Commercial Litigation and Arbitration

Attorney-Client Privilege — Ninth Circuit Rejects Selective Waiver, Even If Party Has Confidentiality Agreement with Government Agency Receiving Privileged Information

In re Pacific Pictures Corp., 2012 U.S. App. LEXIS 9691 (9th Cir. May 10, 2012):


Petitioners' primary contention is that because Toberoff disclosed these documents to the government, as opposed to a civil litigant, his actions did not waive the privilege as to the world at large. That is, they urge that we adopt the theory of "selective waiver" initially accepted by the Eight Circuit, Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1978) (en banc), but rejected by every other circuit to consider the issue since, see In re Qwest Commc'ns Int'l, 450 F.3d 1179, 1197 (10th Cir. 2006); Burden-Meeks v. Welch, 319 F.3d 897, 899 (7th Cir. 2003); In re Columbia/HCA Healthcare Corp. Billing Practices Litig., 293 F.3d 289, 295 (6th Cir. 2002) [hereinafter "In re Columbia"]; United States v. Mass. Inst, of Tech., 129 F.3d 681, 686 (1st Cir. 1997); Genentech, Inc. v. United States Int'l Trade Comm'n, 122 F.3d 1409, 1416-18 (Fed. Cir. 1997); In re Steinhardt Partners, L.P., 9 F.3d 230, 236 (2d Cir. 1993); Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1425 (3d Cir. 1991); In re Martin Marietta Corp., 856 F.2d 619, 623-24 (4th Cir. 1988); Permian Corp. v. United States, 665 F.2d 1214, 1221 (D.C. Cir. 1981).

As the magistrate judge noted, we have twice deferred judgment on whether we will accept a theory of selective waiver. United States v. Bergonzi, 403 F.3d 1048, 1050 (9th Cir. 2005) (per curiam); Bittaker v. Woodford, 331 F.3d 715, 720 n.5 (9th Cir. 2003) (en banc). But we share the concerns expressed by many of our sister circuits about the cursory analysis behind the Diversified rule. The Eighth Circuit--the first court of appeals to consider the issue--adopted what has become a highly controversial rule only because it concluded that "[t]o hold otherwise may have the effect of thwarting the developing procedure of corporations to employ independent outside counsel to investigate and advise them in order to protect stockholders." Diversified, 572 F.2d at 611. This apprehension has proven unjustified. Officers of public corporations, it seems, do not require a rule of selective waiver to employ outside consultants or voluntarily to cooperate with the government. See, e.g., Westinghouse Elec. Corp., 951 F.2d at 1426.

More importantly, such reasoning does little, if anything, to serve the public good underpinning the attorney-client privilege. That is, "selective waiver does not serve the purpose of encouraging full disclosure to one's attorney in order to obtain informed legal assistance; it merely encourages voluntary disclosure to government agencies, thereby extending the privilege beyond its intended purpose." Id. at 1425.

It may well be that encouraging cooperation with the government is an alternative route to the ultimate goal of promoting adherence to the law. In re Columbia, 293 F.3d at 311 (Boggs, J., dissenting). And there are those who assert that "an exception to the third-party waiver rule need [not] be moored to the justifications of the attorney-client privilege." Id. at 308 (emphasis omitted). We disagree. If we were to unmoor a privilege from its underlying justification, we would at least be failing to construe the privilege narrowly. Cf. Univ. of Pa. v. EEOC, 493 U.S. 182, 189 (1990) (citing Trammel, 445 U.S. at 50; United States v. Bryan, 339 U.S. 323, 331) (1950)). And more likely, we would be creating an entirely new privilege. In re Qwest Commc'ns Int'l, 450 F.3d 1179; Westinghouse, 951 F.2d at 1425.

It is not beyond our power to create such a privilege. Univ. of Pa., 493 U.S. at 189 (noting that Fed. R. Evid. 501 provides certain flexibility to adopt privilege rules on a case-by-case basis). But as doing so requires balancing competing societal interests in access to evidence and in promoting certain types of communication, the Supreme Court has warned us not to "exercise this authority expansively." Id.; see also United States v. Nixon, 418 U.S. 683, 710 (1974). Put simply, "[t]he balancing of conflicting interests of this type is particularly a legislative function." Univ. of Pa., 493 U.S. at 189.

Since Diversified, there have been multiple legislative attempts to adopt a theory of selective waiver. Most have failed. Report of the Advisory Committee on Evidence Rules, May 15, 2007, at 4, available at ittee_Report-Evidence.pdf (reporting the selective waiver provision separately from the general proposed rule); SEC Statement in Support of Proposed Section 24(d) of the Securities Exchange Act of 1934, 16 Sec. Reg. & L. Rep. 461 (Mar. 2, 1984). But see H.R. Rep. No. 870, 96th Cong., 1st Sess. (1980), codified at 15 U.S.C. § 1312. Given that Congress has declined broadly to adopt a new privilege to protect disclosures of attorney-client privileged materials to the government, we will not do so here. Univ. of Pa., 493 U.S. at 189 (requiring federal courts to be particularly cautious when legislators have "considered the relevant competing concerns but [have] not provided the privilege").


Petitioners next assert that even if we reject selective waiver as a general matter, we should enforce a purported confidentiality agreement based upon the letter from the U.S. Attorney's Office. Though no circuit has officially adopted such a rule, at least two have "left the door open to selective waiver" where there is a confidentiality agreement. In re Columbia, 293 F.3d at 301 (discussing Steinhardt and Dellwood Farms, Inc. v. Cargill, 128 F.3d 1122 (7th Cir. 1997)); see also In re Qwest Commc'ns Int'l, 450 F.3d at 1192-94 (describing such a rule as a "leap" but declining to reject it completely).

Assuming that this letter constitutes a confidentiality agreement, Petitioners have provided no convincing reason that post hoc contracts regarding how information may be revealed encourage frank conversation at the time of the advice. Indeed, as the Sixth Circuit has noted, while this approach "certainly protects the expectations of the parties to the confidentiality agreement, it does little to serve the 'public ends' of adequate legal representation that the attorney-client privilege is designed to protect." In re Columbia, 293 F.3d at 303. Instead, recognizing the validity of such a contract "merely [adds] another brush on an attorney's palette [to be] utilized and manipulated to gain tactical or strategic advantage." Steinhardt, 9 F.3d at 235; cf. Permian Corp., 665 F.2d at 1221. And it would undermine the public good of promoting an efficient judicial system by fostering uncertainty and encouraging litigation. Upjohn, 449 U.S. at 393 (noting that an "uncertain privilege . . . is little better than no privilege at all").

The only justification behind enforcing such agreements would be to encourage cooperation with the government. But Congress has declined to adopt even this limited form of selective waiver. See Statement of Congressional Intent Regarding Rule 502 of the Federal Rules of Evidence, 154 Cong. Rec. H. 7817 (2008), reprinted in Fed. R. Evid. 502 addendum to comm. n subdivision (d) (noting [*16] that Rule 502 "does not provide a basis for a court to enable parties to agree to a selective waiver of the privilege, such as to a federal agency conducting an investigation"). As such, we reject such a theory here.

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