## Facts

- Shareholders sued The Leslie Fay Companies, Inc. and others, alleging material misstatements in public financial reporting in violation of Exchange Act § 10(b), Rule 10b-5, and § 20(a).
- After accounting irregularities surfaced, the board directed its audit committee to investigate and report findings.
- The audit committee retained Weil, Gotshal & Manges as counsel; Weil retained an Arthur Andersen accounting team to assist the investigation.
- The investigation involved interviews and review of accounting records and culminated in a written Audit Committee Report (ACR) describing the fraud, responsible persons, and remedial recommendations.
- The ACR was produced in the securities litigation and was also provided to the SEC; the company used the ACR to support claims against its outside auditor, BDO, including in bankruptcy-related proceedings.
- BDO, a defendant that filed cross-claims/third-party claims for contribution, subpoenaed Weil for interview memoranda, notes, and other investigative materials underlying the ACR.
- Weil objected, asserting work-product protection for the underlying materials despite production of the final ACR.

## Issues

1. Whether interview notes, memoranda, and related investigative materials prepared for an audit committee investigation are protected work product, and whether any protection was waived by disclosure and use of the ACR.
2. If there was waiver, whether opinion work product (attorneys’ legal analysis or advice) could still be withheld, and on what showing.

## Decision

- The court granted BDO substantial relief and ordered Weil to produce the requested investigation materials.
- Production was required unless Weil demonstrated, on a document-by-document basis, that withheld items contained attorneys’ legal analysis or advice not discussed in the ACR and did not cover subject matters reflected in the ACR.
- The court treated waiver as broad for factual and derivative materials supporting the ACR, while preserving a narrow carve-out for undisclosed opinion work product.

## Legal Principles

- Work product under Fed. R. Civ. P. 26(b)(3) may be waived by voluntary disclosure or by using protected material offensively in litigation such that fairness requires disclosure of related materials.
- Disclosure of an internal investigative report to third parties, including regulators, and production in litigation can be inconsistent with maintaining work-product secrecy as to related subject matter.
- A party may not use a report as a “sword” to advance claims while using work-product doctrine as a “shield” to block access to the report’s factual foundation.
- Courts distinguish fact work product from opinion work product; factual investigation materials are more readily compelled after waiver, while core attorney mental impressions receive stronger protection.
- When waiver is found, withholding must be justified specifically; blanket assertions are insufficient, and the proponent bears the burden on a document-by-document basis.

## Conclusion

The court held that extensive disclosure and affirmative use of the audit committee’s investigative report waived work-product protection for underlying factual materials, and it compelled production subject only to a narrow, specifically justified exception for undisclosed attorney opinion work product outside the report’s subject matter.


In re Leslie Fay Cos., Inc. Sec. Litig., 161 F.R.D. 274 (S.D.N.Y. 1995)