Ninth Circuit Rejects 'Selective Waiver' Of Attorney-Client Privilege In Government Investigations

Author:Mr Vito Costanzo, Vince Farhat and Franco J. Tenerelli
Profession:Holland & Knight

Vito Costanzo and Vince Farhat are Partners and Franco J. Tenerelli an Associate in our Los Angeles office

In a case of first impression, the U.S. Court of Appeals for the Ninth Circuit recently held that a party who provides attorney-client privileged materials to the government may not thereafter claim the privilege in civil litigation. Rejecting the theory of "selective waiver," In re Pacific Pictures Corporation1 has serious implications for companies and individuals considering disclosing privileged materials in connection with a government investigation.

Selective Waiver of Attorney-Client Privilege

Although the attorney-client privilege ordinarily protects communications between clients and their attorneys from compelled disclosure in a court of law,2 courts also recognize that voluntarily disclosing privileged documents to third parties generally destroys the privilege.3 As noted by the court, the assumption behind this rule is that "[i]f clients themselves divulge such information to third parties, chances are that they would also have divulged it to their attorneys, even without the protection of the privilege."4

Creating an exception to this general rule, the Eighth Circuit in Diversified Industries, Inc. v. Meredith,5 adopted the theory of "selective waiver" of the attorney-client privilege. This theory provides that a party's voluntary disclosure of privileged materials to the government — typically as part of an effort to cooperate with an investigation — does not waive the privilege as to other third parties. Rather, such disclosure is only treated as a "limited waiver" of the privilege, allowing the privilege to be asserted thereafter.6 The Eighth Circuit reasoned 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."7 Proponents contend that selective waiver encourages parties to voluntarily cooperate with government investigations.

The selective waiver theory has been rejected by every other circuit to consider the issue since the Eighth Circuit's decision in Diversified Industries.8 Until its recent ruling in Pacific Pictures, the Ninth Circuit had twice deferred judgment on whether to accept a theory of selective waiver.9

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