TURNING OUT THE "LIGHT OF REASON AND EXPERIENCE": THE SELECTIVE WAIVER DOCTRINE AND PROPOSED FEDERAL RULE OF EVIDENCE 502

St. John's Law Review, Fall 2007 by Lambert, Michelle

1. Diversified Industries, Inc. v. Meredith

In 1978, the Eighth Circuit became the only circuit court of appeals to recognize the selective waiver doctrine in Diversified Industries, Inc. v. Meredith.82 After deciding that a report prepared by attorneys for Diversified Industries, Inc. ("Diversified") regarding a proxy fight litigation was protected under the attorney-client privilege,83 the court tackled the question of whether the company waived this privilege by voluntarily providing the privileged document to the securities and Exchange Commission ("SEC") pursuant to an agency subpoena.84 The court concluded that Diversified's disclosure was only a "limited waiver" because the SEC's investigation was "separate and nonpublic."85 The court stated, "To hold otherwise may have the effect of thwarting the developing procedure of corporations to employ independent outside counsel to investigate and advise them in order to protect stockholders, potential stockholders and customers."86 The court attempted to minimize the effect of allowing Diversified to maintain its attorney-client privilege as to the documents it disclosed to the SEC by noting that third party litigants would still be able to obtain the same information through other means.87

In Diversified, the Eighth Circuit did not analyze the effect of the selective waiver doctrine on the attorney-client privilege or compare the doctrine to the purpose of the attorney-client privilege.88 Instead, the court based its acceptance of the selective waiver doctrine on public policy concerns regarding the importance of cooperation by companies during government investigations.89 Since Diversified, every other circuit court faced with the issue of whether to recognize the selective waiver doctrine has rejected the doctrine and its public policy justification.90

2. In re Columbia/HCA Healthcare Corp. Billing Practices Litigation

The Sixth Circuit provided the most complete analysis of the selective waiver doctrine in In re Columbia/Healthcare Corp. Billing Practices Litigation.91 In that case, Columbia/HCA challenged a district court's order to produce documents that it had previously disclosed during a Department of Justice ("DOJ") investigation by claiming the attorney-client privilege.92 After performing an internal audit, Columbia/HCA agreed to disclose these documents to the DOJ in accordance with a strict confidentiality agreement that would maintain the privileged nature of the documents.93 As a result of the investigation, Columbia/HCA settled with the DOJ and paid a fine for overcharging Medicare via miscoding of Medicare patients.94

Once the settlement became public, private insurance companies initiated litigation against Columbia/HCA claiming that the company had also overcharged them.95 The litigants demanded access to the audit report that had been disclosed to the DOJ.96 Columbia/HCA claimed attorney-client privilege and work product doctrine to preclude disclosure as to those litigants.97 Relying on Diversified, the company argued that disclosure to the government did not waive the privilege.98 Additionally, Columbia/HCA argued that its confidentiality agreement with the DOJ precluded disclosure.99 The district court rejected these arguments and followed other circuits' strict construction of the attorney-client privilege.100 Columbia/HCA appealed the district court's opinion that any third party disclosure of privileged documents waived that privilege.101