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.,1 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.2 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.3 The Bureau's investigation began in 2007 after Cadbury contacted the Bureau under the Immunity Program.4 Cadbury's counsel proffered information to the Bureau obtained through Cadbury's internal investigation.5
Following execution of search warrants, Hershey applied to enter the Bureau's Leniency Program.6 In 2013, Hershey pleaded guilty and paid a $4 million fine.7
The Crown's disclosure to the accused included information received from Cadbury and Hershey (or their employees) after they had signed their respective agreements.8 The Crown asserted privilege, however, over certain information in its possession which Cadbury and Hershey had proffered before signing their respective agreements.9
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.10
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.11 This included counsels' witness interview notes taken during each company's internal investigation.12 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.13
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:
- Are materials created through counsel's internal investigations privileged?
- When might privilege over internal investigation materials be lost?
- 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,14 particularly where the fact-gathering aspect of the investigation is "inextricably linked" to providing legal advice.15
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.16 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.17 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.18
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.19 Other courts, however, have recognized limited waiver after a party has produced documents to an adverse party.20
International courts are divided on limited waiver. The United Kingdom, Ireland and Hong Kong have robust limited waiver doctrines, whereas Australia rejects it.21 In the United States, all federal circuit courts, except the 8th circuit,22 have rejected limited waiver.23
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.24
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
Footnotes
1 2015 ONSC 810, 2015 CarswellOnt 1323. Randy Hughes was counsel to ITWAL, one of the accused, in Nestlé.
2 In response to Nestlé (and other matters), the Bureau is updating its guidelines for the Programs. The Senior Deputy Commissioner recently stated that the revised programs may require participants to produce all factual information by default. It remains unclear whether the Bureau will expect production of lawyers' notes, as Justice Nordheimer ordered.
3 Nestlé, supra note 1 at para 5. The charges were laid under a prior version of section 45 of the Competition Act, RSC 1985, c. C-34, which required the Crown to prove beyond a reasonable doubt that the agreement had an undue effect on competition.
4 Ibid at para 6.
5 Ibid at para 8.
6 Ibid at para 12.
7 Ibid at para 16.
8 The Bureau's Immunity Program Bulletin notes that an immunity applicant must advise the Bureau of the progress of its internal investigation "in a manner that does not waive any legal privilege." The Bulletin further provides that records provided to the Bureau after the proffer stage "are treated as confidential or privileged." Ultimately, the Bureau requires "full, complete, frank and truthful disclosure of all non-privileged information, evidence or records in the Applicant's possession, under its control or available to it." Competition Bureau, "Immunity Program: Frequently Asked Questions", at Q 20, 21, and 28.
9 Nestlé, supra note 1 at para 20.
10 R v Stinchcombe, [1991] 3 SCR 326, [1991] SCJ No 83.
11 R v Nestlé Canada Inc (16 March 2015), Toronto, Ont Sup Ct 13-90000394-000 (production order) at para 2.
12 Ibid at para 1.
13 Competition Bureau, "Final price-fixing charges stayed in chocolate case" (November 18, 2015), online.
14 See Slansky v Canada (Attorney General), 2013 FCA 199, 2013 CarswellNat 3338; Strong v General Motors of Canada Ltd, 4 CPC (4th) 412, 1996 CarswellOnt 3759 (Ct J (Gen Div)).
15 Gower v Tolko Manitoba Inc, 2001 MBCA 11, 2001 CarswellMan 24 at para 38.
16 Nestlé, supra note 1 at paras 33-38.
17 S&K Processors Ltd v Campbell Avenue Herring Producers Ltd, [1983] 35 CPC 146, 1983 CarswellBC 147 (SC), McLachlin J (as she then was).
18 See e.g. Stevens v Canada (Prime Minister), 21 CPC (4th) 327, 1998 CarswellNat 1051 (FCA); Rakuten Kobo Inc v Canada (Commissioner of Competition), 2017 FC 382 at paras 62-63, 2017 CarswellNat 1449 and Ross River Dena Council v Canada (Attorney General), 2016 YKSC 51 at para 21, 2016 CarswellYukon 118.
19 Nestlé, supra note 1 at para 36.
20 See e.g., Ed Miller Sales & Rentals Ltd v Caterpillar Tractor Co, 1988 ABCA 282, 1988 CarswellAlta 148; Rekken Estates v Health Region No 1, 2012 SKQB 248, 2012 CarswellSask 912; Pinder v Sproule, 2003 ABQB 33, 2003 CarswellAlta 35; Philip Services Corp (Receiver of) v Ontario (Securities Commission), 77 OR (3d) 209, 2005 CarswellOnt 3934 (Div Ct); Interprovincial Pipe Line Inc v Minister of National Revenue, 22 BLR (2d) 147, 1995 CarswellNat 1151.
21 United Kingdom: British Coal v Dennis Rye Ltd [1988] 3 All ER 816 (CA); B v Aukland District Law Society, [2004] 4 All ER 269 (PC); Property Alliance Group Ltd v Royal Bank of Scotland plc, [2015] EWHC 1557 (Ch); Ireland Fyffes plc v DCC plc, [2005] 1 IR 59 (SC); Hong Kong: Citic Pacific Ltd v Secretary of State for Justice, [2012] HKCA 153; Australia: Goldberg v Ng (1995), 137 ALR 57 (HC).
22 See Diversified Industries Inc v Meredith, 572 F.2d 596 (1977 8th circ).
23 Jonathan Sack, "Selective Waiver in the Second Circuit -- Is It Dead, Or Just Dying?", Forbes (11 December 2013), online.
24 R v Basi, 2008 BCSC 1242, 2008 Carswell BC 3315.