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Guarding The Privilege: Fourth Circuit Reverses District Court Decision Finding Disclosure Pursuant to the Mandatory Disclosure Rule Waived Attorney-Client Privilege

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The United States Court of Appeals for the Fourth Circuit recently, and importantly, reestablished the status quo for government contractor disclosures made pursuant to the Mandatory Disclosure Rule (MDR), while also providing further insight into when a disclosure could waive privilege. Specifically, the Fourth Circuit, in a non-precedential decision, overturned an unsettling decision from the U.S. District Court for the Eastern District of Virginia that certain disclosures a government contractor made pursuant to the MDR constituted a waiver of the attorney-client privilege.

In reaching the conclusion that the contractor’s disclosure pursuant to the MDR did not waive the attorney-client privilege, the Fourth Circuit distinguished between disclosures based on the advice of an attorney (not a waiver of privilege) and disclosures that divulge the underlying attorney-client communication itself (a waiver of privilege). The Fourth Circuit also identified using strong dicta that its decision is consistent with the purpose of the MDR. In specifically focusing on the MDR, the Fourth Circuit stated that:

  • “requiring [the contractor] to produce privileged materials is particularly injurious here, where [the contractor] acted pursuant to a regulatory scheme mandating disclosure of potential wrongdoing. Government contractors should not fear waiving attorney-client privilege in these circumstances”; and
  • “the district court’s decision has potentially far-reaching consequences for companies subject to [the MDR] and other similar disclosure requirements. We struggle to envision how any company could disclose credible evidence of unlawful activity without also disclosing its conclusion, often based on the advice of its counsel, that such activity has occurred. More likely, companies would err on the side of making vague or incomplete disclosures, a result patently at odds with the policy objectives of the regulatory disclosure regime at issue in this case.”

While contractors must remain vigilant about the level of information disclosed pursuant to MDR and ensure the disclosure do not divulge the underlying attorney-client communication, this decision should provide comfort to the government contract community. Contractors, pursuant to the MDR, should be able to inform their government customers in sufficient detail of the contractor’s general conclusions as to whether conduct satisfies the credible evidence standard under the MDR. This, in turn, should enable contractors and the government to preserve resources and enable cost-savings to the extent additional investigations are unnecessary. 

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