AbleToTrain by Willing & Able

Preserving Attorney-client Privilege, Work-product Protection During Internal Investigations

As businesses perform inquiries that remain purely internal, confidentiality must be protected. But several investigations are being undertaken in conjunction with U.S. government officials, who require businesses to share the details they have obtained during those investigations. In such cases, retaining the right of an attorney-client and a lawyer’s work-product protection—especially against potential third-party litigants seeking individual claims—may be difficult.

The probability of retaining rights and protection of work-products over investigation materials improves when such measures are taken by businesses. At the end of the day, however, co-operating companies must carefully weigh the advantages of exchanging such forms of information with the government against the risks—including the possibility that privileged correspondence and the legitimate work product may fall into the hands of the plaintiffs suing the organization.

As a general rule, parties waive the right of the attorney-client when revealing a confidential contact to a third party and waiving the privacy of the work-product when exchanging the protected materials with the opponent. Such waivers can provide third-party litigants with an opportunity to access files that are otherwise shielded. Certain courts have ruled that these standards often extend to disclosures made in cooperation with government inquiries.

The U.S. District Court for the Discovery Order of the Northern District of California in the Wadler v. Bio-Rad Labs case in 2016 shows this danger. The plaintiff, former General Counsel of Bio-Rad, sued to appeal his dismissal, alleging that he had been dismissed in retaliation for raising concerns under the International Corrupt Practices Act. He claimed that the organization had waived any right or confidentiality of the work-product over its investigative files by, inter alia, releasing it to the government as part of its cooperation with an internal investigation. The District Court decided that the declaration of the corporation to the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) amounted to a waiver.

Bio-Rad represents the majority—but not universal—of the opinion that privileged communications cannot be selectively exchanged without waiving the right in general. Divide over the issue, known as the selective waiver doctrine, creates legal confusion and threats for cooperating businesses that share privileged communications or a lawyer’s work product with the government. The U.S. in 1978. The Court of Appeals for the Eighth Circuit was the first to apply this doctrine, in Diversified Industries, Inc. v. Meredith. In view of the fact that the government has a different position to that of private litigants, the court held that the disclosure of confidential materials to the government during an internal inquiry does not waive the right of the other parties. Since then, however, six other appellate courts also rejected the doctrine and ruled that the disclosure of confidential messages to the government waives the right of both parties. One court of appeal followed a fact-specific approach, arguing that the courts should consider confidentiality agreements and any shared interest before deciding the extent of the waiver. Three of the Courts of Appeal considering the matter have ruled on the basis of the specific facts at hand rather than categorically endorsing or denying the doctrine. Others have not yet discussed the limited waiver explicitly or made what seems to be contradictory claims about it.

Regardless of how any individual cooperating organization balances government disclosure against a possible waiver, taking those measures can help mitigate the risks of privilege waiving and security of work-products.


1. Join the Confidentiality Arrangement.

The first thing that cooperating companies should do is to help secure the knowledge they have.

Provide the government—whether privileged or not— to enter confidentiality arrangements. Such agreements frequently (1) limit the government’s discretion to reveal materials produced by the company; (2) provide non-refusal clauses under which the government acknowledges that the creation of any confidential correspondence or legitimate work product does not result in a waiver; (3) provide that the government does not extend a wider exemption on the basis of such disclosures; and (4) provide such disclosures.

Courts are divided as to whether confidentiality arrangements with the government are successful in protecting privilege or work product vis-à-vis third parties: some enforce them, while others do not. However, even though the court held that a confidentiality arrangement did not override a waiver, those agreements remain in effect. Essential for other purposes, including defense against undesired exemptions and remedies. (Many confidentiality arrangements contain clauses on inadvertent waiver and clawback.)


2. Share Information Without Exposing Protected Correspondence or Materials, where possible.

The government usually insists that it requires cooperating firms to reveal the facts and does not compel them to waive the right or security of the work-product. Cooperating firms may make use of the government’s differentiation between the truth, on the one hand, and the privileged correspondence and lawyer’s work product, on the other hand, to their future benefit. Sharing information without disclosing privileged correspondence or a lawyer’s work product should present the least risk to the legal security of a business. As in the U.S. The Supreme Court observed in Upjohn Co. v. United States that the facts, standing alone, are usually not privileged; therefore, they are not a protected work product, so that the disclosure of those rights should not be threatened. However, as noted in the sidebar, the government’s requirements of cooperating firms can not completely account for, or cover, the actual working product.


3. Define the reach of any deliberate waiver.

Cooperating firms often plan to share a privileged information or a lawyer’s work product with the government. Before doing so, they should (1) ensure that the development of the information in question advances an important interest that cannot be fulfilled by disclosing only the details that the government expressly says it wants; and (2) ensure that the value of the provision of such material outweighs both the danger that disclosure will be regarded as a waiver and the implications of more widespread disclosure, if it is waived. If the exempted materials have to be exchanged with the government—for example, since the business claims counsel—the company can carefully examine how the privilege can be described and contained along legally defensible lines in order to prevent a wider waiver. For example, in cases involving counsel-of-counsel protection, the DOJ and the SEC reserve the right to request underlying counsel-client correspondence and related work items to determine the merits of the defense. In the light of the attendant waiver likely to arise from such a defense, businesses should first consider whether the defense is worth asserting and whether it is likely to be successful. In addition, if a corporation wishes to waive privilege or work-product rights (either on the basis of counsel or for some other reason), setting out the exact nature of the intended waiver—e.g. the subject matter and date of the privilege or work product to be waived—in a declaration or agreement with the government can help to prevent or at least restrict the possible future. It can also help to set down a simple, defensible limit to the waiver if it is subsequently challenged.


4. If Necessary, If Work Product is Shared, Restrict It to Fact Work

Product and support a shared interest with the Government. To the degree that businesses share a lawyer’s work product with the government, it is usually better to share a fact—as compared to an opinion—work product. Opinion labor product is entitled to greater protection under the law.

It can also be useful to express a shared interest between the business and the government that can help to protect work-products from other parties. Again, though, the case law is mixed up. In some cases, a lawyer’s work product can be shared with other parties without waiving rights if it advances a mutual purpose. For example, some courts have acknowledged the mutual interest between firms investigating and the government in ensuring that sound financial and accounting procedures are used and in uncovering the incorrect management of the fund.

Other potential shared interests include the responsibility of individual wrongdoers/executives and the detection, remediation, punishment and prevention of cyber attacks.

Popular interest claims could be less likely to succeed, however, if the company itself is the object of the government inquiry. In that case, it is more difficult to argue that the corporation and the organization have a mutual interest and are not competitors. Even if the company is not a target, courts often find that the company could become one and thus consider the security of the work-product to be waived.

Taking the measures outlined above can enable an organization to minimize the likelihood of a waiver, but will not necessarily remove it.

As a result, businesses should calibrate their cooperation activities with the government to comply with the compliance criteria while taking all available measures to prevent or at least restrict the reach of any exemptions.