It has been 25 years since the U.S. Supreme Court recognized in Upjohn Co. v. United States, 449 U.S. 383 (1981), that the attorney-client privilege and work product doctrine are as essential for corporations (and other organizations) as they are for individuals.  As immutable as this principle may appear, corporations have faced growing pressures to waive both the attorney-client privilege and work product protections in order to obtain favorable treatment by federal investigative agencies.  The current policy of the U.S. Department of Justice, Securities and Exchange Commission and other agencies to “request” a waiver of the privilege has led to growing concern about its erosion and has ignited efforts by the American Bar Association, a broad coalition of private counsel, and the Congress, to protect an important cornerstone of our legal system. 

In January, 2003, then-Deputy U.S. Attorney General Larry D. Thompson issued a memorandum entitled “Principles of Federal Prosecution of Business Organization.”  Thompson’s memo identifies a corporation’s voluntary disclosure of information as one of several factors bearing on charging decisions and sentencing recommendations, “including, if necessary, a waiver of the attorney-client and work product protections, both with respect to its internal investigation and with respect to communications between specific officers, directors and employees and counsel.”  A year later, the U.S. Sentencing Commission amended the commentary to its sentencing guidelines to state, for the first time, that a waiver would be required “if necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization.”   U.S. Sentencing Guidelines, §8C2.5 (eff. Nov. 1, 2004).

The privilege waiver controversy is not confined to Washington.  More recently, Acting Deputy Attorney General Robert McCallum issued a memorandum directing all U.S. attorneys to “establish a written waiver review process for your district or component,” creating the potential for the adoption of different waiver policies across the country.  In a brief filed last month in the Tenth Circuit Court of Appeals, the U.S. Chamber of Commerce charged that the government was fostering a “culture of waiver” that threatened to render the attorney-client privilege “meaningless.”

The American Bar Association has not stood on the sidelines.  In August, 2004, it chartered a task force led by former ABA President Bill Ide to study the emerging privilege waiver policies. This effort resulted in an uncharacteristically passionate resolution adopted by the ABA House of Delegates in May, 2005 strongly opposing “policies, practices and procedures of governmental bodies that have the effect of eroding the attorney-client privilege and work product doctrine.”

Waiver Not Absolute

The attorney-client waiver requested by the government is not absolute. The government routinely agrees to enter into a confidentiality agreement with the disclosing corporation that is intended to preserve confidentiality against third-party litigants and the public.  The courts, however, remain divided over the idea of a limited waiver. The majority rule, including in the First Circuit, is that once privileged documents are given to the government, even under a confidentiality agreement, they are waived for all third parties.  U.S. v. Mass. Inst. of Tech., 129 Fed. 3rd 681 (1st Cir. 1997).  On the other hand, courts in the Eighth and Second Circuits have endorsed a contrary view.  In Diversified Industries, Inc. v. Meredith, 572 Fed. 2nd 596 (8th Cir. 1978) (en banc), the Eighth Circuit held that an internal investigation conducted by outside counsel and disclosed to the SEC retained its privileged character and could not be obtained through discovery by third party litigants.  District courts in the Second Circuit have upheld privilege claims where the party explicitly disclosed privileged documents pursuant to a confidentiality agreement with the government.  See, In Re: Natural Gas Commodities litigation, 232 F.Rd. 208, 211 (S.D.N.Y. 2005). 

The government’s growing reliance on “requesting” waivers of the attorney-client privilege and work product protections, many argue, will inappropriately punish corporations for retaining legal counsel in internal investigations.  Corporate employees will withhold disclosing all facts to a corporation’s attorney and corporate attorneys, as a result, will be denied knowledge that is critical in order to provide informed and effective legal advice. Balancing these concerns are the practical effects of confidentiality agreements and their impact on the truth-finding process.  In Columbia/HCA Healthcare Corp. Billing Practices Lit., 293 F.3d 289 (6th Cir. 2002), the court openly expressed its concern about “whether the government should assist in obfuscating the truth -finding process” by entering into such confidentiality agreements at all.  There are similar concerns about the sweeping nature of privilege and work product claims. Present-day corporate realities encourage lawyers’ involvement in all aspects of corporate affairs and there are legitimate concerns that the privilege may be misused to prevent the unmasking of corporate wrongdoing.

ABA Works to Reverse Waiver Policies 

What is clear is that the ABA Task Force continues its work to reverse the present executive branch waiver policies, and the U.S. House of Representatives, Committee on the Judiciary, has signaled its interest by conducting oversight hearings last month.  The U.S. Sentencing Commission, in a reversal of its current policy, has just announced its intention to repeal the 2004 amendment to its guidelines encouraging a privilege waiver.  Whether the attorney-client privilege and work product protections continue to be bargaining chips to be played in the investigation and charging process remains to be determined.

Jeffrey A. Meyers, a partner at Nelson, Kinder, Mosseau & Saturley, P.C. in Manchester, moderated a panel discussion concerning the privilege waiver last month at the ABA’s Annual Environmental Law Conference in Keystone, Colorado.

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