Protecting the Attorney-Client Privilege in Business Negotiations: Would the Application of the Subject-Matter Waiver Doctrine Really Drive Attorneys from the Bargaining Table?
27 Pages Posted: 23 Aug 2012
Date Written: August 23, 2012
Privilege law is arguably the most important doctrinal area in the law of evidence. Most evidentiary doctrines relate primarily to the courts’ institutional concerns about the reliability of the evidence that the trier of fact relies on. In contrast, privileges impact extrinsic social policy such as out-of-court interactions between spouses and attorneys and their clients. It is no accident that since the adoption of the Federal Rules of Evidence in 1975, the Supreme Court has handed down more decisions relating to privilege law than concerning any other part of the Federal Rules.
In particular, in recent years the topic of privilege waivers has garnered a good deal of attention. In 2008, Congress enacted Federal Rule of Evidence 502 governing waivers in federal court. There was a split of authority over the question of whether the inadvertent production of privileged material during pretrial discovery effected a waiver of the privilege. Litigants had begun to spend enormous sums of money on pre-production privilege reviews. In order to reduce that cost, Congress intervened and prescribed a general rule that inadvertent production does not result in a waiver.
Although Rule 502 largely resolved one waiver issue, another dispute is ongoing. That dispute relates to another pretrial context, that is, business negotiations. In the past, when a waiver occurred, the courts applied the subject matter waiver rule: The scope of the waiver not only included the disclosed information but also extended to other communications relevant to the same subject matter. The rule seemed to apply to waivers during pretrial business negotiations as well as waivers occurring during litigation.
However, in recent years several courts have refused to apply the subject matter waiver rule to extrajudicial waivers during business negotiation. They have advanced several arguments to justify their refusal. To begin with, they have noted several supposed distinctions between the negotiation and litigation settings. More importantly, they have asserted that the application of the subject matter waiver rule to the negotiation context will pressure clients to instruct their attorneys not to participate in negotiations.
The thesis of this article is that the arguments against extending the subject matter waiver rule to the negotiation settling are flawed. Part II of the enclosed article examines the supposed distinctions between the negotiation and litigation settings and finds that they are largely illusory. Part II then turns to the prediction that the extension of the rule to business negotiations will drive attorneys from the bargaining table. Part II demonstrates that the prediction rests on fundamental misconceptions about the concept of “communication” in privilege law. Part II concludes that the argument underlying the prediction is “exactly backwards.”
This issue is of obvious importance to attorneys litigating waiver issues. However, the issue is of even greater importance to transactional attorneys who for decades have played an important role in their clients’ business negotiations.
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