CHAPTER 9, C. Good-Faith Affirmative Defenses and the "At Issue Doctrine"

• Jurisdiction: United States

C. Good-Faith Affirmative Defenses and the "At Issue Doctrine"

ABI Journal

November 2019

Scott J. Bogucki

Gleichenhaus, Marchese & Weishaar, PC

Buffalo, N.Y.

Generally speaking, virtually all communications between attorneys and their clients and any information obtained by attorneys during the attorney/client relationship are deemed confidential. Therefore, attorneys have an ethical obligation not to disclose their contents.¹ Under certain circumstances, this information may be further afforded evidentiary protection by attorney/client privilege, one of the oldest common law privileges for confidential information.²

The Restatement (Third) of the Law Governing Lawyers states that the privilege "may be invoked ... with respect to: (1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client."³ For purposes of the attorney/client privilege, "privileged persons" include clients, prospective clients and attorneys, as well as each of their agents who facilitate communications among them, and agents of the attorney who assist in the client's representation.⁴ The right to assert the privilege rests solely with the client; however, it might be invoked by agents of the client, including their attorney.⁵

Neither the Bankruptcy Code nor the Federal Rules of Bankruptcy Procedure address the attorney/client privilege.⁶ According to the Federal Rules of Evidence, state law governs the attorney/client privilege in civil cases.⁷ This privilege is not absolute; rather, it is narrowly construed, burdened with exceptions, and susceptible to various ways in which it might be expressly or impliedly waived. The "at issue doctrine" describes how the privilege might be lost through asserting a claim or defense that compels an adversary to seek discovery of privileged communications to deny allegations or defend against a claim. Courts typically employ one of three fact-intensive tests to determine whether the at-issue doctrine results in a waiver of the attorney/client privilege.⁸

The Hearn Test

Decided in 1975, Hearn v. Rhay stated the broadest "at issue" exception to the attorney/client privilege.⁹ In Hearn, the plaintiff alleged civil rights violations, and the defendants asserted six affirmative defenses, including that they acted in good faith and were therefore immune from suit.¹⁰ In response, the plaintiff sought discovery of communications that the defendants received from the Washington Attorney General.¹¹

The Hearn court analyzed the cases relied upon by the plaintiff to argue that the communications were not privileged, noting that in each, "the party asserting the privilege placed information protected by it in issue through some affirmative act for his own benefit, and to allow the privilege to protect against disclosure of such information would have been manifestly unfair to the opposing party."¹² The court granted the plaintiff's motions to compel discovery, holding that an implied waiver of the privilege exists when (1) an affirmative act such as filing suit results in the assertion of privilege, (2) through which the asserting party places protected information at issue by making it relevant to the litigation, and (3) upholding that the privilege would deny the opposing party information vital to their defense.¹³

The Rhone-Poulenc Test

The Third Circuit created the most conservative "at-issue doctrine" test.¹⁴ In Rhone-Poulenc, more than 200 plaintiffs sued a pharmaceutical company for claims arising from HIV infections, which led to the defendant filing a declaratory judgment against one of its insurers to allege that the insurer owed it coverage for the suits, thereby triggering that insurer to commence its own declaratory judgment action against another insurer by way of a third-party complaint.¹⁵

The two insurers contended that when procuring its insurance, the defendant knew of the HIV transmissions, concealed its knowledge and further knew that its actions posed an unreasonable risk of harm to the people using its product.¹⁶ The insurers argued that the defendant placed its lawyers' advice at issue by filing the declaratory-judgment action, thereby waiving any attorney/client privilege.¹⁷

The Third Circuit found that the attorney/client privilege deserves "maximum legal protection" because it serves the interests of justice.¹⁸ The court held that advice of counsel is placed in issue and not protected by privilege only when "the client asserts a claim or defense, and attempts to prove that claim or defense by disclosing or describing an attorney/client communication."¹⁹

Criticizing the Hearn decision, the court eschewed the notion that relevance of the privileged communications should be considered, regardless of the information sought being vital or highly probative, or whether the subject of the communications might have affected the client's state of mind in a relevant manner.²⁰ The Third Circuit valued predictability in creating its test, further stressing that the holder of the privilege — namely, the client — is the sole party in control of the privilege and the only one able to waive it.²¹ The court held that whether the client placed their state of mind in issue is irrelevant to the court's analysis.²² The court issued a writ of mandamus, quashed the subpoenas authorized and upheld by the lower courts, and remanded for further proceedings.²³

The Erie Test

The test developed by the Second Circuit lies between those announced in Hearn and Rouse-Poulenc.²⁴ In County of Erie, the court was called upon to settle various discovery disputes arising from litigation involving allegations of civil rights violations.²⁵ The communications at issue were emails between the Erie County Attorney and the Erie County Sheriff's Office, in which the attorney's office reviewed the law, assessed the county's current policies, recommended alternative policies and monitored the implementation of those policies.²⁶

Relying on the Hearn test, the district court found an implied waiver of the attorney/client privilege based on the defendants' asserting a...