In In re Pacific Pictures Corporation, decided on April 17, 2012, the U.S. Court of Appeals for the Ninth Circuit joined a long list of courts that have rejected the so-called “selective waiver” theory of privilege.1 The Court’s holding underscores that, before revealing potentially privileged information to the government, counsel must carefully balance the benefits likely to flow from disclosure against the costs of a privilege waiver.

The traditional justification for the attorney-client privilege is that it promotes adequate legal representation by encouraging frank communica-tion between client and attorney. If the client voluntarily discloses privileged communications to a third party, however, courts generally have held that the privilege has been waived as to the whole world, and thus the communications are discover-able in any litigation. The reasoning behind this waiver rule is that if a client is willing voluntarily to divulge this information to a third party, he likely would have divulged it to his attorney even without the privilege. Therefore, the basic justification for the privilege — the promotion of communications between client and lawyer — no longer applies.2

Despite this well-settled doctrine, litigants have often argued that voluntary disclosure of privileged material to one particular third party — the government — should not result in a waiver of the attorney-client privilege as to anyone else. This “selective waiver” theory generally has been justified on the ground that it promotes voluntary disclosures to the government. Such disclosures are well worth encouraging, the argument goes, because they further the paramount goal of effective enforcement of the law.

The Courts of Appeals, however, have, with one exception, rejected the selective waiver theory.3 According to the majority view, selective waiver does not further the purposes underlying the attorney-client privilege because it does not encourage frank communication between lawyer and client. Instead, it merely encourages commu-nication between the client and the government. Therefore, it is, in essence, an entirely different privilege that should be created, if at all, by Congress, not by the courts.

The Ninth Circuit’s Pacific Pictures decision applied this reasoning to somewhat unusual facts. The case arose out of a long-running dispute between D.C. Comics on the one hand, and the heirs to the creators of Superman and their business partner, Marc Toberoff, on the other hand. In 2006, Toberoff hired a lawyer named David Michaels to work for one of his companies. Michaels then absconded with allegedly privileged documents related to the D.C. Comics dispute. At Toberoff’s request, the U.S. Attorney’s Office began investigating Michaels and issued a grand jury subpoena to Toberoff for copies of the documents Michaels stole. In a letter attached to the subpoena, the U.S. Attorney’s Office stated that it would not provide the documents to non-governmental third parties unless required to do so by law or court order. Pursuant to the subpoena, Toberoff produced the documents and made no effort to redact any privileged material.

D.C. Comics immediately requested the documents, claiming that Toberoff’s production to the government waived any privilege that might have covered them. A magistrate judge agreed and ordered Toberoff to produce the documents. After the district court denied review, Toberoff petitioned the Ninth Circuit for a writ of mandamus.

The Ninth Circuit denied the petition. As a matter of first impression in the Ninth Circuit, the Court rejected the selective waiver theory of privilege. Selective waiver, the Court explained, “does little, if anything, to serve the public good underpinning the attorney-client privilege.” 4 Instead, it merely “encourage[s] cooperation with the government[.]”5Thus, it essentially “creat[es] an entirely new privilege,” which the Court was unwilling to do because Congress itself had previously declined to adopt any such privilege. 6

The fact that the letter accompanying the subpoena promised some level of confidentiality did not change the result. While dicta in some prior opinions from other circuits suggested that a selective waiver might be allowed where the government had in fact agreed to keep the disclosed information confidential, the Ninth Circuit squarely rejected this theory. The Court found “no convincing reason” that agreements made after attorney-client communications have already taken place — such as the purported confidentiality agreement contained in the letter accompanying the subpoena to Toberoff — would “encourage frank conversation at the time of the advice.” 7

In addition, the Court rejected the argument that a selective waiver theory should apply because Toberoff allegedly was the victim of the crime (rather than the perpetrator of it) and had produced the documents pursuant to a subpoena. No special rule of selective waiver was required for victims, the Court concluded, because “[t]he desire to see the crime prosecuted is sufficient impetus to cooperate.”8 Likewise, Toberoff himself “solicited the subpoena and chose not to assert the privilege” in response to it.9 Thus, his disclosure was voluntary and the normal rules of waiver applied.

The Ninth Circuit’s decision represents a forceful and broad application of the majority rule that voluntary disclosures of privileged information to the government likely will result in a waiver of the attorney-client privilege. Moreover, the decision is an important reminder that confidentially agreements with the government or the fact that the privileged information was produced pursuant to a subpoena likely will not affect the waiver analysis. Accordingly, it is essential that counsel evaluate the benefits of producing privileged documents to the government in light of the high likelihood that a waiver of privilege will be found.