The battle over whether companies that agree to turn over documents to the government have waived all attorney-client and work-product privileges seems to be turning from the courts to Congress.
Last month, the 10th Circuit Court of Appeals in Denver became the latest appellate court to reject a company’s arguments—in this case, Qwest Communications—that privileges can still be asserted in private litigation despite the documents’ being turned over to the government to be cooperative. Only one federal appellate court to date has recognized the “limited waiver” concept argued by Qwest.
Now a ray of hope may be out there for general counsels and others trying to balance government “requests” for privileged information with the need to encourage employees to seek legal advice without fear of future consequences. That hope comes in the form of the Advisory Committee on the Federal Rules of Evidence, which this spring circulated a proposed rule change that would allow companies to turn over privileged information to the government while allowing the material to remain privileged to others.
Poston
Rebekah Poston, a lawyer with Squire, Sanders & Dempsey, tells Compliance Week that it’s “only a matter of time before … selective waiver will be incorporated into the federal rules. I don’t think this will be an endlessly long process.”
Others aren’t so sure. Bill Ide, a partner with McKenna, Long & Aldridge and chairman of the American Bar Association’s task force on attorney-client privilege, estimates the effort will take two years to work its way through Congress.
Stewart
And Evan Stewart, of the firm Zuckerman Spaeder, flatly predicts that Congress will not pass it. “The plaintiffs’ bar is going to oppose it, and the trial lawyer bar is very influential,” he says. “Why would they agree to something that’s going to hurt their ability to succeed in lawsuits? If they’re going to be in vocal opposition to this, it’s hard to believe they’re not going to be successful.”
RULE 502
The excerpt below is from the Report of the Advisory Committee on Evidence Rules, sent on May 15, 2006, from committee chair Hon. Jerry Smith to Hon. David Levi, who chairs the Standing Committee on Rules of Practice and Procedure:
Proposed Rule 502 On Waiver Of Attorney-Client Privilege And Work Product
The Evidence Rules Committee has found a number of problems with the current federal common law governing the waiver of attorney-client privilege and work product. One major problem is that significant amounts of time and effort are expended during litigation to preserve and privilege, even when many of the documents are of no concern to the producing party. Parties must be extremely careful, because if a privileged document is produced, there is a risk that a court will find a subject matter waiver that will apply not only to the instant case and document but to other cases and documents as well. Moreover, an enormous amount of expense is put into document production in order to protect against inadvertent disclosure of privileged information, because the producing party risks a ruling that even a mistaken disclosure can result in a subject matter waiver. The Committee has determined that the disclosure process would be more efficient and less costly if documents could be produced without risking a subject matter waiver of the attorney-client privilege or work product protection.
Another concern expressed to the Committee by members of the bar involves the production of confidential or work product material by a corporation that is the subject of a government investigation. Most federal courts have held that such a disclosure constitutes a waiver of the privilege, i.e., the courts generally reject the concept that a selective waiver is enforceable. This is a problem because it can deter corporations from cooperating in the first place...
The Committee directed its Reporter and its consultant on privileges to prepare a draft rule for its consideration that would address the problems of subject matter waiver, inadvertent disclosure, enforceability of confidentiality orders, and selective waiver. This draft rules was distributed in advance of the Committee meeting to selected federal judges, state and federal regulators, members of the bar, and academics. On the first day of its April meeting, the Committee held a mini-hearing on the proposed rule 502 and Committee Note, inviting presentations from those who reviewed the rule.
Based on comments received at the hearing, the Reporter and consultant revised the draft for consideration by the Committee at its meeting. Most importantly, the draft was scaled back so that it no longer regulates state rules on waiver as applied by state courts. The Committee—together with its liaisons and several members of the Civil Rules Committee invited to attend the meeting—discussed the draft proposal in extensive detail.
The Committee unanimously agreed on the following basic principles, as embodied in the proposed Rule 502:
A subject matter waiver should be found only when privilege or work product has already been disclosed, and a further disclosure "ought in fairness" to be required in order to protect against a misrepresentation that might arise from the previous disclosure.
An inadvertent disclosure should not constitute a waiver if the holder of the privilege or work product protection too reasonable precautions to prevent disclosure and took reasonably prompt measures, once the holder knew or should have known of the disclosure, to rectify the error.
A provision on selective waiver should be included in any proposed rule released for public comment, but should be placed in brackets to indicate that the Committee has not yet determined whether a provision on selective waiver should be sent to Congress.
Parties to litigation should be able to protect against the consequences of waiver by seeking a confidentiality order from the court; and in order to give the parties reliable protection, that confidentiality order must bind non-parties in any federal or state court.
Parties should be able to contract around common-law waiver rules by entering into confidentiality agreements; but in the absence of a court order, these agreements cannot bind non-parties.
After substantial discussion, the Evidence Rules Committee unanimously approved the proposed Rule 502 and accompanying Committee Note for release for public comment...
Source
Report of the Advisory Committee on Evidence Rules (May 15, 2006)
‘Cops On The Beat’
Morgan
Few issues confront general counsels as often as waivers, says Charles Morgan, former in-house counsel for BellSouth and now executive vice president of On Site E-Discovery, a consulting firm. Companies generally want to cooperate with the Securities and Exchange Commission or the Department of Justice, he says, but are keenly aware that such cooperation can cause plaintiff lawyers to pounce. “What kind of message does that send to corporate constituencies that want to be able to trust their lawyers?” he asks.
Morgan describes general counsels as “cops on the beat; they’re closest to where the action is.” And as such, he says, employees must feel comfortable approaching them to talk about troublesome legal issues. “If you set up a system where people are disincetivized or afraid to go to the general counsel, they’re going to be acting on their own. If Corporate America is going to obey the rules like it should, you have to have a method under which people will feel they can come to the general counsel.”
Hackett
Susan Hackett, general counsel of the Association of Corporate Counsel, says that for many companies under investigation by the government, a limited waiver agreement is the only option they can hope to get. Still, while the ACC filed a brief in support of Qwest in the 10th Circuit case, the organization does worry that codifying the concept of limited waivers into the Federal Rules of Evidence might do more harm than good. “If everybody agrees that the way out of this is to create limited waivers that are enforceable, no company will ever be able to resist” a government demand for documents, Hackett says. “Conceivably, we could be worse off than we are now.”
Ide
Ide, of McKenna Long & Aldridge, says the ABA task force on attorney-client privilege is also concerned about the ramifications of amending the federal rules to recognize limited waiver. “We are opposing the rule change unless there is a recognition that the government should not be able to use that as justification for [demanding] cooperation,” he says.
‘Small Window’ Open?
Mateja
The ruling against Qwest in the 10th Circuit was not particularly surprising, notes William Mateja, a partner with Fish & Richardson. “Even though the government has been of the belief that you can have selective waiver and has strongly advocated for waiver, that argument just hasn’t resonated with most courts,” he notes. “The counter-argument is so strong: How you can really maintain the privileged nature of something if you’ve told the government?”
Allen
Kevin Allen, of Thorp Reed & Armstrong in Pittsburgh, says fighting for selective waivers in other courts isn’t necessarily futile. He contends that the 10th Circuit left open a “small window” in the Qwest case. “There’s a suggestion that, if you have a very strict confidentiality agreement with the government agency, a company might have a stronger argument that there should be limited or selective waiver,” he says.
Fons
Randall Fons, a partner with Morrison & Foerster, notes that in the Qwest case, the agreement didn’t limit what the government could do with the documents once it had them. “The government has an interest in getting companies to cooperate,” he says. “A company could come in and say, ‘We’d love to cooperate but we can’t bare our souls to the rest of the world. Reading the various cases, we think that if we add this or take this out, we may be better protected.’ If that were to happen, there is going to be an incentive for the government to try to work with that.”
The related decision, reports, briefs and coverage can be found in the box above, right.
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