Counsel Not Permitted to Make Independent Claim of Work Product Where Client Has Effected Waiver of Privilege and Work Product — Client’s Assertion of Advice of Counsel Defense Prevails

From SEC v. McNaul, 271 F.R.D. 661 (D. Kan. 2010):

In January 2009, the Receiver issued and served a subpoena on Baker & McKenzie seeking documents related to the firm's former representation of several defendants in this action. ***

Baker & McKenzie [maintains] that while the Receiver is the successor-in-interest to the corporate defendants and as such, now holds the privilege for those defendants, the Receiver does not hold the privilege for the individual defendants***. Baker & McKenzie *** claims that even if the [individual] defendants (Baker & McKenzie's former clients) have somehow waived the attorney-client privilege and work product doctrine, Baker & McKenzie may assert the work product doctrine on its own behalf. ***

II. Baker & McKenzie's Independent Claim of Work Product.

Baker & McKenzie acknowledges that their claim of an independent right of a law firm to protect its work product, even in the face of a client waiver, is an issue of first impression in this District. *** The Receiver agrees that this is a case of first impression in Kansas. *** Baker & McKenzie also acknowledges that jurisdictions that have addressed this issue are split, with some court adopting what is referred to as the "end product approach," while others adopt the "entire file approach." ***

Baker & McKenzie urges the Court to follow the "end product approach" whereby a client is not entitled to preliminary documents used by the lawyer to reach the end result, including internal legal memoranda and preliminary drafts of pleadings and instruments, and thereby the law firm can itself claim such preliminary documents to be covered by the work product doctrine. Baker & McKenzie relies on two cases: First Wis. Mortgage Trust v. First Wis. Corp., 86 F.R.D. 160, 167 (E.D. Wis. 1980); and Catino v. Travelers Ins. Co., Inc., 136 F.R.D. 534, 539 (D. Mass. 1991).

The Receiver urges adoption of the "entire file approach" which recognizes that the client, not the attorney or law firm, owns all documents related to a legal representation and thereby the client may waive any privilege as to such material. *** The Receiver relies on Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn, 91 N.Y.2d 30, 689 N.E.2d 879, 881-82, 666 N.Y.S.2d 985 (N.Y. App. 1997). Sage concludes that the majority position, and the sounder view, is the "entire file approach" pursuant to the American Law Institute Restatement (Third) of the Law Governing Lawyers (hereafter referred to as the Restatement).

[Footnote] 2. Sage quoted Section 58(2) of the Proposed Final Draft No. 1, 1996, of the Restatement. 689 N.E.2d at 881. The substance of that proposed final draft is now found in Section 46(2) of the Restatement (2000).

Before considering the above state court cases, it is important to remember that the work product doctrine, unlike the attorney client privilege, is governed by federal law rather than state law. Frontier Refining, Inc. v. Gorman-Rupp Co., Inc., 136 F.3d 695, n.10 (10th Cir. 1998). As the party asserting work product protection, Baker & McKenzie has the burden of establishing by a "clear showing" that the work product doctrine applies, and to carry that burden, they must show that (1) the materials sought to be protected are documents or tangible things; (2) they were prepared in anticipation of litigation or for trial; and (3) they were prepared by or for a party or a representative of that party. Sawyer v. Southwest Airlines, Case No's 01-2385-KHV and 01-2386-KHV, 2002 U.S. Dist. LEXIS 25111, 2002 WL 31928442, at * 4 (D. Kan., Dec. 23, 2002).

[Note: This is correct to the extent that the work product doctrine is codified in rule 26(b)(3), which is what is relevant in the context of this case, but item (1) is inapt under the 2010 expert witness amendments to the Federal Rules of Civil Procedure, Federal Rule of Evidence 502 and the common law that supplements the Federal Rules, under none of which is it mandatory that the work product be a document or tangible thing.]

Once the party raising the work product protection has established the right to the protection, the requesting party may still discover work product if it can show that it has substantial need for the material, and cannot, without undue hardship, obtain their substantial equivalent by other means; however, the Court is to protect against disclosures of the mental impressions, conclusions, opinions, or legal theories of a party's attorney. Fed. R. Civ. P. 26(b)(3)(A) and (B). ***

In an early federal court case, the court held that upon a client's request, the former attorney was required to turn over the entire contents of the attorney's file since the file belonged to the client, but the attorney could copy portions of the file that he wished to retain. Resolution Trust Corp. v. H--, P.C., 128 F.R.D. 647 (N.D. Tex. 1989). The court concluded that the law firm's reliance on the work product doctrine was inapplicable because the protection afforded by the doctrine was for the benefit of the client and thus could not be used by the attorney against the client. 128 F.R.D. at 649.

Other federal courts have recognized that while both a client and the attorney may have an interest in protecting work product material, where the interests of the client and attorney are not aligned, the client's interest must prevail. See Martin v. Valley Nat'l Bank of Arizona, 140 F.R.D. 291, 320-21 (S.D.N.Y. 1991); Polin v. Wisehart & Koch, No. 00CIV9624, 2002 U.S. Dist. LEXIS 9123, 2002 WL 1033807 at * 2 (May 22, 2002). Thus, where the client is suing the former law firm (as in Polin), or where the client has specifically requested release of the documents in connection with other litigation (as in Martin), a law firm cannot invoke the work product privilege to prevent disclosure of the documents. Finally, two more recent federal cases have found the reasoning in Martin to be persuasive and have denied motions to quash subpoenas which were filed by law firms who were attempting to assert an independent right to assert work product protection on documents in their files. See M and C Corp. v. Erwin Behr GmbH and Co., Case No 91-CV-74110-DT, 2008 U.S. Dist. LEXIS 58872, 2008 WL 3066143 (E.D. Mich., Aug. 4, 2008); In re Subpoenas Served Upon the Law Firm of Snow, Christensen & Martineau, No. 2:08 mc 675 DB, 2008 U.S. Dist. LEXIS 99941, 2008 WL 5191420 (D. Utah, Dec. 10, 2008).

A review of the above federal cases suggests that they support, either expressly or by implication, the reasoning of Sage and the Restatement that the "entire file approach" is the better rule. Therefore, a law firm should not have an independent right to prevent production of its work product, even opinion work product, when the interests of the former client and the law firm are not aligned, and the interests of the former client show a compelling need for production of the information.

In the present case, although the individual defendants *** have not expressly requested Baker & McKenzie to produce any work product to the Receiver. However, the defendants, as former clients, have clearly placed the advice of their former law firm at issue in this case. The defendants are taking the position that they followed the advice of Baker & McKenzie in connection with the operations which are the subject of the present action by the Securities and Exchange Commission. *** As such, defendants have placed at issue all advice they received from their former law firm concerning the formation of the joint ventures and the manner in which they operated their companies and joint ventures in connection with the claims being made in the present case.

On the other hand, Baker & McKenzie has distanced itself from the actions of the defendants, noting that the firm never gave an opinion that investment in the joint ventures would not be deemed to be an investment in securities, and never gave an opinion that sale of these joint ventures would qualify as a private placement, since the firm had no control over how the joint ventures were marketed. ***

It therefore appears clear that the interests of the defendants, as former clients, and the interests of Baker & McKenzie, are not aligned and, in fact, may be directly conflicting. Defendants can not be allowed to use the work product privilege as both a sword and a shield. Frontier Refining, Inc., 136 F.3d 695, 704. Therefore, where, as here, defendants are relying on advice of counsel, they cannot choose which law firm documents to use in support of their advice of counsel defense, while also preventing disclosure of other similarly related law firm documents. If Baker & McKenzie were allowed to independently claim work product and refuse to allow production of its files, this would effectively enable defendants to use the work product doctrine as both a sword and a shield as to the Receiver's claims. Under these circumstances, any independent interest Baker & McKenzie may have in its claimed work product must give way to the needs of the former client, even as to opinion work product.

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