In Re Qwest Communications International, Inc.: The Tenth Circuit Hangs Up the Phone On Qwest's Petition for Selective Waiver, But the Line Is Not Dead
Monday, 14 September 2015
by Seth Gomm, JD MBA
In 2002, the Securities Exchange Commission (SEC) began investigating concerns regarding Qwest's business ac-counting practices. Soon thereafter, the Department of Justice (DOJ) began criminal investigations of the company and its top executives. Upon concluding its investigation, the SEC alleged that Qwest was “engaged in massive financial fraud that hid from the investing public the true source of the company's revenue and earnings growth, caused the company to fraudulently report approximately $3 billion in revenue, and facilitated the company's June 2000 merger with US West.” The SEC claimed that Qwest fraudulently characterized nonrecurring revenue as recurring “data and Internet service revenues” in an attempt to hide the company's declining financial condition. After inflating the revenue reported on Qwest's financial statements, top executives allegedly committed insider trading when they sold large amounts of stock at a time when the executives knew they would miss Qwest's financial targets.
Following the SEC and DOJ investigations, numerous Qwest stockholders filed civil lawsuits against Qwest. During the course of these proceedings, Qwest sought to protect documents that it had disclosed to the SEC and DOJ during their investigations, which might otherwise have been protected from discovery under the attorney-client privilege and work product doctrine. After a district court found that Qwest had waived its attorney-client privilege by its disclosures to the government, Qwest appealed to the Tenth Circuit Court of Appeals on the ground that the selective waiver doctrine should apply to protect these disclosures.
The Tenth Circuit did not find an exception to the traditional waiver rule of the attorney-client privilege and work product doctrine. Qwest failed to convince the court to adopt the doctrine of selective waiver, and was left to contend with exposure of its otherwise privileged documents to third-party litigants. The Tenth Circuit, in its first decision regarding selective waiver, concluded that Qwest's attempt to invoke the selective waiver doctrine was not motivated by an interest in justice, but rather a desire to appease the investigating governmental agencies while deflecting discovery from private litigants. The court saw Qwest's petition for selective waiver as an attempt to create a new privilege, rather than as an extension or exception to the existing traditional privileges.
Many courts and commentators have made compelling policy arguments both for and against adoption of selective waiver. The issue of selective waiver and the nature of its application or adoption have been disputed in other circuit courts and have resulted in a federal circuit split. Because of the unpredictability created by this circuit split, either Congress or the Supreme Court needs to create a uniform solution. A uniform rule is particularly important in today's world, where many business entities establish a national and international presence. Ultimately, Congress and/or the Supreme Court should adopt the selective waiver doctrine in a manner that would ensure cooperation between corporations and the government, thereby enabling government agencies to secure a fair marketplace for public investors.
Part I of this article introduces and examines the background of traditional legal doctrines and principles that gave rise to the dispute in In re Qwest Communications International, Inc. Part II discusses the existing federal circuit court split over the doctrine of selective waiver and its application to both the attorney-client privilege and work product doctrine. Part III examines the facts and reasoning in the Tenth Circuit's In re Qwest decision. Part IV analyzes the Tenth Circuit's reasoning, discusses policy arguments both for and against the adoption of selective waiver, and provides an overview of current legislative attempts to create a uniform rule for selective waiver application. This article will argue the following three points: (1) a uniform selective waiver rule is essential in a modern era of increasing globalization and corporate misbehavior; (2) the selective waiver doctrine should be adopted to ensure cooperation between governmental agencies and corporations; and (3) corporations and government agencies should be able to enforce confidentiality agreements.
This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.
Following the SEC and DOJ investigations, numerous Qwest stockholders filed civil lawsuits against Qwest. During the course of these proceedings, Qwest sought to protect documents that it had disclosed to the SEC and DOJ during their investigations, which might otherwise have been protected from discovery under the attorney-client privilege and work product doctrine. After a district court found that Qwest had waived its attorney-client privilege by its disclosures to the government, Qwest appealed to the Tenth Circuit Court of Appeals on the ground that the selective waiver doctrine should apply to protect these disclosures.
The Tenth Circuit did not find an exception to the traditional waiver rule of the attorney-client privilege and work product doctrine. Qwest failed to convince the court to adopt the doctrine of selective waiver, and was left to contend with exposure of its otherwise privileged documents to third-party litigants. The Tenth Circuit, in its first decision regarding selective waiver, concluded that Qwest's attempt to invoke the selective waiver doctrine was not motivated by an interest in justice, but rather a desire to appease the investigating governmental agencies while deflecting discovery from private litigants. The court saw Qwest's petition for selective waiver as an attempt to create a new privilege, rather than as an extension or exception to the existing traditional privileges.
Many courts and commentators have made compelling policy arguments both for and against adoption of selective waiver. The issue of selective waiver and the nature of its application or adoption have been disputed in other circuit courts and have resulted in a federal circuit split. Because of the unpredictability created by this circuit split, either Congress or the Supreme Court needs to create a uniform solution. A uniform rule is particularly important in today's world, where many business entities establish a national and international presence. Ultimately, Congress and/or the Supreme Court should adopt the selective waiver doctrine in a manner that would ensure cooperation between corporations and the government, thereby enabling government agencies to secure a fair marketplace for public investors.
Part I of this article introduces and examines the background of traditional legal doctrines and principles that gave rise to the dispute in In re Qwest Communications International, Inc. Part II discusses the existing federal circuit court split over the doctrine of selective waiver and its application to both the attorney-client privilege and work product doctrine. Part III examines the facts and reasoning in the Tenth Circuit's In re Qwest decision. Part IV analyzes the Tenth Circuit's reasoning, discusses policy arguments both for and against the adoption of selective waiver, and provides an overview of current legislative attempts to create a uniform rule for selective waiver application. This article will argue the following three points: (1) a uniform selective waiver rule is essential in a modern era of increasing globalization and corporate misbehavior; (2) the selective waiver doctrine should be adopted to ensure cooperation between governmental agencies and corporations; and (3) corporations and government agencies should be able to enforce confidentiality agreements.
This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.
