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Attorney-Client and Work-Product Privileges Only Protect Certain Disclosures

February 05, 2001
Masurovsky, Laura P.

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Last Month at the Federal Circuit - March 2001

Judges: Dyk (author), Mayer, and Bryson

In In re Pioneer Hi-Bred International, Inc., Misc. No. 661 (Fed. Cir. Feb. 5, 2001), the Federal Circuit, by writ of mandamus, vacated the district court’s rulings vitiating the privilege asserted by Defendant Pioneer Hi-Bred International, Inc. (“Pioneer”) concerning merger negotiations and the effect of the merger on intellectual property rights. The Court affirmed the district court’s rulings, however, to the extent that any such information was disclosed as part of a tax opinion relied upon and disclosed by Pioneer in a public document, or to the extent that the information was provided to expert witnesses.

Monsanto Company (“Monsanto”) sued Pioneer for breach of contract, patent infringement, and misappropriation of trade secrets. Monsanto alleged that two license agreements between Monsanto and Pioneer covering Monsanto’s genetic technology to a herbicide terminated when Pioneer merged into a subsidiary of duPont.

Through discovery, Monsanto sought information relating to the merger. Pioneer designated its in-house counsel as a Rule 30(b)(6) witness to respond to Monsanto’s deposition notice. During a deposition, Monsanto sought information relating to analyses of the financial benefits stemming from the merger and its effect on Pioneer’s licenses. Inhouse counsel invoked the attorney-client privilege in response to certain questions. Monsanto moved to compel based on Pioneer’s disclosures in a SEC proxy statement.

The district court granted Monsanto’s motion to compel, finding that Pioneer’s attorney opinions and communications were never privileged because their result was intended to be disclosed in a public filing and was so disclosed. Further, the district court found that if ever privileged, the privilege was waived by (1) disclosure to experts, (2) Pioneer’s disclosure of opinions to duPont in the merger negotiations, and (3) by Pioneer’s designation of its inhouse counsel as its Rule 30(b)(6) representative. The Federal Circuit rejected each of the district court’s findings. First, the Court ruled that while disclosure to a testifying expert waives both the attorney-client privilege and any work product protection because it assumes that the material will be made public, the record in this case did not show the extent of disclosure to experts and absent such a record, could not be a basis for ordering disclosure. Second, the Court ruled that a waiver of privileged information occurs only when a party relies on or discloses privileged communications, e.g., advice of counsel, and that here, such reliance and disclosure was limited to the advice received from counsel concerning the tax consequences of the merger. All documents that formed the basis for that advice and all documents considered by counsel in rendering that advice should be discovered and oral testimony on those matters should be allowed. But Pioneer’s disclosure and reliance on tax advice did not waive its privilege with respect to other merger discussions or analyses.

Finally, the Court found that the designation of in-house counsel as a corporate representative did not waive any privilege, unless counsel was specifically offered to testify as to privileged matters.