How to Best Protect Privilege When
Making Disclosures to the Government
Martin R. Raskin
Raskin & Raskin, P.A.
Presented at the American Bar Association Criminal Justice Section’s Annual National Institute on White Collar Crime held on March 3-4, 2005 in Las Vegas, Nevada.
Much has been written about whether a selective waiver is effective in preventing an adversary from obtaining privileged materials furnished to the government. This outline presents in simplified form the main issues involved in selective waiver cases, the diverse views on the subject taken by the courts throughout the country, and practical steps that may be taken to minimize the risk of waiver.
In today’s enforcement environment, there are many reasons why a corporation would find it necessary or desirable to report the results of a corporate internal investigation to a regulatory agency or the DOJ. A corporation’s motives for making such a disclosure include Sarbanes-Oxley’s disclosure requirements, the benefits afforded under agency voluntary disclosure programs, DOJ cooperation guidelines, corporate sentencing guidelines, as well as public relations concerns. Although sharing the results of counsel’s investigation with the government may be helpful in resolving the corporation’s immediate criminal or regulatory issues, it may also have the effect of placing at risk the corporation’s attorney-client and work product privileges as to third parties. As such, it is possible – even likely – that civil litigants or other government agencies could later obtain access to the same materials furnished to the government, and in some cases, even more.
The Selective Waiver Doctrine
Most courts do not recognize the selective waiver doctrine, under which privileged information voluntarily disclosed to a government agency is deemed waived only as to that agency.
The First, Third, Fourth, Sixth and D.C. Circuits have all roundly rejected the selective waiver doctrine. See United States v. Massachusetts Institute of Technology, 129 F.3d 681 (1st Cir. 1997)(Contractor's disclosure of documents to Defense Contract Audit Agency during routine performance review forfeited any attorney-client privilege covering such documents as to third parties); Westinghouse Electric Corp. v. Republic of the Philippines, 951 F.2d 1414 (3d Cir. 1991)(Voluntary disclosure to third party waives attorney-client privilege even if third party agrees not to disclose communications to anyone else); In re: Martin Marietta Corp., 856 F.2d 619 (4th Cir. 1988)(Disclosures by defense contractor to federal government in attempt to settle criminal investigation constituted impliedly waiver of work product privilege to all non-opinion work-product on same subject matter); In re Columbia/HCA Healthcare Corp. Billing Practices Litigation, 293 F.3d 289 (6th Cir. 2002)("[A]fter due consideration, we reject the concept of selective waiver, in any of its various forms"); Permian Corp. v. United States, 665 F.2d 1214 (D.C. Cir. 1984 ("The client cannot be permitted to pick and choose among his opponents, waiving the [attorney client] privilege for some and resurrecting the claim of confidentiality to obstruct others . . . ." The court went on to distinguish documents protected under the work product privilege and held that such privilege had not been waived.).
Although the Second Circuit has also rejected the selective waiver doctrine, it has recognized that an appropriate confidentiality agreement might protect attorney-client and work product privileges. See In re Steinhardt Partners, L.P., 9 F.3d 230 (2d Cir. 1993)(". . . we decline to adopt a per se rule that all voluntary disclosures to the government waive work product protection. Crafting rules relating to privilege in matters of governmental investigations must be done on a case-by-case basis").
Only the Eighth Circuit has recognized the selective waiver doctrine without qualification. See Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 611 (8th Cir. 1977) (citations omitted) ("As Diversified disclosed these documents in a separate and nonpublic SEC investigation, we conclude that only a limited waiver of the privilege occurred. To hold otherwise may have the effect of thwarting the developing procedure of corporations to employ independent outside counsel to investigate and advise them in order to protect stockholders, potential stockholders and customers").
A confidentiality agreement is one by which the disclosing party specifically reserves its privileges as against third parties. Although most jurisdictions give little or no weight to confidentiality agreements, such agreements have been recognized by some courts. See In re Steinhardt Partners, supra; Maruzen Co., Ltd. v. HSBC USA, Inc., 2002 WL 1628782, at *2 (S.D.N.Y. July 23, 2002)(Defendants' voluntary submission of documents from their internal investigation to regulatory and investigative authorities pursuant to confidentiality agreements did not waive defendants' work product privilege); In the Leslie Fay Cos., Inc. Sec. Litig., 161 F.R.D. 274, 284 (S.D.N.Y. 1995)(Production to government agencies of corporation’s internal investigation did not result in waiver of attorney-client privilege where materials were produced pursuant to confidentiality agreement); Saito v. McKesson HBOC, Inc., 2002 WL 31657622, at *11 (Del. Ch. Nov. 13, 2002)(No waiver of work product privilege since corporation had a reasonable expectation of privacy when it disclosed confidential information to the SEC pursuant to a confidentiality agreement); In re Grand Jury Proceedings, 350 F.3d 299 (2d Cir. 2003)(Work product privilege protected attorney’s notes of conversations with federal agents which had been disclosed in a letter to the U.S. Attorney); In re Keeper of the Records, 348 F.3d 16 (1st Cir. 2003)(Materials furnished to U.S. Attorney in pre-indictment proffers protected where it appeared that such material was meant to remain confidential).
Although the SEC withdrew a proposed rule which would have codified a selective waiver as to materials furnished to it pursuant to an investigation, the Commission made clear that it will continue to enter into confidentiality agreements with corporations it investigates and vigorously defend such agreements in court against third parties.
Work Product vs. Attorney Client Privilege
The work product doctrine "is intended to preserve a zone of privacy in which a lawyer can prepare and develop legal theories and strategy 'with an eye toward litigation,' free from unnecessary intrusion by his adversaries." United States v. Adlman, 134 F.3d 1194, 1196 (2d Cir.1998) (quoting Hickman v. Taylor, 329 U.S. 495, 511, 67 S.Ct. 385, 394, 91 L.Ed. 451 (1947)). Unlike the attorney-client privilege, where privilege is generally lost if a privileged item is shared with a third party, work product protection is not necessarily waived by disclosures to third persons. See In re Grand Jury Proceedings, 219 F.3d 175, 190 (2d Cir.2000) (recognizing that the work-product doctrine is distinct from and, in some instances, broader than the attorney-client privilege); Medinol, Ltd. v. Boston Scientific Corp., 214 F.R.D. 113 (S.D.N.Y. 2002); In re Pfizer Inc. Sec. Litig., No. 90 Civ. 1260(SS), 1993 WL 561125, at * 6 (S.D.N.Y. Dec. 23, 1993); see also, In re Sealed Case, 676 F.2d 793, 809 (D.C. Cir.1982).
Common Interest Exception
Even in cases where the attorney client privilege may have been waived by disclosure to the government, some courts have nevertheless protected the same material as work product, finding that the disclosing party and the government shared common interests. See In re Steinhardt Partners, supra at 236 (" Establishing a rigid rule would fail to anticipate situations in which the disclosing party and the government may share a common interest in developing legal theories and analyzing information . . . ."); Medinol, Ltd., supra at 115 ("It is clear that disclosure of work product to a party sharing common litigation interests is not inconsistent with the policies of encouraging zealous advocacy and protecting privacy that underlie the work product doctrine").
Although a common interest exception has been recognized, courts have been miserly in finding that such common interests exist between a corporation and the government. See, e.g., In re Steinhardt Partners, supra at 236 ("At the time of the submission of the memorandum to the Enforcement Division, the SEC and Steinhardt stood in an adversarial position"); Westinghouse Electric Corp. v. Republic of the Philippines, supra at1429 (When materials are disclosed to a governmental authority to forestall prosecution or to obtain lenient treatment, the purpose of such a disclosure is "foreign to the objectives underlying the work-product doctrine"); Bank of America, N.A. v. Terra Nova Ins. Co., 212 F.R.D. 166 (S.D.N.Y. 2002)(Cour held that disclosing information to governmental authorities in the hope that they will pursue an adversary was insufficient for common interests purposes); Three Crown Ltd. P'ship. v. Salomon Bros. Inc., 1993 WL 277182, at *2 (S.D.N.Y. July 21, 1993) (Same holding); Saito v. McKesson HBOC, Inc., 2002 WL 31657622, at *11 (Del. Ch. Nov. 13, 2002) (No common interest when disclosure made during course of investigations of wrongdoing by corporation).
For common interests purposes, a distinction may be made between a corporation and its individual employees. See, e.g., McKesson HBOC, Inc. v. Adler, 562 S.E.2d 809 (Ga.Ct.App.2002) (The court of appeals directed the trial court to examine whether the fact that the government’s focus was on individual former officers and employees, as opposed to the corporation itself, indicated that the SEC and the disclosing corporation shared a common interest).
Burden of Proof
Where privilege is claimed and the opponent alleges a specific disclosure, the burden of proving that no such disclosure took place is on the party asserting the privilege. United States v. Massachusetts Institute of Technology, supra at 686 (records ordered produced because MIT could not prove that the documents in question were withheld from the government).
HOW TO BEST PROTECT PRIVILEGE WHEN MAKING
DISCLOSURES TO THE GOVERNMENT
Based on the current state of the law in most jurisdictions, fighting the privilege battle over materials voluntarily disclosed to the government can be expected to be an uphill battle. Nevertheless, keeping the following suggestions in mind when dealing with this issue will place counsel in the best position possible to preserve applicable privileges:
- To the extent possible, limit disclosure of privileged materials. For example, sometimes the government will settle for less than a full waiver, especially where reasonable alternatives exists such as assisting the government in identifying witnesses, requiring corporate employees to speak with the government as a condition of their continued employment, or sharing information with the government orally as an attorney proffer or as part of plea negotiations. See Fed. R. Evid. 410 rendering plea discussions inadmissible in subsequent civil or criminal proceedings.
- To the extent possible, memorialize facts establishing a non-adversarial relationship with the government agency to which disclosure has been made.
- Enter into a written confidentiality agreement with the government, expressly preserving all privileges as against third parties.
- Conform the method in which the internal investigation is conducted to reflect the real possibility that privilege will someday be deemed waived based on government disclosure. By way of example, counsel may consider limiting the taking of notes or other means of documenting relevant facts and not preparing a final written report of findings.
- To the extent possible, maintain custody and control of the privileged materiels. One method of accomplishing this is by allowing the government to review the privileged materials at the corporation’s offices or that of counsel, but not furnishing a copy to the government.
Produce the minimum amount of privileged material necessary to make an adequate disclosure. For example, because work product materials are afforded broader protection than attorney client materials, counsel should – to the extent possible – limit disclosure to work product materials.
When defending privilege in court, enlist the support of the government agency to which disclosure was made. As set forth above, it is the SEC’s policy to vigorously defend the confidentiality agreements to which it is a party.
Not only should a written record be kept of the privileged materials turned over to the government, a similar record should be maintained of privileged materials withheld from production.