Academic journal article Vanderbilt Law Review

Pragmatic Selective Waiver: Re-Aligning Corporate Executives' Personal Interests with Those of the Corporation Amidst Government Investigations

Academic journal article Vanderbilt Law Review

Pragmatic Selective Waiver: Re-Aligning Corporate Executives' Personal Interests with Those of the Corporation Amidst Government Investigations

Article excerpt


In the corporate setting, government investigators increasingly ask corporations to waive the attorney-client privilege as part of the "cooperation" necessary to receive incentives.1 In practice, however, these cooperation incentives have led to what has become known as a "culture of waiver," where waiver of the privilege in the face of investigation has become virtually essential.2 One way courts have sought to diminish the negative externalities of waiver is through the doctrine of selective waiver. Selective waiver allows the corporation to waive the attorney-client privilege, but only to the government agency during the course of the investigation, while still retaining the right to assert the privilege against third parties.3

Thus far, the debate over selective waiver has focused on whether selective waiver should be judicially recognized and how to solve the unsettled nature of the law in the courts. Both the culture of waiver and the uncertainty regarding the selective waiver doctrine's validity have created tension between a corporate executive's personal interests and fiduciary duties. As currently implemented, the selective waiver doctrine may promote a perverse incentive for corporate managers to waive the corporation's attorney-client privilege in order to be deemed "cooperative" individually and thereby decrease their own personal criminal liability while potentially subjecting the company to extensive third-party liability.4

Current and past proposed solutions fail to resolve this problem. Efforts by the Department of Justice ("DOJ") to reduce the requirement of waiver within their cooperation policies5 have done little to ameliorate this tension. The proposed Attorney- Client Privilege Protection Act ("ACPPA")6 also fails to eliminate either this tension or the culture of waiver because it still allows for voluntary waiver. The Judicial Conference's Proposed Rule of Evidence 502, 7 while nominally removing the threat of outside liability, allows government agencies to share information, thereby subjecting a company to threat of suit by another agency. Finally, the recently adopted Federal Rule of Evidence 502,8 which rejects the selective waiver language of the proposed rule, perpetuates the predictability problem by allowing federal judges to determine the validity of selective waiver on a case-by-case basis.

Discarding the selective waiver doctrine is not an option. The realities of the culture of waiver and the inherent nature of corporate investigations command adoption of selective waiver in a predictable, codified form. Such an approach would preserve valuable policies without creating negative externalities, such as conflicts between an executive's personal interests and his fiduciary duties to the corporation. Either new legislation or new language is needed to amend the newly enacted Federal Rule 502 in a way that would explicitly recognize selective waiver. Such legislation must protect against both third-party liability and, unlike the formerly proposed Rule 502, separate agency liability. This is the only way to align the executive's personal and fiduciary roles appropriately. Such codification is also needed to protect corporations while giving the government the latitude it requires to investigate corporate crimes, thereby reconciling the duty of protecting shareholders with the preservation of the attorney-client privilege.

The purpose of this Note is to examine selective waiver and the way that non-recognition of the doctrine creates perverse incentives for corporate executives to abrogate their fiduciary duties. This Note suggests that the currently proposed solutions do not resolve this tension and that new or amended legislation is needed to reconcile these competing imperatives. Part II discusses the underlying policies and use of attorney-client privilege waiver, the tension the waiver requirement creates between corporations and government agencies, and the use of selective waiver as a solution to this tension. …

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