Historic Bribery Case’s Privilege Battle Boosts Corporate Probes

The Bottom Line

• The FirstEnergy bribery case in Ohio was historic both for its criminal fine and for the threat it posed to the future of attorney-client privilege in internal investigations.
• Businesses hire attorneys when litigation is a possibility, and they must feel secure in their ability to be candid with their counsel.
• There is a fine line between cooperating with investigations and divulging privileged communications—it’s up to attorneys to know where that line is drawn.

After a five-year legal battle, the US Court of Appeals for the Sixth Circuit has decisively sided with FirstEnergy, vacating the district court’s order and reaffirming that the company’s internal investigation materials are protected by attorney-client privilege and the work-product doctrine.

Few principles are more fundamental to our legal system than the attorney-client privilege—and that protection recently faced serious scrutiny. In May 2024, the Southern District of Ohio had ruled that FirstEnergy, an electric utility company, must turn over documents from an internal investigation to the company’s shareholders. FirstEnergy appealed to the Sixth Circuit, arguing those documents are privileged. On Aug. 7, 2025, the Sixth Circuit offered some reassurance, blocking the shareholders from immediately accessing FirstEnergy’s internal investigative reports and signaling that the company was likely to succeed in its privilege claims.

Most recently, on Oct. 3, the Sixth Circuit vacated the district court’s order, holding that the lower court applied the wrong legal standard and reaffirming the documents were protected under attorney-client privilege.

This case, which emerged out of one of the largest bribery scandals in Ohio’s history, raised fundamental questions about the scope of attorney-client privilege and the work-product doctrine.

At stake, however, was more than just FirstEnergy’s investigative documents: The decision carries far-reaching implications for companies, lawyers, and the broader legal community, shaping how internal investigations are conducted, and protected, in the future.

Privileged Communications

Between 2017 and 2020, FirstEnergy executives allegedly colluded with Larry Householder, the former Ohio House speaker, in a massive bribery scandal.

FirstEnergy funneled roughly $60 million through Generation Now, a social welfare organization, to pay Householder and Matthew Borges, an Ohio-based lobbyist, in exchange for passing the 2019 House Bill 6. The bill was a $1.3 billion piece of legislation that included a bailout for two of FirstEnergy’s power plants that had closed in 2018.

In response to these revelations, FirstEnergy hired two outside law firms to conduct internal investigations. These investigations led FirstEnergy to fire multiple executives and, in 2021, to enter into a three-year deferred prosecution agreement in which it paid a $230 million fine, the largest criminal penalty ever imposed in Ohio, and admitted to its role in the bribery scheme. In 2023, Householder and Borges were found guilty of racketeering and were sentenced to 20 and five years in prison, respectively.

This scandal also prompted shareholders of FirstEnergy to file a lawsuit alleging violations of securities laws tied to the bribery scandal. In this case, the special master appointed to oversee discovery claimed the investigative documents prepared by the two law firms retained by FirstEnergy weren’t covered by attorney-client privilege or the attorney work-product doctrine and thus should be handed over to the movants in the case (comprised of plaintiff shareholders and certain defendants).

In its decision, the Southern District of Ohio agreed, reasoning that the test as to whether the internal investigation documents were protected under the attorney-client privilege was whether the “internal investigation’s purpose was primarily business or human resources-related” and that “the investigation’s predominant purpose must be legal for the privilege to apply.”

Power and Privilege

Despite the Southern District of Ohio recognizing that the internal investigations were close in time to impending lawsuits, and ultimately related to FirstEnergy’s cooperation with the government, it held that FirstEnergy hadn’t shown with enough specificity “when, where, how, to whom, and in what manner” legal advice was communicated during the internal investigations, and therefore refused to extend attorney-client privilege protection to the documents.

For very similar reasons, the Southern District of Ohio also refused to protect the documents under the attorney work-product doctrine. In reaching this conclusion, the Southern District of Ohio ruled that FirstEnergy hadn’t shown that the investigations were “because of” litigation and wouldn’t have been “‘prepared in substantially the same manner regardless’ of litigation” in which the investigations served overlapping business and litigation-related purposes, such as the evaluation of terminating executives.

In 2024, FirstEnergy appealed to the Sixth Circuit, arguing the district court’s ruling undermined both the attorney-client privilege and work-product protections. In August, the Sixth Circuit granted a stay, noting that disclosure would cause irreparable harm.

Importantly, the Sixth Circuit pointed out that FirstEnergy retained counsel immediately following Householder’s arrest—at a moment when it was facing a flood of lawsuits and government investigations. The Sixth Circuit explained in its order: The district court thought that the timing didn’t matter because FirstEnergy also used this advice for business purposes.

But that approach gets it backwards, the Sixth Circuit said. “What matters for attorney-client privilege is not what a company does with its legal advice, but simply whether a company seeks legal advice . . . After all, a corporation could hardly justify expending resources on legal advice that wasn’t business-related.”

Following the Sixth Circuit order, in an Aug. 19 filing, the shareholders stood firm by the lower court’s ruling. Their arguments were twofold.

First, they asserted there was no imminent legal crisis at the time of the internal review. Rather, they claimed FirstEnergy faced multiple “business demands”—such as SEC filings requiring approval from PwC, its auditors; critical personnel decisions that relied on information of levels of knowledge and involvement in the scandal; and securing capital by cooperating with the Department of Justice.

Second, the plaintiffs argued because FirstEnergy disclosed private communications to third-parties such as PwC and the DOJ, any privilege that may have existed no longer applied. They further wrote, “If companies want to preserve the confidentiality of the information their internal investigations generate, all they need to do is preserve the confidentiality of the information their internal investigations generate—and be able to prove it. FirstEnergy chose not to do so.”

Privilege Prevails

This reasoning, however, is deeply flawed. By the time FirstEnergy retained outside counsel, it was clear the company faced an oncoming wave of lawsuits, even if none had officially materialized. The fact that subsequent investigations informed business decisions shouldn’t erase privilege; in that context, it would have been unreasonable for the company not to retain counsel.

In a decisive move on Oct. 3, the Sixth Circuit unanimously vacated the district court’s order, ruling that FirstEnergy’s internal investigation materials are covered by attorney-client privilege and the work-product doctrine. The court affirmed the importance of attorney-client privilege, saying it “is the oldest of the privileges for confidential communications known to the common law.” It further cited the Supreme Court’s 1981 holding in Upjohn v. United States.

In Upjohn, the court held that privilege applied after a company sought counsel to conduct an internal investigation upon learning of potentially improper payments. In its decision, the Sixth Circuit wrote, “What was true for Upjohn is true for FirstEnergy. As with Upjohn, FirstEnergy and its board hired lawyers to ‘secure legal advice’ through internal investigations into the company’s potential criminal and civil wrongdoing.”

This decision is critical. If the district court’s reasoning had been allowed to stand, it would have threatened core protections that enable companies to conduct internal investigations and seek legal advice in the first place by rendering documents relating to litigation or legal advice mutually exclusive from documents relating to business purposes.

The Sixth Circuit’s ruling pushes back on this approach by recognizing the dual purpose that many investigative documents serve, as well as the context of the investigations with regard to the flurry of government regulatory actions.

Preserving Privilege

As someone who has conducted hundreds of internal investigations for corporate clients, I know firsthand how critical it is for companies’ employees to be able to speak openly with counsel, both in-house and external. Such investigations often involve sensitive interviews and difficult recommendations (recommendations that are based on legal considerations such as cooperation and liability). These are only possible when everyone involved understands that their statements will remain strictly confidential. The moment employees believe that their statements to counsel will be public is usually the moment they will stop cooperating or speaking candidly.

This trust is exactly why privilege must be preserved. At the same time, companies that conduct internal investigations are often under pressure to cooperate with regulators. Cooperating with regulatory bodies usually requires disclosure of facts—an issue that has created tension with privilege.

On the one hand, companies want to demonstrate cooperation to agencies such as the Department of Justice by disclosing facts their internal investigations uncover. On the other hand, much of what is learned in investigations can be considered privileged. There is a fine line between cooperation and waiver and it takes a competent lead counsel to know the line not to cross.

The broader implications are hard to overstate. Upholding the district court’s approach would have set a dangerous precedent that could have required disclosure of highly sensitive internal reviews, even when they were initiated while seeking legal advice. That is why 39 law firms—including Cadwalader—filed an amicus brief urging for the reversal of this decision, and why the Sixth Circuit specifically cited the strong “public interest” in preserving attorney-client privilege and work-product protections. Clients must be able to ask for legal advice without fear that their communications, and internal analyses, will later be used against them and aired in open court.

Privilege, after all, isn’t unique to law. It is an important principle used in many other fields and professions to foster trust.

Just as doctor-patient confidentiality enables patients to disclose sensitive information to their provider so they can get the best care possible, attorney-client privilege allows clients to speak openly with counsel so they can receive effective advice. Without that trust and frank communication, investigations will be left incomplete and counsel will be unable to help their corporate clients remedy a situation and prevent future misconduct.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Martin Weinstein is partner in Cadwalader’s global litigation group where he leads global compliance, investigations, and enforcement.

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