When companies conduct investigations that remain strictly internal, maintaining confidentiality is straightforward. But many investigations are conducted in cooperation with U.S. government regulators, who expect companies to share information learned during those investigations. In such situations, maintaining the attorney-client privilege and attorney work-product protection — especially against possible third-party litigants pursuing individual claims — can be challenging.
The likelihood of maintaining the privilege and work-product protection over investigation materials increases if companies take certain precautions. Ultimately, however, cooperating companies must carefully balance the benefits of sharing certain types of information with the government against the risks — including the risk that privileged communications and attorney work product could fall into the hands of plaintiffs suing the company.
As a general rule, parties waive attorney-client privilege when disclosing a privileged communication to a third party and waive work-product protection when sharing protected materials with an adversary. Such waivers may provide third-party litigants with an avenue to access otherwise protected files. Certain courts have held that these principles also apply to disclosures made when cooperating in government investigations.
The U.S. District Court for the Northern District of California’s discovery order in the 2016 Wadler v. Bio-Rad Labs case illustrates this risk. The plaintiff, Bio-Rad’s former general counsel, sued to challenge his dismissal, claiming he had been terminated in retaliation for raising issues under the Foreign Corrupt Practices Act. He argued that the company had waived any privilege or work-product protection over its investigation files by, inter alia, disclosing them to the government as part of its cooperation during an internal investigation. The district court agreed, ruling that the company’s disclosures to the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) amounted to a waiver.
Bio-Rad reflects a majority — but not universal — view that privileged communications cannot be shared selectively without waiving the privilege generally. The divide over the issue, known as the selective waiver doctrine, creates legal uncertainty and risk for cooperating companies that share privileged communications or attorney work product with the government. In 1978, the U.S. Court of Appeals for the Eighth Circuit was the first to apply the doctrine, in Diversified Industries, Inc. v. Meredith. Reasoning that the government occupies a different role than private litigants, that court held that disclosing privileged materials to the government during an internal investigation does not waive the privilege as to other parties. Since then, however, six other courts of appeals have rejected the doctrine and ruled that disclosing privileged communications to the government waives the privilege as to all parties. One court of appeals adopted a fact-specific approach, reasoning that courts should consider confidentiality agreements and any common interest before determining the scope of waiver. Three courts of appeals considering the issue have ruled based on the particular facts at hand rather than categorically accepting or rejecting the doctrine. Still others have not addressed selective waiver directly or have issued what appear to be conflicting statements about it.
Regardless of how any particular cooperating company balances government disclosure against potential waiver, taking certain steps may help minimize risks of waiving privilege and work-product protection.
1. Enter Into a Confidentiality Agreement. The first thing cooperating companies can do to help protect information they provide to the government — whether privileged or not — is to enter into confidentiality agreements with the respective government agencies. Such agreements often (1) limit the government’s discretion to disclose materials produced by the company; (2) include nonwaiver provisions in which the government agrees that the production of any privileged communication or attorney work product does not result in a waiver; (3) provide that the government will not assert a broader subject-matter waiver based on such disclosures; and (4) include clawback provisions to address any inadvertent disclosures.
Courts are split over whether confidentiality agreements with the government are effective in preserving privilege or work product vis-a-vis third parties: Some enforce them, while others do not. But even if a court were to hold that a confidentiality agreement did not negate a waiver, these agreements remain important for other reasons, including to protect against and remedy inadvertent waivers. (Many confidentiality agreements include inadvertent waiver and clawback provisions.)
2. Where Possible, Share Facts Without Disclosing Protected Communications or Materials. As explained in the sidebar, the government generally asserts that it wants cooperating companies to disclose facts and does not require them to waive privilege or work-product protection. Cooperating companies can utilize the government’s distinction between facts, on one side, and privileged communications and attorney work product, on the other, to their possible benefit. Sharing facts without revealing privileged communications or attorney work product should present the least risk to a company’s legal protections. As the U.S. Supreme Court noted in Upjohn Co. v. United States, facts, standing alone, generally are not privileged; moreover, they are not protected work product, so disclosing them should not threaten those protections. As noted in the sidebar, however, the government’s expectations for cooperating companies may not fully account for, or protect, fact work product.
3. Define the Scope of Any Intended Waiver. Cooperating companies sometimes decide to share privileged material or attorney work product with the government. Before doing so, they should (1) make certain that producing the material in question advances an important interest that cannot be attained by sharing only the facts that the government expressly says it wants; and (2) ensure that the benefit of providing such material outweighs both the risk that the disclosure will be deemed a waiver and the consequences of more widespread disclosure, if a waiver is found.
If protected materials must be shared with the government — for instance, because the company asserts an advice-of-counsel defense — the company should carefully consider how the waiver can be defined and contained along legally defensible lines in order to avoid a broader waiver. For instance, in cases involving an advice-of-counsel defense, the DOJ and SEC reserve the right to seek underlying attorney-client communications and related work product to evaluate the merits of the defense. In light of the attendant waiver such a defense likely will entail, companies should first consider whether the defense is worth asserting and whether it is likely to be effective. Moreover, if a company decides to waive privilege or work-product protection (either because of an advice-of-counsel defense or for some other reason), setting forth the precise scope of the intended waiver — e.g., the subject matter and date range of the privilege or work product to be waived — in a statement to or an agreement with the government can help avoid or at least limit a potential future dispute with the government over the extent (and intent) of the waiver. It also may help establish a clear, defensible limit to the waiver if it is later challenged.
4. If Possible, If Work Product Is Shared, Limit It to Fact Work Product and Assert a Common Interest With the Government.To the extent companies share attorney work product with the government, it is generally safer to share fact — as opposed to opinion — work product. Opinion work product is subject to greater protection under the law.
It also can be helpful to articulate a common interest between the company and the government that may help preserve the work-product protection with regard to other parties. Again, however, the case law is mixed. In certain circumstances, attorney work product may be shared with other parties without waiving the protection if doing so advances a common goal. Certain courts, for instance, have recognized a common interest between investigating companies and the government in ensuring that sound financial and accounting practices are utilized, and in uncovering improper management of a fund. Other possible common interests include holding individual wrongdoers/executives accountable and identifying, remediating, punishing and deterring cyberattacks.
Common interest arguments may be less likely to succeed, however, if the company itself is the target of the government’s investigation. In such a case, it is more difficult to argue that the company and the agency share a common interest and are not adversaries. Even if the company is not a target, courts sometimes find that the company could become one and thus deem the work-product protection waived.
Taking the steps outlined above may help a company reduce the risk of a waiver but will not necessarily eliminate it. Accordingly, companies should calibrate their cooperation efforts with the government to comply with enforcement requirements while taking any available steps to avoid, or at least limit the scope of, any waiver.