The privilege protecting an attorney-client communication may be lost in several ways, but perhaps most often by the intentional or inadvertent production of the communication to a third party. An attorney and the client should carefUlly consider the potential for loss of the privilege when sharing privileged communications with third parties, both before and during litigation. Furthermore, if privileged materials are inadvertently produced, the producing and receiving attorneys must abide by certain procedural and ethical rules.

In federal cases which concern federal questions of law, federal law governs the applicability and scope of the attorney-client privilege. Fed. R. Evid. 501. The attorney-client privilege applies to a communication made between privileged persons in confidence for the purpose of obtaining or providing legal assistance for the client. Teleglobe Comm. Corp. v. BCE Inc, 493 F.3d 345, 359 (3d Cir.2007).

In federal cases which are grounded in diversity jurisdiction, state law governs the applicability and scope of the attorney-client privilege. Fed. R. Evid. 501; In re Ford Motor Co., 110 F.3d 954, 965 (3d Cir. 1997). Under New Jersey law, a privilege exists for confidential communications between an attorney and a client made in professional confidence in the course of their legal relationship. The client holds the privilege to refuse to disclose those communications and to prevent the attorney from disclosing the communications. N.J.R. Evid. 504; see also N.J.S.A. § 2A:84A-20; Terrell v. Schweitzer-Mauduit Int'l, Inc., 352 N.J. Super. 109 (App. Div. 2002).

Preliminarily, it must be resolved whether a specific communication that has been shared with a third party is privileged. At first glance, some communications may not seem to be protected by the attorney-client privilege because they are intended for eventual dissemination to third parties, or even to the public at large. However, case law demonstrates that these communications can be privileged in certain circumstances. For example, in Macario v. Pratt & Whitney Canada, Inc., No. 90-3906, 1991 WL 6117 (E.D. Pa. Jan. 17, 1991), the court found that a draft press release was protected under the attorney-client privilege because the parties intended that it remain confidential until the final version was prepared and then released. Likewise, a court held, in United States of Am. v. National Assoc. of Realtors, 242 F.R.D. 491 (N.D. Ill. 2007), that an attorney's edits to an article that was to be published in a magazine contained primarily legal advice, and thus was protected under the attorney-client privilege. Also, in Trilogy Comm., Inc. v. Excom Realty, Inc., 279 N.J. Super. 442 (Law Div. 1994), a court found that a draft letter from defendant's attorney to plaintiff's attorney, that was intended to be first reviewed by defendant's in-house counsel before being sent, was protected from disclosure under the attorney-client privilege.

Therefore, the form of the communication is not determinative when judging whether it is privileged. Rather, one must assess the attorney's role in creating the communication to determine if it is protected by the attorney-client privilege.

Waiver of the privilege can occur where privileged information is disclosed to a third party. Under both federal and New Jersey law, a waiver of the attorney-client privilege must be a knowing and intentional act to be effective. Maldonado v. New Jersey, 225 F.R.D. 120, 128 (D.N.J. 2004); N.J.S.A. § 2A:84A-20. It often is fairly plain when a party has waived the privilege. However, the scope of the waiver can be difficult to determine. One controversial question is whether a party can "selectively" waive the privilege when responding to a government inquiry and when entering into a confidentiality agreement with the government.

In Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414 (3d Cir. 1991), Westinghouse received a report from outside counsel who had conducted an internal investigation regarding the alleged bribery of Philippine officials. The investigation was in response to a Security and Exchange Commission ("SEC") inquiry. Westinghouse produced the report to the SEC pursuant to a confidentiality agreement. In response to a grand jury subpoena, Westinghouse filed a motion to quash, withdrew the motion, and then voluntarily produced the report to the Department of Justice ("DOJ") pursuant to a confidentiality agreement.

Subsequently, the Filipino government brought suit against Westinghouse regarding the alleged bribery and sought production of the report. The court rejected Westinghouse's selective waiver argument. The court noted that a voluntary disclosure to a third party waives the privilege and that the confidentiality agreement only preserves Westinghouse's privilege as to the DOJ and not as to a different entity in an unrelated civil proceeding. The court also found Westinghouse's disclosure to the DOJ was voluntary because it withdrew its motion to quash. The Westinghouse opinion remains pertinent today.

In re Initial Public Offering Securities Litigation, No. 2I-MC-92, 2008 WL 400933 (S.D.N.Y. Feb. 14, 2008), a bank retained outside counsel to conduct an internal inquiry into alleged misconduct relating to initial public offerings. The bank's outside counsel prepared a memorandum summarizing his interviews of bank employees. Pursuant to a confidentiality agreement, the bank produced the memorandum to the U.S. Attorney's Office and the SEC. Subsequently, former bank employees sued the bank for wrongful discharge and moved to compel production of the memorandum, asserting that the bank waived its privilege by producing the document to the government. The court rejected the bank's argument of selective waiver and ordered the bank to produce the memorandum.

These cases demonstrate the limitations of the selective waiver doctrine. Attorneys and clients must consider the consequences of cooperating with government investigations with regard to the discoverability of documents in subsequent litigation. To preserve the privilege, the attorney should move to quash the subpoena and then produce the information only after being ordered by a court to do so. A privilege can also be lost by inadvertent disclosure such as, for example, accidentally producing the document in response to a discovery request during litigation. To determine whether an inadvertent production constitutes a waiver, the United States District Court for the District of New Jersey follows the "culpability" approach, i.e., whether the disclosure meets the stringent standard of gross negligence. Maldonado, 225 F.R.D. at 128. This analysis depends on the following factors: (a) the reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production; (b) the number of inadvertent disclosures; (c) the extent of the disclosure; (d) any delay and measures taken to rectify the disclosure; and (e) whether the overriding interests of justice would or would not be served by relieving the party of its error. Ciba-Geigy Corp. v. Sandoz, 916 F. Supp. 404, 411 (D.N.J. 1996).

When analyzing the reasonableness of the precautions used to prevent the inadvertent disclosure, a one-time review of documents to assess whether any are privileged is deemed reasonable. National Assoc., 242, F.R.D. at 495. The district court, in Fidelity and Deposit Co. of Maryland v. McCulloch, 168 F.R.D. 516, 522 (E.D. Pa. 1996), found no waiver of the attorney-client privilege and stated that the producing party's efforts were "at least minimally adequate, though we can imagine additional precautions that might have been taken in this document-intensive litigation." Accordingly, although this point is an obvious one, it is important for counsel to review all documents thoroughly before producing them to an adversary.

When analyzing the promptness of the party's actions. "[t]he delay should be measured from the time the producing party learns of the disclosure, not from the time of the disclosure itself." Prescient Partners, L.P. v. Fieldcrest Cannon, Inc., No. 96-7590, 1997 WL 736726, (S.D.N.Y. Nov. 26, 1997).

Indeed, courts have looked favorably on parties who acted promptly when learning of the disclosure, even though several years passed between the production of the documents and the assertion of the privilege. National Assoc., 242 F.R.D. at 495. In short, the key to addressing an inadvertent production is to act promptly and diligently.

Under federal law, inadvertent disclosures of privileged communications do not waive the privilege as to the entire subject matter of those communications but only in very limited circumstances as to the particular documents disclosed. McCulloch, 168 F.R.D. at 522, n.7.

A party that inadvertently produces privileged material, as well as the receiving party, must also be cognizant of its statutory obligations. Federal Rule of Civil Procedure 26(b)(5)(B) requires that: (a) if a party produced privileged information in discovery, then that party may notify the receiving party of the privilege claim; (b) after being notified, the receiving party must promptly return, sequester or destroy the specified information and any copies it has and may not use or disclose the information until the claim is resolved; (c) a receiving party may promptly present the information to the court under seal for a determination of the claim; (d) if the receiving party disclosed the information before being notified, it must take reasonable steps to retrieve it.

New Jersey attorneys have additional obligations imposed by the rules of professional responsibility that come into play when an attorney suspects he or she has received inadvertently produced privileged material. New Jersey Rule of Professional Conduct 4.4(b) requires that a lawyer who receives a document and "has reasonable cause to believe that the document was inadvertently sent shall not read the document or, if he or she has begun do so, shall stop reading the document, promptly notify the sender, and return the document to the sender." This rule applies to all New Jersey attorneys, as well as attorneys admitted pro hac vice in New Jersey's federal and state courts.

Reprinted with permission from New Jersey Law Journal, © ALM Media Properties LLC. All rights reserved.