In Securities and Exchange Commission v. Herrera, 2017 WL 6041750 (S.D. Fla. December 5, 2017), a U.S. Magistrate Judge in the Southern District of Florida held that providing “oral downloads” of otherwise-privileged witness interview notes and memos to the Securities and Exchange Commission (SEC) effectively waived work product protection. In coming to this finding, the court in Herrera ruled that there is little or no distinction between (a) producing actual interview notes and memos to a regulator, and (b) orally summarizing that same written material’s meaningful substance.
The Herrera decision highlights the risks associated with communicating the results of an internal investigation with government regulators and suggests that lawyers must now be even more vigilant in mitigating those risks. Although the U.S. work-product doctrine addressed in Herrera differs from Canadian litigation privilege, the lessons of Herrera should not stop at the border. Vigilance against inadvertent waiver is equally indispensable in internal investigations in Canada.
In 2012, Kentucky-based General Cable Corporation (GCC) retained Morgan Lewis & Bockius LLP (Morgan Lewis) to conduct an internal investigation after the company announced accounting errors found at a Brazilian subsidiary. As part of the internal investigation, Morgan Lewis interviewed witnesses and prepared notes and memoranda of those interviews. The firm regularly communicated with the SEC, which included providing oral summaries of 12 witness interviews.
The SEC later launched its own investigation and entered a Cease and Desist Order against GCC in 2016. The SEC also brought a civil action against two former GCC executives for accounting fraud. The executives moved to compel Morgan Lewis to produce its witness-interview notes and memos. The executives did not seek the actual documents that Morgan Lewis provided to the SEC, on the theory that those documents would be produced by the SEC in the litigation in any event.
Waiving work product protection in Herrera
Judge Goodman noted that “[w]ork-product protection is waived when protected materials are disclosed in a way that substantially increases the opportunity for potential adversaries to obtain the information”. As the SEC was GCC’s adversary, GCC waived work product protection tied to the witness-interview notes and memos in respect of which Morgan Lewis gave the SEC oral downloads (which was not the entire universe of all witness-interview notes and memos prepared). In contrast, Judge Goodman denied the executives’ request for producing interview notes and memos that Morgan Lewis had given to GCC’s auditor. The disclosure to the auditor did not waive protection because, unlike the SEC, the auditor was not an adversary at the time of the disclosure.
Litigation privilege in Canada
Litigation privilege is the Canadian parallel to the U.S. attorney work product doctrine. Although there are important differences, Canadian litigation privilege has grown up with, and has been influenced by, the U.S. doctrine. Still, Canadian litigation privilege is substantially less developed than is its U.S. cousin—making cases like Herrera particularly instructive for Canadian lawyers.
Litigation privilege in Canada protects communication and documents created for the “dominant purpose” of actual or anticipated litigation. It ceases to exist once the underlying litigation, or closely related litigation, has ended. The purpose of litigation privilege is to uphold the integrity of the adversarial process by creating a zone of privacy which allows parties to prepare for litigation. Notably, litigation privilege is not restricted to confidential communications between a solicitor and client. It also protects non-confidential communications with third parties.
Although litigation privilege does not necessarily depend on confidentiality for its existence, disclosure beyond the zone of privacy potentially results in waiver of the privilege. In the Supreme Court of Canada’s second foray (of two) into litigation privilege, the Court appears to have approved lower court cases holding that disclosure to third parties may result in waiver against all.
Implications of the Herrera decision
In light of Herrera, U.S. companies and their counsel should be mindful when sharing information obtained over the course of an internal investigation with a government agency or other adversarial entity. Canadian lawyers should pay attention and be equally mindful. Given the comparatively underdeveloped law regarding litigation privilege, Canadian courts may find Herrera persuasive.
Proactive steps to subvert potential waiver issues (when dealing with regulatory authorities in particular) include confidentiality agreements to mitigate the risk of waiver as against the world, and prudently tailored factual presentations. Canadian counsel also need to be cautious not to inadvertently waive privilege over other documents by tripping on the thorny law of partial waiver. Herrera reminds us that vigilance against waiver must be top of mind in any internal investigation.