Amidst the flood of coronavirus news, a major ongoing fight over attorney client privilege and the work product doctrine has received scant attention.

But what's at stake is huge: A federal judge ordered a company to hand over memos by lawyers from Jones Day to the U.S. Securities & Exchange Commission, which is suing the company, RPM International Inc., for disclosure and accounting fraud.

Now before the D.C. Circuit on a mandamus appeal, the case has attracted a joint amicus brief from the U.S. Chamber of Commerce and the Association of Corporate Counsel, which are sounding the alarm.

"If left undisturbed, the district court's rules will hamper the ability of attorneys, auditors, and other professional advisors to provide effective counsel to a wide range of American businesses," wrote Vinson & Elkins partner Jeremy Marwell in the amicus brief. "So too will the decision chill the development of corporate compliance programs and disincentivize companies from undertaking internal investigations."

The case began in 2016, when the SEC sued RPM and its general counsel, Edward W. Moore, in U.S. District Court for the District of Columbia. 

It's not an especially egregious set of allegations—the SEC says RPM and Moore failed "to timely disclose a loss contingency, or record an accrual for, an investigation by the U.S. Department of Justice," and that RPM in 2012 and 2013 "submitted multiple materially false and misleading filings to the SEC." 

RPM countered that it did nothing wrong, and that the company's original accounting was permissible. It's telling that Moore remains GC of RPM, which makes coatings, sealants and specialty chemicals, and employs nearly 15,000 people worldwide. Also, the SEC brought its case under Section 17(a) of the Securities Act of 1933, which doesn't require proof of scienter. And when RPM did issue a restatement, it had no impact on its stock price. 

As far as securities fraud cases go, this should have been a big yawn. 

Instead, a decision earlier this month by U.S. District Judge Amy Berman Jackson of the District of Columbia is turning it into a potential game-changer when it comes to internal investigations. 

In the early days of the SEC probe, RPM's audit committee hired a Jones Day team led by partner Stephen Sozio to conduct an internal investigation related to the timing of the disclosures. 

According to Jones Day, which also filed an amicus brief in the mandamus appeal, RPM's outside auditors from Ernst & Young refused to certify the company's financial statements without such an investigation.

The Jones Day team conducted 19 interviews of 23 witnesses, including current or former RPM executives, employees and in-house attorneys, RPM's outside counsel and lawyers for underwriters of an RPM bond offering. 

"At the committee's request, Jones Day provided certain facts orally to E&Y, but did not disclose its advice to the committee, any of its client's privileged information, or any of its own work product," wrote Jones Day partner James Gauch in the firm's amicus brief. "E&Y thereafter prepared its own analysis based in part on what it learned from Jones Day and, based on that separate analysis, certified the financial statements," 

The fight now is over Jones Day's formal memoranda for those 19 interviews. 

On March 5, Jackson ordered RPM to hand them over to the SEC, ruling that the company "had waived the privilege when they disclosed the substance of the documents to the company's auditors, Ernst & Young."

"The interview memoranda were prepared in conjunction with an internal investigation that was conducted by outside counsel not in anticipation of litigation, but at the request of the company's auditors, so they could gain confidence in issuing the company's 10-K statement," the judge wrote. "[I]nterview memoranda are only work product when they are created in anticipation of litigation; not everything created by an attorney is protected work product."

She also refused to greenlight an interlocutory appeal, writing that "the court is not of the opinion that its order granting the motion to compel involved controlling questions of law as to which there is a substantial ground for difference of opinion."

Which … really?

Besides, she added, even if she thought that there was a solid basis for a difference of opinion, she'd have said no anyway. "[A]llowing interlocutory appeal for a non-dispositive discovery issue would only delay the ultimate resolution of the case."

RPM, which is represented in the SEC case by a team from Sullivan & Cromwell led by Sharon Nelles, rolled the dice by filing a petition for a writ of mandamus with the D.C. Circuit.

The appeals court hasn't officially said yes—but on March 16, it stayed Jackson's order that would have promptly required RPM to turn over the material, and ordered the SEC to file a brief in response to RPM's petition. 

RPM in its appeal argues that Jones Day merely gave E&Y an oral summary of a subset of non-privileged facts. 

"The Jones Day Memoranda are textbook attorney work product that summarize privileged communications between audit committee counsel and RPM's executives and attorneys," wrote the Sullivan & Cromwell team, which also includes Judson Littleton, Stephen Ehrenberg and William Wagener, plus lawyers from Calfee, Halter & Griswold in Ohio, where RPM is based.

"The district court incorrectly reasoned that a lawyer's work in connection with an internal investigation cannot be work product unless that same lawyer is hired to defend subsequent litigation," Nelles added.

The Chamber of Commerce and Association of Corporate Counsel offered their full-throated backing. 

"The district court's focus on the purpose for which Jones Day was initially retained is at odds not only with the record here, but also with the practical realities of how American businesses—including amici's many members—engage and interact with their legal counsel," they wrote. 

"Under the district court's ruling, lawyers retained for a particular nonlitigation 'purpose' would have to presume that their work product will be discoverable—even documents expressly prepared in anticipation of litigation," they added. "In turn, that will strip away the degree of privacy needed for counsel to provide candid, complete advice."