Waiver Worries

Many in-house counsel are hopeful that a proposal to amend Federal Rule of Evidence 502 currently before the Standing Committee on Rules of Practice and Procedure of the Judicial Conference will protect organizations against third-party discovery of attorney-client privilege and work-product protected documents and communications.

While the proposal intends to do that, I have concerns about the most controversial provision in the proposed rules--FRE 502(c).

That rule would create a presumption of enforceability for confidentiality agreements between companies and government investigators when companies turn over privileged information as part of a government proceeding. Known as selective waivers, these agreements are a means of sharing documents with the government while precluding future production to third parties. Such a rule is needed because most courts have held that privileged material provided to the government is waived. The fact that the corporation and the government agreed to limit further distribution doesn't amount to a hill of beans: a majority of circuits don't enforce such agreements.

So you say, "Great! Selective waivers will protect companies! You're all over it, right?" While this relief is welcome to a company already forced to waive privilege, it provides no true relief until we address the underlying problem--the government has no right to force waiver in the first place. Implementing a selective waiver "solution" before addressing the problem will simply cement abuses.

502(c) has other less obvious flaws. First, the rule is designed to protect companies facing a government investigation or proceeding, and so it does not adequately address the disclosure of material that is demanded outside the prosecutorial context. If the government asks you to waive material in a situation outside a formal proceeding--before charges are filed or in the audit context--what you waive won't be protected under 502(c).

Second, 502(c) will not offer any assurances that state courts will honor selective waivers.

Third, ACC fears that "codification" of selective waiver will perversely increase the number of waiver demands. With this carrot in their kit, prosecutors and enforcement officials will suggest to companies their waived disclosures will be protected against future third-party discovery requests, and thus there's no reason why an innocent company would refuse a request for waiver.

Companies need the remedy of proposed FRE 502(c) in the context of a government investigation or proceeding only after they already have been subjected to an inappropriate abrogation of their rights. While it would be nice if we were in a place where it was possible for us to imagine a company truly voluntarily waiving to the government with the protection of an enforceable confidentiality agreement supporting their decision, the reality is there is no such thing as a truly voluntary waiver in today's prosecutorial environment.

The assumption that waiver is needed for a company to be deemed cooperative, and that the full disclosure of facts and other non-privileged material is somehow insufficient, is precisely the problem ACC seeks to remedy. We agree that there are likely circumstances wherein it's necessary for the government to request waiver, but the arbiter of whether that waiver should be sought should be an impartial court weighing the merits of the waiver demand and the company's rights. Our justice system does not impart that authority to the prosecutor.

Proposed FRE 502(c) enables government prosecutors and enforcement officials to continue to demand privilege waivers, violating corporate clients' rights to confidential counsel. ACC stands firm in its commitment to remain focused on protection of the privilege rather than codification of a means by which the government can continue to violate its tenets. To support anything less is to diminish the status of the corporate attorney-client privilege to that of a bargaining chip that must be forfeited on demand.

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Susan Hackett is senior vice president and general counsel of ACC.

Staff Writer

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