Disclosure Pursuant to Coercive Federal Investigation Does Not Waive Privilege

Regents of the University of California v. Superior Court, 165 Cal.App.4th 672, 81 Cal.Rptr.3d 186 (2008)

Brief Summary
California plaintiffs sought production of privileged materials from defendants. The court held that defendants’ prior disclosure of privileged materials to federal authorities in order to avoid indictment did not waive privilege because the disclosure was coerced.

Complete Summary
Prior to the present matter, a group of energy suppliers disclosed attorney-client and work product privileged materials to a federal Corporate Fraud Task Force (the “Task Force”). The Task Force was investigating the group and had a policy of considering cooperation as a factor in deciding whether to indict suspects. The reason for the disclosure was to avoid indictment. A group of California entities then brought the underlying antitrust suit against the same group of energy suppliers. Plaintiffs moved to compel production of the privileged materials arguing that disclosure to the Task Force constituted waiver.

Under California Evidence Code, §912, attorney-client privilege is waived when privileged material is disclosed without coercion. The waiver analysis for work product privilege is the same as for attorney-client privilege. The trial court held that because defendants believed that failure to disclose privileged materials to the Task Force would result in severe regulatory or criminal consequences, the disclosure was coerced. Plaintiffs challenged the trial court order by petition for writ of mandate.

The appellate court denied the petition. In reaching its conclusion, the appellate court first reviewed cases involving inadvertent disclosure. When privileged materials are inadvertently disclosed, privilege is waived unless reasonable steps were taken to prevent disclosure and preserve confidentiality, but such steps need not be “strenuous or Herculean.” Id. at 683. The court then tied the inadvertent disclosure doctrine to the coercion doctrine by citing a case which had held that discovery — in which inadvertent disclosure had occurred — was inherently coercive. O’Mary v. Mitsubishi Electronics America, Inc., 59 Cal.App.4th 563, 69 Cal.Rptr.2d 389 (1997). Comparing O’Mary and other cases to the present matter, the court held that the coercion involved in a government investigation is even more powerful than the coercion involved in a court order because the latter can be challenged without penalty.

Significance of Opinion
This is another in an increasing number of cases on the question whether or when production of documents to the federal government waives attorney-client and work product privilege in other contexts.