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Advice of Counsel Defense Leads to Waiver of Privilege

By Lauren M. Gregory, Litigation News Contributing Editor – July 30, 2014


A recent decision from the U.S. District Court for the District of Idaho serves as an important reminder that reliance on advice of counsel as a defense in litigation is an all-or-nothing proposition: A client’s decision to rely on this defense is also a decision to waive the attorney-client privilege, potentially exposing all otherwise privileged communications—and any documents upon which the attorney relied in communicating advice—to opposing counsel.

This can be true even in cases where the parties have executed an express written waiver purporting to limit the scope of required disclosure, according to the court in In re Fresh & Process Potatoes Antitrust Litigation.

The Antitrust Litigation
The plaintiffs in In re Fresh & Process were a group of individuals and entities claiming to have purchased potatoes from the defendants, whom they alleged formed a cooperative group and illegally agreed to reduce the supply of potatoes in order to raise prices. The defendants claimed they reasonably believed their actions were lawful under the Clayton Act, Capper-Volstead Act, Cooperative Marketing Act, and Agricultural Marketing Act. Because the defendants asserted their belief was based on advice of counsel, the plaintiffs filed a motion to compel production of all documents upon which the defendants were relying in asserting this defense.

Some defendants (the Andersen and Orrick defendants) admitted they relied directly on the advice of counsel and consequently executed an agreement expressly waiving the attorney-client privilege as to the documents they would agree to produce in relation to this defense. Other defendants (the Offutt defendants) asserted that they formed their belief from non-privileged information and thus were not required to produce privileged communications with their attorneys. The plaintiffs disagreed, arguing that the Offutt defendants had impliedly waived the privilege and should be compelled to produce the communications.

The Court’s Holding
The court first addressed the Andersen and Orrick defendants’ express waiver, holding that the defendants’ use of the ambiguous phrase “and/or” in the waiver agreement created a “blanket waiver” that required them to produce all privileged communications except those “not relevant to the parties’ claims or defenses.” Because Federal Rule of Evidence 501 dictates that the privilege is governed by common law, the court relied upon its decision in an earlier case involving “sloppy and careless use of the phrase, ‘and/or.’”

However, the court did not require production from the Offutt defendants. It analyzed whether these defendants had impliedly waived the privilege by putting their reliance on advice of counsel “at issue” in the litigation, citing the Ninth Circuit’s three-factor “at issue” test: (1) the party asserts the privilege as a result of some affirmative act, such as filing suit; (2) through this affirmative act, the asserting party puts the privileged information at issue; and (3) allowing the privilege would deny the opposing party access to information vital to its defense. The court found that because the Offutt defendants “explain[ed] in their memorandum that they have not, will not, and need not rely upon communications with counsel to prove their affirmative defenses,” they had not put privileged communications at issue, and consequently had not waived the privilege.

Considerations in Practice
The court’s initial holding as to the Andersen and Orrick defendants offers an important takeaway for practitioners, says Ian H. Fisher, Chicago, IL, cochair of the ABA Section of Litigation’s Trial Evidence Committee. “Draft discovery agreements—especially something as important as a waiver of attorney-client privilege—with precision. Use objective and unambiguous language so that no one—not the other side nor the court—can later argue that you agreed to more than you did,” Fisher advises.

But ultimately, Fisher notes, even the most carefully worded agreements offer limited protection in this context. “I think the driving issue was putting the attorney-client privilege at issue [in the litigation],” he says. “It basically subsumes the issue of what was the express waiver, because as soon as a client says, ‘I relied on what my attorney said,’ everything the attorney might have said, might have looked at, or might have thought about looking at comes in.”

Any time a client wishes to assert the defense of reliance on advice of counsel, the client is putting attorney-client communications “at issue” and thus will probably be compelled to produce any and all such communications whether or not an express waiver agreement has been signed, says Ronald L. Kammer, Coral Gables, FL, cochair of the Section of Litigation’s Trial Evidence Committee.

“It’s based on the sword and shield doctrine: If you need to rely upon certain documents or a certain theory in your case, you can’t use privilege to shield the other party from obtaining discovery,” Kammer explains. “The court here is saying, ‘If you are going to assert the advice of counsel defense, we’re not going to let you cherry-pick the documents you believe are waived; we are going to make you produce the entire universe of documents,’” Kammer adds.

Yet the harsh holding in Fresh & Process Potatoes should not stop attorneys from considering an advice of counsel defense in the future. “It’s never a comfortable situation,” Fisher notes. “But I think in the right situation, reliance on advice of counsel can be a really great defense.”

Kammer agrees. “If you have someone who really acted in good faith and a lawyer providing good judgment, rely upon that—if the documents you would be producing support your case.”

Keywords: attorney-client privilege, privilege waiver, sword and shield doctrine, waiver agreement, at-issue doctrine

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