Internal Corporate Investigations: The Waiver of Attorney-Client Privilege and Work-Product Protection through Voluntary Disclosures to the Government
Koch, Alec, American Criminal Law Review
I. INTRODUCTION II. INTERNAL INVESTIGATIONS AND WAIVER ISSUES III. MINORITY APPROACHES: "SELECTIVE WAIVER AND
"SELF CRITICAL ANALYSIS
A. Diversified Industries, Inc. v. Meredith and "Limited Waiver"
B. "Self-Critical" Privilege IV. THE MAJORITY APPROACH: STRICT APPLICATION OF THE WAIVER
A. The District of Columbia Circuit's Strict View of Waiver
B. Westinghouse Electric Corp. v. Republic of the Philippines
C. In re Steinhardt Partners, L.P.
D. In re Martin Marietta Corporation V. THE SUPREME COURTS LIKELY TREATMENT VI. CLARIFICATION OF INSTANCES AND SCOPE OF WAIVER VII. CONCLUSION
Internal corporate investigations by outside counsel are now commonplace. When a corporation becomes aware of wrongdoing or a government probe, an internal investigation enables the company to expose the problem and anticipate issues that could subsequently arise in a civil or criminal action. Furthermore, disclosure to the government of the results of an investigation and affirmative action to remedy the situation often will result in more lenient treatment by an enforcement agency.
One of the most important issues in the area of internal corporate investigations is how such disclosure affects the corporation's ability to claim the protections of the attorney-client privilege and the work-product doctrine. Third parties frequently argue that the company's disclosure to the government waives these protections. These third parties often are other government agencies or plaintiffs in civil suits, particularly shareholder-derivative actions. Although some courts have held that disclosure to the government constitutes only a "selective" or "limited" waiver as to the government,(1) the majority of federal circuits to address the issue have construed the waiver doctrine strictly, holding that disclosure to the government also waives the attorney-client and work-product protections as to third party litigants.(2) As a consequence, corporations may be more reluctant to conduct internal reviews and police their own operations for fear that disclosing the results to the government will provide civil plaintiffs with a litigation roadmap.
This Note examines this dilemma in light of the rationales for the attorney-client and work-product protections, Supreme Court precedent, and the competing approaches and policy interests involved. Part II briefly describes the internal investigation process and the applicability of the attorney-client and work-product protections to that process. Part III examines the minority approach taken by those courts that have construed the disclosure of an internal investigation report to an agency to be a waiver of the protections only as to that agency. It also reviews a largely academic proposal calling for recognition of a new self-critical analysis privilege to be applied to internal corporate investigations. Part IV discusses the majority view taken by courts that have construed the waiver doctrine strictly. Part V concludes that the Supreme Court would not, and should not, recognize a new self-evaluative privilege for internal corporate investigations or adopt the minority selective waiver approach. As discussed in Part VI, however, clarification regarding the different contexts in which a waiver occurs, as well as the scope of any such waiver, would both encourage corporate self-policing and promote effective enforcement of public and private rights.
II. Internal Investigation and Waiver Issues
As the scope of potential criminal and civil corporate liability has expanded in recent years, government enforcement activities and potential penalties also have increased.(3) As a result, corporations confronted with evidence of misconduct frequently choose to perform an internal investigation, conducted by either outside or in-house counsel.(4) Investigations of this type became more visible during the 1970s when, in the wake of Watergate revelations about illegal corporate political contributions, the Securities and Exchange Commission (SEC) instituted a Voluntary Disclosure Program. …