SEC v. Welliver, Civil No. 11-CV-3076 (D. Minn. October 26, 2012) serves as a useful reminder to take precautions when responding to government subpoenas and discovery requests to avoid waiving the attorney-client privilege.
The Welliver court held that defendants intentionally disclosed and, therefore, waived their attorney-client privilege over communications they introduced as exhibits during a deposition of their compliance officer. The court declined to require a broader subject matter waiver, however, finding that the disclosure was not made to gain a tactical advantage or in a "selective, misleading and unfair manner."
The court also held that defendants waived their attorney-client privilege for approximately 200 emails inadvertently produced during the SEC's pre-suit investigation and in later discovery because defendants failed to identify a single step taken to prevent inadvertent error. The court rejected defendants' position that the SEC's aggressive six-day timeframe for responding to the subpoenas should excuse the disclosure because defendants never asked to extend the production deadline or sought other arrangements to maintain the privilege. The court considered the following factors in reaching its conclusion: (1) the reasonableness of the precautions taken to prevent inadvertent disclosure in light of the extent of the document production; (2) the number of inadvertent disclosures; (3) the extent of the disclosures; (4) the promptness of measures taken to remedy the problem; and (5) whether justice is served by relieving the party of its error. The court stressed that "[p]arties must recognize there are potentially harmful consequences if they do not take even minimal precautions to prevent against the disclosure of privileged documents . . . ."
Finally, the court held that there was an implied waiver of the attorney-client privilege because defendants' defenses put certain privileged communications at issue, and fairness required a broader subject-matter waiver to allow the SEC to investigate the underlying facts.
As a takeaway, implement reasonable procedures for identifying and redacting or withholding privileged materials when producing documents. Check whether the particular agency has established protocols regarding inadvertent and purposeful productions of privileged documents and agreements related thereto, such as those set forth in the SEC Enforcement Manual. During the review, running keyword searches for the names of attorneys and their law firms and pulling those documents for further review are useful precautionary measures. In addition, consider seeking a reasonable extension of the production deadline if necessary to help avoid inadvertent disclosures. Carefully document communications with the government regarding any changes or attempted changes to the production requirements. Finally, seeking protections under an agreement or court order in the event of a disclosure are useful protective measures that demonstrate efforts to take reasonable precautions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
