The following article appeared in the July 8, 2020 issue of the Delaware Business Court Insider.

Designating Documents as Confidential and Requesting They Remain Confidential Insufficient to Avoid Waiver of Attorney-Client Privilege

The Delaware Court of Chancery recently held that a party waived attorney-client privilege by producing documents to a federal commission during the course of an investigation without requiring the commission to sign a confidentiality agreement first.

By Francis G.X. Pileggi and Chauna A. Abner

The Delaware Court of Chancery recently held that a party waived attorney-client privilege by producing documents to a federal commission during the course of an investigation without requiring the commission to sign a confidentiality agreement first.

In In re Straight Path Communications Consolidated Stockholder Litigation, C.A. No. 2017-0486-SG (Del. Ch. June 15, 2020), the plaintiffs sought to compel the disclosure of 31 documents the defendant corporation previously produced to the Federal Communications Commission (FCC) in connection with an investigation. The defendant withheld the documents from the plaintiffs on the basis that such documents were privileged. The plaintiffs did not dispute that the documents were privileged when created, but instead argued that the defendant waived that privilege by producing the documents to the FCC. The defendant argued that it did not waive privilege because when it produced the documents to the FCC, it designated the documents as confidential and requested that the documents remain confidential.

The court explained that the defendant bore the burden of proving that the documents at issue were privileged, and while the defendant failed to satisfy that burden, the plaintiffs met their burden of proving that the defendant waived privilege regarding the documents. After exploring the purpose of the attorney-client privilege doctrine, the court explained the facts and prior holdings in Saito v. McKesson HBOC, 2002 Del. Ch. LEXIS 125 (Del. Ch. Nov. 13, 2002).

In that case, the plaintiff sought to compel the production of documents that the defendant previously produced to the Securities and Exchange Commission (SEC) in connection with an investigation. The defendants argued that all documents, but one, were protected from disclosure by the work product doctrine and the one document was protected by the attorney-client privilege. The defendant in that case required the SEC to sign a confidentiality agreement in connection with the disclosure of documents. The court held that the defendant did not waive privilege over the documents it disclosed to the SEC after the confidentiality agreement was entered into because the defendant “retained a reasonable expectation of privacy as to such documents because it reasonably believed that its disclosures would remain confidential.” However, the court held that the defendant waived privilege with respect to the documents that were disclosed before the confidentiality agreement was entered into, including the document the defendant argued was protected by the attorney-client privilege.

Applying the rationale in Saito, the court explained that the defendant “did not have an analogous expectation of privacy because the documents were not produced to the FCC under a confidentiality agreement.” Therefore, the court held that the defendant waived the attorney-client privilege with respect to the documents that the plaintiffs sought to compel and ordered the defendants to produce all thirty-one documents.

This case provides a vital lesson for attorneys who represent entities in connection with external investigations: the lack of a confidentiality agreement before disclosure of documents to the investigating body could result in the waiver of attorney-client privilege in future litigation. Designating documents as confidential while merely requesting that documents remain confidential is not sufficient to avoid waiver of the attorney-client privilege.

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Francis G.X. Pileggi is the managing partner of the Delaware office of Lewis Brisbois Bisgaard & Smith. His email address is Francis.Pileggi@LewisBrisbois.com. He comments on key corporate and commercial decisions, and legal ethics topics at www.delawarelitigation.com.

Chauna A. Abner is an associate with the firm.