Disclosure of Investigatory Documents to the SEC Does Not Waive Privilege

A company’s sharing of documents with the Securities and Exchange Commission (“SEC”) does not necessarily waive the company’s work product protection in a subsequent class action.  In In re Symbol Techs.,Inc. Sec. Litig., Magistrate Judge A. Kathleen Tomlinson of the U.S. District Court for the Eastern District of New York ruled that documents generated by outside counsel during a company’s internal investigation of accounting irregularities were protected and not subject to production to the plaintiffs in a securities class action suit.

Prior to the class action before the Court, Symbol Technologies Inc. (“Symbol”) had been subject to an SEC investigations as well as previous class action litigation based upon fraudulent accounting practices. Symbol had cooperated with the government and signed a confidentiality agreement under which it produced certain documents. The investigations ultimately resulted in a Consent Order.

In the present class action case, a discovery dispute arose concerning documents related to an internal investigation that Symbol launched after discovering a revenue overstatement subsequent to Symbol’s signing of the Consent Order with the government. Symbol had produced documents to the government regarding the revenue overstatement investigation so as to comply with terms of the Consent Order.

The plaintiff demanded production of the documents that were generated or collected while investigating the accounting issues underlying the revenue error. The plaintiff relied on two theories as to why the documents at issue were discoverable: “(1) the internal investigatory documents at issue do not fall within the ambit of the work-product privilege; and (2) even if the documents were entitled to work product protection, Symbol waived any such protection by permitting disclosure to the government as well as the Independent Examiner.”

The Magistrate Judge disagreed. The Court held that under the particular circumstances, given Symbol’s history of class action litigation, the material was reasonably prepared in anticipation litigation despite that it was also prepared for the business purpose of discovering and correcting the revenue error in its reporting. Therefore, the investigatory documents remained subject to the work product privilege.

The Court also found that Symbol did not waive the privilege by disclosure to the government because Symbol’s confidentiality agreement with the government stated that Symbol “not intend to waive the protection of the attorney work product doctrine, attorney-client privilege, or any other privilege applicable as to third parties” and the government agreed to “maintain the confidentiality of the Confidential Materials . . . and will not disclose them to any third party, except to the extent that the [SEC] or the USAO determine this disclosure is otherwise required by law or would be in furtherance of the SEC’s or USAO’s discharge of their respective duties and responsibilities.”

 Finally, the Court concluded that the revenue error document disclosure to the government and an independent examiner did not constitute a disclosure to an adversarial party because the disclosure was pursuant to the Consent Order, which rendered all parties as having a common interest.

 The case provides meaningful insight into the nuances of the work product privilege. To read the case click here.

 

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