April 01, 2007

In re Qwest Communications Securities Litigation, 450 F.3d 1179 (10th Cir. 2006), the Court of Appeals for the Tenth Circuit declined to adopt the “selective waiver” doctrine, which would permit a company to produce documents to government agencies, via confidentiality agreements, but still assert the attorney-client privilege and work product doctrine protections as to those same documents in subsequent legal actions.  In so ruling, the 10th Circuit joined the majority of federal circuit courts that have rejected the adoption of the selective waiver doctrine.

Background

During the course of investigations by the United States Securities Exchange Commission (“SEC”) and Department of Justice (“DOJ”), Qwest produced over 220,000 pages of documents to the agencies pursuant to written confidentiality agreements in which Qwest specifically stated that it did not intend to waive the attorney-client privilege or work product protections of the documents.

In the meantime, plaintiffs had filed civil securities lawsuits against Qwest and sought disclosure of the documents that Qwest produced to the SEC and DOJ, which Qwest refused to produce on the basis of the attorney-client privilege and work product doctrine.  The district court held that Qwest’s production to the SEC and DOJ-- even pursuant to confidentiality agreements – constituted a waiver of the attorney-client privilege and work product protections and ordered Qwest to produce the documents.  In a mandamus action to the Tenth Circuit, Qwest urged the court to adopt a selective waiver approach that would enable Qwest to avoid disclosure of the previously produced documents to third party civil litigants.

Doctrine Application Supported?

In affirming the district court’s order, the Tenth Circuit found that “the record in this case is not sufficient to justify adoption of a selective waiver doctrine or an exception to the general rules of waiver upon disclosure of protected materials.”  The court rejected Qwest’s argument that failure to adopt the selective waiver doctrine would have a chilling effect on companies’ willingness to cooperate with government investigations because, despite the looming threat of civil litigation and a dearth of favorable authority on the selective waiver doctrine, Qwest still produced over 220,000 attorney-client privileged and work product protected documents to the government.

The court also rejected Qwest’s argument that its confidentiality agreements with the SEC and DOJ warranted the adoption of the selective waiver doctrine.  Since the confidentiality agreements did “little to restrict the agencies’ use of the materials,” the court found that the confidentiality agreements did not justify its adoption of the selective waiver doctrine.

Moreover, the court noted that the breadth of the selective waiver privilege urged by Qwest was substantially equivalent to a new privilege but found no basis in record “to buck the trend of declining to create a new privilege.” 

Finally, the court rejected the argument advanced by amici curiae that companies litigate in a “culture of waiver” as a basis for adopting a selective waiver approach.  According to the amici, “companies facing federal investigations do not choose to waive their privileges; under current enforcements standards, companies cannot risk being uncooperative; and cooperation, as defined by federal officials, requires producing privileged documents.”  While the court recognized the amici’s position was supported by commentators, it found that the record -- which was “silent regarding Qwest’s particular dealings with the agencies and whether it experienced the tactics deplored by amici” -- did not support the conclusion that Qwest was unfairly pressured to waive the applicable privileges.  According to the court, “[e]venthough common sense and human nature suggest there is some level of pressure for companies to satisfy the government by disclosing as much as possible, including privileged and protected material, this court cannot rely on such a sparse record to recognize a new doctrine of selective waiver or to create a new privilege for government investigations.”

Risks to Corporations

In light of the on-going debate regarding the viability of the selective waiver doctrine, Congress is considering an amendment to Federal Rule of Evidence 502.  The proposed amendment provides that voluntary disclosure of protected information does not waive the attorney- client or work product protections if the disclosure is made "to a federal, state, or local governmental agency during an investigation by that agency, and is limited to persons involved in the investigation."  For the past few months, there has been a quite a bit of debate among corporate defense counsel regarding the desirability of such an amendment and there is now speculation that the proposed amendment will not adopted.

Given the near unanimous rejection of selective waiver among the Circuit Courts of Appeals and courts’ general reluctance to recognize new testimonial privileges strongly suggests that selective waiver is not currently a viable means for preserving the attorney-client privilege or work product protections.  Accordingly, unless and until Congress addresses the issue, companies considering whether and to what extent to cooperate with government investigations must carefully weigh the benefits of disclosure of privileged materials against the risk that the protections will later be deemed waived as to third-party civil litigants.

Eric Sitarchuk is a partner in the Philadelphia office of Ballard Spahr Andrews and Ingersoll, LLP.  He is the Partner in Charge of the firm’s White Collar Litigation Group.

Lisa M. Cuifolo is an associate in the Voorhees, New Jersey  office of Ballard Spahr Andrews and Ingersoll, LLP.  She practices is a member of the firm’s White Collar Litigation Group.