The recent federal district court decision in Roth v. AON Corporation (N.D. Ill. Jan. 8, 2009) serves as a good reminder of best practices for preserving the attorney-client privilege for drafts of SEC filings and related communications. As this Dorsey & Whitney memorandum notes, the court in Roth held that preliminary language in a draft 10-K and related communications that were sent to in-house counsel and other company employees for comment were protected by the attorney-client privilege, even though the Form 10-K was ultimately filed with the SEC. The court also held that the presence of non-lawyers on the distribution did not waive the privilege, because all of the other recipients were AON employees. Also notable was the court’s holding that the draft disclosure was protected even though it related to an operational matter, as opposed to a legal matter – the fact that the in-house legal counsel was consulted for legal advice was enough to maintain the privilege in this case.
The Dorsey & Whitney memo offers up these helpful tips to keep in mind when trying to protect draft SEC filings and the related communications:
1. Legal judgments and considerations are pervasive in producing most SEC filings. In-house or outside counsel should play a pivotal role in a public company’s disclosure controls and procedures and should be a party to all significant or sensitive communications and drafts. Courts will not extend the privilege shield to correspondence simply because it is addressed to a lawyer, but the shield can only apply if a lawyer is an addressee.
2. Communications to be shielded must only be exchanged among in-house or outside counsel and company employees. Including outsiders, such as the company’s outside auditors or other consultants, as recipients would generally waive the privilege.
3. Documents containing draft disclosures or discussion of related issues should be labeled “Preliminary Drafts” and “Confidential/Attorney-Client Privilege.” Such labeling will not necessarily mean that a court will ultimately find such documents to be protected, but it will evince an intent to apply the shield. These labels should also help to prevent unintended delivery to opposing parties in litigation discovery (as originally occurred in the Roth case).
4. E-mails relating to such drafts and discussion of related issues should also be so labeled.
Creating Plain English Disclosure
In preparing annual reports and proxy statements this year, I think that plain English will be more important than ever. As companies struggle to explain the fallout from the economy on their businesses, executive compensation programs and other matters, it will be important to focus on delivering the message in a way that investors, the press and the public can easily understand.
My colleague, Julie Hoffman, recently caught up with Lois Yurow, President of Investor Communications Services, in this podcast to discuss how to create securities disclosure documents in plain English, including:
– What is plain English?
– When does the SEC require public companies to provide disclosure in plain English?
– Why do some companies exceed plain English requirements?
– How much time and expense is involved in converting a document into plain English?
– Do you have any practice pointers for how companies can easily improve the readability of their disclosure?
January-February Issue: Deal Lawyers Print Newsletter
This January-February issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:
– Time to Install a Pill? Dealing With Rights Plans in a Down Market
– How the New Accounting Standards Will Impact M&A
– Lessons from the Meltdown: MAE Clauses
– Increasing Use of – and Great Opportunities – for Exchange Offers
– Portfolio Company Debt: “Loan to Own” to “Buying Your Own”
– The In-House Perspective: What We Want from Outside Counsel
– A 2008 Review: M&A and Proxy Fights
As all subscriptions are on a calendar-year basis, please renew now to receive this issue. If you’re not yet a subscriber, try a 2009 no-risk trial to get a non-blurred version of this issue for free.
– Dave Lynn