A corporation which desires to cooperate either with a civil investigative agency, such as the Securities Exchange Commission, or a prosecutive authority, such as the local U.S. Attorney’s Office, is often asked by the government to turn over the results of any internal investigation as a demonstration of its cooperative spirit and as a badge of good corporate citizenship.
Much ink has been spilled, electronically speaking, on the propriety of governmental demands for the fruits of internal investigations, demands which reached their height in the Justice Department under corporate prosecution guidelines issued in 2003 and known as the Thompson Memorandum (http://www.usdoj.gov/dag/cftf/corporate_guidelines.htm), and which continue to a lesser extent under the superseding 2006 McNulty Memorandum (http://www.justice.gov/dag/speeches/2006/mcnulty_memo.pdf). The SEC has sought similar materials under the coercive pressure of the so-called "Seaboard Report" (Exchange Act Release No. 449969, Oct. 23, 2001). Defenders of the attorney-client privilege have rightly argued that exacting the production to the government of the results of internal investigations as a price for non-prosecution severely undermines the privilege and exemplifies overreaching by the government. Another, corollary consequence of the compelled production of such materials has been less widely discussed: production to the government may effect a general waiver of the work product protection attaching to documents such as interview memoranda and attorney-opinion analyses, leaving them subject to discovery in related civil litigation.
Most circuit courts of appeal have been hostile to corporations seeking to preserve opinion work product in the face of disclosure to the government, holding that a disclosure – even in furtherance of cooperation or under compulsion of a subpoena – amounts to a general waiver. E.g., In re Quest Communications, Int’l, 450 F.3d 1179 (10th Cir. 2006); United States v. Mass. Inst. of Technology, 129 F.3d 681(1st Cir. 1997); Westinghouse Electric Corp. v. Republic of the Philippines, 951, F.2d 1414 (3d Cir. 1991); Permian Corp. v. United States, 665 F.2d 1214 (D.C. Cir. 1981).
Only the Eighth Circuit, in Diversified Indus. v. Meredith, 572 F.2d 596 (8th Cir. 1977), has applied a selective waiver approach, holding that a company’s production of internal memoranda to the SEC under compulsion of a subpoena causes the documents to retain their work product protection. The rationale of the Diversified Indus. court was that protecting such materials even after their disclosure to the government would encourage corporations to retain outside counsel to investigate corporate wrongdoing and would facilitate the disclosure of such evidence to the government.
The Second Circuit in In re Steinhardt Partners, 9 F.3d 230 (2nd Cir. 1993) stopped short of Diversified Indus., and held that no work product protection remained for documents which were voluntarily disclosed to the SEC. The Second Circuit, however, left the door to a selective waiver argument open a crack by suggesting that work product protection could be retained where the disclosing party and the government had a “common interest in developing legal theories and analyzing information” or where the SEC had explicitly agreed to maintain the confidentiality of the documents. Id. at 236.
Recently, however, that door was further closed by the district court in In re Initial Public Offering Sec. Litig., 2008 WL 400933 (S.D.N.Y., Feb. 14, 2008). There, Credit Suisse had produced to the SEC and U.S. Attorney’s Office interview summaries created as part of an internal investigation into alleged IPO allocation misconduct. But Credit Suisse only did so after securing confidentiality agreements from both agencies, expecting that by doing so it would enjoy a safe harbor under the Steinhardt analysis.
Stopping just short of rejecting entirely the selective waiver doctrine, since Steinhardt had in theory recognized the possible application of the doctrine to some hypothetical state of facts, the IPO district court concluded that “selective waiver is not in the long-term best interests of the government, the adversarial system, or litigants.” *6. The court held that a “strong presumption” existed against a finding of selective waiver, and that it should not be permitted “absent special circumstances,” id., which were not identified.
Since the Credit Suisse attorneys believed they had followed the prescription of Steinhardt, yet still found that their disclosure to the government had effected a complete waiver of work product protection, the more prudent course of action in the Second Circuit – at least until the court of appeals speaks again to the selective waiver doctrine - - is to assume that disclosure to the government constitutes a waiver as to the rest of the world.