Waiver of Work Product Protection by Production Pursuant to Grand Jury Subpoena and Understanding with Government

From United States v. Thompson, 2009 U.S. App. LEXIS 8087 (D.C. Cir. April 17, 2009):

This is a third-party appeal of a discovery order in a criminal case compelling the government to produce "all materials disclosed" by the third party pursuant to its cooperation with federal investigators during a criminal investigation of the third party and others. Ultimately, the government agreed to defer prosecution of the third party. Thereafter several of its former employees, including Scott Thompson, were indicted. The district court granted Thompson's motion to compel production of documents the third party had produced to the government that would be material to the preparation of his defense. This court stayed the order of production. The third party now seeks to enforce its agreement with the government that the government would hold the documents in confidence "to the extent possible" in view of the third-party's claims of privilege. ***

On appeal, WPC seeks to enforce its agreement with the government to maintain the confidentiality of the documents it produced during the federal investigation of its trading activities. Specifically, WPC contends that it did not waive its work-product protection as to any other party, including Thompson, when it made a limited, one-time disclosure of documents to federal prosecutors in response to a grand jury subpoena while the target of a criminal investigation. It further contends Thompson has failed to demonstrate any need for the documents because he already has access to the source materials and witnesses on which WPC's work product is based.

***This court has declined to adopt a selective waiver doctrine that would allow a party voluntarily to produce documents covered by the attorney-client privilege to one party and yet assert the privilege as a bar to production to a different party. See In re Sealed Case, 877 F.2d 976, 980 (D.C. Cir. 1989); Permian Corp. v. United States, 665 F.2d 1214, 1219 (D.C. Cir. 1981). But, the question remains whether work-product protection has been waived. Because the work-product doctrine is designed to "promote the adversary system by safeguarding the fruits of an attorney's trial preparation from the discovery attempts of the opponent" and not, as the attorney-client privilege is designed, "to protect a confidential relationship," not all disclosures to third parties waive the protection afforded by the doctrine. United States v. AT&T, 642 F.2d 1285, 1299 (D.C. Cir. 1980); see also Rockwell Int'l Corp. v. Dep't of Justice, 235 F.3d 598, 605 (D.C. Cir. 2001); Permian Corp., 665 F.2d at 1219. Yet "disclosure of work product materials can waive the privilege for those materials if 'such disclosure, under the circumstances, is inconsistent with the maintenance of secrecy from the disclosing party's adversary.'" Rockwell Int'l Corp., 235 F.3d at 605 (quoting AT&T, 642 F.2d at 1299). Three main factors determine whether work-product protection has been waived: "(1) 'the party claiming the privilege seeks to use it in a way that is not consistent with the purpose of the privilege'; (2) the party had no reasonable basis for believing that the disclosed materials would be kept confidential by the [government]; and (3) waiver of the privilege in these circumstances would not trench on any policy elements now inherent in this privilege." In re Subpoenas Duces Tecum, 738 F.2d 1367, 1372 (D.C. Cir. 1984) (internal citation omitted).

As to the first factor, In re Subpoenas Duces Tecum, 738 F.2d 1367, is instructive. There, the court concluded that allowing the party (the Tesoro Company) claiming the privilege the benefits of selective waiver would not well serve the adversary system, "which spawned the need" for work-product protection…. Moreover, the court concluded that the Securities and Exchange Commission ("SEC"), which had created a voluntary disclosure program relying on internal reviews of allegations of improper corporate payments, was an adversary of Tesoro, a company participating in the program; Tesoro's disclosure was motivated by a desire to secure lenient punishment for any wrongdoing exposed in the disclosed materials. The court reasoned that Tesoro's disclosure to the SEC was not simply disclosure to a party with common interests. For purposes of this appeal, contrary to WPC's contention, we will assume that WPC was not coerced into producing documents to the government, as the district court found, for we can reach a disposition that is not inconsistent with WPC's confidentiality claim without addressing a troubling constitutional issue. Like Tesoro, then, WPC "independently and voluntarily chose to participate in a thorough disclosure program, in return for which it received the quid pro quo of lenient punishment for any wrongdoing exposed in the process[.]" ... Consequently, here too "[i]t would . . . be inconsistent and unfair to allow [WPC] to select according to [its] own self-interest to which adversaries [it] will allow access to the materials[.]" ...

As to the second factor, whether the party had a reasonable basis for believing that the government would keep the disclosed materials confidential, the reasoning of In re Subpoenas Duces Tecum, 738 F.2d 1367, is not determinative. In one sense, as in that case, here there were no "common interests between transferor and transferee" to support an expectation of confidentiality…. Just as the SEC and Tesoro were adversaries, the federal investigators and WPC were adversaries. But, unlike here, there was no other solid basis for Tesoro's expectation that its produced documents would be kept confidential…. In contrast, by letters accompanying its disclosures to the government WPC expressed its desire to preserve its privileges and limit waivers…. The government, in turn, acknowledged in opposing Thompson's motion to compel that WPC had a reasonable basis for believing that the Justice Department and the CFTC would keep its documents confidential. WPC has standing, at least at this stage, to seek enforcement of this confidentiality agreement.

Just as clearly, however, WPC has not demonstrated that disclosure of its documents to a criminal defendant under Brady and Rule 16 lay beyond the scope of its confidentiality agreement with the government. Thompson's indictment was an outgrowth of the criminal investigation in which WPC produced the documents at issue. WPC's expression of its expectation of confidentiality sought the commitment of the government to assist in preserving WPC's privileges only "to the extent possible." ... In view of this phrasing, WPC's expectation of confidentiality cannot reach the disclosures grounded in the government's Brady obligations, which are constitutionally based, and may not reach disclosures the government would be required to make under Rule 16, which turns on a balancing of interests. ... Moreover, WPC made the disclosures pursuant to grand jury subpoena and thus the materials were disclosed with the understanding that they potentially would be used at trial. In producing one set of documents to the government, WPC stated through independent counsel that it was "waiv[ing] the attorney work product privilege with respect to [Gray Cary's] investigation of reports to various publications that publish gas indices," … and confirmed the privilege was waived with respect to the government's use of the documents. In transmitting interview notes, WPC stated it was waiving its work-product privilege with respect to "this grand jury investigation by your office," and the prosecutors' "investigation of natural gas price reporting issues." …. Given this evidence of the scope of the waiver under the confidentiality agreement with the government, WPC has not shown that it reasonably expected the government would guard the confidentiality of the documents despite its Brady and Rule 16 obligations.

As to the third factor, which turns on the public policy interests inherent in the work-product doctrine, the court concluded in In re Subpoenas Duces Tecum, 738 F.2d 1367, that if public policy favored an exception to waiver for cooperation with investigative regulatory bodies, a court is not the appropriate forum in which to craft such an exception…. However, the court also noted that "the company can insist on a promise of confidentiality before disclosure to the SEC." ... Here, WPC sought confidentiality, but the assurances it secured were neither sufficiently strong nor sufficiently unqualified to prevent the government's disclosure of documents material to preparation of a criminal defense.

Case remanded for the District Court “to determine which of the documents at issue are material to Thompson's ability to prepare his defense, and upon identifying those documents to afford appropriate protection to WPC against public disclosure in a manner that is consistent with Thompson's right to a fair trial and the government's confidentiality agreement with WPC.”