Federal Evidence Review

The U.S. Judicial Conference and Congress have considered separate measures that would affect the attorney-client privilege. The House approach would codify a new statute whereas the Senate approach adopts a new FRE 502. The other bill would adopt a new statute. How close is either measure to becoming law?

For nearly a decade, there has been a national debate on what guidelines should apply in criminal cases involving corporations. In 1999, the Department of Justice promulgated guidelines for prosecuting corporations. See Memorandum from Deputy Attorney General Eric H. Holder, Jr. to Heads of Department Components and U.S. Attorneys, Bringing Criminal Charges Against Corporations (June 16, 1999) [Holder Memo] This policy was updated in 2003 in the Memorandum from Deputy Attorney General Larry Thompson to Heads of Department Components and U.S. Attorneys, Principles of Federal Prosecution of Business Organizations (Jan. 20, 2003) [Thompson Memo]

One aspect of the DOJ policy concerned the waiver of the attorney client privilege and work product protection:

"One factor the prosecutor may weigh in assessing the adequacy of a corporation's cooperation is the completeness of its disclosure including, if necessary, 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. Such waivers permit the government to obtain statements of possible witnesses, subjects, and targets, without having to negotiate individual cooperation or immunity agreements. In addition, they are often critical in enabling the government to evaluate the completeness of a corporation's voluntary disclosure and cooperation. Prosecutors may, therefore, request a waiver in appropriate circumstances. The Department does not, however, consider waiver of a corporation's attorney-client and work product protection an absolute requirement, and prosecutors should consider the willingness of a corporation to waive such protection when necessary to provide timely and complete information as one factor in evaluating the corporation's cooperation." (footnote omitted)

The memorandum further explained:

"This waiver should ordinarily be limited to the factual internal investigation and any contemporaneous advice given to the corporation concerning the conduct at issue. Except in unusual circumstances, prosecutors should not seek a waiver with respect to communications and work product related to advice concerning the government's criminal investigation.”

Under the DOJ guidelines, some critics have suggested that a corporation has little choice but to waive the attorney-client privilege. To do otherwise risks being seen as being uncooperative or concealing key facts. As one witness testified during House hearings:

"A company that refuses to waive its privilege risks being labeled as uncooperative, which all but guarantees that it will not get a settlement or receive leniency in their sentencing or fine. But it goes far beyond that. The ‘uncooperative’ label can severely damage a company’s brand, shareholder value, their relationships with suppliers and customers, and their very ability to survive. . . . If company employees responsible for compliance with complicated statutes and regulations know that their conversations with attorneys are not protected, they will simply choose not to seek legal guidance. . . . And there’s one other major consequence – once the privilege is waived, third party private plaintiffs’ lawyers can gain access to attorney-client conversations and use them to sue the company or obtain massive settlements." Statement Of Thomas J. Donohue, President & CEO, U.S. Chamber of Commerce House Judiciary Committee, Subcommittee on Crime, Terrorism, and Homeland Security, Oral testimony on Attorney-Client privilege (March 7, 2006 Hearings)

In the case law, there is also an existing circuit split on whether selective waiver rule should apply. See In re: Qwest Communications International Inc., Securities Litigation, 450 F.3d 1179 (10th Cir. 2006) (discussing circuit split) (reviewed in 3 FED. EVID. REV. 885 (July 2006)).

Based on growing congressional interest and other criticisms, the DOJ updated the corporate prosecution guidelines in the Memorandum from Deputy Attorney General Paul J. McNulty to Heads of Department Components and U.S. Attorneys, Principles of Federal Prosecution of Business Organizations (Dec. 12, 2006) [“McNulty Memo”] Some members of Congress viewed the McNulty as offering too little, too late.

Based on recent congressional action, the prospects of a new attorney-client selective waiver rule are closer than they have ever been. Among other things, one of the measures pending would address the situation when a corporation voluntarily produces privileged material to the government, whether a third party later be able to compel production of the privileged material in civil litigation. The bill also includes language which would help litigants avoid waiving the privilege on inadvertent disclosures if parties took reasonable efforts to vet the documents and asked for the return of any privileged information in a timely manner.

Pending Legislation

The language the new proposed FRE 502 (a) provides:

(a) Scope of waiver. — In federal proceedings, the waiver by disclosure of an attorney-client privilege or work product protection extends to an undisclosed communication or information concerning the same subject matter only if that undisclosed communication or information ought in fairness to be considered with the disclosed communication or information.

Latest Action

On February 27, 2008, the U.S. Senate passed S. 2450, which would establish new FRE 502. The Senate measure has been referred to the U.S. House of Representatives. The Senate bill is identical to the proposal of the U.S. Judicial Conference. Sen. Rep. No. 264, 110th Cong., 2d Sess. 4 (2008); U.S. Judicial Conference Report (September 18, 2007)

Last fall, on November 13, 2007, the House of Representatives passed related legislation, The Attorney-Client Privilege Protection Act of 2007, H.R. 3013. According to the House Report, the bill seeks to redress a "culture of waiver," where corporations feel compelled to waive the attorney client privilege in the face of federal investigations. H. Rep. No. 445, 110th Cong.,1st Cong. (Nov. 13, 2007)

Both measures passed by voice vote, indicating little legislative opposition to reform. However, the response of the Administration has yet to be heard.

Questions

• While progress has been made on this issue over the last few years, for some the question will be whether the legislative proposals go far enough?
• What impact will the measure have in reversing the effects of the Holder / Thompson / McNulty Department of Justice memos on the waiver of attorney-client privileges by subjects being investigated by government agencies?

For more information, visit the FederalEvidence.com Amendment Page, which includes links to many of the key documents and reports on this issue since 2004.

Prior REVIEW

The attorney-client privilege selective waiver issue and proposed FRE 502 were previously discussed in the Federal Evidence Review at:

• Lead Story: "Are Further Changes On The Horizon Concerning The Corporate Attorney-Client Privilege And Work Product Protection?: The New McNulty Memorandum, Recent Congressional Action, And Proposed FRE 502 Suggest A Ripe Environment For Even Further Standards To Be Promulgated," 4 FED. EVID. REV. 25 (Jan. 2007)
• Lead Story: "Is The Time Ripe For Adoption Of A Rule Of Selective Waiver Of The Attorney-Client Privilege and Work Product Protection?," 3 FED. EVID. REV. 1040 (Aug. 2006)
• Open Issue: "Tenth Circuit Confronts Open Issue Whether A Selective Waiver Of The Attorney-Client Privilege and Work-Product Doctrine Should Be Recognized And Declines To Do So," 3 FED. EVID. REV. 885 (July 2006)