The Individual Accountability for Corporate Wrongdoing memorandum--known as the "Yates Memo"--issued in 2015 by then-Deputy Attorney General Sally Yates, emphasized DOJ criminal prosecution of individuals and demanded companies' help in the effort. The memo has raised concerns that corporate investigations will run afoul of the Fifth Amendment in compelling executives' cooperation. Thus far, however, the courts have rarely addressed Fifth Amendment issues in the corporate investigation context, leaving companies and their employees without guidance as to when and how aggressively they can push back against unreasonable government demands.
However, the high-profile civil trade secrets dispute in Waymo LLC v. Uber Techs., Inc., No. 3:17-CV-00939-WHA (N.D. Cal.), could present an odd but effective vehicle for vindicating employees' Fifth Amendment rights in corporate investigations induced by DOJ or other government agencies.
In Waymo, the government (a federal judge) forced Uber to threaten a senior executive with termination in order to pressure him to provide information to the company--a scenario somewhat comparable to those that could play out under the Yates Memo. Although the judge in Waymo found no Fifth Amendment violation (see Waymo LLC v. Uber Techs., Inc., 2017 WL 2123560 (N.D. Cal. May 15, 2017), the Ninth Circuit or other courts may take a different view. If they do, the precedent could be a powerful weapon in addressing any excesses under DOJ's new policy.
The Yates Memo and the Fifth Amendment in Corporate Investigations
The Fifth Amendment is increasingly implicated in corporate internal investigations initiated in response to DOJ demands. But in analyzing the legal issue, and practically the right against self-incrimination, it is crucial to maintain focus on the existence of state action.
Because of limited agency resources, when DOJ prosecutors probe possible illegal activity at large corporations, they often ask the companies to conduct their own internal investigations and report their findings. The companies, who face potentially ruinous liability and collateral consequences if they are ever charged, typically comply, collecting documents and interviewing company employees, before providing a detailed report to the government. DOJ then evaluates the quality of the company's investigation and cooperation in deciding whether to charge the company and what penalties to extract from it in a plea or other settlement. This has become standard practice in DOJ enforcement of the Foreign Corrupt Practices Act, among other criminal statutes.
The Yates Memo is the latest in a series of formal DOJ policy statements governing how federal prosecutors conduct corporate investigations, including what companies must do to receive credit for cooperating with the government. Chief among its new directives is a requirement that "[t]o be eligible for any cooperation credit, corporations must provide to the DOJ all relevant facts about individuals involved in corporate misconduct." If a company "declines to learn of such facts" or to turn them over to DOJ, its cooperation will not mitigate the penalty it receives to any degree. While DOJ policy recognizes that there may be circumstances in which "a company genuinely cannot get access to certain evidence," the company will bear the burden of demonstrating those circumstances to the DOJ. See U.S. Attorneys' Manual § 9-28.700, "The Value of Cooperation." As Deputy Attorney General Yates herself put it, "we're not going to let corporations plead ignorance. If they don't know who is responsible, they will need to find out."
The Fifth Amendment problem arises when an employee refuses to submit to an interview by the company's counsel, declines to answer certain questions, or fails to hand over documents in her possession. In some cases, the employee may invoke the Fifth Amendment or may ask to retain her own counsel, who will then assert it. The company, seeking cooperation credit in light of the Yates Memo's directives, may feel the need to pressure employees to cooperate, including by threatening to terminate those who assert their Fifth Amendment rights and decline to cooperate, or by actually carrying through with the threat. DOJ may explicitly or implicitly encourage that approach.
Courts' Treatment of Fifth Amendment Issues in Corporate Investigations
The relatively sparse case law on Fifth Amendment protections in the context of corporate investigations often turns on whether there has been both (1) state action and (2) coercion. The Fifth Amendment applies to the actions of government agents, not private actors. In fact, the general rule is that private employers have the right to terminate employees who refuse to participate in internal investigations. See Gilman v. Marsh & McClennan Cos., Inc., 826 F.3d 69 (2d Cir. 2016). However, actions of a private entity may be attributable to the government if "there is a sufficiently close nexus between the State and the challenged action of the . . . entity so that the action of the latter may be fairly treated as that of the State itself." Jackson v. Metro. Edison Co., 419 U.S. 345, 351 (1974). This may occur when the government "has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State." Blum v. Yaretsky, 457 U.S. 991, 1004 (1982).
It is likely that the mere existence of a DOJ policy regarding corporate internal investigations is insufficient to establish state action. For example, in U.S. v. Ferguson, No. 3:06CR137 (CFD), 2007 WL 4240782 (D. Conn. Nov. 30, 2007), the plaintiff company claimed there was state action because the "Thompson" memo (a DOJ policy issued prior to the Yates memo) forced the company into pressuring their employees to cooperate with a government investigation out of the company's fear of prosecution. The court found that without allegations of significant government influence, the existence of the Thompson memo alone was not enough to establish state action.
Further, the Fifth Amendment is only violated when the government--on its own or through a private actor under its control--"compels" an individual to incriminate herself. In Garrity v. New Jersey, 385 U.S. 493 (1967), the Supreme Court held that a public-sector employee's Fifth Amendment rights are violated when she is forced to make statements in her employer's investigation in order to avoid termination and the statements are then used to criminally prosecute her. The view is that the threat of termination is sufficiently coercive to trigger Fifth Amendment protections. However, Garrity has been limited to public sector employment.
In the context of corporate investigations, courts have rarely addressed the issue of government-directed coercion in violation of employees' Fifth Amendment rights. The most frequently-cited case is United States v. Stein, 440 F. Supp. 2d 315 (S.D.N.Y. 2006). In Stein, the U.S. Attorney's Office, pursuant to a policy statement issued prior to the Yates Memo, threatened accounting firm KPMG with indictment if it did not pressure its employees to cooperate with the government's investigation. In response, KPMG told an employee that if he did not agree to speak with prosecutors, the company would stop paying his legal fees and would fire him. The employee then met with and made statements to the government. The court found that the company had been converted into a state actor and that its threats had compelled the employee statements, thus violating the Fifth Amendment and requiring suppression of the statements.
Stein, however, remains an outlier and has been distinguished in several respects. For example, in United States v. Carson, 09-CR-00077-JVS (C.D. Cal.), individual executive defendants moved to suppress statements they had made to outside counsel conducting an FCPA investigation, on the theory that the company and outside counsel were in effect state actors and had forced the employees to cooperate. Although the outside counsel had communicated extensively with DOJ prosecutors in conducting the investigation and the company's president had directed the defendant executives to cooperate, the district court found no state action and no Fifth Amendment violation. Distinguishing Stein, the court observed that (1) the employees had been asked to speak with corporate counsel, not directly with prosecutors; (2) unlike in Stein, the company had not threatened to cut off payment of attorney fees if the employees did not cooperate; and (3) neither DOJ's nor the company's threats had been stated explicitly. The court thus found no Fifth Amendment violation.
Similarly, in Gilman v. Marsh & McClennan Cos., Inc., 826 F.3d 69 (2d Cir. 2016), the Second Circuit held that there was no state action and no Fifth Amendment violation when a company fired employees who refused to cooperate with an internal investigation. Distinguishing Stein, the court found that although the company was facing a government investigation, that was not its only reason for conducting the internal investigation or seeking information from the employees. Moreover, the court noted, the government (unlike in Stein) had not aggressively pressured the company and had not closely coordinated with it as to the availability of employees. The court thus held that the company's decision was not coerced or directed by the government. Id. at 76-77.
Waymo: State-Ordered Termination for Invoking the Fifth Amendment
Although the Fifth Amendment issue arose in Waymo through a roundabout process, it raises some of the very issues implicated in corporate investigations induced by DOJ. In Waymo, Uber Technologies Inc. executive Anthony Levandowski allegedly took confidential documents from Waymo LLC (his prior employer) and used them to help Uber (his new employer) develop self-driving car technology. Waymo then sued Uber and sought production of the documents, which Judge Alsup ordered. Uber replied that only Levandowski had the documents, and Levandowski invoked his Fifth Amendment rights in refusing to produce them. When Judge Alsup threatened discovery sanctions against Uber, it responded that it was unable to produce documents that were in Levandowski's sole possession.
Judge Alsup replied that Uber could fire Levandowski if he refused to cooperate. During a March 29, 2017 in-camera hearing, Judge Alsup told the parties that "Uber has the authority to say to its employees, 'If you have anything at home you bring it in here, give it to [Uber's counsel], and he will turn it over to the Court.' [Uber has] the authority to do that. And [Uber] also ha[s] the authority to say, 'And if you don't do that, you're fired.'" (Waymo, Dkt. 131 at 12:6-11.) In a May 11, 2017 preliminary injunction decision, Judge Alsup ordered Uber to "exercise the full extent of [its] corporate, employment, contractual, and other authority" to cause Levandowski to "return" documents to Waymo, and to use "the full extent of [its] authority and influence to obtain cooperation" from Levandowski to identify who may have been exposed to Waymo's trade secrets. See Waymo, 2017 WL 2123560, at *13. Uber complied by telling Levandowski that it would fire him if he did not cooperate, and ultimately made good on that threat when he continued to assert his Fifth Amendment rights.
Uber and Levandowski objected to Judge Alsup's order on Fifth Amendment grounds, but Judge Alsup rejected that argument. In his May 11 order, he found that because Uber, as a private employer, had the right to fire Levandowski for refusing to cooperate, it had "no excuse under the Fifth Amendment to pull any punches as to Levandowski." 2017 WL 2123560, at *13 n.9. At a later hearing, after Uber's counsel confirmed the order had been a factor in Levandowski's firing, Judge Alsup refused to reconsider his position, finding that he had full authority to order Uber to take an action "that it would have had the authority to do on its own"--in this case, terminate Levandowski for invoking the Fifth Amendment and declining to cooperate in Uber's document collection. As of the time this article was written, Levandowski had not filed a notice of appeal of that decision; he has until early July to do so. (Levandowski's deposition is scheduled for August 10, 2017. Presumably, he will assert the Fifth Amendment at that time as well. )
Waymo's Potential Impact on Fifth Amendment Challenges in Corporate Investigations
If Levandowski appeals Judge Alsup's order, Waymo could become an important precedent on this issue. Although the procedural posture of the case is unusual, it presents a set of facts that are highly compelling as to both state action and coercion. As Levandowski pointed out in his submissions, it was clear that Uber acted at the direct instruction of a government actor: the court. Judge Alsup issued a mandatory injunction forcing Uber to use all of its "employment, contractual, and other authority" to induce Levandowski's cooperation, and made clear that extended to firing him. There was little question that if Uber did not use the threat of termination to carry out that order, it would have faced contempt of court, as well as possible adverse inferences or other discovery sanctions. This goes beyond the "significant encouragement" described in Blum and amounts to "coercive power," even more overt than the DOJ threats in Stein. Uber made clear that it was acting, at least in part, at the court's instruction. The state action requirement thus appears to be satisfied as a court order compelling testimony or "testimonial" production of documents is considered state action for Fifth Amendment purposes. See, e.g., U.S. v. Hubbell, 530 U.S. 27 (2000) (district court order requiring production of documents over Fifth Amendment objection compelled testimony, requiring subject of order to be given immunity as to the statements).
Similarly, Uber's threat of termination to pressure Levandowski would seem to satisfy the compulsion requirement. This was the very form of coercion that the Supreme Court in Garrity found to violate the Fifth Amendment. And to avoid any doubt, in his written order, Judge Alsup highlighted Levandowski's stark choice between maintaining his employment and asserting his Fifth Amendment rights, stating that:
"[i]f Uber were to threaten Levandowski with termination for noncompliance, that threat would be backed up by only Uber's power as a private employer, and Levandowski would remain free to forfeit his private employment to preserve his Fifth Amendment privilege. No binding case law holds that the Fifth Amendment prohibits such actions by private employers." Waymo, WL 2123560, at *13 n.9.
Judge Alsup's analysis of the issue is difficult to square with the authorities discussed above. He reportedly emphasized that Uber is a private entity with full authority to fire its own employees, and opined that, "a federal district court surely has the authority, as part of remedial provisional relief, to order a private company to do something that it would have the authority to do on its own." This sidesteps entirely the state action doctrine laid out decades ago by the Supreme Court and applied to corporations in Stein and other cases. It is precisely because a government actor such as a court has compelled a company to pressure its employee that the constitution is implicated, and Fifth Amendment rights are at issue. Thus, were Waymo to face Ninth Circuit review, reversal would be a very real possibility. However, even if the order in Waymo is not appealed, the case still demonstrates troubling facts that will only become more prevalent with the Yates Memo. There will be more cases like Waymo, including those in which it is the executive branch, rather than the courts, that imposes excessive pressure.
Implications for Companies and Employees
If the Ninth Circuit were to review and overturn Judge Alsup's ruling, or if a district court in a similar case were to rule differently, then companies and their employees facing DOJ investigations could breathe at least a small sigh of relief. Such decisions would help to mark a limit to the degree of pressure the government can place on companies conducting internal investigations. While Stein indicated a limit to the government's ability to use corporations to coerce employees into speaking with the government itself, Waymo could extend that principle into cases involving coercing employees to speak to company counsel or investigators.
Employees could invoke such a precedent in several ways. Were they to give in and speak with company counsel in order to avoid being fired, employees could invoke the Fifth Amendment to suppress use of their statements in a criminal prosecution. Were they to refuse to cooperate, they could assert the privilege in opposing any effort by the company to terminate them or in seeking reinstatement or compensation after a termination. In the alternative, they might seek to intervene in a DOJ investigation and block DOJ from demanding that the company threaten termination in order to compel cooperation.
Companies, too, could consider Waymo and similar cases when responding to DOJ demands in the course of enforcing the Yates Memo policy. A reversal of Judge Alsup's decision or a district court deciding a similar case differently could suggest that companies can resist pressure to use aggressive tactics to compel employee cooperation. Moreover, depending on the circumstances, company counsel may choose to amend their Upjohn or "corporate Miranda" warnings to interviewees in order to reassure them that invoking constitutional rights will not lead to termination, as public agencies have typically done after Garrity.
Regardless of whether the Fifth Amendment issue is taken up on appeal, Waymo is an example of the issues that the Yates Memo will raise and the arguments that corporations and employees will need to make in response. It is likely that more cases like Waymo will arise with pressure mounting from the Yates Memo. Such cases present an opportunity to defuse some of the constitutional danger inherent in the Yates Memo's prescriptions. How the courts respond to them will be worth watching.
Joshua M. Robbins is a partner at Greenberg Gross LLP in Los Angeles and Costa Mesa, and a former Assistant United States Attorney for the Central District of California. Jamie E. Sutton is an associate at the firm. They can be reached, respectively, at firstname.lastname@example.org and email@example.com