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Wendt and Sultan: How ‘oral downloads’ created a work-product protection waiver

As discussed in our prior post, the SEC charged Mathias Francisco Sandoval Herrera and Maria D. Cidre, two former executives from General Cable, with accounting fraud in January 2017. In response, these defendants sought to compel General Cable’s counsel, Morgan Lewis, to produce certain materials related to the firm’s corresponding investigation for the company, including investigation interview notes, SEC meeting notes, and an investigation report.

Morgan Lewis’s response to motion to compel. In response to the Motion to Compel, Morgan Lewis acknowledged that “[i]nformation regarding specific witness interviews was provided to the SEC through oral discussions” and that certain information was provided to Deloitte, but argued against any waiver of the applicable attorney work-product privilege for three primary reasons.

First, Morgan Lewis argued that sharing a PowerPoint presentation with investigation summaries did not constitute a waiver because the document was prepared for the purpose of debriefing the SEC and because the document reflected only facts and not attorney mental processes. In support, Morgan Lewis cited to a case — specifically, In re GM LLC Ignition Switch Litig., 80 F. Supp. 3d 521 (S.D.N.Y. 2015) — where a report to the government was not deemed a waiver even when it included citations to specific interviews.

Second, regarding the interview memoranda, Morgan Lewis pointed to a recent decision in the Southern District of Florida in which the oral disclosure of a work product-protected expert report did not constitute a waiver and that even if there were a waiver, the scope of the waiver should be limited to only the portion that was orally disclosed (BMI Interior Yacht Refinishing Inc. vs. M/Y Claireor “BMI”). Morgan Lewis also distinguished this case from those involving actual productions of work product-protected documents (and not only oral disclosures).  Morgan Lewis also argued that defendants had not demonstrated a substantial need for access to the firm’s notes and memoranda.

Third, with respect to disclosures made to Deloitte, Morgan Lewis stated that the “crushing weight” of authority says that disclosures to external auditors covered by confidentiality agreements do not constitute work-product waivers because the corporation and the external auditor share a common interest. Morgan Lewis criticized the case law cited by defendants and the novel argument that the SEC’s request for a tolling agreement from Deloitte affected the common interest between General Cable and Deloitte. 

Defendants’ reply. Sandoval and Cidre quickly filed a reply. Most importantly, the defendants emphasized that Morgan Lewis did not specifically rebut that it had in fact provided “an oral recitation of what each (relevant) witness stated during interviews,” per the SEC’s request, and that Morgan Lewis conceded that the SEC was an adversary to General Cable at the time of the disclosures (before the resolutions). Defendants also disagreed with Morgan Lewis’s characterization of BMI, arguing that the case involved an “ambiguous” disclosure by a boat captain in an admiralty case (in which “no one could recall what part of the report was disclosed by the captain”) and was not controlling.

Incredibly, defendants also produced an attorney-client privileged communication between Morgan Lewis and General Cable personnel. Defendants claimed that this email thread showed that Morgan Lewis “itself acknowledged that the disclosure to Deloitte of work product would constitute a waiver.” Later the parties filed a joint notice asking the court not to consider the email because Morgan Lewis had inadvertently produced it to the SEC, and the magistrate judge agreed not to consider the exhibit, which is now under seal.

Defendants then used the remainder of the reply to point to their substantial need for the information, stating that while the SEC can “cherry-pick which witnesses to call” based on information from Morgan Lewis, the defendants would be forced to compel interviews of Brazil-based individuals through letters rogatory.

We note that the SEC did not participate in the discovery dispute, instead permitting the defendants and Morgan Lewis to resolve it before the magistrate judge. Previously, the SEC had declined to share notes on any interview downloads from its meetings with Morgan Lewis, pointing to the ongoing discovery dispute between defendants and Morgan Lewis for resolution of the issues.

Magistrate Judge’s ruling. In early December, Judge Jonathan Goodman (a U.S. magistrate judge for the Southern District of Florida) issued a decision proclaiming that “[v]ery few decisions are consequence-free events.” Ultimately, Judge Goodman ruled that the law firm’s “oral downloads” of twelve internal investigation interviews to the SEC created a waiver of the attorneys’ work-product privilege, whereas the broader disclosures to Deloitte did not.

The court found no distinction between Morgan Lewis providing their actual notes and memoranda to the SEC and the firm providing oral summaries of the same to the SEC. The court noted that Morgan Lewis did “not contend that it provided only vague references of the witness notes and memoranda to the SEC, nor [did] it argue that only detail-free conclusions or general impressions were orally provided.”  In particular, Judge Goodman drew significance from the fact that the SEC had “the functional equivalent of” (emphasis in original) the memoranda and notes “by receiving the oral summaries of the interview materials.”  The court also found that the SEC was Morgan Lewis’s adversary because of the SEC’s open investigation of General Cable that later resulted in a large civil penalty. 

The court meanwhile quickly rejected defendants’ claim that the PowerPoint presentation represented a work product waiver, agreeing with Morgan Lewis on the significance of the fact that the document was prepared for the SEC and noting that it did not include the “substance of what the witnesses [had] said.” 

Similarly, in addressing the question of work product waiver as to the disclosures Morgan Lewis made to Deloitte, Judge Goodman stated that although Morgan Lewis had read the interview notes and memoranda to Deloitte, there was no waiver because Morgan Lewis and Deloitte shared a common interest. Judge Goodman was not persuaded by the defendants’ arguments, noting specifically that:

  • The SEC ultimately did not bring an enforcement action against Deloitte
  • The SEC only requested a tolling agreement with Deloitte 10 months after Morgan Lewis had shared the interview information with the auditor
  • There was not sufficient evidence indicating that either Morgan Lewis or General Cable knew that Deloitte was on the SEC’s radar at the time of the interview sharing
  • Sandoval and Cidre did not produce legal authority from an analogous case in support of their argument that the information conveyed to Deloitte should qualify as a waiver, and
  • Even if Morgan Lewis and Deloitte were potential adversaries on the issue of whether Deloitte might claim that General Cable personnel misled the auditor regarding General Cable’s accounting practices, the two had common interest “for other purposes.”  (emphasis in original)

Additionally, the court ruled that the Defendants did not have a substantial need for access to all investigation interviews, which was still protected by the work product protection.

Holding. Judge Goodman’s decision contained some seemingly conflicting directives that created a degree of confusion over the scope of its holding. In response to the defendants’ request for an in camera review of notes from Morgan Lewis’s October 2013 meeting with the SEC, the court ordered that Morgan Lewis “shall, within seven days from this Order, file under seal a copy of all attorney notes discussing or reflecting what information was disclosed to the SEC or the [DOJ] during meetings (or otherwise),” with a particular emphasis on “notes concerning summaries of what [Morgan Lewis] attorneys told the SEC about the substance of information given by witnesses in interviews.” This directive, therefore, appeared to be limited to notes from meetings with the SEC and DOJ (though meetings with the DOJ had not been at issue).

Elsewhere in the decision, however, the court stated that Morgan Lewis “must provide to Defendants the interview notes and memoranda that were orally downloaded” and that “this order compels [Morgan Lewis] to produce to Defendants the witness interview notes and memoranda for the 12 witnesses flagged in Defendants’ motion.”

The court also ordered Morgan Lewis to disclose within seven days whether Morgan Lewis had provided oral summaries of any other interviews, either to the SEC or DOJ. And again, the court directed Morgan Lewis to file under seal any notes or memoranda reflecting “any other work product information its attorneys provided to the SEC or DOJ about the employee interviews.”

We cover the consequences of Judge Goodman’s decision in our next post.

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Daniel Patrick Wendt, pictured above left, is a Member in Miller & Chevalier’s International Department. He focuses on matters involving the FCPA. 

Ann Sultan, right, is Counsel with Miller & Chevalier’s International Department. Her practice focuses on international corporate compliance and white collar defense related primarily to the FCPA.

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