Does a Party Intending to Rely on Parol Evidence in a Contract Case Waive the Attorney-Client Privilege?

April 15, 2009

Clients and their lawyers waive the attorney-client privilege either by disclosing privileged communications or by relying on the fact of those communications to gain some advantage. In some situations, courts find that litigants waive the privilege by acknowledging the possibility that they will do one or the other.

In Stovall v. United States, 85 Fed. Cl. 810, 816 (Fed. Cl. 2009) (citation omitted), defendant USDA indicated that it might rely on parol evidence in defending a claim of racial discrimination — advising the court that the parol evidence “‘would relate to the contracting parties intention at the time of contract formation,'” and that two USDA lawyers were among those “‘possessing knowledge of the parties’ intent during negotiations.'” Although the USDA relying on communications between the parties would not have waived any protection (because such communications during adversarial negotiations obviously do not deserve privilege protection), the court inexplicably held that USDA’s indication that it “might rely upon evidence taken from [its] attorneys” had the effect of “opening the door for plaintiff to conduct discovery regarding the views held by the [USDA] attorneys during the drafting and negotiation” of the agreement between USDA and plaintiff. Id.

Most courts would not automatically find such a broad subject matter waiver based on what seems to be a fairly innocuous statement by a party indicating that it might rely on some parol evidence from its lawyers about negotiations with the other side. However, companies and their lawyers should be ready for such broad judicial holdings whenever they point even tangentially to a lawyer as a possible witness.