December 4, 2023

FirstEnergy ordered to produce internal investigation documents to class of investors

On November 29, 2023, the Special Master appointed in the case In re FirstEnergy Corp. Securities Litigation, No. 2:20-cv-03785 (S.D. Ohio Nov. 29, 2023) granted a motion to compel FirstEnergy Corp. , an electrical services company based in Ohio, to produce documents related to an internal investigation conducted by outside counsel for the company.

In July 2021, FirstEnergy entered into a deferred prosecution agreement and, as part of that resolution, acknowledged that it had conspired to commit honest services wire fraud and paid millions of dollars to an elected state official in return for that official pursuing legislation favorable to the company.  As part of the DPA, FirstEnergy agreed to pay a criminal penalty of $230 million.

Related to this conduct and the government investigation, numerous purchasers of FirstEnergy stock brought securities lawsuits, which were consolidated into In re FirstEnergy Corp. Securities Litigation.  As part of that civil litigation, the plaintiffs moved for the Court to compel production of documents relating to an internal investigation performed by outside counsel for FirstEnergy, which FirstEnergy had withheld as privileged.  The Special Master ruled that the internal investigation was not protected by either the attorney-client privilege or attorney work-product protections, required FirstEnergy to produce all previously withheld documents, and required any witnesses to answer all “fact-related questions . . . related to the internal investigation.”

The Special Master began his analysis by noting that FirstEnergy, as the one asserting the privilege claim, bears the burden of establishing that the documents are protected by privilege.  To support its argument, FirstEnergy submitted a declaration from a member of the company’s board of directors.  However, the Special Master found the declaration was defective because although the signer made the declaration “under penalty of perjury,” he did not at any point explicitly state that the contents of the declaration were “true.”  Thus, the Special Master found FirstEnergy’s papers “bereft of sufficient persuasive support for meetings its burden.”  Moreover, the plaintiffs provided evidence that the investigation was “conducted for audit/SEC filing purposes and for human resources decisions/public relations benefit.”  The Special Master found that “no reasonable interpretation of the evidence permits the conclusion that the investigation was not just for business purposes or equally for business purposes” (emphasis added).  The Special Master therefore ordered FirstEnergy to produce the previously withheld internal investigation documents.

Order By Special Master on Motion to Compel(ECF No. 489) | DOJ Press Release – 2020 charges filed | DOJ Press Release – FirstEnergy settlement | DOJ Press Release – Householder sentencing