Source: http://attorneyclientprivilege.mcguirewoods.com/chapter.aspx?ch=21
Timestamp: 2019-04-21 12:50:49+00:00

Document:
"May a Defendant Avoid an Implied Privilege Waiver by Withdrawing an 'Advice of Counsel' Defense?'"
Because implied waivers do not involve actual disclosure of privileged communications, litigants triggering an implied waiver can sometimes change their position before it is too late.
In Aboudara v. City of Santa Rosa, the FLSA defendant filed an amended answer raising "an affirmative defense of good faith" – "specifically alleg[ing] that it acted in good faith because, among other things, 'Defendant consulted with legal counsel regarding its FLSA compliance.'" Case No. 17-cv-01661-HSG (JSC), 2018 U.S. Dist. LEXIS 10033, at *2 (N.D. Cal. Jan. 22, 2018) (internal citation omitted). However, defendant then prohibited its witness "from answering any questions as to advice she received," and refused "to produce any documents reflecting such advice." Id. Plaintiff moved to compel the discovery, but the court rejected the plaintiff's motion. The court noted that defendant "has offered to stipulate that it will not in any way rely on advice of counsel in support of its good faith defense and will move to amend its answer if need be." Id. at *3. But the court closed its analysis with an obvious warning about what it called defendant's "change of heart" -- "of course, Defendant is now bound by its current representation and may not in any way rely on the fact that legal advice was sought." Id. at *2, *4.
Corporate defendants not appreciating the waiver implications of early pleadings normally have a chance to reconsider and avoid potentially disastrous implied waivers.
"Can a Litigant Ever Use at Trial Privileged Documents Withheld from Discovery?"
In nearly every situation, courts understandably refuse to allow litigants to use any privileged communications at trial that they withheld from discovery. Is there any situation in which litigants can avoid such a common-sense prohibition on "sandbagging" the adversary?
In Russell v. CSK Auto, Inc., FMLA plaintiff Russell sought to prevent defendant O'Reilly from ever using at trial a statement by an O'Reilly district manager that included "'the circumstances that led to [plaintiff's] reduction of pay' and a 'reply to his allegations that it was because he was on FMLA.'" Civ. Case No. 14-14230, 2017 U.S. Dist. LEXIS 68806 (E.D. Mich. May 5, 2017) (internal citation omitted). During discovery, defendant had withheld the statement as privileged and as work product. The court rejected the plaintiff's motion – noting that defendant "does not intend to introduce the statement as substantive evidence," and "does not intend to make their [sic] case based on the privilege [sic] document." Id. at *3, *4. Instead, defendant explained that it might use the statement to "refresh the [district manager's] memory" or perhaps use it to impeach the district manager if his "testimony conflicts with his privileged statement." Id. at *3.
This scenario does not often arise, but most courts seem to allow litigants to use as impeachment material even documents they successfully withheld from discovery.
(analyzing defendant's investigation of possible sexual harassment; holding that the investigation-related documents deserved privilege protection and work product protection; holding that the defendant could refer to remedial steps and the investigation, but would waive any protection by using investigation-related documents at the trial; "Having asserted privilege to prevent discovery of the D'Alba Report, FOP cannot introduce evidence regarding the fact or contents of the D'Alba investigation or the ensuing report in an attempt to defend itself against McCullough's claim that FOP did not take reasonable corrective action. Further, any claim by FOP that McCullough did not object to sexual harassment during the D'Alba investigation will be deemed a waiver of its privilege as to the investigation and report because it will have placed the investigation and report at issue (which it has not done yet)").
(holding that the attorney-client privilege protected communications in which a corporate employee sought an in-house lawyer's advice about how to respond to public inquiries; finding that the privilege protected a draft report involving a lawyer's legal advice; "Although Mr. Szuszman does not explicitly request an evaluation of the potential liability that may arise from the report, the declarations provided by Ford support the conclusion that Mr. Logel is the attorney in Ford's Office of the General Counsel who is regularly consulted when employees are concerned that a document they intend to publish or disclose will have unintended ramifications in litigation, or may otherwise expose the corporation to liability.").
(holding that the attorney-client privilege protected communications in which a corporate employee sought an in-house lawyer's advice about how to respond to public inquiries; "Mr. Engle's purpose in communicating with Mr. Logel was to obtain legal advice about the wording of an investigation report Mr. Engle intended to supply to the Chicago Transit Authority. . . . Mr. Engle did not provide data to Mr. Logel for the purpose of drafting the investigation report; instead, he submitted the completed report to Mr. Logel to review with an eye toward 'possible legal and/or litigation ramifications of the statements made in [the] draft report and as to the general wording of the document, including whether any information should be omitted or included to comply with legal requirements or principles.'. . . In other words, Mr. Engle's communication with Mr. Logel was not a request for assistance in generating a public report; rather, it was a request to insure that the wording of a report that detailed a completed investigation did not expose the corporation to liability, or negatively affect its position in potential litigation. Being retained to provide legal guidance on how to reduce a client's risk of liability is different than being retained for the specific purpose of preparing a report intended for public dissemination. Certainly, Mr. Engle had reason to obtain legal advice on the wording of the report given his concern that the underlying incidents would lead to litigation. Contrary to Plaintiffs' contention, there is nothing about this request for advice that suggests Mr. Engle's intention to have any of his communications with Mr. Logel published. . . . Accordingly, the Court finds that the e-mail exchange between Mr. Engle and Mr. Logel, and the draft showing the edits of Mr. Logel").
(holding that the attorney-client privilege protected communications in which a corporate employee sought an in-house lawyer's advice about how to respond to public inquiries; finding that the privilege protected a draft report involving a lawyer's legal advice; "While it is true that sections of the draft report contain factual statements that do not involve edits, the undersigned finds that Ford need not produce a redacted version given the extensiveness of the edits and the fact that Plaintiffs have a copy of the final draft report, which includes the same facts as those set forth in the draft."; finding that the work product doctrine did not protect the communications, because they were not motivated by litigation).
("Advising a client on how to respond to media inquiries has important legal implications when that client will issue a public statement about an employee. . . . Given the potential for legal liability, Reed-Frient's input on how to draft a media response was essential.").
(holding that the attorney-client privilege protected communications in which a corporate employee sought an in-house lawyer's advice about how to respond to public inquiries; finding that the privilege protected a draft report involving a lawyer's legal advice; "Similarly, while drafts of documents that contain the legal advice and opinions of attorneys may be privileged, the privilege is waived 'as to those portions of the preliminary drafts ultimately revealed to third parties.' Id. at 1284 (citations omitted). Given that the final reports and investigative materials produced by Ford are exactly the same as the attachments to the e-mails, the drafts are not properly withheld as privileged.").
(holding that the attorney-client privilege protected communications in which a corporate employee sought an in-house lawyer's advice about how to respond to public inquiries; finding that the privilege protected a draft report involving a lawyer's legal advice; "'The Schenet Court expressly declined to follow the Fourth Circuit's opinion in In re Grand Jury Proceedings, 727 F.2d at 1356, suggesting that the Fourth Circuit's narrow interpretation of the attorney-client privilege would discourage clients from freely disclosing information to their attorneys. The undersigned need not address the perceived differences between the courts or otherwise reconcile the opinions, because even under the more liberal view espoused by the Schenet Court, the attachments are not privileged.'").
Courts disagree about the attorney-client privilege protection's applicability to draft documents whose final version will be publicly disclosed. Public companies naturally worry about this issue's impact on their draft securities filings.
In Smith v. Unilife Corp., Civ. A. No. 13-5101, 2015 U.S. Dist. LEXIS 18755 (E.D. Pa. Feb. 13, 2015), a whistleblower plaintiff alleged that Unilife's 2011 Form 10-K report contained false and misleading statements. He sought discovery of Unilife's draft 10-Ks and company lawyers' communications to and from nonlawyer consultants "concerning the [drafts'] contents, style and 'wordsmithing.'" Id. at *5. The court first found that the consultants were the "functional equivalent" of employees — refreshingly acknowledging that "[a] trial judge is not in a good position to second-guess a corporate decision to rely on an independent consultant or an employee to accomplish a specific task." Id. at *7-8. The court then held that the draft 10-Ks deserved privilege protection — citing an earlier decision protecting 10-Ks that contained "legal advice and communications between a law firm and its client . . . even though the final version of the Form 10-K was publicly filed, because the drafts contained information not included in the final version." Id. at *9-10 (citing In re U.S. Healthcare, Inc. Sec. Litig., Master File No. 88-0559, 1989 U.S. Dist. LEXIS 1043, at *12 (E.D. Pa. Feb. 8, 1989)).
Although many decisions seem hostile to corporations' privilege claims, some courts' analyses provide good news.
"The Attorney-Client Privilege Does Not Protect All Lawyer Changes to Draft Documents"
Some courts erroneously fail to extend privilege protection to draft documents prepared by or revised by a lawyer before their final disclosure beyond the attorney-client relationship. Even courts that properly acknowledge the availability of privilege protection for such documents must examine the revisions' primary purpose.
In Entrata, Inc. v. Yardi Systems, Inc., the court rejected defendant's privilege claim for "a draft letter showing edits made by … Yardi's Vice President and General Counsel." Case No. 2:15-cv-00102-CW-PMW, 2018 U.S. Dist. LEXIS 104171, at *9 (D. Utah June 20, 2018). The court: (1) correctly noted that "[t]he mere fact that [defendant's General Counsel] was involved with [the draft letter] does not automatically render it subject to attorney-client privilege protection"; (2) erroneously stated that "documents prepared to be sent to third parties, like [the letter], even when prepared by counsel, are generally not attorney-client privileged"; (3) correctly rejected privilege protection after "conclud[ing] that the types of edits made by [defendant's General Counsel] constitute nothing more than simple editorial changes, which do not qualify for attorney-client privilege protection." Id.
Some lawyers mistakenly assume that the privilege protects all of their changes to clients' draft documents. However, every withheld change in such draft documents must meet the "primary purpose" test to deserve privilege protection. Typographical and stylistic revisions generally do not deserve privilege protection.
"The Trouble with Drafts: Part I"
Because attorney-client privilege protection depends on confidentiality, the privilege evaporates once clients determine to disclose privileged communications – even before the disclosure occurs. For example, the final version of a client-approved pleading loses its privilege protection even before the lawyer files it. Some courts inexplicably misapply this basic principle to strip privilege protection from preliminary privileged drafts reflecting clients' and lawyers' input.
In In re Syngenta AG MIR 162 Corn Litigation, MDL No. 2591, Case No. 14-md-2591-JWL, 2017 U.S. Dist. LEXIS 92606 (D. Kan. June 13, 2017), the court provided an otherwise very helpful list of non-privileged information and communications. After correctly explaining that "drafts of memoranda prepared for a client are protected," the court also indicated that "[d]rafts of documents to be submitted to third parties, although prepared by counsel, are not generally privileged. Submission of the document to the third party removes any cloak of privilege." Id. at *286 (alteration in original; citation omitted). The court quoted another District of Kansas case, which was even more blunt. Burton v. R.J. Reynolds Tobacco Co., 170 F.R.D. 481, 485 (D. Kan. 1997) ("When documents are prepared for dissemination to third parties, neither the document itself, nor preliminary drafts, are entitled to immunity." (emphasis added)). Another court even held that "handwritten communications between [a corporate client's employees] and its attorneys" on draft offering documents did not deserve privilege protection, because the client intended to publicly disseminate the final version. In re Micropro Sec. Litig., No. C-85-7428-ECF (JSB), 1988 U.S. Dist. LEXIS 19375, at *7 (N.D. Cal. Feb. 26, 1988).
This approach does not make much sense. For instance, judges themselves prepare draft opinions, but their disclosure of an opinion's final version does not strip away confidentiality from their in-progress drafts. Next week's Privilege Point will discuss a decision decided the same day as Syngenta – but which took what seems to be the proper approach.
"The Trouble with Drafts: Part II"
Last week's Privilege Point discussed a decision holding that the privilege did not protect in-progress drafts of documents whose final version will be disclosed to third parties. In re Syngenta AG MIR 162 Corn Litig., MDL No. 2591, Case No. 14-md-2591-JWL, 2017 U.S. Dist. LEXIS 92606 (D. Kan. June 13, 2017).
On the same day, the Eastern District of Louisiana dealt with this issue. In SCF Waxler Marine LLC v. Aris T, Civ. A. Nos. 16-902, -959, -1022, -1134, & -1614 SECTION: “A”(1), 2017 U.S. Dist. LEXIS 90256 (E.D. La. June 13, 2017), the court rejected a party's effort to discover preliminary drafts of an incident report whose final version was ultimately made public. The court noted that the client and his lawyer "did not intend that their drafts and analysis would be subject to disclosure." Id. at *25. The court then emphasized an obvious point some courts seemingly overlook – "the argument raised by [the party seeking discovery] here would result in disclosure of every draft of a pleading, brief, or affidavit that is exchanged between counsel and client merely because such drafts concern facts and the final draft is made public." Id.
The SCF Waxler Marine court's refreshingly logical approach should carry the day in every court. But to be safe, clients and their lawyers should carefully document (1) both of their roles in drafting documents for ultimate disclosure; (2) the lawyer's legal input as reflecting legal advice, rather than business, stylistic, or grammatical advice; and (3) their intent to maintain their drafting process's confidentiality until they agree on a final version to be disclosed.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v.