Inside Baseball on Privilege Waiver: the Los Angeles Angels’ Recent Win Over Federal Prosecutors Serves a Welcome Reminder to Cover Your Bases and Protect Privilege in High-Profile Cases

Background

In a tragic example of how far the ongoing fentanyl and opioid epidemics have reached, on July 1, 2019, Los Angeles Angels (or “Angels”) pitcher Tyler Skaggs was found nonresponsive in his hotel room in Southlake, Texas, northwest of Dallas, from an apparent overdose; an autopsy report revealed that Mr. Skaggs died after consuming a toxic combination of ethanol, fentanyl and oxycodone.¹  After an investigation by the United States Drug Enforcement Agency (“DEA”) and prosecutors with the United States Attorney’s Office for the Northern District of Texas, federal criminal charges were filed against the Angels’ former communications director for allegedly supplying the controlled substances to Mr. Skaggs and others. The trial against the former club employee is set to begin in February 2022.

The Privilege Fight

Months after Mr. Skaggs’ overdose, the Angels retained outside counsel, which engaged a PR firm to aid its internal investigation into the high-profile matter. The club later released public statements about the internal investigation and claimed that no one within the Angels organization was aware that drugs were being distributed to Mr. Skaggs, or that he was using them.

On August 23, 2021, the federal government moved to compel the Angels to comply with a subpoena in connection with it’s criminal case against the Angels’ former communications director. The government sought “[a]ny and all documents, records, reports, and information made, commissioned, or obtained by Angels Baseball, LP regarding the distribution of drugs by any Angels Baseball, LP employees or contractors or otherwise within the organization.”² The Angels fought the motion on the grounds that the materials demanded were either already produced, protected by privilege, or protected as attorney work product. The government, in turn, argued that the Angles had waived privilege and/or work product protections.

The Waiver Battle

The government’s waiver arguments focused on two types of privilege waivers:

(1) Waiver by communicating privileged materials to a PR consultant, Marie Garvey, retained by outside counsel – prosecutors contended that the Angels waived any applicable privileges by communicating the privileged information directly to third parties, including to the PR firm that had been engaged by outside counsel. The Angels countered that no waiver took place because Ms. Garvey was an agent retained by Angels’ outside legal counsel to aid the firm in the course of its representation of the ball club.³

(2) Waiver by revealing privileged information in public statements – the government alleged that the Angels waived their privilege over internal investigation materials when the club issued the following public statement:

In 2019, Angels Baseball hired a former federal prosecutor to conduct an independent investigation to comprehensively understand the circumstances that led to Tyler’s tragic death. The investigation confirmed that the Organization did not know that Tyler was using opioids, nor was anyone in management aware or informed of any employee providing opioids to any player.⁴

In response, the Angels claimed that the bare-bones statement included only a conclusory statement that did not reveal any privileged content and, as a result, was not enough to support the government’s waiver argument.

The Court’s Ruling

On October 7, 2021, the court sided with the Angels and denied the government’s motion to compel in a sealed order. The order was unsealed on November 9, 2021.⁵ The court did not dedicate much time to the waiver arguments in its opinion, holding that the government “wholly failed” to present anything other than “its counsels’ speculation” that any underlying privileged documents even existed.⁶ Instead, the court emphasized the government’s failure to meet its burden to compel documents under Federal Rule of Criminal Procedure 17—concerning subpoenas. The Court emphasized the government’s overreach against the Angels, and that “the government’s failure to meet its Rule 17(c) burden [wa]s glaring.”⁷

Examining the Intersection of Privilege and the Engagement of PR Firms

Managing public opinion can be crucial to protecting the ongoing viability of an organization, especially for companies operating in the spotlight.  If high-profile investigations are at play, sensational allegations may appear in national newsfeeds and invite responses. But as the Angels’ case reminds us, companies need be mindful of privilege waiver issues that inevitably arise under such circumstances. The Angels’ showdown highlighted several key issues that can be particularly acute in professional sports, entertainment, politics, or other matters that attract heightened public scrutiny. In this case, the Angels explained that the motion to compel alone spurred coverage from “the Los Angeles Times, the New York Times, the Athletic, and ESPN, among many others.”⁸

The law is fairly well-settled that “the [attorney-client] privilege must include all the persons who act as the attorney’s agents.”⁹ But there are always extra bases to cover when it comes to PR firms, because it remains “generally true” that “disclosure of otherwise privileged documents to a public relations firm is a waiver of the privilege.”¹⁰

For communications to stay privileged in precarious circumstances, the public relations consultant must be either (a) necessary to a legal team and the legal strategy, or (b) fully integrated with the organization so as to function as an employee. For the Angels, the facts—however limited on the docket—appear to support the former argument. The PR firm was not a part of the Angels organization, and the firm was retained by Angels’ outside counsel rather than the club itself. Had Ms. Garvey been retained directly by the ball club in response to Mr. Skaggs’ overdose, maintaining privilege may have proven markedly more difficult – courts have found the attorney-client privilege “inapplicable or waived”  where communications were directly to “a representative of a public relations firm . . . not an officer or employee of the corporation, but [] an outside consultant.”¹¹

While outside counsel’s engagement of the PR firm likely would have been helpful, it is not dispositive in retaining privilege, and the more significant test is demonstrating that the PR firm was necessary to assist in rendering legal services because a “party may not cloak a document with a privilege by simply having business . . . or public relations matters handled by attorneys.”¹² This “‘necessity’ element means more than just useful and convenient, but rather requires that the involvement of the third party be nearly indispensable or serve some specialized purpose in facilitating the attorney-client communications.”¹³ In other words, protecting the client’s public image is not enough to protect the communications from discovery, because a “media campaign is not a litigation strategy.”¹⁴  Nor can the PR consultant’s role be passive.  For example,  in LifeVantage Corp. v. Domingo,¹⁵ a district court found waiver and emphasized (twice) that the PR firm was retained “to monitor the mediasphere” and “to monitor the fallout” from the termination at issue.  Id. at 1 (emphasis original). Counsel should ensure that the PR firm plays an active role in the design and execution of the litigation strategy.

On the other hand, in-house counsel may be able to protect communications where the PR consultant is so integral to the operations of the company that the consultant is the “functional equivalent” of an employee. The circuits are split when it comes to this standard for privilege protection, though the “functional equivalent” of an employee test may play a role in the analysis even where a circuit has not adopted it. In Church & Dwight Co. Inc. v. SPD Swiss Precision Diagnostics, GmbH,¹⁶ the Court noted that the “Second Circuit has not adopted the equivalent function exception,” but acknowledged the confusion within the circuit and added, “[a]pplying the factors that courts use to determine when the ‘equivalent function’ exception applies . . . the Court concludes that SPD has failed to satisfy its burden of showing that the exception is applicable here.”¹⁷ Similarly, a District Court in the Seventh Circuit applied the test, arguendo, just months ago.¹⁸

Examining Privilege and Public Statements

The Angels’ short public statement regarding its internal investigation played a large role in the criminal subpoena it received. Generally speaking, “disclosure of any significant portion of a confidential communication waives the privilege as to the whole.”¹⁹ But the government’s aggressive argument—that the Angels’ short statement referencing the outcome of an internal investigation constituted waiver—ultimately struck out.

For waiver of privilege based on short statements, the government relied heavily on In re Target Tech. Co. LLC, 208 Fed. App’x 825 (Fed. Cir. 2006).  In Target Tech the circuit court upheld waiver based on a sentence in a sales letter: “I also asked my patent attorney to conduct a search in the U.S. patent literature, and no potential infringement was found.”²⁰ The privilege waiver in that case was “necessarily limited” only “to the subject matter of the disclosure,” Id. at 827, however, and the weight of the case law appears to require more to find waiver.²¹

Although the Government also relied on Doe 1 v. Baylor Univ., 320 F.R.D. 430 (W.D. Tex. 2017), the facts there did not remotely resemble the Angels’ statement. Doe 1 involved three significant disclosures including Findings of Fact and Recommendations, quoted text message exchanges and paraphrased conversations, and certain briefings given to third parties about an otherwise confidential investigation.²² The Angels’ press release, on the other hand, was one surface-level summary statement.

Nor did the Angels’ statement align with the “News Release” at issue in Electro Scientific Industries, Inc. v. General Scanning, Inc., 175 F.R.D. 539 (N.D. Cal. 1997), another case the government cited, where the court found waiver when the party asserting the privilege “declared that it ‘has previously carefully studied ESI’s patent claims and has been advised by legal counsel that the referenced patents are invalid based upon prior patents and publications not cited to the Patent Office.’”²³ Again, where the Angels’ press release summarily stated the conclusion of the investigation, the release in Electro Scientific Industries revealed both the conclusion and the basis for that conclusion.

In contrast, the Angels cited to several cases stating the proposition that there is no waiver when disclosing an attorney’s ultimate conclusion, as it did.²⁴ The court ultimately agreed, albeit without providing much in the way or reasoning.

What This Means for You

While the court found that the government failed in its efforts to compel the Angels to produce privileged communications in this case, there are real risks surrounding third-party involvement of any kind in otherwise-privileged communications. And if the Angels case is any indication, those risks are on the rise when defending public figures and entities.

First, if there is a high-profile dispute such as the Angels’ here, managing public relations is a necessity, and public statements may be inevitable. Likewise, retaining outside counsel to perform an internal investigation can be crucial to mitigating risk, investigating any wrongdoing, and addressing past mistakes (if any turn up). Finally, ensuring that public relations and legal teams are working in concert, with open lines of communication, is a good practice. With all that said, companies should be particularly mindful of privilege waiver where internal investigations and PR firms intersect:

• Companies should ensure that there is always a legal reason or strategy for including a PR consultant on communications, or else they may risk waiving privilege over sensitive internal statements and deliberations.
• Educating employees, in-house counsel, and outside consultants as to the applicable privileges is critical, because the exceptions are narrow, and there are virtually no guarantees in this area of privilege law.
• Unless a client has a PR consultant that is already the functional equivalent of an employee, case law advises counsel to engage PR firms on a case-by-case basis. Matter-specific engagements will help differentiate the PR consultants from the long-term business consultants of the client entity, and a firm that specializes in litigation or crisis management would help show the precise and necessary role in the legal representation. Such a firm would also demonstrate the specialized skills that the legal team would otherwise be without.
• Counsel should make use of engagement letters and invoices to create a clear record of the legal purpose and necessity for the PR player on the defense team. In camera reviews of such documentation can shore up a court’s determination that representatives of the PR firm are included within the protection of the attorney-client privilege.

Second, companies and in-house counsel would be well-served to omit any legal basis or rationale for those high-level conclusions. Rather than smooth things over, press releases could end up clearing the benches on privileged communications if there is any disclosure beyond high-level conclusions. Without putting these PR-related boundaries in place, companies are bound to strike out against the government on a privilege waiver challenge. Repeated privilege disputes like this one highlight the fact that there are very few bright lines in this area of the law, and counsel should be sure to familiarize itself with the applicable law in the jurisdiction. Plus, the Angels’ experience demonstrates that even the mere impression of a privilege waiver can result in costly and burdensome legal challenges.

We have provided a helpful Practical Guide on the topic that can guide those considering privilege and waiver issues. We have also provided past guidance on risks related to waiver in government investigations and settlements. And as always, be sure to consult with competent counsel whenever tricky privilege issues like this arise.

¹ DOJ Press Release, https://www.justice.gov/usao-ndtx/pr/former-angels-employee-charged-pitcher-s-fatal-fentanyl-overdose; Indictment available at https://www.law360.com/articles/1320436/attachments/0.

² Mot. to Compel, at 3, United States v. Kay, No. 4:20-cr-269 (N.D. Tex. Aug. 23, 2021), ECF No. 37.  More generally, the government argued that it was entitled to all factual documentation underlying, and all relevant documentation pre-dating, the investigation, which Angels Baseball claimed it had already produced if not otherwise protected by the attorney-client and work product privileges.  The parties also disputed the proper application and scope of common interest and joint defense privileges as they related to separate communications the Angels had with both a minority shareholder and Major League Baseball’s Commissioner’s Office.  However, the instant discussion is limited to the attorney-client privilege issue as it relates to communications with PR firms and public statements. 

³ Opp’n to Mot. to Compel, at 16, United States v. Kay, No. 4:20-cr-269 (N.D. Tex. Sep. 7, 2021), ECF No. 58.

⁴ “Angels Statement,” MLB.com (June 29, 2021), https://www.mlb.com/amp/press-release/press-release-angels-statement-x3235.html.

⁵ Order Granting Request to Unseal, United States v. Kay, No. 4:20-cr-269 (N.D. Tex. Nov. 9, 2021), ECF No. 84.

⁶ Sealed Order Denying Motion to Compel Production, at 4, United States v. Kay, No. 4:20-cr-269 (N.D. Tex. Oct. 7, 2021), ECF No. 67.

⁷ Sealed Order Denying Motion to Compel Production, at 4; see also Federal Rule of Criminal Procedure 17(c).

⁸ Opp’n to Mot. to Compel, at 17 n.9.

⁹ United States v. Kovel, 296 F.2d 918, 921 (2d Cir. 1961).

¹⁰ Breuder v. Bd. of Trustees of Cmty. Coll. Dist. No. 502, No. 15 CV 9323, 2021 WL 4283464, at *7 (N.D. Ill. Sept. 21, 2021) (internal quotation omitted).

¹¹ See Nance v. Thompson Med. Co., 173 F.R.D. 178, 182 (E.D. Tex. 1997). See also Breuder v. Bd. of Trustees, 2021 WL 4283464, at *7 (“Courts have consistently held that this type of general public relations work, even when related to ongoing litigation, falls outside the scope of the narrowly construed attorney-client privilege.”).

¹² Burton v. R.J. Reynolds Tobacco Co., 200 F.R.D. 661, 669 (D. Kan. 2001).

¹³ Egiazaryan v. Zalmayev, 290 F.R.D. 421, 431 (S.D.N.Y. 2013) (quoting Nat’l Educ. Training Grp., Inc. v. Skillsoft Corp., No. M8-85 (WHP), 1999 WL 378337, at *4 (S.D.N.Y. June 10, 1999)).

¹⁴ In re New York Renu with Moistureloc Product Liability Litigation, No. MDL 1785, CA 2:06–MN–77777–DCN, 2008 WL 2338552, at *8 (D.S.C. May 8, 2008).

¹⁵ No. 2:13-CV-01037-DB-PMW, 2015 WL 5714426 (D. Utah Sept. 29, 2015).

¹⁶ No. 14-CV-585, 2014 WL 7238354 (S.D.N.Y. Dec. 19, 2014).

¹⁷ Id. at *2 (internal citation omitted).

¹⁸ See Breuder v. Bd. of Trustees, 2021 WL 4283464, at *6 (“[E]ven assuming arguendo that the Seventh Circuit would adopt the functional equivalent test – which is far from clear – the factors considered under the test establish that Res Publica and Levick do not qualify as the functional equivalents of College employees.”).

¹⁹ Nguyen v. Excel Corp., 197 F.3d 200, 208 (5th Cir. 1999).

²⁰ Id. at 826.

²¹ In another patent case with facts similar to In re Target Tech, the court also found a waiver based on this relatively simple public statement: “[the defendant] has been advised by legal counsel that the referenced patents are invalid based upon prior patents and publications not cited to the Patent Office.” Electro Sci. Indus., Inc. v. Gen. Scanning, Inc., 175 F.R.D. 539, 542 (N.D. Cal. 1997).

²² Id. at 437.

²³ Id. at 542 (emphasis added).

²⁴ See, e.g., YETI Coolers, LLC v. RTIC Coolers, LLC, 2016 WL 8677303, at *3 (W.D. Tex. Dec. 30, 2016) (finding “[w]e believe and our attorney has confirmed that we are not infringing on YETI patent or trade dress” did not waive privilege over the defendant’s communications with counsel).