The Incredible Shrinking Privilege

Assessing the Options

Given this harsh reality, counsel must look to new tools to avoid waiver entirely, or prevent a partial waiver of factual findings from turning into a subject matter waiver of underlying information and work product. Some of the options include:

• Provide witnesses and information as an alternative to waiving the privilege.
• Cloak privileged material in a non-waiver agreement.
• Waive privilege, but minimize the impact by inserting “firewalls” to prevent the scope from spreading.
• Rethink the construction of internal investigation reports and documents.

One of the Thompson Memo-randum's justifications for looking to waiver of privilege is that “[s]uch waivers permit the government to obtain statements of possible witnesses, subjects, and targets, without having to negotiate individual cooperation or immunity agreements.” The corporation can provide the government with the same factual information through a non-privileged communication, such as making fact witnesses available for interview. Making witnesses available may alleviate the government's perceived “need” for this waiver, and reduce the pressure to waive privilege and work product in the quest for non-prosecution. In fact, the Thompson Memorandum specifically states: “In gauging the extent of the corporation's cooperation, the prosecutor may consider the corporation's willingness to identify the culprits within the corporation, including senior executives; to make witnesses available; to disclose the complete results of its internal investigation; and to waive attorney-client and work product protection.” (Emphasis added.)

Cloak Privileged Material in a Non-Waiver Agreement

The scope of a waiver as to third parties often turns on a case-by-case analysis. To limit the extent of a waiver, corporate counsel can take certain steps to construct barriers to subject matter waiver. These potential firewalls include the use of carefully and narrowly tailored waiver language in a confidentiality agreement and/or protective court order. In either case, the corporation's express written intent may be imperative to the judicial determination as to whether a document disclosure becomes a subject matter waiver.

While there is still an argument that confidentiality agreements provide full waiver protection; there is also authority that confidentiality agreements may not effectively preserve privilege as to disclosed documents themselves. See Business Crimes Bulletin, Mar. 2003. Regardless, confidentiality agreements may serve a vital function in limiting waiver to the material produced. The following are several suggested provisions to include in a signed confidentiality agreement with the requesting agency. They evidence the corporation's intent not to create a subject matter waiver of privilege and/or work product, as well as acknowledgement and acceptance by the agency of the client's intent.

• Client believes the material to be attorney-client or work-product privileged. For example: client believes the material requested contains the mental impressions, and legal theories of counsel, which may have been prepared in anticipation of future litigation; and as such, warrant protection from disclosure.
• Make any common interests clear. If client is not a “target” and/or production is voluntary cooperation, not under a subpoena, make this clear in the agreement. For example: client will produce the materials pursuant to the common interests of the agency and client, which include the shared desire to analyze and gather information relating to the matter under review.
• Agency agrees to keep confidential and not to disclose to any third-party. For example: agency will maintain the confidentiality of the materials pursuant to this agreement, and not to disclose material to any third party.
• Not a waiver as to any third party. The Agreement language should express client's intent, as well as Agency's agreement, that third-party waiver is not intended
• Does not provide grounds for additional discovery. For example: Agency agrees that production of the material provides agency no additional grounds to subpoena testimony, documents or other privileged material from client.

This is only a general, non-exhaustive list of potential provisions that illustrate the type of language that may decrease the likelihood, and narrow the scope, of any potential waiver.

Seek a Protective Court Order

When the client receives a government request or subpoena, another possible tool of defense against subject matter waiver is to move for a protective order, making clear the corporation's intention not to waive subject matter privilege. For example, language like the following creates a court record of the client's intent to preserve the privilege:

• The client wishes to take no action that can be construed in any way as a waiver of its position that the subject documents and any other documents or testimony concerning the same subject matters covered by the subject documents are protected by the attorney-client privilege and work product doctrine.
• The client reserves all rights it may have with respect to the subject documents, the matters described therein, and other documents or any testimony, in any action, proceeding or inquiry, as against any person or entity.

The language and detail of the motion and proposed order can be as protective as In addition, if the corporation is not a “target” at the time of cooperation, the motion (or other record) should state that the parties are not presently in an adversarial posture on the merits of this investigation. Obtaining and memorializing government assurances that they will treat the information confidentially or will only use it for a specific purpose may also help. See In re Leslie Fay Companies Securities Litigation, 161 F.R.D. 274, 284 (SDNY 1995) (privilege not waived because government agreed to keep materials in confidence except “as necessary to further law enforcement objectives”). counsel is able to imagine; a court might agree. The motion must express the unmistakable intent not to waive subject matter privilege and protections.

Rethink the Construction of Internal Investigation Reports and Documents

While the Thompson Memorandum says that a company's waiver of privilege should be taken into account in making a charging decision, Footnote 3 acknowledges that this waiver “should ordinarily be limited to the factual internal investigation and any contemporaneous advice given to the corporation concerning the conduct at issue.” The Memorandum thus implies that what the government wants is the interviews and working papers – the fruits of the internal investigations that it “encourages corporations, as part of their compliance programs, to conduct.” The Memorandum also instructs that ordinarily “prosecutors should not seek a waiver with respect to communications and work product related to advice concerning the government's criminal investigation.”

Therefore, the Thompson Memorandum invites defense counsel to rethink their approach to internal investigations and limit any writings to “just the facts.” Counsel running internal investigations should consider keeping attorney opinion and thought process out of the interview notes and investigation memorandum. This is a departure from the traditional view that counseled attorneys to incorporate their thoughts and impressions into such records to assure work product status. However, if disclosure of internal investigation material is a high probability – and disclosure usually means waiver – counsel should try to assure that any waiver encompasses only the documents produced and the factual material therein, and does not inadvertently provide grounds for subject matter waiver covering whole categories of privileged information and attorney work product.

Conclusion

Given the current status of the law of waiver, corporations should assume from the outset that a disclosure to the government creates a waiver, and that the disclosed information or reports will become public. Subject matter waiver, however, is not inevitable. Steps like those suggested above can at least tilt the odds a bit in the corporation's favor.

The headlines reporting multi-million dollar corporate guilty pleas often miss a point widely understood among white-collar practitioners: The driving force behind the corporate plea is often not the merits of the government's charge, but the corporation's need to reach a global settlement resolving administrative and criminal sanctions that could put the company out of business. Considering the role of prosecutorial discretion and the draconian consequences of a corporate conviction, corporations often have little choice but to plead guilty and cooperate with the government. Recently, the feds have raised the ante in this process by defining “cooperation” to include waiving the attorney-client privilege. Thus, corporations and counsel alike are forced into a Hobson's choice where at least partial waiver may be inevitable. Waiver law in the majority of circuits is stark – disclosure to the government is waiver as to third parties, at least as to the material disclosed. Therefore, the civil plaintiff that inevitably follows the government's investigative path finds fertile fodder in otherwise privileged, confidential, and often sensitive corporate documents that, but for the government's disclosure requirement, would be protected by privilege.

New Ground Rules from the DOJ

Deputy Attorney General Thompson's expansion of the Principles of Federal Prosecution of Business Organizations (the “Thompson Memorandum”) in early 2003 places an “increased emphasis on and scrutiny of the authenticity of a corporation's cooperation,” which includes “the corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of corporate attorney-client and work product protection.” The Thompson Memorandum advises prosecutors to consider whether a company agreed to a “waiver of the attorney-client and work product protections, both with respect to its internal investigation and with respect to communications between specific officers, directors and employees and counsel” in “assessing the adequacy of a corporation's cooperation.” Therefore, the motivation to stand tall on privilege and principle may be dwarfed by the corporation's charge to counsel to satisfy the guidelines – and hopefully avoid draconian penalties, if not criminal prosecution.

Assessing the Options

Given this harsh reality, counsel must look to new tools to avoid waiver entirely, or prevent a partial waiver of factual findings from turning into a subject matter waiver of underlying information and work product. Some of the options include:

• Provide witnesses and information as an alternative to waiving the privilege.
• Cloak privileged material in a non-waiver agreement.
• Waive privilege, but minimize the impact by inserting “firewalls” to prevent the scope from spreading.
• Rethink the construction of internal investigation reports and documents.

One of the Thompson Memo-randum's justifications for looking to waiver of privilege is that “[s]uch waivers permit the government to obtain statements of possible witnesses, subjects, and targets, without having to negotiate individual cooperation or immunity agreements.” The corporation can provide the government with the same factual information through a non-privileged communication, such as making fact witnesses available for interview. Making witnesses available may alleviate the government's perceived “need” for this waiver, and reduce the pressure to waive privilege and work product in the quest for non-prosecution. In fact, the Thompson Memorandum specifically states: “In gauging the extent of the corporation's cooperation, the prosecutor may consider the corporation's willingness to identify the culprits within the corporation, including senior executives; to make witnesses available; to disclose the complete results of its internal investigation; and to waive attorney-client and work product protection.” (Emphasis added.)

Cloak Privileged Material in a Non-Waiver Agreement

The scope of a waiver as to third parties often turns on a case-by-case analysis. To limit the extent of a waiver, corporate counsel can take certain steps to construct barriers to subject matter waiver. These potential firewalls include the use of carefully and narrowly tailored waiver language in a confidentiality agreement and/or protective court order. In either case, the corporation's express written intent may be imperative to the judicial determination as to whether a document disclosure becomes a subject matter waiver.

While there is still an argument that confidentiality agreements provide full waiver protection; there is also authority that confidentiality agreements may not effectively preserve privilege as to disclosed documents themselves. See Business Crimes Bulletin, Mar. 2003. Regardless, confidentiality agreements may serve a vital function in limiting waiver to the material produced. The following are several suggested provisions to include in a signed confidentiality agreement with the requesting agency. They evidence the corporation's intent not to create a subject matter waiver of privilege and/or work product, as well as acknowledgement and acceptance by the agency of the client's intent.

• Client believes the material to be attorney-client or work-product privileged. For example: client believes the material requested contains the mental impressions, and legal theories of counsel, which may have been prepared in anticipation of future litigation; and as such, warrant protection from disclosure.
• Make any common interests clear. If client is not a “target” and/or production is voluntary cooperation, not under a subpoena, make this clear in the agreement. For example: client will produce the materials pursuant to the common interests of the agency and client, which include the shared desire to analyze and gather information relating to the matter under review.
• Agency agrees to keep confidential and not to disclose to any third-party. For example: agency will maintain the confidentiality of the materials pursuant to this agreement, and not to disclose material to any third party.
• Not a waiver as to any third party. The Agreement language should express client's intent, as well as Agency's agreement, that third-party waiver is not intended
• Does not provide grounds for additional discovery. For example: Agency agrees that production of the material provides agency no additional grounds to subpoena testimony, documents or other privileged material from client.

This is only a general, non-exhaustive list of potential provisions that illustrate the type of language that may decrease the likelihood, and narrow the scope, of any potential waiver.

Seek a Protective Court Order

When the client receives a government request or subpoena, another possible tool of defense against subject matter waiver is to move for a protective order, making clear the corporation's intention not to waive subject matter privilege. For example, language like the following creates a court record of the client's intent to preserve the privilege:

• The client wishes to take no action that can be construed in any way as a waiver of its position that the subject documents and any other documents or testimony concerning the same subject matters covered by the subject documents are protected by the attorney-client privilege and work product doctrine.
• The client reserves all rights it may have with respect to the subject documents, the matters described therein, and other documents or any testimony, in any action, proceeding or inquiry, as against any person or entity.

The language and detail of the motion and proposed order can be as protective as In addition, if the corporation is not a “target” at the time of cooperation, the motion (or other record) should state that the parties are not presently in an adversarial posture on the merits of this investigation. Obtaining and memorializing government assurances that they will treat the information confidentially or will only use it for a specific purpose may also help. See In re Leslie Fay Companies Securities Litigation, 161 F.R.D. 274, 284 (SDNY 1995) (privilege not waived because government agreed to keep materials in confidence except “as necessary to further law enforcement objectives”). counsel is able to imagine; a court might agree. The motion must express the unmistakable intent not to waive subject matter privilege and protections.

Rethink the Construction of Internal Investigation Reports and Documents

While the Thompson Memorandum says that a company's waiver of privilege should be taken into account in making a charging decision, Footnote 3 acknowledges that this waiver “should ordinarily be limited to the factual internal investigation and any contemporaneous advice given to the corporation concerning the conduct at issue.” The Memorandum thus implies that what the government wants is the interviews and working papers – the fruits of the internal investigations that it “encourages corporations, as part of their compliance programs, to conduct.” The Memorandum also instructs that ordinarily “prosecutors should not seek a waiver with respect to communications and work product related to advice concerning the government's criminal investigation.”

Therefore, the Thompson Memorandum invites defense counsel to rethink their approach to internal investigations and limit any writings to “just the facts.” Counsel running internal investigations should consider keeping attorney opinion and thought process out of the interview notes and investigation memorandum. This is a departure from the traditional view that counseled attorneys to incorporate their thoughts and impressions into such records to assure work product status. However, if disclosure of internal investigation material is a high probability – and disclosure usually means waiver – counsel should try to assure that any waiver encompasses only the documents produced and the factual material therein, and does not inadvertently provide grounds for subject matter waiver covering whole categories of privileged information and attorney work product.

Conclusion

Given the current status of the law of waiver, corporations should assume from the outset that a disclosure to the government creates a waiver, and that the disclosed information or reports will become public. Subject matter waiver, however, is not inevitable. Steps like those suggested above can at least tilt the odds a bit in the corporation's favor.