Inadvertent Waiver of the Attorney-Client Privilege by Disclosure of Documents: An Economic Analysis
32 Pages Posted: 17 Jan 2012 Last revised: 2 Jun 2014
Date Written: 1990
This article examines and critiques the three standards courts employ to assess whether inadvertent disclosure of a document protected by the attorney-client privilege constitutes a waiver of that privilege. The attorney-client privilege creates a property right in information generated within the context of the attorney-client relationship, and this right induces regulated parties to produce information about the legal standards that apply to their behavior. Ordinarily the “waiver” of a property right must be intentional. As the article explains, however, some courts have adopted a “strict liability” approach in the document disclosure context, holding that any disclosure of privileged documents waives the privilege, regardless of how much care the party took to prevent the disclosure. Others have adopted the equivalent of a negligence approach, whereby a party only waives the privilege if it does not use “due care” to prevent disclosure. Still others hold that any waiver of the privilege must be intentional; even a careless disclosure of documents does not waive the privilege under this approach.
The article uses tools developed in the Tort context to determine the economic impact of these alternate approaches to waiver by disclosure of documents. The article concludes that both the “strict liability” and the “negligence” approaches will, like parallel liability rules in the Tort context, induce parties to expend real resources on reasonable precautions in an effort to avoid a disclosure in the first place (if operating under a strict liability standard) or avoid a finding of waiver if there is a disclosure (if operating under a negligence standard). In addition, the strict liability standard will induce parties to alter their activity level by, for instance, seeking less information in the form of legal advice, thereby undermining to this extent the positive impact of legal advice on law compliance. In the Tort context, of course, expenditures on precautions and changes in activity level can be cost-justified because they reduce the chance of accidents that produce real social harm. The article argues that, by contrast, such activity changes and expenditures on precaution produce no offsetting benefit and are thus a social waste, given that release of a privileged document produces no social harm. Thus, the article concludes by arguing that courts should retain the “property right” character of the attorney-client privilege and only deem disclosure of a document a waiver if that disclosure was intentional.
Keywords: Attorney-Client Privilege, Information. Property Rights, Liability Rules, Waiver, Strict Liability, Negligence
JEL Classification: K41, K42, D83, L51
Suggested Citation: Suggested Citation