Draft SEC Filings Can Be Protected From Discovery

In a January 9, 2009 order, Magistrate Judge Morton Denlow of the US District Court for the Northern District of Illinois ruled that Aon was not required to produce an email seeking comments on draft disclosure language for Aon’s Form 10-K because it was protected by the attorney-client privilege. Magistrate’s Opinion and Order in Roth v. Aon

The ruling is part of a securities class action suit against Aon. The plaintiffs were seeking an email with with a draft portion of Aon’s 10-K. In rejecting the plaintiff’s request, Judge Denlow recognized that the process of preparing SEC filings involves legal judgments throughout, even where the disclosure in question concerns operational rather than legal matters. Judge Denlow lays out the eight prong test for attorney-client privilege:

“(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.”

Judge Denlow goes on to point out that the inclusion of non-lawyers as recipients of the email did not waive the attorney-client privilege so long as all other recipients were employees of Aon.

Judge Denlow also rejected the argument that because the final 10-k was a public document that drafts should not subject to the privilege.

A key take-away is that communications to be protected by the attorney-client privilege must only be exchanged among in-house or outside counsel and company employees. Including outsiders, such as the company’s auditors or other consultants, as recipients could waive the privilege. You should also label these drafts as preliminary drafts and as confidential attorney/client privilege.

Although this ruling is based on SEC filings, you should be able to apply the same analysis to private placement memorandum and other documents related to private investment fund-raising.

See also:

• Ruling in Aon Case Protects Drafts of SEC Filings by Bruce Carton of Enforcement Action
• Privilege May Apply to Drafts of SEC Filings by Bryn R. Vaaler and Andrew E. Brehm of Dorsey & Whitney LLP