Aug 12 (Reuters) - When a major Ohio utility was

ensnared in a bribery scandal in 2020, it turned to a

time-honored playbook for organizations in hot water: The

company and its board of directors each hired a large law firm

to investigate and advise on how to respond to looming

litigation and enforcement actions.

What FirstEnergy ( FE ) didn't expect was for a federal judge in

Columbus, Ohio, to rule last year that the probe findings

weren't shielded by attorney-client or work-product protections.

That's because the utility also made use of the advice for

business purposes, U.S. District Judge Algenon Marbley found.

He ordered the company to turn the documents over to

plaintiffs lawyers representing a class of investors suing for

securities fraud in the wake of the scandal.

The decision sent "shockwaves" through corporate boardrooms

and the legal industry, FirstEnergy ( FE ) lawyers said, and prompted

more than three dozen blue chip law firms to sign an amicus

brief urging the Sixth Circuit U.S. Court of Appeals to

intervene.

Should the decision stand, the firms said, it would

"threaten the success of countless internal investigations

necessary to the good governance of companies in the United

States." (Left unsaid: their lucrative practices conducting the

probes would take a hit as well.)

Exhale, everyone.

Last week, the appeals court ruled that all likelihood,

Marbley got it wrong. FirstEnergy ( FE ) is apt to succeed on the

merits of its mandamus petition, the panel held, and the

investigation documents created by Jones Day and Squire Patton

Boggs will indeed be shielded from discovery.

"What matters for attorney-client privilege is not what a

company does with its legal advice, but simply whether a company

seeks legal advice," the unsigned August 7 order stated. "After

all, a corporation could hardly justify expending resources on

legal advice that wasn't business-related."

Sullivan & Cromwell co-chair Robert Giuffra, who represents

FirstEnergy ( FE ) in the 6th Circuit appeal and underlying securities

class action, told me he was pleased that the decision

"reiterates that attorney-client privilege and the attorney work

product doctrine apply fully to internal corporate

investigations."

Plaintiffs' lawyer Jason Forge, a partner at Robbins Geller

Rudman & Dowd, did not respond to a request for comment.

The fight over the internal investigation documents reflects

what can sometimes be a tricky question: Must legal advice be

the only primary purpose of a privileged communication?

The U.S. Supreme Court in 2023 had the chance to offer

guidance in a case involving an unnamed law firm's bid to

designate such "dual purpose" client records as privileged in a

tax and cryptocurrency investigation. Rather than weigh in,

though, the high court in a one-sentence order dismissed the

case as improvidently granted a few weeks after oral arguments.

Internal corporate investigations have been around for

decades, and FirstEnergy ( FE ) lawyers point to a 1981 Supreme Court

decision to argue the fruits of such probes have consistently

been treated as protected communications.

As chronicled by my former Reuters colleague Alison Frankel,

the FirstEnergy ( FE ) case began in July 2020. That's when the

company disclosed that it had received subpoenas from the U.S.

Justice Department in connection with what turned out to be the

biggest political corruption scandal in Ohio history. Almost

overnight, FirstEnergy's ( FE ) share price plunged from nearly $42 to

less than $23, and investors lost billions.

The company went on to admit to paying a combined $64

million to entities controlled by then-Ohio House Speaker Larry

Householder and the chair of the state's public utility

commission in exchange for favorable legislation and regulatory

treatment, Reuters reported.

While FirstEnergy ( FE ) has since resolved much of the legal

fallout, including paying $230 million to the U.S. government to

settle a federal criminal investigation, it's continued to fight

the securities class action by investors, who are seeking $8

billion in damages.

In seeking the internal investigation documents, the

plaintiffs argued that FirstEnergy ( FE ) brought in Jones Day and

Squire for two business reasons: to assuage its auditor's

concerns about certifying the company's U.S. Securities and

Exchange Commission filings and to determine if the utility

should fire any of its executives. The special master and the

trial judge agreed that the investigations were not sparked by

litigation fears but were intended to provide business advice.

The appellate panel - judges Jeffrey Sutton, Alice

Batchelder and John Nalbandian, who were appointed by

Republicans George W. Bush, George H.W. Bush and Donald Trump --

disagreed, writing that the lower court "gets it backwards."

Precedent requires considering "whether a communication

primarily seeks 'to render or solicit legal advice,'

irrespective of a company's reason for wanting that legal

advice," they held.

Moreover, the work-product doctrine, which covers documents

prepared in anticipation of litigation, also likely applies.

Here, the "flood of legal and regulatory actions prompting

FirstEnergy's ( FE ) investigations explains why," the panel held.

"FirstEnergy ( FE ), simply put, faced an onslaught of civil and

criminal investigations while pursuing internal investigations."