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

September 9, 2015

Last week’s Privilege Point described several cases in which litigants waived their privilege protection by filing a statutory “good faith” defense or just arguing that they acted in good faith.

Other courts take a different view. In Bacchi v. Massachusetts Mutual Life Insurance Co., defendant resisting a policyholder class action filed affirmative defenses “that it acted in good faith . . . and that its actions were approved by the appropriate regulatory agency.” Civ. A. No. 12-cv-11280-DJC, 2015 U.S. Dist. LEXIS 80552, at *9 (D. Mass. June 22, 2015). Not surprisingly, plaintiff claimed a waiver. The court rejected plaintiff’s argument — noting that defendant “does not intend to rely on counsel’s opinion or advice” — but instead “will argue that it took the same types of steps that other similar situated entities would take if they were proceeding in good faith to do what the law required.” Id. at *15-16. About five weeks later, the Fourth Circuit reached the same conclusion about plaintiff’s claim against an insurance company, based on the company’s handling of an underlying lawsuit — about which the company obviously received its lawyers’ advice. Smith v. Scottsdale Ins. Co., No. 15-1002, 2015 U.S. App. LEXIS 13290 (4th Cir. July 30, 2015). The plaintiff claimed an “at issue” waiver, but the court disagreed. The court noted that the insurance company “did not assert any claim or defense based on counsel’s advice in the underlying case; instead, it maintained that its actions were based on its own evaluation of the case.” Id. at *4.

Litigants defending their actions do not automatically waive privilege protection for communications with their lawyers about those actions. But litigants relying on a formal affirmative defense of “good faith” or arguing generally that they acted reasonably must hope that the court will let them support that defense while withholding privileged communication that informed their decisions.