Disclosures to SEC Waive Attorney-Client Privilege and Work Product Protection

First reported: April 12, 2004

In a case of first impression in California (McKesson HBOC v. Superior Court), the First District Court of Appeal ruled on February 20, 2004 that when a corporation voluntarily discloses to the Securities and Exchange Commission and the U.S. Attorney's Office the contents of an internal investigation by outside counsel, it waives the attorney-client privilege and attorney work product protection, and those materials are discoverable by plaintiffs in subsequent securities litigation. In McKesson HBOC v. Superior Court, McKesson had retained outside counsel to perform an internal review of improperly recorded revenues at its subsidiary, HBOC. McKesson disclosed the results of the review, in the form of written interview memoranda and a written report, to the SEC and the U.S. Attorney by means of agreements designed to prevent disclosure of the information to any other parties, including subsequent civil plaintiffs. When plaintiffs sought discovery, McKesson argued that the privileges had not been waived by disclosure, since the company and the government had a common interest in investigating and rooting out any improprieties. The court was not persuaded, stating that the government was adverse to McKesson and that McKesson could not share the materials with one plaintiff while withholding them from another. The case can be reviewed on the State's website at http://www.courtinfo.ca.gov/opinions/documents/A103055.pdf . McKesson has appealed the case to the Ninth Circuit. The same issue was litigated at the federal level with a similar result (see U.S. v. Bergonzi, 216 F.R.D. 487, 496-97 (N.D. Cal. 2003).

(Source: 2005 The State Bar of California)

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