In Re: Grand Jury ( 1998 )


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  •                                                                                                                            Opinions of the United
    1998 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    3-13-1998
    In Re: Grand Jury
    Precedential or Non-Precedential:
    Docket 97-7347
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    Recommended Citation
    "In Re: Grand Jury" (1998). 1998 Decisions. Paper 48.
    http://digitalcommons.law.villanova.edu/thirdcircuit_1998/48
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    Filed March 13, 1998
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    No. 97-7347
    IN RE: GRAND JURY (IMPOUNDED)
    On Appeal from the United States District Court
    for the District of Delaware
    (D.C. Misc. No. 97-00020)
    Argued February 11, 1998
    BEFORE: GREENBERG, NYGAARD, and MCKEE,
    Circuit Judges
    (Filed: March 13, 1998)
    Charles M. Oberly, III (argued)
    Oberly, Jennings & Drexler, P.A.
    800 Delaware Avenue, Suite 901
    P.O. Box 2054
    Wilmington, DE 19899
    Attorneys for Appellant
    Gregory M. Sleet, United States
    Attorney
    Colm F. Connolly (argued),
    Assistant United States Attorney
    Chase Manhattan Centre
    1201 Market Street, Suite 1100
    P.O. Box 2046
    Wilmington, DE 19899-2046
    Attorneys for Appellee
    OPINION OF THE COURT
    GREENBERG, Circuit Judge.
    I. JURISDICTION
    Thomas J. Capano appeals from an order entered in the
    district court on June 27, 1997, holding that he waived the
    attorney work product privilege with respect to certain
    documents he created which the United States seized from
    a third party pursuant to a subpoena.1 The district court
    had jurisdiction under 18 U.S.C. S 3231, and we have
    jurisdiction to review the order of the district court
    pursuant to 28 U.S.C. S 1291. Cf. In re Grand Jury, 
    111 F.3d 1066
    , 1073-77 (3d Cir. 1997) (holding that a denial of
    an order to quash a subpoena not directed to a movant was
    a final order if the movant had no further opportunity to
    challenge the subpoena).
    II. FACTUAL AND PROCEDURAL HISTORY
    In July 1996, the Federal Bureau of Investigation ("FBI")
    and a federal grand jury in Delaware began a kidnaping
    investigation into the disappearance of Anne Marie Fahey,
    who last was seen alive on June 27, 1996. Capano became
    the major target of these investigations. At the time of
    Fahey's disappearance, Capano, who is an attorney, was a
    partner in the Wilmington office of the Saul, Ewing, Remick
    & Saul law firm ("Saul Ewing"), a position he held until his
    resignation on May 31, 1997.
    On June 30, 1996, Capano retained attorneys after police
    officers notified him that they considered him a suspect in
    Fahey's disappearance. One of Capano's attorneys, Charles
    M. Oberly, III, directed him to prepare "a time-line of
    everything he could remember concerning his whereabouts
    _________________________________________________________________
    1. While the proceedings on this appeal originally were sealed, the
    district court on December 2, 1997, unsealed itsfile in this case.
    Accordingly, in response to our inquiry at oral argument, the parties
    agreed that we need not use ficticious names in our opinion.
    2
    on June 27, 1996 and immediately thereafter," and to
    "write down his thoughts and notes, as he remembered
    them, of anything he could recall about his relationship
    with Ms. Fahey." App. at 42. Following his attorney's
    instructions, Capano created a time-line and wrote down
    other notes regarding his relationship with Fahey and
    placed them in a legal file.
    Capano then put the file on a bookshelf in the office
    adjacent to his own office at Saul Ewing occupied by of one
    of his law partners, Timothy A. Frey, because he was
    concerned that there could be an unauthorized search of
    his own office leading to an unauthorized seizure of the file.
    Initially Frey was unaware that Capano placed thefile in
    his office; however, in August or September of 1996,
    Capano informed Frey about the location of the file. Within
    the next month, Frey found the file in his office, read it,
    and returned it to its prior location on his bookshelf.
    The file remained in Frey's office until the United States
    seized it on November 4, 1996. On that day, Assistant
    United States Attorney Colm F. Connolly telephoned Frey to
    inform him that an FBI agent would serve him with a grand
    jury subpoena for Capano's file. Frey then re-examined the
    file and determined that it was the same file he had
    examined previously. Connolly also telephoned the
    chairman of Saul Ewing, J. Clayton Undercofler, to notify
    him about the subpoena. Undercofler expressed a concern
    that the production of the file might reveal information
    relating to the law firm's representation of its clients.
    Connolly and Undercofler then agreed that thefile would be
    produced under seal, and that the law firm would have an
    opportunity to screen the file for any confidential
    information.
    After these phone calls, FBI Special Agent Kevin Shannon
    arrived at Frey's office and served the subpoena. The file
    was placed in an envelope, sealed, and delivered to
    Assistant United States Attorney Patricia Hannigan, who
    had been "walled off " from the investigation to avoid any
    possibility of taint. On November 5, 1996, Hannigan met
    with Undercofler and Saul Ewing's executive partner,
    Frederick D. Strober. After unsealing the envelope, the two
    attorneys from Saul Ewing examined the file and
    3
    determined that it did not contain any information relating
    to the law firm's representation of its clients. Hannigan
    then examined the file and determined that nothing in it
    arguably was privileged or protected. She then made a copy
    of the file which she gave to Connolly. She, however,
    retained the original file.
    Although the parties dispute exactly when Capano
    learned of the seizure, they agree that Capano and his
    attorneys did not know that the government intended to
    seize the file prior to the service of the subpoena and that
    they were informed of the seizure only after it had occurred.
    Capano asserts that his attorney first learned of the
    disclosure on November 6, 1996, two days after the seizure.
    See br. at 27. In any event, on November 12, 1996, one of
    Capano's attorneys, Bartholomew J. Dalton, sent a letter to
    the United States Attorney advising the government that
    the file contained privileged information. The United States,
    through Connolly, responded on November 26, 1996, by
    telephone and informed Dalton that the United States did
    not believe that the attorney-client privilege or the attorney
    work product doctrine protected the materials contained in
    the file. Connolly told him to "take the issue up with the
    Court." App. at 138.
    On at least two occasions between December 30, 1996,
    and February 1997, Connolly also had telephone
    discussions with Oberly regarding the applicability of the
    attorney work product and the attorney-client privileges to
    the seized documents. In a second letter to the United
    States dated January 22, 1997, Oberly requested that the
    government either return the documents in the file or send
    him a letter stating its opposition to the assertion of the
    privileges. In response, Connolly formally denied the
    production request in a letter dated February 25, 1997,
    contending that the documents were not privileged and
    that, in any event, Capano waived any privilege when he
    placed them in Frey's office. Finally, on March 14, 1997,
    Capano, citing both the attorney-client and the attorney
    work product privileges, filed a motion in the district court
    seeking an order compelling the government to return the
    file.
    4
    In a memorandum opinion dated June 27, 1997, the
    district court denied Capano's motion. While the district
    court held that the attorney-client privilege did not offer
    any protection to the file, it nevertheless held that the file
    was attorney work product, because Capano acted as his
    attorney's agent in creating the file in preparation of
    litigation. However, the district court determined that
    Capano waived this work product protection based on both
    disclosure and timeliness grounds. In particular, because
    Capano had revealed the presence of the file to Frey and
    had stored it in Frey's unlocked and easily accessible office,
    the district court held that Capano disregarded the risk
    that an adversary might obtain the file, and thus had
    waived the work product privilege. Alternatively, the district
    court held that Capano waived the work product privilege
    by waiting nearly four months to file a motion to compel the
    return of the seized materials. Finally, the district court
    noted in a footnote in its opinion that even if Capano did
    not waive the attorney work product protection of the file,
    the United States had demonstrated sufficient cause to
    overcome that protection.
    Capano filed a timely appeal to this court on July 7,
    1997. Neither party has challenged the district court's
    holdings regarding the applicability of the attorney-client or
    the attorney work product privileges; therefore, we accept
    its determination that the seized file was attorney work
    product, but was not protected by the attorney-client
    privilege. Because we will affirm the district court's holding
    that Capano waived his attorney work product privilege
    with regard to the seized file based on his delay in seeking
    a judicial determination, we do not determine whether
    Capano waived the privilege by disclosing the documents.
    Nor do we decide whether the United States demonstrated
    sufficient cause to overcome the work product protection.
    III. WAIVER OF THE WORK PRODUCT PROTECTION
    In examining the district court's holding that Capano
    waived his work product privilege, we use an abuse of
    discretion standard of review. Cf. Livingstone v. North Belle
    Vernon Borough, 
    91 F.3d 515
    , 524 (3d Cir. 1996), cert.
    5
    denied, 
    117 S. Ct. 1311
    (1997) (using an abuse of discretion
    standard to review a waiver of an attorney-client privilege).2
    The work-product doctrine, first recognized by the
    Supreme Court in Hickman v. Taylor, 
    329 U.S. 495
    , 
    67 S. Ct. 385
    (1947), "shelters the mental processes of the
    attorney, providing a privileged area within which he can
    analyze and prepare his client's case." United States v.
    Nobles, 
    422 U.S. 225
    , 238, 
    95 S. Ct. 2160
    , 2170 (1975). The
    privilege thus promotes the adversarial system by
    protecting the confidential nature of materials prepared by
    attorneys in anticipation of litigation and "enabl[es]
    attorneys to prepare cases without fear that their work
    product will be used against their clients." Westinghouse
    Elec. Corp. v. Republic of the Philippines, 
    951 F.2d 1414
    ,
    1428 (3d Cir. 1991). This protection also can extend to
    materials prepared by an attorney's agent, if that agent acts
    at the attorney's direction in creating such documents. See
    
    Nobles, 422 U.S. at 238-39
    , 95 S.Ct. at 2170.
    The attorney work product privilege, however, is not
    absolute, and it may be waived. See 
    id. at 239,
    95 S.Ct. at
    2170. Thus, we have held that a party may waive the
    attorney work product privilege by disclosing protected
    documents in certain circumstances. See 
    Westinghouse, 951 F.2d at 1428-29
    . It has been held that a disclosure
    sufficient to waive the work product protection does not
    have to be intentional; therefore inadvertent or
    unintentional disclosures of protected materials also might
    result in the waiver of the privilege. See, e.g., Carter v.
    Gibbs, 
    909 F.2d 1450
    , 1451 (Fed. Cir. 1990). However,
    such a disclosure does not automatically forfeit the
    attorney work product privilege. In determining whether a
    party has waived the privilege through an inadvertent or
    involuntary disclosure, courts consider, among other
    _________________________________________________________________
    2. Capano argues in his brief that we should exercise plenary review. Br.
    at 18-19. We disagree but observe that even exercising plenary review we
    would reach the same result. While we will assume without deciding that
    in some circumstances we would exercise plenary review to determine if
    the work product privilege had been waived, we think that it is
    appropriate to use an abuse of discretion standard here because the
    weighing of various considerations leads us to affirm the district court's
    order.
    6
    factors, the steps taken by a party to remedy the disclosure
    and any delay in doing so. See, e.g., United States v.
    Keystone Sanitation Co., 
    885 F. Supp. 672
    , 676 (M.D. Pa.
    1994); cf. United States v. de la Jara, 
    973 F.2d 746
    , 749-50
    (9th Cir. 1992) (holding that a defendant waived his
    attorney-client privilege with regards to a seized letter
    because he waited six months after the seizure to assert his
    privilege). But see 
    Carter, 909 F.2d at 1451
    (holding that
    even an inadvertent disclosure automatically waives the
    attorney work product privilege, because to do otherwise
    "would do no more than seal the bag from which the cat
    has already escaped."). Thus, in the case of inadvertent or
    involuntary disclosures, the party asserting the work
    product doctrine must pursue all reasonable means to
    restore the confidentiality of the materials and to prevent
    further disclosures within a reasonable period to continue
    to receive the protection of the privilege.
    It is undisputed that neither Capano nor his attorneys
    knew of the subpoena until after it had been issued and the
    file had been seized. Consequently, Capano had no
    opportunity to challenge the involuntary disclosure of the
    file by seeking to quash the subpoena; instead, his only
    remedy was to assert the attorney work product privilege
    after the United States took possession of the file. Capano
    clearly made a timely assertion of the attorney work
    product privilege to the government; his attorney mailed a
    letter asserting the privilege to the United States within
    eight days after the seizure. However, as of November 26,
    1996, Capano and his attorneys were on notice that the
    United States disagreed with the assertion of the privilege
    and would not relinquish the file voluntarily. In spite of this
    knowledge, Capano waited until March 14, 1997, tofile a
    motion to compel the return of the seized file. Thus, the
    determinative issue on this appeal is whether Capano's
    initial assertion of the privilege to the United States
    sufficiently protected his rights or whether his failure to
    seek a judicial ruling on the issue more promptly waived
    the privilege.
    We hold that the district court did not abuse its
    discretion determining that even though Capano timely
    notified the United States of his claim of the privilege and
    7
    continued to assert it in subsequent communications, these
    assertions were insufficient to protect his rights. The United
    States was a direct adversary of Capano, and its continued
    use of the documents directly undermined the purpose of
    the attorney work product privilege of protecting
    confidential documents prepared in anticipation of litigation
    from a party's adversary. Capano's repeated admonitions to
    his adversary to return the protected documents did not
    prevent the continuing harm resulting from the disclosure.
    Judicial enforcement of the privilege was the only remedy
    that Capano could have obtained which would have
    foreclosed the United States from further use of the seized
    file. Without such judicial vindication, the United States
    was free to continue to utilize the documents, thereby
    negating their confidential character.
    In the case of such an involuntary disclosure, a
    reasonable person would not only inform his or her
    adversary of the breach of the privilege, but also would seek
    a judicial determination of the controversy if his or her
    adversary took an opposing stance. Merely asserting the
    privilege to an adversary is not sufficient to protect the
    privilege in these circumstances inasmuch as the adversary
    has possession of the materials claimed to be privileged and
    thus can make use of them. Moreover, if the district court
    countenanced Capano's delay in judicially asserting his
    privilege and then upheld his claim of privilege, the grand
    jury's use of the seized file potentially could have tainted its
    investigation.3
    In short, when a party's adversary has obtained
    possession of a party's work product and refuses to
    recognize the work product privilege, the party asserting the
    privilege must move expeditiously for relief particularly
    _________________________________________________________________
    3. In his brief Capano asserts that during the four months before he
    served his motion, the government had possession of the disputed
    documents and "is believed to have used these documents in the grand
    jury proceedings." Br. at 29. He reasons from this belief that there "was
    no prejudice to the Government as a result of the four-month period
    between [his] initial assertion of the . . . work product privilege[ ]"
    and
    the filing of his motion. 
    Id. While the
    grand jury in fact did not indict
    Capano, clearly his argument overlooks the taint problem we have
    identified.
    8
    where, as here, the party asserting the privilege does not
    even claim that he had reason to believe that the
    adversarial party was not making use of the work product.
    Indeed, in his brief Capano asserts that in "this entire
    period," i.e., between November 12, 1996, and March 14,
    1997, when he filed his motion, the govenment "used these
    documents to further its grand jury investigation." Br. at
    15-16. While we cannot set an exact time within which
    such a motion must be made, we hold that the district
    court did not abuse its discretion in holding that Capano
    waived the privilege as we are satisfied that Capano acted
    unreasonably in waiting nearly four months to seek a
    judicial vindication of his assertion of the privilege.
    Capano contends that SEC v. Lavin, 
    111 F.3d 921
    (D.C.
    Cir. 1997), supports his position that his assertion of the
    privilege to the United States sufficiently protected his
    rights. In Lavin, the Securities and Exchange Commission
    ("SEC") sought to obtain copies of tape recordings of
    conversations between a husband and a wife. These
    recordings were made by and were in the possession of the
    husband's employer, Bankers Trust Company ("Bankers
    Trust"). See 
    id. at 924.
    Initially, Bankers Trust had
    submitted these tapes to the Federal Reserve Board
    ("Board") as part of a production request pursuant to the
    Board's examination powers. When Bankers Trust notified
    Lavin, the husband, that it had relinquished the tapes to
    the Board, he immediately asserted his marital
    communications privilege and requested that Bankers Trust
    assert it on his behalf to the Board. Bankers Trust and
    Lavin subsequently entered into an agreement whereby
    Bankers Trust would give him the opportunity to challenge
    any further requests seeking the release of the tapes.
    However, Lavin did not institute any legal proceedings
    against Bankers Trust to obtain the tapes. Subsequently,
    the SEC sought the disclosure of the tapes, and Lavin
    asserted his marital communications privilege.
    In considering whether the privilege had been waived, the
    Court of Appeals for the District of Columbia Circuit held
    that Lavin had no obligation to initiate any legal
    proceedings against Bankers Trust to protect the
    conversations "absent a concrete threat of further
    9
    disclosure." 
    Id. at 931.
    There was no such threat in Lavin's
    case, because Bankers Trust continued to abide by its
    agreement. In fact, Lavin had intervened successfully in an
    unrelated civil suit to assert his marital communications
    privilege with respect to the tapes. See 
    id. at 924-25,
    931.
    The court also noted that "taking reasonable precautions to
    preserve the confidentiality of privileged materials does not
    require gaining physical possession in cases such as this
    where . . . attempts to gain such possession would have
    been futile because the tapes were not the property of
    [Lavin]." 
    Id. at 932.
    Thus, Capano argues that like Lavin, he
    should not have been forced to seek an immediate judicial
    determination regarding the return of his file, because the
    disclosure already had occurred and no threat of future
    disclosures existed.
    Aside from the obvious differences in the privileges at
    issue and the purposes behind them, the facts of Lavin
    differ substantially from the present case. In Lavin, Lavin
    took active measures to assure that no one beyond the
    owner of the recordings, Bankers Trust, had access to
    them. More importantly, Lavin took legal action against any
    potential adversary that sought to obtain the recordings,
    and the entity in possession of the tapes, Bankers Trust,
    was not such an adversary. Capano was in a more difficult
    position than Lavin, because the privilege already had been
    breached by the seizure, and his adversary already had
    access to the documents. Thus, unlike Lavin, Capano was
    harmed immediately by the initial disclosure as it was to
    his direct adversary and not to a third party. Repeated
    communications by Capano asserting the privilege to his
    adversary were insufficient to prevent further harm; only
    timely intervention by a court could accomplish that
    objective.
    Therefore, we reiterate that the district court did not
    abuse its discretion in determining that Capano waived his
    attorney work product privilege with regard to the seized
    documents by failing to file a timely motion to compel their
    return. Within a few weeks after the seizure of thefile,
    Capano was on notice both of the seizure and of the
    government's unwillingness to recognize his attorney work
    product privilege with regard to the seized file. Yet, he
    10
    waited nearly four months to seek a judicial vindication of
    his claim of privilege. This delay is inconsistent with the
    purpose behind the attorney work product privilege, and
    thus the district court did not abuse its discretion in
    determining that Capano's delay waived the privilege.
    In view of the aforesaid, we will affirm the order of June
    27, 1997.
    11
    McKEE, Circuit Judge, concurring.
    I concur with the holding of the majority. I write
    separately for two reasons. First, I think that we should
    reject the assertion that the government has established
    "good cause" to overcome the protection of the privilege.
    Second, I write because I believe that my colleagues'
    apparent concern for eliminating any taint from this
    ongoing investigation is misplaced.
    I.
    The government argues that "[its] need for the file results
    from [Capano's] refusal to testify before the grand jury and
    speak with investigators. The Government attempted to
    secure [Capano's] testimony, but its efforts failed."
    Appellant's Br. at 23. This amounts to nothing more than
    an assertion that failure to waive the privilege against self-
    incrimination under the Fifth Amendment gives the
    government the right to obtain information that would
    otherwise be protected as work product because it allows
    the government to establish the "good cause" needed to
    defeat that privilege. Surely, one need not waive the
    protections embedded in the Fifth Amendment in order to
    preserve a work product privilege.
    We have historically been quite reluctant to find the good
    cause needed to overcome the protections of the work
    product doctrine. See In re Grand Jury, 
    633 F.2d 282
    (3d
    Cir. 1980); United States v. Armerada Hess Corp., 
    619 F.2d 980
    (3d Cir. 1985); and In re Grand Jury Investigation, 
    599 F.2d 1224
    (3d Cir. 1979). We should not be reluctant to
    reject the government's claim of "good cause" insofar as it
    is based upon the argument that assertion of a
    constitutional right defeats the work product privilege.
    II.
    My colleagues note that "if the district court
    countenanced Capano's delay in judicially asserting his
    privilege and then upheld his claim of privilege, the grand
    jury's use of the seized file potentially could have tainted its
    investigation." Maj. Op. at 8. This may well be true, but is
    12
    irrelevant. The government risked tainting the investigation
    when it decided to proceed in the manner that it did. The
    circumstances here are unique. There is no reason that has
    been pointed out to this court why the government could
    not have sought to have Saul Ewing secure the Capano file,
    and then notified Capano of the government's intent to
    subpoena it. The district court could then have decided the
    motion to quash that Capano would most certainly have
    filed, and there would have been no possibility of taint prior
    to an adjudication of the privilege. The government was
    obviously aware of the problems it was creating by seizing
    the documents and setting up a "Chinese wall" in an
    attempt to insulate them. Because the Government chose
    that tactic, we ought not to allow a concern for any taint
    that the seizure may have created to affect our analysis of
    the claim of privilege. "The ultimate aim [of the work
    product privilege doctrine] is to promote the proper
    administration of justice." In re Grand Jury Proceedings,
    
    604 F.2d 798
    , 802 (3d. Cir. 1979). That objective is not well
    served if we allow a possible taint that the government itself
    created to influence our inquiry.1
    A True Copy:
    Teste:
    Clerk of the United States Court of Appeals
    for the Third Circuit
    _________________________________________________________________
    1. There is no suggestion that Capano deliberately delayed filing a motion
    to secure an advantage. Where a defendant or target does that, I agree
    that consideration of taint may be appropriate.
    13