sixth Circuit granted FirstEnergy Corporation’s petition for a writ of mandamus and vacated a district court order compelling production of materials generated during two internal investigations conducted by outside counsel in the wake of a high-profile bribery scandal. The district court below had adopted a special master’s recommendation requiring FirstEnergy to produce “all previously withheld documents related to” the investigations and to permit witness questioning about them. The Sixth Circuit found that the materials were protected by the attorney-client privilege and work product doctrine.

Regarding attorney-client privilege, the Sixth Circuit held that the discovery sought was protected by Upjohn Co. v. United States, 449 U.S. 383 (1981). The court emphasized that the privilege attaches to confidential communications made for the purpose of securing legal advice, regardless of whether the company later uses the advice to inform business decisions. The record demonstrated that both law firms were retained to investigate potential wrongdoing and to advise on the company’s response to actual and anticipated litigation. 

The Sixth Circuit also rejected the district court’s conclusion that the attorney-client privilege did not apply because the investigations were initiated for business advice, explaining that what matters under the privilege is whether a company seeks legal advice, not what it later does with that advice. “Over and over,” the Sixth Circuit found, “FirstEnergy showed that it primarily sought and received legal advice from its attorneys throughout the investigations.” 

Regarding work product, the Sixth Circuit held that documents and materials generated in the investigations were protected work product because they were prepared “in anticipation of” litigation. The surrounding circumstances and timeline of events—including criminal subpoenas, regulatory investigations, and ultimately, multiple civil suits—established that actual and anticipated legal action was the driving force behind the law firms’ investigations. The claimants (plaintiffs in the securities action) themselves conceded that “no internal investigations would have taken place but for the Department of Justice investigation.” The Sixth Circuit further found that the district court’s conclusion that only “employment decisions and business concerns” prompted the investigations ignored practical realities and the “intensely practical” nature of the work-product doctrine. 

FirstEnergy is consistent with Delaware courts’ general approach to the attorney-client privilege and work product doctrine in the context of internal investigations conducted by counsel in response to imminent legal threats. The Sixth Circuit in FirstEnergy did not confront the fiduciary exception to the attorney-client privilege as established in Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970). That exception “allows stockholders of a corporation to invade the corporation's attorney-client privilege in order to prove fiduciary breaches by those in control of the corporation upon showing good cause.” Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Tr. Fund IBEW, 95 A.3d 1264, 1276 (Del. 2014).  

In Delaware, the Garner doctrine may be applied to plenary stockholder/corporation proceedings as well as books-and-records actions. Id. at 1278. “Delaware courts have agreed with the United States Supreme Court’s characterization of the attorney-client privilege as ‘critical’ to ‘encourag[ing] full and frank communication between attorneys and their clients and thereby promot[ing] broader public interests in the observance of law and administration of justice,’ including where the client is a corporation.” Id. (quoting In re Lyle, 74 A.3d 654 (Del. 2013) (Table)). Accordingly, “the Garner doctrine … is narrow, exacting, and intended to be very difficult to satisfy.” Id. Thus, Garner, and Delaware courts’ books-and-records and privilege jurisprudence generally, in no way endorse the kind of unlimited, wide-ranging disclosure of privileged materials authorized by the trial court in FirstEnergy.