Two Forums, One Witness

Question 23: Two Forums, One Witness

Your role

You represent Bexley Medical Devices in a shareholder civil action and a parallel grand-jury investigation concerning the same revenue-recognition practices. Civil discovery deadlines arrive before the grand-jury response. Sequence the next 14 days without waiving privilege, making false civil assurances, or sacrificing criminal protections held by individual witnesses.

Governing law

Assume the following parallel-proceeding rules apply:

1. Civil and criminal investigations may proceed at the same time. A civil court may stay all or part of discovery after weighing overlap, criminal prejudice, civil prejudice, court efficiency, public interest, and whether an indictment has issued.

2. A corporation has no privilege against self-incrimination and may not refuse to produce nonprivileged corporate records on that ground. Individual custodians may invoke their own privilege when truthful answers could incriminate them.

3. In a civil case, a factfinder may draw a reasonable adverse inference from an individual's valid invocation when independent evidence supports the inference. Invocation does not automatically establish liability or automatically bind the corporation.

4. A corporation may seek a protective order, sequencing, deposition postponement, or a targeted stay when particular discovery would expose defense strategy or force individual witnesses to choose between testimony and self-incrimination.

5. Disclosure of privileged investigation material to an adversary or the government waives privilege under the supplied rules. A civil protective order does not prevent a grand jury from subpoenaing material and does not restore privilege after voluntary disclosure.

6. A common-interest agreement preserves existing privilege only for communications pursuing a shared legal strategy. It does not make underlying facts privileged or permit conflicted joint representation.

7. The company must preserve relevant records in both matters, suspend deletion, and avoid coaching or coordinating factual accounts among witnesses.

8. Company counsel represents the entity. An executive whose personal interests may diverge requires separate counsel before advice about testimony, invocation, or cooperation.

9. A civil declaration must be truthful and based on personal knowledge. It should not be used to make broad exculpatory claims while the underlying witness is unable or unwilling to answer discovery.

10. A stay request should be no broader or longer than necessary and should propose a workable civil alternative rather than silence without end.

Facts

Bexley announced $46 million in fourth-quarter distributor revenue. Shareholders allege that side letters made $18 million of those sales returnable. A civil complaint asserts securities fraud and seeks expedited discovery.

A grand jury is investigating the same transactions. It served Bexley with a subpoena due in 14 days for side letters, distributor communications, board materials, and accounting records. The prosecutor told company counsel by phone that Bexley's status and the status of chief financial officer Nora Keene are “under active review.” No written target or subject designation has been provided.

Civil deadlines are:

• Nonprivileged document production in seven days.
• Nora's deposition in ten days.
• Bexley's opposition to preliminary relief in twelve days.

Bexley has responsive ordinary business records and a privileged outside-counsel investigation memorandum. Shareholder counsel offers a 30-day deposition extension only if Bexley produces the memorandum. The chief executive wants Nora to sign a declaration stating that “every distributor sale was final and no executive knew otherwise.” Nora has not reviewed all side letters and has separate personal exposure. She does not yet have individual counsel.

Some directors want the company to invoke the Fifth Amendment and produce nothing. Others want to give the memorandum to both forums to show cooperation. The board has not formed an independent committee.

The missing facts are the prosecutor's nonprivileged position on whether Bexley and Nora are targets, subjects, or witnesses and whether the government will support, oppose, or remain neutral on a narrowly tailored civil stay. Counsel can request that information immediately, but the government may decline.

Assignment

Provide a 14-day sequence addressing:

• Preservation and collection in both matters.
• Corporate production obligations and individual self-incrimination rights.
• Separate counsel for Nora and any other exposed executive.
• The civil document production due in seven days.
• A targeted stay or protective-order request concerning Nora's deposition and overlapping merits discovery.
• The risk and limits of civil adverse inferences.
• The privileged memorandum and the proposed extension exchange.
• The chief executive's proposed declaration.
• The information to request from prosecutors and how to proceed if they decline.
• Board governance and communications.
• The order in which actions must occur so neither forum is waived or defaulted.

Q23 key (Two Forums, One Witness)

1. Issue and confirm a cross-matter preservation plan immediately, collect ordinary records once, maintain separate privilege review, and prevent witness coordination. Missed: evidence is lost or inconsistent collections contaminate both matters.
2. Bexley cannot invoke self-incrimination and must produce responsive nonprivileged corporate records. It should make the seven-day civil production with a privilege log and separately prepare the grand-jury production, subject to lawful objections. Missed: the entity defaults in both forums on a privilege it does not have.
3. Retain separate counsel for Nora before any declaration, deposition decision, or government contact. Identify other exposed executives and give noncoercive warnings that company counsel represents Bexley, privilege belongs to Bexley, and separate counsel may be needed. Missed: company counsel advises a witness whose interests may diverge.
4. Seek a prompt, narrow stay or protective order postponing Nora's deposition and overlapping testimony until her status is clarified, while allowing nonprivileged document production and nonoverlapping civil work. Missed: an overbroad stay is denied or Nora is forced into an avoidable choice.
5. A valid invocation can support a corroborated civil inference but is not automatic liability or automatic imputation to Bexley. The company must not direct invocation or promise no employment consequence. Missed: civil risk is either ignored or exaggerated into certain loss.
6. Do not trade the privileged investigation memorandum for an extension or give it voluntarily to the government. Voluntary disclosure waives privilege, and the civil protective order would not restore it. Missed: the principal legal analysis becomes discoverable in both matters.
7. Do not submit the chief executive's proposed declaration. Nora lacks personal basis for “every sale,” side letters remain unreviewed, and the declaration risks a false civil statement and criminal use. Missed: a deadline response creates new evidence of intent.
8. Ask prosecutors now for nonprivileged status information and their position on a narrow civil stay. If they decline, proceed on the known overlap and uncertainty rather than assume target or witness status. Form an independent board committee to direct entity decisions. Missed: the company waits for a fact it may never receive or lets implicated management control the response.
9. Sequence: preserve and retain separate counsel; request government status; collect and produce nonprivileged civil records; file targeted stay before the deposition; maintain privilege; prepare the grand-jury response; then reassess testimony after status and counsel review. Missed: right actions occur in an order that waives or defaults one forum.