Two More Courts Rule That Sharing Work Product with an Auditor Does Not Waive That Protection

December 6, 2006

Before the Enron scandal, most courts held that a company waived the privilege protection for any privileged communications disclosed to its outside auditor, but did not waive the work product protection. In 2002, however, the Southern District of New York held that in the post-Enron world, a company’s outside auditor was adverse enough to its client that disclosing work product to the auditor waived that protection as well. Medinol, LTD. v. Boston Scientific Corp., 214 F.R.D. 113 (S.D.N.Y. 2002).

Since 2002, an unbroken string of district court decisions has gone the other way. Most recently, the Northern District of Illinois and the Northern District of California held that companies do not waive the work product protection by disclosing work product to their outside auditors. Lawrence E. Jaffee Pension Plan v. Household Int’l, Inc., 237 F.R.D. 176 (N.D. Ill. 2006); In re JDS Uniphase Corp. Sec. Litig., No. C-02-1486 CW (EDL), 2006 U.S. Dist. LEXIS 76169 (N.D. Cal. Oct. 5, 2006).

Companies should be heartened by this continuing trend. It now looks as if Medinol might have been an aberration.