Corporate Investigations, Attorney-Client Privilege, and Selective Waiver: Is a Half-Privilege Worth Having at All?

Article Excerpt

Corporate Investigations, Attorney-Client Privilege, and Selective Waiver: Is a Half-Privilege Worth Having at All?

By Colin P. Marks

Imagine that a federal agent approached you at work and informed you that you were under investigation for fraud and embezzlement. After recovering from the initial shock, and possibly a mild heart attack, you would likely seek the services of an attorney. Imagine, however, that this same federal agent then told you that you could attempt to avoid indictment by cooperating, and in that vein, waiving your attorney-client privilege, including past and future communications with your attorney. You would likely be outraged at the federal agent’s attempt to force a waiver of one of the longest standing common-law privileges. Yet this very situation is occurring every day to corporations in modern governmental investigations.

Beginning in 1999, the Department of Justice (DOJ) articulated new policies establishing factors it would consider when deciding whether to charge corporations. One of the factors the DOJ will consider is whether the corporation under investigation has “cooperated,” which often includes waiver of the attorney-client privilege. The Securities Exchange Commission (SEC) and other governmental agencies appear to be following suit. Waiver of the attorney-client privilege in the context of a governmental investigation, however, usually also means waiver as to third parties, thus opening companies to larger liability in the context of third-party civil suits. As a result, corporations face a Hobson’s choice: they either waive the privilege to avoid possible indictment, thereby essentially making the privileged materials available to third parties, or assert the privilege, thus risking an indictment or stiffer penalties from an agency such as the SEC.

As a possible solution to this Hobson’s choice, some commentators have advocated the adoption of a “selective” or “limited” waiver of the privilege, whereby waiver to a governmental agency would not waive the privilege to third-party litigants. Selective waiver is even being proposed as an amendment to the Federal Rules of Evidence. Though adoption of selective waiver may have, at first blush, some appeal, does it do anything more than simply remedy a corporation’s fear that waiver of privilege to the government also waives privilege to third parties? In other words, does selective waiver address any of the other various issues and problems that arise with waiver of the attorney-client privilege, such as the erosion of open and frank communications with counsel? If the purpose of the attorney-client privilege is to promote open and frank communications between a client and an attorney to, in part, promote compliance with the law, then does a policy that encourages disclosure of attorney-client materials to the government destroy the underlying purpose of the privilege in the first place? In that sense, is a half privilege worth having at all?

This Article will explore both the various problems that arise with a policy that essentially mandates waiver of the attorney-client privilege as well as the limited appeal of the selective waiver theory as a compromise position. It concludes that selective waiver is inadequate in addressing the many problems created by policies that coerce waiver and that a more desirable solution is to eliminate or amend the governmental policies that coerce waiver. Part II of this article explains and explores the metes and bounds of the attorney-client privilege and work-product protection. Part III explains the development of the selective waiver theory, as well as its relation to the current charging policies of the DOJ. In Part IV, the various problems that arise from the DOJ’s policy are explored. Part V then discusses the adequacy of selective waiver in addressing these problems, and ultimately concludes that selective waiver essentially eviscerates the purposes of attorney-client privilege and work-product protection and thus has limited appeal. Finally, Part VI concentrates on what efforts are underway to rectify the situation and what efforts can be made in the future to restore the sanctity of the attorney-client privilege to its pre-1999 status.

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