Opinion ID: 574318
Heading Depth: 1
Heading Rank: 4

Heading: the attorney-client privilege and the selective waiver theory

Text: 35 The central question regarding Westinghouse's attorney-client privilege claim is the validity of the celebrated and controversial selective waiver 7 theory fashioned by the Eighth Circuit in Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir.1978) (en banc), and resoundingly rejected by the D.C. Circuit in Permian Corp. v. United States, 665 F.2d 1214 (D.C. Cir.1981), and subsequent cases. See In re Subpoenas Duces Tecum, 738 F.2d 1367 (D.C. Cir.1984); In re Sealed Case, 676 F.2d 793 (D.C. Cir.1982). In Diversified, the Eighth Circuit held that disclosure of material protected by the attorney-client privilege to the SEC during a formal investigation constituted only a selective waiver of the privilege, and that therefore the material could not be discovered in subsequent civil litigation. 36 It is often stated that the purpose of the attorney-client privilege is to encourage full and frank communication between attorneys and their clients. See, for example, Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). Full and frank communication is not an end in itself, however, but merely a means to achieve the ultimate purpose of the privilege: promot[ing] broader public interests in the observance of law and administration of justice. Id. See also Developments, 98 Harv.L.Rev. at 1644 (cited in note 7). The Supreme Court recognized this underlying rationale for the privilege long ago, when it stated: 37 [The attorney-client privilege] is founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure. 38 Hunt v. Blackburn, 128 U.S. 464, 470, 9 S.Ct. 125, 32 L.Ed. 488 (1888) (quoted in Upjohn, 449 U.S. at 389, 101 S.Ct. at 682). See also Edward W. Cleary, ed., McCormick on Evidence, § 87 at 204 (West 1972) (The proposition is that the detriment to justice from a power to shut off inquiry to pertinent facts in court, will be outweighed by the benefits to justice (not to the client) from a franker disclosure in the lawyer's office.). 39 Because the attorney-client privilege obstructs the truth-finding process, it is construed narrowly. In re Grand Jury Investigation (Sun Co.), 599 F.2d 1224, 1235 (3d Cir.1979); In re Grand Jury Investigation of Ocean Transportation, 604 F.2d 672, 675 (D.C. Cir.1979); Radiant Burners, Inc. v. American Gas Association, 320 F.2d 314, 323 (7th Cir.1963). 8 The privilege protects only those disclosures--necessary to obtain informed legal advice--which might not have been made absent the privilege. Fisher v. United States, 425 U.S. 391, 403, 96 S.Ct. 1569, 1577, 48 L.Ed.2d 39 (1976) (emphasis added). Accordingly, voluntary disclosure to a third party of purportedly privileged communications has long been considered inconsistent with an assertion of the privilege. United States v. AT & T, 642 F.2d 1285, 1299 (D.C. Cir.1980). As one commentator cogently explained: 40 If clients themselves divulge such information to third parties, chances are that they would also have divulged it to their attorneys, even without the protection of the privilege. Thus, once a client has revealed privileged information to a third party, the basic justification for the privilege no longer applies ... 41 Comment, Stuffing the Rabbit Back into the Hat: Limited Waiver of the Attorney-Client Privilege in an Administrative Agency Investigation, 130 U.Pa.L.Rev. 1198, 1207 (1982). Consequently, it is well-settled that when a client voluntarily discloses privileged communications to a third party, the privilege is waived. See Rockwell, 897 F.2d at 1265. See also 8 Wright & Miller, § 2016 at 127 and n. 71; id., § 2024 at 210 (citing cases). 42 When disclosure to a third party is necessary for the client to obtain informed legal advice, courts have recognized exceptions to the rule that disclosure waives the attorney-client privilege. For example, courts have held that the client may allow disclosure to an agent assisting the attorney in giving legal advice to the client without waiving the privilege. 8 Wigmore, Evidence § 2301 at 583 (McNaughton rev. 1961); McCormick, Evidence § 92 at 188. Courts have also held that the client may disclose communications to co-defendants or co-litigants without waiving the privilege. See, for example, Hunydee v. United States, 355 F.2d 183, 184-85 (9th Cir.1965). These exceptions are consistent with the goal underlying the privilege because each type of disclosure is sometimes necessary for the client to obtain informed legal advice. 43 Westinghouse in essence asks that we recognize another exception to the waiver doctrine, one designed to accommodate voluntary disclosure to government agencies. In this regard, we note preliminarily that numerous cases have applied the traditional waiver doctrine to communications disclosed to government agencies. See Note, The Limited Waiver Rule: Creation of an SEC-Corporation Privilege, 36 Stan.L.Rev. 789, 792 and n. 17 (1984) (citing cases finding waiver when disclosures made to various government agencies, including the IRS, the DOJ, the Department of Labor, and the SEC). 44 In Diversified, the Eighth Circuit departed from the traditional waiver doctrine by recognizing an exception for voluntary disclosures made in cooperation with SEC investigations. The court's explanation for its departure consists, in its entirety, of the following sentence: 45 To hold otherwise 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, potential stockholders and customers. 572 F.2d at 611. 9 46 In rejecting Diversified, the D.C. Circuit observed that it could not see how the availability of a selective waiver would serve the interests underlying the [attorney-client privilege]. Permian, 665 F.2d at 1220. The court reasoned that selective waiver has little to do with the privilege's purpose--protecting the confidentiality of attorney-client communications in order to encourage clients to obtain informed legal assistance. Id. The court explained that while voluntary cooperation with government investigations may be a laudable activity, ... it is hard to understand how such conduct improves the attorneyclient relationship. Id. at 1221. The court then advanced a second reason for rejecting the selective waiver rule, stating: 47 The client cannot be permitted to pick and choose among his opponents, waiving the privilege for some and resurrecting the claim of confidentiality to obstruct others, or to invoke the privilege as to communications whose confidentiality he has already compromised for his own benefit.... The attorney-client privilege is not designed for such tactical employment. 48 Id. 49 We find the first part of the D.C. Circuit's reasoning persuasive. The Eighth Circuit's sole justification for permitting selective waiver was to encourage corporations to undertake internal investigations. Unlike the two widely recognized exceptions to the waiver doctrine we discussed at page 1424, selective waiver 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 government agencies, thereby extending the privilege beyond its intended purpose. See Note, 36 Stan.L.Rev. at 804 (noting that selective waiver rule merely encourages disclosure to government agencies); Developments, 98 Harv.L.Rev. at 1645, 1647 (noting concern that selective waiver rule extends breadth of attorney-client privilege). Moreover, selective waiver does nothing to promote the attorney-client relationship; indeed, the unique role of the attorney, which led to the creation of the privilege, has little relevance to the selective waiver permitted in Diversified. See Note, 36 Stan.L.Rev. at 804. 50 The traditional waiver doctrine provides that disclosure to third parties waives the attorney-client privilege unless the disclosure serves the purpose of enabling clients to obtain informed legal advice. Because the selective waiver rule in Diversified protects disclosures made for entirely different purposes, it cannot be reconciled with traditional attorney-client privilege doctrine. Therefore, we are not persuaded to engraft the Diversified exception onto the attorney-client privilege. Westinghouse argues that the selective waiver rule encourages corporations to conduct internal investigations and to cooperate with federal investigative agencies. We agree with the D.C. Circuit that these objectives, however laudable, are beyond the intended purposes of the attorney-client privilege, see Permian, 665 F.2d at 1221, and therefore we find Westinghouse's policy arguments irrelevant to our task of applying the attorney-client privilege to this case. In our view, to go beyond the policies underlying the attorney-client privilege on the rationale offered by Westinghouse would be to create an entirely new privilege. 51 Several factors counsel against the creation of a new privilege allowing parties to disclose communications to government agencies without waiving the attorney-client privilege. First, because privileges obstruct the truth-finding process, the Supreme Court has repeatedly warned the federal courts to be cautious in recognizing new privileges. See, for example, University of Pennsylvania, 110 S.Ct. at 582 (cited in note 8). In addition, the Supreme Court has been especially reluctant to recognize a privilege in an area where it appears that Congress has considered the competing concerns but has not provided the privilege itself. Id. In 1984, Congress rejected an amendment to the Securities and Exchange Act of 1934, proposed by the SEC, that would have established a selective waiver rule regarding documents disclosed to the agency. See SEC Statement in Support of Proposed § 24(d) of the Securities and Exchange Act of 1934, in 16 Sec.Reg. & L.Rep. at 461 (March 2, 1984). 52 Moreover, although a selective waiver rule might increase voluntary cooperation with government investigations, a new privilege must promote[ ] sufficiently important interests to outweigh the need for probative evidence. Trammel, 445 U.S. at 50, 100 S.Ct. at 912 (cited in note 8). We do not question the importance of the public interest in voluntary cooperation with government investigations. We have little reason to believe, however, that this interest outweighs the fundamental principle that 'the public ... has a right to every man's evidence.'  University of Pennsylvania, 110 S.Ct. at 582 (citations omitted). 10 53 In addition, we do not think that a new privilege is necessary to encourage voluntary cooperation with government investigations. Indeed, no such privilege was established at the time Westinghouse decided to cooperate with the SEC and the DOJ. When Westinghouse first disclosed privileged materials to the SEC, only one court of appeals had adopted the selective waiver rule. By the time Westinghouse made its disclosures to the DOJ, another court of appeals had trenchantly rejected the selective waiver rule. We find it significant that Westinghouse chose to cooperate despite the absence of an established privileged protecting disclosures to government agencies. We also note that many other corporations also have chosen to cooperate with the SEC despite the lack of an established privilege protecting their disclosures. See Note, 36 Stan.L.Rev. at 822 (noting that over 425 corporations participated in the SEC's Voluntary Disclosure Program 11 in 1979, when only one court of appeals had adopted the selective waiver rule). 54 Our rejection of the selective waiver rule does not depend, however, on the second reason the D.C. Circuit gave in Permian for rejecting Diversified. Generally, the fairness doctrine is invoked in partial (as opposed to selective) disclosure cases. 12 This case involves selective, rather than partial, disclosure. The courts and commentators disagree about whether there is anything unfair about selective disclosure. 13 Here it is unnecessary to decide the question. We need not find unfairness to the Republic in order to find waiver because we have concluded already that the attorney-client privilege protects only those disclosures necessary to encourage clients to seek informed legal advice and that Westinghouse's disclosures were not made for this purpose. 55 Westinghouse further contends, however, that the SEC's regulations concerning confidentiality and the stipulated court order memorializing the confidentiality agreement between Westinghouse and the DOJ must be regarded as preserving the attorney-client privilege with respect to the information disclosed because of Westinghouse's expectations of confidentiality engendered thereby. We reject Westinghouse's argument that it did not waive the privilege because it reasonably expected that the SEC and the DOJ would maintain the confidentiality of the information that it disclosed to them. 56 Even though the DOJ apparently agreed not to disclose the information, under traditional waiver doctrine a voluntary disclosure 14 to a third party waives the attorney-client privilege even if the third party agrees not to disclose the communications to anyone else. See, for example, Rockwell, 897 F.2d at 1265 (The attorney-client privilege does not apply to communications that are intended to be disclosed to third parties or that in fact are so disclosed.) (emphasis added). See also 8 Wigmore, Evidence, § 2327 at 636; Note, 36 Stan.L.Rev. at 792. We also note that the agreement between Westinghouse and the DOJ preserved Westinghouse's right to invoke the attorney-client privilege only as to the DOJ--and does not appear in any way to have purported to preserve Westinghouse's right to invoke the privilege against a different entity in an unrelated civil proceeding such as the instant case. 57 Moreover, even if Westinghouse could preserve the privilege by conditioning its disclosure upon a promise to maintain confidentiality, no such promise was made here regarding the information disclosed to the SEC. As Westinghouse emphasizes, SEC regulations in effect at the time of Westinghouse's disclosures to that agency provided that the SEC would maintain confidentiality as to information and documents obtained in the course of any investigation. See 17 CFR §§ 203.2, 240.0-4 (1978). We do not think, however, that these regulations justified a reasonable belief on Westinghouse's part that the attorney-client privilege would be preserved with respect to the Kirkland & Ellis letter and the other information disclosed to the SEC. As the Republic observes, the very regulations on which Westinghouse relies explicitly provided that information obtained in the course of a non-public investigation must be made a matter of public record and provided upon request if the disclosure of the confidential information was not contrary to the public interest. 17 CFR § 240.0-.04 (1978). Moreover, as the Republic further notes, the SEC unsuccessfully sought to have the Securities and Exchange Act of 1934 amended to include a specific provision establishing a selective waiver rule protecting corporate disclosures to the agency. See SEC Statement in Support of Proposed § 24(d) of the Securities and Exchange Act of 1934, in 16 Sec.Reg. & L.Rep. at 461 (March 2, 1984). That the SEC itself sought such legislation suggests that the SEC did not interpret its regulations to confer the selective waiver that Westinghouse would have us find in them. 15 58