July 05, 2006
Joining a growing list of Circuit Courts, the Tenth Circuit in In re Qwest Communications International Inc. Sec. Litig., CV No. 06-1070 (10th Cir., June 19, 2006), rejected Qwest’s argument that it did not have to produce 220,000 privileged documents in a class action lawsuit where the company had previously produced the documents to the SEC and DOJ pursuant to confidentiality agreements that expressly provided for a “selective” or “limited” waiver. The Court found that the District Court was within its discretion when it declined to adopt a rule of “selective” or “limited” waiver which would allow production of attorney-client privileged and work product documents to the DOJ and SEC during the course of agency investigations without waiving protection for those materials as to third-party litigants.
Both the SEC and the DOJ undertook investigations of Qwest during 2002. In the course of those investigations, Qwest voluntarily produced to the agencies over 220,000 documents that it claimed were protected by the attorney-client privilege and work product doctrines.[i] The documents were produced pursuant to subpoenas and written confidentiality agreements which stated that Qwest did not intend to waive either attorney-client privilege or work product protection. Both the SEC and the DOJ agreed to maintain confidentiality of the documents and to not disclose them to third parties.
Prior to and following the SEC and DOJ investigations, private plaintiffs filed suits against Qwest, many of which were consolidated into a federal securities action. During the course of the federal securities action, Qwest produced millions of pages of documents but did not produce the 220,000 privileged and work product documents that it had previously produced to the DOJ and the SEC. After the plaintiffs moved to compel production, the District Court ordered Qwest to produce the documents and certain reports prepared by its counsel but allowed Qwest to redact attorney opinion work product from both the documents and the reports.
Waiver of Attorney-Client Privilege: The Court found that Qwest had waived its attorney-client privilege in the securities action by producing the documents in the course of the DOJ and SEC investigations. In doing so, the Tenth Circuit joined the First, Second, Third, Fourth, Sixth, and DC Circuits in rejecting a “selective waiver” rule which would allow a company to voluntarily surrender documents to government agencies but still assert attorney-client privilege in subsequent legal actions. Currently, only the Eighth Circuit accepts a “selective” or “limited” waiver rule as to attorney-client privileged documents.
Waiver of Work Product Protection: The Court also found that Qwest had waived work product protection by producing the documents to the SEC and DOJ. In reaching this conclusion, the Tenth Circuit joined the Third, Sixth, and Eighth Circuits in declining to apply a selective waiver rule to work product documents. Only the Fourth Circuit has approved a selective waiver rule; however, the Fourth Circuit limited its application of that rule to opinion work product, declining to apply it to non-opinion work product.
The Court’s Fact-Based Approach: The Tenth Circuit appears to have applied a fact-specific analysis, determining that “the record in this case is not sufficient to justify adoption of a selective waiver doctrine or an exception to the general rules of waiver upon disclosure of protected material.” The Court acknowledged arguments that the selective waiver rule might further important objectives, including (1) encouraging cooperation with law enforcement; (2) increasing investigative efficiencies; (3) encouraging settlements; and (4) possibly increasing corporate self-policing. However, the Court rejected these arguments, noting that cooperation with the government was likely to continue even in the face of privilege waiver. Of note, the Court observed that the DOJ—which filed an amicus brief at the Court’s request—did not expressly advocate for an adoption of the selective waiver rule.
Impact of Confidentiality Agreements and Fairness Standard: The Court also found that the record did not support Qwest’s argument that its confidentiality agreements justified selective waiver, noting that “[t]he record does not indicate whether Qwest negotiated or could have negotiated for more protection for the waiver documents, or whether, as it asserted at oral argument, setting further restrictions would have so diluted its cooperation [as] to render it valueless.” Instead, the Court observed that the confidentiality agreements in the case gave the agencies “broad discretion” to use the documents and, in fact, that the documents could be shared with other federal, state, and local agencies and had already “been introduced as evidence in a criminal trial, produced as discovery in three separate criminal proceedings and used as exhibits to SEC investigative testimony.” By producing only a portion of the attorney-client privileged and work product documents, the Court found Qwest had taken a calculated risk and hedged the odds of compelled production of privileged or work product documents. As a result, the Court found that ordering Qwest to produce documents was not unfair.
This case represents one more effort by a public company to get judicial relief from the potentially severe negative consequences of cooperating with a government investigation. Given the long list of circuit courts that have refused to provide that relief, it now appears that the only remaining “fix” to this issue is the amendment to the federal rules of evidence which has been proposed by the Federal Judicial Conference’s Advisory Committee on Evidence Rules. That amendment, which is supported by the SEC, would limit the discovery and admissibility of privileged communications turned over to the government during an investigation. Unless and until that amendment is made into law, however, companies have to assume that any information turned over to the government, regardless of protective measures taken, will also end up in the hands of private plaintiffs.