Pennsylvania Appeals Court Addresses Scope of Attorney-Client Privilege in Corporate Investigations

Controversy occurs at work all the time, and as a result, employees file lawsuits. Pennsylvania businesses often struggle with how to properly investigate these lawsuits, especially with how to obtain and keep confidential statements from employee witnesses. Now a Pennsylvania appellate court has provided guidance.

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Karen Newsuan was working at a Republic Services, Inc. recycling center when a front-end loader crushed her leg, requiring it to be amputated.  Newsuan sued Republic and other owners/operators for negligence.  Sixteen employees witnessed the incident. Republic’s corporate counsel interviewed twelve of them about the incident, taking notes at the interviews. At the end of each interview, corporate counsel asked the former/current employee if they wanted corporate counsel to represent them.  

Newsuan’s attorney requested all of the employees’ statements, but Republic’s counsel refused to produce them, claiming that all of the employee witnesses agreed to be represented by corporate counsel. They invoked attorney-client privilege with respect to the communications made during their interviews with the former/current employee fact witnesses.  Notably, Republic’s corporate counsel admitted that during the interviews, they did not inform the former/current employee fact witnesses about any potential conflicts the company lawyers may have in simultaneously representing the company and the witnesses, nor did they obtain an informed waiver of any conflicts. 

The trial court rejected the existence of a purported attorney-client relationship between Republic’s corporate counsel and the former/current employees. It ruled that Republic had to produce the former/current employee contact information and all written communications and notes of oral interviews occurring prior to corporate counsel’s offer of representation.

Republic appealed, arguing that the statements represent privileged communications because its corporate counsel and each employee formed a specific attorney-client relationship at the end of the interviews. Republic also argued that counsel’s notes taken during the interviews were also protected under the work product doctrine.  The Superior Court agreed that the violation of rules of professional conduct by Republic’s corporate counsel prevented the direct formation of an attorney-client relationship between counsel and the employees. 

However, it also held that Republic possessed a privilege over the communications because its corporate counsel sought them to assist in providing legal advice to Republic in the lawsuit. As such, the particular communications shared between Republic’s employees and corporate counsel fell within the scope of Republic’s attorney-client privilege and did not have to be disclosed. 

The court emphasized that Republic’s corporate counsel made clear to the employees that predominant corporate-interest purpose of the interviews.  Also, the court observed that while the resultant attorney-client relationship that corporate counsel and the employees believed they had formed was invalid for reasons of potential conflict of interest without informed consent, the apparent agreement to keep their communications confidential satisfied the confidentiality requirement of attorney-client privilege. The court did note that the privilege does not protect underlying facts, and therefore allowed Newsuan to seek ex parte interviews with each employee – to the extent they are not represented by counsel – regarding their factual observations of the incident and seek further discovery through depositions and interrogatories.

The court also held that Republic’s corporate counsel’s notes regarding his communications with the employees were protected by the work product doctrine, which precludes disclosure of the mental impressions of an attorney or their conclusions, opinions, memoranda, notes or summaries, legal research or legal theories.  In doing so, it noted that the work product doctrine is closely related to the attorney-client privilege but broader because it protects any material constituting the mental impressions and processes of an attorney acting on behalf of a client, whether prepared in anticipation of litigation or not.

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Newsuan is an odd case with odd facts. Nevertheless, the decision serves as an important reminder for corporate counsel of the potential privilege pitfalls with regard to conducting interviews of former and current corporate employees. Corporate counsel should remember that:

  1. Their client is not the individual they are interviewing, but the corporate entity;
  2. Counsel should inform the interviewee that they are not their personal attorney; and,
  3. In order to secure privilege protection, be clear from the outset of the interview that its purpose is to assist them in advising the corporation on legal matters.   

The Grail Law Firm advises business victims of crime, conducts internal investigations, and also defends suspects and persons accused of criminal and other bad acts, and also defends companies and professionals in federal and state regulatory enforcement actions.

Upcoming Event: The First Amendment

Attorney Efrem M. Grail will present on the First Amendment as it pertains to a free press at the McKeesport Community Newsroom, as an initiative of the Center for Media Innovation at Point Park University Center. The Community Newsroom supports citizen journalism and storytelling by residents of the Mon Valley’s largest city and surrounding areas.

“Freedom of the press is irrelevant if journalists ignore the facts and voters ignore the news, and each accepts “alternative facts” as anything other than falsehoods,” said Attorney Grail. “Liberty requires a dynamic partnership between a media committed to exposing truth responsibly and consumers willing to pay them for the effort, even when they occasionally get it wrong.”

The presentation, to be held on Thursday, October 17, 2019 at 6:00 pm at the Tube City Center, will include discussion on freedom of information, libel, and how to file under Pennsylvania’s Right-to-Know Law. The event is free and open to the public. More information is available on the McKeesport Community Newsroom website.

Attorney Grail is a Pittsburgh lawyer and former journalist who works on First Amendment speech, press and religion cases, in addition to his White Collar Criminal Defense practice.

 

Dispensing Controlled Substances from the Office: A Guide for Physicians

Given law enforcement’s current focus on combating the opioid epidemic, controlled substance-dispensing physicians are under increased scrutiny from local, state, and federal governments. Below is a brief overview of the law and regulations covering physicians’ office-based dispensing of controlled substances, specifically those pertaining to prescription drug monitoring, practice management, security, and diversion prevention.

  • Routinely monitor compliance with your state’s dispensing and PDMP laws.

Any physician dispensing controlled substances from their office must ensure their practice complies with the applicable federal laws and regulations, namely the federal Controlled Substances Act. They also must know and be in compliance with their respective state dispensing laws.  Some states prohibit physician dispensing, others restrict which controlled substances can be dispensed (or their quantity and frequency), while some states require dispensing physicians obtain an additional license, as well as follow their Board of Pharmacy regulations. Many states regulate who must hand the medicine to the patient, often mandating that only the physician can do so. 

More importantly, physicians dispensing controlled substances must know and comply with their respective state’s Prescription Drug Monitoring Program (“PDMP”) requirements. PDMPs are electronic databases that collect designated information on dispensed controlled substances. After conducting any PDMP mandated prescriber queries, approved physician dispensers must promptly report certain dispensed controlled substance information to their respective state’s PDMP.  In most states, dispensing physicians can delegate the PDMP query and data input to a few specifically identified practice employees.

State legislatures have also amended their state PDMP laws to make them more rigorous in light of the opioid crisis, and law enforcement and professional licensing boards are increasingly scrutinizing PDMP records to track controlled substance prescribing and dispensing rates.

  • Protect your practice from theft.

Dispensing controlled substances requires the implementation of a strong system of inventory control and medication security. Having these substances in stock places your practice at greater risk of a break-in and increases the possibility of employee theft.

All controlled substance dispensers are required to provide effective controls to guard against theft and diversion of them and must be bolted or cemented to the floor. Additional controls might include: a wall safe or locked steel cabinet; a storage unit alarm system; video surveillance of medicine storage locations; and employing security personnel. How substantial your security measures need to be is based on your practice location, the type of physical buildings it’s in, the type and quantity of controlled substances stored on the premises, the control of public access to the facility, the adequacy of practice’s alarms and detection systems, and the availability of local police protection.

If you do become a victim of theft, the theft must be reported to the DEA immediately, and may, depending on the state, have to be reported to additional regulatory and law enforcement entities, like the state medical board, state pharmacy board, or local law enforcement.   

  • Always prescribe medication for a legitimate medical purpose.

It goes without saying: both prescribers and dispensers are responsible for ensuring that controlled substances are issued for a legitimate medical purpose by a practitioner acting in the usual course of professional practice. A person who knowingly fills a prescription not issued for a legitimate medical purpose and not in the usual course of professional practice can be found civilly or criminally liable under the Controlled Substances Act. Enforcement actions can cost you your medical license, hospital privileges, DEA authorization to prescribe substances, and revocation of panel participation.

Some state courts have permitted individual controlled substance users who admittedly broke laws to obtain controlled substances to bring civil actions against their doctors and pharmacists for negligent prescribing and dispensing that allegedly caused the users’ drug addiction. Of course, a criminal conviction lead to a prison sentence and a hefty fine and possibly a restitution award.

In addition, malpractice insurance might not provide coverage or even a legal defense for a dispensing physician in a dispensing lawsuit because the court may find that the controlled substances were dispensed not for a legitimate medical purpose and not in the usual course of professional practice.  Such illegal conduct is usually not covered by insurance.  Physicians should contact their malpractice insurance carrier before dispensing controlled substances.

  • Check the background of your employees, train yourself and your staff on drug-seeking behavior, and restrict the number of employees with access to controlled substances.

In most cases, physician controlled substance dispensing removes the pharmacist from the prescription review process. Pharmacists often alert physicians to prescribing errors or a patient’s controlled substance prescription history, leading some to conclude that physician dispensing eliminates a crucial second check of the prescribed drug therapy, potentially increasing the chances of diversion. In light of this, physician controlled substance dispensers must be well trained in identifying drug-seeking behavior among their patients and must thoroughly train their employees in how to recognize it. They must screen prospective employees to ensure they do not have past controlled substance and/or theft felony convictions and can be trusted to work in a security stringent office. 

They should also restrict the number of employees who have access to controlled substances and the prescription and dispensing records.  Many instances of diversion start where a physician or the physician’s employee dispenses a controlled substance to a family member, a mistress, or fellow employee “off the books.” Never prescribe a controlled substance to anyone without logging its dispensation. Dispensers must ensure they and their staff are proactive in monitoring the practice’s patients, its drug supply, its PDMP reporting, and its internal records.

And if at all possible, avoid treating and prescribing a scheduled narcotic to anyone near and dear to you.

  • Don’t be afraid to dispense controlled substances, but be cautious.

Though the potential liability may dissuade practitioners from dispensing controlled substances, it’s possible to do so in a compliant and safe manner that greatly reduces the chances of diversion and law enforcement scrutiny. Consult with experienced counsel or compliance professionals for assistance. There are no ‘do-overs’ when it comes to the DEA so be sure to get it right the first time.