Does Asserting a “Good Faith” Affirmative Defense Waive the Attorney-Client Privilege?: Part I

September 2, 2015

As the most extreme example of an implied waiver, the “at issue” doctrine can waive privilege protection if a litigant affirmatively raises an issue that implicates privileged communications. Some courts hold that corporations relying on an affirmative defense that they acted in “good faith” reliance on the law necessarily implicate their lawyer’s advice โ€” and therefore trigger such an “at issue” waiver.

In Edwards v. KB Home, Civ. A. No. 3:11-CV-00240, 2015 U.S. Dist. LEXIS 93584 (S.D. Tex. July 18, 2015), FLSA defendant KB Home relied upon the 29 U.S.C. ยง 259 defense of good faith reliance on administrative regulations, etc., in defending its employee classifications. KB Home “emphasize[d] that it is not relying on advice of counsel to prove its good faith defenses” โ€” instead explaining that its “witnesses will say that their own independent judgment (based on a review of the DOL letters and perhaps other considerations) caused them to conclude that the classification was lawful.” Id. at *7. The court rejected this argument โ€” concluding that privileged communications “are highly probative of whether [KB Home] had a good faith belief in the lawfulness of its policy.” Id. at *9. The court reminded KB Home that it “may elect to withdraw its good faith defenses, in which case the privilege would still attach.” Id. at *14. Four days later, another court found that a defendant had waived its privilege by arguing that its patent infringement accusations against the plaintiff “were grounded in a good-faith belief” that the plaintiff had infringed its patent. Skyline Steel, LLC v. Pilepro, LLC, No. 13-CV-8171 (JMF), 2015 U.S. Dist. LEXIS, at *6 (S.D.N.Y. July 22, 2015). The court quoted an earlier decision in holding that defendant cannot “‘be permitted, on the one hand, to argue that it acted in good faith and without an improper motive and then, on the other hand, to deny [the adversary] access to the advice given by counsel where that advice . . . played a substantial and significant role in formulating [its] actions.'” Id. at *8-9. (quoting Pereira v. United Jersey Bank, No. 94-CV-1565 (LAP), 1997 WL 773716, at *6 (S.D.N.Y. Dec. 11, 1997).

Litigants putting their mental state at issue or referring to withheld documents to support an assertion might waive their privilege. Next week’s Privilege Point discusses two cases going the other way.