We know that typically a company waives the privilege covering an internal-investigation memo if it discloses that memo to a government 
agency. One company nevertheless wanted it both ways, so it created a second memo summarizing (the favorable) part of an in-house lawyerâs privileged internal-investigation memo, and disclosed the second memo to the feds. Did this circumnavigation attempt avoid privilege waiver for the internal-investigation memo?
A Missouri federal court found that disclosing the second memo waived the privilege over the in-house lawyerâs memo, and ordered partial disclosure. Sherman v. Berkadia Commercial Mortgage, LLC, 2018 WL 4300322 (E.D. Mo. Sept. 10, 2018). You may read the opinion here.
Read This One, Not That One
When an allegation arose that Berkadia falsely certified to HUD that it complied with all HUD regulations, Berkadia retained outside counsel to conduct an internal investigation. Based on outside counselâs employee interviews, Berkadiaâs in-house counsel drafted a memo about the investigation and underlying events.
Berkadia then prepared a second memo that summarized outside counselâs investigation. This second memo discussed someâbut not allâdetails of the investigation findings, and Berkadia decided to disclose this second memo to HUD.
But I Want to Read That One
In an employeeâs anti-retaliation lawsuit under the False Claims Act, the employee claimed that Berkadiaâs disclosure of the second memo actually waived the privilege over the in-house lawyerâs memo summarizing the internal investigation. He wanted the privileged memorandum to show that Berkadia had information contradicting its HUD disclosures.
RulingâThe Fairness Doctrine
The court read the in-house lawyerâs memo in camera, and agreed that it met the privilege elements: it contained communications between Berkadiaâs in-house lawyer and employees, and was marked âconfidentialâ and âsubject to attorney-client privilege.â
The court referenced the at-issue waiver doctrine, which holds that one waives the privilege when it places the subject matter of the privileged communications at issue in the lawsuit. A âclosely relatedâ concept is the fairness doctrine, which states that âa party should not be able to make use of privileged information as a sword when it is advantageous for the privilege holder[,] and then as a shield.â
The court applied this fairness doctrine to thwart Berkadiaâs attempt to use the HUD-produced memo but withhold the in-house lawyerâs memoâfrom which the HUD memo derivedâfrom the employee. The court found that Berkadia waived the privilege over the in-house lawyerâs memo, and ordered the company to produce the sections that disclosed interviews with Berkadiaâs employees.
POP Analysis
While the company appropriately handled the in-house lawyerâs memo from a privilege perspective, its attempt to âdisclose the memo without disclosing itâ backfired. The moral of the story is that disclosing privileged information to government entities typically waives the privilege.
While there are some instances of companies avoiding privilege waiver by entering into a NDA with the governmental entity, as discussed here and here, those situations are rare and companies must proceed with caution. The âmemo about the memoâ idea was apparently not cautious enough.