In our recent industry seminar on Emergency Response issues, we covered many of the risks associated with criminal prosecution of companies and their managers for releases and/or explosions. One of those risks arises when federal criminal prosecution is threatened because it has been the government’s position that both the company and its individual managers must turn over all documents containing their attorney-client communications or face an enhanced penalty. Worse yet, lawyers representing civil claimants have successfully obtained those private records on the theory that the production to the government constitutes a waiver, and have then pointed to the candid discussions contained in them as evidence of admissions against interest including advance knowledge of safety risks to prove fault and even punitive damage contentions. For many years, the industry’s complaints about unfairness and a distinctly unlevel playing field fell upon deaf ears, but things may now be changing because last month a California appellate court held that civil plaintiffs are not entitled to those sensitive records.
More specifically, in an August, 2008 decision entitled The Regents of the University of California v. Superior Court (Aquila Merchant Services, Real Party in Interest) California’s Fourth Appellate District held that the production of privileged records to the federal government by a company seeking to avoid indictment was a production made under coercive circumstances and hence there was no waiver of the attorney-client privilege. As a result, the civil plaintiffs seeking the records turned over to the federal government were not entitled to obtain them pursuant to a claim of waiver.
Though the federal government has recently indicated that it may be softening its position on how far a company or its managers must go in turning over attorney-client communications, the threat remains very real and the unfair advantage obtained by civil plaintiffs remains a big concern. But if the Fourth Appellate District’s decision is followed by other courts in California and elsewhere then a badly needed rebalancing process seems to have begun.