Protecting Privilege in Internal Investigation Memos

What Protects an Internal Investigation Memo in Minnesota?

Two separate protections can cover an investigation memo: the attorney-client privilege and work-product protection. The privilege protects confidential communications made to get or give legal advice. Work-product protection covers materials prepared in anticipation of litigation, and a court can order some of it produced.

The privilege comes from § 595.02, subd. 1(b), and from Minnesota Supreme Court decisions applying it to companies. When the company is the client, the privilege is the company’s, not the employees’. It also has a high threshold. Kobluk v. University of Minnesota, 574 N.W.2d 436 (Minn. 1998), concerned drafts of a letter that a public university’s provost exchanged with the university’s lawyer. The court asked, as a first step, “whether the contested document embodies a communication in which legal advice is sought or rendered.” The company that claims the privilege must prove it.

Work product comes from Minn. R. Civ. P. 26.02(d). It covers documents “prepared in anticipation of litigation or for trial by or for another party or by or for that other party’s representative (including the other party’s attorney, consultant, surety, indemnitor, insurer, or agent).” The other side can obtain them “only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party’s case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means.” Even then, “the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.”

The two protections fail in different ways, so a memo should be built to qualify for both. The page on attorney-client privilege inside a Minnesota company covers the privilege outside the investigation setting.

How Does the Predominant Purpose Test Apply to an Investigation Memo?

A memo that mixes legal advice with business advice is privileged in full only if legal advice is its main purpose. In In re Polaris, Inc., 967 N.W.2d 397 (Minn. 2021), the Minnesota Supreme Court held that “when a document contains both legal advice and business advice, for the attorney-client privilege to apply to the document in its entirety, the predominant purpose of the communication must be legal advice.”

The facts show how an investigation memo can fail this test. Polaris faced a federal safety investigation and hired outside lawyers to audit its safety processes. The lawyers interviewed witnesses, reviewed records, and delivered a 32-page report to senior management and the board. The report stated that the lawyers did “not represent the company” on the recall or the agency’s questions and were hired “to make the company better when it comes to dealing with safety concerns.” The district court found the report’s main purpose was business advice, and the Minnesota Supreme Court affirmed under a deferential standard, because “determining the predominant purpose of a document is a question of fact.” The court added that “not all compliance advice is legal advice.”

The court listed the factors it weighs: “(1) the purpose of the communication, (2) the content of the communication, (3) the context of the communication, (4) the recipients of the communication, and (5) whether legal advice permeates the document or whether any privileged matters can be redacted.” The court also held that “even when the predominant purpose of the communication is business advice, the attorney-client privilege will protect any portions of the document that contain legal advice.” Polaris was a product-liability case and did not decide work product, which Polaris did not raise in the Supreme Court.

For your memo, I suggest putting the legal assignment in writing at the start, in the engagement letter or board resolution, because purpose and context are the first two factors. I also suggest keeping operational recommendations, such as training plans and process changes, in a separate document, because the legal analysis is easier to protect when it does not share pages with business advice. The investigation file should still be preserved in full; the page on preserving evidence during an internal investigation covers that duty.

What Makes Employee Interviews Part of the Privileged Communication?

Under federal law, employee interviews are privileged when the employee speaks to the company’s lawyer, at the company’s direction, about matters within the employee’s job, so the company can get legal advice. Under Minnesota law, communications in a general investigation with an employee who is merely a witness to an accident, and not a party to the later lawsuit, do not create an attorney-client relationship. The leading federal case is Upjohn Co. v. United States, 449 U.S. 383 (1981). There, “The communications at issue were made by Upjohn employees to counsel for Upjohn acting as such, at the direction of corporate superiors in order to secure legal advice from counsel.” The Court added that “The communications concerned matters within the scope of the employees’ corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice.” Upjohn applied federal common law, so it governs federal claims; it is persuasive, not binding, on a Minnesota-law claim in state court.

The Minnesota Supreme Court has drawn a line for employees who only saw what happened. In Leer v. Chicago, Milwaukee, St. Paul & Pacific Railway Co., 308 N.W.2d 305 (Minn. 1981), a railroad investigator took statements from crew members after a switchman was injured. The court held “that when an employee is merely a witness to an accident and not a party to a subsequent action, communications made with him in a general investigation do not create an attorney-client relationship.” Leer described, without formally adopting, the Eighth Circuit’s test from Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1978) (en banc). That test also requires that “the communication is not disseminated beyond those persons who, because of the corporate structure, need to know its contents.”

The lawyer conducting the interviews also has duties to the employee. Under Minn. R. Prof. Conduct 1.13(a), “A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.” Under Rule 1.13(e), “a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing.” Under Minn. R. Prof. Conduct 4.3(a), the lawyer “shall not state or imply that the lawyer is disinterested.” I suggest that the lawyer open each interview by saying that the lawyer represents the company, that the conversation is privileged, and that the company, not the employee, decides whether to waive it. When the employee is the subject of the investigation, Rule 4.3(b) adds that “a lawyer shall clearly disclose that the client’s interests are adverse to the interests of the unrepresented person, if the lawyer knows or reasonably should know that the interests are adverse.” Upjohn also relied on the employees’ awareness of why they were questioned. The page on running a workplace investigation covers the interview sequence.

What Stays Discoverable Even When the Memo Is Privileged?

The facts stay discoverable. The privilege protects what was said to the lawyer, not what happened. Upjohn put it this way: “The privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney.” In Kobluk, the Minnesota Supreme Court said the party seeking production “remains free to use all available methods of discovery to inquire into the facts conveyed in the communication.” The other side can depose the employees you interviewed and ask what they saw.

Three other categories can come out:

1. Preexisting business records. Under Kobluk, “an otherwise unprivileged, preexisting document does not become privileged upon delivery by the client to the attorney.” The emails, timecards, and expense reports the lawyer reviewed remain discoverable.
2. Witness statements of non-parties. Rule 26.02(d) provides: “Upon request, a party or other person may obtain without the required showing a statement concerning the action or its subject matter previously made by that person who is not a party.” Leer read the rule then in force as “providing for free discovery of any statements made by persons who are not parties to the litigation,” and noted that this differs from the federal rule. The federal version, Fed. R. Civ. P. 26(b)(3)(C), lets a person “obtain the person’s own previous statement about the action or its subject matter.” The Minnesota rule reaches documents “otherwise discoverable pursuant to Rule 26.02(b),” and Rule 26.02(b) covers “nonprivileged matter.” Leer took up privilege as a separate question and held that the privilege did not reach the crew members’ statements, because the crew members were merely witnesses to the accident. A signed statement from a non-party employee witness in a Minnesota state case can therefore reach the other side more easily than the lawyer’s notes.
3. Business portions of a mixed memo. Under Polaris, the business-advice portions of a document whose main purpose is business advice are produced, with the legal portions redacted.

For this reason, I suggest that the lawyer keep interview notes in the lawyer’s own words rather than having employees sign statements, unless a signed statement serves a specific purpose. The page on Minnesota’s Rule 26 discovery process explains when these requests arrive.

Why Does the “Privileged and Confidential” Label Not Decide the Question?

A “Privileged and Confidential” label does not make a memo privileged. In Kobluk, the Minnesota Supreme Court said that “a document is not cloaked with the privilege merely because it bears the label” privileged or confidential. Polaris shows the point. Every page of the audit report carried the stamp “PRIVILEGED AND CONFIDENTIAL: Protected by Attorney Client Privilege and Attorney Work Product,” and the report still was not privileged in full.

The label can still help. Confidentiality is an element of the privilege, and Kobluk asked “whether the client intended to keep the specific draft confidential and whether the client and attorney took all steps reasonably necessary to prevent disclosure.” A consistent label, together with limited distribution, is evidence of both. I suggest using the label on the lawyer’s memo, interview notes, and the emails that carry them, and not on routine business documents. A label applied to everything carries little weight when you ask a court to treat one document as privileged.

How Does Sharing the Memo Waive the Privilege?

Sharing the memo outside the company ordinarily waives the protection. In Energy Policy Advocates v. Ellison, 980 N.W.2d 146 (Minn. 2022), the Minnesota Supreme Court stated: “Ordinarily, parties waive the protection of the attorney-client privilege and the work-product doctrine when they disclose protected information to third parties.”

Inside the company, Polaris noted “that the communication of privileged information to a company’s board of directors does not waive the privilege.” Beyond the board and the managers who must act on the advice, each extra recipient becomes a fact the other side can use under Diversified’s need-to-know factor and Polaris’s recipients factor. The page on board observers who receive privileged materials covers one recipient question.

Energy Policy Advocates also recognized the common-interest doctrine, which lets parties share privileged material without waiver when “(1) two or more parties, (2) represented by separate lawyers, (3) have a common legal interest (4) in a litigated or non-litigated matter, (5) the parties agree to exchange information concerning the matter, and (6) they make an otherwise privileged communication in furtherance of formulating a joint legal strategy.” The company claiming the doctrine must prove it. I suggest a written common-interest agreement, signed before the memo is shared with a co-defendant or a related company, because it records each element the company will have to prove. The page on discovery reaching affiliated companies addresses the affiliate setting.

A deliberate disclosure can also reach further than the document disclosed. Under Minn. R. Evid. 502(a), when a disclosure in a state court proceeding waives the protection, “the waiver extends to an undisclosed communication or information in a state court proceeding only if” three conditions hold. The waiver must be intentional, the materials must concern the same subject matter, and “they ought in fairness to be considered together.”

How Does Minnesota’s Claw-Back Rule Work for a Memo Produced by Mistake?

When a privileged memo is produced in discovery by mistake, the company can demand it back, and the receiving party must stop using it until a court decides. Under Rule 26.02(f)(2), the company notifies the receiving party of the claim and its basis. “After being notified, a party must promptly return, sequester, or destroy the specified information and any copies it has and may not use or disclose the information until the claim is resolved.” The rule adds that “A receiving party may promptly present the information to the court under seal for a determination of the claim.”

The claw-back procedure does not decide whether the memo was privileged. Under Minn. R. Evid. 502(b), “When made in a state court proceeding, the disclosure does not operate as a waiver if” the disclosure is inadvertent, “the holder of the privilege or protection took reasonable steps to prevent disclosure,” and “the holder promptly took reasonable steps to rectify the error, including (if applicable) following Minnesota Rule of Civil Procedure 26.02(f)(2).” Polaris followed that procedure the day after it learned of the disclosure, and the courts still examined whether the report was privileged at all.

I suggest two steps before production begins. First, when you withhold the memo, Rule 26.02(f)(1) requires that “the party shall make the claim expressly and shall describe the nature of the documents, communications, or things not produced or disclosed in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the applicability of the privilege or protection.” That description is the privilege log. Second, an agreement with the other side on inadvertent production can help, but under Rule 502(d), “An agreement on the effect of disclosure in a state proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.” I suggest asking the court to enter it as an order, because only then does it bind beyond the parties. The page on legal hold notices and privilege covers the related preservation steps.

How Do Minnesota’s Personnel-Record Rules Reach Investigation Files?

Minnesota’s personnel-record statute covers investigations of an employee’s statute violation or of employee conduct the employer may be liable for. Under Minn. Stat. § 181.960, subd. 4, the personnel record does not include “information relating to the investigation of a violation of a criminal or civil statute by an employee or an investigation of employee conduct for which the employer may be liable, unless and until” both of the statute’s conditions are met: “the investigation is completed and, in cases of an alleged criminal violation, the employer has received notice from the prosecutor that no action will be taken or all criminal proceedings and appeals have been exhausted,” and “the employer takes adverse personnel action based on the information contained in the investigation records.”

Two other exclusions in subdivision 4 matter for the memo:

1. Privileged material. The record does not include “privileged information or information that is not discoverable in a workers’ compensation, grievance arbitration, administrative, judicial, or quasi-judicial proceeding.”
2. Coworker identities. The record does not include “any portion of a written or transcribed statement by a coworker of the employee that concerns the job performance or job-related misconduct of the employee that discloses the identity of the coworker by name, inference, or otherwise.”

The employee’s access comes from Minn. Stat. § 181.961. Under subdivision 1, “Upon written request by an employee, the employer shall provide the employee with an opportunity to review the employee’s personnel record,” and under subdivision 2, a separated employee receives a copy on written request. Under § 181.960, subd. 2, the statute covers an “Employee” whose services “have been performed predominately within this state,” including “any person who has been separated from employment for less than one year.” Under subdivision 3, it covers an “Employer” with “one or more employees,” other than public bodies subject to chapter 13.

Under Minn. Stat. § 181.963, “Information properly belonging in an employee’s personnel record that was omitted from the personnel record provided by an employer to an employee for review pursuant to section 181.961 may not be used by the employer in an administrative, judicial, or quasi-judicial proceeding, unless the employer did not intentionally omit the information and the employee is given a reasonable opportunity to review the omitted information prior to its use.” When an investigation ends in discipline, I suggest separating the privileged legal memo from the non-privileged findings and discipline notice before any personnel-record request arrives. The findings belong in the file, and the memo does not. The page on the closure memo that records the outcome covers that document.

When Does Relying on the Investigation as a Defense Open the File?

A company that uses its lawyer’s investigation to prove a defense can lose the privilege over that investigation. My research for this page did not identify a Minnesota appellate decision on this question. The Iowa Supreme Court decided it in Fenceroy v. Gelita USA, Inc., 908 N.W.2d 235 (Iowa 2018), a harassment case under Iowa’s civil rights statute, by a 4-3 vote. The court held: “When an employer raises a Faragher - Ellerth affirmative defense and relies upon an internal investigation to support that defense, the employer waives attorney-client privilege and nonopinion work-product protection over testimony and documents relating to the investigation.” Iowa law does not bind a Minnesota court, but the decision shows the argument the other side will make.

The same court said that “When confronted with a discovery request, the employer controls the outcome of the waiver issue.” The choice is whether the investigation will be offered as evidence of how the company responded. I suggest making that choice early, before the position statement or answer describes the investigation, because a description of the investigation’s thoroughness is the kind of reliance Fenceroy treated as a waiver.

Which privilege law applies depends on the court and the claim. Under Federal Rule of Evidence 501, “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Otherwise, “The common law” as interpreted by federal courts governs, so a federal claim in federal court in Minnesota takes federal privilege law, including Upjohn.

How Should a Minnesota Company Build a Privileged Investigation Memo?

I suggest building a privileged investigation memo in this sequence, because each step answers a factor the courts apply:

1. A lawyer in charge, in writing, with the legal assignment stated at the start.
2. Interviews conducted or directed by the lawyer, who tells each employee whom the lawyer represents.
3. The legal analysis in the lawyer’s memo, and the business recommendations in a separate document.
4. Distribution limited to the board and the managers who must act on the memo. Outside the company, it goes only to a separately represented party with a common legal interest, such as a co-defendant, under a written common-interest agreement.
5. A plan that assumes the facts, the business records, and non-party statements will come out.
6. A privilege log for withheld documents, and a court order on inadvertent production.
7. Personnel-file findings kept apart from the privileged memo when the investigation ends in discipline.
8. A decision, before litigation, on whether the company will rely on the investigation as a defense.

If you would like me to analyze how a planned or completed investigation in your company is structured and which records would be protected, email aaron@aaronhall.com with a short description. I will run a conflict check first, so you can send confidential documents once I confirm I can take the matter. More on business disputes is in my contracts and disputes material.