Does Revealing a Privileged Document During Settlement Negotiations Waive the Privilege Protection?

January 15, 2003

The law obviously encourages settlement discussions, and has created a number of legal doctrines designed to prevent settlement negotiators from taking advantage of their adversary’s statements if the settlement negotiations fail. However, this settlement-friendly approach does not always include a forgiving attitude toward waiver of the attorney-client privilege. Courts go both ways on this issue.

In Eagle Compressors, Inc. v. HEC Liquidating Corp., 206 F.R.D. 474 (N.D. Ill. 2002), the court held that a participant in settlement negotiations had waived the attorney-client privilege otherwise protecting a document by allowing the other negotiator to read the document—even though the participant retrieved the document after the negotiations. On the other hand, in Akamai Technolgies, Inc. v. Digital Island, Inc., No. C-00-3508 CW (JCS), 2002 U.S. Dist. LEXIS 13515 (N.D. Cal. May 30, 2002), the court held that a participant in unsuccessful settlement negotiations did not waive the attorney-client privilege by disclosing legal memoranda during the negotiations (in part because the parties agreed that the disclosure would be used only for the settlement talks).

Lawyers participating in or advising their clients about settlement negotiations should familiarize themselves with the standard that might apply to this important issue—making a mistake could come back to haunt the lawyers and their clients.