Court Rules that Law Firm’s Oral Summaries to SEC of Interview Notes and Memoranda Constitutes Waiver of Work Product Protection


Posted on December 14, 2017, by John S. Yi and Mary P. Hansen in General. Comments Off on Court Rules that Law Firm’s Oral Summaries to SEC of Interview Notes and Memoranda Constitutes Waiver of Work Product Protection

We previously reported that on October 31, 2017, two former executives from General Cable Corporation (“GCC”) moved to compel Morgan Lewis & Bockius LLP (“Morgan Lewis”) to produce interview memoranda and notes created during an internal investigation of GCC that were subsequently provided to the SEC and an independent auditor. In S.E.C. v. Herrera, et al., No. 17-20301, 2017 WL 6041750 (S.D. Fla. Dec. 5, 2017), the issue before the court was whether Morgan Lewis “waived work product protection when it voluntarily gave the SEC oral summaries of the work product notes and memoranda its attorneys prepared about interviews of its client’s executives and employees.” On December 5, 2017, Magistrate Judge Jonathan Goodman issued a ruling ordering Morgan Lewis to produce the notes and memoranda for the interviews the firm discussed with the SEC.

As a matter of background, GCC retained the law firm to conduct an internal investigation after the company announced that it had identified accounting errors related to inventory at its operations in Brazil. As part of its internal investigation, Morgan Lewis interviewed more than three dozen witnesses, many of which were conducted in Brazil, and prepared notes and memoranda of those interviews. According to the motion papers, Morgan Lewis “regularly communicated with the SEC, voluntarily produced documents, and routinely made Brazil-based witnesses available for interviews with the SEC.” Specifically, Morgan Lewis attorneys “met with SEC staff and provided oral downloads of 12 witness interviews.” Subsequently, a Cease and Desist Order against GCC was entered and shortly thereafter, the SEC filed suit against the defendants alleging that they actively concealing material inventory accounting errors in violation of various securities laws.

In their motion to compel, the defendants sought all of the law firm’s interview notes and memoranda on the basis that Morgan Lewis waived work product protection by providing oral downloads of some interviews to the SEC and by providing work product, both orally and in writing, to Deloitte, GCC’s independent auditor. For its part, Morgan Lewis argued that “the oral conveyance of information derived from interviews does not waive the work product protection as to the underlying attorney notes and memoranda[,]” and if a waiver had occurred, it did not extend beyond the specific disclosures made. As for the disclosures made to Deloitte, Morgan Lewis argued that the oral conveyance or actual provision of work product to a company’s auditors does not waive the work product protection.

As an initial matter, Judge Goodman noted that “[i]n the context of work product, the question is not, as in the case of the attorney-client privilege, whether confidential communications are disclosed, but to whom the disclosure is made – because the protection is designed to protect an attorney’s mental processes from discovery by adverse parties.” This protection is waived when otherwise protected materials are “‘disclosed in a manner which is either inconsistent with maintaining secrecy against opponents or substantially increases the opportunity for a potential adversary to obtain the protected information.’” Judge Goodman “easily conclude[d]” that the SEC was an adversary of Morgan Lewis’ client, GCC, since the SEC was investigating GCC and eventually imposed a $6.5 million civil penalty against the company. Judge Goodman dismissed Morgan Lewis’ argument that the oral conveyance, as opposed to the actual production, of the notes and memoranda did not constitute a waiver, finding the oral downloads to be the “functional equivalent” of the actual notes and summaries. Judge Goodman did agree that the waiver did not extend beyond the notes and memoranda of the 12 interviews the law firm provided oral summaries of to the SEC. Judge Goodman noted that the compelling the disclosure of attorney work product is disfavored and the defendants failed to demonstrate substantial need to overcome this high hurdle. In addition, Judge Goodman denied the defendants’ request for documents produced to Deloitte holding that the disclosure of work product to Deloitte did not constitute a waiver because Deloitte is not an adversary to GCC.

On December 12, 2017, Morgan Lewis filed a motion for clarification or reconsideration of Judge Goodman’s Order. In its motion, the firm represents that the attorney notes taken during a meeting with the SEC “reflect the substance of the oral communications conveyed to the SEC by Morgan Lewis concerning the twelve interviews at issue.” Morgan Lewis requests, to avoid “manifest injustice,” that the Court review these notes in camera and then modify its Order “to provide that, instead of the interview notes and memos for the twelve interviews at issue,” only the attorney notes and a portion of an interview memo read to the SEC be produced to the Defendants. This motion is still pending and we will report back when there are further developments.

When sharing information obtained over the course of an internal investigation with a government agency, one should consider the implications such conduct has on privilege and waiver. The decision above serves as a reminder that even oral disclosures of work product to an adversary can constitute a waiver.





Comments are closed.



From the Blog:

Department of Justice Announces New Policy on Coordination of Enforcement Actions and Corporate Penalties

The Department of Justice has established a new policy that requires its attorneys to coordinate with one another and with other enforcement authorities when...

SEC Chief Accountant Shines Spotlight on Audit Committees

SEC Chief Accountant Wesley Bricker spoke before the Baruch College Financial Reporting Conference on May 3, 2018. As in recent presentations, Mr. Bricker commenced...

The Government Suffers a Spoofing Setback

On April 25, 2018, a New Haven federal jury acquitted a former trader with a global bank accused of scheming to manipulate the precious...