On November 20, 2013, US District Judge Paul G. Gardephe of the US District Court for the Southern District of New York issued a decision with potentially significant consequences for attorneys conducting internal investigations and parties seeking to obtain (or shield) disclosure of witness interview notes memorializing such investigations. Gruss v. Zwirn, 09-CV-6441 (S.D.N.Y., Nov. 20, 2013). Judge Gardephe’s ruling, issued in a defamation action brought against a hedge fund by a former employee, followed a request for clarification after an earlier ruling in July 2013. Through the two rulings, Judge Gardephe ordered production, for in camera inspection by the court, of interview notes prepared by outside counsel for the fund pertaining to 21 witnesses whose statements were obtained in the course of an internal investigation. The witness statements were voluntarily disclosed to the US Securities and Exchange Commission (SEC), in summary form, through PowerPoint presentations. Judge Gardephe found that the fund’s voluntary production of the PowerPoint presentations to the SEC containing summaries of what the 21 witnesses told outside counsel during the internal investigation constituted a subject-matter waiver warranting the production of the underlying witness interview notes, subject to redaction of opinion work product material (which plaintiff in the defamation action did not seek).

Judge Gardephe’s rulings offer a broad application of the Second Circuit’s decision in In re Steinhardt Partners, L.P., 9 F.3d 230 (2d Cir. 1993), and further limit the utility of the “selective waiver” doctrine, under which a party may, under narrowly circumscribed conditions, voluntarily produce privileged material to an adversary on a selective basis, while maintaining the privilege as to others. Indeed, Judge Gardephe’s rulings arguably expand on Steinhardt’s repudiation of selective waiver in three important ways: (1) the court ignored a confidentiality agreement between the fund and the SEC that sought to insulate the voluntary SEC production from a waiver claim, finding that a carve-out in the confidentiality agreement permitting disclosure “in furtherance of [the SEC’s] discharge of its duties and responsibilities” rendered the agreement illusory; (2) the court extended the waiver to witness interview notes prepared by outside counsel that were not themselves produced to the SEC; and (3) the court expanded on doctrinal opposition to selective waiver, highlighting purported “strategic and manipulative” abuses of selective productions while minimizing the indisputable salutary purposes of the doctrine (e.g., promotion of cooperation with governmental investigations).