The subject matter waiver doctrine posits that a client's offer of his or his attorney's testimony as to a specific attorney-client communication waives the attorney-client privilege for all other communications on the same subject matter. Generally, the doctrine arises in litigation where a party discloses some art of privileged communications yet still wishes to keep privileged some other parts. Application of the subject matter waiver, however, raises different concerns when the privileged comunications are disclosed in an extrajudicial setting, such as during business or commercial transaction negotiations. The Illinois Supreme Court held recently in Center Partners, Ltd. v. Growth Head GP, LLC, No. 113107 (November 29, 2012), "that subject matter waiver does not apply to the extrajudicial disclosure of attorney-client communications not thereafter used by the client to gain an adversarial advantage in litigation."
Center Partners is a business tort suit, and at issue were disclosures of privileged communications among some of the defendants while they were negotiating with third parties and among themselves the terms of a real estate and commercial property deal. The plaintiffs invoked the subject matter waiver doctrine and argued that these disclosures waived the privilege as to all communications on the same subject matter. The Illinois Supreme Court following decisions of the Second and First Circuits disagreed unanimously.
First, "the purpose behind the doctrine of subject matter waiver is to prevent partial or selective disclosure of favorable material while sequestering unfavorable." This is a fairness concern, the Court explained, that prevents parties from using the "sword" or partial disclosure while wielding the attorney-client privilege to prevent further disclosures. But this exemplary purpose is not served as to extrajudicial disclosures where the doctrine would be "expanded to cover the disclosures made before litigation is initiated or, in many cases, even contemplated." Second, application of the doctrine to extrajudicial communications such as during business negotiations would likely hamper or impede business transactions while transparency promoted by even limited disclosures might promote the transaction.
The prior decisions relied upon by the Illinois Supreme Court were: In re Von Bulow, 828 F2d 94 (2d Cir. 1987), and In re Keeper of the Records (Grand Jury Subpoena Addressed to XYZ Corp.), 348 F3d 16 (1st Cir. 2003).