Privilege and waiver: Disclosure requirements for parties in the Competition Bureau's Immunity and Leniency Programs

Note: Adapted from the authors' paper originally published at the 2016 International Cartel Workshop and presented at The Advocates' Society Competition Law for Advocates, March 7, 2016

Introduction

Immunity and leniency programs are important tools in international cartel enforcement. Companies taking advantage of these programs may benefit significantly from avoiding criminal prosecution by cooperating with antitrust authorities. Recent case law, however, has introduced a spectre of loss of privilege over internal investigation materials, which may discourage companies from participating in such programs.

In R v Nestlé Canada Inc.,^Footnote1 Justice Nordheimer ordered the Crown to disclose to the accused information proffered to the Competition Bureau by two cooperating parties, Cadbury Canada Inc. and Hershey Canada Inc. Justice Nordheimer later signed production orders which required Cadbury, Hershey, and their lawyers to produce to the Crown redacted versions of counsels' internal investigation materials, including memoranda recording witness interviews. The implications of the Orders are potentially problematic for the Bureau's Immunity and Leniency Programs.

Because Cadbury and Hershey withdrew their challenges to the Orders, significant uncertainty remains about whether participants in the Programs must produce internal investigation materials.^Footnote2 In this context, this paper explores key considerations for counsel and their clients in determining whether to participate in the Programs and possible steps to take after entering the Programs.

Nestlé

In Nestlé, the Crown brought criminal price-fixing charges against various accused.^Footnote3 The Bureau's investigation began in 2007 after Cadbury contacted the Bureau under the Immunity Program.^Footnote4 Cadbury's counsel proffered information to the Bureau obtained through Cadbury's internal investigation.^Footnote5

Following execution of search warrants, Hershey applied to enter the Bureau's Leniency Program.^Footnote6 In 2013, Hershey pleaded guilty and paid a $4 million fine.^Footnote7

The Crown's disclosure to the accused included information received from Cadbury and Hershey (or their employees) after they had signed their respective agreements.^Footnote8 The Crown asserted privilege, however, over certain information in its possession which Cadbury and Hershey had proffered before signing their respective agreements.^Footnote9

The accused requested disclosure of relevant materials in the Crown's possession, including materials received at the proffer stage. Cadbury and Hershey intervened in support of the Crown.

Justice Nordheimer held that the disputed information was not privileged and that the Crown must disclose all relevant factual information.^Footnote10

The Orders

After the release of Nestlé, Justice Nordheimer granted the Crown's request for orders to require Cadbury, Hershey, and their lawyers to produce "factual information" in their power, possession and control related to the criminal proceedings.^Footnote11 This included counsels' witness interview notes taken during each company's internal investigation.^Footnote12 The Orders permitted redactions for legal advice only.

Cadbury and Hershey initially sought to quash the Orders, but withdrew their challenges. Several months later, the Crown stayed the charges against all accused.^Footnote13

Implications

The Orders raise the possibility that participation in the Programs may require a party to produce documents created by counsel during internal investigations. Parties and their counsel must consider three questions when contemplating participating in the Programs:

1. Are materials created through counsel's internal investigations privileged?
2. When might privilege over internal investigation materials be lost?
3. If privilege over internal investigation materials is lost, is it lost to the entire world?

What materials are privileged?

Counsel's materials created through internal investigations will likely be privileged,^Footnote14 particularly where the fact-gathering aspect of the investigation is "inextricably linked" to providing legal advice.^Footnote15

Materials created prior to a party entering the Programs likely meet this standard. Parties and their counsel, however, should consider whether materials created while participating in the Programs and cooperating with the government are "inextricably linked" to providing legal advice. To reduce the uncertainty surrounding what materials are privileged, parties may prefer to conduct a robust internal investigation prior to deciding to enter the Programs. Parties may also prefer to make witnesses available to the Bureau to answer follow-up questions from pre-cooperation interviews, rather than counsel acting as an intermediary. Proceeding in this fashion would reduce post-cooperation information gathered by counsel, but it would also likely increase the burden of cooperation, as having witnesses attend interviews is costly, time-consuming and distracting.

Does proffering some information to the Bureau waive privilege over all internal investigation materials?

Nestlé established that Cadbury and Hershey waived privilege over information proffered to the Bureau.^Footnote16 The Court, however, did not define the extent of the waiver to non-proffered material.

Waiver of one piece of information generally waives privilege over all related materials.^Footnote17 Some courts have accepted partial waiver if the disclosing party does not intend to mislead the court and neither the court nor another party will be misled.^Footnote18

Uncertainty of the waiver's scope may deter parties from participating in the Programs if the risk of waiving privilege outweighs the potential benefits.

A party entering one of the Programs may reduce the risk of waiving privilege over the investigation files by significantly reducing the amount and detail of information it provides the Bureau through counsel. It is unclear, however, how such an approach would work practically and it contrasts with the preferred approach of the US Department of Justice.

Does proffering privileged information to the Bureau waive privilege for all purposes?

Courts have recognized a doctrine of limited waiver, whereby waiving privilege for some parties does not necessarily waive privilege for the world.

In Nestlé, Justice Nordheimer held that materials produced to an adverse party are not subject to limited waiver.^Footnote19 Other courts, however, have recognized limited waiver after a party has produced documents to an adverse party.^Footnote20

International courts are divided on limited waiver. The United Kingdom, Ireland and Hong Kong have robust limited waiver doctrines, whereas Australia rejects it.^Footnote21 In the United States, all federal circuit courts, except the 8th circuit,^Footnote22 have rejected limited waiver.^Footnote23

Uncertainty around limited waiver in Canada may discourage some companies from entering the Programs, as unlimited waiver increases the risk of production to civil plaintiffs. A party faced with production orders as in Nestlé could, however, seek a provision asserting the waiver's limited nature.^Footnote24

Conclusion

Given the uncertain state of the law, parties considering entering the Programs must be aware of the risk that participation may require production of some internal investigation materials to the Crown and result in the potential loss of privilege entirely. Parties entering the Programs and their counsel should, therefore, consider the risk mitigation steps discussed in this paper, and others.

Randal T. Hughes, Emrys Davis and Ethan Z. Schiff are with Bennett Jones LLP