Workplace Investigation Cannot Be Both Sword and Shield

Last week, the Portage County Court of Appeals issued an opinion addressing the confidentiality of workplace investigation notes, reports, recommendations and recordings of witness interviews when the employer’s attorney conducted the investigation and interviews.  Smith v. Technology House, Ltd., 2019-Ohio-2670.   The defendant employer had broadly asserted its Faragher/Ellerth affirmative defense of taking prompt remedial action, but had not specifically cited to its attorney’s investigation as the basis for that defense.  Nonetheless, the trial court found that the interview recordings, report and recommendations should be produced in discovery.  The Court of Appeals reversed in part on the grounds that the employer had not specifically waived attorney-client privilege or yet asserted that the investigation was the basis for its defense, but held that the recording of the plaintiff’s interview must be produced because she was clearly adverse to the employer at the time and had her own attorney.  It also ordered an in camera inspection of the investigation materials to determine what else may be outside privilege and work product protection because it predated the investigation, etc.  Finally, it noted that privilege may not be used as both a sword (i.e., defense) and shield (confidential). 


According to the Court’s opinion, the plaintiff alleged that she complained about sexual harassment.  The employer, fearing litigation, immediately retained counsel to conduct an investigation, which began the following day.  When the plaintiff was brought into a room with the company’s attorney, she left the room to contact her attorney and then informed the employer’s attorney that she was represented.  He still interviewed her, a few managers and a few hourly employees.  All of the interviews were apparently recorded.  When litigation commenced, the plaintiff sought during discovery a copy of the interview recordings of her and her non-supervisory co-workers as well as any notes and documents related to those interviews.  The employer responded that the information was protected by attorney-client privilege and the work product privilege.   The trial court granted the plaintiff’s motion, but the discovery order was broader than the request in that it ordered the production of all recordings and documents related to the investigation.  The defendant was also ordered to correct its discovery responses to identify the attorney who conducted the investigation.   The employer appealed the discovery order.


The employer pointed out that the Ohio Supreme Court has found workplace investigations by attorneys to be covered by the attorney-client privilege.   Therefore, the trial court’s broad order compelled the production of materials that were protected by privilege.   Nonetheless, the Court found that not everything related to the investigation was privileged.  “Documents and records whose existence preceded a factual investigation or were created independent of such investigation, i.e., independent of any communication between attorney and client, would not be protected by the attorney client privilege.”


“Also, the identity of persons who participated in the investigation is not covered by the privilege.”  Therefore, the attorney’s participation in the investigation is not confidential.

Further, the recording of the interview with the plaintiff was not protected by privilege because she was, by then, an adverse party with her own attorney.

Finally, the attorney-client privilege does not protect the recording of the interview with Smith as this interview may not properly be said to have occurred within the context of the attorney-client relationship.  In the case of a corporate client, Ohio cases have generally held that the privilege extends to communications between counsel and employees of the corporate client.  . . . In light of the foregoing, Technology House could not reasonably expect that the substance of the interview would have the character of a confidential communication between an attorney and client which underlies the reason for the privilege.  At the time of Smith’s interview, a de facto adversarial relationship existed between the parties and, therefore, the substance of that interview falls outside the scope of the privilege.

The Court also found that the attorney’s assessment and materials about the plaintiff’s interview would be protected as work product.   However, the application of privilege or work product to a particular document requires an analysis of the particular document and that was not possible on the current record because the employer failed to provide or produce a privilege log describing the documents being withheld as privileged and work product.

Upon remand, the trial court of necessity must either conduct an in camera review of the compelled discovery to determine whether the attorney-client privilege and work-product doctrine exempts them from discovery or require the production of description of the documents sufficient to make such a determination, noting that the following types of materials are not privileged: documents and records whose existence preceded Attorney Thompson’s factual investigation or were created independent of that investigation (supra at ¶ 24); the identity of persons who participated in the investigation (supra at ¶ 25); and any recordings or transcripts of the substance of the interview with [the plaintiff].

The Court also rejected the plaintiff’s assertion of waiver as premature on the current record.  The plaintiff argued that the employer’s assertion of its Faragher/Ellerth defense waived privilege and work product protection for the investigation. 

Although no Ohio court has adopted this position, it has been held in other jurisdictions that the assertion of the Faragher/Ellerth defense effects a waiver of any privilege attaching to a party’s investigation of the alleged harassment.  “When an employer puts the reasonableness of an internal investigation at issue by asserting the Faragher/Ellerth defense, the employer waives any privilege that might otherwise apply to documents concerning that investigation,” including “‘not only the [investigative] report itself, but [ ] all documents, witness interviews, notes and memoranda created as part of and in furtherance of the investigation.” . . . .

The issue of whether Technology House and Gear waived the privilege attaching to Attorney Thompson’s investigation by asserting a Faragher/Ellerth defense may be resolved by recourse to “[o]rdinary waiver principles” and the “animating maxim that the privilege cannot ‘be used as both sword and shield.’”  In re Itron, Inc., 883 F.3d 553, 558 (5th Cir.2018).  That is: “when a party entitled to claim the attorney-client privilege uses confidential information against his adversary (the sword), he implicitly waives its use protectively (the shield) under that privilege.”  (Citation omitted.)  Id.  

Accordingly, courts do not find a waiver of privilege unless a party indicates its reliance  on a particular investigation in its assertion of the Faragher/Ellerth defense.  The “clear majority view” is that the defense must be “premised, in whole * * * or [in] part, on the results of an * * * investigation.”  . .  . . “This holding aligns with the numerous cases across jurisdictions finding waiver ‘when a client asserts reliance on an attorney’s advice as an element of a claim or defense,’ * * * and the many dozens of cases finding no waiver when no such reliance has occurred.”

In the present case, Technology House and Gear’s assertion of the Faragher/Ellerth defense does not acknowledge the existence of much less indicate reliance upon Attorney Thompson’s investigation.  The mere assertion that they exercised “reasonable care to prevent and promptly correct any alleged sexually harassing behavior” does not constitute a waiver of any privilege applicable to the investigation.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Franklin County Appeals Court Remands Incentive Compensation Claim and Dismisses Whistleblower and Reverse Discrimination Claims

Last week, a unanimous Franklin County Court of Appeals affirmed the dismissal on summary judgment of whistleblower and reverse race discrimination claims, but remanded the highly-compensated plaintiff’s equitable claims for a six-figure profit bonus on the grounds that the written bonus plan was unenforceable to bar his equitable claims because there was no evidence that the plaintiff knew about or had agreed to its terms and because the employer’s “promises” to award a bonus in its unfettered discretion were illusory. Pohmer v. JPMorgan Chase Bank, N.A., 2015-Ohio-1229 (3-31-15).  In affirming the dismissal of the race discrimination claim, the Court agreed that the plaintiff had not shown that the defendant employer was unusual in discriminating against the majority, that he was similarly situated to his supervisor, or that the explanation for his termination (violating the employer’s technology policy by inappropriate and personal use of his blackberry and email) was pretextual.  He could not prevail on his whistleblower claim because he could not prove that he had ever made any relevant complaints to his employer in writing and the trial court did not abuse its discretion in refusing to compel additional electronic discovery that was unlikely to reveal additional relevant evidence without exorbitant costs. 

According to the Court’s opinion, the plaintiff had received very favorable performance evaluations for over a decade, the most recent of which was in December 2011.  He had been assured in writing that he would be receiving a 4.5% profit bonus for 2011.  However, in a random review of his text messages and emails, the employer discovered that he had been sending inappropriate sexual-themed emails and messages to his children’s babysitter and co-workers in violation of the employer’s technology code of conduct.  He was soon terminated in mid-January 2012.  A few days later, the employer set the amount of discretionary incentive compensation and awarded bonuses to remaining employees a few weeks later.  The plaintiff filed suit and alleged, among other things, that he was subjected to reverse race discrimination because his supervisor also sent inappropriate emails and was not fired.  Second, he claimed that he had actually been fired in retaliation for reporting to his supervisor that one of the employer’s financial product campaigns was an illegal scam.  However, he could not produce any written evidence that he had ever made such an allegation prior to his termination despite the employer’s production of thousands of pages of emails and texts messages.  He also claimed that he was entitled to his profit bonus since he had earned it prior to his termination.

Incentive Compensation.  The trial court had dismissed his claim for his incentive compensation on the grounds that the employer’s Performance Based Incentive Compensation Plan (PBIC) was a binding implied-in-fact contract, thus barring any equitable claim under the theories of unjust enrichment or quantum meruit.   Pursuant to the terms of the PBIC, the Plaintiff was not entitled to any profit bonus or incentive compensation unless he was still employed on the date when the profit bonus was actually paid.  However, the Court of Appeals found that the PBIC could not be a contract since there was no evidence that the plaintiff even knew about the PBIC, let alone agreed to it.   All that the employer produced was an unsigned plan document and not any communications to the Plaintiff about the PBIC or indication that the Plaintiff’s employment and incentive compensation were subject to the PBIC.  Moreover, to the extent that the PBIC contained any promises, they were illusory (and thus, non-binding) since the employer retained “sole and absolute discretion” as to when, whether, and in what amount to award bonuses.  In contrast, the plaintiff produced evidence of a powerpoint presentation about the incentive compensation he was eligible to earn for that year and an email from his supervisor about the percentage of his profit bonus; neither exhibit made any reference to the PBIC or any requirement that he needed to still be employed on the date that the bonus was paid.

The doctrine of unjust enrichment “applies when a benefit is conferred and it would be inequitable to permit the benefitting party to retain the benefit without compensating the conferring party.” . . . A claim for quantum meruit shares the same essential elements as a claim for unjust enrichment, and both doctrines are equitable doctrines.  . . .  the two doctrines differ, however, when calculating damages.  The damages for unjust enrichment are " ' "the amount the defendant benefited," ' " while the damages for quantum meruit are " ' "the measure of the value of the plaintiff's services, less any damage suffered by the other party." ' "

 . . . 

"A contract is illusory only when by its terms the promisor retains an unlimited right to determine the nature or extent of his performance; the unlimited right, in effect, destroys his promise and thus makes it merely illusory." . . . . In deciding that the PBIC Plan is an illusory contract with respect to [the plaintiff], we do not mean to say that the PBIC Plan would be illusory under all circumstances. This is not a case where [the plaintiff] was made aware of the terms of the PBIC Plan and thereby assented to the PBIC's terms in exchange for his continued employment with JPMC.

Reverse Race Discrimination.  The Court of Appeals affirmed the dismissal of this claim because the Plaintiff failed to meet his prima facie case or show that the employer’s explanation was pretextual.  First, the Court adopted the heightened burden of proof for a reverse race discrimination claim, which requires evidence of “background circumstances supporting the inference that [the defendant employer] was the unusual employer who discriminated against non-minority employees.”  The plaintiff could not meet this burden, although he correctly argued that some courts have questioned the correctness of using a modified burden of proof in any race discrimination claim.    

In any event, the Court found that the Plaintiff did not identify any similarly situated non-white employees who were treated better.   The Plaintiff identified his supervisor for sending inappropriate personal emails because he only received a disciplinary warning, but the Court found him not to be similarly situated “in all respects” (i.e., “ 'all of the relevant aspects of his employment situation were "nearly identical" to those of the [comparable employee's] employment situation.'").  

Thus, to be deemed "similarly situated," "the comparables 'must have dealt with the same supervisor, have been subject to the same standards and have engaged in the same conduct without such differentiating or mitigating circumstances that would distinguish their conduct or the employer's treatment of them for it.'

They obviously did not report to the same supervisor.  “[A] supervisor's "position of authority within the company create[s] a meaningful distinction" that "explains [the employer's] different treatment of the two.” More importantly, the employer did not learn of the supervisor’s alleged misconduct until the plaintiff raised it after his termination (presumably during his deposition).  “Other factors may have been at play including a discrepancy in the volume, frequency, and level of inappropriateness contained in the emails of each of the two men.”  

Ultimately, the Court found that the plaintiff could not show that his termination for admittedly violating the employer’s code of conduct was pretextual.   He could not “demonstrate that the proffered reason ‘(1) has no basis in fact, (2) did not actually motivate the employer's challenged conduct, or (3) was insufficient to warrant the challenged conduct.’"  Importantly, he could not show that the employer knew of any other similar violations of the code of conduct (including that of his supervisor) at the time of the Plaintiff’s termination in January 2012.   

Whistleblowing.  The trial and appellate courts both concluded that the plaintiff could not prevail on his whistleblower claim because he could not satisfy the statutory requirement that the complaint be made in writing to the employer after first making a verbal report.  The employer had produced several thousand pages of documents in discovery, including emails and text messages.  The plaintiff insisted that he had texted and/or emailed his supervisor (in addition to personal conversations) about his objections to the legality of a product campaign.  However, his alleged objections were not reflected in the documents produced in discovery.  Therefore, he could not satisfy his statutory burden of proof under Ohio’s whistleblower statute.   

The Plaintiff filed a motion to compel a forensic examination of his email and text mail boxes to ensure that none of his messages were inappropriately deleted by the defendant employer.  However, the trial court denied that discovery motion on the grounds that it was “unlikely to lead to admissible evidence and disproportionately costly.”  The appellate court found this not to be an abuse of discretion in light of the thousands of pages produced in discovery.  Moreover, it noted that the Plaintiff’s  

argument has less to do with the adequacy of the discovery process and more to do with [his] dissatisfaction that he did not discover sufficient evidence to support his claims. The trial court noted it had made an effort throughout the case "to keep discovery proportionate to the issues, and to sensibly minimize the financial cost and time burden which electronic discovery might otherwise require."

Indeed, the supervisor denied ever receiving such a written report and the Plaintiff failed to mention any written objections about the product campaign in his own deposition.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Employer’s Summary Judgment Reversed Where Plaintiff Was Denied Deposition of Kmart Chairman and SVP of Finance

This morning, a divided Sixth Circuit Court of Appeals reversed summary judgment entered in favor of Sears Holding Corporation f/k/a Kmart Holding Corporation on an age discrimination claim brought by the former Senior Vice President of Sales/Division President because he had been denied the opportunity to depose the Chairman of the Board and Senior Vice President of Finance of the company about potentially ageist comments after establishing a prima facie case of age discrimination. Marsico v. Sears Holding Corporation, No. 07-2231 (6^th Cir. 3/26/10). The Court's majority found the denial of the plaintiff's motion to compel discovery to be an abuse of discretion by the trial judge because the alleged comments were equivocal and the plaintiff had shown that he had been replaced by someone who was considerably younger than him. He had been employed by Kmart for 30 years.

In particular, the Court's decision reflects that there had been deposition testimony that the new post-bankruptcy Chairman (who was 41) mentioned to the plaintiff that he had "been around here a long time" and there were some non-specified things that he did not like about store operations. He was also alleged to have said that what was "wrong with these Kmart people, that old way of thinking." Plaintiff was then demoted to a Vice President position for Super Kmart in September 2003, was replaced as SVP by and began reporting to someone who was substantially younger, and, after he make that Super Kmart more profitable than Kmart, his salary was cut. After his demotion, the president offered in November 2004 to help find him another job elsewhere. When plaintiff protested and argued that he could still help the company, the president explained that the Chairman did not "think that someone's that's been around for 30 years can fix Kmart." At the end of that month, Plaintiff was informed that his VP position was being eliminated, but the SVP felt that he could be transferred to Sears after the merger of Kmart and Sears (although the VP of HR told plaintiff he disagreed). The new SVP suggested that he look for another job because no one cared about the sacrifices and contributions he had made for the company in the past. The SVP also allegedly told him that the SVP of Finance also wanted him gone from the company. Plaintiff resigned in February 2005 because of the age discrimination he had suffered and the hostile work environment.

While agreeing that the alleged comments made by the Chairman were not necessarily indicative of discrimination, they were ambiguous enough to justify asking him to clarify and explain them in a deposition because they could indicate discriminatory intent. (The dissent noted that it was inconceivable that comments post-bankruptcy comments about the business savvy of Kmart's former officers could be construed as discriminatory as opposed to describing failed business strategies). In short:

It was through the discovery already conducted that Plaintiff obtained the evidence represented by
witnesses' comments, and given the substance of the comments, there is enough evidence of discriminatory intent such that additional discovery should have been permitted. No one but Lampert and Crowley can testify as to whether the comments cited by Marsico were motivated by age discrimination as indicated by the context and circumstances in which the comments were made. Plaintiff should have been allowed to elicit such testimony and use it in responding to Defendant's motion for summary judgment. Accordingly, we conclude that the district court abused its discretion in denying Plaintiff's motion to compel the depositions and hold that Marsico may depose both Lampert and Crowley.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.