Privilege In Government Investigations: The Walmart FCPA Case

The attorney-client privilege serves the long, well-established goals of encouraging full and frank disclosure between an attorney and client, thereby promoting the public interest as the Supreme Court held in UpJohn v. U.S., 449 U.S. 383 (1981). Equally clear is the fact that the privilege can hinder the fact finding process. In Government investigations there can be a tension between those two principles for a firm seeking to cooperate with the inquiry. The bridge between the divide may an agreement under which the firm discloses certain otherwise privileged material to the Government in return for an agreement that furnishing the information does not constitute a waiver. Such an agreement was at the core of a dispute between Walmart and the Government in an on-going FCPA inquiry. U.S. v. Under Seal 1, No. 17-4183 (4th Cir. Decided June 27, 2018).

The firm and the Government entered into an agreement under which the former general counsel of a company subsidiary could be interviewed by investigators. The agreement had three key provisions: First: In providing the information the company and its directors “do not intend to waive the protection of the attorney work product doctrine, attorney-client privilege, or any other privilege.” Second: The Government “will maintain the confidentiality of any Protected Information provided . . and will not disclose such information to any third party except to the extent . . [it determines] that disclosure would be in furtherance of . . . [the Government’s] discharge of its duties and responsibilities or is otherwise required by law.” Third: The Government will not assert that the disclosure gives it “additional grounds to subpoena other privileged materials . . .”

The Government interviewed the former general counsel who did in fact disclose privileged information. Later the Government issued a grand jury subpoena for testimony to the former general counsel. The firm objected. The district court ruled in favor of the Government.

This case turns on the question of whether the agreement between the Government and the company preserved the firm’s attorney-client privilege and work-product doctrine, according to the Circuit Court. The Court held that it does.

The question here is one of interpreting the contract. Decisions regarding the manner in which the privileges are interpreted are inapposite. Here, the First Clause “plainly conveys X Corp.’s intent not to waive any privilege.” While the Government claims that this clause has no effect on it because the Second Clause waived the firm’s privileges as to it, this reading of the two passages is incorrect. This is because the “Government’s reading fails to account for the difference between the topic of the First Clause – privilege – and that of the Second Clause – confidentiality.” Privilege is the right to refuse to disclose information in response to a judicial inquiry. Confidentiality, on the other hand involves preventing others from making extrajudicial disclosures. “Thus, in the Second Clause, the parties agreed that the Government would not share the Protected Information with third parties outside judicial proceedings except in furtherance of its duties,” the Court found. Accordingly, the Second Clause qualifies only the “Government’s promise to keep the information confidential.” While voluntary disclosure of privileged information can constitute a waiver, the First Clause here prevents that result.

The Court also rejected the Government’s claim that the Third Clause presumed a waiver. To the contrary “the Agreement maintains the status quo regarding X Corp.’s privileges. It nullifies the effect of both . . . [the general counsel’s] initial disclosure of privileged information and the Government’s later disclosure of the same information on X Corp.’s ability to assert privilege against the Government.” Accordingly, the firm can assert privilege as if the information had never been disclosed.

Finally, construing the agreement to preserve the privileges serves an important policy consideration. “Cooperation between private entities and the Government furthers the truth-fining process. . . Declining to hold the Government to the terms of an agreement it struck would discourage private entities from cooperation with the Government in the future,” the Court concluded. The decision of the district court was vacated and the case remanded.

Tagged with: , , ,