Filing A Form 10-K Does Not Waive Privilege As To Drafts
In Roth v. Aon Corporation, Case No. 04 C 6835 (N.D. Ill. Ruling Jan. 8, 2009), the district court concluded that a draft of part of a Form 10-K transmitted to in-house counsel and several employees of the company during preparation remained privileged when the final Form 10-K was filed with the SEC. The opinion is important for those who prepare disclosure documents. It is also significant to the work of in-house counsel since it can be difficult to draw the line between their privileged legal work and non-privileged business dealings.
The issue arose in a securities class action based on Aon’s claimed role in, and reliance on, contingent commission kickbacks and steering arrangements with insurers. Plaintiff’s sought the production of an e-mail which solicited thoughts and comments on an attached a memorandum which contained an expanded draft version of part of the company’s Form 10-K. The memo was from the CFO to the CEO and General Counsel. The e-mail was from the CFO to the Deputy General Counsel, the Controller and an employee in the controller’s division. The Deputy General Counsel stated that he received the e-mail and memo in connection with rendering legal advice about the draft From 10-K.
In denying plaintiff’s motion to compel production, the court began by noting that it is to be expected that legal counsel would be involved with drafting a Form 10-K: “Consultation as to the scope of the provisions of the Act, as to language, and as to how best to legally comply with SEC regulations, for instance, are precisely the type of day-to-day guidance for which a corporation would likely rely on counsel. … The Court finds that the communications contained in the Bolger [CFO] e-mail did reasonably seek legal advice.”
The court then turned to the question of whether the e-mail and draft remained privileged after the final version of the Form 10-K was filed with the SEC and became public. Here, the court concluded that the filing did not waive the privilege as to the e-mail and draft. On this point the court concluded that “most courts have found that even when a final product is disclosed to the public, the underlying privilege attached to drafts of the final product remains intact.”
Finally, the court held that circulating the papers to a number of corporate officials did not waive the privilege: “To disallow corporations the space to collectively discuss sensitive information with legal counsel would be to ignore the realities of large-scale corporate operations. For this reason, there is no doubt that the inclusion of these individuals in the e-mail correspondence did not destroy the attorney-client privilege.” Circulating the e-mail and memo to a number of employees does not necessarily result in a waiver of privilege. Rather, the question is whether consulting those employees was, as here, a necessary part of rendering legal advice by in-house counsel.