In re Grand Jury Proceedings ( 1994 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 94-60714
_____________________
IN RE: GRAND JURY PROCEEDINGS
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________________________________________________
(December 22, 1994)
Before KING, HIGGINBOTHAM, and DeMOSS, Circuit Judges.
PER CURIAM:
This is an appeal from an order of the district court
directing two attorneys to comply with a subpoena duces tecum
issued by a grand jury. The attorneys moved to quash the
subpoena on grounds that the documents requested by the
government were privileged under the work product doctrine. The
district court denied the motion to quash and turned over two of
the documents to the government. The district court also
determined that the remaining documents, which are presently in
the custody of the district court, were to be turned over to the
government. On October 27, 1994, this court granted a temporary
stay to block delivery of the remaining documents pending review
of the district court's turnover order. For the reasons
elaborated below, we reverse the judgment of the district court
and remand for an evidentiary hearing to determine whether the
government can establish the requisite need to overcome the work
product privilege.
I. FACTUAL AND PROCEDURAL BACKGROUND
In March 1992, the law firm of Rogers & Wells was consulted
regarding the potential representation of a wealthy Mexican
citizen, Ricardo Aguirre-Villagomez ("Aguirre"), his wife,
Rosalinda Silva de Aguirre ("Silva"), his daughter, Gloria
Aguirre, and Green Mountain Holdings, Ltd. ("Green Mountain"), an
investment company owned by the Aguirre family. After Aguirre
was reported killed in an automobile accident in Mexico1, Silva
and Gloria Aguirre formally retained Rogers & Wells in an effort
to obtain the release of a $25 million investment portfolio held
by Green Mountain which had been seized by the government in
connection with a civil forfeiture action.
In February 1993, believing Aguirre's death to have been
falsified, the government indicted Aguirre on narcotics and money
laundering charges, dismissed the civil forfeiture proceeding
against Green Mountain, and began a criminal forfeiture action
against Green Mountain and other property owned by Aguirre. In
response, Rogers & Wells' attorneys filed a suggestion of death
and moved to dismiss the indictment and obtain a release of the
Green Mountain portfolio.
1
The government's brief states that Aguirre's body was
never recovered and contends that Aguirre is still alive and
presently in hiding.
2
In August 1993, the motion to dismiss the indictment against
Aguirre was denied. On September 1, 1993, Rogers & Wells
terminated its representation of the Aguirre family interests.
In 1994, the government indicted Silva on a charge of money
laundering. She agreed to cooperate with the authorities and
entered a guilty plea.
On October 4 and 5, 1994, the government served subpoenas
duces tecum on two Rogers & Wells' attorneys: Mark Pomerantz, a
partner in the firm's New York office, and Whitney Adams, an
associate in the firm's Washington, D.C. office. The subpoenas
directed Pomerantz and Whitney to testify before a grand jury in
the Southern District of Texas and ordered them to produce all
"notes, memoranda, or any document pertaining to any interviews
of any person pertaining to this case" and "[a]ny records, notes,
memoranda, or any document referencing any conversation between
any employee of Rogers & Wells and any of [certain specified]
individuals." The government obtained express waivers of the
attorney-client privilege from Silva, Gloria Aguirre, and Green
Mountain.
Whitney and Pomerantz have turned over many non-privileged
documents to the grand jury; however, believing other documents
to be privileged under the work product doctrine, Whitney and
Pomerantz filed a motion to quash or modify the subpoenas, and
submitted all of the disputed documents to the district court for
in camera inspection. These documents included, inter alia,
internal law firm memoranda, e-mails, draft pleadings, and
3
memoranda to file, including memoranda of conversations with
third parties.
On October 21, 1994, the district court held a hearing on
the motion to quash or modify and ruled that the documents were
not privileged under the work product doctrine. Although the
basis for the court's ruling is not entirely clear, it appears to
be based on the district court's conclusions that the work
product privilege does not apply to communications with third
parties and does not extend to subsequent litigation. The
district court ordered Pomerantz and Whitney to redact those
portions of the documents which reflected litigation strategy but
to leave intact those portions which revealed any third party
communications. In order to define for the parties the scope of
its ruling, the district court reviewed two of the documents in
camera and identified for Pomerantz and Whitney those portions of
the two documents that it believed could be redacted pursuant to
its turnover order. The district court then ordered Pomerantz
and Whitney to redact the documents in accordance with its order
and submit all redacted documents to the district court for
turnover to the government by November 1, 1994.
On October 24, 1994, Pomerantz and Whitney formally
submitted the redacted documents to the district court. The
following day, the district court turned two of the redacted
documents over to the government. Pomerantz and Whitney then
asked the district court to stay its turnover order to prevent
disclosure of the remaining documents. The district court denied
4
the requested stay and informed the parties that "I am going to
turn them [the remaining documents] over to the Government unless
the Circuit tells me not to."
On October 25, 1994, Pomerantz and Whitney filed a notice of
appeal and asked this court to grant an emergency stay of the
district court's turnover order. On October 27, 1994, this court
granted the requested stay pending consideration of the merits of
the district court's work product ruling.
The government argues that the district court's turnover
order was appropriate and makes four arguments on appeal: (1)
this court lacks subject matter jurisdiction to consider the
appeal because the district court's order is not final absent a
finding of contempt against Pomerantz and Whitney; (2) the work
product privilege does not protect documents which reflect
conversations with third parties; (3) the work product privilege
does not extend to subsequent litigation; and (4) the work
product privilege is inapplicable in this case because the
crime/fraud exception permits discovery of work product documents
if the client was engaged in a crime or fraud. Finding the first
three of these arguments to be without merit, and the fourth to
be not sufficiently developed in the district court to provide an
alternative means of upholding the district court's decision, we
reverse the judgment of the district court and remand for a
determination of whether the government can establish the
requisite need for the remaining documents. We now proceed to
address each of the government's arguments in turn.
5
II. ANALYSIS
A. Is there a "final order" over which this court may exercise
jurisdiction?
The government contends that this court lacks subject matter
jurisdiction to entertain this appeal because the district
court's order is not a "final decision" within the meaning of 28
U.S.C. § 1291. To be appealable, an order must be either: (1)
final; (2) fall within a specific class of interlocutory orders
made appealable by statute, see, e.g., 28 U.S.C. § 1292(a); or
(3) fall within some jurisprudential exception. Lakedreams v.
Taylor, 932 F.2d 1103, 1107 (5th Cir. 1991).
The government correctly recites the general rule that a
denial of a motion to quash a subpoena is not final until the
individual seeking to quash disobeys the court order and is held
in contempt. New York Times Co. v. Jascalevich, 439 U.S. 1304,
1305-06 (1978); United States v. Ryan, 402 U.S. 530, 532-33
(1971); Cobbledick v. United States, 309 U.S. 323, 327-28 (1940);
In re Grand Jury Subpoena, 926 F.2d 1423, 1429-30 (5th Cir.
1991). This general rule, however, is just that: a general
rule. The courts have carved out numerous exceptions, the most
applicable one in this case being the so-called "collateral order
doctrine" which permits immediate appeal of a trial court order
if it "conclusively determine[s] the disputed question,
resolve[s] an important issue completely separate from the merits
of the action, and [is] effectively unreviewable on appeal from a
final judgment." Coopers & Lybrand v. Livesay, 437 U.S. 463, 468
6
(1978) (citations omitted). The Supreme Court first announced
the collateral order doctrine in the landmark case of Cohen v.
Beneficial Loan Corp., 337 U.S. 541 (1949), which explained that
the exception is necessary to permit appellate review in those
cases where waiting for a final judgment "will be too late
effectively to review the present order, and the rights conferred
[upon the appellant] . . . will have been lost, probably
irreparably." Id. at 546.
We believe that the requirements for the invocation of the
collateral order doctrine have been satisfied in this case.
First, the district court's turnover order has been fully
executed by the appellants and the district court explicitly
stated, "Well, I think generally the issue is appealable now. . .
. I want you to preserve your right to appeal. I want you to be
able to take up these things . . . ."
Normally, orders to turn over property to a court officer
(such as a receiver) are not considered final orders which can be
appealed. Jascalevich, 439 U.S. at 1306; United States v.
Beasley, 558 F.2d 1200, 1201 (5th Cir. 1977); Wark v. Spinuzzi,
376 F.2d 827 (5th Cir. 1967); see generally Charles Alan Wright,
et al., 15A Federal Practice and Procedure § 3910 n.38 (2d ed.
1991) (citing cases). This is so because in such cases, "whether
the materials will eventually be released to the defense and the
public is a matter yet to be litigated." Jascalevich, 439 U.S.
at 1306. Thus, it would appear at first blush that the district
court's turnover has not been conclusively decided because the
7
district court itself, not the government, presently has
possession of the documents. Yet a closer look at the October
24, 1994 turnover order reveals that the order contemplates
turnover of all documents to the government, not to the court.
In such situations where a court has possession of property and
thereafter issues an immediately enforceable order to turn over
the property to the other party, the order is sufficiently ripe
for appellate review. The reason for this rule is obvious: if
the court already has lawful possession of the documents, a
subsequent turnover order will be immediately enforceable without
the necessity of holding the property owner in contempt. Cf.
Perlman v. United States, 247 U.S. 7, 13 (1918) (holding turnover
order to be final as to third party intervenor whose property was
in custody of trial court at time order issued).
In this case, there is an immediately enforceable order to
turn over the remaining documents. Judge Vela stated that "I am
going to turn them [the disputed documents] over to the
Government unless the Circuit tells me not to." The written
turnover order denying the motion to "withhold said documents
from the government until Movants' appeal of the Court's turnover
order has been ruled upon by the Fifth Circuit" echoes this
determination.
It seems clear that the district court considers its
turnover order to have been executed and complied with such that
it intends to turn the documents over to the prosecution without
having to hold Pomerantz and Adams in contempt. It would be
8
absurd to decline jurisdiction on grounds that Pomerantz and
Adams must await a judgment of contempt which Judge Vela has so
clearly indicated will not be forthcoming.
Second, the turnover order clearly presents an important
issue that is completely separate from the merits of the
underlying grand jury investigation. Third, denying appellate
review would result in irreparable injury because the district
court's ruling on the two redacted documents also extends to the
remaining documents which have not yet been turned over to the
government. If these documents are turned over, Pomerantz and
Adams will irretrievably lose any protectible interest they have
in such documents.
In short, the district court already has possession of these
documents and it believes it can turn them over to the
prosecution unless this court says otherwise. To decline
jurisdiction on grounds that there has been no final order would
mean that we are impuissant to prevent the irreparable harm that
will occur if the district court's turnover order is in error.
In the words of the Supreme Court in Perlman v. United States,
247 U.S. 7 (1918), to decline jurisdiction on grounds that there
has been no adjudication of contempt would leave Pomerantz and
Adams "powerless to avoid the mischief of the order." Id. at 13.
We decline the invitation to construe the final order doctrine in
such a manner. Accordingly, we believe that the unique dilemma
presented by this case warrants invocation of the collateral
order doctrine and permits us to exercise subject matter
9
jurisdiction. We now turn to analyze the district court's
turnover order on the merits.
B. Does the work product privilege prevent disclosure of
communications with third parties?
Pomerantz and Adams characterize the district court's
turnover order as resting exclusively on the conclusion that the
work product privilege is coextensive with the attorney-client
privilege in that it does not provide immunity for communications
with third parties. While the district court clearly indicated
that it did not believe that communications with third parties
were covered by the work product doctrine, it is not clear that
the district court based its ruling exclusively on such grounds.
Whatever the district court's reasoning, however, we find it
necessary to reiterate that "the mere voluntary disclosure to a
third person is insufficient in itself to waive the work product
privilege." Shields v. Sturm, Ruger & Co., 864 F.2d 379, 382
(5th Cir. 1989). Rather, the test for whether a third party
communication is privileged by the work product doctrine is
whether the information recorded by the attorney is "obtained or
prepared by an adversary's counsel with an eye toward
litigation." Hickman v. Taylor, 329 U.S. 495, 511 (1947). Even
if a third party communication is obtained or prepared with an
eye toward litigation, it may be discoverable if the "one who
would invade that privacy [can] establish adequate reasons to
justify production." Furthermore, to the extent that the
documents in question reflect oral conversations made by third
10
parties to Pomerantz and Adams, Hickman makes it clear that
discovery may be had only in a "rare situation," because of the
danger that the attorney's version of such conversations is
inaccurate and untrustworthy. Id. at 513. Perhaps more
importantly, the stricter limits on disclosure of work product
which results from oral communications with third parties is also
necessary due to the likelihood that such documents will reveal
the attorney's mental processes or litigation strategy. Upjohn
Co. v. United States, 449 U.S. 383, 400 (1981); see Fed. R. Civ.
P. 26(b)(3).
While Hickman does not spell out the burden of proof which
the government must carry in order to obtain discovery of
documents based upon oral communications with third parties, the
Supreme Court in Upjohn Co. v. United States, 449 U.S. 383 (1981)
clarified that the requisite showing is "far stronger" than for
other work product documents. Id. at 402. Specifically, the
Upjohn court stated that "[a]s Rule 26 [of the Federal Rules of
Civil Procedure] and Hickman make clear such work product [based
on oral statements from third parties] cannot be disclosed simply
on a showing of substantial need and inability to obtain the
equivalent without undue hardship." Id. at 401; see also Fed. R.
Civ. P. 26(b)(3).2
2
While the Federal Rules of Civil Procedure are not
applicable to grand jury proceedings such as this case, Hickman--
and presumably its progeny such as Upjohn-- is. See United
States v. Nobles, 422 U.S. 225, 236 (1975) (extending Hickman's
work product privilege to the criminal context); see also FED. R.
CRIM. P. 16(b)(2) (establishing work product protection in
pretrial criminal context).
11
C. Does the work product privilege extend to subsequent
litigation?
The government argues that the work product privilege
recognized in Hickman-- which was extended to the criminal
context in United States v. Nobles, 422 U.S. 225, 236 (1975)--
evaporates when the litigation for which the document was
prepared has ended. Hickman and its progeny, however, do not
delineate a temporal scope for the privilege.
In the context of Rule 26 of the Federal Rules of Civil
Procedure-- which was modeled upon Hickman, see Fed. R. Civ. P.
26(b)(3), advisory committee's notes to 1970 amendment-- the
Supreme Court recognized that "the literal language of the Rule
protects materials prepared for any litigation or trial as long
as they were prepared by or for a party to the subsequent
litigation." FTC v. Grolier, Inc., 462 U.S. 19, 25 (1983). In
Grolier, the Supreme Court held that the work product privilege
contained in Exemption 5 of the Freedom of Information Act3
extended to subsequent litigation. The Court proclaimed that it
was "not rely[ing] exclusively on any particular construction of
Rule 26(b)(3) . . ." in reaching its decision, but was
independently relying on the statutory language of Exemption 5.
Id. Nonetheless, Grolier provides a strong hint that Rule 26
3
Exemption 5 exempts from public disclosure "interagency or
intra-agency memorandums or letters which would not be available
by law to a party . . . in litigation with the agency." 5 U.S.C.
§ 552(b)(5).
12
and a fortiori, Hickman (which is the genesis of Rule 26),
applies to subsequent litigation.
The emerging majority view among the circuits which have
struggled with the issue thus far seems to be that the work
product privilege does extend to subsequent litigation. One
circuit, the Third Circuit, appears to extend the work product
privilege only to "closely related" subsequent litigation. In re
Grand Jury Proceedings, 604 F.2d 798, 803-04 (3d Cir. 1979).
A broader view, exemplified by the Fourth, Sixth and Eighth
Circuits, is that the privilege extends to all subsequent
litigation, related or not. See United States v. Pfizer, Inc.
(In re Murphy), 560 F.2d 326, 335 (8th Cir. 1977); United States
v. Leggett & Platt, Inc., 542 F.2d 655, 660 (6th Cir. 1976),
cert. denied, 430 U.S. 945 (1977); Duplan Corp. v. Moulinage et
Retorderie de Chavanoz, 487 F.2d 480, 484-85, n.15 (4th Cir.
1973).
We need not choose between these two alternative theories at
this time because the documents sought to be discovered in this
case satisfy both. The original litigation for which the
documents were prepared involved the seizure of the Green
Mountain portfolio pursuant to a criminal investigation of money
laundering by Aguirre. The grand jury investigation for which
the documents are now being sought is merely a broadened
investigation of money laundering by Aguirre and others. Thus,
the litigation for which the Rogers & Wells attorneys prepared
the documents is unquestionably "closely related" to the grand
13
jury investigation for which they are presently being sought.
Accordingly, whichever view of the temporal scope of the work
product privilege one prefers, it is clear that the documents
sought in this case are still protected by the work product
privilege.
(3) Does the crime/fraud exception apply in this case?
This court has clearly recognized the validity of a
crime/fraud exception to the work product privilege. See In re
Burlington Northern, Inc., 822 F.2d 518, 524-25 (5th Cir. 1987),
cert. denied, 484 U.S. 1007 (1988). One question we have as yet
not answered, however, is whether the crime/fraud exception will
permit disclosure of materials when the attorney who prepared the
materials had no knowledge that his efforts were furthering his
client's criminal activity. In this case, the government
concedes that Pomerantz and Adams are not suspected of criminal
involvement.
In the attorney-client privilege context, the crime/fraud
exception permits disclosure of any communications between the
attorney and client if the client seeks advice from the attorney
in carrying out a crime or fraud. 1 McCormick on Evidence § 95,
at 350 (John William Strong ed., 4th ed. 1992). The test is
whether the client's purpose is the furtherance of a future fraud
or crime. Id. However, this focus on the client's purpose
appears to be driven by the fact that the attorney-client
privilege is, of course, held by the client and not the attorney.
14
In contrast to the attorney-client privilege, the work
product privilege belongs to both the client and the attorney,
either one of whom may assert it. Thus, a waiver by the client
of the work product privilege will not deprive the attorney of
his own work product privilege, and vice versa. What is unclear,
however, is whether a prima facie case of fraud or criminal
activity by the client will be sufficient to invoke the
crime/fraud exception if the party asserting the work product
privilege is an innocent attorney.
Numerous courts have agreed that, in the specific context of
the work product privilege, an innocent attorney may invoke the
privilege even if a prima facie case of fraud or criminal
activity has been made as to the client. See United States v.
Under Seal (In re Grand Jury Proceedings, Thursday Special Grand
Jury September Term 1991), 33 F.3d 342, 349 (4th Cir. 1994) ("The
record in the case does not indicate that the attorney engaged in
. . . misconduct . . . and, therefore, the attorney may not be
said to have waived his right to assert the work product
privilege."); In re Sealed Case, 676 F.2d 793, 812 (D.C. Cir.
1982) (noting that the crime/fraud exception applies "[u]nless
the blameless attorney is before the court with an independent
claim of privilege."); In re Special September 1978 Grand Jury,
640 F.2d 49, 63 (7th Cir. 1980) (commenting that when the work
product privilege is asserted by an innocent attorney, the
invasion of the attorney's privacy occasioned by divulging his
work product is "not justified by the misfortune of representing
15
a fraudulent client."); In re Grand Jury Proceedings, 604 F.2d
798, 802 n.5 (3d Cir. 1979) (stating that an "attorney, without
knowledge of his client's illegal activity, might nevertheless
properly claim and prevail in asserting a work product
privilege.").
The district court, although aware of the crime/fraud
exception, does not appear to have rested its decision thereon.
The government, perhaps sensing the weakness of the district
court's actual bases for its ruling, argues that because the
district court and the parties had a "discussion" about the
applicability of the crime/fraud exception, this court should
feel free to invoke the crime/fraud exception as an alternative
basis for upholding the district court's decision. We decline
this invitation. It would not be prudent to address an issue
which was, at most, the subject of a brief "discussion" in the
trial court.
III. CONCLUSION
We conclude that: (1) the collateral order doctrine permits
appellate review of the district court's turnover order; (2) the
work product privilege encompasses third party communications;
and (3) the work product privilege extends to protect the
documents in this case despite the fact that the litigation for
which they were prepared has terminated. Thus, we REVERSE and
REMAND to the district court for consideration of whether the
16
government has made a sufficient showing to overcome the work
product privilege.4
4
The government argues in its brief that it has established
substantial need for the evidence being sought and undue hardship
if the privilege shields third party communications. We decline
the invitation to entertain this argument on appeal, however,
because the district court did not address this issue and we
believe it would be more appropriate to let the district court
make this determination after a full adversarial hearing.
17