White Collar & Government Investigations - California Court Holds no Waiver by Production of Counsel Privileged Materials to Federal Authorities
As Congress and the Justice Department continue to duel over federal policy and practice concerning disclosure of counsel-privileged information, a California appellate court has ruled that no waiver occurred when companies provided
privileged material to federal authorities. The decision is particularly interesting to federally regulated energy companies, as it has been issued against state authorities seeking privileged materials from natural gas suppliers
that were produced to a federal task force consisting of the FERC, SEC and Department of Justice. The Regents of the University of California v. The Superior Court of San Diego County,
No. D051364, Ct. of App., 4th Dist, Div. 1, Cal. (July 30, 2008) (the “Regents Decision”).
The decisive factor of the Regents Decision is the court’s finding that production of counsel-privileged information to federal authorities under the 2003 Justice Department’s Thompson Memo is a coerced act;
and, under California law, such coerced disclosure of privileged material does not constitute a waiver.
The California court reviewed many of the recent decisions addressing selective waiver and federal investigative practices, noting particularly Judge Kaplan’s decision in U.S. v. Stein, 435 F.Supp. 2d 330 (S.D.N.Y.
2006), holding that federal prosecutors had violated the defendants’ constitutional right to counsel by coercing their former company into cutting off funding for their defense. The Regency Decision court refused
to follow Second Circuit and other court holdings that have rejected selective waiver, holding that federal policy under the Thompson Memo was “as a practical matter, more powerful than a court order, [because a] court order
can be challenged, without penalty, by way of extraordinary writ or appeal; [whereas] the defendants here had no means of asserting the privileges without incurring the severe consequences threatened by the government agencies.”
Regents Decision, at 15.
This decision adds additional support for an argument that, contrary to largely unsuccessful attempts to maintain counsel privileges for materials disclosed to federal authorities under the so-called common interest privilege, the
relationship between the producing entity and the federal government is accurately characterized as, not only adversarial, but unreviewably and coercively one-sided. The Regents Decision also lends support to an argument
that the rule of topical waiver - that any waiver effects waiver of all material on the same topic - should not be applied when a company or individual feels compelled to share counsel-privileged material with federal authorities.
The topical waiver rule is based on a principle of fairness, i.e., that it is unfair to disclose some privileged material and not all. As the court in the Regents Decision reasoned, waiver is a voluntary act,
and, thus, it is unfair to impose topical waiver on disclosure that has been is effectively coerced.
It should be noted that there remains a method under federal law for sharing the results of an internal corporate investigation with federal authorities without waiving counsel privileges covering the underlying material. See Upjohn v. U.S.,
449 U.S. 383 (1981).