What Are the Waiver Implications of a Company Sharing Protected Documents with Potential Bidders?

September 19, 2007

Not surprisingly, potential purchasers of a company’s stock or assets frequently ask the company for documents that are protected by the attorney-client privilege, the work product doctrine or both (such as a company’s assessment of litigation in which it is engaged). Does the company waive these protections by sharing the documents with potential bidders during such due diligence?

In Nidec Corp. v. Victor Co. of Japan, No. C-05-0686 SBA (EMC), 2007 U.S. Dist. LEXIS 48841 (N.D. Cal. July 3, 2007), Matsushita solicited bids from third parties to purchase its majority interest in JVC Components Co. JVC shared protected documents with the bidders. A third party later claimed waiver. The court agreed that the disclosure waived the privilege protection — specifically rejecting an earlier decision’s refusal to find a waiver based on a “policy consideration” in favor of “removing barriers to business deals.” Id. at *16. Not surprisingly, the court found that the disclosure did not necessarily waive the work product protection.

Lawyers representing clients who engage in transactions like this should assess the waiver implications of such disclosures.