Ninth Circuit Rejects “Selective Waiver” of Attorney-Client Privilege

On April 17, 2012, the U.S. Court of Appeals for the Ninth Circuit ruled in In re Pacific Pictures Corporation that a party may not selectively waive attorney-client privilege by voluntarily producing privileged materials to the government while maintaining the privilege in civil litigation.

Theory of Selective Waiver

The case presented a matter of first impression for the Ninth Circuit regarding its position on selective waiver of the attorney-client privilege. The theory of selective waiver provides that a party’s voluntarily disclosure of privileged materials to the government does not necessarily waive the privilege in civil litigation. Any contrary rule, proponents argue, would discourage parties from voluntarily cooperating with government investigations.

The theory of selective waiver was first adopted by the Eighth Circuit in Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir.1978) (en banc). Since Diversified, however, every other circuit to consider the issue has rejected the theory. The Ninth Circuit itself had twice deferred judgment on the issue, leaving it an open question as to whether the court would accept a theory of selective waiver. See United States v. Bergonzi, 403 F.3d 1048, 1050 (9th Cir. 2005) (per curiam); Bittaker v. Woodford, 331 F.3d 715, 720 n. 5 (9th Cir. 2003) (en banc).

Factual Background

Around the turn of the millennium, heirs to Superman creators Jerome Siegel and Joe Shuster hired Hollywood producer and licensed attorney, Marc Toberoff, to litigate ongoing royalty disputes with D.C. Comics. In 2006, an attorney working for Toberoff absconded with several confidential documents from the litigation file purportedly revealing Toberoff’s “master plan to capture Superman for himself.” When Toberoff reported the incident to the authorities, the U.S. Attorney’s Office issued a grand jury subpoena for Toberoff to produce copies of the stolen documents. The U.S. Attorney’s Office also agreed not to disclose the documents “except as may be required by law or court order.” Toberoff readily complied with the subpoena, producing unredacted copies of the stolen documents without objection.

Thereafter, D.C. Comics requested discovery of all documents produced to the U.S. Attorney, arguing that Toberoff’s voluntary disclosure waived the attorney-client privilege for all purposes. The magistrate judge agreed with D.C. Comics and granted its motion to compel. The heirs sought review through a writ of mandamus to the Ninth Circuit.

The Ninth Circuit’s Holdings

The Ninth Circuit unequivocally rejected the theory of selective waiver. Consequently, the Court denied the petition for mandamus.

First, the Ninth Circuit ruled that producing documents to the government constituted a voluntary waiver of the attorney-client privilege. Even though the documents were subpoenaed, the heirs voluntarily waived the privilege by producing them without redaction and without objection. Moreover, the fact that the heirs were victims of the crime under investigation did not justify a common-interest exception to waiver.

Second, the Ninth Circuit ruled that waiving attorney-client privilege as to the government waives the privilege for all purposes. Because any voluntary disclosure is inconsistent with promoting full and frank attorney-client communication, such disclosure waives the privilege regardless of whether the third party is the government or a civil litigant. Likewise, voluntary disclosure cannot be cured by any “post hoc” confidentiality agreement. Therefore, while encouraging cooperation with the government may be a laudable objective, allowing selective wavier would contravene the underlying purpose of the attorney-client privilege.

Implications

The Ninth Circuit’s decision makes clear that waiving attorney-client privilege as to any third party waives the privilege as to the world. Individuals and companies should discuss the implications of the court’s decision with legal counsel before voluntarily cooperating with any government investigation.

The case is In re Pacific Pictures Corporation, --- F.3d ----, 2012 WL 1293534 (9th Cir. 2012).

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