In an important case of first impression, the Ninth Circuit holds that documents voluntarily disclosed to the government are not protected by the attorney-client privilege under a theory of “selective waiver.” In re Pictures Corp., — F.3d —, 2012 WL 1293534 (9th Cir. (Cal.) April 17, 2012)
An attorney involved in litigation with D.C. Comics over intellectual property rights to the Superman character (on behalf of certain heirs), hired another attorney to work for one of his companies. The hired attorney absconded with copies of documents relevant to the pending litigation and sent them to D.C. executives. D.C. filed an action against the original attorney, the heirs, and various entities owned by the attorney, claiming the attorney had interfered with its contractual relationship with the heirs, which was predicated in part on the documents received from the departed lawyer. After suit was filed, the attorney asked the U.S. Attorney’s Office to investigate the departed attorney’s conduct. The U.S. Attorney’s Office issued a grand jury subpoena to the complaining attorney seeking copies of the documents taken from his offices. The subpoena was accompanied by a letter stating that if the attorney voluntarily complied with the subpoena the government “would not provide the … documents … to non-governmental third parties except as required by lawful court order.” The letter further confirmed that disclosure would indicate that the attorney had obtained all relevant permissions and consents needed (if any) to provide the documents to the government. The attorney complied with the subpoena and produced the documents without redaction. D.C. subsequently moved for production of all documents disclosed to the U.S. Attorney. A Magistrate Judge concluded that the documents were not privileged, and the district court denied review of the Magistrate’s decision. The attorney filed a writ.
The court of appeal began its analysis by noting that the attorney-client privilege contravenes the fundamental principle that the public has a right to every man’s evidence, and must therefore be construed narrowly to serve its intended purposes. Those purposes include encouraging full and frank communication between attorneys and their clients thereby promoting broader public interests in the observance of law and the administration of justice. The court further noted that well-established case law recognizes that the voluntary disclosure of privileged documents to third parties generally destroys the privilege.
The court was critical of other appellate courts who have adopted the concept of selective waiver based on the rational that a failure to do so “may have the effect of thwarting the developing procedure of corporations to employ independent outside counsel to investigate and advise them in order to protect stockholders.” Officers of public corporations, the court reasoned, do not require a rule of selective waiver to employ outside consultants or to voluntarily cooperate with the government. Moreover, such a rationale does not serve the purpose of encouraging full disclosure to one’s attorney in order to obtain informed legal assistance; it merely encourages voluntary disclosure to governmental agencies. Permitting selective waiver in order to promote voluntary disclosure to the government would be extending the attorney-client privilege beyond its intended purpose.
The court further declined to create an exception to the third-party waiver rule that is unmoored to the justifications of the attorney-client privilege. To do so, the court said, would be to fail to construe the privilege narrowly; and, more likely, would be to create an entirely new privilege. While the court acknowledged that it was not beyond its power to create such a privilege, it noted that doing so would require a balancing of competing societal interests in access to evidence and in promoting certain types of communications, and that such authority should not be exercised in an expansive manner. The court noted that several legislative attempts had been made to adopt a theory of selective waiver, most of which failed. Given that Congress had declined to broadly adopt a new privilege protecting the disclosure of attorney-client privileged materials to the government, the court declined to do so as well.
The court next turned to the argument that the letter from the U.S. Attorney’s Office was, in effect, a “confidentiality agreement” that should be enforced by the court. The court acknowledged that some circuits have left the door open to the possibility of selective waiver in situations where there is an agreement regarding confidentiality. The court concluded however that no convincing reason had been provided that post hoc contracts regarding how information may be revealed encourage frank conversation at the time legal advice is rendered. While such an approach would protect the expectations of the parties to the confidentiality agreement, it would do little to serve the public ends of adequate legal representation that the attorney-client privilege is designed to protect. The only justification for enforcing such agreements, the court posited, would be to encourage cooperation with the government, and Congress had already declined to adopt even this limited form of selective waiver.
The court also rejected an argument that the disclosure in question should be treated differently because the attorney responding to the grand jury subpoena was a “victim” of crime. The court found it unnecessary to adopt a theory of selective waiver to encourage victims to report crimes, reasoning that the desire to see the crime prosecuted is a sufficient impetus to cooperate with the government.
The court also refused to apply the “common interest” or “joint defense” exception to waiver of the attorney-client privilege. The court explained that while the victim of the crime and the government might share a desire to see the same outcome in a legal matter, that does not bring their communications within the “common interest” exception. For the common interest exception to apply, the parties must have made the communications in the pursuit of a joint strategy in accordance with some form of agreement, whether written or unwritten. Here, there was no evidence the responding attorney and the U.S. Attorney’s Office had agreed to jointly pursue sanctions against the departed attorney before the disclosures were made. The responding attorney was not strategizing with the prosecution, and had no more of a common interest with the government than any individual who wishes to see the law upheld.
Finally, the court rejected the argument that because the documents were provided pursuant to a grand jury subpoena, they were not voluntarily disclosed. Without the threat of contempt, the court explained, the mere existence of a subpoena does not render testimony or the production of documents “involuntary.” The complaining attorney had both solicited the subpoena, and chosen not to assert the privilege when it was appropriate to do so. Moreover, although the subpoena specifically contemplated that the attorney might redact privileged materials, he did not do so.
This case underscores the critical decision clients responding to governmental inquiries must make about whether to assert the attorney-client privilege. It further emphasizes the fact that a failure to assert the privilege, and voluntary disclosure of protected information to governmental authorities, can open the door to the use of such information by third parties in other proceedings, regardless of whether the government agrees to keep the information confidential.