449 U.S. 383 (1981)
Upjohn Co. manufactures and sells pharmaceuticals in the United States and abroad.1 In January 1976, independent accountants conducting an audit of one of Upjohn's foreign subsidiaries discovered that the subsidiary had made payments to or for the benefit of foreign government officials in order to secure government business.2 The accountants informed Gerard Thomas, Upjohn's Vice President, Secretary, and General Counsel.3
Thomas is a member of the Michigan and New York Bars and had served as General Counsel for twenty years.4 Thomas consulted with outside counsel and R. T. Parfet, Jr., Upjohn's Chairman of the Board.5 It was decided that the company would conduct an internal investigation of what were termed questionable payments.6
As part of this investigation, the attorneys prepared a letter containing a questionnaire that was sent to all foreign general and area managers over the Chairman's signature.7 The letter noted recent disclosures that several American companies had made possibly illegal payments to foreign government officials.8 It stated that Thomas had been asked to conduct an investigation to determine the nature and magnitude of any such payments.9 Managers were instructed to treat the investigation as highly confidential and to send responses directly to Thomas.10 Thomas and outside counsel also interviewed the recipients of the questionnaire and thirty-three other Upjohn officers or employees.11
On March 26, 1976, Upjohn voluntarily submitted a preliminary report to the Securities and Exchange Commission on Form 8-K disclosing the questionable payments.12 A copy of the report was simultaneously submitted to the Internal Revenue Service.13 The IRS immediately began an investigation to determine the tax consequences of the payments.14 On November 23, 1976, the Service issued a summons pursuant to 26 U.S.C. § 7602 demanding production of the records described in the summons.15 The records included written questionnaires sent to managers of the Upjohn Company's foreign affiliates.16 They also included memorandums or notes of the interviews conducted in the United States and abroad with officers and employees of the Upjohn Company and its subsidiaries.17
Upjohn declined to produce the documents specified in the summons on the grounds that they were protected by the attorney-client privilege and constituted attorneys' work product prepared in anticipation of litigation.18 On August 31, 1977, the United States filed a petition in the United States District Court for the Western District of Michigan seeking enforcement of the summons under 26 U.S.C. §§ 7402(b) and 7604(a).19 The district court adopted a magistrate's recommendation that the summons should be enforced.20 Upjohn appealed to the Court of Appeals for the Sixth Circuit.21 The Sixth Circuit rejected the magistrate's finding of a waiver of the attorney-client privilege.22 However, it held that the privilege did not apply to the extent the communications were made by officers and agents not responsible for directing Upjohn's actions in response to legal advice.23 The court remanded to the district court for a determination of who was within the control group.24 In a footnote, the court stated that the work-product doctrine is not applicable to administrative summonses issued under 26 U.S.C. § 7602.25 The Supreme Court granted certiorari.26
Whether the attorney-client privilege protects communications made by corporate employees outside the control group to corporate counsel during an internal investigation?27
The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law.28 Its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.29 The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer being fully informed by the client.30
Yes. The communications at issue were made by Upjohn employees to counsel for Upjohn acting as such, at the direction of corporate superiors to secure legal advice from counsel.31 As the Magistrate found, Mr. Thomas consulted with the Chairman of the Board and outside counsel.32 He thereafter conducted a factual investigation to determine the nature and extent of the questionable payments and to be in a position to give legal advice to the company with respect to the payments.33 Information not available from upper-echelon management was needed to supply a basis for legal advice concerning compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas.34
The communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned so that the corporation could obtain legal advice.35 The questionnaire identified Thomas as the company's General Counsel and referred in its opening sentence to the possible illegality of payments such as the ones on which information was sought.36 A statement of policy accompanying the questionnaire clearly indicated the legal implications of the investigation.37 Pursuant to explicit instructions from the Chairman of the Board, the communications were considered highly confidential when made and have been kept confidential by the company.38 Consistent with the underlying purposes of the attorney-client privilege, these communications must be protected against compelled disclosure.39
The attorney-client privilege protects the communications involved in this case from compelled disclosure.40
Related opinions on this issue
Chief Justice Burger joined in Parts I and III of the opinion of the Court and in the judgment.41 He agreed fully with the Court's rejection of the so-called control group test, its reasons for doing so, and its ultimate holding that the communications at issue are privileged.42 Because of the great importance of the issue, he believed that the Court should articulate a standard that will govern similar cases and afford guidance to corporations, counsel advising them, and federal courts.43
In his view, a communication is privileged at least when an employee or former employee speaks at the direction of the management with an attorney regarding conduct or proposed conduct within the scope of employment.44 The attorney must be one authorized by the management to inquire into the subject.45 The attorney must be seeking information to assist counsel in evaluating whether the employee's conduct has bound or would bind the corporation, assessing the legal consequences of that conduct, or formulating appropriate legal responses to actions that have been or may be taken by others with regard to that conduct.46
Whether the work-product doctrine applies in proceedings to enforce IRS tax summonses under 26 U.S.C. § 7602?47
The work-product doctrine protects written statements, private memoranda and personal recollections prepared or formed by an adverse party's counsel in the course of his legal duties.48 The strong public policy underlying the work-product doctrine was reaffirmed in United States v. Nobles and has been substantially incorporated in Federal Rule of Civil Procedure 26(b)(3).49 The obligation imposed by a tax summons remains subject to the traditional privileges and limitations.50 Nothing in the language of the IRS summons provisions or their legislative history suggests an intent on the part of Congress to preclude application of the work-product doctrine.51 The Federal Rules of Civil Procedure are made applicable to summons enforcement proceedings by Rule 81(a)(3).52
Yes. The Government conceded that the Court of Appeals erred in holding that the work-product doctrine is not applicable to administrative summonses issued under 26 U.S.C. § 7602.53 The doctrine was announced by the Court in Hickman v. Taylor and protects an attorney's thoughts and mental processes from disclosure.54 Rule 26(b)(3) codifies the work-product doctrine and applies here.55
The Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the work-product doctrine.56 He used only the substantial need and undue hardship standard.57 Notes and memoranda based on oral statements of witnesses are work product.58 They reveal the attorneys' mental processes in evaluating the communications.59 Such work product cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship.60
The work-product doctrine applies in proceedings to enforce IRS tax summonses under 26 U.S.C. § 7602.61