Bad News and Good News About Communicating With Outside Auditors

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One key distinction between attorney-client privilege protection and work product doctrine protection is their fragility. Disclosure to non-adverse third parties normally waives the former, but not the latter.

In Breuder v. Board of Trustees, No. 15 CV 9323, 2021 U.S. Dist. LEXIS 179680 (N.D. Ill. Sept. 21, 2021), the court addressed (among other things) a college's disclosure of protected communications to its outside auditor. After noting that the college's "Board itself concedes [that] disclosure of privileged information to an independent auditor typically results in a waiver of the attorney-client privilege," the court applied the universally-accepted principle that "this disclosure does not waive the [college's] work-product privilege unless the disclosure was made 'in a manner which substantially increases the opportunity for potential adversaries to obtain the information.'" Id. at *25-26. The court pointed to the plaintiff's failure to argue that the college's disclosure to its independent auditor, "was made in such a manner," or "object to the [college's] work product designations." Id. at *26.

This basic principle applies to other non-adverse third parties, such as public relations consultants and other third parties assisting corporations. An explicit confidentiality agreement is always best. But the robust work product protection normally survives disclosure even without that – if the disclosing owner reasonably expects that the recipient will keep it confidential.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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