The Supreme Court said yesterday significantly expanded corporations' abilities to withhold information in government investigations and other legal proceedings by invoking the lawyer-client privilege of confidentiality.
The unanimous ruling, upholding a pharmaceutical company's resistance to a demand for data on overseas bribes, was the court's first direct attempt to define the privilege beyond its well-understood application to individuals and their lawyers. The question was who and what information is covered by the confidentiality when an attorney represents not just one person, but a company or agency with hundreds or thousands of employes.
The court rejected the government's plea for a narrow protection of communications between the lawyer and only the top executives who get legal advice. It ruled, instead, that a lawyer's contacts with any employe may be covered. The government had argued that approach might create a "zone of silence" around evidence required for investigations and civil suits.
In an opinion of great importance to lawyers and businesses, the court went out of its way to say its holding was limited to Internal Revenue Service summons. But government lawyers considered it a major defeat with potential application not only to corporations under investigation for such things as overseas bribes but to one government agency under investigation by another. A low-level federal official, for example, might try to use the opinion to withhold Watergate-type information.
The Upjohn Corp. had contended its broad lawyer-client privilege argument -- that it protects not just top officials but any communications on the subject being investigated -- would encourage voluntary internal probes of corruption and voluntary compliance with the law.
The case stemmed from Upjohn's refusal to comply with an IRS demand for information gathered by its corporate attorney conducting just such a voluntary internal probe. In January 1976, the pharmaceutical company discovered that one of its subsidiaries had made payments to foreign government officials in order to obtain business. The corporate lawyer sent a questionnaire to other employes to find out if there had been additional payments made.
Upjohn voluntarily told the Securities and Exchange Commission about the payments. The company was then confronted by a demand for the questionnaires and related documents by the IRS, which wanted to conduct its own investigation.
Upjohn contested the summons, arguing the material was communication between its lawyer and his client (the employes who filled out the questionnaires) and thus protected by the traditional attorney-client privilege.
The government said the privilege protected communications only between the lawyer and the top executives in control of company decisions. Two appeals courts agreed. Upjohn, however, argued that subject matter of the communication -- not the level of the employe -- determined its confidentiality. Any confidence between the lawyer and any employe is protected so long as the subject was the overseas payments, Upjohn said. The 6th U.S. Circuit Court of Appeals ruled in favor of the government. The Supreme Court, in an opinion written by Justice William Rehnquist, reversed the lower court.
"The privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice," Rehnquist said.
"Middle-level -- and indeed lower-level -- employes can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employes would have the relevent information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties."
In other actions yesterday:
A unanimous court ruled that improper contact between a defendant and law enforcement officials should not result in dismissal of an indictment unless the contact demonstrably hurt the chances of a fair trial.The case, U.S. vs. Morrison, concerned efforts by federal drug agents to alienate the defendant from her lawyer by criticizing him in private conversation.
A 7-to-2 court ruled in Watkins vs. Sowders that judges need not always hold hearings away from the jury to determine whether disputed evidence can be introduced at a trial. The evidence in question was the courtroom identification by a witness of a defendant as the man involved in a holdup-shooting.