Court Takes a Harsh View of Waiver in a Significant Corporate Transaction

June 9, 2010

Some lawyers overlook the waiver impact of such transaction-related activities as allowing their client’s potential buyer to conduct due diligence (which can waive the attorney-client privilege protection for the disclosed documents), or the sale of assets to a buyer (which can be seen as transferring the privilege’s ownership to the buyer, or waiving the privilege). However, courts sometimes seem to go too far in finding a waiver in a company’s transaction-related actions.

In Society of Professional Engineering Employees in Aerospace, IFPTE Local 2001 v. Boeing Co., Case Nos. 05-1251- & 07-1043-MLB, 2010 U.S. Dist. LEXIS 27093 (D. Kan. Mar. 22, 2010), several labor unions sued Boeing in connection with its sale of a Wichita, Kansas, facility to buyer Spirit. Boeing and Spirit sought the return of protected e-mails that they claimed to have inadvertently produced to the unions. The court refused to order the documents’ return, finding that they did not deserve any protection – because Boeing had waived any attorney-client privilege protection during the sale to Spirit. As the court explained it, to “facilitate a smooth transition” after the sale of the Wichita facility, Boeing allowed 8,000 former Boeing employees (now working for Spirit) to continue using the Boeing e-mail system. Id. at *12. Boeing argued that this disclosure of pre-transaction privileged documents in its e-mail system to another company’s employees did not waive the privilege, because there were “unique circumstances” resulting from “the need for Spirit employees to have access to the Boeing e-mail messages in order to continue their work at the Wichita facility.” Id. at *18. The court rejected Boeing’s argument – concluding that Boeing had made “an educated business decision” to allow employees who no longer worked for Boeing to have access to Boeing electronic records. Id. at *21. Although the court acknowledged that the 8,000 Spirit employees with access to the Boeing records had themselves been Boeing employees, it nevertheless found a waiver.

Although presumably the same harsh result would not apply to the less-fragile work product protection for some e-mails, this surprisingly strict application of the attorney-client privilege waiver doctrine should remind all lawyers to carefully consider the waiver impact of large corporate transactions.