Qwest Communications International Inc. can't use a "selective waiver" to prevent documents it handed over to federal investigators from reaching lawyers for shareholders, a federal appeals court ruled.
Qwest, the fourth-largest U.S. local-phone company, had asked the Denver-based 10th U.S. Circuit Court of Appeals to adopt a rule shielding the documents. Qwest claimed the papers, handed over to the U.S. Department of Justice and U.S. Securities and Exchange Commission as part of a fraud investigation, were protected by attorney-client privilege.
"Rather than a mere exception to the general rules of waiver, one could argue that Qwest seeks the substantial equivalent of an entirely new privilege," the appeals court said. The rule Qwest advocates "would be a leap, not a natural, incremental next step in the common law development of privileges and protections."
Qwest in November agreed to pay $400 million to settle class-action claims over bogus sales. The company also agreed to pay $250 million to resolve an SEC investigation after losing $80 billion in market value from 1999 to 2002. Former Chief Executive Officer Joseph Nacchio was indicted last year on charges of insider trading.
Joseph Daley, a lawyer representing the lead plaintiffs in the class action, the New England Health Care Employees Pension Fund, said shareholders want the Qwest documents for cases they are pursuing against Nacchio and former Chief Financial Officer Robert S. Woodruff.
The court "correctly found that the majority rule is that Qwest can't pick and choose the parties to whom they want to waive the privilege, and at the same time assert the privilege against private civil litigants," said Daley, a lawyer at Lerach, Coughlin, Stoia Geller Rudman & Robbins in San Diego.
Qwest spokesman Robert Toevs said he wouldn't comment on pending litigation.
Shares of Qwest fell 3 cents to close at $7.53 Tuesday on the New York Stock Exchange. They peaked in March 2000 at $66.