ABA SECTION OF INTERNATIONAL LAW FALL
MEETING
SHOWCASE PROGRAM , WEDNESDAY 26 OCTOBER 2005
2:00 – 3:30 PM
MOCK ARGUMENT:
CROSS-BORDER APPLICATION OF PRIVILEGE
DOCTRINES
50147014v1
INDEX OF RELEVANT AUTHORITIES ATTACHED
I. U.S. Authorities addressing choice of law issues in privilege determinations
Astra Aktiebolag, et al., Plaintiffs, v. Andrx Pharmaceuticals, Inc., 208 F.R.D. 92 (S.D.N.Y. 2002)
Renfield Corporation v. E. Remy Martin & Co., S.A., et al., 98 F.R.D. 442 (D. Del. 1982)
Honeywell, Inc. v. Minolta Camera Co., Ltd., et al., 1990 U.S. Dist. LEXIS 5954 (D.N.J. 1990)
II. U.S. Authorities addressing privilege and waiver in corporations and in internal
investigations
Upjohn Co. et al. v. United States et al., 449 U.S. 383; 101 S. Ct. 677 (1981)
Dennis Rossi v. Blue Cross and Blue Shield of Greater New York, 73 N.Y.2d 588 (N.Y. 1989)
In re Steinhardt Partners, 9 F.3d 230 (2d Cir. 1993)
In re Natural Gas Commodity Litigation, 2005 U.S. Dist. LEXIS 11950 (S.D.N.Y. June 21, 2005)
In re Columbia/Hca Healthcare Corporation Billing Practices Litigation, 293 F.3d 289 (6th Cir. 2002)
Restat 2d of Conflict of Laws, § 139
III. French Authorities addressing professional secrecy
Criminal Code, art. 226-13
Loi n°71-1130 du 31 décembre 1971
IV. EU Authorities Regarding Privilege
AM&S v. Commission [1982] ECR 1575
Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission, [2003] ECR 00
V. English Authorities Regarding Legal Advice Privilege And Waiver
Three Rivers District Council and others v. Governor and Company of the Bank of England [2004] UKHL 48
Three Rivers Council and Others v. The Governor and Company of the Bank of England [2003] EWCA Civ 474.
50147014v1
ASTRA AKTIEBOLAG, et al., Plaintiffs, v. ANDRX PHARMACEUTICALS, INC.,
Defendant. In re OMEPRAZOLE PATENT LITIGATION.
MDL Docket No. 1291
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK
208 F.R.D. 92; 2002 U.S. Dist. LEXIS 9985; 64 U.S.P.Q.2D (BNA) 1331
June 1, 2002, Decided
June 4, 2002, Filed
DISPOSITION: [**1] Astra was directed to produce the
following documents in their entirety: 246, 334, 531,
531-1, 533-1, 533-2, 535, 578-1, 580, 827, 1524, 1525,
1546, 2133, 2142, 2289, and 2605. Astra was further
directed to produce the following documents in redacted
form: 530, 533, 535-1, 578, 623, and 1627.
LexisNexis(R) Headnotes
COUNSEL: Attorneys for plaintiffs Astra Akiebolag, et
al.: Errol B. Taylor, Fredrick M. Zullow, Robert L.
Baechtold, Charles P. Baker, Gregory B. Sephton and
John D. Carlin Fitzpatrick, Cella, Harper & Scinto, New
York, NY.
578-1, 580, 580-1, 587, 588, 616, 616-1, and 623 on the
May 15, 2002, Supplemental '281 Privilege Log; documents 116-1, 197-1, 200-2, 211-2, 217, 223, 223-1, 235-1,
237-1, 245-1, 263-1-1, 430-1, 484-1, 585, n1 827, and
836-1 on the April 24 Kim and Chang Log; n2 documents
235, 246, 1524, 1525, 1544, 1546, 1550, 2133, 2134,
2142, 2421, 2534, 2585, 2587, 2588, n3 and 2605 on the
Astra May 2 Categorical Log and May 7 Supplement;
documents 712-1, 712-2, 731-1, and 775-2 on the April
30, 2002, Kim and Chang Supplemental Privilege Log;
documents 984A, 990, 1627, 2289, 2292, n4 2412, 2413,
and 2414 on the May 2 Supplement to the 1999 Categorical Log; and documents 3059, 3059A, 3059B, 3059C,
and 3059D on the May 10 Supplement to the 1999 Categorical Log. n5 (See id.)
Attorneys for defendant Andrx Pharmaceuticals, Inc.:
Louis M. Solomon, Margaret A. Dale and Colin A. Underwood of Solomon, Zauderer, Ellenhorn, Frischer &
Sharp, New York, NY, and James V. Costigau and Martin
P. Endres of Hodman & Costigan, P.C., New York, NY.
JUDGES: BARBARA S. JONES, UNITED STATES
DISTRICT JUDGE.
OPINIONBY: BARBARA S. JONES
OPINION: [*95]
BARBARA S. JONES
UNITED STATES DISTRICT JUDGE
I. INTRODUCTION
Andrx challenged Astra's assertions of attorney-client
privilege and/or work product protection for seventy-five
documents for Phase IV of this trial. (See Letter from
Astra to court of 5/29/02; Letter from [**2] Andrx to
court of 5/24/02.) Andrx challenged the following documents, which were listed on several different privilege
logs: documents 59, 334, 367, 442, 442-1, 521, 526, 527,
530, 531, 531-1, 533, 533-1, 533-2, 535, 535-1, 543, 578,
50147014v1
n1 Document 585 has already been produced to
Andrx. That production by Astra eliminates the
need for in camera review.
[**3]
n2 Documents 217, 223, and 827 were also listed
on the April 8, 2002, Kim and Chang Privilege
Log.
n3 Document 2588 has already been produced to
Andrx. That production by Astra eliminates the
need for in camera review.
n4 Document 2292 has already been produced to
Andrx with a single handwritten note appropriately redacted. That production by Astra eliminates the need for further in camera consideration
of the document.
n5 Since none of the numbers assigned to the
seventy-five challenged documents repeat, the
court will refer to the documents by number,
without reference to the privilege log on which the
document was listed.
Because of the complexity of this case, this court
decided that an in camera inspection of the documents
would be necessary to decide properly the issues raised by
Andrx's challenges. Astra submitted the challenged
documents to the court for review in a series of five in
camera submissions. The court reviewed each of the
documents individually. After conducting a complete in
camera review of all of the challenged documents, [**4]
the court ordered the immediate production of twenty-two
of the challenged documents either in their entirety or
with appropriate redactions. (See Order of 5/27/02.) The
court also provided Andrx with a redacted copy of an
additional document during a conference on May 30,
2002. The court addresses the issues raised by each of
Andrx's challenges in detail below.
Astra's first in camera submission contained documents 116-1, 197-1, 200-2, 211-2, 217, 223, 223-2, 235-1,
237-1, 245-1, 263-1-1, 430-1, 484-1, 827, and 836-1. All
of those documents were maintained in the files of the
Korean law firm Kim and Chang and related to Korean
proceedings, including those between Astra and CKD.
(Ryberg Decl. of 4/29/02, P 2.) There are two general
categories of documents at issue in the first in camera
submission: (1) communications between employees of
Astra in Sweden, including Astra's in-house counsel, and
Astra's outside counsel in Korea regarding matters pending in the Korean courts and before the Korean Intellectual Property Office ("KIPO") and (2) internal communications among Astra employees in Sweden that were
transmitted to Astra's outside counsel in Korea.
Astra's second [**5] in camera submission contained documents 235, 246, 334, 367, 442, 442-1, 521,
526, 527, 543, 578, 578-1, 580, 580-1, 585, 587, 588, 616,
616-1, 623, 1524, 1525, 1544, 1546, 1550, 2133, 2134,
2142, 2421, [*96] 2534, 2585, 2587, 2588, and 2605.
With the exception of document 585, which was maintained in the files of Kim and Chang, the documents were
maintained either by Astra's legal department, Astra's
patent department, or the offices of Astra's in-house scientific advisors. Documents 235, 246, 585, 1524, 1525,
1544, 1546, 1550, 2133, 2134, 2142, 2421, 2534, 2585,
2587, 2588, and 2605 are either (1) communications between Astra employees in Sweden and in-house lawyers
or Kim and Chang lawyers or (2) communications between Astra employees, including lawyers, Kim and
Chang lawyers, and Professor C. T. Rhodes. All of those
documents relate to Korean litigation between Astra and
CKD. Documents 442, 442-1, 616, and 616-1 are either
(1) communications between Astra employees in Sweden
and in-house lawyers or (2) communications between
Astra employees, including lawyers, and Astra's German
counsel Wolfgang Dost. These documents relate to
Astra's patents and pending applications. Documents 334,
50147014v1
521, 526, [**6] 527, 543, 578, 578-1, 580, 580-1, 587,
588, and 623 are communications between or among
Astra employees and in-house counsel or (2) communications between Astra employees, including lawyers, and
Astra's U.S. counsel. These documents relate to one of
Astra's U.S. patent applications or its PCT and Swedish
priority applications. Document 367 relates to a foreign
patent application never submitted for review.
Astra's third in camera submission contained documents 503, 531, 531-1, 533, 533-1, 533-2, 535, and 535-1.
All of those documents were maintained originally in the
files of Birgitta Larsson, an Astra employee responsible
for prosecuting, or coordinating with Astra's outside
counsel in prosecuting, patent applications around the
world. (Larsson Decl. of 5/15/02, PP 1-2.) Each of the
documents is a communication between Larsson and
either American or Korean outside counsel for Astra.
Astra's fourth in camera submission contained documents 59, 712-1, 712-2, 731-1, 775-2, 984A, 990, 2289,
2292, 2412, 2413, 2414, 3059, 3059A, 3059B, 3059C,
and 3059D. Those documents were maintained by Astra's
legal department, Astra's patent department, the offices of
Astra's in-house scientific [**7] advisors or in the files of
the Korean law firm Kim and Chang. (Ryberg Decl. of
5/23/02, P 2.)
Astra's fifth in camera submission consisted solely of
document 1627, (see Letter from Astra to court of
5/29/02), which was requested after this court issued its
initial order on May 27, 2002, requiring Astra to produce
some of the challenged documents.
II. RELEVANCE
As a threshold issue, the court considered the relevance of each of the challenged documents. The determination of whether material is relevant in a patent case is
governed by Federal Circuit law when the material relates
to an issue of substantive patent law. See Advanced
Cardio Vascular Sys., Inc. v. Medtronic, Inc., 265 F.3d
1294, 1307 (Fed. Cir. 2001); Midwest Indus., Inc. v.
Karavan, 175 F.3d 1356, 1359 (Fed. Cir. 1999) (citing
Truswal Sys. Corp. v. Hydro-Air Eng'g, Inc., 813 F.2d
1207, 1212 (Fed. Cir. 1987)). Applying Federal Circuit
law, the court finds that it need not address Andrx's
challenges to documents 59, 367, 2412, 2413, 2414, 3059,
3059A, 3059B, [**8] 3059C, and 3059D because the
documents are irrelevant to the issues raised by the claims
and defenses asserted in Phase IV of this trial.
III. CHOICE OF LAW
A. REGIONAL OR FEDERAL CIRCUIT
In deciding issues in a patent case, a district court
applies the law of the circuit in which it sits with respect to
nonpatent issues and the law of the Federal Circuit to
issues of substantive patent law. Institut Pasteur v. Cambridge Biotech Corp., 186 F.3d 1356, 1358 (Fed. Cir.
1999). An issue "that is not itself a substantive patent law
issue is nonetheless governed by Federal Circuit law if the
issue pertains to patent law, if it bears an essential relationship to matters committed to [the exclusive control of
the Federal Circuit] by statute, or if it clearly implicates
the jurisprudential responsibilities of [the Federal Circuit]
in a field within its exclusive jurisdiction." Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359
(Fed. Cir. 1999) (en banc in relevant [*97] part) (internal
citations and quotation marks omitted); see [**9] GFI,
Inc. v. Franklin Corp., 265 F.3d 1268, 1272 (Fed. Cir.
2001). Under these rules, questions of privilege, confidentiality, and waiver are generally governed by regional
circuit law. GFI, 265 F.3d at 1272 (waiver by disclosure
of privileged material); In re Pioneer Hi-Bred Int'l Inc.,
238 F.3d 1370, 1374 (Fed. Cir. 2001) (privilege); In re
Jenoptik AG, 109 F.3d 721, 723 (Fed. Cir. 1997) (confidentiality); In re Regents of Univ. of Cal., 101 F.3d 1386,
1390 n.2 (Fed. Cir. 1996) (privilege); Dorf & Stanton
Comm., Inc. v. Molson Breweries, 100 F.3d 919, 922-23
(Fed. Cir. 1996) (discovery orders and waiver); see also
In re VISX, Inc., 18 Fed. Appx. 821, 823 (Fed. Cir. 2001)
(unpublished) (waiver by partial disclosure); Amgen, Inc.
v. Hoechst Marion Roussel, Inc., 232 F.3d 905, at **2
(Fed. Cir. 2000) (Table, Text in WESTLAW) (waiver by
inadvertent production).
Despite those general guidelines, the Federal Circuit
has held that its "own law [**10] applies to the issue
whether the attorney-client privilege applies to an invention record prepared and submitted to house counsel relating to a litigated patent." In re Spalding Sports
Worldwide, Inc., 203 F.3d 800, 803 (Fed. Cir. 2000). In
Spalding, the Federal Circuit noted that the applicability
of the attorney-client privilege to Spalding's invention
record implicated the substantive patent law issue of inequitable conduct. 203 F.3d at 803-04. Unlike the document at issue in Spalding, most of the documents at issue
in this case are litigation documents and correspondence,
including draft briefs and legal arguments, transmitted
between in-house counsel and their agents and outside
foreign counsel for purposes of obtaining legal advice
about the conduct of litigation overseas. Since the question of whether such documents are covered by the attorney-client privilege or work product protection does
not implicate issues unique to patent law, the court applies
the law of the Second Circuit when determining the applicability of the attorney-client privilege or work product
protection to the bulk of the challenged documents. n6
See [**11] Spalding, 203 F.3d at 804; In re Regents of
the Univ. of California, 101 F.3d 1386, 1390 n.2 (Fed. Cir.
1996).
50147014v1
n6 The court respectfully disagrees with the conclusion reached in Softview Computer Products
Corp. v. Haworth, Inc., 2000 U.S. Dist. LEXIS
11274, 2000 WL 351411, at *2 n.5 ("It now appears that the scope of the attorney-client privilege
in patent cases is governed by Federal Circuit
standards and not the standards ordinarily applied
by the regional circuit.") (citing Spalding, 203
F.3d at 803). The conclusion reached in Softview
and ascribed to Spalding is simply too broad in
light of other Federal Circuit precedent concerning
attorney-client privilege and related issues.
Ultimately, this court's decision to apply the
law of either the Federal Circuit or the Second
Circuit when ruling on Andrx's challenges does
not affect the substance of the court's decisions.
The court finds that the outcome with respect to
each document is the same regardless of which
law applies. The Federal Circuit recognizes the
same principles of comity that this court relies
upon in determining the choice-of-law issues in
this case. Moreover, the law of attorney-client
privilege and work product protection, as recognized by the Second Circuit and the Federal Circuit, is not substantively different. See Softview
Computer Products Corp. v. Haworth, Inc., 2000
U.S. Dist. LEXIS 11274, 97 Civ. 8815, 2000 WL
351411, at *2, n.5 ("There does not appear to be a
material difference between the [Second Circuit]
definition and the definition applied by the Federal
Circuit.") (citing Shearing v. Iolab Corp., 975 F.2d
1541, 1546 (Fed. Cir. 1992); American Standard,
Inc. v. Pfizer, Inc., 828 F.2d 734, 745 (Fed. Cir.
1987)). As the Federal Circuit stated with respect
to the attorney-client privilege in Spalding, "the
central inquiry is whether the communication is
one that was made by a client to an attorney for the
purpose of obtaining legal advice or services." 203
F.3d at 805 (citing Genentech, Inc. v. United
States Int'l Trade Comm'n, 122 F.3d 1409, 1415
(Fed. Cir. 1997)).
[**12]
B. FOREIGN LAW
Most, if not all, of the challenged documents are
foreign documents; therefore, determination of the applicability of attorney-client privilege or work product
protection to many of the challenged documents implicates issues of foreign law. Rule 501 of the Federal Rules
of Evidence provides that questions of privilege in a federal question case are "governed by the principles of
common law as they may be interpreted by the courts of
the United States in the light of reason and experience."
The "common law" applied under Rule 501 includes
"choice of law" questions. Golden Trade S.r.L. v. Lee
Apparel Co., 143 F.R.D. 514, 519 (S.D.N.Y. 1992). [*98]
The Federal Circuit generally defers to the law of the
regional circuit on questions of comity. International
Nutrition Co. v. Horphag Research Ltd., 257 F.3d 1324,
1328 (Fed. Cir. 2001) (affirming extension of comity to
French judgment under Second Circuit law). Even when
the Federal Circuit applies its [**13] own law, it observes
principles of international comity. Cochran Consulting,
Inc. v. Uwatec USA, Inc., 102 F.3d 1224, 1229 (Fed. Cir.
1996) (applying "long established principles of international comity" to application of foreign judgment). Accordingly, the outcome of the choice-of-law analysis
concerning these documents is the same regardless of
whether Second Circuit or Federal Circuit law is applied.
In Golden Trade, S.r.L. v. Lee Apparel Co., 143
F.R.D. 514, 518-19 (S.D.N.Y. 1992), the court adopted
the comity or "touching base" approach and applied a
traditional choice-of-law "contacts" analysis to determine
the law that applies to claims of privilege involving foreign documents:
In assessing the potential availability
of foreign privilege law governing communications with patent agents, most
courts have engaged in a form of traditional choice-of-law "contacts" analysis . .
. and have thus looked to whether the client
was domestic or foreign, and whether the
foreign patent agent was working on foreign patent matters or assisting in efforts to
obtain a United States patent. . . . The
working standard in these cases has been
summarized in [**14] general terms as
follows: "any communications touching
base with the United States will be governed by the federal discovery rules while
any communications related to matters
solely involving [a foreign country] will be
governed by the applicable foreign statute." . . . . Communications by a foreign
client with foreign patent agents "relating
to assistance in prosecuting patent applications in the United States" are governed
by American privilege law whereas
communications "relating to assistance in
prosecuting patent applications in their
own foreign country" or "rendering legal
advice . . . on the patent law of their own
country" are, as a matter of comity, governed by the privilege "law of the foreign
country in which the patent application is
50147014v1
filed," even if the client is a party to an
American lawsuit.
143 F.R.D. at 520 (internal citations omitted); see also
VLT Corp. v. Unitrode Corp., 194 F.R.D. 8, 15-17 (D.
Mass. 2000) (adopting and explaining "touching base"
analysis); accord Stryker Corp. v. Intermedics Orthopedics, Inc., 145 F.R.D. 298, 305 (E.D.N.Y. 1992); Detection Systems, Inc. v. Pittway Corp., 96 F.R.D. 152, 156
(W.D.N.Y. 1982); [**15] Bayer AG & Miles, Inc. v. Barr
Lab., Inc., 1994 U.S. Dist. LEXIS 17988, 1994 WL
705331 (S.D.N.Y. Dec. 16, 1994).
Where, as here, alleged privileged communications
took place in a foreign country or involved foreign attorneys or proceedings, this court defers to the law of the
country that has the "predominant" or "the most direct and
compelling interest" in whether those communications
should remain confidential, unless that foreign law is
contrary to the public policy of this forum. Golden Trade,
143 F.R.D. at 522; Bayer, 1994 U.S. Dist. LEXIS 17988,
1994 WL 705331, at *4; see also In re Ampicillin Antitrust Lit., 81 F.R.D. 377, 391 (D.D.C. 1978); McCook
Metals L.L.C. v. Alcoa Inc., 192 F.R.D. 242, 256 (N.D.
Ill. 2000). The jurisdiction with the "predominant interest" is either "the place where the allegedly privileged
relationship was entered into" or "the place in which that
relationship was centered at the time the communication
was sent." Golden Trade, 143 F.R.D. at 521-22; [**16]
see Bayer, 1994 U.S. Dist. LEXIS 17988, 1994 WL
705331, at *4. Under these standards, it is clear that the
challenged documents implicate the law of several different countries.
The court's review of documents 442, 442-1, 616, and
616-1 implicates the law of Germany. Documents 442-1
and 616-1 are copies of a letter to Astra's in-house counsel
from Astra's outside German counsel providing legal
opinions and conveying legal advice. Documents 442 and
616 are copies of a confidential communication in Swedish between Astra's in-house counsel and other Astra
employees in Sweden forwarding copies of the opinions
and advice rendered by Astra's German counsel for the
purpose of obtaining and rendering additional legal advice. The court finds that Germany has the most compelling interest in whether these documents are protected
[*99] from disclosure; therefore, this court applies German law during its review of the following documents:
442, 442-1, 616, and 616-1.
Many of the challenged documents relate to four
proceedings in Korea between Astra U.S.A. and CKD, a
Korean entity. Three of those proceedings focused on
Korean Patent No. 55426--a patent owned by [**17]
Astra U.S.A. (Han Decl. of 5/6/02, P 5, Ex. 2.) The first
two proceedings, a preliminary injunction action and a
damages/infringement action, were conducted in the Korean courts. (Han Decl. of 5/6/02, P 5.) The third proceeding, a confirmation of scope trial, was conducted in
the KIPO to determine whether a hypothetical process fell
within the coverage of Astra U.S.A.'s Korean Patent No.
55426. (Id.) The fourth proceeding, an opposition proceeding in the KIPO, was brought by Astra U.S.A. against
CKD's Patent Application No. 95-15059. With respect to
these proceedings, Astra's employees and in-house legal
counsel communicated with outside Korean counsel, the
law firm of Kim and Chang, on behalf of Astra U.S.A.
(Id.) "When a Korean attorney is representing a foreign
client in a Korean proceeding, the Korean attorney will
generally anticipate that the Korean law of privilege will
apply to the attorney's communications with the client and
the work product created for that proceeding." (Shin Decl.
of 5/4/02, P 9.) Under applicable principles of comity, this
court will apply the law of Korea [**18] to Andrx's
challenges to the following documents, all of which relate
to the four Korean proceedings: 116-1, 197-1, 200-2,
211-2, 217, 223, 223-1, 235, 235-1, 237-1, 245-1,
263-1-1, 430-1, 484-1, 712-1, 712-2, 731-1, 775-2, 827,
836-1, 984A, 990, 1524, 1544, 1546, 1550, 1627, 2133,
2134, 2289, 2421, 2534, 2585, 2587, and 2605. n7
n7 As discussed in detail below, even if this court
were to find that any of the subject communications have more than an "incidental connection" to
the United States or that the United States has the
"most direct and compelling interest" in them
because Astra U.S.A. was a party to all four Korean proceedings, the outcome of the court's in
camera review of the documents would remain
unchanged.
The court finds that the following documents "touch
base" with the United States: 334, 521, 526, 527, 530,
531, 531-1, 533, 533-1, 533-2, 535, 535-1, 543, 578,
578-1, 580, 580-1, 587, 588, and 623. All but one of these
documents are either communications between Astra
employees, including [**19] in-house counsel, and
Astra's outside American counsel or between Astra's
in-house counsel and other Astra employees relating to
the prosecution of patent applications or the conduct of
litigation in the United States. The remaining document,
document 535, is a communication between Astra's
in-house counsel and Astra's Korean counsel, but the
communication relates to the prosecution of a patent application in the United States and was maintained by Astra
in its files relating to the prosecution of that patent.
Therefore, United States law applies to the court's review
50147014v1
of those documents. See Odone v. Croda Inter, PLC, 950
F. Supp. 10, 13 (D.D.C. 1997) (finding that communications involving not only United States patents but also the
foreign priority applications of U.S. patents "touch base"
with the United States.)
IV. REVIEWING THE DOCUMENTS n8
n8 Astra has asserted that both the attorney-client
privilege and work product doctrine protect many
of the challenged documents from disclosure. If
the court has found that the attorney-client privilege applies to a particular document for which
attorney work product protection was also asserted, the court has not addressed the work
product doctrine with respect to that document.
[**20]
A. APPLYING GERMAN LAW
In support of its claims of attorney-client privilege
and work product protection under German law, Astra has
supplied the court with the declaration of Dr. Mathias
Ricker, a Patent Attorney and partner with a German law
firm. Declarant Ricker reports that German law promises
confidentiality to communications between a patent attorney or agent and his clients. (Ricker Decl. of 5/16/02, P
3.) German courts may not compel such a patent attorney
or agent to disclose or produce those communications,
whether written or oral. (Id.) This unrebutted showing
suffices to establish that the documents in [*100] question would be protected under German law. See Golden
Trade, 143 F.R.D. at 524; see also Bayer, 1994 U.S. Dist.
LEXIS 17988, 1994 WL 705331, at *7 n.6 (discussing
and quoting Golden Trade); Softview, 2000 U.S. Dist.
LEXIS 11274, 2000 WL 351411, at *11 ("German law
protects communications between a patent agent and his
or her clients.") (citing Golden Trade); McCook, 192
F.R.D. at 257 (" [**21] Under German law, attorney-client privilege protects 'all communications between
a German patent attorney and his client which occur in the
rendition of legal services for the client.'") (quoting
Santrade, Ltd. v. General Electric Co., 150 F.R.D. 539,
547 (E.D.N.C. 1993)).
Documents 442, 442-1, 616, and 616-1 would also be
protected from disclosure by the attorney-client privilege
under the law of this Circuit. Accordingly, the court finds
that the protection of these four documents under German
law "would not seriously impinge on any significant
policy of this forum." Golden Trade, 143 F.R.D. at 522.
Therefore, the court sustains Astra's claims of attorney-client privilege for documents 442, 442-1, 616, and
616-1 under German law.
B. APPLYING KOREAN LAW
In support of its claims of attorney-client privilege
and work product protection under Korean law, Astra has
supplied the court with numerous declarations by Korean
counsel. Korea is a civil law country. (Shin Decl. of
5/4/02, P 10.) Judges in civil law countries do not make
new law in the sense that common law courts do; instead,
they interpret [**22] the statutory codes of their countries. See Alpex Computer Corp. v. Nintendo Co., Ltd.,
1992 U.S. Dist. LEXIS 3129, 1992 WL 51534, at *3
(S.D.N.Y. Mar. 10, 1992) (affirming Magistrate Judge's
refusal to imply a privilege under Japanese civil code
nearly identical to that at issue in this case). n9 Thus,
principles of comity limit this court's inquiry under Korean law to a determination of whether there is a Korean
statute establishing a privilege on the basis of which Astra
is entitled to withhold production of the documents at
issue. If no privilege is provided for by the statutes of the
foreign forum, no privilege can be implied. Alpex, 1992
U.S. Dist. LEXIS 3129, 1992 WL 51534, at *2; Bayer,
1994 U.S. Dist. LEXIS 17988, 1994 WL 705331, at *5;
see also Bristol-Myers Squibb Co. v. Rhone-Poulenc
Rorer, Inc., 1998 U.S. Dist. LEXIS 4213, 1998 WL
158958, at *3 (1998), mot. for recons. denied, 188 F.R.D.
189 (S.D.N.Y. 1999) (noting that evidence of customary
practices is "generally not considered adequate [**23]
authority" as to foreign law).
n9 The Japanese code provision at issue in Alpex
stated:
A witness may refuse to testify:
2. In cases where the witness is
questioned as to the knowledge of
facts which, he, being or having
been, a doctor, dentist, pharmacist,
mid-wife, attorney, patent agent,
advocate, notary or an occupant of
a post connected with religion or
worship, has obtained in the exercise of professional duties and
which facts should remain secret;
or
3. in cases where the witness is
questioned with respect to matters
relating to technical or professional
secrets.
50147014v1
Alpex, 1992 U.S. Dist. LEXIS 3129, 1992 WL
51534, at * 2 (quoting Article 281 of the Japanese
Code of Civil Procedure).
Korean statutes do provide for a number of protections related to the concept of attorney-client privilege as
it is known in this country. For example, Korea has statutory provisions [**24] that excuse attorneys from the
obligation of revealing their clients' secrets when they are
testifying in court. (Shin Decl. of 5/4/02, P 13.) n10 That
testimonial immunity, [*101] however, can only be
invoked by professionals, not their clients. (Shin Decl. of
5/4/02, P 14.) The Korean statutes address confidential
information received by the attorney, not communications
from the lawyer to the client. (Shin Decl. of 5/4/02, PP 6,
12, 14, 16; see Han Decl. of 5/2/02, PP 3-5.) Neither an
attorney's communication to a client nor information that
the client anticipates the attorney will convey to a court or
adverse party is covered within the text of these provisions. (See Shin Decl. of 5/4/02, PP 13-19.) Moreover,
Korean law does not recognize a work product doctrine as
it is understood in the United States; the court has been
advised of no statute, rule, court decision, or doctrine that
provides that a party or attorney may refuse to disclose
tangible materials on the ground that they were prepared
in anticipation of litigation. (Shin Decl. of 5/4/02, P 11.)
n10 Article 286 of the Korean Code of Civil Procedure provides:
Article 286 (Right to Refuse to Testify
(1) A witness may refuse to testify
in the following cases:
<Amended Jan. 13, 1990>
1. Where a lawyer, patent attorney,
notary public, . . . or a person who
was in such profession is questioned on secret matters which
came to his knowledge in the
course of performing his professional duties; and
2. Where he is questioned on matters relating to a technical or professional secret.
(2) The provisions of paragraph (1)
shall not apply where the witness
has been released from his duty to
keep secret. <Amended Jan. 13,
1990>
(Shin Decl. Of 5/4/02, P 13.) See also Article 26 of
the Attorney-at-law Act (Duty to Maintain Confidentiality) (quoted in Shin Decl. of 5/4/02, P 15),
which states that "any attorney-at-law or any
former attorney-at-law shall not disclose any
confidential matters that he learned in the course
of performing his duties: Provided, That this shall
not apply to the case where such disclosure of
confidential matters is especially prescribed otherwise by Acts. Such "Acts" might include Article
288 and 289 of the Civil Procedure Act, which
require the attorney to testify after court order or to
face penalties. (Shin Decl. of 5/4/02, P 16.)
cedure. (Han. Decl. of 5/2/02, PP 6-10; Han Decl. of
5/6/02, PP 10-11.) That is, none of challenged documents
were cited during Astra's [**27] Korean legal proceedings, Andrx has no independent legal right to the documents under Korean law, and none of the documents
evidences a legal relationship between [*102] Andrx and
Astra that would under Korean law entitle Andrx to demand their delivery or inspection. (Han Decl. of 5/2/02,
PP 7-9; Han Decl. of 5/6/02, P 10.) Thus, if this court were
to apply Korean law to the question of whether these
documents should be produced in this case, the court
would not require production of any of these documents.
(See Han Decl. of 5/2/02, P 10.)
[**25]
Courts in this District have recognized that the "fact
that a [foreign] statute requires a party to keep clients'
affairs secret does not mean that a privilege exists," and
that, even in the United States, there are confidentiality
requirements in the law that "do not create a privilege
equivalent to the attorney/client privilege." Bristol-Myers,
1998 U.S. Dist. LEXIS 4213, 1998 WL 158958, at * 3;
see Bayer, 1994 U.S. Dist. LEXIS 17988, 1994 WL
705331, at *5 (finding that communications with a professional cannot be deemed privileged under foreign law
"simply because" a provision of foreign law grants the
professional "the right not to testify about information she
obtains in the course of her duties"); Alpex, 1992 U.S.
Dist. LEXIS 3129, 1992 WL 51534, at *2; see also
Santrade, 150 F.R.D. at 547 (following Alpex). Despite
conclusory statements to the contrary, (see Han Decl. of
5/2/02, P 3; Han Decl. of 5/6/02, P 2), Astra has not shown
that Korean law entitles Astra, as Kim and Chang's client,
[**26] to invoke any attorney-client privilege or work
product protection with respect to the documents at issue.
Therefore, the documents are not shielded from production on that basis.
However, both of these findings--lack of a statutory
attorney-client privilege and work product protection in
Korea-rest on the assumption that parties may be ordered
or required to testify or produce documents concerning
confidential communication by a Korean court during a
lawsuit. The court finds that such an assumption is, in fact,
erroneous. Astra has demonstrated sufficiently for the
purposes of this court's present document review that
these documents would not be subject to production,
whether through a discovery process or by court order, in
a Korean civil lawsuit. Under Korean law, a court may
only issue an order to compel document production under
specific limited circumstances designated by statute. n11
These challenged documents would not be ordered produced under any of the three limited circumstances described by Article 316 of the Korean Code of Civil Pro-
50147014v1
n11 Article 316 of the Korean Code of Civil Procedure sets out the three specific circumstances
when documents must be produced:
Article 316 (Obligation to Produce Documents)
The holder of a document shall not
refuse to produce it in the following cases:
1) When the party himself possesses the document which he has
cited in the lawsuit;
2) When the applicant is entitled to
request the holder of the document
to deliver it or to make it available
for inspection; and
3) When the document has been
prepared for the benefit of the applicant, or prepared with regard to
a legal relation between the applicant and the holder thereof.
Han Decl. of 5/2/02, P 6. Notably, these same
statutory limitations existed under Japanese law as
considered by the court in Alpex. "Prior to January
1, 1998, documents held by parties in litigation
were not generally subject to mandatory production under Article 312 of the Japanese Code, except in three instances not applicable here." VLT
Corp. v. Unitrode Corp., 194 F.R.D. 8, 17 (D.
Mass. 2000) (upholding claims of privilege as to
communications with Japanese patent agents). On
January 1, 1998 the Japanese Code was amended
to allow for liberal discovery similar to the practices in the United States. Id. Even under those
new discovery rules, documents reflecting communications with patent attorneys and patent
agents in Japan are not subject to production. Id.
chanical or overbroad rules of thumb are of little value;
what is required is a careful balancing of the interests
involved and a precise understanding of the facts and
circumstances of the particular case.") (internal citations
omitted).
Andrx correctly points out, however, that this court
should not apply the Korean law of discovery, since law
regarding document disclosure is procedural. (See Letter
from Andrx to court of 5/19/02, at 3.) Courts use
choice-of-law rules to determine whether to apply another
forum's substantive law but always use their own procedural rules. American Dredging Co. v. Miller, 510 U.S.
443, 453-55, 127 L. Ed. 2d 285, 114 S. Ct. 981 (1994).
The liberal principles of Rule 26 of the Federal Rules of
Civil Procedure are clearly applicable even in cases where
the documents at issue were created in foreign countries.
Cf. Societe Nationale Industrielle Aerospatiale v. United
States District Court for the S.D. Iowa, 482 U.S. 522, 540,
96 L. Ed. 2d 461, 107 S. Ct. 2542 (1987); In re Jenoptik,
AG, 109 F.3d 721, 723 (Fed. Cir. 1997); Dietrich v.
Bauer, 2000 U.S. Dist. LEXIS 11729, 2000 WL 1171132,
at *2, *5 (S.D.N.Y. Aug. 16, 2000) (rejecting contention
that foreign discovery would have to be used) ("[A] district court [**29] has the power to impose discovery
under the Federal Rules of Civil Procedure when it has
personal jurisdiction over the foreign party.").
Further, ordering discovery without any protection
also offends the public policy of this forum, which promotes full discovery but, at the same time, prevents disclosure of privileged documents. If the court were to rule
without taking Korea's discovery practices into account,
the court would be required to order complete disclosure
of all of the Korean documents, many of which would be
protected under either the attorney-client privilege or
work product doctrine as applied in this jurisdiction.
Contrary to the policies of upholding [**31] or expanding
privilege to protect documents whenever they would be
protected in other countries, see Golden Trade, 143
F.R.D. at 520-23 (finding that claimant's "showing adequately establishes that the communications were covered
by the attorney-client privilege in American terms" so that
the court need not even resort to foreign law), application
of foreign privilege law in this case would require disclosure of many documents (1) that are protected from
disclosure under American law and (2) that would not be
discoverable under Korean law. Therefore, the court will
apply its own privilege law to the Korean documents,
even though the communications do not "touch base" with
the United States. [*103]
[**28]
Accordingly, this court agrees with Andrx that discovery of the Korean documents is governed by the Federal Rules of Civil Procedure. It does not agree, however,
that the absence of Korean attorney-client privilege and
work product provisions requires this court to order the
wholesale production of all of the Korean documents in
their entirety. To do so would violate principles of comity
and would offend the public policy of this forum. The fact
is that vastly different discovery practices, which permit
only minimal discovery, are applicable to civil suits
conducted in Korea. Indeed, none of the documents at
issue here would be discoverable in a Korean civil suit.
Under these circumstances, where virtually no disclosure
is contemplated, it is hardly surprising that Korea has not
developed a substantive law relating to attorney-client
privilege and work product that is co-extensive with our
own law. It also seems clear that to apply Korean privilege
law, or the lack thereof, in a vacuum--without taking
account of the very limited discovery provided [**30] in
Korean civil cases--would offend the very principles of
comity that choice-of-law rules were intended to protect.
See United States v. First National City Bank, 396 F.2d
897, 901 (2d Cir. 1968)("The courts must take care not to
impinge upon the prerogatives and responsibilities of the
political branches of the government in the extremely
sensitive and delicate area of foreign affairs. . . . Me-
50147014v1
C. APPLYING AMERICAN LAW
1. ATTORNEY-CLIENT PRIVILEGE
The attorney-client privilege is intended to encourage
clients to be forthcoming and candid with their attorneys
so that the attorney is sufficiently well-informed to provide sound legal advice. See Upjohn Co. v. United States,
449 U.S. 383, 389, 66 L. Ed. 2d 584, 101 S. Ct. 677
(1981). [**32] The Second Circuit has provided the following definition of the attorney-client privilege:
(1) Where legal advice of any kind is
sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4)
made in confidence (5) by the client, (6)
are at his instance permanently protected
(7) from disclosure by himself or by the
legal advisor, (8) except the protection be
waived.
In re Grand Jury Subpoena Duces Tecum Dated Oct. 22,
1991, 731 F.2d 1032, 1036 (2d Cir. 1984); United States
v. Kovel, 296 F.2d 918, 921 (2d Cir. 1961). The attor-
ney-client privilege "should be strictly confined within the
narrowest possible limits underlying its purpose." United
States v. Goldberger & Dubin, P.C., 935 F.2d 501, 504
(2d Cir. 1991) (citations omitted). The party claiming the
benefit of the attorney-client privilege has the burden of
establishing all essential elements. von Bulow v. von
Bulow, 811 F.2d 136, 144 [**33] (2d Cir.), cert. denied,
481 U.S. 1015, 95 L. Ed. 2d 498, 107 S. Ct. 1891 (1987);
see, e.g., In re Horowitz, 482 F.2d 72, 82 (2d Cir.), cert.
denied, 414 U.S. 867, 38 L. Ed. 2d 86, 94 S. Ct. 64 (1973).
The claimant's burden cannot be "discharged by mere
conclusory or ipse dixit assertions." von Bulow, 811 F.2d
at 146 (quoting In re Bonanno, 344 F.2d 830, 833 (2d Cir.
1965)).
"The privilege only protects disclosure of communications; it does not protect disclosure of the underlying
facts by those who communicated with the attorney."
Upjohn, 449 U.S. at 396; In re Six Grand Jury Witnesses,
979 F.2d 939, 944 (2d Cir. 1992), cert. denied, 509 U.S.
905 (1993). In order to be privileged, a communication
either must be from a client to an attorney or, in the case of
communications from an attorney to a client, must include
confidential information conveyed to the lawyer from the
client. "The central inquiry is whether the communication
is one that was [**34] made by a client to an attorney for
the purpose of obtaining legal advice or services." Spalding, 203 F.3d at 805 (citations omitted). The request for
confidential legal assistance need not be expressly stated
when the request is implied. See Spalding, 203 F.3d at
806 (citing In re Sealed Case, 237 U.S. App. D.C. 312,
737 F.2d 94, 102 (D.C. Cir. 1984)).
"Attachments which do not, by their content, fall
within the realm of the privilege cannot become privileged by merely attaching them to a communication with
an attorney." Sneider v. Kimberly-Clark Corp., 91 F.R.D.
1, 4 (N.D. Ill. 1980). However, the mere fact that a
document contains some public or nonconfidential information does not necessarily make the document discoverable. Knogo Corp. v. United States, 1980 U.S. Ct.
Cl. LEXIS 1262, 213 U.S.P.Q. 936, 941 (Ct. Cl. 1980)
("If an attorney-client communication could be discovered if it contained information known to others, then it
would be the rare communication that would be protected
[**35] and, in turn, it would be the rare client who would
freely communicate to an attorney.") Similarly, the inclusion of technical information or references to prior art
does not render the document discoverable. See Spalding,
203 F.3d at 806 (citing Knogo, 213 U.S.P.Q. at 941)
("Requests for legal advice on patentability necessarily
require the evaluation of technical information such as
prior art.")
2. WORK PRODUCT PROTECTION
50147014v1
The scope of the work product doctrine is set forth in
Federal Rule of Civil Procedure 26(b)(3), which states in
relevant part:
[A] party may obtain discovery of documents and tangible things otherwise discoverable . . . and prepared in anticipation
of litigation or for trial by or for another
party or by or for that other party's representative . . . only upon a showing that the
party seeking discovery has substantial
need of the materials in the preparation of
the party's case and that the party is unable
without undue hardship to obtain the substantial equivalent of the materials by
[*104] other means. In [**36] ordering
discovery of such materials when the required showing has been made, the court
shall protect against disclosure of the
mental impressions, conclusions, opinions,
or legal theories of an attorney or other
representative of the party concerning the
litigation.
Generally, "three conditions must be met in order to earn
work product protection. The material must (1) be a
document or tangible thing, (2) that was prepared in anticipation of litigation, and (3) was prepared by or for a
party, or by or for his representative." In re Grand Jury
Subpoenas Dated Dec. 18, 1981 & Jan. 4, 1982, 561 F.
Supp. 1247, 1257 (E.D.N.Y. 1982); see Weinhold v.
Witte Heavy Lift, Inc., 1994 U.S. Dist. LEXIS 4559, 1994
WL 132392, at *2 (S.D.N.Y. Apr. 11, 1994). In United
States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998), the
Second Circuit observed that "documents should be
deemed prepared 'in anticipation of litigation,' and thus
within the [**37] scope of the Rule, if 'in light of the
nature of the document and the factual situation in the
particular case, the document can fairly be said to have
been prepared or obtained because of the prospect of
litigation.'" Although a document does not lose protection
"merely because it is created in order to assist with a
business decision," the work-product doctrine does not
extend to "documents that are prepared in the ordinary
course of business or that would have been created in
essentially similar form irrespective of the litigation." Id.
Generally, work product immunity continues to protect documents even when the litigation is completed.
United States v. Pfizer Inc., 560 F.2d 326, 334 (8th Cir.
1977) ("What is needed, if we are to remain faithful to the
articulated policies of Hickman, is a perpetual protection
for work product, one that extends beyond the terminated
litigation for which the documents were prepared."); In re
Murphy, 560 F.2d 326, 334-35 (8th Cir. 1972); Duplan
Corp. v. Moulinage et Retorderie De Chavanoz, 487 F.2d
480, 483-84 (4th Cir. 1973). [**38] However, "to the
extent that the need for protection of work product does
decrease after the end of a suit, that fact might in some
cases lower the threshold for overcoming the
work-product barrier." FTC v. Grolier, Inc., 462 U.S. 19,
31, 76 L. Ed. 2d 387, 103 S. Ct. 2209 (1983) (Brennan, J.,
concurring) (emphasis added); see also United States v.
IBM, 66 F.R.D. 154, 178 (S.D.N.Y. 1974).
Even where the applicability of the work product
doctrine has been established, factual material may be
ordered produced "upon a showing of substantial need
and inability to obtain the equivalent without undue
hardship." Upjohn, 449 U.S. at 400. Such discoverable
factual material must be distinguished, however, from the
mental impressions, conclusions, or legal theories of a
party's attorney or other representative. As to those
documents, "a far greater showing is required to pierce the
doctrine's protection, and there is some authority that the
protection afforded such opinion work product may be
absolute." Softview, 2000 U.S. Dist. LEXIS 11274, 2000
WL 351411, [**39] at *4 (citations omitted).
The third category of documents consists of documents numbered 116-1, 197-1, 200-2, 211-2, 223, 223-1,
and 836-1. These documents contain scientific information, including reports, analyses, and other scientific
data communicated between internal Astra scientists and
Astra in-house lawyers and forwarded to Kim and Chang
lawyers or between internal Astra scientists and Kim and
Chang lawyers. These documents were prepared in response to requests by Kim and Chang lawyers, or Astra
lawyers on behalf of Kim and Chang lawyers, to conduct
scientific investigations of CKD's products and to provide
scientific information for the purpose of soliciting legal
advice regarding Astra's Korean legal proceedings with
CKD.
Additionally, documents 2421 and 2587 are communications between an Astra employee and Astra's consulting
expert n12 discussing scientific testing methods [**41]
for the purpose of providing confidential information to
Astra's counsel and soliciting legal advice regarding
Astra's Korean legal proceedings with CKD. Astra's
claims of attorney-client privilege in these documents are
sustained.
3. DOCUMENTS PROTECTED BY ATTORNEY
CLIENT PRIVILEGE
n12 Some of the challenged documents referred to
in this and other sections of this Opinion include
communications sent to or from C.T. Rhodes. Dr.
Rhodes was, and still is, a technical consultant for
Astra in its worldwide litigations relating to
omeprazole. Andrx has argued that all communications involving Dr. Rhodes must be disclosed
because Dr. Rhodes testified as an expert during
Astra's Korean proceedings. However, only some
of Dr. Rhodes' work related to actual testimony.
(See, e.g., Ryberg Decl. of 5/17/02, PP 7, 8, 10,
12.) Dr. Rhodes submitted an affidavit in connection with an Astra/CKD litigation on June 3, 1994,
and subsequently testified on June 10, 1994.
(Ryberg Decl. of 5/17/02, P 2.) Dr. Rhodes did not
testify in the Korean matters after that date. Accordingly, some communications with Dr. Rhodes
relate to his work as a non-testifying expert. Andrx
is only entitled to documents that formed the basis
for his testimony. Some of the documents Andrx
seeks, however, were created after Dr. Rhodes
testified in the Korean proceedings. Id. Those
documents could not form the basis for his opinions. Thus, documents dated after Dr. Rhodes
testified in Korea on June 10, 1994, are not discoverable because Dr. Rhodes was a consulting
expert at that time.
The court makes the following findings concerning
documents that are protected in their entirety from disclosure by the attorney-client privilege:
The first category of documents consists of document
245-1. This document is a confidential communication
between Astra employees, including in-house lawyers,
and Kim & Chang lawyers. The document relates to advice solicited by or given to Astra regarding Astra's Korean legal proceedings with CKD. It contains advice and
requests for advice regarding Korean court procedure,
KIPO procedure, discussions of strategy regarding Korean legal proceedings with CKD, and other confidential
information. Astra's claim of attorney-client privilege in
this document is sustained.
The second category of documents consists of documents 263-1-1, 430-1, 484-1, 1550, 2534, and 2585.
These documents are work product documents that reflect
a lawyer's involvement, such as draft pleadings, draft
briefs, and other drafts or documents prepared by lawyers.
Many of these documents [*105] also contain handwritten annotations and comments that reflect legal advice
or requests for legal [**40] advice. Some of the documents were prepared by Kim and Chang or Astra's
in-house lawyers, while others were prepared by technical
advisors to the legal team, for the purpose of providing
legal advice during Astra's Korean legal proceedings with
CKD. Astra's claims of attorney-client privilege in these
documents are sustained.
50147014v1
[**42]
The fourth category of documents consists of documents 521, 526, 527, 543, 580, 587, and 588. These
documents are confidential communications between
Astra employees and Astra's in-house lawyers or between
Astra employees, including in-house lawyers, and Astra's
outside counsel in the United States. The documents related to advice solicited by or given to Astra regarding
Astra's legal proceedings in the United States, the prosecution of various patent applications in the PTO, discussions of strategy, and other confidential information.
Astra's claims of attorney-client privilege in these documents are sustained.
4. DOCUMENTS PROTECTED BY THE WORK
PRODUCT DOCTRINE
The court makes the following findings concerning
documents that are protected in their entirety from disclosure by the work product doctrine:
Documents 217, 235, 235-1, 237-1, 712-1, 712-2,
731-1, 775-2, 984A, 990, 1544, 2134, relate to the litigation conducted in Korea between Astra and CKD. Each of
the documents was prepared or obtained because of either
ongoing litigation or the prospect of additional litigation.
Astra's claims of work product protection for these documents are sustained.
5. DOCUMENTS PRODUCED IN [**43] THEIR
ENTIRETY
Astra has indicated that documents 246 and 2142 are
copies of a letter from Kim and Chang to Astra's in-house
counsel Ivan Hjertman concerning Dr. Rhodes' testimony
in Astra's preliminary injunction action against CKD.
(Ryberg Decl. of 5/17/02, P 9.) Document 1525 is apparently a portion of that same letter. (Id.) The declaration
provided with Astra's in camera submission states that
"this document was produced to [*106] Andrx." (Id.)
Although Astra asserts that the production of one of the
three documents eliminates the need for in camera review,
it is unclear to the court which of the three documents was
produced and whether all three of the documents come
from the same file. Even though the documents were
challenged by Andrx, Astra did not provide these documents to the court in an in camera submission, so the court
is unable to determine these issues. Nevertheless, it is
clear to the court that all three documents cannot be
identical--document 1525 is only a portion of the other
two. Under these circumstances, Astra has failed to meet
its burden, and the court sustains Andrx's challenges to all
three documents. Astra must produce documents [**44]
246, 1525, and 2142, regardless of whether one or all of
them have been produced previously. (See Order of
5/27/02, at 1.)
Astra is asserting attorney-client privilege, but not
work product protection, for documents 531, 531-1,
50147014v1
533-1, 533-2, 535, 827, and 2289. The court finds that
these documents do not contain confidential information
or legal advice rendered by an attorney. Many of the
documents are simply requests for or transmittals of publicly available information. The court overrules Astra's
claims of attorney-client privilege for these documents.
Since Astra has not claimed work product protection for
these documents, they must be produced in their entirety.
(See Order of 5/27/02, at 1-2.)
Astra is also asserting attorney-client privilege, but
not work product protection for document 334. Document
334 is a communication in Swedish between Astra employees in Sweden who serve as in-house counsel. Because Astra failed to provide a translation of the document, n13 the court is unable to determine whether the
document contains any confidential communications.
Astra has not met its burden to sustain the privilege for
document 334. See Burroughs Wellcome Co. v. Barr
Laboratories, Inc., 143 F.R.D. 611, 622 (E.D.N.C. 1992);
[**45] cf. Saxholm AS v. Dynal, Inc., 164 F.R.D. 331
(E.D.N.Y. 1996). The document must be produced in its
entirety. (See Order of 5/27/02, at 2.) Like document 334,
Astra has failed to provide a translation for document
2605. Astra has indicated that a different version of the
document, without a note handwritten in Swedish that is
present on document 2605, was already produced to Andrx. Since the only difference between the document
already produced and this document is the handwritten
note that the court is unable to translate, Astra has failed to
meet its burden to support nondisclosure under either the
attorney-client privilege or work product protection.
Document 2605 must be produced in its entirety. (See
Order of 5/27/02, at 1.)
n13 In her Declaration dated May 17, 2002, Ms.
Ryberg indicates that she has included a translation she prepared of document 334. (Ryberg Decl.
Of 5/17/02, P 27.) However, the translation is not
actually included in the submissions.
For documents [**46] 578-1, 580-1, 1524, 1546, and
2133, the court sustains Andrx's challenges to Astra's
claims of both attorney-client privilege and work product
protection. These documents must be produced in their
entirety. (See Order of 5/27/02, at 1-2.)
6. DOCUMENTS PRODUCED IN REDACTED
FORM
Astra's fifth in camera submission consisted solely of
document 1627, (see Letter from Astra to court of
5/29/02), which was requested after this court issued its
initial order on May 27, 2002, requiring Astra to produce
some of the challenged documents. The document, a
facsimile letter sent from Kim and Chang to Ivan Hjertman discussing CKD's 1992 Korean patent application
and its 1995 publication, contains information extremely
relevant to the issue of inventorship and the knowledge
held by the inventors of the '281 patent about those Korean documents. Andrx had been unable to obtain that
same information through deposition questioning. The
court understands that it is not always appropriate to redact documents for the sake of producing non-privileged
portions. See Spalding, 203 F.3d at 806. Nevertheless, "[
[**47] a] party should not be allowed to conceal critical,
non-privileged, discoverable information, which is
uniquely in the knowledge of the party and which is not
obtainable from any other source, simply by imparting the
[*107] information from its attorney and then attempting
to hide behind the work product doctrine after the party
fails to remember the information." Xerox Corp. v. IBM,
64 F.R.D. 367, 381-82 (S.D.N.Y. 1974). At the very least,
the documents should be produced in a redacted form. Id.;
see In re Missouri Dep't of Natural Resources, 105 F.3d
434, 436 (8th Cir. 1997). Indeed, "if such a distillation
becomes impossible" then "the entire comments of the
documents must be produced." Xerox, 64 F.R.D. at 381.
Given the highly relevant nature of the underlying facts
contained within this communication and Andrx's inability to obtain the information through depositions, the
court produced a redacted copy to Andrx at a conference
on May 30, 2002. n14 By redacting the document, the
court was able to remove all material contained within the
letter that could be viewed as either privileged or protected by work product doctrine. [**48]
n14 On page one of document 1627, the court
redacted the last sentence of the first paragraph
and the second and third paragraphs in their entirety. On the second page of document 1627, the
court redacted the second full paragraph, which
appeared between the claim language and the
closing, "With best regards."
privilege and work product protection for documents 578
and 623, but Astra asserts only attorney-client privilege
for documents 530, 533, and 535-1. The ordered redactions were as follows:
Document 530, redact the last paragraph ("Please . . .
date");
Document 533, redact the last paragraph ("Please . . .
date") in both the document and the confirmation sheet;
Document 535-1, produce only pages 01497-01504
(the translation), but not page 01496;
Document 578, redact the last paragraph (the final
two sentences preceding "Best regards"); [**49]
Document 623, redact the last paragraph (the final
two sentences preceding "Best regards").
Once the stated redactions are made, the court finds
that the attorney-client privilege is inapplicable to the
remainder of the five documents. Moreover, the remaining portions of documents 578-1 and 623 are not shielded
from production under the work product doctrine. All five
documents must be produced in their redacted form.
V. CONCLUSION
For the foregoing reasons, Astra was directed to
produce the following documents in their entirety: 246,
334, 531, 531-1, 533-1, 533-2, 535, 578-1, 580, 827,
1524, 1525, 1546, 2133, 2142, 2289, and 2605. Astra was
further directed to produce the following documents in
redacted form: 530, 533, 535-1, 578, 623, and 1627.
The court has received the documents as submissions
made by Astra in camera and has reviewed the documents
in camera. Astra is directed to file one copy of each of the
five in camera submissions with the Clerk's Office under
seal.
SO ORDERED:
BARBARA S. JONES
UNITED STATES DISTRICT JUDGE
Dated: New York, New York
In its Order of May 27, 2002, the court ordered the
production of five documents in redacted form. (See Order of 5/27/02, at 2.) Astra asserts both attorney-client
50147014v1
June 1, 2002
RENFIELD CORPORATION and Renfield Importers, Ltd., Plaintiffs, v. E. REMY
MARTIN & CO., S.A., Remy Martin Amerique, Inc., Glenmore Distilleries Company, and Foreign Vintages, Inc., Defendants
Civ. A. No. 80-197
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
98 F.R.D. 442; 1982 U.S. Dist. LEXIS 10254; 37 Fed. R. Serv. 2d (Callaghan) 173;
1984-1 Trade Cas. (CCH) P65,970; 13 Fed. R. Evid. Serv. (Callaghan) 1373
December 13, 1982
LexisNexis(R) Headnotes
COUNSEL: [**1]
William J. Wier, Jr., Bader, Dorsey & Kreshtool,
Wilmington, Delaware, Jerome A. Hochberg, David B.
Hopkins, Paul H. Friedman, Laura Metcoff Klaus and
Ann K. Sullivan of Arter, Hadden & Hemmendinger,
Washington, District of Columbia, for plaintiffs.
R. Franklin Balotti, Richards, Layton & Finger,
Wilmington, Delaware, Sullivan & Cromwell, Spengler,
Carlson, Gubar, Brodsky & Rosenthal, New York City,
for defendants E. Remy Martin & Co., S.A., and Remy
Martin Amerique, Inc.
Bruce M. Stargatt, David C. McBride, Young,
Conaway, Stargatt & Taylor, Wilmington, Delaware,
Elliot S. Kaplan, James L. Harlow, Rita A. McConnell,
Robins, Zelle, Larson & Kaplan, Minneapolis, Minnesota,
for defendants Glenmore Distilleries Co. and Foreign
Vintages, Inc.
ground of attorney-client privilege. In the alternative,
Renfield seeks an in camera inspection of these documents by the Court to determine on a document-by-document basis whether they are protected by
the attorney-client privilege.
I. AVAILABILITY OF THE ATTORNEY-CLIENT
PRIVILEGE.
The communications at issue are 119 documents that
reflect communications between officials of both Remy
defendants and employees of Remy S.A. identified as its
French "in-house counsel." n1 Renfield challenges Remy's assertion of the attorney-client privilege on the basis
that the privilege does not apply to communications with
French "in-house counsel." I shall consider separately the
documents located in the offices of Remy S.A. in France
and those located in the New York offices of Remy
Amerique.
n1 There are four individuals so identified:
Guillaume d'Avont, Thibaud de Chasteigner,
Pierre de Viel-Castel, and Alain Raab.
JUDGES:
Stapleton, District Judge.
OPINIONBY:
STAPLETON
OPINION:
[*443] MEMORANDUM OPINION
A. DOCUMENTS LOCATED IN THE OFFICES
OF REMY S.A. IN FRANCE.
The parties [**3] are not in disagreement that the
Hague Evidence Convention governs discovery of any of
the documents located in France; they are in disagreement, however, as to the meaning of the relevant provisions of that Convention.
STAPLETON, District Judge:
This is an antitrust action brought by plaintiffs Renfield Corporation and Renfield Importers ("Renfield")
against E. Remy Martin & Co., S.A. ("Remy S.A."),
Remy Martin Amerique, Inc. ("Remy Amerique"), and
other defendants. Renfield has moved under Fed.R.Civ.P.
37(a)(2) for an order compelling production of certain
documents withheld [**2] by the Remy defendants on the
50147014v1
Two provisions are pertinent. Article 21(e) provides
that:
A person requested to give evidence may
invoke the privileges and duties to refuse
to give the evidence contained in Article
11.
d only those decreed by both legislations cumulatively?
Article 11, in turn, provides that:
[**5]
The person concerned may refuse to give
evidence insofar as he has a privilege or
duty to refuse to give the evidence -- (a)
under the law of the State of execution; or
(b) under the law of the State of origin. . . ."
Defendants read these provisions to assure that a
witness will have the benefit not only of privileges recognized by the forum State, but also privileges recognized
by the State where the letters are executed. n2
n2 Article 11 goes on to indicate that a signatory of the Convention may elect to afford the
witness the benefit of the privileges of other jurisdictions, such as the privilege recognized by the
witness's domicile.
[**4]
Renfield reads them to permit a witness to assert only
a privilege of the State of origin or State of execution
which is otherwise applicable under conflict of laws
principles. While there is room for argument, I find
Renfield's reading of the language employed less plausible than that of defendants. Moreover, I believe defendant's interpretation is more compatible with the limited
"legislative history" of the Convention currently available
to me. Both the United States and France in their answers
to Question 10 of the "Questionnaire on the Taking of
Evidence Abroad" n3 made in [*444] preparation for the
Hague Convention evinced their intent that the treaty be a
privilege creating, rather than privilege limiting, law. n4
Thus, I conclude that if a privilege is recognized by either
French or United States law, the defendants may invoke it.
n3 Question 10 reads:
What privileges are available to
witnesses appearing under a letter
rogatory -a only those of the law of the requested State?
b only those of the law of the requesting State?
c each privilege decreed either by
the law of the requested State or by
that of the requesting State?
50147014v1
n4 Under Renfield's reading, the only effect
of this provision of Article 11 is to limit the privileges otherwise available to the witness, i.e. to
restrict otherwise applicable privileges to those
recognized by the State of execution and the State
of origin, excluding, for example, otherwise applicable privileges recognized by the law of the
witness's domicile, absent a special undertaking
from the State of origin.
For the purpose of this motion, I assume that French
law would not grant a privilege to refuse to disclose these
documents. Therefore, I must consider whether United
States law provides such a privilege. I conclude that it
does. Preliminarily, it is clear that the communications
were intended and reasonably expected to be confidential.
n5 Thus, the only issue of any substance is whether the
privilege is available where the attorney is a French
"in-house counsel." Plaintiffs have urged that because
French "in-house counsel" are not members of a bar, the
privilege is unavailable. In order to decide this, it is
necessary to have some understanding of the structure of
the French legal [**6] profession.
n5 The communicators did not expect the recipients to share the information other than perhaps with outside counsel. Renfield erroneously
equates the issue of whether the communications
were reasonably expected to be confidential with
the issue of whether they are protected by an attorney-client privilege under the law which would
be applicable under conventional conflict of law
principles. To equate those issues in this context
would be to defeat what I believe to be the intent
of the Hague Evidence Convention -- that a witness shall not be limited to the attorney-client
privilege law of the jurisdiction whose laws would
be applicable under such conflicts rules.
The organization of the French legal profession is
unlike that in the United States. In France, there are several categories within the practicing legal profession and
each category performs a different function that, in the
United States, would all be performed by an American
lawyer (Affid. of Cournot P5, Appendix D to p.b.). For
example, [**7] the "avocat" provides legal advice to
clients and appears in court but may not be employed by
any person or organization. The "conseil juridique" is
allowed to provide legal advice but may not appear in
court and may only be employed by, or associated with,
other "conseils juridiques." (Cournot PP6, 7; Affid. of
Goldman PP35, 39, Appendix E to d.b.). Thus, an individual who is employed by a corporation is not permitted
by law to be on the list of "avocats" or "conseils juridiques." Nevertheless, these individuals are not prohibited
from giving legal advice.
Because there is no clear French equivalent to the
American "bar," in this context membership in a "bar"
cannot be the relevant criterion for whether the attorney-client privilege is available. Rather, the requirement
is a functional one of whether the individual is competent
to render legal advice and is permitted by law to do so.
French "in-house counsel" certainly meet this test; like
their American counterparts, they have legal training and
are employed to give legal advice to corporate officials on
matters of legal significance to the corporation. n6
n6 In a related argument, Renfield asserts
that, as a matter of law, the communications
cannot be treated as ones seeking legal advice
where the lawyers are French and, therefore,
presumptively unqualified to render advice on
United States law. I disagree. While the fact that a
lawyer is not a member of the bar of a United
States jurisdiction may be relevant in determining
whether a communication is for the purpose of
securing legal advice, it is not necessarily determinative of that issue.
[**8]
B. DOCUMENTS IN THE NEW YORK OFFICE
OF REMY AMERIQUE.
The Hague Evidence Convention is not applicable to
documents located in the United States. Therefore, I must
50147014v1
apply choice-of-law principles to determine whether
United States or French privilege law applies.
There is no dispute that the choice-of-law standard is
that the applicable law is that [*445] of the state with the
most significant relationship with the communications.
Restatement (Second) of Conflict of Laws § 139(1)
(1971). In this case, the United States has the most significant relationship with the communications. The officials located in the New York office of Remy Amerique
are the ones who have sought the legal advice and the
United States has the same interest in protecting the
freedom of these individuals to obtain legal advice as it
does for any other American residents. For the same
reasons stated above in connection with the Remy S.A.
documents, the United States privilege law does recognize
the Remy Amerique communications as privileged. It
follows, therefore, that the attorney-client privilege is also
appropriately applied to communications of Remy
Amerique officials with French "in-house [**9] counsel."
II. IN CAMERA INSPECTION.
As Renfield acknowledges, a party has no right to an
in camera inspection of documents where his or her opponent files an affidavit setting forth facts sufficient to
justify a claim of privilege and there is no record basis for
questioning the veracity of the affidavit. I find no reason
to question the representations of the defendants in this
case. Renfield has had the opportunity to take discovery
concerning the defendants' claims of privilege and has
come up with nothing more than a single incident of
misclassification which would appear to be the result of
inadvertence. While the fact of foreign lawyers being
consulted on United States law might, in some factual
context, raise an issue of whether the communications
were for the purpose of seeking legal, as contrasted with
business advice, the background of the attorneys involved
in these communications is such that their nationality
raises no question in my mind about the defendants' representation.
HONEYWELL, INC., Plaintiff, v. MINOLTA CAMERA CO., LTD., et al., Defendant
Civil Action No. 87-4847
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW
JERSEY
1990 U.S. Dist. LEXIS 5954
May 15, 1990, Decided and Filed
NOTICE: [*1] NOT FOR PUBLICATION
SUBSEQUENT HISTORY: Later proceeding at Honeywell, Inc. v. Minolta Camera Co., 1991 U.S. Dist.
LEXIS 4222 (D.N.J., Apr. 5, 1991)
PRIOR HISTORY: Honeywell, Inc. v. Minolta Camera
Co., 1988 U.S. Dist. LEXIS 6379 (D.N.J., June 27, 1988)
DISPOSITION: Magistrate's orders reversed in part.
Defendant's motion to dismiss claims granted.
LexisNexis(R) Headnotes
COUNSEL:
ROBERT T. EDELL, ESQ., ALAN W.
KOWALCHYK, ESQ., Merchant, Gould, Smith, Edell,
Welter & Schmidt, Minneapolis, Minnesota, -and- JOHN
N. BAIN, ESQ., Carella, Byrne, Bain & Gilfillian,
Roseland, New Jersey, (Attorneys for Plaintiff).
JOSEPH J. FLEISCHMAN, ESQ., WILLIAM W.
ROBERTSON, ESQ., Hannoch Weisman, Roseland,
New Jersey, -and- FREDERICK C. MICHAUD, ESQ.,
Burns, Doane, Swecker & Mathis, Alexandria, Virginia,
(Attorneys for Defendants).
OPINIONBY:
WOLIN
OPINION:
Alfred M. Wolin, United States District Judge.
OPINION
Before the Court plaintiff Honeywell, Inc. ("Honeywell") appeals from an order of the Magistrate and
defendant Minolta Camera Co., Ltd. ("Minolta") moves to
dismiss counts three through six of Honeywell's Second
Amended Complaint. Honeywell appeals the Order of
50147014v1
Magistrate Haneke filed December 6, 1989 which denied
plaintiff's application for reconsideration of the Order of
the Magistrate filed August 22, 1989 ("the August Order"). The August Order denied Honeywell's telephone
motion of August 8, 1989 to compel the deposition testimony of Kazuo Kessoku ("Kessoku"), an employee of
defendant Minolta, over defendants' objections on the
basis of the attorney-client privilege and work [*2]
product doctrine. Minolta moves to dismiss counts three
through six of Honeywell's Second Amended Complaint
for failure to state a claim for which relief can be granted.
In the alternative, Minolta moves to dismiss count five for
failure to plead fraud with particularity pursuant to Fed. R.
Civ. P. 9(b). First, the Court will consider Honeywell's
appeal from the Magistrate's order, and then, the Court
will consider Minolta's motion to dismiss.
I. THE APPEAL OF THE MAGISTRATE'S ORDER
A. BACKGROUND
Honeywell's appeal concerns on-going depositions
which are being conducted in Japan. During the taking of
the deposition of Kessoku, he was directed not to answer
certain questions pursuant to the attorney-client privilege
and the work product doctrine. It is undisputed that
Kessoku is not admitted to the bar of Japan or any other
country and is not a registered patent agent of Japan or any
other country.
Honeywell moved by telephone application from
Japan for an order compelling Kessoku to answer the line
of questioning and to compel Minolta to produce certain
documents requested in connection with the questioning
of Kessoku. After the telephone conference, the Magistrate [*3] permitted the filing of additional and supplemental briefs. The Magistrate's Order of August 22, 1989
denied the application of Honeywell on the ground that
Kessoku was the "functional equivalent" of an attorney
under the rationale of Renfield Corp. v. E. Remy Martin &
Co., S.A., 98 F.R.D. 442 (D. Del. 1982), and was entitled
to assert the attorney-client privilege and work product
doctrine. Honeywell appealed that decision to this Court.
This Court remanded the issue back to the Magistrate for
reconsideration in light of the submission by Honeywell
of the affidavit of Berthold Goldman which had been filed
in the Renfield case. The Magistrate denied the motion on
reconsideration. The instant appeal followed.
B. DISCUSSION
A magistrate's adjudication of a non-dispositive motion will be set aside only if the order is found to be clearly
erroneous or contrary to law. Cipollone v. Liggett Group,
Inc., 785 F.2d 1108, 1113 (3d Cir. 1986), cert. denied, 484
U.S. 976, 108 S. Ct. 487, (1987) (citing 28 U.S.C. § 636
(b)(1)(A)); see Fed. R. Civ. P. 72 (a); General Rule 40
D(4) of the U.S. Dist. Ct. for the Dist. of N.J. This Court
will determine that a finding is [*4] clearly erroneous
"when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. Gypsum Co., 333 U.S. 364, 395,
68 S. Ct. 525, 542 (1948). The Magistrate's order may also
be reversed if it is found that his determination was contrary to law. The Magistrate has delegated authority pursuant to 28 U.S.C. § 636 (b)(1) to exercise wide discretion in fashioning appropriate discovery orders. Several
courts have also held that a magistrate's determination in a
discovery dispute is entitled to great deference and reversible only for an abuse of discretion. See Environmental Tectonics v. W.S. Kirkpatrick & Co., 659 F. Supp.
1381, 1399 (D.N.J. 1987) (citing cases), aff'd in part. rev'd
in part, 847 F.2d 1052 (3d Cir. 1988), aff'd 110 S. Ct. 701
(1990); see also, Schroeder v. Boeing Commercial Airplane Co., 123 F.R.D. 166 (D.N.J. 1988).
Honeywell contends that the Magistrate's decision to
deny the motion to compel must be reversed as contrary to
law. At oral argument both Honeywell and Minolta
agreed that the taking of this deposition in Japan is governed [*5] by United States law. See Defendants' Memorandum in Opposition to Motion to Reverse, p. 13.
Honeywell asserts that it was error for the Magistrate to be
"persuaded" by the rationale of the Renfield case. Specifically, Honeywell contends that Renfield is contrary to
the law of the Third Circuit and to prior district court
opinions in this district. Honeywell contends that Renfield
is contrary to the policy underlying the attorney-client
privilege and the work product doctrine. Honeywell also
submits that the Magistrate's failure to rule on the issue of
the work product doctrine was clearly erroneous in that it
will lead to duplicitous litigation. Minolta argues that the
Magistrate's decision conforms to applicable law and that
the Magistrate's determination that Kessoku is, in fact, a
de facto attorney is supported by sufficient evidence. The
Court finds that the issue to be decided is whether the
Magistrate's determination that Kessoku could assert the
50147014v1
attorney-client privilege and work product doctrines as a
de facto attorney is clearly erroneous or contrary to law.
Privileges asserted in federal court are "governed by
the principles of common law as they may be interpreted
[*6] by the courts of the United States in light of reason
and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to
which State law supplies the rule of decision, the privilege
. . . shall be determined in accordance with State law."
Fed. R. Evid. 501. The validity of a privilege is to be
determined on a case-by-case basis. Unjohn Co. v. U.S.,
449 U.S. 383, 396-97, 101 S. Ct. 677, 686 (1981). The
Third Circuit has held that "the applicability of a privilege
is a factual question" and the determination of "the scope
of a privilege is a question of law." Matter of Bevill,
Bresler & Schulman Asset Management Corp., 805 F.2d
120, 124 (3d Cir. 1986), citing to United States v. Liebman, 742 F.2d 807, 809 (3d Cir. 1984). The determination
as to whether Kessoku may assert either the attorney-client privilege or the work product doctrine in refusing to answer questions at his deposition depends on
the determination of his status as a de facto attorney.
The Magistrate found that Kessoku was the functional equivalent of an attorney under the rationale of
Renfield Corp. v. E. Remy Martin & Co., S.A., 98 F.R.D.
442 (D. Del. 1982), [*7] and was, therefore, entitled to
assert the attorney-client privilege and work product
doctrine. The Renfield court expanded the attorney-client
privilege to encompass employees of a french corporation
who acted in the capacity of "in-house" counsel, although
the employees were not members of the organized french
bar. The court discussed only the factual circumstances of
the case before it and cited no authority for this expansion
of the privilege. The specific holding of Renfield has not
been adopted by the Third Circuit, nor has the functional
equivalence rationale been applied as a general proposition.
Minolta cites Vernitron Medical Products, Inc. v.
Baxter Laboratories. Inc, et al., 186 U.S.P.Q. 324 (D.N.J.
1975), for the proposition that a functional equivalence
test, similar to the one employed by the court in Renfield,
has been applied in this district. Vernitron Medical
Products was an earlier case which dealt with the application of the attorney-client privilege to communications
between a client and a patent agent registered to practice
in front of the U.S. Patent Office. In the area of patent law,
registered patent agents have been made a specific exception [*8] to the general rule that an attorney must be
involved for the assertion of an attorney-client privilege.
See e.g. Sperry v. State of Florida, 373 U.S. 379, 83 S. Ct.
1322 (1963). There is no indication that this specialized
exception was intended to be applied in a general fashion.
The Third Circuit was guided by the requirements of
United States v. United Shoe Machinery Corp., 89 F.
Supp. 357, 358-59 (D. Mass 1950) n1 in its application of
the attorney-client privilege in In Re Grand Jury Investigations, 599 F.2d 1224, 1233 (3d Cir. 1979). This Court
has failed to find any case which indicates that the Third
Circuit has since altered its approach to the application of
the attorney-client privilege. Therefore, the Court finds
that the Magistrate's application of the rationale of Renfield was contrary to the law of this Circuit and must be
reversed.
n1 The "oft-quoted" passage of that case
provides that:
The privilege applies only if (1) the asserted
holder of the privilege is or sought to become a
client; (2) the person to whom the communication
was made (a) is a member of the bar of a court, or
his subordinate and (b) in connection with this
communication is acting as a lawyer; (3) the
communication relates to a fact of which the attorney was informed (a) by his client (b) without
the presence of strangers (c) for the purpose of
securing primarily either (i) an opinion on law or
(ii) legal services or (iii) assistance in some legal
proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has
been (a) claimed and (b) not waived by the client.
Id.
[*9]
Next, the Court must examine whether the Magistrate's factual determination that Kessoku was the functional equivalent of an attorney was clearly erroneous.
The Court has thoroughly reviewed all of the submissions
of the parties, including the affidavits submitted which
attest to Kessoku's duties, background and training, the
voluminous affidavits submitted which explain Japanese
law on the subject, and the factual circumstances of the
Renfield decision. The Court notes that Kessoku has
never been licensed to practice law in any country and has
never been registered as a patent agent in Japan or in the
United States. Kessoku has a Bachelor's of Science degree
and, over the years, has attended various seminars, lectures and classes concerning legal and patent issues. The
Court finds this is insufficient factual support for the
finding that Kessoku is a de facto attorney. On the entire
evidence, the Court "is left with the definite and firm
conviction that a mistake has been committed." Therefore,
the Court finds that the Magistrate's determination as to
Kessoku status as a de facto attorney for the purposes of
the applying the attorney-client privilege and the work
50147014v1
product doctrine [*10] is clearly erroneous and must be
reversed. n2
n2 In their exhibits and at oral argument,
Minolta raised the issue that this Court, under the
principles of comity, ought to apply Japanese law
to provide Kessoku with a privilege which would
prevent the discovery at issue. This Court has
considered Minolta's arguments, as well as the
exhibits of the parties, and finds that no sovereign
interest of Japan is implicated in this action where
depositions have been conducted in Japan merely
as a courtesy to Minolta. Also, the Court notes that
the affidavits of the parties explaining Japanese
law on the subject of privileges conflict with each
other and do not provide a proper basis from
which this Court could determine any applicable
law.
In the August Order, the Magistrate ordered that:
"Honeywell's application for an Order compelling the
witness, Kazuo Kessoku, to answer questions over objections on the basis of the attorney-client privilege and
the work product doctrine (to the extent it is proper to
claim the application [*11] of the work product doctrine
based upon a finding that the witness is the functional
equivalent of in-house counsel for Minolta Camera Co.,
Ltd.) is hereby denied[.]"
Therefore, the appeal of the denial of reconsideration of
that order places the issue of the applicability of the work
product doctrine before the Court. "The work-product
doctrine . . . protects from discovery materials prepared or
collected by an attorney in the course of preparation for
possible litigation.'" In Re Grand Jury Investigation, 599
F.2d at 1228, quoting Hickman v. Taylor, 329 U.S. 495,
505, 67 S. Ct. 385, 391 (1947). The Magistrate applied the
work product doctrine based on his finding that Kessoku
was a de facto attorney. Therefore, for the reasons expressed above, the determination in the August Order
concerning the work product doctrine must also be reversed.
II. THE MOTION TO DISMISS CERTAIN COUNTS
A. BACKGROUND
Pursuant to Fed. R. Civ. P. 12(b)(6), Minolta moves
to dismiss counts three through six of the Second
Amended Complaint for failure to state a claim upon
which relief can be granted. In the alternative, Minolta
moves to dismiss count five of the Second Amended
Complaint [*12] for failure to plead fraud with the requisite particularity pursuant to Fed. R. Civ. P. 9(b).
Honeywell originally sued Minolta for patent infringement, contending that certain of defendants' multifunction
cameras infringe Honeywell's patent claims on a camera
and certain focus detecting apparatuses. Honeywell's
Second Amended Complaint added five counts against
Minolta. Count two alleges a cause of action for breach of
contract. Counts three through six allege causes of action
which sound in tort. n3 Minolta contends that, as a matter
of law, a tort claim may only be asserted, in conjunction
with a contract claim, if a party breaches a duty which he
owes to another independently of the contract. Accordingly, Minolta asserts that Honeywell's tort claims are not
based on separate and alternative legal theories, but are
claims which overlap with and restate Honeywell's contract and infringement claims. In the alternative, Minolta
asks this Court to dismiss count five, which alleges fraud,
for failing to sufficiently plead the circumstances of the
alleged fraud. Honeywell opposes both of these motions.
Honeywell contends that its tort counts are separate and
independent causes of action, [*13] irrespective of any
contract claims alleged, and also contends that it has plead
count five with sufficient particularity to pass Rule 9(b)
muster.
n3 Count three alleges misappropriation of
confidential information, count four alleges
breach of fiduciary duty and obligation of good
faith and fair dealing, count five alleges fraud, and
count six alleges conversion.
B. DISCUSSION
To determine the sufficiency of pleadings under a
Rule 12(b)(6) standard, the Court must take the allegations of the complaint as true, view them liberally and
give plaintiff the benefit of all inferences fairly drawn.
Wilson v. Rackmill, 878 F.2d 772, 775 (3d Cir. 1989).
The complaint will not be dismissed unless plaintiff can
prove no set of facts entitling him to relief. Id.; Conley v.
Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-02 (1957).
The Court's inquiry is two-fold. First, the Court must
determine the substantive law under which the sufficiency
of Honeywell's tort counts must be measured. Second, the
Court must [*14] determine whether, in fact, Honeywell's
counts may be asserted as a matter of law. The substantive
law of the three jurisdictions which have a connection
with this action are all in agreement that a plaintiff can
only assert tort claims if those claims exist separately and
independently from alleged contract claims in the same
action. See Spring Motors Distributors, Inc. v. Ford Motor
Co., 98 N.J. 555, 581-82 (1985); Wild v. Rarig, 234
N.W.2d 775, 789-90 (Minn. 1975), cert. denied 424 U.S.
50147014v1
902 (1976); Covert v. Allen Group, Inc., 597 F. Supp.
1268, 1269-70 (D. Colo. 1984) (applying Colorado law).
n4 Honeywell has attempted to persuade this Court that
the rule should be otherwise by citing the law of jurisdictions which have no connection with the matter at bar.
Although the Court recognizes that some jurisdictions
allow tort damages to be collected for contract actions in
general, this is not the majority rule, nor is it the rule of the
jurisdictions which have an interest in this matter. See
Noye v. Hoffman-La Roche Inc., 238 N.J. Super. 430,
434-36 (App. Div. 1990) (and cases cited therein). The
Court will judge the sufficiency of plaintiff's tort counts
by the [*15] similar standard adopted by the three interested jurisdictions. Therefore, Honeywell's tort claims
must be separate and independent from its contract claim
in order for those claims to withstand the instant motion to
dismiss pursuant to Rule 12(b) (6).
n4 New Jersey is the forum state and is the
headquarters of the American corporate defendant. Minnesota is where the plaintiff is headquartered. Colorado is where the Honeywell group
apparently developed the confidential information
at issue in this litigation.
Honeywell's second count alleges that pursuant to the
"TCL Agreement" between Honeywell and Minolta
Camera Co. Ltd., Honeywell disclosed confidential, proprietary design information which was to be used in
conjunction with a component manufactured by Honeywell to Minolta for the purpose of Minolta developing,
manufacturing, and marketing an autofocus, single-lens-reflex camera using the Honeywell component.
Honeywell alleges that Minolta breached this agreement
and caused an, as yet, unspecified amount of damages.
[*16] Honeywell's third count alleges that Minolta willfully and intentionally misappropriated the information
which, pursuant to the TCL Agreement, was intended to
remain confidential. The TCL Agreement specifies what
information received is considered to be confidential and
the conditions under which the information must remain
confidential. The fourth count alleges that Minolta
breached both its fiduciary duty and its obligation of good
faith and fair dealing embodied in the TCL Agreement.
The fifth count alleges that Minolta "secretly and fraudulently obtained and utilized Honeywell's confidential
proprietary design information in the development of
[Minolta's] own autofocus component while at the same
time directly and impliedly representing to Honeywell
that [Minolta] would use the Honeywell confidential
proprietary design information for the design, manufacture, use and sale of autofocus photographic equipment in
fulfillment of its T.C.L. AGREEMENT with Honeywell."
Second Amended Complaint, para. 46. Honeywell's sixth
count alleges that Minolta's use of the confidential information for its own purposes constituted a conversion of
the information, in that Honeywell did not receive [*17]
"fair, reasonable, and sufficient compensation." Second
Amended Complaint, para. 53.
After reviewing the entire Second Amended Complaint, the Court finds that Honeywell has failed to allege
a separate and independent tort duty which has been
breached by Minolta in any of its counts alleging causes
of action in tort. Counts three through six all attempt to
take elements of Honeywell's cause of action for breach of
contract and plead those elements as separate tort actions.
All of the duties which Minolta has allegedly breached are
derived from the TCL Agreement. That agreement governs the rights and obligations of the parties in this instance. Therefore, the Court will grant Minolta's motion to
dismiss counts three through six because Honeywell has
failed to allege the breach of a duty independent of the
contract involved in this action. The dismissal will be
without prejudice. Because of the Court's disposition of
the Rule 12(b)(6) motion, Minolta s alternative motion
pursuant to Rule 9(b) will be dismissed without prejudice.
III. CONCLUSION
I. For the reasons stated above, the Court finds that
the provision of the Magistrate's August Order appealed
from is clearly erroneous [*18] and contrary to law.
Therefore, the Court will reverse the determination of the
Magistrate and order that Kessoku may not assert either
the attorney-client privilege or the work product doctrine
50147014v1
in refusing to respond to the questions which were put to
him at his depositions in Japan.
II. Also, for the reasons previously stated, the Court
will grant Minolta's motion pursuant to Rule 12(b)(6) and
dismiss counts three through six of the Second Amended
Complaint without prejudice. Minolta's alternative motion
pursuant to Rule 9(b) will be dismissed without prejudice.
An appropriate order is attached.
ORDER
For the reasons stated in the accompanying Opinion
of the Court,
It is on this 15th day of May, 1990;
ORDERED that the Magistrate's Orders filed December 6, 1989 and August 22, 1989 are reversed in part;
and it is further
ORDERED that Kazuo Kessoku may not assert either
the attorney-client privilege or the work product doctrine
in his response to the questions which were put to him at
his depositions in Japan; and it is further
ORDERED that Minolta's motion pursuant to Rule
12(b)(6) is granted; and it is further
ORDERED that counts three through six of the
Second Amended [*19] Complaint are dismissed without
prejudice; and it is further
ORDERED that Minolta's alternative motion pursuant to Rule 9(b) is dismissed without prejudice.
II. US AUTHORITIES REGARDING PRIVILEGE AND WAIVER
IN INTERNAL INVESTIGATIONS
UPJOHN CO. ET AL. v. UNITED STATES ET AL.
No. 79-886
SUPREME COURT OF THE UNITED STATES
449 U.S. 383; 101 S. Ct. 677; 66 L. Ed. 2d 584; 1981 U.S. LEXIS 56; 49 U.S.L.W.
4093; 81-1 U.S. Tax Cas. (CCH) P9138; 1980-81 Trade Cas. (CCH) P63,797; Fed. Sec.
L. Rep. (CCH) P97,817; 47 A.F.T.R.2d (RIA) 523; 30 Fed. R. Serv. 2d (Callaghan)
1101
November 5, 1980, Argued
January 13, 1981, Decided
PRIOR HISTORY:
CERTIORARI TO THE UNITED STATES COURT
OF APPEALS FOR THE SIXTH CIRCUIT.
DISPOSITION:
600 F.2d 1223, reversed and remanded.
SYLLABUS:
When the General Counsel for petitioner pharmaceutical manufacturing corporation (hereafter petitioner)
was informed that one of its foreign subsidiaries had made
questionable payments to foreign government officials in
order to secure government business, an internal investigation of such payments was initiated. As part of this
investigation, petitioner's attorneys sent a questionnaire to
all foreign managers seeking detailed information concerning such payments, and the responses were returned
to the General Counsel. The General Counsel and outside
counsel also interviewed the recipients of the questionnaire and other company officers and employees. Subsequently, based on a report voluntarily submitted by
petitioner disclosing the questionable payments, the Internal Revenue Service (IRS) began an investigation to
determine the tax consequences of such payments and
issued a summons pursuant to 26 U. S. C. § 7602 demanding production of, inter alia, the questionnaires and
the memoranda and notes of the interviews. Petitioner
refused to produce the documents on the grounds that they
were protected from disclosure by the attorney-client
privilege and constituted the work product of attorneys
50147014v1
prepared in anticipation of litigation. The United States
then filed a petition in Federal District Court seeking
enforcement of the summons. That court adopted the
Magistrate's recommendation that the summons should be
enforced, the Magistrate having concluded, inter alia, that
the attorney-client privilege had been waived and that the
Government had made a sufficient showing of necessity
to overcome the protection of the work-product doctrine.
The Court of Appeals rejected the Magistrate's finding of
a waiver of the attorney-client privilege, but held that
under the so-called "control group test" the privilege did
not apply "[to] the extent that the communications were
made by officers and agents not responsible for directing
[petitioner's] actions in response to legal advice . . . for the
simple reason that the communications were not the 'client's.'" The court also held that the work-product doctrine
did not apply to IRS summonses.
Held:
1. The communications by petitioner's employees to
counsel are covered by the attorney-client privilege insofar as the responses to the questionnaires and any notes
reflecting responses to interview questions are concerned.
Pp. 389-397.
(a) The control group test overlooks the fact that such
privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving
of information to the lawyer to enable him to give sound
and informed advice. While in the case of the individual
client the provider of information and the person who acts
on the lawyer's advice are one and the same, in the cor-
porate context it will frequently be employees beyond the
control group (as defined by the Court of Appeals) who
will possess the information needed by the corporation's
lawyers. Middle-level -- and indeed lower-level -- employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would
have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to
such actual or potential difficulties. Pp. 390-392.
(b) The control group test thus frustrates the very
purpose of the attorney-client privilege by discouraging
the communication of relevant information by employees
of the client corporation to attorneys seeking to render
legal advice to the client. The attorney's advice will also
frequently be more significant to noncontrol employees
than to those who officially sanction the advice, and the
control group test makes it more difficult to convey full
and frank legal advice to the employees who will put into
effect the client corporation's policy. P. 392.
(c) The narrow scope given the attorney-client privilege by the Court of Appeals not only makes it difficult
for corporate attorneys to formulate sound advice when
their client is faced with a specific legal problem but also
threatens to limit the valuable efforts of corporate counsel
to ensure their client's compliance with the law. Pp.
392-393.
(d) Here, the communications at issue were made by
petitioner's employees to counsel for petitioner acting as
such, at the direction of corporate superiors in order to
secure legal advice from counsel. Information not
available from upper-echelon management was needed to
supply a basis for legal advice concerning compliance
with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in
each of these areas. The communications concerned
matters within the scope of the employees' corporate
duties, and the employees themselves were sufficiently
aware that they were being questioned in order that the
corporation could obtain legal advice. Pp. 394-395.
2. The work-product doctrine applies to IRS summonses. Pp. 397-402.
(a) The obligation imposed by a tax summons remains subject to the traditional privileges and limitations,
and nothing in the language or legislative history of the
IRS summons provisions suggests an intent on the part of
Congress to preclude application of the work-product
doctrine. P. 398.
(b) The Magistrate applied the wrong standard when
he concluded that the Government had made a sufficient
showing of necessity to overcome the protections of the
work-product doctrine. The notes and memoranda sought
50147014v1
by the Government constitute work product based on oral
statements. If they reveal communications, they are protected by the attorney-client privilege. To the extent they
do not reveal communications they reveal attorneys'
mental processes in evaluating the communications. As
Federal Rule of Civil Procedure 26, which accords special
protection from disclosure to work product revealing an
attorney's mental processes, and Hickman v. Taylor, 329
U.S. 495, make clear, such work product cannot be disclosed simply on a showing of substantial need or inability to obtain the equivalent without undue hardship. P.
401.
COUNSEL:
Daniel M. Gribbon argued the cause and filed briefs
for petitioners.
Deputy Solicitor General Wallace argued the cause
for respondents. With him on the brief were Solicitor
General McCree, Assistant Attorney General Ferguson,
Stuart A. Smith, and Robert E. Lindsay. *
* Briefs of amici curiae urging reversal were
filed by Leonard S. Janofsky, Leon Jaworski, and
Keith A. Jones for the American Bar Association;
by Thomas G. Lilly, Alfred F. Belcuore, Paul F.
Rothstein, and Ronald L. Carlson for the Federal
Bar Association; by Erwin N. Griswold for the
American College of Trial Lawyers et al.; by
Stanley T. Kaleczyc and J. Bruce Brown for the
Chamber of Commerce of the United States; and
by Lewis A. Kaplan, James N. Benedict, Brian D.
Forrow, John G. Koeltl, Standish Forde Medina,
Jr., Renee J. Roberts, and Marvin Wexler for the
Committee on Federal Courts et al.
William W. Becker filed a brief for the New
England Legal Foundation as amicus curiae.
JUDGES:
REHNQUIST, J., delivered the opinion of the Court,
in
which
BRENNAN,
STEWART,
WHITE,
MARSHALL, BLACKMUN, POWELL, and STEVENS,
JJ., joined, and in Parts I and III of which BURGER, C. J.,
joined. BURGER, C. J., filed an opinion concurring in
part and concurring in the judgment, post, p. 402.
OPINIONBY:
REHNQUIST
OPINION:
[*386] [***589] [**681] JUSTICE REHNQUIST
delivered the opinion of the Court.
[***LEdHR1A] [1A] [***LEdHR2A] [2A]We
granted certiorari in this case to address important questions concerning the scope of the attorney-client privilege
in the corporate context and the applicability of the
work-product doctrine in proceedings to enforce tax
summonses. 445 U.S. 925. With respect to the privilege
question the parties and various amici have described our
task as one of choosing between two "tests" which have
gained adherents in the courts of appeals. We are acutely
aware, however, that we sit to decide concrete cases and
not abstract propositions of law. We decline to lay down a
broad rule or series of rules to govern all conceivable
future questions in this area, even were we able to do so.
We can and do, however, conclude that the attorney-client
privilege protects the communications involved in this
case from compelled disclosure and that the work-product
doctrine does apply in tax summons enforcement proceedings.
I
Petitioner Upjohn Co. manufactures and sells pharmaceuticals here and abroad. In January 1976 independent accountants conducting an audit of one of
Upjohn's foreign subsidiaries discovered that the subsidiary made payments to or for the benefit of foreign government officials in order to secure government business.
The accountants so informed petitioner Mr. Gerard
Thomas, Upjohn's Vice President, Secretary, and General
Counsel. Thomas is a member of the Michigan and New
York Bars, and has been Upjohn's General Counsel for 20
years. He consulted with outside counsel and R. T. Parfet,
Jr., Upjohn's Chairman of the Board. It was decided that
the company would conduct an internal investigation of
what were termed "questionable payments." As part of
this investigation the attorneys prepared a letter containing a questionnaire which was sent to "All Foreign General and Area Managers" over the Chairman's signature.
The letter [*387] began by noting recent disclosures that
several American companies made "possibly illegal"
payments to foreign government officials and emphasized
that the management needed full information concerning
any such payments made by Upjohn. The letter indicated
that the Chairman had asked Thomas, identified as "the
company's General Counsel," "to conduct an investigation
for the purpose of determining the nature and magnitude
of any payments made by the Upjohn Company or any of
its subsidiaries to any employee or official of a foreign
government." The questionnaire sought detailed information concerning such payments. Managers were instructed to treat the investigation as "highly confidential"
and not to discuss it with anyone other than Upjohn employees [***590] who might be helpful in providing the
requested information. Responses were to be sent directly
to Thomas. Thomas and outside counsel also interviewed
50147014v1
the recipients of the questionnaire and some 33 other
Upjohn officers or employees as part of the investigation.
On March 26, 1976, the company voluntarily submitted a preliminary report to the Securities and Exchange
Commission on Form 8-K disclosing certain questionable
payments. n1 A copy of the report was simultaneously
submitted to the Internal Revenue Service, which immediately began an investigation to determine the tax
consequences of the payments. Special agents conducting
the investigation were given lists by Upjohn of all those
interviewed and all who had responded to the questionnaire. On November 23, 1976, the Service issued a
summons pursuant to 26 U. S. C. § 7602 demanding
production of:
"All files relative to the investigation conducted under the supervision of Gerard Thomas to identify payments to employees of foreign governments and any
[**682] political [*388] contributions made by the
Upjohn Company or any of its affiliates since January 1,
1971 and to determine whether any funds of the Upjohn
Company had been improperly accounted for on the
corporate books during the same period.
"The records should include but not be limited to
written questionnaires sent to managers of the Upjohn
Company's foreign affiliates, and memorandums or notes
of the interviews conducted in the United States and
abroad with officers and employees of the Upjohn Company and its subsidiaries." App. 17a-18a.
The company declined to produce the documents specified in the second paragraph on the grounds that they were
protected from disclosure by the attorney-client privilege
and constituted the work product of attorneys prepared in
anticipation of litigation. On August 31, 1977, the United
States filed a petition seeking enforcement of the summons under 26 U. S. C. § § 7402 (b) and 7604 (a) in the
United States District Court for the Western District of
Michigan. That court adopted the recommendation of a
Magistrate who concluded that the summons should be
enforced. Petitioners appealed to the Court of Appeals for
the Sixth Circuit which rejected the Magistrate's finding
of a waiver of the attorney-client privilege, 600 F.2d
1223, 1227, n. 12, but agreed that the privilege did not
apply "[to] the extent that the communications were made
by officers and agents not responsible for directing
Upjohn's actions in response to legal advice . . . for the
simple reason that the communications were not the 'client's.'" Id., at 1225. The court reasoned that accepting
petitioners' claim for a broader application of the privilege
would encourage upper-echelon management to ignore
unpleasant facts and create too broad a "zone of silence."
Noting that Upjohn's counsel had interviewed officials
such as the Chairman and President, the Court of Appeals
remanded to the District [***591] Court so that a de-
termination of who was [*389] within the "control
group" could be made. In a concluding footnote the court
stated that the work-product doctrine "is not applicable to
administrative summonses issued under 26 U. S. C. §
7602." Id., at 1228, n. 13.
n1 On July 28, 1976, the company filed an
amendment to this report disclosing further payments.
II
Federal Rule of Evidence 501 provides that "the
privilege of a witness . . . shall be governed by the principles of the common law as they may be interpreted by
the courts of the United States in light of reason and experience." The attorney-client privilege is the oldest of the
privileges for confidential communications known to the
common law. 8 J. Wigmore, Evidence §
2290
(McNaughton rev. 1961). Its purpose is to encourage full
and frank communication between attorneys and their
clients and thereby promote broader public interests in the
observance of law and administration of justice. The
privilege recognizes that sound legal advice or advocacy
serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client. As we stated last Term in Trammel v. United States,
445 U.S. 40, 51 (1980): "The lawyer-client privilege rests
on the need for the advocate and counselor to know all
that relates to the client's reasons for seeking representation if the professional mission is to be carried out." And
in Fisher v. United States, 425 U.S. 391, 403 (1976), we
recognized the purpose of the privilege to be "to encourage clients to make full disclosure to their attorneys." This
rationale for the privilege has long been recognized by the
Court, see Hunt v. Blackburn, 128 U.S. 464, 470 (1888)
(privilege "is founded upon the necessity, in the interest
and administration of justice, of the aid of persons having
knowledge of the law and skilled in its practice, which
assistance can only be safely and readily availed of when
free from the consequences or the apprehension of disclosure"). Admittedly complications in the application of
the privilege arise when the client is a corporation, which
in theory is an artificial creature of the [*390] [**683]
law, and not an individual; but this Court has assumed that
the privilege applies when the client is a corporation,
United States v. Louisville & Nashville R. Co., 236 U.S.
318, 336 (1915), and the Government does not contest the
general proposition.
[***LEdHR3] [3]The Court of Appeals, however,
considered the application of the privilege in the corporate
context to present a "different problem," since the client
was an inanimate entity and "only the senior management,
guiding and integrating the several operations, . . . can be
50147014v1
said to possess an identity analogous to the corporation as
a whole." 600 F.2d, at 1226. The first case to articulate the
so-called "control group test" adopted by the court below,
Philadelphia v. Westinghouse Electric Corp., 210 F.Supp.
483, 485 (ED Pa.), petition for mandamus and prohibition
denied sub nom. General Electric Co. v. Kirkpatrick, 312
F.2d 742 (CA3 1962), cert. denied, 372 U.S. 943 (1963),
reflected a similar conceptual approach:
"Keeping in mind that the question is, Is it the corporation which is seeking the lawyer's advice [***592]
when the asserted privileged communication is made?, the
most satisfactory solution, I think, is that if the employee
making the communication, of whatever rank he may be,
is in a position to control or even to take a substantial part
in a decision about any action which the corporation may
take upon the advice of the attorney, . . . then, in effect, he
is (or personifies) the corporation when he makes his
disclosure to the lawyer and the privilege would apply."
(Emphasis supplied.)
Such a view, we think, overlooks the fact that the privilege exists to protect not only the giving of professional
advice to those who can act on it but also the giving of
information to the lawyer to enable him to give sound and
informed advice. See Trammel, supra, at 51; Fisher, supra, at 403. The first step in the resolution of any legal
problem is ascertaining the factual background and sifting
through the facts [*391] with an eye to the legally relevant. See ABA Code of Professional Responsibility,
Ethical Consideration 4-1:
"A lawyer should be fully informed of all the facts of the
matter he is handling in order for his client to obtain the
full advantage of our legal system. It is for the lawyer in
the exercise of his independent professional judgment to
separate the relevant and important from the irrelevant
and unimportant. The observance of the ethical obligation
of a lawyer to hold inviolate the confidences and secrets
of his client not only facilitates the full development of
facts essential to proper representation of the client but
also encourages laymen to seek early legal assistance."
See also Hickman v. Taylor, 329 U.S. 495, 511 (1947).
In the case of the individual client the provider of
information and the person who acts on the lawyer's advice are one and the same. In the corporate context,
however, it will frequently be employees beyond the
control group as defined by the court below -- "officers
and agents . . . responsible for directing [the company's]
actions in response to legal advice" -- who will possess the
information needed by the corporation's lawyers. Middle-level -- and indeed lower-level -- employees can, by
actions within the scope of their employment, embroil the
corporation in serious legal difficulties, and it is only
natural that these employees would have the relevant
information needed by corporate counsel if he is adequately to advise the client with respect to such actual or
potential difficulties. This fact was noted in Diversified
Industries, Inc. v. Meredith, 572 F.2d 596 (CA8 1978) (en
banc):
"In a corporation, it may be necessary to glean information relevant to a legal problem from middle management or non-management personnel as well as from
top executives. The attorney dealing with a complex legal
problem 'is thus faced with a "Hobson's choice". If he
[**684] interviews employees not having "the very
highest authority", [*392] their communications to him
will not be privileged. If, on the other hand, he interviews
only those employees with "the very highest authority", he
may find it [***593] extremely difficult, if not impossible, to determine what happened.'" Id., at 608-609
(quoting Weinschel, Corporate Employee Interviews and
the Attorney-Client Privilege, 12 B. C. Ind. & Com. L.
Rev. 873, 876 (1971)).
The control group test adopted by the court below
thus frustrates the very purpose of the privilege by discouraging the communication of relevant information by
employees of the client to attorneys seeking to render
legal advice to the client corporation. The attorney's
advice will also frequently be more significant to noncontrol group members than to those who officially sanction the advice, and the control group test makes it more
difficult to convey full and frank legal advice to the employees who will put into effect the client corporation's
policy. See, e. g., Duplan Corp. v. Deering Milliken, Inc.,
397 F.Supp. 1146, 1164 (SC 1974) ("After the lawyer
forms his or her opinion, it is of no immediate benefit to
the Chairman of the Board or the President. It must be
given to the corporate personnel who will apply it").
The narrow scope given the attorney-client privilege
by the court below not only makes it difficult for corporate attorneys to formulate sound advice when their client
is faced with a specific legal problem but also threatens to
limit the valuable efforts of corporate counsel to ensure
their client's compliance with the law. In light of the vast
and complicated array of regulatory legislation confronting the modern corporation, corporations, unlike most
individuals, "constantly go to lawyers to find out how to
obey the law," Burnham, The Attorney-Client Privilege in
the Corporate Arena, 24 Bus. Law. 901, 913 (1969),
particularly since compliance with the law in this area is
hardly an instinctive matter, see, e. g., United States v.
United States Gypsum Co., 438 U.S. 422, 440-441 (1978)
("the behavior proscribed by the [Sherman] Act is [*393]
often difficult to distinguish from the gray zone of socially
acceptable and economically justifiable business conduct"). n2 The test adopted by the court below is difficult
50147014v1
to apply in practice, though no abstractly formulated and
unvarying "test" will necessarily enable courts to decide
questions such as this with mathematical precision. But if
the purpose of the attorney-client privilege is to be served,
the attorney and client must be able to predict with some
degree of certainty whether particular discussions will be
protected. An uncertain privilege, or one which purports
to be certain but results in widely varying applications by
the courts, is little better than no privilege at all. The very
terms of the test adopted by the court below suggest the
unpredictability of its application. The test restricts the
availability of the privilege to those officers [***594]
who play a "substantial role" in deciding and directing a
corporation's legal response. Disparate decisions in cases
applying this test illustrate its unpredictability. Compare,
e. g., Hogan v. Zletz, 43 F.R.D. 308, 315-316 (ND Okla.
1967), aff'd in part sub nom. Natta v. Hogan, 392 F.2d
686 (CA10 1968) (control group includes managers and
assistant managers of patent division and research and
development department), with Congoleum Industries,
Inc. v. GAF Corp., 49 F.R.D. 82, 83-85 (ED Pa. 1969),
aff'd, 478 F.2d 1398 (CA3 1973) (control group includes
only division and corporate [**685] vice presidents, and
not two directors of research and vice president for production and research).
n2 The Government argues that the risk of
civil or criminal liability suffices to ensure that
corporations will seek legal advice in the absence
of the protection of the privilege. This response
ignores the fact that the depth and quality of any
investigations to ensure compliance with the law
would suffer, even were they undertaken. The
response also proves too much, since it applies to
all communications covered by the privilege: an
individual trying to comply with the law or faced
with a legal problem also has strong incentive to
disclose information to his lawyer, yet the common law has recognized the value of the privilege
in further facilitating communications.
[*394] [***LEdHR1B] [1B] The communications
at issue were made by Upjohn employees n3 to counsel
for Upjohn acting as such, at the direction of corporate
superiors in order to secure legal advice from counsel. As
the Magistrate found, "Mr. Thomas consulted with the
Chairman of the Board and outside counsel and thereafter
conducted a factual investigation to determine the nature
and extent of the questionable payments and to be in a
position to give legal advice to the company with respect
to the payments." (Emphasis supplied.) 78-1 USTC para.
9277, pp. 83,598, 83,599. Information, not available from
upper-echelon management, was needed to supply a basis
for legal advice concerning compliance with securities
and tax laws, foreign laws, currency regulations, duties to
shareholders, and potential litigation in each of these
areas. n4 The communications concerned matters within
the scope of the employees' corporate duties, and the
employees themselves were sufficiently aware that they
were being questioned in order that the corporation could
obtain legal advice. The questionnaire identified Thomas
as "the company's General Counsel" and referred in its
opening sentence to the possible illegality of payments
such as the ones on which information was sought. App.
40a. A statement of policy accompanying the questionnaire clearly indicated the legal implications of the investigation. The policy statement was issued "in order
that there be no uncertainty in the future as to the policy
with respect to the practices which are the subject of this
investigation." [*395] It began "Upjohn will comply with
all laws and regulations," and stated that commissions or
payments "will not be used as a subterfuge for bribes or
illegal payments" and that all payments must be "proper
and legal." Any future agreements with foreign distributors or agents were to be approved "by a company attorney" and any questions concerning the policy were to be
referred "to the company's General Counsel." Id., at
165a-166a. This statement was issued to Upjohn employees worldwide, so that even those interviewees not
receiving a questionnaire were aware of the legal implications of [***595] the interviews. Pursuant to explicit
instructions from the Chairman of the Board, the communications were considered "highly confidential" when
made, id., at 39a, 43a, and have been kept confidential by
the company. n5 Consistent with the underlying purposes
of the attorney-client privilege, these communications
must be protected against compelled disclosure.
n3 Seven of the eighty-six employees interviewed by counsel had terminated their employment with Upjohn at the time of the interview.
App. 33a-38a. Petitioners argues that the privilege
should nonetheless apply to communications by
these former employees concerning activities
during their period of employment. Neither the
District Court nor the Court of Appeals had occasion to address this issue, and we decline to decide
it without the benefit of treatment below.
n4 See id., at 26a-27a, 103a, 123a-124a. See
also In re Grand Jury Investigation, 599 F.2d
1224, 1229 (CA3 1979); In re Grand Jury Subpoena, 599 F.2d 504, 511 (CA2 1979).
n5 See Magistrate's opinion, 78-1 USTC para.
9277, p. 83,599: "The responses to the questionnaires and the notes of the interviews have been
treated as confidential material and have not been
50147014v1
disclosed to anyone except Mr. Thomas and outside counsel."
[***LEdHR4] [4]The Court of Appeals declined to
extend the attorney-client privilege beyond the limits of
the control group test for fear that doing so would entail
severe burdens on discovery and create a broad "zone of
silence" over corporate affairs. Application of the attorney-client privilege to communications such as those
involved here, however, puts the adversary in no worse
position than if the communications had never taken
place. The privilege only protects disclosure of communications; it does not protect disclosure of the underlying
facts by those who communicated with the attorney:
"[The] protection of the privilege extends only to communications and not to facts. A fact is one thing and a
communication concerning that fact is an entirely different [*396] [**686] thing. The client cannot be compelled to answer the question, 'What did you say or write
to the attorney?' but may not refuse to disclose any relevant fact within his knowledge merely because he incorporated a statement of such fact into his communication to
his attorney." Philadelphia v. Westinghouse Electric
Corp., 205 F.Supp. 830, 831 (ED Pa. 1962).
See also Diversified Industries, 572 F.2d, at 611; State ex
rel. Dudek v. Circuit Court, 34 Wis. 2d 559, 580, 150 N.
W. 2d 387, 399 (1967) ("the courts have noted that a party
cannot conceal a fact merely by revealing it to his lawyer"). Here the Government was free to question the
employees who communicated with Thomas and outside
counsel. Upjohn has provided the IRS with a list of such
employees, and the IRS has already interviewed some 25
of them. While it would probably be more convenient for
the Government to secure the results of petitioner's internal investigation by simply subpoenaing the questionnaires and notes taken by petitioner's attorneys, such
considerations of convenience do not overcome the policies served by the attorney-client privilege. As Justice
Jackson noted in his concurring opinion in Hickman v.
Taylor, 329 U.S., at 516: "Discovery was hardly intended
to enable a learned profession to perform its functions . . .
on wits borrowed from the adversary."
Needless to say, we decide only the case before us,
and do not undertake to draft a set of rules which should
govern challenges to investigatory subpoenas. Any such
approach would violate the spirit of Federal Rule of Evidence 501. See S. Rep. No. 93-1277, p. 13 (1974) ("the
recognition of a privilege based on a confidential relationship . . . should be determined on a case-by-case basis"); Trammel, 445 U.S., at 47; United States v. Gillock,
445 U.S. 360, 367 (1980). [***596] While such a
"case-by-case" basis may to some slight extent undermine
desirable certainty in the boundaries of the attorney-client
[*397] privilege, it obeys the spirit of the Rules. At the
same time we conclude that the narrow "control group
test" sanctioned by the Court of Appeals in this case
cannot, consistent with "the principles of the common law
as . . . interpreted . . . in the light of reason and experience," Fed. Rule Evid. 501, govern the development of the
law in this area.
III
interests of the clients and the cause of justice would be
poorly served." Id., at 511.
The "strong public policy" underlying the work-product
doctrine was reaffirmed recently in United States v. Nobles, 422 U.S. 225, 236-240 (1975), and has been substantially incorporated in Federal Rule of Civil Procedure
26 (b)(3) . n7
n7 This provides, in pertinent part:
Our decision that the communications by Upjohn
employees to counsel are covered by the attorney-client
privilege disposes of the case so far as the responses to the
questionnaires and any notes reflecting responses to interview questions are concerned. The summons reaches
further, however, and Thomas has testified that his notes
and memoranda of interviews go beyond recording responses to his questions. App. 27a-28a, 91a-93a. To the
extent that the material subject to the summons is not
protected by the attorney-client privilege as disclosing
communications between an employee and counsel, we
must reach the ruling by the Court of Appeals that the
work-product doctrine does not apply to summonses
issued under 26 U. S. C. § 7602. n6
n6 The following discussion will also be
relevant to counsel's notes and memoranda of interviews with the seven former employees should
it be determined that the attorney-client privilege
does not apply to them. See n. 3, supra.
The Government concedes, wisely, that the Court of
Appeals erred and that the work-product doctrine does
apply to IRS summonses. Brief for Respondents 16, 48.
This doctrine was announced by the Court over 30 years
ago in Hickman v. Taylor, 329 U.S. 495 (1947). In that
case the Court rejected "an attempt, without purported
necessity or justification, to secure written statements,
private memoranda and personal recollections prepared or
formed by an adverse party's counsel in the course of his
legal duties." Id., at 510. The Court noted that "it is essential that a lawyer work with [*398] a certain degree of
privacy [**687] " and reasoned that if discovery of the
material sought were permitted
"much of what is now put down in writing would remain
unwritten. An attorney's thoughts, heretofore inviolate,
would not be his own. Inefficiency, unfairness and sharp
practices would inevitably develop in the giving of legal
advice and in the preparation of cases for trial. The effect
on the legal profession would be demoralizing. And the
50147014v1
"[A] party may obtain discovery of documents and
tangible things otherwise discoverable under
subdivision (b)(1) of this rule and prepared in anticipation of litigation or for trial by or for another
party or by or for that other party's representative
(including his attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing
that the party seeking discovery has substantial
need of the materials in the preparation of his case
and that he is unable without undue hardship to
obtain the substantial equivalent of the materials
by other means. In ordering discovery of such
materials when the required showing has been
made, the court shall protect against disclosure of
the mental impressions, conclusions, opinions, or
legal theories of an attorney or other representative of a party concerning the litigation."
[***LEdHR5] [5] As [***597] we stated last
Term, the obligation imposed by a tax summons remains
"subject to the traditional privileges and limitations."
United States v. Euge, 444 U.S. 707, 714 (1980). Nothing
in the language of the IRS summons provisions or their
legislative history suggests an intent on the part of Congress to preclude application of the work-product doctrine. Rule 26 (b)(3) codifies the work-product doctrine,
and the Federal Rules of Civil Procedure are made applicable [*399] to summons enforcement proceedings by
Rule 81 (a)(3). See Donaldson v. United States, 400 U.S.
517, 528 (1971). While conceding the applicability of the
work-product doctrine, the Government asserts that it has
made a sufficient showing of necessity to overcome its
protections. The Magistrate apparently so found, 78-1
USTC para. 9277, p. 83,605. The Government relies on
the following language in Hickman:
"We do not mean to say that all written materials
obtained or prepared by an adversary's counsel with an
eye toward litigation are necessarily free from discovery
in all cases. Where relevant and nonprivileged facts remain hidden in an attorney's file and where production of
those facts is essential to the preparation of one's case,
discovery may properly be had. . . . And production might
be justified where the witnesses are no longer available or
can be reached only with difficulty." 329 U.S., at 511.
The Government stresses that interviewees are scattered
across the globe and that Upjohn has forbidden its employees to answer questions it considers irrelevant. The
above-quoted language from Hickman, however, did not
apply to "oral statements made by witnesses . . . whether
presently in the form of [the attorney's] mental impressions or memoranda." Id., at 512. As to such material the
Court did "not believe that any showing of necessity can
be made under the circumstances of this case so as to
justify production. . . . If there should be a rare situation
justifying production of these matters, petitioner's case is
not of that type." Id., at 512-513. See also Nobles, supra,
at 252-253 (WHITE, J., concurring). Forcing an attorney
to disclose notes and memoranda of witnesses' oral
statements is particularly disfavored because it tends to
reveal the attorney's mental processes, 329 U.S., at 513
("what he saw fit to write down regarding witnesses' remarks"); id., at 516-517 (" [**688] the statement would
be his [the [*400] attorney's] language, permeated
[***598] with his inferences") (Jackson, J., concurring).
n8
n8 Thomas described his notes of the interviews as containing "what I considered to be the
important questions, the substance of the responses to them, my beliefs as to the importance
of these, my beliefs as to how they related to the
inquiry, my thoughts as to how they related to
other questions. In some instances they might
even suggest other questions that I would have to
ask or things that I needed to find elsewhere." 78-1
USTC para. 9277, p. 83,599.
[***LEdHR2B] [2B]Rule 26 accords special protection to work product revealing the attorney's mental
processes. The Rule permits disclosure of documents and
tangible things constituting attorney work product upon a
showing of substantial need and inability to obtain the
equivalent without undue hardship. This was the standard
applied by the Magistrate, 78-1 USTC para. 9277, p.
83,604. Rule 26 goes on, however, to state that "[in] ordering discovery of such materials when the required
showing has been made, the court shall protect against
disclosure of the mental impressions, conclusions, opinions or legal theories of an attorney or other representative
of a party concerning the litigation." Although this language does not specifically refer to memoranda based on
oral statements of witnesses, the Hickman court stressed
the danger that compelled disclosure of such memoranda
would reveal the attorney's mental processes. It is clear
50147014v1
that this is the sort of material the draftsmen of the Rule
had in mind as deserving special protection. See Notes of
Advisory Committee on 1970 Amendment to Rules, 28 U.
S. C. App., p. 442 ("The subdivision . . . goes on to protect
against disclosure the mental impressions, conclusions,
opinions, or legal theories . . . of an attorney or other
representative of a party. The Hickman opinion drew
special attention to the need for protecting an attorney
against discovery of memoranda prepared from recollection of oral interviews. The courts have steadfastly safeguarded against disclosure of lawyers' mental impressions
and legal theories . . .").
[*401] Based on the foregoing, some courts have
concluded that no showing of necessity can overcome
protection of work product which is based on oral statements from witnesses. See, e. g., In re Grand Jury Proceedings, 473 F.2d 840, 848 (CA8 1973) (personal recollections, notes, and memoranda pertaining to conversation with witnesses); In re Grand Jury Investigation, 412
F.Supp. 943, 949 (ED Pa. 1976) (notes of conversation
with witness "are so much a product of the lawyer's
thinking and so little probative of the witness's actual
words that they are absolutely protected from disclosure"). Those courts declining to adopt an absolute rule
have nonetheless recognized that such material is entitled
to special protection. See, e. g., In re Grand Jury Investigation, 599 F.2d 1224, 1231 (CA3 1979) ("special considerations . . . must shape any ruling on the discoverability of interview memoranda . . . ; such documents will
be discoverable only in a 'rare situation'"); cf. In re Grand
Jury Subpoena, 599 F.2d 504, 511-512 (CA2 1979).
We do not decide the issue at this time. It is clear that
the Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the
work-product doctrine. The Magistrate applied the "substantial [***599] need" and "without undue hardship"
standard articulated in the first part of Rule 26 (b)(3). The
notes and memoranda sought by the Government here,
however, are work product based on oral statements. If
they reveal communications, they are, in this case, protected by the attorney-client privilege. To the extent they
do not reveal communications, they reveal the attorneys'
mental processes in evaluating the communications. As
Rule 26 and Hickman make clear, such work product
cannot be disclosed simply on a showing of substantial
need and inability to obtain the equivalent without undue
hardship.
While we are not prepared at this juncture to say that
such material is always protected by the work-product
rule, we [*402] [**689] think a far stronger showing of
necessity and unavailability by other means than was
made by the Government or applied by the Magistrate in
this case would be necessary to compel disclosure. Since
the Court of Appeals thought that the work-product protection was never applicable in an enforcement proceeding such as this, and since the Magistrate whose recommendations the District Court adopted applied too lenient
a standard of protection, we think the best procedure with
respect to this aspect of the case would be to reverse the
judgment of the Court of Appeals for the Sixth Circuit and
remand the case to it for such further proceedings in
connection with the work-product claim as are consistent
with this opinion.
Accordingly, the judgment of the Court of Appeals is
reversed, and the case remanded for further proceedings.
It is so ordered.
CONCURBY:
BURGER (In Part)
CONCUR:
CHIEF JUSTICE BURGER, concurring in part and
concurring in the judgment.
I join in Parts I and III of the opinion of the Court and
in the judgment. As to Part II, I agree fully with the
Court's rejection of the so-called "control group" test, its
reasons for doing so, and its ultimate holding that the
communications at issue are privileged. As the Court
states, however, "if the purpose of the attorney-client
privilege is to be served, the attorney and client must be
able to predict with some degree of certainty whether
particular discussions will be protected." Ante, at 393. For
this very reason, I believe that we should articulate a
standard that will govern similar cases and afford guidance to corporations, counsel advising them, and federal
courts.
The Court properly relies on a variety of factors in
concluding that the communications now before us are
privileged. See ante, at 394-395. Because of the great
importance of the issue, in my view the Court should
make clear now that, as a [*403] general rule, a communication is privileged at least when, as here, an employee or former employee speaks at the direction of the
management with an attorney regarding conduct or proposed conduct within the scope of employment. The
attorney must be one authorized by the management to
inquire into the subject and must be seeking information
to assist counsel in performing any of the following
functions: (a) evaluating [***600] whether the employee's conduct has bound or would bind the corporation; (b) assessing the legal consequences, if any, of that
conduct; or (c) formulating appropriate legal responses to
actions that have been or may be taken by others with
regard to that conduct. See, e. g., Diversified Industries,
Inc. v. Meredith, 572 F.2d 596, 609 (CA8 1978) (en
50147014v1
banc); Harper & Row Publishers, Inc. v. Decker, 423
F.2d 487, 491-492 (CA7 1970), aff'd by an equally divided Court, 400 U.S. 348 (1971); Duplan Corp. v.
Deering Milliken, Inc., 397 F.Supp. 1146, 1163-1165 (SC
1974). Other communications between employees and
corporate counsel may indeed be privileged -- as the petitioners and several amici have suggested in their proposed formulations * -- but the need for certainty does not
compel us now to prescribe all the details of the privilege
in this case.
* See Brief for Petitioners 21-23, and n. 25;
Brief for American Bar Association as Amicus
Curiae 5-6, and n. 2; Brief for American College
of Trial Lawyers and 33 Law Firms as Amici Curiae 9-10, and n. 5.
Nevertheless, to say we should not reach all facets of
the privilege does not mean that we should neglect our
duty to provide guidance in a case that squarely presents
the question in a traditional adversary context. Indeed,
because Federal Rule of Evidence 501 provides that the
law of privileges "shall be governed by the principles of
the common law as they may be interpreted by the courts
of the United States in the light of reason and experience,"
this Court has a special duty to clarify aspects of the law
of privileges properly [*404] before us. Simply asserting
that this failure "may to some slight extent undermine
desirable certainty," ante, at 396, neither minimizes the
consequences [**690] of continuing uncertainty and
confusion nor harmonizes the inherent dissonance of
acknowledging that uncertainty while declining to clarify
it within the frame of issues presented.
Dennis Rossi, Appellant, v. Blue Cross and Blue Shield of Greater New York, Respondent
Court of Appeals of New York
73 N.Y.2d 588; 540 N.E.2d 703; 542 N.Y.S.2d 508; 1989 N.Y. LEXIS 668
May 2, 1989, Argued June 6, 1989, Decided
PRIOR HISTORY:
Appeal, by permission of the Appellate Division of
the Supreme Court in the First Judicial Department, from
an order of that court, entered May 12, 1988, which (1)
reversed, on the law and the facts, an order of the Supreme
Court (William P. McCooe, J.), entered in New York
County, granting a motion by plaintiff for production by
defendant of an internal memorandum from a corporate
staff attorney to a corporate officer regarding a corporate
form that was the subject of an imminent defamation
action, and (2) granted a motion by defendant for a protective order. The following question was certified by the
Appellate Division: "Was the order of this Court, which
reversed the order of the Supreme Court, properly made?"
Rossi v Blue Cross & Blue Shield, 140 AD2d 198.
DISPOSITION:
Order affirmed, etc.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff physician appealed the judgment of the Appellate Division of the
Supreme Court in the First Judicial Department (New
York), which concluded an internal memorandum from
defendant insurance corporation's staff attorney to a corporate officer communicating advice regarding a company form that was the subject of an imminent defamation
action was protected from disclosure in that action by the
attorney-client privilege.
OVERVIEW: The physician contended that the memorandum was discoverable. The court held that the attorney-client privilege protected the memorandum from
discovery. According to the court, the memorandum was
clearly an internal, confidential document not accessible
to anyone outside the insurance corporation. The court
also held that the memorandum was written for the purpose of facilitating the rendition of legal advice or ser-
50147014v1
vices in the course of a professional relationship. Furthermore, the court held that the memorandum referred to
the corporate counsel's conversations with the physician's
counsel and expressed the corporate counsel's views regarding the rejection language of the form. The court also
held that nothing suggested that a document was passed
on to the corporate counsel to avoid its disclosure. Finally,
the court held that public policy considerations did not
require discovery of the memorandum because nothing he
gave rise to the level of subverting the lawful and honest
purposes for which the attorney-client privilege existed.
OUTCOME: The court affirmed the judgment of the
lower court.
COUNSEL:
Steven Cohen and Arnold V. Goldstein for appellant.
I. The May 2, 1985 memo is not privileged and is discoverable. ( Koump v Smith, 25 NY2d 287; Graf v Aldrich, 94 AD2d 823; Zimmerman v Nassau Hosp., 76
AD2d 921; People v Belge, 59 AD2d 307; Allied Artists
Picture Corp. v Raab Prods., 38 AD2d 537; Matter of
Jacqueline F., 47 NY2d 215; Hoffman v Ro-San Manor,
73 AD2d 207.) II. The document was prepared in the
ordinary course of business and is multipurpose. (
Chemical Bank v National Union Fire Ins. Co., 70 AD2d
837; Crowe v Lederle Labs., 125 AD2d 875; Mold
Maintenance Serv. v General Acc. Fire & Life Assur.
Corp., 56 AD2d 134; Westhampton Adult Home v National Union Fire Ins. Co., 105 AD2d 627; New England
Seafoods v Travelers Cos., 84 AD2d 676; E. B. Metal
Indus. v State of New York, 138 Misc 2d 698;
Crow-Crimmins-Wolff & Munier v County of Westchester, 123 AD2d 813; Hawley v Travelers Indem. Co., 90
AD2d 684; Millen Indus. v American Mut. Liab. Ins. Co.,
37 AD2d 817; Brandman v Cross & Brown Co., 125 Misc
2d 185.) III. A document is discoverable when there is a
strong public policy. ( Matter of Priest v Hennessy, 51
NY2d 62; Matter of Jacqueline F., 47 NY2d 215; Upjohn
Co. v United States, 449 U.S. 383.)
Kevin B. Pollak and John V. Fabiani, Jr., for respondent. I. The May 2, 1985 memo is a privileged
communication between attorney and client. ( Matter of
Vanderbilt [Rosner -- Hickey], 57 NY2d 66; Matter of
Priest v Hennessy , 51 NY2d 62; Matter of Grand Jury
Subpoena [Bekins Record Stor. Co.], 62 NY2d 324; Allied Artists Picture Corp. v Raab Prods., 38 AD2d 537;
Rockwood Natl. Corp. v Peat, Marwick, Mitchell & Co.,
60 AD2d 837; Ford Motor Co. v Burke Co., 59 Misc 2d
543; O'Keeffe v Bry, 456 F Supp 822; Matter of
Jacqueline F., 47 NY2d 215; Crowe v Lederle Labs., 125
AD2d 875.) II. The May 2, 1985 memo is the work
product of an attorney. ( Kenford Co. v County of Erie, 55
AD2d 466; Victory Mkts. v Purer, 51 AD2d 895; Hoffman
v Ro-San Manor, 73 AD2d 207; Warren v New York City
Tr. Auth., 34 AD2d 749; Wickham v Socony Mobil Oil
Co., 45 Misc 2d 311.) III. The May 2, 1985 memo is
material prepared for litigation. ( Crowe v Lederle Labs.,
125 AD2d 875.)
JUDGES:
Kaye, J. Chief Judge Wachtler and Judges Simons,
Alexander, Titone, Hancock, Jr., and Bellacosa concur.
OPINIONBY:
KAYE
OPINION:
[*590] [***508] OPINION OF THE COURT
An internal memorandum from a corporate staff attorney to a corporate officer communicating advice regarding a company form that was the subject of an imminent defamation action is protected from [**704]
disclosure in that action by the attorney-client privilege
(CPLR 4503 [a]).
[***509] As alleged in the complaint, in April 1984,
plaintiff, a physician specializing in radiology, opened a
facility for medical diagnostic testing through the use of a
Diasonics NMR (nuclear magnetic resonance) Imaging
Scanner. Over the next year and a half, plaintiff performed NMR scans on numerous patients, among them
subscribers of defendant health insurer, Blue Cross and
Blue Shield. Defendant allegedly rejected more than
2,000 claims by plaintiff's patients seeking reimbursement
for the scans. In rejecting claims, defendant sent its subscribers a form containing the following statement: "Your
contract does not cover procedures which are experimental or whose effectiveness is not generally recognized
by an appropriate governmental agency." Apparently, the
procedure had in fact been approved by the Federal Food
and Drug Administration, National Center for Devices
and Radiological Health.
50147014v1
After several times notifying defendant of the FDA
approval and unsuccessfully seeking correction of the
statement, on May 2, 1985, plaintiff drew up a summons
and complaint for defamation. In the complaint, plaintiff
pleaded that hundreds of his patients who had received
defendant's rejection notice condemned him for using an
unapproved, experimental nuclear procedure that could
harm them physically. Plaintiff alleged that Blue Cross
knew that the language used in rejecting his patients'
claims was false and fraudulent, but [*591] that it
nonetheless persisted in sending the statement to his patients, gravely damaging his practice and reputation.
The focus of this appeal is an internal Blue Cross
memorandum dated May 2, 1985 -- the date of the summons and complaint -- from Edward Blaney, Jr., to Dr.
Mordecai Berkun. Blaney was a lawyer employed by
Blue Cross on its counsel's staff, not a company officer;
Berkun was an officer of Blue Cross and its Medical
Director. Copies of the memorandum were indicated for
C. Ammarati, Blue Cross Vice-President of Professional
Affairs (Berkun's staff superior), and J. L. Shurtleff, Blue
Cross Vice-President and General Counsel (Blaney's staff
superior).
In response to discovery requests, defendant identified the Blaney memorandum but withheld production on
grounds of attorney-client privilege, work product and
material prepared for litigation. While the document has
not been made public, defendant has described its contents, paragraph by paragraph, as follows. According to
defendant, the first paragraph refers to conversations
between Blaney and plaintiff's attorney regarding a possible defamation suit based on the rejection form; the
second concerns conversations between Blaney and the
FDA regarding plaintiff's NMR Imaging System; the third
paragraph sets forth Blaney's understanding of Blue
Cross' NMR reimbursement policy and his understanding
of new language that was going to be used to deny NMR
claims; and the final paragraph expresses Blaney's opinion and advice regarding the rejection language of the
form, and requesting comments from the Medical Director.
On plaintiff's motion for production of the memorandum in its entirety, Supreme Court reviewed the
document in camera and directed that it be turned over to
plaintiff. A divided Appellate Division reversed, concluding that the memorandum was a privileged attorney-client communication as well as work product, and it
granted plaintiff leave to appeal to this court on a certified
question. The dissenters would have ordered production
because the thrust of the memorandum "concerns the
quality of a business judgment and does not in any significant way involve a lawyer's learning and professional
skills reflecting legal research or theory." (140 AD2d 198,
201.) We now affirm on the ground that the memorandum
is privileged, and therefore do not reach the alternative
arguments advanced by defendant.
To begin with points of agreement, no one questions
that [HN1] [*592] corporations, as other clients, may
avail themselves of the attorney-client privilege for confidential communications with attorneys relating to
[**705] their legal matters (see, Upjohn Co. v United
States, 449 U.S. 383; [***510] 5 Weinstein-Korn-Miller,
NY Civ Prac para. 4503.06; McCormick, Evidence § 87,
at 206-209 [Cleary 3d ed 1984]). A corporation's communications with counsel, no less than the communications of other clients with counsel, are encompassed
within the legislative purposes of CPLR 4503, which
include fostering uninhibited dialogue between lawyers
and clients in their professional engagements, thereby
ultimately promoting the administration of justice (see,
Matter of Vanderbilt [Rosner -- Hickey], 57 NY2d 66, 76;
Matter of Priest v Hennessy, 51 NY2d 62, 67-68; Matter
of Jacqueline F., 47 NY2d 215, 218-219; Hurlburt v
Hurlburt, 128 NY 420, 424). The privilege applies to
communications with attorneys, whether corporate staff
counsel or outside counsel (see, e.g., Allied Artists Picture
Corp. v Raab Prods., 38 AD2d 537). Finally, while the
cases largely concern communications by clients to their
attorneys, CPLR 4503 speaks of communications "between the attorney * * * and the client" (CPLR 4503 [a]),
and the privilege thus plainly extends as well to the attorney's own communications to the client ( Matter of
Creekmore, 1 NY2d 284, 296; Richardson, Evidence §
415, at 410 [Prince 10th ed]; 5 Weinstein-Korn-Miller,
NY Civ Prac para. 4503.11a).
Beyond these points of agreement, the attorney-corporate client privilege has raised nettlesome
questions -- particularly as to communications from corporate agents to counsel (see, e.g., Waldman, Beyond
Upjohn: The Attorney-Client Privilege in the Corporate
Context, 28 Wm & Mary L Rev 473 [1987]; Saltzburg,
Corporate and Related Attorney-Client Privilege Claims:
A Suggested Approach, 12 Hofstra L Rev 279 [1984];
Sexton, A Post-Upjohn Consideration of the Corporate
Attorney-Client Privilege, 57 NYU L Rev 443 [1982]).
But even where the communication in issue is -- as here -from the staff attorney to the corporate agent, difficult
questions may arise.
For example, [HN2] unlike the situation where a
client individually engages a lawyer in a particular matter,
staff attorneys may serve as company officers, with mixed
business-legal responsibility; whether or not officers,
their day-to-day involvement in their employers' affairs
may blur the line between legal and nonlegal communications; and their advice may originate not in response to
the client's consultation about a particular problem but
with them, as part of an ongoing, [*593] permanent
relationship with the organization. In that the privilege
50147014v1
obstructs the truth-finding process and its scope is limited
to that which is necessary to achieve its purpose ( Matter
of Priest v Hennessy, supra, at 68; Matter of Jacqueline
F., supra, at 219), the need to apply it cautiously and
narrowly is heightened in the case of corporate staff
counsel, lest the mere participation of an attorney be used
to seal off disclosure (see, Simon, The Attorney-Client
Privilege as Applied to Corporations, 65 Yale LJ 953,
970-973 [1956]; 5 Weinstein-Korn-Miller, NY Civ Prac
para. 4503.06).
Obviously, [HN3] not every communication from
staff counsel to the corporate client is privileged. It is
equally apparent that no ready test exists for distinguishing between protected legal communications and unprotected business or personal communications; the inquiry
is necessarily fact-specific (8 Wigmore, Evidence § 2296,
at 566-567 [McNaughton rev ed 1961]). However, certain guideposts to reaching this determination may be
identified by looking to the particular communication at
issue in this case. Here, as the Appellate Division noted,
the "memorandum is clearly an internal, confidential
document. Nothing indicates that anyone outside the
defendant company had access to it." (140 AD2d, at 199.)
Moreover, there is no dispute as to the author's status or
role. Blaney functioned as a lawyer, and solely as a
lawyer, for defendant client; he had no other responsibility within the organization. His communication to his
client was plainly made in the role of attorney. [HN4]
[**706]
For the privilege to apply when communications are
made from client to attorney, [***511] they "must be
made for the purpose of obtaining legal advice and directed to an attorney who has been consulted for that
purpose." ( Matter of Grand Jury Subpoena [Bekins
Record Stor. Co.]., 62 NY2d 324, 329.) By analogy, for
the privilege to apply when communications are made
from attorney to client -- whether or not in response to a
particular request -- they must be made for the purpose of
facilitating the rendition of legal advice or services, in the
course of a professional relationship (see, Matter of
Creekmore, supra, at 296). Here that test is met.
The subject of the memorandum was plaintiff's imminent defamation suit based on the language of defendant's rejection form. The memorandum, written the
very day plaintiff's summons and complaint were drafted,
began by referring to Blaney's conversations with plaintiff's counsel and went on to express the lawyer's views
regarding the rejection language of [*594] the form.
[HN5] Communications from an attorney to a client
dealing with the substance of imminent litigation generally will fall into the area of legal rather than business or
personal matters (see, Britton v Lorenz, 45 NY 51, 57;
Whiting v Barney, 30 NY 330, 334). That the memorandum does not reflect legal research is not determina-
tive, where the communication concerns legal rights and
obligations and where it evidences other professional
skills such as lawyer's judgment and recommended legal
strategies (see, 8 Wigmore, Evidence § 2296, at 567
[McNaughton rev ed 1961]).
[HN6] So long as the communication is primarily or
predominantly of a legal character, the privilege is not lost
merely by reason of the fact that it also refers to certain
nonlegal matters (id.; see also, Gergacz, Attorney-Corporate Client Privilege, at 3-30 [1987]). Indeed,
the nature of a lawyer's role is such that legal advice may
often include reference to other relevant considerations
(see, United States v United Shoe Mach. Corp., 89 F Supp
357, 359). Here, it is plain from the content and context of
the communication that it was for the purpose of facilitating the lawyer's rendition of legal advice to his client.
While we are mindful of the concern that mere participation of staff counsel not be used to seal off discovery of
corporate communications, here "[nothing] suggests that
this is a situation where a document was passed on to a
defendant's attorney in order to avoid its disclosure." (140
AD2d, at 199 [citing Radiant Burners v American Gas
Assn., 320 F2d 314, cert denied 375 U.S. 929].) It appears
that Blaney was exercising a lawyer's traditional function
in counseling his client regarding conduct that had already
brought it to the brink of litigation.
Plaintiff finally asserts that even if the memorandum
is privileged, the privilege should give way to "strong
public policy considerations," citing Matter of Priest v
Hennessy (51 NY2d 62, supra) and Matter of Jacqueline
F. (47 NY2d 215, supra). The "strong public policy
considerations" are defendant's alleged massive fraud and
Blaney's death. Neither the nature of the alleged wrong
nor the attorney's unavailability rises to the level of subverting the lawful and honest purposes for which the
privilege exists; indeed, were Blaney alive, the communication still would be shielded from discovery. Protecting this memorandum from disclosure in plaintiff's defamation action is, in the circumstances, consistent with
the lawful and honest aims of the privilege to foster uninhibited communication between lawyer and client in the
fulfillment of the professional relationship.
[*595] Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified
question answered in the affirmative.
50147014v1
In re STEINHARDT PARTNERS, L.P., STEINHARDT MANAGEMENT CO.,
INC., and MICHAEL STEINHARDT, Defendants-Petitioners. SALOMON
BROTHERS TREASURY LITIGATION Plaintiff-Respondent, v. STEINHARDT
PARTNERS, L.P., STEINHARDT MANAGEMENT CO., INC., and MICHAEL
STEINHARDT, Defendants-Petitioners. SECURITIES AND EXCHANGE
COMMISSION, Amicus Curiae.
Docket No. 93-3079
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
9 F.3d 230; 1993 U.S. App. LEXIS 28979; Fed. Sec. L. Rep. (CCH) P97,818; 27
Fed. R. Serv. 3d (Callaghan) 726
October 15, 1993, Argued
November 8, 1993, Decided
SUBSEQUENT HISTORY: [**1] As Amended November 22, 1993.
PRIOR HISTORY: Petition for a writ of mandamus to
set aside an Opinion and Order of the United States District Court for the Southern District of New York, Patterson, J., dated June 30, 1993, granting plaintiff's motion
to compel production of documents.
DISPOSITION: The petition is denied. $
COUNSEL: TFREDERICK P. SCHAFFER (Argued),
Schulte Roth & Zabel, New York, NY, for Defendants-Petitioners Steinhardt Partners, L.P., Steinhardt
Management Co., Inc. and Michael Steinhardt.
THEODORE V. WELLS, JR., Lowenstein, Sandler,
Kohl, Fisher & Boylan, Roseland, NJ, for Defendant-Petitioner Michael Steinhardt. KAREN MORRIS
(Argued), Morris & Morris, Wilmington, DE, for Plaintiff-Respondent Salomon Brothers Treasury Litigation.
STANLEY M. GROSSMAN, Pomerantz Levy Haudek
Block & Grossman, New York, NY, for Plaintiff-Respondent Salomon Brothers Treasury Litigation.
JULES BRODY, Stull, Stull & Brody, New York, NY,
for Plaintiff-Respondent Salomon Brothers Treasury
Litigation.
PAUL GONSON, Solicitor, Securities and Exchange
Commission, Washington, DC, for Amicus Curiae Securities and Exchange Commission.
JUDGES: Before: NEWMAN, Chief Judge, KEARSE,
Circuit Judge, and TENNEY n1, District Judge.
50147014v1
n1 The Honorable Charles H. Tenney, Senior
United States District Judge for the Southern
District of New York, sitting by designation.
[**2]
OPINIONBY: TENNEY
OPINION:
[*232] TENNEY, District Judge:
Defendants-petitioners Steinhardt Partners, L.P.,
Steinhardt Management Co. and Michael Steinhardt
(collectively "Steinhardt") are codefendants with several
other parties in a civil class action suit alleging manipulation of the market for two-year Treasury notes during
the Spring and Summer of 1991. In answer to a discovery
request in the class action suit, Steinhardt identified as
responsive a memorandum prepared by its attorneys and
previously submitted to the Securities and Exchange
Commission (SEC). Steinhardt declined to produce the
memorandum, claiming that the memorandum was attorney work product. Plaintiffs moved to compel production. The district court granted the motion to compel,
holding that the prior disclosure of the memorandum to
the SEC waived the claim for work product protection.
Steinhardt filed this petition for a writ of mandamus to
prevent discovery of the document. The court's jurisdiction arises under 28 U.S.C. § 1651 and the petition is
denied.
Background
This petition for a writ of mandamus arises out of highly
publicized allegations of wrongdoing in the market for
Treasury notes. In [**3] June 1991, the SEC began an
informal investigation of the Treasury markets. As part of
this informal investigation, the SEC asked Steinhardt,
among many others, to provide certain documents related
to its trading activities. In August of 1991, the SEC began
a formal investigation of the Treasury markets, and issued
subpoenas to Steinhardt and others. Steinhardt complied
with these subpoenas.
In the Spring of 1992, the SEC's Enforcement Division solicited Steinhardt's views regarding several issues
in the investigation. The SEC explained to counsel that it
had not yet decided whether to initiate enforcement proceedings against Steinhardt. Apparently, existing case law
did not provide complete answers to some of the possible
legal bases for an enforcement action in the Treasury
markets. After two meetings between the SEC and
Steinhardt, the Enforcement Division asked Steinhardt's
counsel to submit a memorandum that would address the
facts and issues involved in the case and discuss the relevant legal theories. Steinhardt claims that the SEC stated
that this would not be a so-called Wells submission, although the SEC's amicus brief now characterizes the
memorandum as a Wells [**4] submission. See 17
C.F.R. § 202.5(c). We do not address the question of
whether the memorandum was in fact a Wells submission,
since we do not believe that characterizing the memorandum as such alters our conclusion.
Counsel prepared and submitted a memorandum and
accompanying exhibits to the SEC on June 26, 1992. A
notice reading "FOIA Confidential Treatment Requested"
appeared on the document. Steinhardt does not dispute the
SEC's assertion that there was no agreement that the SEC
would maintain the confidentiality of the memorandum.
See Amicus Brief of SEC at 8. To date, the SEC has not
brought any enforcement proceedings against Steinhardt
related to its trading activities in the Treasury markets
during 1991.
While the SEC investigated the Treasury markets,
civil suits commenced against Steinhardt and numerous
other defendants. Now consolidated as a class action, the
suits allege various acts of fraud and manipulation in the
Treasury markets, and have not reached a hearing on the
merits. During discovery, plaintiffs requested all documents previously produced by defendants to any investigating government agency. Steinhardt identified the June
26, 1992 memorandum as [**5] responsive to the request, but declined to produce the document, citing the
work product doctrine. On June 3, 1993, plaintiffs moved
to compel production of the memorandum. After hearing
the parties on June 17, 1993, the district court granted the
motion to compel [*233] on June 30, 1993. Steinhardt
promptly filed a petition for mandamus. This court entered a stay of the order compelling production, pending
consideration of the petition for mandamus.
50147014v1
Discussion
I.
As a threshold matter, the court must determine
whether it will use mandamus to review the district court's
order compelling production of the memorandum. We
have consistently expressed reluctance to use mandamus
as a means to circumvent [HN1] the general rule that
pretrial discovery orders are not appealable. In re W.R.
Grace & Co., 984 F.2d 587, 589 (2d Cir. 1993). "Unlike
other circuits, we have rarely used the extraordinary writ
of mandamus to overturn a discovery order involving a
claim of privilege." Chase Manhattan Bank, N.A. v.
Turner & Newall, PLC, 964 F.2d 159, 163 (2d Cir. 1992).
[HN2] The circuit will use mandamus to review discovery
orders involving a claim of privilege [**6] only when:
(i) an issue of importance and of first impression is raised; (ii) the privilege will be
lost in the particular case if review must
await a final judgment; and (iii) immediate
resolution will avoid the development of
discovery practices or doctrine undermining the privilege.
W.R. Grace, 984 F.2d at 589, quoting Turner & Newall,
964 F.2d at 163.
This dispute presents one of the very rare circumstances permitting the use of mandamus to review a district court order. The circuit has not previously resolved
the important question of whether disclosure of attorney
work product in connection with a government investigation waives the privilege in later civil discovery. The
district courts of the circuit have addressed similar questions, arriving at different results. See Enron Corp. v.
Borget, 1990 U.S. Dist. LEXIS 12471, 1990 WL 144879
(S.D.N.Y. Sept. 22, 1990) (no waiver of work product
protection); Teachers Ins. & Annuity Ass'n v. Shamrock
Broadcasting Co., 521 F. Supp. 638 (S.D.N.Y. 1981)
(disclosure to SEC waived attorney-client privilege);
Byrnes v. IDS Realty Trust, 85 F.R.D. 679 (S.D.N.Y.
1980) [**7] (applying Eighth Circuit law and holding
attorney-client privilege not waived); GAF Corp. v.
Eastman Kodak Co., 85 F.R.D. 46 (S.D.N.Y. 1979) (no
waiver of work product protection). The circuits have also
split on this issue. Compare Westinghouse Elec. Corp. v.
Republic of the Philippines, 951 F.2d 1414 (3rd Cir.
1991) (waiver of work product and attorney-client privilege upon voluntary disclosure of information to SEC and
Department of Justice) and In re Subpoenas Duces Tecum, 738 F.2d 1367, 238 U.S. App. D.C. 221, (D.C. Cir.
1984) (waiver of work product and attorney-client privi-
lege upon voluntary disclosure of information to SEC)
with Diversified Indus., Inc. v. Meredith, 572 F.2d 596,
606 (8th Cir. 1977) (en banc) (no waiver of attorney-client
privilege).
In addition, the alleged privilege will be lost if review
must await final judgment. Disclosure of the memorandum will destroy the alleged privilege and moot the
question. As to the final part of the Turner & Newall test,
Steinhardt's argument that the district court's order will
lead to discovery practices undermining the privilege
[**8] is not a mere conclusory allegation, but is supported
by the decisions of at least one circuit. See Diversified,
572 F.2d at 611. Given the fact that this court is yet to
resolve this important issue, a decision from at least one
circuit supporting petitioner's argument that the district
court's order undermines the privilege, and the need for
immediate resolution before the alleged privilege is lost,
this petition satisfies the conditions of the Turner &
Newall test.
II.
[HN3] On the merits, we apply a stringent standard of
review to petitions for mandamus. [HN4] The petitioner
must show that he or she lacks an adequate alternative
means to obtain the relief sought, and must demonstrate a
clear and indisputable right to the issuance of the writ,
amounting to a clear abuse of discretion or a usurpation of
judicial power. Mallard v. United States District Court,
490 U.S. 296, 309, 104 L. Ed. 2d 318, 109 S. Ct. 1814
(1989). This standard requires a showing of an "extreme
need for reversal." In re Weisman, 835 F.2d 23, 27 [*234]
(2d Cir. 1987). It is not enough that the court of appeals
might disagree with the district judge's decision were
[**9] it a conventional appeal from a final judgment. Id.
"'Even if the judge was wrong, indeed very wrong . . . that
is not enough.'" Id., quoting United States v. DiStefano,
464 F.2d 845, 850 (2d Cir. 1972).
In considering the merits, we do not address the
question of whether the memorandum actually constituted
attorney work product. The record does not state that the
district judge conducted an in camera review of the
memorandum to determine whether it was indeed work
product. Believing the question of waiver dispositive of
the motion, the district court stated that "the present motion involves only whether the protection of the
work-product doctrine has been waived as to the Memorandum, not whether the protection ever existed." A66.
The record indicates that in the district court, plaintiffs did
not dispute the fact that the memorandum constituted
attorney work product. See id. Since the issue was not
raised in the district court, we accept the district court's
assumption that the memorandum includes the mental
impressions, conclusions, opinions, or legal theories of an
attorney within the meaning of Fed. R. Civ. P. 26(3).
50147014v1
The district [**10] court found that Steinhardt had
disclosed the work product to an adversary, and that the
disclosure was voluntary. A65. The district court then
held, as a matter of law, that the voluntary disclosure
waived the privilege in this subsequent civil suit. The
district court followed the analysis of the Westinghouse
and In re Subpoenas Duces Tecum opinions that the policy considerations behind the work product doctrine do
not merit the creation of an exception to the waiver rule.
A69.
The district court's finding that Steinhardt voluntarily
disclosed the memorandum to an adversary was not erroneous. The court correctly concluded that Steinhardt
disclosed the memorandum voluntarily. The declarations
submitted by Steinhardt in connection with the motion to
compel do not allege that the SEC coerced or required
compliance in any way. This case is therefore distinguishable from situations in which disclosure to an adversary is only obtained through compulsory legal process. See generally, In re Subpoenas Duces Tecum, 738
F.2d at 1373.
We agree with the district court's conclusion that the
SEC stood in an adversarial position to Steinhardt when it
[**11] requested assistance. See e.g., Westinghouse, 951
F.2d at 1428; In re Subpoenas Duces Tecum, 738 F.2d at
1372. This was not a case in which a party complied with
a benign request to assist the SEC in performing its routine regulatory duties. The determinative fact in analyzing
the adversarial nature of the relationship is that Steinhardt
knew that it was the subject of an SEC investigation, and
that the memorandum was sought as part of this investigation. The fact that the request came from the SEC's
Enforcement Division further supports the conclusion that
this was an adversarial relationship. Even though the
SEC's investigation has not resulted in any formal enforcement proceedings against Steinhardt, the presence of
an adversarial relationship does not depend on the existence of litigation. Additionally, the fact that Steinhardt
cooperated voluntarily does not transform the relationship
from adversarial to friendly.
Given these findings of fact by the district court, we
now turn to its holding that voluntary disclosure to the
SEC waived the privilege as a matter of law. The logic
behind the work product doctrine [**12] is that opposing
counsel should not enjoy free access to an attorney's
thought processes. Hickman v. Taylor, 329 U.S. 495,
511, 91 L. Ed. 451, 67 S. Ct. 385 (1947); In the Matter of
Grand Jury Subpoenas, 959 F.2d 1158, 1166-67 (2nd Cir.
1992). [HN5] An attorney's protected thought processes
include preparing legal theories, planning litigation
strategies and trial tactics, and sifting through information. See Hickman, 329 U.S. at 511. "At its core, the
work-product doctrine 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, 45 L. Ed. 2d 141, 95 S. Ct.
2160 (1975). "The doctrine grants counsel an opportunity
to think or prepare a client's case without fear of intrusion
by an adversary." In re Six Grand Jury Witnesses, 979
F.2d 939, 944 (2d [*235] Cir. 1992), cert. denied, 113 S.
Ct. 2997 (1993).
Common sense and the practicalities of litigation
define the limits of the work product doctrine. Nobles,
422 U.S. at 238. [**13] Once a party allows an adversary
to share the otherwise privileged thought processes of
counsel, the need for the privilege disappears. Courts
therefore accept the waiver doctrine as a limitation on
work product protection. [HN6] The waiver doctrine
provides that voluntary disclosure of work product to an
adversary waives the privilege as to other parties. See
Nobles, 422 U.S. at 239; In re John Doe Corp., 675 F.2d
482, 489 (2d Cir. 1982).
Steinhardt relies on the Eighth Circuit's opinion in
Diversified for the proposition that voluntary disclosure
of privileged material to an investigatory government
agency does not waive the privilege as to subsequent
private litigants. The en banc opinion in Diversified addressed this question in the context of the attorney-client
privilege, rather than in the context of the work product
doctrine. See Diversified, 572 F.2d at 611 n.4. This is not
fatal to Steinhardt's argument, since much of the reasoning in Diversified has equal, if not greater, applicability in
the context of the work product doctrine.
Examination of conflicting authority and of [**14]
the purposes of the work product doctrine convinces us
that Steinhardt waived any work product protection by
voluntarily submitting the memorandum to the SEC. The
Diversified opinion based its "selective waiver" theory on
the policy consideration that if voluntary disclosure to the
SEC waives privilege as to subsequent private litigants,
parties might be discouraged from cooperating with governmental investigations. Id.; see also Byrnes, 85 F.R.D.
at 688-89. Corporations might also hesitate before initiating an independent investigation of wrongdoing within
the corporation when asked to by government authorities.
Diversified, 572 F.2d at 611.
However, the Supreme Court has rejected attempts to
use "the work-product doctrine to sustain a unilateral
testimonial use of work-product materials . . . ." Nobles,
422 U.S. at 239-40. We have previously denied a claim of
privilege after a claimant decided to selectively disclose
confidential materials in order to achieve other beneficial
purposes. In re John Doe Corp., 675 F.2d at 489. Similarly, we now reject [**15] Steinhardt's attempt to use the
doctrine to sustain the unilateral use of a memorandum
containing counsel's legal theories voluntarily submitted
to an investigatory body.
50147014v1
The D.C. Circuit rejected the selective waiver theory,
in part based on the perception that the selective waiver
doctrine allows a party to manipulate use of the privilege
through selective assertion. Permian Corp. v. United
States, 665 F.2d 1214, 1221, 214 U.S. App. D.C. 396
(D.C. Cir. 1981). We agree that selective assertion of
privilege should not be merely another brush on an attorney's palette, utilized and manipulated to gain tactical
or strategic advantage. The Permian court noted that the
basis for the attorney-client privilege is that frank communication between attorney and client will be fostered
by confidentiality, and that the "privilege ceases when the
client does not appear to have been desirous of secrecy. . .
. Voluntary cooperation with government investigations
may be a laudable activity, but it is hard to understand
how such conduct improves the attorney-client relationship." Id. at 1220-21. [HN7] "The client cannot be permitted to pick and choose among his [**16] opponents,
waiving the privilege for some and resurrecting the claim
of confidentiality to obstruct others, or to invoke the
privilege as to communications whose confidentiality he
has already compromised for his own benefit." Id. at
1221. Although Permian was limited to a discussion of the
attorney-client privilege, the D.C. and Third Circuits
applied similar reasoning to work product in In re Sealed
Case, 676 F.2d 793, 219 U.S. App. D.C. 195, (D.C. Cir.
1982), and Westinghouse Elec. Corp. v. Republic of the
Philippines, 951 F.2d 1414 (3rd Cir. 1991), respectively.
Voluntary disclosure is generally made because a corporation believes that there is some benefit to be gained from
disclosure. See generally, James D. Cox, Insider Trading
Regulation and the Production of Evidence, 64 Wash.
U.L.Q. 421 (1986) (analyzing market incentives for disclosure of positive [*236] and negative information).
The SEC's amicus brief argues convincingly that the
protection of privilege is not required to encourage compliance with SEC requests for cooperation with investigations. See Amicus Brief [**17] of SEC at 20-25. The
SEC has continued to receive voluntary cooperation from
subjects of investigations, notwithstanding the rejection
of the selective waiver doctrine by two circuits and public
statements from Directors of the Enforcement Division
that the SEC considers voluntary disclosures to be discoverable and admissible. See id. at 3, 20-25; SEC Form
1662.
The D.C. Circuit recognizes that a corporation has
substantial incentives to cooperate with SEC requests for
assistance. Voluntary cooperation offers a corporation an
opportunity to avoid extended formal investigation and
enforcement litigation by the SEC, the possibility of leniency for prior misdeeds, and an opportunity to narrow
the issues in any resulting litigation. In re Subpoenas
Duces Tecum, 738 F.2d at 1369; In re Sealed Case, 676
F.2d at 801; see In re Worlds of Wonder Securities Liti-
gation, 147 F.R.D. 208, 213 (N.D. Cal. 1992). These
incentives exist regardless of whether private third party
litigants have access to attorney work product disclosed to
the SEC. "When a corporation elects to participate in a
voluntary disclosure [**18] program like the SEC's, it
necessarily decides that the benefits of participation
outweigh the benefits of confidentiality . . . . It forgoes
some of the traditional protections of the adversary system in order to avoid some of the traditional burdens that
accompany adversary resolution of disputes, especially
disputes with such formidable adversaries as the SEC." In
re Subpoenas Duces Tecum, 738 F.2d at 1372; quoting In
re Sealed Case, 676 F.2d at 822-23.
Petitioner alleges that a denial of the petition will
present those in similar situations with a Hobson's choice
between waiving work product protection through cooperation with investigatory authorities, or not cooperating
with the authorities. Whether characterized as forcing a
party in between a Scylla and Charybdis, a rock and a hard
place, or some other tired but equally evocative metaphoric cliche, the "Hobson's choice" argument is unpersuasive given the facts of this case. [HN8] An allegation
that a party facing a federal investigation and the prospect
of a civil fraud suit must make difficult choices is insufficient justification for carving a substantial exception
[**19] to the waiver doctrine.
In denying the petition, we decline to adopt a per se
rule that all voluntary disclosures to the government
waive work product protection. [HN9] Crafting rules
relating to privilege in matters of governmental investi-
50147014v1
gations must be done on a case-by-case basis. Upjohn Co.
v. United States, 449 U.S. 383, 396, 66 L. Ed. 2d 584, 101
S. Ct. 677 (1981); see In re Six Grand Jury Witnesses, 979
F.2d at 944 (work product doctrine to be applied in a
common sense manner in light of reason and experience
as determined on a case-by-case basis). Establishing a
rigid rule would fail to anticipate situations in which the
disclosing party and the government may share a common
interest in developing legal theories and analyzing information, or situations in which the SEC and the disclosing party have entered into an explicit agreement that
the SEC will maintain the confidentiality of the disclosed
materials. See In re Sealed Case, 676 F.2d at 817 (work
product protection only waived if privileged material is
disclosed to a party who doesn't share such common interests); In re LTV Securities Litigation, 89 F.R.D. 595,
614-15 (N.D. Tex. 1981) [**20] (SEC and corporation
shared interest in analyzing facts and legal theories upon
appointment of an independent special investigatory officer by consent decree).
Conclusion
At the time of the submission of the memorandum to the
Enforcement Division, the SEC and Steinhardt stood in an
adversarial position. Steinhardt's voluntary submission of
the memorandum to the Enforcement Division waived the
protections of the work product doctrine as to subsequent
civil litigants seeking the memorandum from Steinhardt.
The petition is denied and the stay is lifted.
In Re NATURAL GAS COMMODITY LITIGATION
03 Civ. 6186 (VM) (AJP)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK
2005 U.S. Dist. LEXIS 11950
June 21, 2005, Decided
SUBSEQUENT HISTORY: Motion denied by In re
Natural Gas Commodity Litig., 2005 U.S. Dist. LEXIS
14142 (S.D.N.Y., July 15, 2005)
PRIOR HISTORY: In re Natural Gas Commodity
Litig., 358 F. Supp. 2d 336, 2005 U.S. Dist. LEXIS 2870
(S.D.N.Y., 2005)
COUNSEL: [*1] For Conerstone Propane Partners,
L.P., individually and on behalf of all others similarly
situated, Plaintiff: Ali Oromchian, Finkelstein Thompson
& Loughram, San Francisco, Ca; Bernard Persky, Craig
L. Briskin, Vaishali Shetty, Goodkind Labaton Rudoff &
Sucharow LLP, New York, NY.
For Roberto E. Calle Gracey, Consol Plaintiff: Ali
Oromchian, Finkelstein Thompson & Loughram, San
Francisco, Ca; Bernard Persky, Craig L. Briskin, Vaishali
Shetty, Goodkind Labaton Rudoff & Sucharow LLP, New
York, NY; Christopher J. Gray, Law Office of Christopher J. Gray, P.C., New York, NY; Christopher Lovell,
Gary S. Jacobson, Lovell, Stewart, Halebian, L.L.P., New
York, NY; Louis F. Burke, Louis F. Burke, P.C., New
York, NY.
For Dominick Viola, Jr., Consol Plaintiff: Ali Oromchian,
Finkelstein Thompson & Loughram, San Francisco, Ca;
Bernard Persky, Craig L. Briskin, Vaishali Shetty,
Goodkind Labaton Rudoff & Sucharow LLP, New York,
NY.
For Reliant Energy Services, Inc., Defendant: Gregory
Copeland, Holly Roberts, J. Michael Baldwin, James
Hail, Mark Robeck, Baker Botts, L.L.P., Houston, TX;
Paul Anthony Ragsua, Baker Botts LLP (NY), New York,
NY; Diana L. Weiss, Orrick, Herrington & Sutcliffe [*2]
LLP, New York, NY; Douglas R. Tribble, Pillsbury
Winthrop LLP, San Diego, CA; Jonathan L. Abram,
Hogan & Hartson, L.L.P., New York, NY.
For Centerpoint Energy Houston Electric, L.L.C., Defendant: Blossom Kan, John L. Hendricks, Orrin L. Har50147014v1
rison, III, Akin Gump Strauss Hauer & Feld LLP (NYC),
New York, NY.
For Dynegy Marketing and Trade, Defendant: J. Michael
Baldwain, Baker Botts, L.L.P., Houston, TX; Diana L.
Weiss, Orrick, Herrington & Sutcliffe LLP, New York,
NY; Douglas R. Tribble, Michael J. Kass, Pillsbury
Winthrop LLP, San Diego, CA; Jonathan L. Abram,
Hogan & Hartson, L.L.P., New York, NY; Mark Robert
Hellerer, Pillsbury Winthrop Shaw Pittman, LLP (NY),
New York, NY.
For Dygeny Holdings, Inc., Dygeny, Inc., Defendants:
Mark Robert Hellerer, Pillsbury Winthrop Shaw Pittman,
LLP (NY), New York, NY; Douglas R. Tribble, Pillsbury
Winthrop LLP, San Diego, CA; Michael J. Kass, Pillsbury Winthrop LLP, San Francisco, CA.
For Aquila Energy Marketing Corp., Aquila Merchant
Service, Inc., Defendants: J. Michael Baldwain, Baker
Botts, L.L.P., Houston, TX; Diana L. Weiss, Orrick,
Herrington & Sutcliffe LLP, New York, NY; Douglas R.
Tribble, Pillsbury Winthrop LLP, San [*3] Diego, CA;
Jonathan L. Abram, Hogan & Hartson, L.L.P., New York,
NY.
For AEP Energy Service, American Electric Power
Company, Inc., Defendants: J. Michael Baldwain, Baker
Botts, L.L.P., Houston, TX; Diana L. Weiss, Orrick,
Herrington & Sutcliffe LLP, New York, NY; Douglas R.
Tribble, Pillsbury Winthrop LLP, San Diego, CA; Jonathan L. Abram, Hogan & Hartson, L.L.P., New York, NY;
Steven J. Routh, Hogan & Hartson, LLP, Washington,
DC.
For El Paso Merchant Energy, L.P., El Paso Corporation,
Defendants: J. Michael Baldwain, Baker Botts, L.L.P.,
Houston, TX; Diana L. Weiss, Orrick, Herrington &
Sutcliffe LLP, New York, NY; Douglas R. Tribble,
Pillsbury Winthrop LLP, San Diego, CA; Jonathan L.
Abram, Hogan & Hartson, L.L.P., New York, NY;
Stephanie J. Goldstein, Fried, Frank, Harris, Shriver &
Jacobson, New York, NY.
For Williams Energy Marketing and Trading Company,
Williams Companies, Inc., Defendants: J. Michael
Baldwain, Baker Botts, L.L.P., Houston, TX; Diana L.
Weiss, Orrick, Herrington & Sutcliffe LLP, New York,
NY; Douglas R. Tribble, Pillsbury Winthrop LLP, San
Diego, CA; Jonathan L. Abram, Hogan & Hartson,
L.L.P., New York, NY; Jeffrey M. Shohet, Mark H.
Hamer, Noah [*4] A. Katsell, DLA Piper Rudnick Gray
Cary US LLP, San Diego, CA; Stanley J. Panikowski,
Gray Cary Ware & Freidenrich LLP, San Diego, CA.
For Duke Energy Corporation, Defendant: Peter Joseph
Kadzik, Dickenstein, Shapiro, Morin & Oshinsky, L.L.P.,
Washington, DC.
For CMS Energy Corporation, Defendant: J. Michael
Baldwain, Baker Botts, L.L.P., Houston, TX; Diana L.
Weiss, Orrick, Herrington & Sutcliffe LLP, New York,
NY; Douglas R. Tribble, Pillsbury Winthrop LLP, San
Diego, CA; Jonathan L. Abram, Hogan & Hartson,
L.L.P., New York, NY; Banks Brown, Patrick S. Sinclair,
Robert E. Rice, McDermott, Will & Emery, New York,
NY.
For Sempra Energy, Defendant: Melvin Arnold Brosterman, Stroock & Stroock & Lavan LLP, New York, NY.
For Enserco Energy, Inc., Defendant: Richard P. Swanson, Thelen, Reid & Priest, L.L.P., New York, NY.
For WD Energy Services, Encana Corporation, Defendants: J. Michael Baldwain, Baker Botts, L.L.P., Houston,
TX; Diana L. Weiss, Orrick, Herrington & Sutcliffe LLP,
New York, NY; Douglas R. Tribble, Pillsbury Winthrop
LLP, San Diego, CA; Jonathan L. Abram, Hogan &
Hartson, L.L.P., New York, NY; Robert A. Sacks, Sullivan & Cromwell, Los Angeles, CA. [*5]
For Entergy-Kock Trading, L.P., Defendant: J. Michael
Baldwain, Baker Botts, L.L.P., Houston, TX; Diana L.
Weiss, Orrick, Herrington & Sutcliffe LLP, New York,
NY; Douglas R. Tribble, Pillsbury Winthrop LLP, San
Diego, CA; Jonathan L. Abram, Hogan & Hartson,
L.L.P., New York, NY; Jill Diane Fairbrother, Kenneth
M. Raisler, Sullivan and Cromwell, LLP(NYC), New
York, NY.
For Kock Industries, Inc., Defendant: J. Michael Baldwain, Baker Botts, L.L.P., Houston, TX; Diana L. Weiss,
Orrick, Herrington & Sutcliffe LLP, New York, NY;
Douglas R. Tribble, Pillsbury Winthrop LLP, San Diego,
CA; Jonathan L. Abram, Hogan & Hartson, L.L.P., New
York, NY; Kenneth Conboy, Latham & Watkins, LLP,
New York, NY.
50147014v1
For Cook Inlet Energy Supply, L.L.C., Defendant: J.
Michael Baldwain, Baker Botts, L.L.P., Houston, TX;
Diana L. Weiss, Orrick, Herrington & Sutcliffe LLP, New
York, NY; Douglas R. Tribble, Pillsbury Winthrop LLP,
San Diego, CA; Jonathan L. Abram, Hogan & Hartson,
L.L.P., New York, NY; Mary Anne Sullivan, William H.
Johnson, Hogan & Hartson, L.L.P., Washington, DC.
For Cook Inlet Region, Inc., Inupait Energy Corporation,
Defendants: Mary Anne Sullivan, William H. Johnson,
Hogan [*6] & Hartson, L.L.P., Washington, DC.
For Midamerican Energy Company, Defendant: J. Michael Baldwain, Baker Botts, L.L.P., Houston, TX; Diana
L. Weiss, Orrick, Herrington & Sutcliffe LLP, New York,
NY; Douglas R. Tribble, Pillsbury Winthrop LLP, San
Diego, CA; Jonathan L. Abram, Hogan & Hartson,
L.L.P., New York, NY; Robert A. Jaffe, Kutak, Rock,
L.L.P., New York, NY.
For MIECO, Inc., Defendant: J. Michael Baldwain, Baker
Botts, L.L.P., Houston, TX; Diana L. Weiss, Orrick,
Herrington & Sutcliffe LLP, New York, NY; Douglas R.
Tribble, Pillsbury Winthrop LLP, San Diego, CA; Jonathan L. Abram, Hogan & Hartson, L.L.P., New York, NY;
Richard T. Marooney, Jr, King & Spalding, LLP (NYC),
New York, NY.
For Idaho Power Company, Idacorp., Inc., Defendants:
David H. Hetzel, Leboeuf, Lamb, Greene & Macrae, LLP,
New York, NY; Dennis Kerrigan, Jr., Leboeuf, Lamb,
Greene & Macrae, LLP, Hartford, CT.
For Cinergy Services, Inc., Cinergy Corp., Defendants: J.
Michael Baldwain, Baker Botts, L.L.P., Houston, TX;
Diana L. Weiss, Orrick, Herrington & Sutcliffe LLP, New
York, NY; Douglas R. Tribble, Pillsbury Winthrop LLP,
San Diego, CA; Jonathan L. Abram, Hogan & Hartson,
L.L.P., New York, [*7] NY; Patrick M. McGuirk, Steven
M. Bierman, Sidley Austin Brown & Wood LLP (NY),
New York, NY; Thomas K. Cauley, Chicago, IL.
For Does 1-100, Defendant, Consol Defendant: J. Michael
Baldwain, Baker Botts, L.L.P., Houston, TX; Diana L.
Weiss, Orrick, Herrington & Sutcliffe LLP, New York,
NY; Douglas R. Tribble, Pillsbury Winthrop LLP, San
Diego, CA; Jonathan L. Abram, Hogan & Hartson,
L.L.P., New York, NY.
For West Coast Power, LLC, Defendant: Michael J. Kass,
Pillsbury Winthrop Shaw LLP, San Diego, CA.
For Cinergy Marketing & Trading, LP, Defendant: Steven
M. Bierman, Sidley, Austin, Brown & Wood, New York,
NY.
For Duke Energy Trading and Marketing, L.L.C., Consol
Defendant: J. Michael Baldwain, Baker Botts, L.L.P.,
Houston, TX; Diana L. Weiss, Orrick, Herrington &
Sutcliffe LLP, New York, NY; Douglas R. Tribble,
Pillsbury Winthrop LLP, San Diego, CA; Jonathan L.
Abram, Hogan & Hartson, L.L.P., New York, NY; Peter
J. Kadzik, Dickenstein, Shaprio, Morin & Oshinsky LLP
(DC), Washington, DC.
For Coral Energy Holding, L.P., Coral Energy Resources
L.P., Consol Defendants: J. Michael Baldwain, Baker
Botts, L.L.P., Houston, TX; Diana L. Weiss, Orrick,
Herrington & [*8] Sutcliffe LLP, New York, NY;
Douglas R. Tribble, Pillsbury Winthrop LLP, San Diego,
CA; Jonathan L. Abram, Hogan & Hartson, L.L.P., New
York, NY; Felice Beth Galant, Robert D. Owen, Fulbright
& Jaworski L.L.P., New York, NY.
For Calpine Energy Services, L.P., Consol Defendant:
Richard P. Swanson, Thelen, Reid & Priest, L.L.P., New
York, NY.
For E Prime, Inc., Consol Defendant: Robert C. Micheletto, Jones Day (NYC), New York, NY.
For Oneok Energy Marketing and Trading Company,
L.P., Oneok, Inc., Consol Defendants: Karen Michele
Crupi-Fitzgerald, Heller Ehrman, White & McAulifee,
LLP (NYC), New York, NY.
For Western Gas Resouces, Inc., Consol Defendant: Jerome S. Hirsch, Peter E. Greene, Skadden, Arps, Slate
Meagher & Flom, LLP (4 Times Sq, Rm 44), New York,
NY; Peter S. Julian, Skadden, Arps, Slate, Meagher &
Flom, New York, NY.
For Intelligence Press, Movant: Alia Lyerly Smith, Nathan Siegel, Levine, Sullivan, Kick & Schulz, L.L.P.,
New York, NY.
For McGraw-Hill Companies, ADR Provider: Matthew
A. Leish, Victor A. Kovner, Davis Wright Tremaine LLP,
New York, NY.
JUDGES: ANDREW J. PECK, United States Chief
Magistrate Judge.
OPINIONBY: ANDREW J. PECK
OPINION: OPINION [*9]
50147014v1
AND ORDER
ANDREW J. PECK, United States Chief Magistrate
Judge :
Plaintiffs, natural gas futures traders, have moved to
compel the production of documents from defendants
American Electric Company, Inc. ("AEP") and Aquila
Merchant Services ("Aquila" or "AMS") (for purposes of
this decision, collectively "defendants"). (5/2/05 Plfs.
Letter Br.) n1 Defendants claim that these documents are
privileged and that their prior production of these documents to governmental agencies has not waived this
privilege, since that production was pursuant to
non-waiver agreements.
n1 The parties did not docket and file most of their
submissions with the Clerk of Court.
For the reasons discussed below, plaintiffs' motion to
compel is DENIED.
FACTS
The facts pertaining to the underlying action have
been set forth in Judge Marrero's opinion denying defendants' motion to dismiss. See In re Natural Gas
Commodity Litig., 337 F. Supp. 2d 498 (S.D.N.Y. 2004).
Only those facts relevant [*10] to this motion are set forth
below.
AEP's Internal Investigation
In September 2002, in response to media reports
exposing the inaccurate reporting of another natural gas
trading company, AEP subsidiary American Electric
Power Energy Services, Inc. ("AEPES") asked all AEPES
traders to certify that they had not engaged in inaccurate
reporting of natural gas transactions to trade publications.
(5/16/05 Routh Aff. P 2.) In October 2002, AEP dismissed five traders who had been unable to certify their
trading conduct, publicly reported the dismissals, and
reported them to the Federal Energy Regulatory Commission ("FERC") and the Commodity Futures Trading
Commission ("CFTC"). (5/16/05 Routh Aff. P 2.) At a
meeting a week later between FERC, CFTC (collectively
"the governmental agencies") and AEP outside counsel
Stephen Routh from Hogan & Hartson, the governmental
agencies said that "AEP would have to conduct an internal
investigation of the circumstances surrounding inaccurate
reporting and provide the agencies with a report of that
investigation before the agencies would resolve claims
regarding the conduct of the AEPES traders through settlement, as opposed to through litigation. [*11] " (Id. P
3.) Hogan & Hartson retained an outside consultant,
Cornerstone Research, to aid in the internal investigation.
(5/16/05 AEP Letter Br. at 7.)
The internal investigation involved comparison/analysis of two different types of data, both of which
have been produced to plaintiffs in this litigation. (5/16/05
Routh Aff. P 4.) The first type of data, referred to by AEP
as "spreadsheet data," contained information "in a form
consistent with data transmitted by natural gas traders to
trade publications," reflecting daily high, low and average
prices from different trading hubs or reflecting monthly
trade-by-trade price and volume information for each
trading hub. (Id.) While the data in these spreadsheets was
in the form generally used to transmit data to the trade
publications, AEP does not know whether these spreadsheets were in fact transmitted to the trade publications
because the trader responsible for doing so was one of the
dismissed traders. (Id.) The second type of data, referred
to by AEP as "system data," was from AEP's database of
"trades actually made by traders on behalf of AEP." (Id.)
The system data includes data for all trades made by AEP,
including [*12] "physical and financial natural gas trades
as well as trades for other types of commodities." (Id. P 7.)
Aquila's Internal Investigation
Aquila's outside counsel Orrick, Herrington & Sutcliffe conducted a similar internal investigation. (5/2/05
Plfs. Letter Br. Ex. E: 7/14/03 Orrick, Herrington Letter to
CFTC.) Orrick, Herrington hired the forensic accounting
firm Kroll Zolfo Cooper LLC ("Kroll") to assist in the
analysis. (Id.; see also Dkt. No. 279: Deacon 5/26/05 Aff.
PP 1-2.) Kroll conducted an analysis comparing "trade
data recorded internally by AMS to available trade data
that AMS employees sent or may have sent to natural gas
trade publications." (Deacon Aff. P 2.) This analysis,
finalized in a Kroll Report, compared
certain spreadsheets containing reported
trading data for certain months with corresponding data recorded in AMS's internal Gas Works system. Kroll analyzed all
of the trades contained on these spreadsheets and did not selectively analyze any
specific individual reported trades. Kroll's
analysis was limited to a review of the data
contained in these documentary sources,
and was not based on witness interviews or
other non-documentary [*13] sources.
(Deacon Aff. P 3.) One type of data Kroll analyzed were
spreadsheets that apparently were reported to trade publications, which spreadsheets were made available to
plaintiffs in this case in October 2004. (Id. P 4.) A second
50147014v1
type of data Kroll analyzed were spreadsheets containing
similar trade data presumed to have been reported to the
trade publications, and produced to plaintiffs in this litigation in October 2004. (Id. P 5.) The third type of data
which AMS located but was not used in the Kroll Report
were draft spreadsheets, which AMS produced to plaintiffs as well. (Id. P 6.) Finally, AMS produced to plaintiffs
the recorded trading data from its internal Gas Works
system that was analyzed in the Kroll Report. (Id. P 7.)
The Non-Waiver Agreements
AEP
In February 2003, in connection with ongoing settlement discussions between the CFTC and AEP, the
CFTC requested review of a draft AEP attorney-client
memorandum that "in part summarized certain data
analyses undertaken by and at the direction of AEP's
outside legal counsel, including" Routh. (Routh Aff. P
11.) Before producing this information to the CFTC,
Routh secured [*14] the CFTC's agreement that it would
keep the information confidential, that it would not consider it a waiver of privilege "with respect to any information beyond what was specifically set forth in the
memorandum," and that the CFTC would not disclose
information to anyone else. (Id. P 12.) Routh memorialized that agreement in a letter dated February 24, 2003
(id.), which stated:
We are providing the enclosed Memorandum in reliance on the Division's
agreement that, in deference to our concerns regarding preservation of privilege
set forth below, the Division will return the
Memorandum to us at our meeting scheduled for February 27, 2003 and not retain
any copy.
We submit this Memorandum as a
selective and limited disclosure of a confidential and privileged attorney-client
communication and of attorney work
product solely for the purpose of exploring
and negotiating a possible settlement and
resolution of the Division's investigation
as to AEPES. We intend that its privileged
character be preserved. As to the Division
Staff, no waiver of privilege is intended
beyond the specific statements contained
in the Memorandum (there is no general
waiver of privilege to the subject [*15]
matters discussed in the Memorandum or
of any underlying information or analyses
referenced in the Memorandum). As to
third parties, there is no waiver of privilege
at all; the information in the Memorandum
is disclosed for the Division's Staff alone
in furtherance of our settlement discussions and the resolution of the investigation as to AEPES.
(Routh Aff. Ex. 1: 2/24/03 Letter from Routh to CFTC.)
n2
n2 At oral argument, the Court addressed whether
the settlement privilege should enter into analysis
of the waiver issue, and because both parties
agreed it should not, it is not considered here. (See
5/19/05 Conf. Transcript ["Tr."] at 45.)
In April 2003, attorneys for FERC and the DOJ requested that AEP's counsel provide them with the same
attorney-client memorandum and appendices that AEP
had given the CFTC. (Routh Aff. P 13.) The governmental agencies also requested "back-up information" for
and additional information on "the data analyses that had
been undertaken by and at the direction [*16] of AEP's
legal counsel." (Id.)
Before producing the requested documents, AEP
counsel Routh secured non-waiver agreements from each
agency with respect to all material produced. (Id. P 14.)
The terms of the nonwaiver agreements were substantially
the same as those outlined in the February 2003 letter and
were memorialized in a letter dated April 15, 2003. (Id. P
14; Routh Aff. Ex. 2: 4/15/03 Routh letter to CFTC,
FERC, DOJ.) The only differences were that in the April
15, 2003 letter, the privileged documents were produced
in cooperation with "investigations being conducted by
each [agency]," instead of as part of ongoing settlement
discussions as had been the case in the February 2003
letter; there was no reference to any of the agencies returning the documents after any set point, as had been the
case in the February 2003 letter; and the April 2003 letter
said that in addition to being covered by attorney-client
and work product privilege, the materials were within the
scope of 17 C.F.R. § 145.9(d)(1)(i)-(iv), and that AEP
requested that the government maintain the confidentiality under the Freedom of Information Act ("FOIA") of
submitted documents, [*17] while the February 2003
only referenced that regulation at the top of the letter.
(Compare Routh Aff. Ex. 1: 2/24/03 Routh Letter to
CFTC (quoted above), with Routh Aff. Ex. 2: 4/15/03
Routh letter to CFTC, FERC, DOJ.)
In May 2003, in response to follow-up requests, AEP
produced additional materials to the CFTC and FERC
under the same non-waiver agreement. (Routh Aff. P 14.)
50147014v1
In September 2003, the CFTC filed a civil action
against AEP in the United States District Court for the
Southern District of Ohio alleging that AEP had knowingly reported inaccurate data to the trade publications
and attempted manipulation. (Id. P 16.) In January 2005,
the CFTC and AEP settled that litigation. (Id.) At no point
during that litigation did the CFTC identify which trades
had been allegedly false or knowingly inaccurate. (Id.)
Aquila
In response to a subpoena, Aquila produced "Confidential Materials" including the Kroll Report to the CFTC
in July 2003 (5/2/05 Plfs. Letter Br. Ex. E: 7/14/03 Orrick,
Herrington Letter to CFTC), but only after delineating the
terms of a non-waiver agreement:
Please be advised that by producing
the Confidential Materials pursuant [*18]
to this agreement, Aquila does not intend
to waive the protection of the attorney
work product doctrine, attorney-client
privilege, or any other privilege applicable
as to third parties. Aquila believes that the
Confidential Materials are protected by, at
a minimum, the attorney work product
doctrine and the attorney-client privilege.
Aquila believes that the Confidential Materials warrant protection from disclosure.
The CFTC will maintain the confidentiality of the Confidential Materials
pursuant to this agreement and will not
disclose them to any third party, except to
the extent that the CFTC determines that
disclosure is otherwise required by law or
would be in furtherance of the CFTC's
discharge of its duties and responsibilities.
The CFTC will not assert that the
production of the Confidential Materials to
the CFTC by Aquila constitutes a waiver
of the protection of the attorney work
product doctrine, the attorney-client privilege, or any other privilege applicable as
to any third party. The CFTC agrees that
production of the Confidential Materials
by Aquila to CFTC does not effect a subject matter with regard to additional testimony, documents or other materials. Any
grounds [*19] for additional production
by Aquila to CFTC that may exist apart
from the production provided for in this
agreement shall remain unaffected by this
agreement.
(Id. at 1-2.) Aquila, like AEP, also requested confidential
treatment of its documents under 17 C.F.R. § 145.9 for
FOIA purposes. (Id. at 2.) The CFTC counter-signed the
letter as "Agreed and Accepted." (Id.) The "confidential
materials" "primarily included the Kroll comparison
analysis" (5/16/05 AMS Letter Br. at 2), supplemented by
documents identified on Aquila's privilege log in this case
(see 5/2/05 Plaintiff Letter Br. Ex. B). In September 2003,
Aquila produced the same materials to the FBI after obtaining an agreement by the FBI to abide by the terms of
the confidentiality agreement with the CFTC. (5/2/05
Plfs. Letter Br. Ex. B: 9/12/03 Orrick, Herrington Letter to
FBI; see 5/16/05 AMS Letter Br. at 3.)
Plaintiffs' Motion to Compel
On May 2, 2005, plaintiffs moved to compel production of the documents that AEP and Aquila previously
disclosed to the governmental agencies but in this litigation have withheld from plaintiffs (including the Kroll and
Cornerstone [*20] Reports) because defendants claim
attorney-client and/or work product privilege, and rely on
the non-waiver agreements to respond to plaintiffs' waiver
claim. (See 5/2/05 Plfs. Letter Br. at 2; Plfs. Letter Br.
Exs. A-B: AEP & Aquila Privilege Logs.)
Plaintiffs argue that if a work product privilege applies to the documents, plaintiffs' substantial need overcomes that protection for factual material. (5/2/05 Plfs.
Letter Br. at 4.) Mostly, however, plaintiffs contend that
defendants' production of these documents to the governmental agencies constituted a waiver of any privilege
and therefore that defendants should be compelled to
produce all the withheld documents. (Id. at 8-12.) n3
n3 Plaintiffs also contended that the Court should
grant their motion on the ground that defendants
have put these documents "at issue." (Id. at 3.) At
the May 19, 2005 discovery conference, this Court
denied plaintiffs' motion on this point. (5/19/05
Conf. Tr. at 46.) Plaintiffs also contended that the
"short-cut" proposal amounted to a waiver by defendants of any privilege they now claim. (5/2/05
Plfs. Letter Br. at 8 n.1.) The Court also denied
plaintiffs' motion on this point at the May 19, 2005
conference. (5/19/05 Conf. Tr. at 46-47.) Finally,
plaintiffs in a throw-away paragraph in their letter
brief assert that "plaintiffs do not concede that
defendants' submissions to the government are
protected by the attorney-client or work-product
privilege in the first instance. Indeed, the burden
of demonstrating both that the privilege exists and
has not been waived is on Defendants." (5/2/05
Plfs. Letter Br. at 8.) Defendants have clearly es50147014v1
tablished that these analyses - by counsel and by
consultants hired by counsel because of government investigations and potential litigation - are at
least subject to the work product privilege, and
plaintiffs did not renew this argument in their reply letter brief or at oral argument. The Court
accordingly finds that the material is subject to the
work product privilege. The issue that remains is
whether defendants waived that privilege.
[*21]
ANALYSIS
I. PRIOR DISCLOSURE OF PRIVILEGED
DOCUMENTS TO GOVERNMENTAL AGENCIES
UNDER A NON-WAIVER AGREEMENT
Plaintiffs contend that defendants waived any privilege when they disclosed documents to the governmental
agencies in connection with a previous investigation.
(5/2/05 Plfs. Letter Br. at 8-12.) In contrast, defendants
contend that their non-waiver agreements were sufficient
to preserve the privilege.
A. State of the Law
The Second Circuit has not directly answered the
question posed by plaintiffs' motion to compel: whether
disclosure of privileged documents to governmental
agencies in response to a subpoena constitutes a waiver of
that privilege for subsequent litigations where the disclosing party (defendants, here) entered into a confidentiality, "non-waiver" agreement before producing the
documents to the governmental agencies. In In re Steinhardt Partners, L.P., 9 F.3d 230, 235 (2d Cir. 1993), the
Second Circuit held that the defendant Steinhardt had
waived its work product privilege when it voluntarily
submitted a privileged memorandum to the SEC in a
previous investigation. The Second Circuit in Steinhardt
[*22] found the disclosure to have been voluntary despite
the fact that it was made in response to an SEC subpoena,
because no compulsory legal process had been necessary
to compel production to the SEC. Id. at 234. The defendant in Steinhardt had not entered into a confidentiality
agreement before disclosing its privileged documents to
the government.
The Second Circuit in Steinhardt explained the
background to work-product protection and waiver:
The logic behind the work product doctrine is that opposing counsel should not
enjoy free access to an attorney's thought
processes. An attorney's protected thought
processes include preparing legal theories,
planning litigation strategies and trial tac-
tics, and sifting through information. At its
core, the work product doctrine shelters
the mental processes of the attorney,
providing a privileged area within which
he can analyze and prepare his client's
case. The doctrine grants counsel an opportunity to think or prepare a client's case
without fear of intrusion by an adversary.
Common sense and the practicalities
of litigation define the limits of the work
product doctrine. Once a party allows an
adversary [*23] to share the otherwise
privileged thought processes of counsel,
the need for the privilege disappears.
Courts therefore accept the waiver doctrine as a limitation on work product protection. The waiver doctrine provides that
voluntary disclosure of work product to an
adversary waives the privilege as to other
parties.
In re Steinhardt Partners, L.P., 9 F.3d at 234-35 (citations
& internal quotations omitted, emphasis added).
The Second Circuit in Steinhardt, after reviewing
decisions from other Circuits, rejected a "selective waiver" approach, and found that Steinhardt had waived the
privilege by producing the document to the SEC. In re
Steinhardt Partners, L.P., 9 F.3d at 235. The "selective
waiver" approach adopted by the Eighth Circuit preserves
privilege in a civil litigation for documents previously
disclosed to the government in response to litigation or
investigation. See Diversified Indus. v. Meredith, 572
F.2d 596, 611 (8th Cir. 1978). The Second Circuit agreed
with the D.C. Circuit "that selective assertion of privilege
should not be merely another brush on an attorney's palette, utilized and [*24] manipulated to gain tactical or
strategic advantage." In re Steinhardt Partners, L.P., 9
F.3d at 235 (citing Permian Corp. v. United States, 214
U.S. App. D.C. 396, 665 F.2d 1214, 1221 (D.C. Cir.
1981)).
Nevertheless, the Second Circuit in Steinhardt "declined to adopt a per se rule that all voluntary disclosures
to the government waive work product protection." Id. at
236. Instead, according to the Second Circuit:
[HN1] Crafting rules relating to privilege
in matters of governmental investigations
must be done on a case-by-case basis. Establishing a rigid rule would fail to anticipate situations in which the disclosing
party and the government may share a
50147014v1
common interest in developing legal theories and analyzing information, or situations in which the SEC and the disclosing
party have entered into an explicit agreement that the SEC will maintain the confidentiality of the disclosed materials.
Id. (emphasis added). n4
n4 Cf. In re Grand Jury Proceedings, 219 F.3d
175, 185 (2d Cir. 2000) (In case concerning
whether corporation's chairman's grand jury testimony waived the corporation's privilege, the
Second Circuit stated that "we believe that the
implied waiver analysis should be guided primarily by fairness principles. . . . Since fairness depends on context, we believe it is not prudent to
formulate a per se rule in this area of the law.")
(citing, inter alia, Steinhardt).
[*25]
Subsequent to Steinhardt, in cases where the parties
disclosed privileged material to the government in a prior
litigation/investigation, the district courts within this
Circuit have found significant the presence or absence of a
non-waiver/confidentiality agreement. See, e.g., Maruzen
Co. v. HSBC USA, Inc., 2002 U.S. Dist. LEXIS 13288,
00 Civ. 1079, 00 Civ. 1512, 2002 WL 1628782 at *2
(S.D.N.Y. 2002) (Since defendants, who claimed the
privilege, had "explicit confidentiality agreements with
the authorities satisfying Steinhardt, [and other cases],
plaintiffs' motion to compel is hereby denied in all respects."); In re Leslie Fay Cos. Sec. Litig. ("Leslie Fay
II"), 161 F.R.D. 274, 282-84 (S.D.N.Y. 1995) ("When the
Company has voluntarily disclosed to the SEC the ACR
[Audit Committee Report] exonerating Leslie Fay management and later sued BDO based on the report's findings," subject matter waiver of attorney-client privilege
found in Report and factual underlying documents. Court
found no further waiver from disclosures to U. S. Attorney's Office and bankruptcy examiner, which "were made
pursuant to confidentiality agreements intended to preserve any [*26] privilege applicable to the disclosed
documents. . . . We think that the May 23 [confidentiality]
agreement satisfies the standard articulated in Steinhardt."); In re Leslie Fay Cos. Sec. Litig. ("Leslie Fay I"),
152 F.R.D. 42, 44 (S.D.N.Y. 1993) (Court need not determine whether Audit Committee Report constitutes
work product "because we find that the Audit Committee
waived any work product immunity it may have had when
it voluntarily disclosed the Report to the SEC without first
obtaining a confidentiality agreement."); see also, e.g.,
Spanierman Gallery, Profit Sharing Plan v. Merritt, 2003
U.S. Dist. LEXIS 22141, 00 Civ. 5712, 2003 WL
22909160 at *3, 5 (S.D.N.Y. Dec. 9, 2003) (defendant
waived attorney-client and work product privileges for
documents produced to FBI; defendant "took no precautions to preserve the privilege when the documents were
produced to the FBI. They were not labeled 'confidential'
or 'privileged,' and there was no agreement with the FBI
that the documents were to be treated as privileged and
confidential, and should not be produced to third parties."); Bank of America v. Terra Nova Ins. Co., 212
F.R.D. 166,172-73 (S.D.N.Y. 2002) [*27] (disclosure of
work-product material to government agencies in hope
they would prosecute person who stole from company is
not trial preparation, so waiver found; Court notes that
"when material is disclosed to a law enforcement agency
without any agreement regarding confidentiality, there is
a strong potential that the material may ultimately become
public and thus available to an adversary." "In re Steinhardt left open the possibility that a waiver might not be
found if there is an explicit agreement to maintain confidentiality, see 9 F.3d at 236 - a circumstance that does not
exist in this case.")
It appears that while the Second Circuit in Steinhardt
declined to adopt a per se waiver approach, the majority of
Circuits have adopted such a position, leaving the Second
Circuit (and the different Eighth Circuit approach) in the
minority. See, e.g., In re Columbia/HCA Healthcare Corp.
Billing Practices Litig., 293 F.3d 289, 302-07 (6th Cir.
2002) (adopting per se waiver approach for attorney-client and work product privilege), n5 cert. denied,
539 U.S. 977, 124 S. Ct. 27 (2003); United States v. MIT,
129 F.3d 681, 686, 688 (1st Cir. 1997) [*28] (rejecting
selective waiver approach, finding attorney-client and
work product privileges waived by disclosure to government agency, but leaving open issue of whether waiver
would apply to opinion work product documents);
Westinghouse Elec. Corp. v. Republic of the Philippines,
951 F.2d 1414, 1418, 1426-30 (3d Cir. 1991) (Finding
attorney-client and work product privileges waived because of prior disclosure of privileged documents to
governmental agency; even if government and disclosing
party had entered into a confidentiality agreement, result
would be the same.); In re Chrysler Motors Corp. Overnight Evaluation Program Litig., 860 F.2d 844, 846-47
(8th Cir. 1988) (defendant waived work product privilege
for documents sought by government which defendant
had disclosed to adversary in civil litigation, despite confidentiality agreement); Permian Corp. v. United States,
214 U.S. App. D.C. 396, 665 F.2d 1214, 1217-18,
1219-22 (D.C. Cir. 1981) (attorney-client privilege was
waived when party disclosed documents to the SEC,
regardless of intent to preserve privilege against other
government agencies; affirmed district court's [*29]
finding that work product privilege had not been waived
50147014v1
as to other documents because of written confidentiality
agreement); cf. Genentech, Inc. v. United States ITC, 122
F.3d 1409, 1417 (Fed. Cir. 1997)(rejecting limited waiver
approach in an "inadvertent disclosure" case); n6 see
generally Theodore R. Lotchin, No Good Deed Goes
Unpunished? Establishing a Self-Evaluative Privilege for
Corporate Internal Investigations, 46 Wm. & Mary L.
Rev. 1137, 1157 (2004) ("The disclosure of confidential
information to a federal agency will usually waive the
privilege for all future cases regarding communication on
the same subjects, especially if the disclosure took place
during the course of an investigation or administrative
proceeding. Although this precedent is firmly established,
several federal circuits have declined to adopt a per se rule
that every voluntary production by a corporate client
waives the attorney-client and work product privileges.")
(fns. omitted); Jay G. Martin, Strategies for Boards of
Directors Conducting Internal Investigations, 1479
PLI/Corp 473, 485 (2005) ("Recent cases are divided on
whether providing [*30] these materials to the government, even under a confidentiality or nonwaiver agreement, operates as a waiver of the attorney-privilege and
work product privileges as to third parties. Recent decisions favoring waiver outnumber those rejecting waiver."); Andrew J. McNally, Comment, Revitalizing Selective Waiver: Encouraging Voluntary Disclosure of Corporate Wrongdoing by Restricting Third Party Access to
Disclosed Materials, 35 Seton Hall L. Rev. 823, 828
(2005) ("In most jurisdictions, a corporation's disclosure
of sensitive materials to a government agency constitutes
a complete waiver of the otherwise applicable privileges.
A corporation's initial disclosure of otherwise privileged
materials to the government, according to most courts,
waives those privileges as to all other parties; thus, civil
litigants seeking to sue the corporation will typically be
granted unfettered access to the disclosed materials. Even
confidentiality arrangements between the disclosing
corporation and the government agency are seldom sufficient to permit the successful assertion of privilege
against a civil plaintiff if a previous disclosure was
made.") (fns. omitted); Mark Robeck et al. [*31] , Corporate Governance in the Face of Government Investigations, 17 No. 2 Health Law. 20, 26 (2005) ("The majority
rule in the circuits is that a voluntary disclosure of information operates as a waiver of the surrounding privileges in subsequent actions, therefore disallowing argument for protection when future plaintiffs demand the
same information provided to the government. Therefore,
anything produced to the government should be expected
to end up in the hands of plaintiffs in subsequent civil
actions via the discovery process and requests to the
government agency through the Freedom of Information
Act. Despite this rule, corporations may be able to safeguard their privileges via a written agreement with the
government agency.") (fns. omitted); Kara Alten-
baumer-Price, Assessing Risks of Sharing Internal Investigations: Target Firms Cooperating with Government
Risk Waiving Their Privilege, N.Y.L.J., Mar. 21, 2005, at
S2 ("The D.C., 1st, 3d and 6th circuits have completely
rejected the idea that the attorney-client privilege or
work-product doctrine protection are not waived by virtue
of the 'selective waiver' or 'limited waiver' doctrine by
production to the [*32] government, even if the government and the company enter into a confidentiality
agreement. . . . The Federal, 2d and 4th Circuits have
rejected the 'selective waiver' doctrine but have not addressed it in a context in which the government and the
company have entered into a confidentiality agreement.
The 8th Circuit alone has unqualifiedly adopted the 'selective waiver' doctrine . . . The majority rule clearly
provides, particularly absent a strong confidentiality
agreement, that disclosure to the government will destroy
the protections of the attorney-client privilege and
work-product doctrine.") (citations omitted); Lee G. Durst
& Ariane J. Sims, Cooperation With Government Probes,
Subsequent Civil Litigation, N.Y.L.J., May 13, 2005, at 4
("The cases discussed above indicate that the typical defenses against claims of waiver as related to documents
produced to the government during the course of an investigation may not hold much weight in today's jurisprudence. Indeed, with the exception of the Eighth Circuit, which still permits the application of the limited
waiver doctrine [fn. citing Diversified omitted], the best
possible preemptive protection against waiver seems
[*33] to be the existence of a detailed, explicit and unconditional agreement with the government that the
documents are to be treated confidentially and that production does not constitute any form of waiver as to third
parties."); David Francescani & Michael Autuoro, Caught
Between a Rock and a Hard Place, N.Y.L.J., June 20,
2005, at S10 ("The doctrine of selective waiver, first set
forth by the Eighth Circuit in 1978, has been rejected in
most of the jurisdictions considering the issue. Although
the Second Circuit has not been openly receptive to selective waiver, it has left open the possibility of whether
disclosure of work product to the government under a
confidentiality agreement constitutes a waiver.") (fns.
omitted); Jerold S. Solovy & Robert L. Bryan, Unwaiver,
National L.J., Apr. 4, 2005, at 11 ("If you care about the
privilege, don't disclose the material. Don't assume that
production with a subpoena pointed at your head is
enough. Don't count on an agreement with the government in case A to persuade the judge in case B. You might
as well try to put Humpty Dumpty back together again as
unwaive a waived privilege.").
n5 The Sixth Circuit in Columbia noted that a
"review of the positions presented by the various
50147014v1
courts reveals three general opinions on the issue selective waiver is permissible; selective waiver is
not permissible under any situations; and selective
waiver is permissible in situations where the
Government agrees to a confidentiality order." Id.,
293 F.3d at 295 (citations omitted). The Second
Circuit does not explicitly fall into any of those
three categories, but would appear to be closest to
the last category; indeed, the Sixth Circuit in Columbia categorized the Second Circuit's position,
based on Steinhardt and district court decisions, as
falling in the third group. 293 F.3d at 300-01.
[*34]
n6 District court decisions in those Circuits which
have not decided the issue mostly have rejected
the selective waiver approach. Compare, e.g.,
Hobley v. Burge, 2004 U.S. Dist. LEXIS 6858,
No. 03 C 3678, 2004 WL 856439 at *7 (N.D. Ill.
Apr. 21, 2004) (work product privilege waived
because City had previously disclosed documents
to Special Prosecutor); In re Bank One Secs.
Litig., 209 F.R.D. 418, 423-25 (N.D. Ill. 2002) (in
accord with Westinghouse and Columbi/HCA
Healthcare, defendant Bank One's voluntary production to governmental investigative body, Office of the Comptroller of the Currency, waived its
work product privilege because the relationship
was adversarial notwithstanding existing confidentiality agreement); United States v. Bergonzi,
216 F.R.D. 487, 494, 496-98 (N.D. Cal. 2003)
(company waived its attorney-client and work
product privileges when it disclosed documents to
government where the confidentiality agreements
were not unconditional), appeal dismissed as
moot, 403 F.3d 1048, 1050 (9th Cir. 2005)
("Given our finding of mootness, we do not reach
[company's] argument that we should recognize a
form of 'selective' or 'partial' waiver . . ."); United
States v. South Chicago Bank, 1998 U.S. Dist.
LEXIS 17444, No. 97 CR 849, 1998 WL 774001
at *4-5 (N.D. Ill. Oct. 30, 1998) (report produced
to governmental regulatory agency under confidentiality agreement waived privilege); with, e.g.,
In re McKesson HBOC, Inc. Secs. Litig., 2005
U.S. Dist. LEXIS 7098, No. 99-CV-20743, 2005
WL 934331 at *9-10 (N.D. Cal. Mar. 31, 2005)
(Company's confidentiality agreements with the
government were sufficient to preserve work
product privilege as to the extent possible under
the law, that disclosure of the protected materials
will not reach adverse parties."); Saito v.
McKesson HBOC, Inc., 2002 Del. Ch. LEXIS
139, No. Civ. A. 18553, 2002 WL 31657622 at
*11 (Del. Ch. Nov. 13, 2002) (applies selective
waiver rule: McKesson HBOC, due to its confidentiality agreement, reasonably expected its
privilege would be preserved in disclosure of
documents to SEC), aff'd, 870 A.2d 1192 (Del.
2005); cf. LaBelle v. Philip Morris Inc., No.
2-98-3235-23, 2000 WL 33957169 at *5-7
(D.S.C. Oct. 23, 2000) (defendants waived attorney-client and work product privileges for documents produced to government in response to
grand jury subpoena despite confidentiality
agreement); In re M & L Bus. Mach. Co., Jobin v.
Bank of Boulder, 167 B.R. 631, 637 (D. Colo.
1994), ("Production of documents under a grand
jury subpoena does not automatically vitiate the
attorney-client privilege, mush less in an unrelated
civil proceeding brought by a non-governmental
entity. This is especially true in a case such as this,
where the record demonstrates that the [defendant]
has consistently sought to protect its privilege"
through production pursuant to a confidentiality
agreement); In re M & L Bus. Mach. Co., Jobin v.
Bank of Boulder, 161 B.R. 689, 695-97 (D. Colo.
1993) (recognizing split in circuits on limited
waiver and that 10th Circuit had yet to rule on the
issue, and holding defendant had not waived its
attorney-client privilege through previous disclosure of documents to United States Attorney in
connection with grand jury investigation for purposes of subsequent bankruptcy proceedings because defendant had entered into a letter agreement with the government which specifically expressed intention to preserve confidentiality of
documents with respect to third parties including
subsequent proceedings).
[*35]
B. Application of the Legal Standards to This
Case
While the Second Circuit has neither re-examined
Steinhardt in a case dealing directly with this issue, nor
instructed how much weight to give to a confidentiality
agreement with the government agency, this Court is not
free to adopt the so-called majority view, this Court is
bound by Steinhardt until the Second Circuit (or Supreme
Court) reverses or otherwise modifies it. See, e.g., United
States v. Collado, No. 99-1218, 201 F.3d 433 (table),
1999 WL 1212647 at *1 (2d Cir. 1999) ("The fact that
there is a split among the circuits on this issue, in no way
changes our obligation to follow binding precedent of this
court.") (citation omitted), cert. denied, 530 U.S. 1264,
120 S. Ct. 2724 (2000); United States v. Foont, 901 F.
50147014v1
Supp. 729, 734 n.1 (S.D.N.Y. 1995) ("This Court is bound
by Second Circuit precedent on the matter; defendant's
arguments about circuit splits are of no avail in this forum."), aff'd, 93 F.3d 76 (2d Cir. 1996); Bass v. Coughlin,
800 F. Supp. 1066, 1071 (N.D.N.Y. 1991) ("When [*36]
the Court of Appeals announces a principle of law for this
circuit, it remains the law until the case is overruled or
reversed."), aff'd, 976 F.2d 98 (2d Cir. 1992). As discussed above, the Second Circuit in Steinhardt rejected
the Eighth Circuit's "selective waiver" approach, but declined to adopt a per se rule that disclosure to the government always waives the privilege. In adopting a
case-by-case approach, the Second Circuit specifically
referred to one factor relevant here - "situations in which
the [government agency] and the disclosing party have
entered into an explicit agreement that the [government
agency] will maintain the confidentiality of the disclosed
materials." In re Steinhardt Partners, L.P., 9 F.3d 230, 236
(2d Cir. 1993). The district court decisions in this Circuit
have relied on the presence of an explicit confidentiality
agreement to find no waiver from production of work
product material to the government. (See cases cited at
pages 11-12 above.)
Here, both AEP and Aquila had explicit written confidentiality and non-waiver agreements with the government agencies. (See pages 4-7 above.) Under Steinhardt, that [*37] goes a long way to a finding of
non-waiver here. In this Court's view, however, Steinhardt does not create a "per se" rule that if there is a confidentiality/non-waiver agreement with the government,
the privilege is not waived. While that is an important
factor, this Court also must examine other relevant factors
(although Steinhardt does not provide any further guidance on the factors this Court should consider).
The second most important factor here (besides the
non-waiver agreements), is that both AEP and Aquila
have produced to plaintiffs in this litigation the factual
documents underlying the work product analyses provided to the government agencies. For example, if the
analyses had been based on oral information from defendants' traders, or if the underlying factual trade data
was no longer available, plaintiffs would have made a
strong showing of substantial need for the analyses defendants produced to the governmental agencies. The
analyses, however, were not based on oral information but
documents, and those underlying documents have been
produced to plaintiffs here. (See Dkt. No. 279: Deacon
5/26/05 Aff. P 3: The Kroll Report "was limited to a review of the [*38] data contained in [the] documentary
sources, and was not based on witness interviews or other
nondocumentary sources."; id. PP 4-7: identifies by Bates
numbers the spreadsheets containing the data upon which
the Kroll Report was based, which documents were produced to Plaintiffs; 5/16/05 AEP Letter Br. at 8: The
underlying data AEP and Cornerstone used in their analyses was produced to plaintiffs.) Plaintiffs and their experts therefore can perform their own analyses of the
trading data and the data reported to the trade publications. To the extent that defendants and defendants' experts disagree with plaintiffs' analyses, plaintiffs will
receive defendants' current analyses of the data during the
expert discovery period. (See 5/19/05 Conf. Tr. at 32:
AEP counsel Routh: "There are analyses that can be done.
We have not said that they can't be. . . . If [plaintiffs] focus
on that, or ultimately if their experts do, we will have all
of this out in experts discovery but it will be discovery of
the testifying experts analysis, not of [counsel's] analysis.") Plaintiffs do not have a substantial need for the
analyses that defendants' counsel and experts provided to
the government. [*39] Since the data used in defendants'
analyses has been provided to plaintiffs, plaintiffs suffer
no hardship by not having defendants' analyses. (See
5/16/05 AMS Letter Br. at 14; 5/16/05 AEP Letter Br. at
21-23.)
Accordingly, because defendants had explicit written
confidentiality and non-waiver agreements with the governmental agencies, and because plaintiffs have not
shown a substantial need for defendants' experts' and
counsels' analyses, having been provided the underlying
documents and data on which the analyses were based,
under Steinhardt, the Court finds that defendants did not
50147014v1
waive the work product privilege and the documents at
issue need not be provided.
CONCLUSION
For the reasons discussed above, plaintiffs' motion to
compel production of defendants' privileged documents
given to governmental agencies pursuant to a confidentiality nonwaiver agreement is DENIED. n7
n7 Plaintiffs also claim that as to a few of the
documents, the privilege was waived by defendant
AEP's inadvertent but sloppy production to plaintiffs. The Court will address that issue in a separate Opinion.
[*40]
SO ORDERED.
Dated: New York, New York
June 21, 2005
Andrew J. Peck
United States Chief Magistrate Judge
In re: COLUMBIA/HCA HEALTHCARE CORPORATION BILLING
PRACTICES LITIGATION. TENNESSEE LABORERS HEALTH & WELFARE
FUND; BOARD OF TRUSTEES OF THE CARPENTERS & MILLWRIGHTS OF
HOUSTON & VICINITY HEALTH AND WELFARE TRUST FUND; BOARD OF
TRUSTEES OF THE PIPEFITTERS LOCAL 522 HOSPITAL, MEDICAL AND
LIFE BENEFIT FUND; OPERATING ENGINEERS LOCAL 312 HEALTH &
WELFARE FUND; UNITED PAPERWORKERS INTERNATIONAL UNION;
CORDULA BOYSEN, PLAINTIFFS-APPELLEES, V. COLUMBIA/HCA
HEALTHCARE CORPORATION, Defendant-Appellant.
No. 00-6059
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
293 F.3d 289; 2002 U.S. App. LEXIS 10969; 2002 FED App. 0201P (6th Cir.); 53
Fed. R. Serv. 3d (Callaghan) 789
January 22, 2002, Argued
June 10, 2002, Decided
June 10, 2002, Filed
SUBSEQUENT HISTORY: [**1] As Corrected June
25, 2002. Rehearing En Banc Denied September 9, 2002,
Reported at: 2002 U.S. App. LEXIS 20212. Rehearing, en
banc, denied by Columbia/HCA Healthcare Corp. Billing
Practices Litig. v. Columbia/HCA Healthcare Corp. (In re
Columbia/HCA Healthcare Corp. Billing Practices
Litig.), 2002 U.S. App. LEXIS 20212 (6th Cir., Sept. 9,
2002)
US Supreme Court certiorari dismissed by Hca, Inc. v.
Tenn. Laborers Health & Welfare Fund, 2003 U.S.
LEXIS 5311 (U.S., Aug. 5, 2003)
PRIOR HISTORY: Appeal from the United States District Court for the Middle District of Tennessee at Nashville. No. 98-01227. Thomas A. Higgins, District Judge.
Boyson v. Columbia/HCA Health Care Corp. (In re Columbia/HCA Health Care Corp.), 229 F.3d 1151, 2000
U.S. App. LEXIS 28302 (6th Cir. Tenn., 2000)
David S. Stellings, Erik L. Shawn, Richard M. Heimann,
LIEFF, CABRASER, HEIMANN & BERNSTEIN, New
York, New York, Morris A. Ratner, LIEFF, CABRASER,
HEIMANN & BERNSTEIN, San Francisco, California,
Jane B. Stranch, BRANSTETTER, KILGORE,
STRANCH & JENNINGS, Nashville, Tennessee, for
Appellees.
JUDGES: Before: BOGGS and MOORE, Circuit Judges;
RUSSELL, District Judge. * RUSSELL, D. J., delivered
the opinion of the court, in which MOORE, J., joined.
BOGGS, J., delivered a separate dissenting opinion.
* The Honorable Thomas B. Russell, United
States District Judge for the Western District of
Kentucky, sitting by designation.
DISPOSITION: Affirmed and remanded.
OPINIONBY: Russell
LexisNexis(R) Headnotes
OPINION: [***3]
COUNSEL: ARGUED: Richard P. Bress, LATHAM &
WATKINS, Washington, D.C., for Appellant. David S.
Stellings, LIEFF, CABRASER, HEIMANN &
BERNSTEIN, New York, New York, for Appellees.
ON BRIEF: Richard P. Bress, Peter L. Winik, LATHAM
& WATKINS, Washington, D.C., for Appellant.
50147014v1
[*291] RUSSELL, District Judge. This action is an
interlocutory appeal from an order of the district court
compelling [**2] Columbia/HCA Healthcare Corporation ("Columbia/HCA") to produce certain otherwise
privileged documents. Columbia/HCA having previously
produced the documents to the Department of Justice
("DoJ"), the Health Care Finance Administration and
other related governmental agencies, the district court
concluded that the company had waived any privilege
associated with the documents. Because the Court agrees
that the district court properly rejected the selective
waiver argument presented by Columbia/HCA, we
AFFIRM.
n2 Other paragraphs contained in the agreement grant DoJ the ability to transfer the information to other governmental agencies as well as
to congressional committees for certain purposes.
BACKGROUND
The underlying facts of this action, at least as they
pertain to the instant appeal, are relatively simple. The
Department of Justice began investigating Columbia/HCA in the mid 1990s for possible Medicare and
Medicaid fraud. Columbia/HCA, either in response to the
investigation or in anticipation of it, conducted several
internal audits n1 [*292] of its Medicare patient records.
The Coding Audits pertained not only to Columbia/HCA
itself, but nearly all of its subsidiary and related corporations. The audits examined the various billing codes assigned to the patients in order to receive reimbursement
from the Medicare program, and any possible miscoding
(deliberate [**3] or otherwise) of the Medicare patients.
When DoJ attempted to obtain the audits, Columbia/HCA
[***4] rebuffed the request based on attorney-client
privilege and the work product doctrine.
n1 Columbia/HCA refers to these internal
audits as the "Coding Audits," and for reasons of
convenience and consistency, the Court adopts
this term as well.
Ultimately, DoJ and Columbia/HCA reached a settlement of the fraud investigation, which resulted in Columbia/HCA paying a $ 840,000,000 fine to the Government. The sum represented criminal penalties as well
as civil remuneration to the Government for overcharges
incurred due to the miscoding of Medicare patients.
Once the nature, extent and results of the DoJ investigation came to light, private insurance companies and
private individuals undertook to evaluate the billing they
received from Columbia/HCA. [**5] This review resulted in the filing of numerous lawsuits around the
country, which the Panel on Multidistrict Litigation
transferred to the Middle District of [***5] Tennessee.
n3 The various plaintiffs n4 contend that like the Health
Care Finance Administration, Columbia/HCA overbilled
them for various services. The litigation seeks the recovery of excess sums tendered by the Private Payors to
Columbia/HCA.
n3 The court below entered a stay pursuant to
the All-Writs Act, 28 U.S.C. § 1651, staying any
actions remaining in state court pending the outcome of the instant appeal. The stay also applies to
the MDL actions pending before it. See In re Columbia/HCA Healthcare Corporation Billing
Practices Litigation, 93 F. Supp. 2d 876 (M.D.
Tenn. 2000).
A change in corporate control at Columbia/HCA led
the company to engage in negotiations with the Government about a possible settlement of the fraud investigation. In coordination with this effort, Columbia agreed to
produce some of the Coding Audits and related documents to the Government. In exchange for this cooperation, DoJ agreed that certain stringent confidentiality
provisions would govern its obtaining of the documents.
As relevant to the instant appeal, the agreement provided
that:
the disclosure of any report, document, or
information by one party to the other does
not constitute a waiver of any applicable
privilege or claim under the work product
[**4]
doctrine. Both parties to the
agreement reserve the right to contest the
assertion of any privilege by the other
party to the agreement, but will not argue
that the disclosing party, by virtue of the
disclosures it makes pursuant to this
agreement, has waived any applicable
privilege or work product doctrine claim.
n2
50147014v1
n4 Innumerable plaintiffs are involved in the
MDL and related state-court actions. Participating
in this appeal are the Tennessee Laborers Health
and Welfare Fund; the Board of Trustees of the
Carpenters & Millwrights of Houston and Vicinity
Health and Welfare Trust Fund; the Board of
Trustees of the Pipefitters, Local 522, Hospital,
Medical and Life Benefit Fund, Operating Engineers Local No. 312 Health and Welfare Fund;
United Paper Workers International Union; and
Cordula Boysen. These parties refer to themselves
in the record as "the Private Payors," and the Court
will adopt this term as well.
[**6]
[*293] The Private Payors sought an order from the
district court compelling Columbia/HCA to produce the
Coding Audits. According to the Private Payors, the
billing codes used by Columbia/HCA for Medicare billing
were also used in calculating charges paid by the Private
Payors. Thus, the Coding Audits would contain highly
relevant information pertaining to alleged overbilling by
Columbia/HCA to these persons and insurance funds.
Importantly, the Private Payors alleged that notwithstanding whatever privilege the Coding Audits may have
once held, Columbia/HCA waived the protections of
those privileges by disclosing the materials to the Government.
As it had initially with DoJ, Columbia/HCA refused
to produce the Coding Audits on grounds of the work
product doctrine and attorney-client privilege. It argued
that based on case law from other jurisdictions, disclosing
the information to the Government did not waive the
protections of the two privileges. See generally Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir.
1978) (en banc). [***6] Moreover, Columbia/HCA
pointed out that in disclosing the information to the
Government, it had expressly reserved the right [**7] to
assert attorney-client privilege and the work product
doctrine pursuant to the confidentiality agreement negotiated with DoJ.
In a published opinion, the court below granted the
motion to compel. In re Columbia/HCA Healthcare
Corporation Billing Practices Litigation, 192 F.R.D. 575
(M.D. Tenn. 2000). After first noting that this Court had
not spoken on the issue, the district court examined the
approaches taken by other courts, including the Eighth
Circuit in Diversified Industries. Relying heavily on the
opinion of the First Circuit in United States v. Massachusetts Institute of Technology, 129 F.3d 681 (1st Cir.
1997), it found that "voluntary disclosure of privileged
materials to the government constitutes a waiver of the
attorney-client privilege to all other adversaries." In re
Columbia/HCA Healthcare, 192 F.R.D. at 579. Turning
to the Third Circuit for support, see Westinghouse Electric
Corp. v. Republic of the Philippines, 951 F.2d 1414 (3d
Cir. 1991), the court below also found that by disclosing
the documents to DoJ, Columbia/HCA waived any protections under the work product doctrine as well. In re
Columbia/HCA Healthcare, 192 F.R.D. at 579-80. [**8]
However, the court did find that the case presented a
"controlling question of law as to which there is a substantial ground for difference of opinion," and certified its
decision on the issue for interlocutory appeal pursuant to
28 U.S.C. § 1292(b). A previous panel of this Court ruled
that immediate appeal was proper in this case. The panel
found that the resolution of the issue presented "may
materially advance the ultimate termination of the litigation." Cardwell v. Chesapeake & Ohio Railway Co., 504
F.2d 444, 446 (6th Cir. 1974); see 28 U.S.C. §
1292(b)(same).
50147014v1
In its appeal, Columbia/HCA renews the arguments it
presented to the court below. It contends that this Circuit
should adopt the approach of the Eighth Circuit in Diversified Industries and reject the "all-or-nothing" methodology [***7] represented by the decision of the court
below. According to Columbia/HCA, various public
policy arguments, as well as caselaw from other jurisdictions, provides support for its position. The Private Payors
encourage the Court to join the majority position and
affirm the opinion of the district court.
STANDARD [**9]
"The question of whether the attorney-client privilege
applies is a mixed question of law and fact, subject to de
novo [*294] review." Reed v. Baxter, 134 F.3d 351, 355
(6th Cir. 1998) (citing In re Grand Jury Proceedings
October 12, 1995, 78 F.3d 251, 253-54 (6th Cir. 1996));
see also United States v. Dakota, 197 F.3d 821, 825 (6th
Cir. 2000) ("This court reviews de novo a district court's
decision regarding waiver of the attorney-client privilege") (citing United States v. Collis, 128 F.3d 313, 320
(6th Cir. 1997)). While the burden of establishing the
existence of the privilege rests with the person asserting
it," Dakota, 197 F.3d at 825 (citing In re Grand Jury
Investigation No. 83-2-35, 723 F.2d 447, 450 (6th Cir.
1983)), in this case the parties have assumed for purposes
of this appeal that the Coding Audits and related documents are covered by the attorney-client privilege and the
work product doctrine. Claims of attorney-client privilege
are "narrowly construed because [the privilege] reduces
the amount of information discoverable during the course
of a lawsuit." Collis, 128 F.3d at 320 [**10] (citing In re
Grand Jury Proceedings, 78 F.3d at 254). The privilege
"applies only where necessary to achieve its purpose and
protects only those communications necessary to obtain
legal advice." In re Antitrust Grand Jury, 805 F.2d 155,
162 (6th Cir. 1986) (citing Fisher v. United States, 425
U.S. 391, 403, 96 S. Ct. 1569, 1577, 48 L. Ed. 2d 39
(1975)).
The work product doctrine "is distinct from and
broader than the attorney-client privilege." In re Antitrust
Grand Jury, 805 F.2d at 163 (quoting United States v.
Nobles, 422 U.S. 225, 238 n. 11, 95 S. Ct. 2160, 2170 n.
11, 45 L. Ed. 2d 141 (1975)). The doctrine is designed to
allow an attorney to "assemble information, sift what he
considers to be the [***8] relevant from the irrelevant
facts, prepare his legal theories and plan his strategy
without undue and needless interference . . . to promote
justice and to protect [his] clients' interests." Hickman v.
Taylor, 329 U.S. 495, 510, 67 S. Ct. 385, 393, 91 L. Ed.
451, 34 Ohio Op. 395 (1947). So-called "fact" work
product, the "written or oral information transmitted to the
attorney and recorded [**11] as conveyed by the client,"
In re Antitrust Grand Jury, 805 F.2d at 163, may be obtained upon a showing of substantial need and inability to
otherwise obtain without material hardship. See Toledo
Edison Co. v. G.A. Technologies, Inc., 847 F.2d 335,
339-40 (6th Cir. 1988). However, absent waiver, a party
may not obtain the "opinion" work product of his adversary; i.e., "any material reflecting the attorney's mental
impressions, opinions, conclusions, judgments, or legal
theories." In re Antitrust Grand Jury, 805 F.2d at 163-64
(citations omitted).
who has disclosed privileged
communications to one party to
continue asserting the privilege
against other parties. Partial waiver
permits a client who has disclosed
a portion of privileged communication to continue asserting the
privilege as to the remaining portions of the same communications.
DISCUSSION
I. ATTORNEY-CLIENT PRIVILEGE
As a general rule, the "attorney-client privilege is
waived by voluntary disclosure of private communications by an individual or corporation to third parties. See
In re Grand Jury Proceedings October 12, 1995, 78 F.3d
251, 254 (6th Cir. 1996). In addition, a client may waive
the privilege by conduct which implies a waiver of the
privilege or a consent to disclosure." Dakota, 197 F.3d at
825 (citing In re von Bulow, 828 F.2d 94, 104 (2d Cir.
1987)). The prevailing view is that once a client [**12]
waives the privilege to one party, the privilege is waived
en toto. See, e.g., Westinghouse, 951 F.2d at 1424.
However, as evidenced by the instant case, some
courts have recognized that a client may "selectively"
waive the privilege. n5 And, unfortunately, "the case law
[*295] addressing the [***9] issue of limited waiver [is]
in a state of 'hopeless confusion.'" In re M&L Business
Machine Company, Inc., 161 B.R. 689, 696 (D. Col.
1993) (citing John W. Gergacz, Attorney-Corporate Client Privilege, at 5-53 (2d ed. 1990). Indeed, as will be
discussed infra, some courts have even taken internally
inconsistent opinions. A review of the positions presented
by the various courts reveals three general opinions on the
issue - selective waiver is permissible, see Diversified,
supra; selective waiver is not permissible under any situations, see Westinghouse, supra; and selective waiver is
permissible in situations where the Government agrees to
a confidentiality order, see In re M&L Business Machine,
supra - and the Court will examine each.
Westinghouse, 951 F.2d at 1423 n. 7 (citations
omitted).
[**13]
A. NO SELECTIVE WAIVER
The Eighth Circuit became the first court to recognize
selective waiver in Diversified. The next circuit court
opinion to evaluate the issue found the "'limited' waiver
theory wholly unpersuasive." Permian Corp. v. United
States, 214 U.S. App. D.C. 396, 665 F.2d 1214, 1220
(D.C. Cir. 1981) (citing In re Weiss, 596 F.2d 1185 (4th
Cir. 1979)). n6 In Permian, Permian's corporate parent,
Occidental Petroleum, had provided certain documents to
the Securities and Exchange Commission ("SEC") regarding possible illegal bribes paid to foreign [***10]
officials and concomitant income tax fraud. n7 The SEC
and Occidental reached an agreement n8 that the information would be held confidential prior to its disclosure
by the petroleum company. Permian, 665 F.2d at
1216-18.
n6 Weiss also rejected Diversified, but did so
without analysis.
n7 During the mid 1970s, information came
to light that many of the largest corporations in the
United States had paid numerous bribes to foreign
officials (as well as made secretive domestic political contributions) to obtain overseas business.
The SEC initiated a "voluntary disclosure program" to encourage corporate America to reveal
past misdeeds and publicly disclose the accounting and tax fraud used to hide the payments. In
exchange for "coming clean," the SEC agreed not
to pursue certain enforcement actions. In most
situations, the companies created internal auditing
committees which, with the assistance of outside
legal counsel, prepared reports documenting the
full extent any illegal practices at the company. It
is against this background that many of the reported cases discussed herein arose.
n5 Other courts refer to this as "limited"
waiver. Unless quoting another case, we will refer
to the issue as "selective" waiver for the reasons
set forth by the Third Circuit in Westinghouse:
Although the rule in Diversified is
often referred to as the "limited
waiver rule," we prefer not to use
that phrase because the word "limited" refers to two distinct types of
waivers: selective and partial. Selective waiver permits the client
50147014v1
[**14]
n8 Notably, this agreement provided that the
SEC would not disclose the documents "to any
third-party unless prior notice of such proposed
disclosure has been given to Occidental." Id. at
1216. In other words, the confidentiality agreement did not absolutely prevent disclosure.
to assert confidentiality must maintain genuine confidentiality." Id. (quoting Permian, 665 F.2d at 1222). n11
n9 The Second Circuit, relying on Permian,
held that "that Court rejected a 'pick and choose'
theory of attorney-client privilege. We agree with
the sentiment and note that the case before us is
somewhat stronger since it does not involve an
agreement with a governmental agency purporting
to protect the privilege so far as other agencies are
concerned." In re John Doe Corp., 675 F.2d 482,
489 (2d Cir. 1982)(citing Permian). Ultimately,
however, the John Doe court relied on a finding
that the audit committee report in that case was
prepared in furtherance of an ongoing criminal
enterprise, and overruled the claim of privilege on
that ground. Id. at 491.
The Department of Energy, interested in investigating whether Occidental's activities had violated certain
federal energy laws, sought to obtain the documents.
Occidental, notified by the SEC that it intended to comply
with the request, responded by filing suit to prevent the
handover. Relying on Diversified, Occidental argued that
a "limited" waiver had occurred when it tendered the
information to the SEC. The district court agreed with
[*296] Occidental, and enjoined the Department of Energy from obtaining the information from the SEC. Id.
The Southern District of New York, looking
to Permian, Westinghouse, In re John Doe Corp.,
and other cases, rejected selective waiver in any
form, even if attempted through a confidentiality
agreement. Bowne of New York City, Inc. v. AmBase Corp., 150 F.R.D. 465, 480 (S.D.N.Y. 1993)
(holding that "even if the disclosing party requires,
as a condition of disclosure, that the recipient
maintain the materials in confidence, this agreement does not prevent the disclosure from constituting a waiver of the privilege; it merely obligates the recipient to comply with the terms of any
confidentiality agreement." (citations omitted)).
The D.C. Circuit reversed. It began by noting that
"we cannot see how the availability of a 'limited waiver'
would serve the interests underlying the common law
privilege for confidential communication between attorney and client." Id. at 1220.
The Eighth Circuit's [**15] "limited
waiver" rule has little to do with this confidential link between the client and his
[***11] legal advisor. Voluntary cooperation with government investigations may
be a laudable activity, but it is hard to understand how it improves the attorney-client relationship. If the client feels
the need to keep his communications with
his attorney confidential, he is free to do so
under the traditional rule by consistently
asserting the privilege, even when the
discovery request comes from a "friendly"
agency.
Id. at 1220-21 (footnote omitted). The court concluded
that the "client cannot be permitted to pick and choose
among his opponents, waiving the privilege as to some
and resurrecting the claim of confidentiality to obstruct
others, or to invoke the privilege as to communications
whose confidentiality he has already compromised for his
own benefit." Id. at 1221 (citations omitted). n9 The D.C.
Circuit reaffirmed this position in In re Subpoenas Duces
Tecum, 238 U.S. App. D.C. 221, 738 F.2d 1367, 1370
(D.C. Cir. 1984), n10 stating that "we believe that the
attorney-client [***12] privilege should be available
only at the traditional price: [**16] a litigant who wishes
50147014v1
[**17]
n10 Utilizing this case for support, the Fourth
Circuit subsequently affirmed its position against
selective waiver of attorney-client privilege in In
re Martin Marietta Corp., 856 F.2d 619, 623 (4th
Cir. 1988).
n11 The Federal Circuit relied on both Permian and In re Weiss in holding that it "has never
recognized such a limited waiver [of attorney
client privilege]." Genentech, Inc. v. United States
International Trade Commission, 122 F.3d 1409,
1417 (Fed. Cir. 1997).
As noted previously, the Third Circuit rejected the
concept of selective waiver in Westinghouse. Like Occidental, Westinghouse found itself under investigation for
problematic dealings with foreign governments (in this
case, bribes to a cohort of Ferdinand Marcos to obtain a
nuclear power plant contract). Westinghouse, 951 F.2d at
1417-18. Westinghouse prepared certain internal audits
and provided the information to the SEC and the DoJ.
Once Marcos was deposed, the Philippine government
brought suit against Westinghouse for wrongfully obtaining the contract through [**18] the payment of illegal
bribes. [*297] Id. When the Philippines tried to obtain
the information given to the governmental agencies,
Westinghouse refused on the grounds of attorney-client
privilege and work product protections. Like Occidental,
it contended the disclosure to the Government was a
"limited" waiver of these discovery shelters. Id. at 1423.
The Third Circuit rejected this argument. It found that
the
Eighth Circuit's sole justification [in Diversified] for permitting selective waiver
was to encourage corporations to undertake internal investigations. Unlike the two
widely recognized exceptions to the
waiver doctrine we discussed at page
1424, n12 selective waiver does not serve
the purpose of encouraging full disclosure
[***13] to one's attorney in order to obtain
informed legal assistance; it merely encourages voluntary disclosure to government agencies, thereby extending the
privilege beyond its intended purpose.
Westinghouse, 951 F.2d at 1425 (citation omitted). The
court concluded disclosing information to the Government "has little relevance" to the unique role of an attorney as confidential counselor. Id. [**19] While recognizing the objectives of encouraging cooperation with
governmental agencies and conducting internal investigations as "laudable," it disagreed with the conclusion
they had anything to do with "the intended purposes of the
attorney-client privilege." Id. (citing Permian, 665 F.2d at
1221). n13
n12 These consist of the ability of counsel to
retain outside experts (such as accountants) to assist in giving legal advice to the client, and the
ability of co-defendants or co-litigants to share
information without waiving the privilege. Westinghouse, 951 F.2d at 1424 (footnote added) (citations omitted).
n13 The Westinghouse court also pointed out
that in 1984, "Congress rejected an amendment to
the Securities and Exchange Act of 1934, proposed by the SEC, that would have established a
selective waiver rule regarding documents disclosed to the agency." Id. at 1425.
50147014v1
Finally, in United States v. MIT, supra, the First
Circuit rejected [**20] selective waiver as well. MIT
performed contract work for the Department of Defense
("DoD") to perform certain research projects. In coordination with this work, DoD audited, from time to time, the
billing statements submitted by MIT. MIT, 129 F.3d at
683. The Internal Revenue Service ("IRS"), in the process
of reviewing MIT's Section 501(c)(3) tax-exempt status,
n14 sought to obtain the DoD audits. DoD stated it would
not turn over the audits without MIT's consent, and MIT
steadfastly refused to produce the information. MIT and
DoD did not, however, have any agreement to keep the
information strictly confidential. Id.
n14 Title 26, United States Code, Section
501(c)(3) affords an organization which meets the
criteria set forth in that section a broad exemption
from paying income tax. It also permits donors to
the organization to take certain tax deductions for
amounts contributed to the organization. See MIT,
129 F.3d at 682.
[***14]
After the [**21] district court upheld a petition filed
by the IRS to obtain the documents, MIT appealed to the
First Circuit. Following a review of caselaw from other
circuits, the MIT court chose to reject the Diversified
approach. It held:
anyone who chooses to disclose a privileged document to a third party, or does so
pursuant to a prior agreement or understanding, has an incentive to do so,
whether for gain or to avoid disadvantage.
It would be perfectly possible to carve out
some of those disclosures and say that,
although the disclosure itself is not necessary to foster attorney-client communications, neither does it forfeit the privilege.
With rare exceptions, [*298] courts have
been unwilling to start down this path which has no logical terminus - and we
join in this reluctance.
MIT, 129 F.3d at 686.
B. SELECTIVE WAIVER IN ALL SITUATIONS
The selective waiver doctrine stems from the Diversified opinion alluded to seriatim above. Diversified, a
Delaware corporation operating in Missouri, manufactured and processed nonferrous metals. During a proxy
fight, it became apparent that Diversified had engaged
domestically in the type of activities that Westinghouse
[**22] and Occidental had engaged in abroad; i.e., it was
paying bribes to obtain business. Diversified, 572 F.2d at
607. The company formed an independent audit committee, retained outside counsel, and set about preparing
an internal report on the issue. Outside counsel then presented the information to the board, which acted on the
information contained therein. Id. The SEC also obtained
a copy of the report in question, apparently through the
use of an administrative subpoena. Id. at 611.
One of the customers bribed by Diversified brought
suit, and sought to obtain the audit report (prepared by
Arthur Anderson & Co.), as well as the minutes of the
board meeting where outside counsel presented it to Diversified. Id. at 596, 601. The district court ordered the
production of the documents in question, finding they
were not covered by [***15] attorney-client privilege. A
panel opinion of the Eighth Circuit then affirmed that
decision. Id. at 602-03.
On rehearing en banc, the full Eighth Circuit found
that the information in question was covered by the attorney-client privilege. It then turned to the issue of
waiver: [**23]
We finally address the issue of whether
Diversified waived its attorney-client
privilege with respect to the privileged
material by voluntarily surrendering it to
the SEC pursuant to an agency subpoena.
As Diversified disclosed these documents
in a separate and nonpublic SEC investigation, we conclude that only a limited
waiver of the privilege occurred. See
Bucks County Bank and Trust Co. v.
Storck, 297 F. Supp. 1122 (D. Haw. 1969).
Cf. United States v. Goodman, 289 F.2d
256, 259 (4th Cir.), vacated on other
grounds, 368 U.S. 14, 82 S. Ct. 127, 7 L.
Ed. 2d 75 (1961). To hold otherwise may
have the effect of thwarting the developing
procedure of corporations to employ independent outside counsel to investigate
and advise them in order to protect
stockholders, potential stockholders, and
customers.
Diversified, 572 F.2d at 611. n15
n15 Bucks County Bank pertains to the fact
that testimony given in a suppression hearing is
not admissible at a subsequent criminal trial.
50147014v1
Bucks County Bank, 297 F. Supp. at 1123.
Goodman pertains to the ability to invoke the Fifth
Amendment privilege against self-incrimination
in a subsequent criminal investigation. Goodman,
289 F.2d at 259.
A subsequent Eighth Circuit opinion not referred to by the parties calls into question Diversified. In In re Grand Jury Proceedings Subpoena,
841 F.2d 230, 234 (8th Cir. 1988) (citing, inter
alia, Permian), the court stated
voluntary disclosure is inconsistent
with the confidential attorney-client relationship and waives
the privilege. A claim that a need
for confidentiality must be respected in order to facilitate the
seeking and rendering of informed
legal advice is not consistent with
selective disclosure when the
claimant decides that the confidential materials can be put to other
beneficial purposes.
After this discussion, and a list of supporting cases
and other authority, the court noted "but cf. Diversified Industries, Inc. v. Meredith, 572 F.2d
596, 611 (8th Cir. 1977) (banc) [sic] (limited
waiver theory)." In re Grand Jury Proceedings
Subpoena, 841 F.2d at 234.
[**24] [***16]
[*299] Following Diversified, n16 several district
courts held that disclosures to government agencies
(typically the SEC in a voluntary disclosure program
situation) do not waive the protections of the attorney-client privilege. Citing Diversified, the court in In re
Grand Jury Subpoena Dated July 13, 1979, 478 F. Supp.
368, 373 (D. Wis. 1979), held "I believe that such cooperation [with the SEC] should be encouraged, and therefore I will not treat the release of the Quarles & Brady n17
report to the Securities and Exchange Commission, Internal Revenue Service, or the New York grand jury as a
waiver of the corporation's attorney-client privilege with
regard to the notes." The Northern District of Texas arrived at a similar conclusion. See In re LTV Securities
Litigation, 89 F.R.D. 595, 605 (N.D. Tex. 1981) ("LTV's
disclosure of the additional materials to the SEC does not
justify the class' discovery of the identity of those documents believed by LTV to be most important [i.e., privileged]"). The Southern District of New York, in Byrnes v.
IDS Realty Trust, 85 F.R.D. 679, 689 (S.D.N.Y. 1980)
relied on both Diversified [**25] and In re Grand Jury
Subpoena Dated July 13, 1979 to find that "voluntary
submissions to agencies in separate, private proceedings
should be a waiver only as to that proceeding." See also
Enron Corp. v. Borget, 1990 U.S. Dist. LEXIS 12471, No.
88 CIV. 2828 (DNE), 1990 WL 144879 (S.D.N.Y. Sept.
22, 1990), at *2 ("the public policy concern of encouraging [***17] cooperation with law enforcement militates in favor of a no waiver [of the privilege as to other
parties] finding.").
n16 Of note, the Supreme Court alluded to the
Diversified opinion several times in Upjohn Co. v.
United States, 449 U.S. 383, 101 S. Ct. 677, 66 L.
Ed. 2d 584 (1981), but only for its definition of the
scope of attorney-client privilege.
n17 Quarles and Brady, a Milwaukee, Wisconsin, law firm had performed an audit of the
Miller Brewing Company in response to an SEC
investigation into questionable "slush fund" payments during the early 1970s. 478 F. Supp. at
370-71.
C. SOME SELECTIVE WAIVER
The final approach to this [**26] issue, adopted by
some courts overtly and suggested by others, has its roots
in Teachers Insurance & Annuity Association of America
v. Shamrock Broadcasting Co., 521 F. Supp. 638
(S.D.N.Y. 1981). As with many of the other cases on this
subject, Teachers Insurance involved the investigation,
during the 1970s, of alleged improper dealings by a corporation. Here, the issue involved a series of questionable
loans and other debentures by Shamrock. Id. at 640. Using
its investigatory subpoena powers, the SEC marshaled
numerous documents pertaining to the questionable
dealings, and ultimately obtained a consent judgment for
securities' law violations. Id.
Teachers, as a shareholder of Shamrock, sought to
obtain the information disclosed to the SEC. The SEC
subpoena expressly stated that the information sought
was to be used "principally for the purpose
of investigating possible violations of the
federal securities laws"; and that the information might also be used "in any
proceeding where the Federal securities
laws are in issue or in which the Commission or past or present members of its staff
is a party or otherwise involved in an official [**27] capacity."
50147014v1
Id. In other words, Shamrock did not enter into any limiting confidentiality agreement with the SEC (nor did it
fight the subpoenas on the grounds of privilege when the
SEC issued them).
[*300] The court reviewed the case law published as
of the date of the opinion, including Diversified, In re
Grand Jury Subpoena Dated July 13, 1979, In re Weiss,
and others, and arrived at the following conclusion: "I am
of the opinion that disclosure to the SEC should be
deemed to be a complete waiver of the attorney-client
privilege unless the right to [***18] assert the privilege
in subsequent proceedings is specifically reserved at the
time the disclosure is made." Teachers Insurance, 521 F.
Supp. at 644-45 (emphasis added). The court concluded
that some case law "suggested" a "third alternative" to the
positions in Diversified and In re Weiss: "no waiver if the
documents were produced to the SEC under a protective
order, stipulation or other express reservation of the
producing party's claim of privilege as to the material
disclosed." Id., at 646. The court noted that "it does not
appear that such a reservation would [**28] be difficult to
assert, nor that it would substantially curtail the investigatory ability of the SEC. . .." Id. Such a stipulation would
also "make clear that . . . the disclosing party had made
some effort to preserve the privacy of the privileged
communication, rather than having engaged in abuse of
the privilege by first making a knowing decision to waive
the rule's protection and then seeking to retract that decision in subsequent litigation." Id. n18
n18 Schnell v. Schnall, 550 F. Supp. 650
(S.D.N.Y. 1982), which closely followed Teachers Insurance, adopted its analysis (as partial
support) in finding that a disclosure made to the
SEC did not constitute a waiver of attorney-client
privilege. Schnell also relied on Diversified and
Byrnes.
While the Bowne opinion (which rejected selective
waiver) purported to overrule Teachers Insurance, both
were followed by the Second Circuit's opinion in In re
Steinhardt Partners, L.P., 9 F.3d 230 (2d Cir. 1993).
[**29] Steinhardt involved an SEC investigation into
irregularities in the treasuries market. Steinhardt, cooperating with SEC officials, prepared a memorandum and
exhibits concerning its involvement in the treasuries
market. Id. at 232. While the memorandum was marked
"FOIA [Freedom of Information Act] Confidential
Treatment Requested," no confidentiality agreement was
reached with the SEC prior to turning over the materials.
The district court granted a motion to compel production
of the materials tendered by class action plaintiffs. Id.
[***19]
On appeal, Steinhardt raised the issue of selective
waiver. Making no mention of In re John Doe Corp., n19
the court noted "the circuits have . . . split on this issue [of
selective waiver]." Steinhardt, 9 F.3d at 233 (citing
Westinghouse, In re Subpoena Duces Tecum, and Diversified). After evaluating the case law, the court concluded
"we agree that selective assertion of privilege should not
be merely another brush on an attorney's palette, utilized
and manipulated to gain tactical or strategic advantage."
Id. at 235 (discussing work product) (citing Permian, 665
F.2d at 1221). [**30] Nonetheless, the court "declined to
adopt a per se rule that all voluntary disclosures to the
government" waives the protection of privilege. Id. at 236.
Establishing a rigid rule would fail to anticipate situations in which the disclosing
party and the government may share a
common interest in developing [*301]
legal theories and analyzing information,
or situations in which the SEC and the
disclosing party have entered into an explicit agreement that the SEC will maintain
the confidentiality of the disclosed materials.
to confidentiality agreements intended to preserve any
privilege applicable to the disclosed documents." Id. The
agreements provided that "production of these documents
'shall not be deemed to be a breach of any available attorney/client or work product privilege.'" Id. (citation
omitted). The Court noted that in "Steinhardt, the Second
Circuit indicated that the disclosure of privileged information to the government may not constitute a waiver if
the government agrees to maintain the confidentiality of
the disclosed materials. We think that the [confidentiality]
agreement satisfies the standard articulated in Steinhardt."
Id. (footnote [**32] omitted)(citing Steinhardt, 9 F.3d at
236).
Two other circuit court opinions left the door open to
selective waiver conditioned on the presence of a confidentiality agreement. In Dellwood Farms, Inc. v. Cargill,
Inc., 128 F.3d 1122 (7th Cir. 1997), Chief Judge Posner
indicated that rejection of selective waiver stemmed, in
part, from the courts' opinion "that the possessor of the
privileged information should have been more careful, as
by obtaining an agreement by the person to whom they
made the disclosure not to spread it further." Id. at 1127
(citation omitted). The First Circuit, in United States v.
Billmyer, 57 F.3d 31 (1st Cir. 1995), provided the following discussion:
if there were ever an argument for limited
waiver, it might well depend importantly
on just what had been disclosed to the
government and on what understandings.
Without intending to preclude such an
argument in a future case, we think that it
is enough in this one to say that no such
claim of limited waiver has been argued to
us.
Id. (citing In re Sealed Case, 219 U.S. App. D.C. 195, 676
F.2d 793, 817 (D.C. Cir. 1982); In re LTV, 89 F.R.D. at
614-15).
n19 Recently, the Second Circuit has returned
again to In re John Doe Corp. for the proposition
that "where a corporation has disseminated information to the public that reveals parts of privileged communications or relies on privileged reports, courts have found the privilege waived." In
re Grand Jury Proceedings), 219 F.3d 175, 184
(2d Cir. 2000) (citing, inter alia, In re John Doe
Corp., 675 F.2d at 488-89).
Id. at 37 (emphasis added). n20
n20 Of course, this opinion precedes MIT
(discussed supra).
[**31]
[**33]
Following the decision in Steinhardt, the Southern
District of New York returned to the approach set out in
Teachers Insurance. The In re Leslie Fay Companies, Inc.
Securities Litigation opinion involved disclosures of an
audit report to the Office of the United States Attorney (as
well as certain other individuals related to the ongoing
audit). In re Leslie Fay Companies, Inc. Securities Litigation, 161 F.R.D. 274, 284 (S.D.N.Y. 1995). When the
disclosures occurred, they [***20] "were made pursuant
Finally, the District of Colorado adopted the Teachers Insurance approach as "a compromise position." In re
M&L Business Machine Company, Inc., 161 B.R. 689,
695 (D. Col. [***21] 1993). M&L Business Machine
pertained to an agreement between a bank and the Office
of the United States Attorney investigating the bankruptcy
of M&L. The bank agreed to give the U.S. Attorney certain information, provided the information would be held
in confidence by the U.S. Attorney and the grand jury. Id.
50147014v1
at 691. Subsequently, the bankruptcy trustee attempted to
obtain the same information pursuant to a subpoena. The
bank filed a motion to quash, arguing (in part) that only a
selective waiver as to attorney-client privilege occurred.
Id. at 693.
The court found that "the Teachers Insurance view
strives to balance the policy goal of encouraging cooperation with the government noted in [Diversified] with the
strict requirement of confidentiality [*302] held paramount in Permian." Id. (citing Fox v. California Sierra
Financial Services, 120 F.R.D. 520, 526 (N.D. Cal.
1988)). n21 The court noted not only the steps [**34]
taken to ensure confidentiality, but also the fact that by
disclosing the information to the U.S. Attorney, the bank
was not doing so "for the purpose of obtaining some
benefit for itself." 161 B.R. at 696. The court found this
distinguished the M&L Business Machine case from the
numerous cases involving the SEC's voluntary disclosure
program (where disclosure was predicated on the hope of
obtaining favorable treatment from the SEC). Id.
n21 Fox adopted the Teachers Insurance approach explicitly. Fox, 120 F.R.D. at 526 ("I find
that where, as here, information has been voluntarily and selectively disclosed to the SEC without
attempts to protect the privileged nature of such
information, fairness requires a finding that the
attorney-client privilege has been waived as to the
disclosed information and all information on the
same
subject."(citing
Weil
v.
Investment/Indicators, Research and Management, 647
F.2d 18, 24 (9th Cir. 1981); Teachers Insurance;
and Handgards v. Johnson & Johnson, 413 F.
Supp. 926, 929 (N.D. Cal. 1976))).
[**35]
D. CONCLUSION
As pointed out by Columbia/HCA, this Court recently alluded to the Diversified opinion, stating "though
we need not decide whether we would approve of 'selective' waiver in [***22] this case, we believe that some of
the interests considered in Diversified Indus. are similar to
those in the instant case." In re Perrigo Co., 128 F.3d 430,
441 (6th Cir. 1997). However, after due consideration, we
reject the concept of selective waiver, in any of its various
forms.
First, the uninhibited approach adopted out of
wholecloth n22 by the Diversified court has little, if any,
relation to fostering frank communication between a
client and his or her attorney. As pointed out by the Third
Circuit in Westinghouse, the Diversified approach
"merely encourages voluntary disclosure to government
50147014v1
agencies." Westinghouse, 951 F.2d at 1425. The attorney-client privilege was never designed to protect conversations between a client and the Government - i.e., an
adverse party - rather, it pertains only to conversations
between the client and his or her attorney. In Upjohn, the
Supreme Court recognized that the
purpose [**36] [of attorney-client privilege] is to encourage full and frank communication between attorneys and their
clients and thereby promote broader public
interests in the observance of law and administration of justice. The privilege . . .
rests on the need for the advocate and
counselor to know all that relates to the
client's reasons for seeking representation
if the professional mission is to be carried
out. [The] purpose of the privilege [is] to
encourage clients to make full disclosure
to their attorneys.
Upjohn, 449 U.S. at 389, 101 S. Ct. at 682. Nowhere
amongst these reasons is the ability to "talk candidly with
the Government."
n22 As indicated in note 15, supra, the two
cases relied upon by the Eighth Circuit in Diversified pertain to the protections of the Fifth
Amendment, not attorney-client privilege.
Secondly, any form of selective waiver, even that
which stems from a confidentiality agreement, transforms
the attorney-client privilege into "merely another brush on
[**37] an [***23] attorney's palette, utilized and manipulated to gain tactical or strategic advantage." Steinhardt, 9 F.3d at 235. Once "the privacy for the sake of
which the privilege was created [is] gone by the [client's]
own consent, . . . the privilege does not remain in such
circumstances for [*303] the mere sake of giving the
client an additional weapon to use or not at his choice."
Green v. Crapo, 181 Mass. 55, 62, 62 N.E. 956, 959
(1902) (Holmes, J.). "The client cannot be permitted to
pick and choose among his opponents, waiving the privilege for some and resurrecting the claim of confidentiality as to others, or to invoke the privilege as to communications whose confidentiality he has already compromised for his own benefit." Permian, 665 F.2d at 1221.
Moreover, attorney-client privilege is a matter of
common law right, "the oldest of the privileges for confidential communications known to the common law."
Upjohn, 449 U.S. at 389, 101 S. Ct. at 682. It is not a
creature of contract, arranged between parties to suit the
whim of the moment. While the approach advocated by
Teachers Insurance certainly protects the [**38] expectations of the parties to the confidentiality agreement, it
does little to serve the "public ends" of adequate legal
representation that the attorney-client privilege is designed to protect. Id.
There is considerable appeal, and justification, for
permitting selective waiver when the initial disclosure is
to an investigating arm of the Government. Undoubtedly,
by waiving privilege as to the Government, a client furthers the "truth-finding process." Permian, 665 F.2d at
1221. Considerable savings are realized to the Government, and through it to the public, in time and fiscal expenditure related to the investigation of crimes and civil
fraud. Such a policy might also, like the SEC voluntary
disclosure policy, increase the likelihood that corporations would engage in the type of self-policing represented by the Coding Audits. Without a doubt, disclosure
of information to the Government in a cooperative manner encourages settlement of disputes and by encouraging
cooperative exchange of information, selective [***24]
waiver would improve the ability of the Government and
private parties to settle certain actions.
However, this argument has several flaws. [**39]
As noted by the First Circuit, it "has no logical terminus."
MIT, 129 F.3d at 686. Insofar as the "truth-finding process" is concerned, a private litigant stands in nearly the
same stead as the Government. This argument holds
considerable weight in the numerous circumstances
whereby litigants act as private attorneys general, and
through their actions vindicate the public interest. A
plaintiff in a shareholder derivative action or a qui tam
action who exposes accounting and tax fraud provides as
much service to the "truth finding process" as an SEC
investigator. Recognizing this, a difficult and fretful
linedrawing process begins, consuming immeasurable
private and judicial resources in a vain attempt to distinguish one private litigant from the next.
A countervailing policy concern, heretofore not discussed, is whether the Government should assist in obfuscating the "truth-finding process" by entering into such
confidentiality agreements at all. The investigatory agencies of the Government should act to bring to light illegal
activities, not to assist wrongdoers in concealing the information from the public domain. Governmental agencies "have means to secure the [**40] information they
need" other than through voluntary cooperation achieved
via selective waiver (albeit at a higher cost in time and
money). MIT, 129 F.3d at 685. It is not necessary for the
courts to create a new method, one which effectively
prevents future litigants from obtaining the same information, when other means (means which will not result in
50147014v1
the information being concealed from the public) are
available to the Government.
[*304] The decision to enter into settlement negotiations, and to disclose otherwise confidential information in the process, is a tactical one made by the client
and his or her attorney. All litigation-related tactical decisions have an upside and a downside. By refusing the
doctrine of selective waiver, the Court agrees with the
First Circuit that the [***25]
general principle that disclosure normally
negates the privilege is worth maintaining.
To maintain it here makes the law more
predicable and certainly eases its administration. Following the Eighth Circuit's
approach would require, at the very least, a
new set of difficult line-drawing exercises
that would consume time and increase
uncertainty.
MIT, 129 F.3d at 685. [**41] Just as the attorney-client
privilege itself provides certainty to litigants that information relayed to one's attorney will not be disclosed,
rejection of selective waiver provides further certainty
that waiver of the privilege ensures that the information
will be disclosed. n23
n23 The application of this "bright line" rule
in the instant case does not unduly or unexpectedly thwart the expectations of Columbia/HCA.
Its counsel admitted during oral arguments that the
company knew the unsettled nature of the law, and
arrived at the decision to enter into the agreement
with the Government after contemplating the
possibility the agreement would not protect its
confidential information.
II. WORK PRODUCT
"Even if [Columbia/HCA] is deemed to have waived
the attorney-client privilege [], this does not necessarily
mean that [Columbia/HCA] also has waived work product
immunity." Picard Chemical Inc. Profit Sharing Plan v.
Perrigo Co., 951 F. Supp. 679, 689 (W.D. Mich. 1996)
(citing In re Grand Jury, 106 F.R.D. 255, 257 (D.N.H.
1985); [**42] and Handgards, 413 F. Supp. at 929). n24
See also Permian, 665 F.2d at 1219 [***26] ("We conclude, then, that while the mere showing of a voluntary
disclosure to a third person will generally suffice to show
waiver of the attorney-client privilege, it should not suffice in itself for waiver of the work product privilege."(footnote omitted) (quoting United States v. AT&T,
206 U.S. App. D.C. 317, 642 F.2d 1285, 1299 (D.C. Cir.
1980))). As noted previously, the "work product doctrine
is distinct from and broader than the attorney-client privilege" and extends beyond confidential communications
between the attorney and client to "any document prepared in anticipation of litigation by or for the attorney."
In re Antitrust Grand Jury, 805 F.2d at 163 (internal
quotation and citations omitted). Indeed, in Permian,
which so roundly rejected selective waiver as to attorney-client privilege, the D.C. Circuit upheld a finding by
the district court that the agreement between Occidental
and the SEC preserved the work product protection.
Permian, 665 F.2d at 1215. n25 See also [*305] Steinhardt, 9 F.3d at 236 (discussing [**43] the ability of
using an agreement with the SEC to protect work product
and attorney-client privilege); In re Subpoena Duces
Tecum, 738 F.2d at 1375 (finding that the party waives
work product unless it insists "on a promise of confidentiality before disclosure to the SEC."(citing In re Sealed
Case, 676 F.2d at 823)).
n24 There is no dispute that a party may
waive the protections of the work product privilege, as this Circuit has recognized. See Ginett v.
Federal Express Corp., 166 F.3d 1213 (table),
1998 WL 777998 (6th Cir. Oct. 21, 1998), at *10
n.7 (citing Carter v. Gibbs, 909 F.2d 1450 (Fed.
Cir. 1990)). See also Nobles, 422 U.S. at 239, 95
S. Ct. at 2170 (the work product doctrine is "like
other qualified privileges, [it] may be waived.").
The district court in Picard Chemical held
that the disclosure of work product in one case by
order of a court, where the party had undertaken
considerable efforts to protect the disclosure, did
not waive the privilege "before another court."
Picard Chemical, 951 F. Supp. at 689 (quoting
Shields v. Sturm, Ruger & Co., 864 F.2d 379, 382
(5th Cir. 1989)).
[**44]
n25 The In re Martin Marietta court, which
also rejected selective waiver for attorney-client
privilege, similarly found that work product privilege had been maintained (but only as to opinion
work product). In re Martin Marietta, 856 F.2d at
626-27.
However, other circuits have been more willing to
recognize waiver of the work product doctrine. The
Eighth Circuit, which so strongly protected attorney-client privilege in Diversified, easily found waiver of
the work product doctrine. See In re Chrysler Motors
50147014v1
Corp. Overnight Evaluation Program Litigation, 860
F.2d 844 (8th Cir. 1988). Chrysler established a "quality
control" program whereby workers disconnected the
odometers on new cars and then took the cars home
overnight for a "test drive." When the [***27] program
came to light, both private plaintiffs and the Government
launched lawsuits against Chrysler. Id., at 845. Chrysler
undertook to prepare an audit of the program to determine
its full extent; i.e., how many cars left Chrysler facilities
under these circumstances, which [**45] employees
drove the cars, etc. Chrysler then provided the analysis to
counsel for a class action group pursuant to a confidentiality agreement, but refused to turn it over to the Government. Id. n26
n26 Thus, this case notably differs from the
instant dispute in that the policy considerations
undergirding selective waiver in favor of the
Government were not present. However, as noted
previously, several of the same policy considerations apply to private litigants, especially in the
type of situation presented by the Chrysler dispute.
After declining to determine whether or not the
analysis constituted "ordinary" or "opinion" work product, the court concluded "that Chrysler waived any work
product protection by voluntarily disclosing the computer
tape to its adversaries, the class action plaintiffs, during
the due diligence phase of the settlement negotiations." Id.
at 846. The court continued "disclosure to an adversary
waives the work product protection as to items actually
disclosed, even where [**46] disclosure occurs in settlement." Id. (quoting Grumman Aerospace Corp. v. Titanium Metals Corp. of America, 91 F.R.D. 84, 90
(E.D.N.Y. 1981); and Chubb Integrated Systems Ltd. v.
National Bank, 103 F.R.D. 52, 67 (D.D.C. 1984)). The
court discounted the confidentiality agreement, finding
that
nor does the agreement between Chrysler
and co-liaison counsel for the class action
plaintiffs not to disclose the computer tape
to third-parties change the fact that the
computer tape has not been kept confidential. "Confidentiality is the dispositive
factor in deciding whether material is
privileged."
Id. at 847 (quoting Chubb, 103 F.R.D. at 67). [***28]
As noted by the court below, In re Columbia
Healthcare, 192 F.R.D. at 579-80, the Third Circuit in
Westinghouse rejected application of selective waiver in
the work product arena. The Westinghouse court found
that "the standard for waiving the work-product doctrine
should be no more stringent that the standard for waiving
the attorney-client privilege." Westinghouse, 951 F.2d at
1429.
When a party discloses protected [**47]
materials to a government agency investigating allegations against it, it uses those
materials to forestall prosecution (if the
charges are unfounded) or to obtain lenient
treatment (in the case of well-founded allegations). These objectives, however rational, are foreign to the objectives n27
[*306] underlying the work-product doctrine.
counsel conducting the investigation may
hesitate to pursue unfavorable information
or legal theories about the corporation.
Thus, allowing a party to preserve the
doctrine's protection while disclosing work
product to a government agency could
actually discourage attorneys from fully
preparing their cases.
Id. at 1429-30. n28
n28 The First Circuit upheld the "prevailing
rule that disclosure to an adversary, real or potential, forfeits work product protection." MIT, 129
F.3d at 687 (rejecting a selective waiver theory for
work product) (citing Steinhardt, 9 F.3d at 234;
Westinghouse, 951 F.2d at 1428-31; In Re Subpoena Duces Tecum, 738 F.2d at 1372). The court
noted that waiver of the work product protection
differs slightly from waiver of attorney-client
privilege in that the original disclosure must be to
an "adversary" in order to find initial waiver. Id. at
n.6 (collecting cases). There is no question that in
the instant case DoJ was an "adversary" of Columbia/HCA when the disclosure occurred.
Id.
n27 Westinghouse found that the work product doctrine "promotes the adversary system by
protecting the confidentiality of papers prepared
by or on behalf of attorneys in anticipation of litigation. Protecting attorneys' work product promotes the adversary system by enabling attorneys
to prepare cases without fear that their work
product will be used against their clients." Westinghouse, 951 F.2d at 1428 (citing Hickman, 329
U.S. at 510-11, 67 S. Ct. at 393-94; United States
v. AT&T, 642 F.2d at 1299)(footnote added).
Westinghouse rejected the argument that under In re
Sealed Case and In re Subpoena [**48] Duces Tecum a
confidentiality agreement could preserve the work product privilege. While noting that had Westinghouse and the
SEC not been adversaries the court "might reach a different result," the Third Circuit found that "because
Westinghouse deliberately disclosed work product to two
government agencies investigating allegations against it,"
it could not rely on the confidentiality agreement to salvage work product protections. Westinghouse, 951 F.2d at
1431. The court also noted that as a matter of public policy,
if internal investigations are undertaken
with an eye to later disclosing the results to
a government agency, the [***29] outside
50147014v1
[**49]
The Northern District of California adopted the reasoning employed in Westinghouse to reject selective
waiver in the work product context. See In re Worlds of
Wonder Securities Litigation, 147 F.R.D. 208 (N.D. Cal.
1992). Although Worlds of Wonder disclosed information
to the SEC pursuant to a confidentiality agreement, the
court found that "waiver of work product to the SEC also
waives work product to others." Id., at 211 (citing In re
Sealed Case, 676 F.2d at 817). It concluded that the
company could "not pick and choose to which adversaries
[it would] reveal documents." Id., at 212.
Other than the fact that the initial waiver must be to
an "adversary, n29 there is no compelling reason for differentiating waiver of work product from waiver of attorney-client privilege. Many of the reasons for disallowing selective waiver in the attorney-client privilege
context also apply to the work product doctrine. The
ability to prepare one's case in confidence, which is the
chief reason articulated [***30] in Hickman, supra, for
the work product protections, has little to do with talking
to the Government. [**50] Even more than attorney-client privilege waiver, waiver of the protections
afforded by the work product doctrine is a tactical litigation decision. Attorney and client both know the material
in question was prepared in anticipation of litigation; the
subsequent decision on whether or not [*307] to "show
your hand" is quintessential litigation strategy. Like attorney-client privilege, there is no reason to transform the
work product doctrine into another "brush on the attorney's palette," used as a sword rather than a shield.
Steinhardt, 9 F.3d at 235.
n29 See supra note 28.
Again, like our discussion of the attorney-client
privilege above, preserving the traditional confines of the
rule affords both an ease of judicial administration as well
as a reduction of uncertainty for parties faced with such a
decision. These and other reasons "persuade us that the
standard for waiving the work-product doctrine should be
no more stringent n30 than the standard for waiving the
attorney-client privilege" - [**51] once the privilege is
waived, waiver is complete and final. Westinghouse, 951
F.2d at 1429.
n30 This is especially true as to "fact" work
product, since it may be obtained even absent
waiver by a showing of substantial need and
hardship. (footnote added). See Toledo Edison
Co., 847 F.2d at 339-40.
CONCLUSION
For the foregoing reasons, we AFFIRM the decision
of the district court, and REMAND for further proceedings consistent with this opinion.
DISSENTBY: BOGGS
DISSENT: [***31]
BOGGS, Circuit Judge, dissenting. The court's
opinion today unnecessarily raises the cost of cooperating
with a government investigation. For the court, the existence of a government investigation exception to the
third-party waiver rule is an impediment to the
truth-seeking process. Op. at 24. After all, under the
court's rule more participants in the criminal and civil
justice systems have access to privileged information, and
the courts' task of making accurate factual determinations
[**52] is eased. Realistically speaking, the choice before
this court today is not between narrower and wider disclosure, but between a disclosure only to government
officials and no disclosure at all. Because I am convinced
that a government investigation exception to the
third-party waiver rule would increase the information
available over that produced by the court's rule and would
aid the truth-seeking process, I respectfully dissent.
50147014v1
The court undertakes an exhaustive review of the
other federal decisions which have addressed this question. The court's analysis of the extant law is largely accurate. I would make clear, however, that the authority
arrayed in favor of the court's rule is not overwhelming. It
is true that only one circuit court of appeals has implemented a government investigation exception to the third
party waiver rule. See Diversified Indus., Inc. v. Meredith,
572 F.2d 596, 611 (8th Cir. 1978) (en banc). Yet it is
equally true that one other circuit court of appeals has
expressly contemplated a government investigation exception where, as here, the holder of the privilege information executes a confidentiality agreement with the
government [**53] before disclosure. See In re Steinhardt Partners, 9 F.3d 230, 236 (2d Cir. 1993). One circuit court of appeals has rejected a government investigation exception in the case before it, but was not presented with and did not specifically comment upon cases
in which the disclosing party had entered into a confidentiality [***32] agreement. Permian Corp. v. United
States, 214 U.S. App. D.C. 396, 665 F.2d 1214 (D.C. Cir.
1981). Only one court of appeals has rejected the government investigation exception when the disclosing party
had entered into some kind of confidentiality agreement
with the government. Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414, 1427-27 [*308]
(3d Cir. 1991). n1 All of the other circuit decisions that the
court cites either concern whether disclosures to one
federal government agency waive privilege as to another
federal government agency, United States v. Massachusetts Inst. of Tech., 129 F.3d 681, 686 (1st Cir. 1997)
(holding that disclosure to Department of Defense audit
committee without a confidentiality agreement waived
privilege in IRS investigation), or address privileges
[**54] other than the attorney-client privilege. See
Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d 1122 (7th
Cir. 1997) (considering waiver rules concerning the government investigatory privilege). Needless to say, the
circuit courts of appeal are deeply split on whether a disclosure of privileged information to the government, in
the course of an investigation and with a confidentiality
agreement, waives the privilege as to all other parties.
More certainly, this court has never addressed this question, and all of the authority cited, to the extent it provides
any answer, does not bind our resolution of this case.
n1 Even in Westinghouse, the court doubted
that the disclosing party actually had entered into
comprehensive confidentiality agreement for all
of its disclosures to government agencies. See
Westinghouse, 951 F.2d at 1427.
I would have resolved this open question by holding
that there is a government investigation exception to the
third-party waiver rule. I address [**55] the existence of
this exception with regard to the attorney-client and the
attorney-work-product privileges separately below.
[***33]
A. The Attorney-Client Privilege
I am unpersuaded by the court's reasoning for its rejection of the exception. First and most generally, the
court claims that the "attorney-client privilege [is] narrowly construed" and suggests that we should start with a
presumption against Columbia's claim of privilege. Op. at
7. It is certainly true that the application of the privilege to
certain communications is to be "narrowly construed," in
part because it "reduces the amount of information discoverable in a lawsuit." United States v. Collis, 128 F.3d
313, 320 (6th Cir. 1997). Neither the parties nor the court
denies that the privilege would ordinarily cover the information sought in this case. Once we decide that the
attorney-client privilege applies to certain communications, the question becomes one of waiver. When the
question is whether the attorney-client privilege is waived
by certain actions, the presumption shifts in favor of
preserving the privilege. As this court has recently made
clear, "a court should begin [**56] its analysis with a
presumption in favor of preserving the privilege." In re
Perrigo Co., 128 F.3d 430, 440 (6th Cir. 1997).
Second, the court suggests that the exception is "unrelated to" the justification for the attorney-client privilege, that is, encouraging "frank communication" between
attorney and client. Op. at 22. Therefore, the court contends, the exception ought to be rejected.
It is not clear why an exception to the third-party
waiver rule need be moored to the justifications of the
attorney-client privilege. More precisely, we ought to
seek guidance from the justifications for the waiver rule to
which the exception is made. Those justifications are not
exactly coincident with the justifications for the privilege
itself. Although the philosophical pedigree of the rule is
unclear, I can discern at least two frequently articulated
justifications for the third-party waiver rule.
The first justification draws on the reasons behind the
attorney-client privilege itself. The attorney-client privilege is designed [*309] to foster frank communication
between attorney [***34] and client. See Commodity
Futures Trading Comm'n v. Weintraub, 471 U.S. 343,
348, 85 L. Ed. 2d 372, 105 S. Ct. 1986 (1985). [**57]
Although some view privileges as impediments to the
truth-seeking process, the calculation is that the attorney-client privilege improves the adversarial process
without a net loss in the amount of information produced.
Insofar as the existence of the privilege creates the
communication sought, the exclusion of privileged information conceals no probative evidence that would
50147014v1
otherwise exist without the privilege. The absence of the
communication would leave the adversarial process with
no more information and with counsel less able to present
focused arguments to the courts.
Courts explaining the waiver rule note that once a
client or his lawyer voluntarily reveals privileged information, the basic justification for the privilege no longer
obtains. The disclosure indicates that the privilege was not
a necessary incentive for the privileged communication to
occur, by demonstrating that "the client does not appear to
have been desirous of secrecy." Permian, 665 F.2d at
1220. See also 8 Wigmore on Evidence § 2311, at 599
(1961). Courts employing this explanation for the waiver
rule essentially make a statistical inference: "if clients
themselves divulge such information [**58] to third
parties, chances are that they would also have divulged it
to their attorneys, even without the protection of the
privilege." Westinghouse, 951 F.2d at 1424.
The court's opinion also hints strongly at this type of
reasoning, suggesting that the "uninhibited approach" of
recognizing an exception "has little, if any, relation to
fostering frank communication between a client and his or
her attorney." Op. at 22. The analysis of these courts does
not account for the element of time. Clients do not communicate with their attorneys with perfect knowledge of
the future. Without the premise of perfect, or at least very
good, predictive information in the hands of attorneys and
their clients, there is no basis for the inference from a later
disclosure to the motivation behind the privileged communication. That a client is willing to disclose privileged
information to the government at time T2 indicates very
little [***35] indeed about whether she would have
communicated with her attorney, absent the promise of
the privilege, at time T1. In the meantime, the client certainly has learned more about intervening events and
perhaps has become more legally sophisticated [**59]
(through the informed legal advice arising from her candid communication with her attorney). It seems clear to
me that ex ante the attorney-client privilege is generally
quite important in producing the communication, and that
later disclosures provide only the weakest evidence to
contradict that conclusion. n2
n2 The court also contends that the attorney-client privilege has nothing to do with protecting communication between "a client and the
government." Op. at 22. Of course, no one is
contending that communications between the
government and a private individuals are protected
by the attorney-client privilege. The only situation
in which the attorney-client privilege would be
relevant is when a private individual discloses
already privileged information to the government.
The question then is whether the communication
between the government and the holder of the
privilege waives the already existing privilege. To
me, the court's argument seems inapposite.
A more pragmatic approach would evaluate [**60]
the impact of the waiver rule on the client's incentives at
the time of the putative disclosure. I introduce now, and
will detail later, what I believe to be an uncontroversial
behavioral prediction: Faced with a waiver of the attorney-client privilege [*310] over the entire subject matter
of a disclosure and as to all persons, the holder of privileged information would be more reluctant to disclose
privileged information voluntarily to the government than
if there were no waiver associated with the disclosure.
This prediction raises at least one question: Is the effect on
governmental investigations the type of concern of which
the waiver rule may take account?
The court suggests that the proper analysis of the
waiver rule cannot include mere "public policy" considerations like the efficient dissemination of information to
the government. Op. at 23. Yet, the court's analysis ignores the common law nature of the privilege inquiry in
the hands of courts. The construction and interpretation of
privileges, including the [***36] circumstances under
which they are waived, are conferred to the "reason and
experience" of federal courts. Fed. R. Evid. 501. In exercising this authority, [**61] federal courts have regularly
analyzed whether particular rules are "in the public interest," or whether the rules regarding the privilege would
have undesirable side effects. These questions of "policy,"
like the deleterious impact of a waiver rule on government
investigations, are at the heart of the privilege inquiry. See
Jaffee v. Redmond, 518 U.S. 1, 135 L. Ed. 2d 337, 116 S.
Ct. 1923 (1996) (engaging in a extensive "policy" inquiry
to formulate a psychotherapist-patient privilege under
federal law). I can find no rule narrowly constraining the
considerations that courts may take into account in developing rules regarding a common law privilege or requiring that courts turn a blind eye to the practical effect
of the privilege rules that they are charged to create.
Moreover, the second justification generally offered
for the third-party waiver rule -- preventing the selective
invocation of the privilege -- contradicts the court's
premise. Reducing the client's choices to two, the complete abandonment of the privilege or preserving total
confidentiality, the third-party waiver rule prevents parties from strategically deploying the most favorable privileged material [**62] while jealously guarding the most
damaging. See United States v. Workman, 138 F.3d 1261,
1263-64 (8th Cir. 1998); United States v. Rakes, 136 F.3d
1, 5 (1st Cir. 1998). To the extent that a party seeks to use
otherwise privileged evidence, his opponent should be
able to respond with the same. Without the waiver rule,
50147014v1
the worst of all circumstances could emerge: the court
may be presented with an incomplete view of the facts,
where exposed evidence would be contradicted by concealed privileged information.
Preventing the distortion of the record only justifies
the topical scope of the waiver. By waiving the privilege
as to the entire subject matter of the disclosure, United
States v. Collis, 128 F.3d 313, 320 (6th Cir. 1997), the
third-party-waiver rule has the effect of preventing an
incomplete presentation of privileged information in a
particular proceeding. [***37]
Of particular concern here is the feature of the waiver
rule that eliminates the privilege not only with regard to
the adversary to whom the information is revealed, but
also with regard to all other parties. The policy justification for this feature is much more [**63] conclusory. As
the court notes, the holders of a privilege ought not have
the capacity to select among their opponents. Op. at 23; In
re Permian Corp., 665 F.2d at 1221 ("The client cannot be
permitted to pick and choose among his opponents,
waiving the privilege for some and resurrecting the claim
of confidentiality as to others . . . ."). Implicit in this feature is some conception of fairness, that the privilege is
not an entitlement to discriminate between parties who are
roughly on the same footing. See Op. at 24. See also In
[*311] re Grand Jury Proceedings, 219 F.3d 175, 183,
185 (2d Cir. 2000). Yet there is no reason why this
amorphous appeal to "fairness" should not yield to an
important public policy interest in easing governmental
investigations.
The preference against selective use of privileged
material is nothing more than a policy preference, and
really also has very little to do with fostering frank
communication between attorney and client. The question
for this court is one of policy: Whether the benefits obtained by the absolute prohibition on strategic disclosure
outweigh the benefits of the information of which the
government has [**64] been deprived by the rule? As the
harms of selective disclosure are not altogether clear, the
benefits of the increased information to the government
should prevail.
The court's rule does nothing more than increase the
cost of cooperating with the government. The third-party
waiver rule, if enforced in disclosures to the government,
would require an investigated party to withhold the requested information, lest she lose the privilege entirely.
While it is hard to say exactly how high the marginal costs
of the waiver would be without facts in an individual case,
the scope of the waiver sheds some light on the general
magnitude of the costs. Under the current operation of the
rule, the holder of the privilege waives it as to everyone
when he discloses [***38] privileged information to a
third party. Plus, the waiver covers not just the documents
disclosed, but all privileged documents "pertaining to the
subject matter of the disclosure." See, e.g., Collis, 128
F.3d at 320; Painewebber Group, Inc. v. Zinsmeyer Trusts
Partnership, 187 F.3d 988, 992 (8th Cir. 1999). These
features combine significantly to penalize the revelation
of privileged information [**65] to the government.
Relatively narrow cooperation with the government in the
form of a disclosure of privileged information can expose
an individual or firm to massive liability and reveal privileged documents far afield from the disclosure itself.
Contrary to the court's argument, increased access to
privileged information increases the absolute efficacy of
government investigations, regardless of increased investigatory costs to the government. There is some evidence
provided by privileged information for which there is no
non-privileged substitute or to which there is no path
without the privileged evidence. The court, as well as
other courts addressing this question, argues that the
government has "other means" to secure the information
that they need, while conceding that those other means
may consume more government time and money. Op. at
24; Massachusetts Inst. of Tech., 129 F.3d at 685. Presumably, the court is referring to search warrants or civil
discovery. It should be emphasized, however, that the
government has no other means to secure otherwise privileged information. That the documents or other evidence
sought is privileged permits the target of an [**66] investigation to refuse production through civil discovery,
to quash any subpoena duces tecum, or to prevent the
admission of the privileged information even by the
government. The only way that the government can obtain
privileged information is for the holder of the privilege
voluntarily to disclose it. The court's argument about the
adequacy of other means, suggesting that the only difference between them and voluntary disclosure is cost,
requires the premise that all privileged information has a
non-privileged analogue that is discoverable with enough
effort. That premise, however, does not hold. [***39]
Why should we minimize the cost and maximize the
accuracy of government investigations? After all, as the
court notes, [*312] private litigants also seek the truth
and could benefit from the decreased costs of discovery
and the increased accuracy of their positions and arguments. Op. at 24. They too, through the adversarial process, serve the truth-seeking mission with which courts
are charged.
The government's investigations are generally more
important. Government officials, with finite litigative
resources and no individual monetary stake in the outcome of litigation, generally [**67] are more selective
regarding the matters they choose to pursue than are private parties. Because of these incentives, government
investigations are more likely to be in the public interest.
Private litigants, often encouraged by large potential lia50147014v1
bility, on balance will have a greater incentive to press the
legal envelope and to pursue legal actions less certainly
within the public interest.
The differential remedies available to public and
private parties also reflect the greater importance of government investigations. The government has the authority
to seek imprisonment and punitive fines. The costs and
benefits of government investigations are diffuse, and
therefore managing those costs and benefits most efficiently is definitionally in the public interest. On top of all
this, government investigators and prosecutors start at a
tactical disadvantage to private plaintiffs given the procedural protections afforded criminal defendants against
the government, such as a higher burden of proof and the
privilege against self-incrimination. I am comfortable,
therefore, providing a clear exception for government
investigations, and leaving private litigants out.
Throughout its opinion, [**68] the court suggests
that recognition of an exception would deprive private
parties of evidence to which they would otherwise be
entitled. See Op. at 24 (characterizing the exception as a
government investigatory tool "which effectively prevents future litigants from obtaining the same information"). It is important to identify [***40] the silent
premise of the court's argument: private parties would
disclose privileged material to the government regardless
of the existence of an exception. If the holders of the
privilege did not disclose privileged information to the
government, the material would still be protected by the
privilege. In short, the choice presented in this case is not
one whether or not to release privileged information to
private parties that has already been disclosed to the
government, but rather one to create incentives that permit
voluntary disclosures to the government at all. In the run
of cases, either the government gets the disclosure made
palatable because of the exception, or neither the government nor any private party becomes privy to the privileged material.
The court finally makes a type of moral argument.
Why should the government sully its [**69] hands, the
court asks, by assisting in "obfuscating the 'truth-finding
process'"? Op. at 24. The government is not about cover-ups, rather it should "act to bring to light illegal activities." Ibid. I wonder what exactly the court thinks the
government would be doing if permitted to encourage
voluntary disclosure through confidentiality agreements.
The government either could use the information to find
additional evidence or could present the privileged information if it decided to initiate a criminal prosecution or
civil action. In any event, the court's argument misses the
mark. It is not the government's confidentiality agreement
that shields the information from civil discovery by private parties, but instead the privilege itself. Without the
exception, much otherwise disclosed material would stay
completely in the dark, under the absolute cover of privilege. The exception aids the [*313] government in
bringing violations of the law to light.
The theoretical merits of the exception aside, the
court questions the administrability of the rule that it
rejects. Op. at 24. In essence, the court suggests that the
exception lacks rule-like features and that, as a result, the
exception [**70] would dramatically increase judicial
decision and private litigation costs. At first glance, it not
entirely clear why the exception at issue would be more
standard-like, threaten certainty, and [***41] raise decision costs. It would only apply when the disclosure was
made to a government agency. It seems pretty simple to
know what government agencies are. We might place a
confidentiality agreement requirement on the exception.
n3 Really, the exception seems clear and predictable.
n3 A word about the relevance of the confidentiality agreement seems appropriate. I agree
with the other courts addressing this issue that
parties cannot create a privilege against civil discovery by mere written agreement. See Westinghouse, 951 F.2d at 1426. The relevance of the
confidentiality agreement, however, is as evidence
that the holder of the privilege intended to preserve the privilege against all parties other than the
government. Without such a confidentiality
agreement, we could imply from the disclosure a
lack of concern about the privilege.
[**71]
The court's argument is more sophisticated, however.
It claims that it would be difficult to distinguish between
the government and several types of private parties who
act particularly in the public interest. Op. at 24. A qui tam
plaintiff, for example, brings a suit in the government's
stead. See 31 U.S.C. 3730(b)(1). More tenuously, a
plaintiff in a shareholder derivative action seeks recovery
for the corporation, at least in addition to himself. The
claimed risk of attempts to stretch the exception seems
tenuous to me. At least the Eighth Circuit has had the
exception in place for twenty-four years, see Diversified
Indus., Inc. v. Meredith, 572 F.2d 596, 611 (8th Cir. 1978)
(en banc), and I can find no case in which a litigant has
pressed the exception in these situations. Nevertheless,
the quasi-governmental actors listed here seem categorically different. The difference between these actors and
the government is that they stand to recover personally,
and the prospect of personal recovery changes the incentives for bringing and prosecuting their actions in the first
instance. See 31 U.S.C. § 3730 [**72] (d) (providing
substantial awards to qui tam plaintiffs if they recover for
the United States). In short, because of the potentially
50147014v1
massive recovery that both qui tam and derivative suit
plaintiffs stand to receive personally, the assurance that
their activities are as much in the public interest as government agency conducted investigations seems absent.
[***42]
Plus, the exception is as rule-like as this court makes
it, and thus the cure for this defect lies in our own hands. If
the jurisprudence that this exception would produce contains a series of "difficult and fretful" exercises in
"linedrawing," Op. at 24, this court would have no one to
blame but itself.
Because of a similar concern for the preservation of
rule-like values in the field of privilege, I would make the
exception categorical. There would undoubtedly be some
voluntary disclosures to the government that would occur
without the exception. The benefits of such a disclosure to
the government may, in some cases, be so great for the
private party that they would outweigh the massive costs
of a full subject matter waiver of privilege. n4 Nevertheless, [*314] a rule removing the penalty of waiver from
all [**73] disclosures of privileged information to the
government would provide the certainty necessary to
encourage cooperation with the government.
n4 Or, in some cases, the costs of subject
matter waiver just may not be so high that it is not
a significant deterrent to cooperation with the
government.
Another problem with the rule-like features of the
exception is that the exception may have limited efficacy
absent uniformity among courts. It would be difficult to
remove the disincentive to cooperate with the government
if protection from waiver depended on the circuit in which
a party would be eventually involved in litigation. The
mere split between our sister circuits should not dissuade
us from adopting the exception. This court should follow
the legal position that it finds most meritorious and leave
the problem of uniformity to a higher court. [***43]
B. Waiver of the Attorney-Work-Product Privilege
The court also holds today that Columbia's voluntary
disclosure to the government of materials [**74] protected by the attorney-work-product privilege waives that
privilege as well. Op. at 29-30. I believe that the reasons
why the attorney-client privilege should not be waived by
a disclosure to the government are also sufficient to bar
waiver of the attorney-work-product privilege under similar circumstances. Some courts have decided that the
requirements for waiver of the attorney-client and the
work-product privileges are different. See, e.g., In re
Permian Corp., 214 U.S. App. D.C. 396, 665 F.2d 1214,
1219 (D.C. Cir. 1981). Indeed, courts have explicitly held
that "while the mere showing of voluntary disclosure to a
third person will generally suffice to show waiver of the
attorney-client privilege, it should not suffice in itself for
waiver of the work product privilege." United States v.
AT&T, 206 U.S. App. D.C. 317, 642 F.2d 1285, 1299
(D.C. Cir. 1980). Unlike the attorney-client privilege, the
work-product privilege is explicitly protected by a federal
rule of civil procedure, which makes no provision for
waiver of the privilege. See Fed. R. Civ. P. 26(b)(3).
The court contends that the only difference between
the two standards is that attorney work product may be
disclosed to [**75]
non-adversaries, through the
so-called "common interest exception," without waiving
the privilege. Op. at 29-30. Other courts, however, have
explicitly rejected the claim that the two waiver standards
are identical, except for the "common interest exception."
For example, the District of Columbia Circuit has held
50147014v1
that "the purposes of the work product privilege are more
complex, and they are not inconsistent with selective
disclosure -- even in some circumstances to an adversary."
In re Sealed Case, 219 U.S. App. D.C. 195, 676 F.2d 793,
818 (D.C. Cir. 1982).
In any event, I would also hold that the public interest
in easing government investigations counsels against
holding the attorney-work-product privilege waived when
the holder of the privilege discloses privileged information to the government. Because I believe that Columbia intended to [***44] preserve both the attorney-client and attorney-work-product privileges and that a
limited disclosure pursuant to a government agency's
investigatory request ought not waive the privileges as to
all other parties, I respectfully dissent from the court's
affirming of the district court's order compelling discovery of [**76] the otherwise privileged material in question.
Restatement of the Law, Second, Conflict of Laws (1988 Revisions)
Copyright (c) 1989, The American Law Institute
Chapter 6 - Procedure
Topic 2 - Specific Applications of General Principle
Title B - Witnesses and Evidence
Restat 2d of Conflict of Laws, § 139
§ 139 Privileged Communications
(1)
Evidence that is not privileged under the local law of the state which has the most significant relationship with the communication will be admitted, even though it would be privileged under the local law of the forum,
unless the admission of such evidence would be contrary to the strong public policy of the forum.
(2)
Evidence that is privileged under the local law of the state which has the most significant relationship
with the communication but which is not privileged under the local law of the forum will be admitted unless there is some
special reason why the forum policy favoring admission should not be given effect.
COMMENTS & ILLUSTRATIONS: Comment:
a. Scope of Section. The rule of this Section applies to evidence obtained from an oral or written interchange between
persons or from an inspection of a person or thing. So the rule applies to evidence of a person's oral or written statement or
of a hospital or bank record or of information obtained by a physician by means of a physical examination. See Restatement Third, Foreign Relations Law of the United States § 442, Comment d.
b. Kinds of privileges. Most privileges are designed to encourage socially desirable confidences. Common examples
of such privileges involve communications between husband and wife, client and lawyer, patient and doctor and penitent
and priest. A privilege of a different sort is that against self-incrimination. It is governed by the local law of the forum or,
stated in other words, by the local law of the state where the communication will be required to be made if the claim of
privilege is denied. Recognition by the States of the United States of the privilege against self-incrimination is required by
the Fourteenth Amendment to the Constitution.
Comment on Subsection (1):
c. Rationale. There can be little reason why the forum should exclude evidence that is not privileged under the local
law of the state which has the most significant relationship with the communication, even though this evidence is privileged under the local law of the forum. Admitting such evidence cannot defeat the expectations of the parties since, if they
relied on any law at all, they would have relied on the local law of the state of most significant relationship. This state has
a substantial interest in determining whether evidence of the communication should be privileged. If this state has not
chosen to make certain evidence privileged, its interests obviously will not be infringed if this evidence is admitted by the
forum. Admission of this evidence, if relevant, will usually be in the best interests of the forum since such admission will
assist the forum in arriving at the true facts and thus in making a correct disposition of the case.
The evidence will not, however, be admitted in those rare instances where its admission would be contrary to the
strong public policy of the forum. Such a situation may occasionally arise when the state of the forum, although it is not
the state which has the most significant relationship with the communication, does have a substantial relationship to the
parties and the transaction and a real interest in the outcome of the case. On still rarer occasions, the state of the forum
might consider a given privilege, as that of priest and penitent, sacrosanct and therefore not permit introduction of the
evidence even though the state of the forum has no relationship to the transaction and the privilege was not recognized in
the state of most significant relationship.
For a discussion of which state has the most significant relationship with a communication, see Comment e.
Illustrations:1. In state X, A, a business man doing business in X, gives certain information to B, an accountant, which
is not privileged under X local law. The information would, however, be privileged under the local law of state Y, and in
50147014v1
the trial of an action brought in Y, A claims that evidence of his conversation with B should be excluded. The evidence
will be received.
2. In state X, A applies for and is issued a life insurance policy by the B insurance company. After A's death, his
beneficiaries bring suit on the policy in state Y and B defends on the ground that A misrepresented his physical condition
in his application for the policy. To support its claim, B seeks to introduce the testimony of a physician whom A consulted
in state X shortly before he obtained the insurance. A's statements to the physician are not privileged under X local law but
would be privileged under Y local law. The testimony will be received.
Comment on Subsection (2):
d. Rationale. The state of the forum will wish to reach correct results in domestic litigation. It will therefore have a
strong policy favoring disclosure of all relevant facts that are not privileged under its own local law. On the other hand, the
state which has the most significant relationship with the communication has a substantial interest in determining whether
evidence of the communication should be privileged. It is also the state to whose local law a person might be expected to
look for guidance in determining whether to make a certain statement or to make a certain information available.
The forum will admit evidence that is not privileged under its local law but is privileged under the local law of the
state which has the most significant relationship with the communication, unless it finds that its local policy favoring
admission of the evidence is outweighed by countervailing considerations. Among the factors that the forum will consider
in determining whether or not to admit the evidence are (1) the number and nature of the contacts that the state of the
forum has with the parties and with the transaction involved, (2) the relative materiality of the evidence that is sought to be
excluded, (3) the kind of privilege involved and (4) fairness to the parties. If the contacts with the state of the forum are
numerous and important, the forum will be more reluctant to give effect to the foreign privilege and to exclude the evidence than it would be in a case where the contacts are few and insignificant. In the latter situation, the forum may feel that
the interest of the state of most significant relationship in having the evidence excluded should prevail. A second factor is
the relative materiality in the particular case of the evidence that is sought to be excluded. The forum will be more inclined
to give effect to the foreign privilege and to exclude the evidence if the facts that would be established by this evidence
would be unlikely to affect the result of the case or could be proved in some other way. So in a case where the issue
involves a person's health at a given time, the forum may not permit a doctor to testify about statements made to him by
the person in state X that are privileged under X local law if the person's health at the time in question can be established
by other admissible evidence. The kind of privilege involved is also important. So the forum will be more inclined to give
effect to a foreign privilege that is well established and recognized in many states than to a privilege that is relatively novel
and recognized in only a few states. The forum will also be more inclined to give effect to a privilege which, although
different, is generally similar to one or more privileges found in its local law than to a privilege which is entirely different
from any found in the state of the forum. Fairness to the parties is another important consideration. The forum will be
more inclined to give effect to a privilege if it was probably relied upon by the parties. Such reliance may be found if at the
time of the communication the parties were aware of the existence of the privilege in the local law of the state of most
significant relationship. Such reliance may also be found if the parties, although unaware of the existence of the privilege,
made the communication in reliance on the fact that communications of the sort involved are treated in strict confidence in
the state of most significant relationship. In this latter situation, the fact that the communication was of a sort treated in
strict confidence in the state of most significant relationship was presumably a result of the existence of the privilege.
Hence, in a real sense the parties could be said to have relied upon the privilege although ignorant of it. A further question
bearing on the question of fairness is whether the privilege belongs to a person who is not a party to the action. If so, the
forum will be more inclined to recognize the privilege and to exclude the evidence than it would be in a situation where the
privilege is claimed by a person who is a party to the action.
The forum will take such steps as may be necessary to prevent a party to the action from taking an inequitable advantage of the privilege. What steps the forum will take will depend upon its discretion and upon the precise facts of the
case. If, for example, the witness whose testimony is desired is available, the forum may simply disregard the privilege
and permit the witness to testify. Or if evidence claimed to be privileged must be procured in the state where the privilege
is recognized, the forum may require the party to waive the privilege, or even to procure the desired evidence himself on
pain of otherwise being prohibited from introducing evidence on a given point or in an extreme situation of having the
entire suit dismissed.
e. State of most significant relationship. The state which has the most significant relationship with a communication
will usually be the state where the communication took place, which, as used in the rule of this Section, is the state where
an oral interchange between persons occurred, where a written statement was received or where an inspection was made
50147014v1
of a person or thing. The communication may take place in a state different from that whose local law governs the rights
and liabilities of the parties. So in a case involving an issue in contract that is governed by the local law of state X under
the rule of § 187, a question of privilege may arise with respect to a communication that took place in state Y.
The state where the communication took place will be the state of most significant relationship in situations where
there was no prior relationship between the parties to the communication. If there was such a prior relationship between
the parties, the state of most significant relationship will be that where the relationship was centered unless the state where
the communication took place has substantial contacts with the parties and the transaction. So if a husband and wife are
domiciled in state X and the wife makes a statement to the husband in state Y while the spouses are spending a weekend in
the latter state, X is the state which has the most significant relationship with the communication. Y, on the other hand,
might be the state of most significant relationship if the spouses spent a considerable portion of their time there. Again in
an international case where the great majority of the important contacts are with X, a State of the United States, but the
communication occurs abroad, X would probably be the state of most significant relationship.
f. Depositions. Additional problems arise when evidence claimed to be privileged is sought by deposition outside the
state of trial. There are a number of possible situations. Where the matter is privileged under the local law of the deposition state, a court of that state should not, for this reason alone, apply its rule of privilege to bar the evidence. The court
should not apply its rule unless doing so would serve a substantial local interest. This would be the case when the deposition state is the one which has the most significant relationship with the communication, and also perhaps when this
state, although not that of most significant relationship, nevertheless has a substantial relationship with the parties and the
communication. Compare the analogous situation discussed in the second paragraph of Comment c. Where the evidence
would be privileged under the local law of both the state of most significant relationship and the state of trial, a court in the
deposition state should bar the evidence whatever its own rule of privilege may be. A more difficult situation is where the
evidence would be privileged under the local law of one of these states but not under that of the other. The fact that the
type of communication fell within the scope of a rule of privilege of the state of trial would not necessarily mean that a
court of that state would refuse to permit the evidence. Under the rule of Subsection (1) of this Section, a court in the trial
state would admit the evidence unless to do so would be contrary to a strong local public policy. This being the case, a
court in the deposition state, assuming that it has no substantial local interest to protect, should permit the deposition to
proceed unless it is persuaded that the evidence would be rejected in the state of trial. The more difficult situation is where
a privilege is claimed under the local law of the state of most significant relationship. Here a court of the deposition state
might make admissibility of the evidence depend upon a weighing of the factors set forth in Comment d. This would be a
burdensome procedure. In any event, the deposition court should permit the deposition to proceed unless it finds that the
state of most significant relationship would hold its privilege applicable in the circumstances of the case.
Illustrations:3. In an action pending in state X, the deposition of an officer of a party defendant is taken in state Y. The
communication sought to be discovered is privileged under the local law of both state X and state Y. No other state has
any connection with the communication or the transaction that is the subject of the action. The claim of privilege will be
sustained.
4. Same facts as Illustration 3 except that the communication is not privileged under the local law of state X, the state
of trial, but is privileged under the local law of state Y, the deposition state. In addition, the communication occurred in
state Y; the participants to the communication relied in making it on the local law of state Y; the transactions establishing
the confidential relationship within which the communication was made occurred in state Y; and the party of which the
deponent is an officer is headquartered in state Y. The claim of privilege is raised in a state Y court. The claim of privilege
will be sustained.
5. Same facts as Illustration 4 except that the claim of privilege is raised in a state X court. The privilege will be
sustained unless state X has a strong policy opposed to the privilege and a substantial reason for giving effect to that policy
by denying the privilege.
6. Same facts as Illustration 4 except that the communication is privileged under the local law of state X, the state of
trial, but not privileged under the local law of state Y, the deposition state. In addition, state X has an overall interest in
having relevant evidence admitted in trials occurring in its courts and has no interest in extending its privilege to communications occurring in other states. The claim of privilege will be denied, whether it is claimed in state X or state Y.
7. Same facts as Illustration 4 except that the communication occurred in state X; the participants to the communication did not rely on or act with reference to the local law of state Y; the communication is relevant to the issues in the
action in state X; and no policy of state Y would be vitiated by applying the nonprivilege rule of state X. The claim of
privilege will be denied, whether it is claimed in state X or state Y.
50147014v1
REPORTERS NOTES: Changes: The only substantial change is in Comment f. Comment f is an addition, rather than a
correction, to the prior text and reflects the importance of depositions. The statements made in the fourth paragraph to
Subsection (2) of the original Reporter's Note are now obsolete in view of Rule 501 of the Federal Rules of Evidence
(effective since 1975), which is reprinted below.
Subsection (1): See Levy v. Mutual Life Insurance Co., 56 N.Y.S.2d 32 (Sup.Ct.1945). Contra: Wexler v. Metropolitan Life Ins. Co., 38 N.Y.S.2d 889 (City Ct.1942); cf. Lorde v. Guardian Life Ins. Co., 252 App.Div. 646, 300 N.Y.S.
721 (1st Dept.1937).
Subsection (2): Cases where the forum denied effect to a foreign privilege include Societe Internationale v.
McGranery, 111 F.Supp. 435 (D.D.C.1953), affirmed, 243 F.2d 254 (1957), modified on other grounds, 357 U.S. 197
(1958); Doll v. Equitable Life Assur. Society, 138 Fed. 705 (3d Cir.1905); cf. Ings v. Ferguson, 282 F.2d 149 (2d
Cir.1960); First Nat. City Bank of N.Y. v. Internal Revenue Service, 271 F.2d 616 (2d Cir.1959) (dictum), cert. denied,
361 U.S. 948 (1960); Abety v. Abety, 10 N.J.Super. 287, 77 A.2d 291 (Ch.Div.1950). See Application of Chase Manhattan Bank, 192 F.Supp. 817 (S.D.N.Y.1961), holding that a court will not order the production of records situated in a
friendly nation where this would be a violation of the local law of that nation.
See generally Hill v. Huddleston, 263 F.Supp. 108 (D.Md.1967) (citing section).
For a case indicating that effect will be given on occasion to a foreign privilege, see Cepeda v. Cohane, 233 F.Supp.
465 (S.D.N.Y. 1964).
Rule 501 of the Federal Rules of Evidence (effective since 1975) provides:
Except as otherwise required by the Constitution of the United States or provided by the Act of
Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a
witness, person, government, State, or political subdivision thereof shall be governed by the principles of
the common law as they may be interpreted by the courts of the United States in the light of reason and
experience. However, incivil actions and proceedings, with respect to an element of a claim or defense as
to which State law supplies the rule of decision, the privilege of a witness, person, government, State, or
political subdivision thereof shall be determined in accordance with State law.
For discussion of the choice of law problems that may arise in a federal court when under Rule 501 "State law supplies the
rule of decision," see 23 Wright & Graham, Federal Practice and Procedure § 5435 (1980).
Comment f: The analysis in Comment f is consistent with the results reached in the cases. In candor, however, it must
be said that the opinions on the question are not helpful. Literally read, the relevant opinions sometimes suggest that a
court in the deposition state can properly bar the deposition inquiry under its own rule of privilege, even though this state
has no relationship with the parties or the transaction. See, e.g., Palmer v. Fisher, 228 F.2d 603 (7th Cir.1955), cert. denied
351 U.S. 965 (1956); Ex parte Sparrow, 14 F.R.D. 351 (N.D.Ala. 1953). In all probability, the deposition State in these
cases had a substantial relationship with the parties and the transaction. See generally Reese and Leiwant, Testimonial
Privileges and Conflict of Laws, 41 L. & Contemp.Prob. 85 (1977).
50147014v1
III. FRENCH AUTHORITIES CONCERNING PROFESSIONAL SECRECY
French Criminal Code
Section 4. – Breach of Secrecy
§ 1. - Of the breach of professional secrecy
ARTICLE 226-13
Ordinance No. 2000-916 of 19 September 2000 Article 3 Official Journal of 22 September
into force 1 January 2002
The disclosure of secret information by a person entrusted with such a secret, either because of his position or profession, or because of a temporary function or mission, is punished by
one year’s imprisonment and a fine of € 15,000.
Loi n°71-1130 du 31 décembre 1971
Loi portant réforme de certaines professions judiciaires et juridiques
Article 66-5
Modifié par Loi n°2004-130 du 11 février 2004 art. 34 (JORF 12 février 2004).
En toutes matières, que ce soit dans le domaine du conseil ou dans celui de la défense, les consultations
adressées par un avocat à son client ou destinées à celui-ci, les correspondances échangées entre le client et son avocat,
entre l'avocat et ses confrères à l'exception pour ces dernières de celles portant la mention "officielle", les notes
d'entretien et, plus généralement, toutes les pièces du dossier sont couvertes par le secret professionnel.
[Unofficial Translation by KBW]
Law No. 71-1130 of 31 December 1971
Law bringing reform of certain judicial and legal professions
In all matters, whether in the area of advice or defence, consultations addressed by a lawyer
(“avocat”) to his client or destined for his client, correspondence exchanged between the client and
his lawyer (“avocat”), between the lawyer (“avocat”) and his fellow lawyers with the exception of
those bearing the legend “official”, memoranda of meetings, and more generally, all parts of the file
are covered by the professional secrets doctrine.
IV. EU AUTHORITIES REGARDING PRIVILEGE
Court of Justice
Judgment of the Court of 18 May 1982. AM & S Europe Limited v Commission of the European Communities. Legal
privilege. Case 155/79.
European Court Reports 1982 page 1575
© ELLIS Publications.
© European Communities.
Text
1 . COMPETITION - ADMINISTRATIVE PROCEDURE - COMMISSION ' S INVESTIGATORY POWERS POWER TO REQUIRE PRODUCTION OF BUSINESS RECORDS - CONCEPT OF ' ' BUSINESS RECORDS ' ' COMMUNICATIONS BETWEEN LAWYER AND CLIENT - INCLUSION - CONDITIONS
(REGULATION NO 17 OF THE COUNCIL , ART . 14)
2 . COMPETITION - ADMINISTRATIVE PROCEDURE - COMMISSION ' S INVESTIGATORY POWERS POWER TO DEMAND PRODUCTION OF THE DOCUMENTS WHOSE DISCLOSURE IT CONSIDERS
NECESSARY - POWER TO DECIDE WHETHER OR NOT A DOCUMENT MUST BE PRODUCED
(REGULATION NO 17 OF THE COUNCIL , ART . 14)
3 . COMPETITION - ADMINISTRATIVE PROCEDURE - COMMISSION ' S INVESTIGATORY POWERS POWER TO DEMAND PRODUCTION OF COMMUNICATION BETWEEN LAWYER AND CLIENT - LIMITS
- PROTECTION OF THE CONFIDENTIALITY OF SUCH COMMUNICATIONS
(REGULATION NO 17 OF THE COUNCIL , ART . 14)
4 . COMPETITION - ADMINISTRATIVE PROCEDURE - COMMISSION ' S INVESTIGATORY POWERS REFUSAL OF THE UNDERTAKING TO PRODUCE COMMUNICATIONS WITH ITS LAWYER ON THE
GROUND OF CONFIDENTIALITY - POWERS OF THE COMMISSION
(REGULATION NO 17 OF THE COUNCIL , ART . 14)
SUMMARY
1. Article 14 (1) of Regulation no 17 empowers the Commission when investigating an undertaking to require production of ' ' business records ' ' , that is to say, documents concerning the market activities of the undertaking, in
particular as regards compliance with those rules. Written communications between lawyer and client fall, in so far as
they have a bearing on such activities, within that category of documents.
2. Since by virtue of Article 14 (1) of Regulation no 17 the Commission may demand production of the documents
whose disclosure it considers ' ' necessary ' ' in order that it may bring to light an infringement of the Treaty rules on
competition, it is in principle for the Commission itself, and not the undertaking concerned or a third party, to decide
whether or not a document must be produced to it.
3. The national laws of the Member States protect, in similar circumstances, the confidentiality of written communications between lawyer and client provided that, on the one hand, such communications are made for the purposes
and in the interests of the client ' s rights of defence and, on the other hand, they emanate from independent lawyers,
that is to say, lawyers who are not bound to the client by a relationship of employment. Viewed in that context Regulation no 17 must be interpreted as protecting, in its turn, the confidentiality of written communications between
lawyer and client subject to those two conditions, and thus incorporating such elements of that protection as are
common to the laws of the Member States. Such protection must, if it is to be effective, be recognized as covering all
written communications exchanged after the initiation of the administrative procedure under Regulation no 17 which
may lead to a Decision on the application of Articles 85 and 86 of the Treaty or to a Decision imposing a pecuniary
sanction on the undertaking. It must also be possible to extend it to earlier written communications which have a
relationship to the subject-matter of that procedure. The protection thus afforded must apply without distinction to any
lawyer entitled to practise his profession in one of the Member States, regardless of the Member State in which the
client lives.
However, the principle of confidentiality does not prevent a lawyer ' s client from disclosing the written communications between them if he considers that it is in his interests to do so.
4. Since disputes concerning the application of the protection of the confidentiality of written communications between lawyer and client affect the conditions under which the Commission may act in a field as vital to the functioning
of the common market as that of compliance with the rules on competition, their solution may be sought only at
Community level. If, therefore, an undertaking which is the subject of an investigation under Article 14 of Regulation
no 17 refuses, on the ground that it is entitled to protection of the confidentiality of information, to produce, among
the business records demanded by the Commission, written communications between itself and its lawyer, and the
Commission is not satisfied that proof of the confidential nature of the documents has been supplied, it is for the
Commission to order, pursuant to Article 14 (3) of the abovementioned Regulation, production of the com munications in question and, if necessary, to impose on the undertaking fines or periodic penalty payments under that Regulation as a penalty for the undertaking ' s refusal either to supply such additional evidence as the Commission considers necessary or to produce the communications in question whose confidentiality, in the Commission ' s view, is
not protected by law.
ISSUE 1
In case 155/79
Am & s europe limited, represented by j. Lever, qc, of gray ' s inn, c. Bellamy, barrister, of gray ' s inn, and g. Child,
solicitor, of messrs slaughter and may, london, with an address for service in Luxembourg at the chambers of messrs
elvinger and hoss, 15 cote d ' eich,
Applicant,
Supported by
The United Kingdom, represented by w. H. Godwin, principal assistant treasury solicitor, acting as agent, assisted
by the rt. Hon. S. C. Silkin, qc, of the middle temple, and by d. Vaughan, qc, of the inner temple, with an address for
service in Luxembourg at the british embassy, 28 boulevard royal,
And
The consultative committee of the bars and law societies of the European Community, represented by d. A. O.
Edward, qc, of the scots bar, and j.-r. Thys, of the Brussels bar, with an address for service in Luxembourg at the
chambers of t. Biever and l. Schiltz, 83 boulevard grande-duchesse charlotte,
Interveners,
V
Commission of the European Communities, represented by its legal adviser, j. Temple lang, acting as agent, with an
address for service in Luxembourg at the office of its legal adviser, m. Cervino, jean monnet building, kirchberg,
Defendant,
Supported by
The French Republic, represented by n. Museux, acting as agent, and a. Carnelutti, acting as assistant agent, with an
address for service in Luxembourg at the french embassy, 2 rue bertholet,
Intervener,
ISSUE 2
Application for:
(a) a review by the court under Article 173 of the EEC Treaty of the legality of Article 1 (b) of Commission Decision no 79/670/EEC of 6 July 1979 (oj l 199, p. 31) which provides for the production by the applicant, for examination by the Commission, of certain documents for which the applicant claims legal privilege; and
(b) a declaration under Article 174 of the EEC Treaty that Article 1 (b) of the Decision of 6 July 1979 is void;
alternatively, a declaration that it is void in so far as it requires the applicant to produce for examination by the
Commission the whole of each of those documents.
GROUNDS
1 by application lodged at the court registry on 4 October 1979 australian mining & smelting europe limited (hereinafter referred to as ' ' am & s europe ' ' ), which is based in the United Kingdom, instituted proceedings pursuant to the
second paragraph of Article 173 of the EEC Treaty to have Article 1 (b) of an individual Decision notified to it, namely
Commission Decision no 79/760/EEC of 6 July 1979 (oj l 199, p. 31), declared void. That provision required the
applicant to produce for examination by officers of the Commission charged with carrying out an investigation all the
documents for which legal privilege was claimed, as listed in the appendix to am & s europe ' s letter of 26 March 1979
to the Commission.
2 The application is based on the submission that in all the Member States written communications between lawyer
and client are protected by virtue of a principle common to all those states, although the scope of that protection and
the means of securing it vary from one country to another. According to the applicant, it follows from that principle
which, in its view, also applies ' ' within possible limits ' ' in Community law, that the Commission may not when
undertaking an investigation pursuant to Article 14 (3) of Regulation no 17 of the Council of 6 February 1962 (oj,
english special edition 1959-1962, p. 87), claim production, at least in their entirety, of written communications between lawyer and client if the undertaking claims protection and takes ' ' reasonable steps to satisfy the Commission
that the protection is properly claimed ' ' on the ground that the documents in question are in fact covered by legal
privilege.
3 On the basis of that premise the applicant contends that it is a denial of the principle of confidentiality to permit an
authority seeking information or undertaking an investigation, such as the Commission in this instance, against which
the principle of protection is relied upon, to inspect protected documents in breach of their confidential nature.
However, it concedes that ' ' the Commission has a prima facie right to see the documents. . . In the possession of an
undertaking ' ' by virtue of Article 14 of Regulation no 17, and that by virtue of that right ' ' it is still the Commission
that takes the Decision whether the documents are protected or not, but on the basis of a description of the documents
' ' and not on the basis of an examination of the whole of each document by its inspectors.
4 In that respect the applicant accepts that initially the undertaking claiming protection must provide the Commission
with sufficient material on which to base an assessment: for example, the undertaking may provide a description of the
documents and show the Commission ' s inspectors ' ' parts of the documents ' ' , without disclosing the contents for
which protection is claimed, in order to satisfy the Commission that the documents are in fact protected. Should the
Commission remain unsatisfied as to the confidential nature of the documents in question the undertaking would be
obliged to permit ' ' inspection by an independent third party who will verify the description of the contents of the
documents ' ' .
5 The contested Decision, based on the principle that it is for the Commission to determine whether a given document
should be used or not, requires am & s europe to allow the Commission ' s authorized inspectors to examine the
documents in question in their entirety. Claiming that those documents satisfy the conditions for legal protection as
described above, the applicant has requested the court to declare Article 1 (b) of the above-mentioned Decision void,
or, alternatively, to declare it void in so far as it requires the disclosure to the Commission ' s inspector of the whole of
each of the documents for which the applicant claims protection on the grounds of legal confidence.
6 The United Kingdom, intervening, essentially supports the argument put forward by the applicant, and maintains
that the principle of legal protection of written communications between lawyer and client is recognized as such in the
various countries of the Community, even though there is no single, harmonized concept the boundaries of which do
not vary. It accepts that the concept may be the subject of differing approaches in the various Member States.
7 As to the most suitable procedure for resolving disputes which might arise between the undertaking and the
Commission as to whether certain documents are of a confidential nature or not, the United Kingdom proposes that if
the Commission ' s inspector is not satisfied by the evidence supplied by the undertaking, an independent expert
should be consulted, and, should the dispute not be resolved, the matter should be brought before the Court of Justice
by the party concerned following the adoption by the Commission of a Decision under Regulation no 17.
8 The view taken by the consultative committee of the bars and law societies of the European Community (hereinafter
referred to as ' ' the consultative committee ' ' ), which has also intervened in support of the applicant ' s conclusions, is
that a right of confidential communication between lawyer and client (in both directions) is recognized as a fundamental, constitutional or human right, accessory or complementary to other such rights which are expressly recognized, and that as such that right should be recognized and applied as part of Community law. After pointing out that
the concept is not a static one, but is continually evolving, the consultative committee concludes that if the undertaking
and the Commission cannot agree as to whether a document is of a confidential nature or not, the most appropriate
procedure would be to have recourse to an expert ' s report, or to arbitration. Assuming, moreover, that the court is the
sole tribunal with jurisdiction to settle such a dispute it ought in that case to be necessary for it only to determine
whether or not the contested documents are of a confidential nature on the basis of an expert ' s report obtained pursuant to an order under Article 49 of the rules of procedure.
9 To all those arguments the Commission replies that even if there exists in Community law a general principle
protecting confidential communications between lawyer and client, the extent of such protection is not to be defined in
general and abstract terms, but must be established in the light of the special features of the relevant Community rules,
having regard to their wording and structure, and to the needs which they are designed to serve.
10 The Commission concludes that, on a correct construction of Article 14 of Regulation no 17, the principle on
which the applicant relies cannot apply to documents the production of which is required in the course of an investigation which has been ordered under that Article, including written communications between the undertaking concerned and its lawyers.
11 The applicant ' s argument is, the Commission maintains, all the more unacceptable inasmuch as in practical terms
it offers no effective means whereby the inspectors may be assured of the true content and nature of the contested
documents. On the contrary, the solutions which the applicant proposes would have the effect, particularly in view of
the protracted nature of any arbitration procedure (even assuming that such a procedure were permissible in law) of
delaying considerably, or even of nullifying, the Commission ' s efforts to bring to light infringements of Articles 85
and 86 of the Treaty, thereby frustrating the essential aims of Regulation no 17.
12 The government of the French Republic, intervening in support of the conclusions of the Commission, observes
that as yet Community law does not contain any provision for the protection of documents exchanged between a legal
adviser and his client. Therefore, it concludes, the Commission must be allowed to exercise its powers under Article
14 of Regulation no 17 without having to encounter the objection that the documents whose disclosure it considers
necessary in order to carry out the duties assigned to it by that Regulation are confidential. To permit the legal adviser
and the undertaking subject to a proceeding in a matter concerning competition to be the arbiters of the question
whether or not a document is protected would, in the opinion of the french government, not be compatible with
Community law and would inevitably create grave inconsistencies in the application of the rules governing competi-
tion.
13 It is apparent from the application, as well as from the legal basis of the contested Decision, that the dispute in this
case is essentially concerned with the interpretation of Article 14 of Regulation no 17 of the Council of 6 February
1962 for the purpose of determining what limits, if any, are imposed upon the Commission ' s exercise of its powers of
investigation under that provision by virtue of the protection afforded by the law to the confidentiality of written
communications between lawyer and client.
14 Once the existence of such protection under Community law has been confirmed, and the conditions governing its
application have been defined, it must be determined which of the documents referred to in Article 1 (b) of the contested Decision may possibly be considered as confidential and therefore beyond the Commission ' s powers of investigation. Since some of those documents have in the meantime been produced to the Commission by the applicant
of its own volition, the documents to be considered now are those which were lodged in a sealed envelope at the court
registry on 9 March 1981, pursuant to the court ' s order of 4 February 1981 re-opening the oral procedure in this case.
(a) the interpretation of Article 14 of Regulation no 17
15 The purpose of Regulation no 17 of the Council which was adopted pursuant to the first subparagraph of Article 87
(1) of the Treaty, is, according to paragraph (2) (a) and (b) of that Article, ' ' to ensure compliance with the prohibitions
laid down in Article 85 (1) and in Article 86 ' ' of the Treaty and ' ' to lay down detailed rules for the application of
Article 85 (3) ' ' . The Regulation is thus intended to ensure that the aim stated in Article 3 (f) of the Treaty is achieved.
To that end it confers on the Commission wide powers of investigation and of obtaining information by providing in
the eighth recital in its preamble that the Commission must be empowered, throughout the common market, to require
such information to be supplied and to undertake such investigations ' ' as are necessary ' ' to bring to light infringements of Articles 85 and 86 of the Treaty.
16 In Articles 11 and 14 of the Regulation, therefore, it is provided that the Commission may obtain ' ' information ' '
and undertake the ' ' necessary ' ' investigations, for the purpose of proceedings in respect of infringements of the rules
governing competition. Article 14 (1) in particular empowers the Commission to require production of business records, that is to say, documents concerning the market activities of the undertaking, in particular as regards compliance
with those rules. Written communications between lawyer and client fall, in so far as they have a bearing on such
activities, within the category of documents referred to in Articles 11 and 14.
17 Furthermore, since the documents which the Commission may demand are, as Article 14 (1) confirms, those whose
disclosure it considers ' ' necessary ' ' in order that it may bring to light an infringement of the Treaty rules on competition, it is in principle for the Commission itself, and not the undertaking concerned or a third party, whether an
expert or an arbitrator, to decide whether or not a document must be produced to it.
(b) applicability of the protection of confidentiality in Community law
18 However, the above rules do not exclude the possibility of recognizing, subject to certain conditions, that certain
business records are of a confidential nature. Community law, which derives from not only the economic but also the
legal interpenetration of the Member States, must take into account the principles and concepts common to the laws of
those states concerning the observance of confidentiality, in particular, as regards certain communications between
lawyer and client. That confidentiality serves the requirements, the importance of which is recognized in all of the
Member States, that any person must be able, without constraint, to consult a lawyer whose profession entails the
giving of independent legal advice to all those in need of it.
19 As far as the protection of written communications between lawyer and client is concerned, it is apparent from the
legal systems of the Member States that, although the principle of such protection is generally recognized, its scope
and the criteria for applying it vary, as has, indeed, been conceded both by the applicant and by the parties who have
intervened in support of its conclusions.
20 Whilst in some of the Member States the protection against disclosure afforded to written communications between lawyer and client is based principally on a recognition of the very nature of the legal profession, inasmuch as
it contributes towards the maintenance of the rule of law, in other Member States the same protection is justified by the
more specific requirement (which, moreover, is also recognized in the first-mentioned states) that the rights of the
defence must be respected.
21 Apart from these differences, however, there are to be found in the national laws of the Member States common
criteria inasmuch as those laws protect, in similar circumstances, the confidentiality of written communications between lawyer and client provided that, on the one hand, such communications are made for the purposes and in the
interests of the client ' s rights of defence and, on the other hand, they emanate from independent lawyers, that is to say,
lawyers who are not bound to the client by a relationship of employment.
22 Viewed in that context Regulation no 17 must be interpreted as protecting, in its turn, the confidentiality of written
communications between lawyer and client subject to those two conditions, and thus incorporating such elements of
that protection as are common to the laws of the Member States.
23 As far as the first of those two conditions is concerned, in Regulation no 17 itself, in particular in the eleventh
recital in its preamble and in the provisions contained in Article 19, care is taken to ensure that the rights of the defence
may be exercised to the full, and the protection of the confidentiality of written communications between lawyer and
client is an essential corollary to those rights. In those circumstances, such protection must, if it is to be effective, be
recognized as covering all written communications exchanged after the initiation of the administrative procedure
under Regulation no 17 which may lead to a Decision on the application of Articles 85 and 86 of the Treaty or to a
Decision imposing a pecuniary sanction on the undertaking. It must also be possible to extend it to earlier written
communications which have a relationship to the subject-matter of that procedure.
24 As regards the second condition, it should be stated that the requirement as to the position and status as an independent lawyer, which must be fulfilled by the legal adviser from whom the written communications which may be
protected emanate, is based on a conception of the lawyer ' s role as collaborating in the administration of justice by the
courts and as being required to provide, in full independence, and in the overriding interests of that cause, such legal
assistance as the client needs. The counterpart of that protection lies in the rules of professional ethics and discipline
which are laid down and enforced in the general interest by institutions endowed with the requisite powers for that
purpose. Such a conception reflects the legal traditions common to the Member States and is also to be found in legal
order of the Community, as is demonstrated by Article 17 of the protocols on the statutes of the Court of Justice of the
EEC and the eaec, and also by Article 20 of the protocol on the statute of the Court of Justice of the ECSC.
25 Having regard to the principles of the Treaty concerning freedom of establishment and the freedom to provide
services the protection thus afforded by Community law, in particular in the context of Regulation no 17, to written
communications between lawyer and client must apply without distinction to any lawyer entitled to practise his profession in one of the Member States, regardless of the Member State in which the client lives.
26 Such protection may not be extended beyond those limits, which are determined by the scope of the common rules
on the exercise of the legal profession as laid down in Council Directive 77/249/EEC of 22 March 1977 (oj l 78, p. 17),
which is based in its turn on the mutual recognition by all the Member States of the national legal concepts of each of
them on this subject.
27 In view of all these factors it must therefore be concluded that although Regulation no 17, and in particular Article
14 thereof, interpreted in the light of its wording, structure and aims, and having regard to the laws of the Member
States, empowers the Commission to require, in the course of an investigation within the meaning of that Article,
production of the business documents the disclosure of which it considers necessary, including written communications between lawyer and client, for proceedings in respect of any infringements of Articles 85 and 86 of the Treaty,
that power is, however, subject to a restriction imposed by the need to protect confidentiality, on the conditions defined above, and provided that the communications in question are exchanged between an independent lawyer, that is
to say one who is not bound to his client by a relationship of employment, and his client.
28 Finally, it should be remarked that the principle of confidentiality does not prevent a lawyer ' s client from disclosing the written communications between them if he considers that it is in his interests to do so.
(c) the procedures relating to the application of the principle of confidentiality
29 If an undertaking which is the subject of an investigation under Article 14 of Regulation no 17 refuses, on the
ground that it is entitled to protection of the confidentiality of information, to produce, among the business records
demanded by the Commission, written communications between itself and its lawyer, it must nevertheless provide the
Commission ' s authorized agents with relevant material of such a nature as to demonstrate that the communications
fulfil the conditions for being granted legal protection as defined above, although it is not bound to reveal the contents
of the communications in question.
30 Where the Commission is not satisfied that such evidence has been supplied, the appraisal of those conditions is
not a matter which may be left to an arbitrator or to a national authority. Since this is a matter involving an appraisal
and a Decision which affect the conditions under which the Commission may act in a field as vital to the functioning of
the common market as that of compliance with the rules on competition, the solution of disputes as to the application
of the protection of the confidentiality of written communications between lawyer and client may be sought only at
Community level.
31 In that case it is for the Commission to order, pursuant to Article 14 (3) of Regulation no 17, production of the
communications in question and, if necessary, to impose on the undertaking fines or periodic penalty payments under
that Regulation as a penalty for the undertaking ' s refusal either to supply such additional evidence as the Commission
considers necessary or to produce the communications in question whose confidentiality, in the Commission ' s view,
is not protected in law.
32 The fact that by virtue of Article 185 of the EEC Treaty any action brought by the undertaking concerned against
such Decisions does not have suspensory effect provides an answer to the Commission ' s concern as to the effect of
the time taken by the procedure before the court on the efficacy of the supervision which the Commission is called
upon to exercise in regard to compliance with the Treaty rules on competition, whilst on the other hand the interests of
the undertaking concerned are safeguarded by the possibility which exists under Articles 185 and 186 of the Treaty, as
well as under Article 83 of the rules of procedure of the court, of obtaining an order suspending the application of the
Decision which has been taken, or any other interim measure.
(d) the confidential nature of the documents at issue
33 It is apparent from the documents which the applicant lodged at the court on 9 March 1981 that almost all the
communications which they include were made or are connected with legal opinions which were given towards the
end of 1972 and during the first half of 1973.
34 It appears that the communications in question were drawn up during the period preceding, and immediately
following, the accession of the United Kingdom to the Community, and that they are principally concerned with how
far it might be possible to avoid conflict between the applicant and the Community authorites on the applicant ' s
position, in particular with regard to the Community provisions on competition. In spite of the time which elapsed
between the said communications and the initiation of a procedure, those circumstances are sufficient to justify considering the communications as falling within the context of the rights of the defence and the lawyer ' s specific duties
in that connection. They must therefore be protected from disclosure.
35 In view of that relationship and in the light of the foregoing considerations the written communications at issue
must accordingly be considered, in so far as they emanate from an independent lawyer entitled to practise his profession in a Member State, as confidential and on that ground beyond the Commission ' s power of investigation under
Article 14 of Regulation no 17.
36 Having regard to the particular nature of those communications Article 1 (b) of the contested Decision must be
declared void in so far as it requires the applicant to produce the documents mentioned in the appendix to its letter to
the Commission of 26 March 1979 and listed in the schedule of documents lodged at the court on 9 March 1981 under
numbers 1 (a) and (b), 4 (a) to (f), 5 and 7.
37 Nevertheless, the application must be dismissed inasmuch as it is directed against the provisions in the
above-mentioned Article 1 (b) relating to documents other than those referred to above, which are likewise listed in the
above-mentioned appendix and schedule and which have not yet been produced to the Commission.
COSTS
Costs
38 Under Article 69 (2) of the rules of procedure the unsuccessful party is to be ordered to pay the costs. Under Article
69 (3) the court may order that the parties bear their own costs in whole or in part where each party succeeds on some
and fails on other heads or where the circumstances are exceptional.
39 Since the parties to the action and the interveners have failed on some heads they must bear their own costs.
RULING
On those grounds,
The court
Hereby:
1. Declares Article 1 (b) of Commission Decision no 79/760 of 6 July 1979 void inasmuch as it requires the applicant
to produce the documents which are mentioned in the appendix to the letter from the applicant to the Commission of
26 March 1979 and listed in the schedule of documents lodged at the court on 9 March 1981 under numbers 1 (a) and
(b), 4 (a) to (f), 5 and 7
2. For the rest, dismisses the application;
3. Orders the parties to the action and the interveners to bear their own costs.
Court of First Instance
Order of the President of the Court of First Instance of
30 October 2003. Akzo Nobel Chemicals Ltd and
Akcros Chemicals Ltd v Commission of the European
Communities. Interim measures - Competition Commission's powers of investigation - Protection of
confidentiality - Communications between lawyers
and clients - Limits. Joined cases T-125/03 R and
T-253/03 R.
European Court Reports 2003 page II-04771
© ELLIS Publications.
© European Communities.
Text
Commission of the European Communities, represented by R. Wainwright and C. Ingen-Housz, acting
as Agents, with an address for service in Luxembourg,
defendant,
APPLICATION for, first, suspension of the operation
of the Commission's decision of 10 February 2003
amending the decision of 30 January 2003 ordering
Akzo Nobel Chemicals Ltd, Akcros Chemicals Ltd
and Akcros Chemicals and their subsidiaries to submit
to an investigation under Article 14(3) of Council
Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81] and [82] of the Treaty
(OJ, English Special Edition 1959-1962, p. 87), and
also other interim measures to protect the applicants'
interests (Case T-125/03 R), and, second, suspension
of the operation of the Commission's decision of 8
May 2003 rejecting a claim of legal privilege in respect of five documents copied during an investigation
and also other interim measures to protect the applicants' interests (Case T-253/03 R),
Index
Year (Dates)
THE PRESIDENT OF THE COURT OF FIRST
INSTANCE OF THE EUROPEAN COMMUNITIES
References
Registrar: J. Plingers, Administrator,
Bibliographic Information
makes the following
Text
Order
Interim measures
Competition
Commission's powers of investigation
Protection of confidentiality
Communications between lawyers and clients
Limits
In Joined Cases T-125/03 R and T-253/03 R,
Akzo Nobel Chemicals Ltd, established in London
(United Kingdom),
Akcros Chemicals Ltd, established in Surrey (United
Kingdom), represented by C. Swaak and M. Mollica,
lawyers,
1. On 10 February 2003, the Commission adopted a
decision under Article 14(3) of Council Regulation No
17 of 6 February 1962, First Regulation implementing
Articles [81] and [82] of the Treaty (OJ, English
Special Edition 1959-1962, p. 87) (the decision of 10
February 2003), amending the decision of 30 January
2003 whereby the Commission ordered, among other
undertakings, Akzo Nobel Chemicals Ltd and Akcros
Chemicals Ltd (the applicants) and their respective
subsidiaries to submit to an investigation aimed at
seeking evidence of possible anti-competitive practices (the decision of 30 January 2003).
2. On 12 and 13 February 2003, Commission officials
accompanied by representatives of the Office of Fair
Trading carried out an investigation on the basis of
those decisions at the applicants' premises in Eccles,
Manchester (United Kingdom). During the investigation, the Commission officials made copies of a large
number of documents.
applicants,
v
3. In the course of the investigation, the applicants'
representatives informed the Commission officials
that certain documents in a particular file might be
covered by the legal professional privilege that protects communications with lawyers and that the
Commission could not therefore have access to them.
4. The Commission officials then informed the applicants' representatives that they needed to look at the
documents briefly, without examining them, so that
they could form their own opinion as to whether the
documents should be privileged. Following a long
discussion, and after the Commission officials and
those from the Office of Fair Trading had reminded
the applicants of the criminal consequences of obstructing an investigation, it was decided that the
leader of the investigating team would briefly review
the documents in question, with a representative of the
applicants at her side. It was also decided that, should
the applicants' representative claim that a document
was covered by professional privilege, he was to provide more detailed reasons for his request.
5. In the course of the examination of the documents in
the file indicated by the applicants' representatives, a
dispute arose in respect of five documents which were
ultimately treated in two different ways.
6. The first of these documents is a two-page typewritten memorandum dated 16 February 2000 from
the General Manager of Akcros Chemicals to one of
his superiors. According to the applicants, this memorandum contains information gathered by the General Manager of Akcros Chemicals in the course of
internal discussions with other employees. They state
that the information was gathered for the purpose of
obtaining outside legal advice in connection with the
competition law compliance programme already put
in place by Akzo Nobel.
7. The second of these documents is a second copy of
the two-page memorandum described in the preceding
paragraph, which also contains handwritten notes
referring to contacts with one of the lawyers representing the applicants and mentioning him by name.
8. After receiving the applicants' explanations about
these first two documents, the Commission officials
were not in a position to reach a definitive conclusion
on the spot about whether the documents should be
privileged. They therefore made copies and placed
them in a sealed envelope, which they removed at the
close of the investigation. In their application, the
applicants have designated these documents as belonging to Set A.
9. The third document at issue between the Commission officials and the applicants consists of a series of
handwritten notes by the General Manager of Akcros
Chemicals, which, the applicants maintain, were
drafted during discussions with lower-level employees and used for the purpose of preparing the typewritten memorandum in Set A.
10. Finally, the last two documents in question represent an exchange of e-mails between the General
Manager of Akcros Chemicals and Akzo Nobel's
competition law coordinator, who is registered as an
attorney at the Netherlands Bar and, at the material
time, was also a member of Akzo Nobel's Legal Department and, consequently, employed by that undertaking on a permanent basis.
11. After reviewing the last three documents and receiving the applicants' explanations, the leader of the
investigating team formed the view that they were
definitely not protected by legal privilege. She therefore copied the documents and placed the copies with
the rest of the file, but did not place them in a sealed
envelope, unlike the documents in Set A. In their
application, the applicants have designated these
documents as belonging to Set B.
12. On 17 February 2003, the applicants wrote to the
Commission explaining why in their view both the
documents in Set A and those in Set B were protected
by legal privilege.
13. By letter of 1 April 2003, the Commission informed the applicants that it was not convinced by the
arguments, set out in their letter of 17 February 2003,
that the documents referred to were covered by professional privilege. In that letter, however, the Commission informed the applicants that they could submit observations on those preliminary conclusions
within two weeks, following which it would adopt a
final decision.
14. By application lodged at the Registry of the Court
of First Instance on 11 April 2003, the applicants
brought an action under the fourth paragraph of Article 230 EC for, in particular, annulment of the decision of 10 February 2003 and, so far as necessary, the
decision of 30 January 2003, in as far as it has been
interpreted by the Commission as legitimating and/or
constituting the basis of the Commission's action
(which is not severable from the decision), of seizing
and/or reviewing and/or reading documents covered
by [legal professional privilege]. That case is Case
T-125/03.
15. On 17 April 2003, the applicants informed the
Commission that they had lodged their application in
Case T-125/03. They also informed the Commission
that the observations which they had been invited to
submit on 1 April 2003 were incorporated in the application.
16. On the same day, the applicants lodged an application under Articles 242 EC and 243 EC requesting
the President of the Court of First Instance, inter alia,
to suspend the operation of the decision of 10 February 2003 and, so far as necessary, the operation of the
decision of 30 January 2003. That case was registered
by the Registry as Case T-125/03 R.
17. On 8 May 2003, the Commission adopted a decision under Article 14(3) of Regulation No 17 (the
decision of 8 May 2003). In Article 1 of that decision,
the Commission rejects the applicants' request for the
return of the documents in Set A and Set B and for
confirmation that all the copies of those documents in
the Commission's possession have been destroyed. In
Article 2 of the decision of 8 May, moreover, the
Commission states that it intends to open the sealed
envelope containing the documents in Set A. The
Commission states, however, that it will not do so
before the expiry of the period prescribed for lodging
an appeal against the decision of 8 May 2003.
18. On 14 May 2003, the Commission presented its
written observations on the application for interim
measures in Case T-125/03 R.
19. On 22 May 2003, the President of the Court of
First Instance invited the applicants to submit their
observations on the inferences which in their view
should be drawn, in Case T-125/03 R, from the decision of 8 May 2003. The applicants submitted their
observations on 9 June 2003 and the Commission
replied on 3 July 2003.
20. By application under the fourth paragraph of Article 230 EC, lodged at the Registry of the Court of
First Instance on 4 July 2003, the applicants brought
an action for annulment of the decision of 8 May 2003
and for an order that the Commission should pay the
costs of the action. By separate document registered
on 11 July 2003, the applicants lodged an application
for interim measures, requesting the President of the
Court of First Instance, in particular, to suspend the
operation of the decision of 8 May 2003. That case is
Case T-253/03 R.
21. In their application, the applicants also request that
Cases T-125/03 R and T-253/03 R be joined, in application of Article 50 of the Rules of Procedure of the
Court of First Instance.
22. On 1 August 2003, the Commission submitted its
observations in writing on the application for interim
measures in Case T-253/03 R.
23. On 7 and 8 August 2003 respectively, the Algemene Raad van de Nederlandse Orde van Advocaten
(General Council of the Netherlands Bar), represented
by O. Brouwer, lawyer, and the Council of the Bars
and Law Societies of the European Union (the CCBE),
represented by J.E. Flynn QC, lodged applications for
leave to intervene in Cases T-125/03 R and T-253/03
R in support of the forms of order sought by the applicants.
24. On 12 August 2003, the European Company
Lawyers Association (ECLA), represented by M.
Dolmans, lawyer, and J. Temple Lang, Solicitor,
lodged an application for leave to intervene in Case
T-125/03 R in support of the form of order sought by
the applicants. On 18 August 2003, ECLA also lodged
an application to intervene in Case T-253/03 R, again
in support of the form of order sought by the applicants.
25. On 1 September 2003 and 2 September 2003 respectively, the Commission and the applicants lodged
their observations on the applications for leave to
intervene in Cases T-125/03 R and Case T-253/03 R.
On 2 September 2003, the applicants also lodged an
application for confidential treatment of certain items
in the file, on the basis of Article 116(2) of the Rules
of Procedure.
26. On 8 September 2003, at the request of the President of the Court of First Instance in application of
Articles 64(3)(d) and 67(3) of the Rules of Procedure,
the Commission sent the President, under confidential
cover, a copy of the Set B documents and also the
sealed envelope containing the Set A documents.
27. By letters of 4 and 5 September 2003, the Registry
requested the applicants for leave to intervene to attend the hearing.
28. On 15 September 2003, in the presence of a representative of the Registry, the President of the Court
of First Instance opened the sealed envelope containing the Set A documents and examined their contents.
Following that operation, the documents were again
placed in a sealed envelope and a report was drawn up
and placed in the file in Cases T-125/03 R and
T-253/03 R.
29. On the same day, both the CCBE and the Algemene Raad van de Nederlandse Orde van Advocaten
submitted objections on a number of points in the
application for confidential treatment lodged by the
applicants under Article 116(2) of the Rules of Procedure. In application of that article, the President of
the Court of First Instance on 16 September 2003
granted in part, and provisionally, the applicants' request for confidential treatment, at the stage of the
application for interim measures.
33. The Commission contends, in Case T-125/03 R,
that the President should:
- dismiss the application for interim measures;
- order the applicants to pay the costs;
30. On 19 September 2003, the Registry communicated to the applicants for leave to intervene a new
non-confidential version of the procedural documents
in Cases T-125/03 R and T-253/03 R.
31. On 23 September 2003, the applicants, the Commission, the Algemene Raad van de Nederlandse Orde
van Advocaten, the CCBE and ECLA presented oral
argument at a hearing.
- order the Algemene Raad van de Nederlandse Orde
van Advocaten, the CCBE and ECLA to pay the costs
incurred by the Commission in connection with their
intervention.
34. In Case T-253/03 R, the applicants request the
President to adopt the following measures:
- suspend the operation of the decision of 8 May 2003;
Forms of order sought by the parties
32. In Case T-125/03 R, the applicants request the
President to adopt the following measures:
- suspend the operation of the decision of 10 February
2003 and, so far as necessary, the operation of the
decision of 30 January 2003, in so far as it has been
interpreted by the Commission as legitimating and/or
constituting the basis of the Commission's action of
seizing and/or reviewing and/or reading documents
covered by professional privilege;
- order the Commission to keep the Set A documents
in the sealed envelope, which should be given to an
independent third party (whose identity should be
agreed between the parties within five days of the date
of the decision in these interim proceedings) to keep
pending the resolution of the dispute to which the
main application relates;
- order the Commission to place the Set B documents
in a sealed envelope to be given to an independent
third party (whose identity is to be agreed between the
parties within five days of the date of the decision in
these interim proceedings) to keep pending the resolution of the dispute to which the main application
relates;
- order the Commission to dispose of any additional
copies it may have of the Set B documents and to
confirm that they have been destroyed within five days
of the decision to be taken;
- order the Commission not to take any steps in reviewing (further) or using the documents in either Set
A or Set B pending the resolution of the main dispute;
- order the Commission to pay the costs.
- order the Commission to keep the Set A documents
in the sealed envelope pending the resolution of the
dispute to which the main application relates;
- order the Commission to place the Set B documents
in a sealed envelope pending the resolution of the
dispute to which the main application relates;
- order the Commission to dispose of any additional
copies it may have of the Set B documents and to
confirm that they have been destroyed within five days
of the decision in these proceedings;
- order the Commission not to take any steps in reviewing (further) or using the documents in either Set
A or Set B pending the resolution of the main action;
- order the Commission to pay the costs.
35. The Commission contends in Case T-253/03 R
that the President should:
- dismiss the application for interim measures;
- order the applicants to pay the costs;
- order the Algemene Raad van de Nederlandse Orde
van Advocaten, the CCBE and ECLA to pay the costs
incurred by the Commission in connection with their
intervention.
Law
36. As a preliminary point, it should be borne in mind
that Article 104(2) of the Rules of Procedure provides
that an application for interim measures is to state the
circumstances giving rise to urgency and the pleas of
fact and law establishing a prima facie case (fumus
boni juris) for the interim measures applied for. Those
conditions are cumulative, so that an application for
interim measures must be dismissed if any one of them
is absent (order of the President of the Court of Justice
of 14 October 1996 in Case C-268/96 P(R) SCK and
FNK v Commission [1996] ECR I-4971, paragraph
30). Where appropriate, the judge hearing such an
application must also weigh up the interests involved
(order of the President of the Court of Justice of 23
February 2001 in Case C-445/00 R Austria v Council
[2001] ECR I-1461, paragraph 73).
37. The measure requested must further be provisional
inasmuch as it must not prejudge the points of law or
fact in issue or neutralise in advance the effects of the
decision subsequently to be given in the main action
(order of the President of the Court of Justice of 19
July 1995 in Case C-149/95 P(R) Commission v Atlantic Container Line and Others [1995] ECR I-2165,
paragraph 22).
38. Furthermore, in the context of that overall examination, the judge hearing the application enjoys a
broad discretion and is free to determine, having regard to the specific circumstances of the case, the
manner and order in which those various conditions
are to be examined, there being no rule of Community
law imposing a pre-established scheme of analysis
within which the need to order interim measures must
be analysed and assessed (order in Commission v
Atlantic Container Line and Others, cited at paragraph
37 above, paragraph 23).
1. The joinder of Cases T-125/03 R and T-253/03 R
39. In their application for interim measures in Case
T-253/03 R, the applicants requested that Cases
T-125/03 R and T-253/03 R be joined. In its observations in Case T-253/03 R, the Commission opposes
the application for joinder on the ground that the main
application in Case T-125/03 R is manifestly inadmissible.
40. Since, however, Cases T-125/03 R and T-253/03 R
concern the same facts, involve the same parties and
have related subject-matter, it is appropriate to order,
under Article 50 of the Rules of Procedure, that they
be joined for the purposes of this order.
2. The applications for leave to intervene
41. As noted at paragraphs 23 and 24 above, the
CCBE, the Algemene Raad van de Nederlandse Orde
van Advocaten and ECLA have lodged applications to
intervene in Case T-125/03 R and in Case T-253/03 R
in support of the forms of order sought by the appli-
cants.
42. The Commission has stated that it had no comments to make on the three applications for leave to
intervene. The applicants, moreover, have stated that
they supported the applications.
43. Under the second paragraph of Article 40 of the
Statute of the Court of Justice, which, pursuant to the
first paragraph of Article 53 thereof, is applicable to
the Court of First Instance, the right of an individual to
intervene is subject to the condition that he is able to
establish an interest in the result of the case. Representative associations whose object it is to protect their
members in cases raising questions of principle liable
to affect those members are allowed to intervene (orders of the President of the Court of Justice of 17 June
1997 in Joined Cases C-151/97 P(I) and C-157/97 P(I)
National Power and PowerGen [1997] ECR I-3491,
paragraph 66, and of 28 September 1998 in Case
C-151/98 P Pharos v Commission [1998] ECR I-5441,
paragraph 6; orders of the President of the Court of
First Instance of 22 March 1999 in Case T-13/99 R
Pfizer v Council, not published in the European Court
Reports, paragraph 15, and of 28 May 2001 in Case
T-53/01 R Post Italiane v Commission [2001] ECR
II-1479, paragraph 51).
44. In the present case, the CCBE, an association
governed by Belgian law, stated in its application for
leave to intervene that it is authorised by its members
to take all steps of whatever nature necessary to realise
its objectives, namely, in particular, to act in matters
involving the application of the Treaties of the European Union to the profession of lawyer.
45. It must therefore be held that the CCBE has
demonstrated, first, that it represents the interests of
the Bars of the European Union and, second, that its
objective is to defend the interests of its members.
Since, moreover, the present case directly raises
questions of principle in relation to the confidentiality
of written communications with lawyers, those questions are liable to affect the members of the CCBE,
whose function is, inter alia, to define and approve the
rules of professional conduct applicable to lawyers.
46. Furthermore, these proceedings directly raise
questions of principle relating to the conditions in
which the judge hearing an application for interim
measures may order interim measures in respect of the
documents which the Commission intends to peruse
pursuant to Article 14(3) of Regulation No 17, but
which according to the undertakings under investigation are protected by professional privilege. The definition of those conditions is liable to impinge directly
on the interests of the members of the CCBE, in that
those conditions limit or extend the provisional legal
protection applicable, in particular, to documents
originating from those members and regarded by the
CCBE as covered by professional privilege.
47. The CCBE has therefore demonstrated, at this
stage, that it has an interest in the applications for
interim measures being granted. Consequently, the
CCBE must be granted leave to intervene in Cases
T-125/03 R and T-253/03 R.
48. The Algemene Raad van de Nederlandse Orde van
Advocaten states that it is the body responsible under
Netherlands law for ensuring compliance with the
principles governing the profession of lawyer in the
Netherlands, for defining the rules of the Netherlands
Bar and also for protecting its rights and interests.
49. The Algemene Raad van de Nederlandse Orde van
Advocaten has therefore adduced evidence of such a
kind as to demonstrate that its object is the protection
of the interests of its members. Since, moreover, the
present case touches directly on the status of Netherlands lawyers employed by an undertaking on a permanent basis, it raises questions of principle liable to
affect the interests of the members of the Netherlands
Bar and those of the Bar itself.
50. Furthermore, as already held at paragraph 46
above, these proceedings directly raise questions of
principle relating to the conditions in which the judge
hearing an application for interim measures may order
interim measures in respect of the documents which
the Commission intends to peruse pursuant to Article
14(3) of Regulation No 17, but which according to the
undertakings under investigation are protected by
professional privilege. The definition of those conditions is liable to impinge directly on the interests of the
members of the Algemene Raad van de Nederlandse
Orde van Advocaten, in that those conditions limit or
extend the provisional legal protection applicable, in
particular, to documents originating from those
members and regarded by the Algemene Raad van de
Nederlandse Orde van Advocaten as covered by professional privilege.
51. The Algemene Raad van de Nederlandse Orde van
Advocaten has therefore demonstrated, at this stage,
that it has an interest in the applications for interim
measures being granted. Consequently, the Algemene
Raad van de Nederlandse Orde van Advocaten must
be granted leave to intervene in Cases T-125/03 R and
T-253/03 R.
52. Last, ECLA has adduced in its application for
leave to intervene evidence establishing that it represents organisations which themselves represent the
vast majority of in-house lawyers in Europe. ECLA
has also stated that its principal activity is representing
the interests of those in-house lawyers and, in particular, defending their position on the question of the
confidentiality of written communications with them.
ECLA has therefore demonstrated, at this stage, that it
represents the interests of its members and that its
objective is, in particular, the defence of their interests. Since, moreover, the present case directly concerns the question of the confidentiality of written
communications with in-house lawyers, it raises
questions of principle liable to have a direct effect on
the interests of the members of ECLA.
53. Furthermore, as already held at paragraphs 46 and
50 above, these proceedings directly raise questions of
principle relating to the conditions in which the judge
hearing an application for interim measures may order
interim measures in respect of the documents which
the Commission intends to peruse pursuant to Article
14(3) of Regulation No 17, but which according to the
undertakings under investigation are protected by
professional privilege. The definition of those conditions is liable to impinge directly on the interests of the
members of ECLA, in that those conditions limit or
extend the provisional legal protection applicable, in
particular, to documents originating from those
members and regarded by ECLA as covered by professional privilege.
54. ECLA has therefore demonstrated, at this stage,
that it has an interest in the applications for interim
measures being granted. Consequently, ECLA must
be granted leave to intervene in Cases T-125/03 R and
T-253/03 R.
3. The application for confidential treatment
55. At the stage of the application for interim
measures, confidential treatment should be granted in
respect of the information referred to as such in the
letter of 16 September 2003 from the Registry to the
applicants, since such information may prima facie be
regarded as secret or confidential within the meaning
of Article 116(2) of the Rules of Procedure.
4. The application in Case T-125/03 R
Admissibility of the application for interim measures
56. It is settled case-law that the admissibility of an
action before the court adjudicating on the substance
should not, in principle, be examined in proceedings
relating to an application for interim measures so as
not to prejudge the case in the main proceedings.
However, where it is contended that the main action
from which the application for interim measures is
derived is manifestly inadmissible, it may be necessary to establish certain grounds for the conclusion
that such an action is prima facie admissible (order of
the President of the Court of Justice of 12 October
2000 in Case C-300/00 P(R) Federacion de Cofradias
de Pescadores de Guipuzcoa and Others v Council
[2000] ECR I-8797, paragraph 34; orders of the
President of the Court of First Instance of 15 January
2001 in Case T-236/00 R Stauner and Others v Parliament and Commission [2001] ECR II-15, paragraph
42, and of 8 August 2002 in Case T-155/02 R VVG
International and Others v Commission [2002] ECR
II-3239, paragraph 18).
57. In this case, the Commission contends that the
main action in Case T-125/03 is inadmissible. It must
therefore be determined whether there are none the
less grounds for the conclusion that the main action in
this case is prima facie admissible.
Arguments of the parties concerning the admissibility
of the main action
58. In Case T-125/03 R, the applicants claim that the
Court should annul the decision of 10 February 2003
and, so far as necessary, the decision of 30 January
2003, in so far as it has been interpreted by the
Commission as legitimating and/or constituting the
basis of the Commission's action (which is not severable from the Decision), of seizing and/or reviewing
and/or reading documents covered by [legal professional privilege].
62. It is not disputed, in the present case, that the applicants are addressees of the decisions of 30 January
2003 and of 10 February 2003 and that each of those
decisions produces mandatory legal effects liable to
affect their interests.
63. The Commission submits, however, that the legal
effects complained of in the main application are not
the consequence of the decisions of 30 January 2003
and 10 February 2003, but of measures adopted subsequent to those decisions. The Commission's arguments none the less tend to show, in essence, that, on
the substance, none of the pleas put forward by the
applicants can be properly invoked in support of the
claims for annulment of the decision of 10 February
2003 and, so far as necessary, of the decision of 30
January 2003. These arguments should therefore, at
first sight, be taken into account in the context of
assessing whether a prima facie case (fumus boni
juris) can be made for the main application.
64. As regards, next, the Commission's arguments that
certain of the applicants' pleas seek annulment of only
part of the decision of 10 February 2003 amending the
decision of 30 January 2003 and should therefore be
rejected in so far as annulment of that decision would
require the Court to adjudicate ultra petita, it is apparent from the file that in their observations of 3 July
2003 the applicants denied having sought annulment
of only part of that decision.
65. There are therefore grounds on which it may be
concluded that the admissibility of the claims for
annulment in Case T-125/03 R cannot be precluded.
A prima facie case
59. The applicants contend that their action is admissible, in that the decision of 30 January 2003, the
decision of 10 February 2003 and the subsequent
treatment of both sets of documents in issue in reality
constitute one and the same decision of the Commission, the legality of which may be challenged before
the Court. Next, as regards locus standi, the applicants
observe that the decision of 30 January 2003 and that
of 10 February 2003 are directly addressed to them.
60. The Commission contends that the main action is
manifestly inadmissible.
Findings of the President
61. The fourth paragraph of Article 230 EC provides
that [a]ny natural or legal person may ... institute
proceedings against a decision addressed to that person ....
66. The applicants raise three pleas in law against the
decision of 10 February 2003 and, so far as necessary,
against the decision of 30 January 2003. First, during
the investigation, the Commission infringed the general procedural principles laid down in the case-law
(Case 155/79 AM & S v Commission [1982] ECR
1575) and also the applicants' right to request interim
measures under Article 242 EC, since, first, the
Commission's officials read and discussed among
themselves certain Set A and Set B documents and,
second, they immediately placed the Set B documents
in their file. Second, still during the investigation, the
Commission substantially infringed the professional
privilege protecting communications with lawyers,
first by refusing on the spot to regard the Set B documents as covered by professional privilege and,
second, by seizing the Set A documents. Third, those
same facts also constitute a breach of the fundamental
rights forming the very foundation of professional
privilege.
5. The application in Case T-253/03 R
67. It follows from the foregoing that all the pleas
which the applicants direct against the decision of 10
February 2003 and, so far as necessary, the decision of
30 January 2003, in reality relate, as the Commission
submits, to measures taken subsequent to and, moreover, distinct from those decisions. Contrary to the
applicants' contention, the decision of 10 February
2003 and that of 30 January 2003 are clearly severable
from the contested operations, especially since they
contain no particular reference to the documents in Set
A and Set B. Consequently, the individualisation of
and the contested treatment given to those documents,
by comparison with the other documents covered by
the decisions of 10 February 2003 and 30 January
2003, are necessarily the consequence of distinct,
subsequent measures.
68. It is sufficient to recall, in that regard, that, according to a consistent line of decisions, in connection
with an investigation based on Article 14 of Regulation No 17, an undertaking cannot plead the illegality
of the investigation procedures as a ground for annulment of the measure on the basis of which the
Commission carried out that investigation (see, to that
effect, Case 85/87 Dow Benelux v Commission
[1989] ECR 3137, paragraph 49, and Joined Cases
T-305/94 to T-307/94, T-313/94 to T-316/94,
T-318/94, T-325/94, T-328/94, T-329/94 and
T-335/94 Limburgse Vinyl Maatschappij and Others v
Commission [1999] ECR II-931, paragraph 413).
69. That impossibility merely reflects the general
principle that the legality of a measure must be assessed in the light of the circumstances of law and of
fact existing at the time when the decision was
adopted, so that the validity of a decision cannot be
affected by acts subsequent to its adoption (Joined
Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and
110/82 IAZ and Others v Commission [1983] ECR
3369, paragraph 16, and Dow Benelux v Commission,
cited at paragraph 68 above, paragraph 49).
70. Without its being necessary to examine the applicants' submissions in greater detail, it must therefore be concluded that even on the assumption that
they were well founded, they could not be properly
invoked in support of the claims for annulment of the
decision of 10 February 2003 and, so far as necessary,
the decision of 30 January 2003.
71. Consequently, the applicants have failed to establish the existence of a prima facie case, which is sufficient ground to dismiss the application in Case
T-125/03 R.
72. It is appropriate, first, to consider whether the
applicants have demonstrated the existence of a prima
facie case, then, second, to consider whether they have
demonstrated the urgency of the interim measures
sought and, last, to balance the interests involved.
A prima facie case
Arguments of the parties
73. The applicants maintain that their action against
the decision of 8 May 2003, which is based on three
pleas in law, is not unfounded.
74. First, the applicants maintain that the Commission
has infringed the procedural principles laid down in
AM & S v Commission, cited at paragraph 66 above,
concerning professional privilege. Where an undertaking subject to an investigation on the basis of Article 14(3) of Regulation No 17 relies on the protection
of documents covered by professional privilege, the
procedure that the Commission must follow consists
of the following three stages. First of all, if the undertaking in question relies on professional privilege
and on that ground refuses to produce documents, it
must demonstrate that the substantive conditions required by the case-law are satisfied, although it is not
obliged to reveal the contents of the documents concerned. Second, if the Commission is not satisfied by
the explanations given by the undertaking subject to
an investigation, it must order, by a decision adopted
pursuant to Article 14(3) of Regulation No 17, production of the documents in question. Third, and last,
if the undertaking continues to maintain that the
documents are covered by professional privilege, it is
for the Community Courts to resolve the dispute.
75. In the present case, the applicants submit that the
Commission reversed the order of the stages of that
procedure, since, during the investigation, the Commission's officials took possession of and discussed
among themselves, for several minutes, certain Set A
and Set B documents and, second, placed the Set B
documents in the file without placing them in a sealed
envelope. The applicants maintain, essentially, that
instead of taking copies of the documents in question
and adopting the decision of 8 May 2003, the Commission should have left them where they were and
adopted a decision ordering the applicants to produce
them. That decision could then have formed the subject-matter of an action before the Community Courts.
The applicants also contend that the different treatment of the Set A and the Set B documents constitutes
a breach of the principle of non-discrimination.
76. In their second plea, the applicants maintain, essentially, that at the investigation stage the Commission breached the principle of professional privilege,
first, by denying all protection to the Set B documents
and, second, by exhaustively examining the Set A
documents. The decision of 8 May 2003 also breached
the principle of professional privilege in so far as it
reflects, in particular, the Commission's refusal to
return and destroy the Set A and Set B documents and,
moreover, manifests the Commission's intention to
open the sealed envelope containing the Set A documents.
77. The applicants state in that regard that the two Set
A documents and the Set B handwritten memoranda
are covered by professional privilege, since they are
the direct result of the competition law compliance
programme which they put in place with the assistance
of outside counsel.
78. The applicants then set out their arguments in
respect of each of the documents in question, maintaining, first, that the memorandum forming the basis
of the two Set A documents must be regarded as the
written basis of a telephone conversation with an
external counsel, as evidenced by the handwritten
reference to that lawyer's name on one of the two
copies of the memorandum.
79. Next, in the applicants' submission, the Set B
handwritten memoranda are also covered by professional privilege, since they were used to prepare the
Set A memoranda, which are themselves protected.
80. As regards, last, the Set B e-mails, the applicants
maintain that they constitute written communications
between the General Manager of Akcros Chemicals
and a member of Akzo Nobel's Legal Department.
The latter person is a member of the Netherlands Bar,
subject to professional obligations as regards independence and respect for the rules of the Bar comparable to those of an external lawyer. Those rules prevail over his duty of loyalty towards his employer. In
that regard, the applicants are agreed that the Community case-law does not at present recognise that the
work of in-house lawyers is protected by professional
privilege; none the less, they maintain, essentially, that
numerous changes in the professional rules of the
Member States have occurred since the judgment in
AM & S v Commission, cited at paragraph 66 above,
tending, in particular, to extend the cover of professional privilege to the activities of certain in-house
lawyers. The applicants also rely, by analogy, on the
judgment in Case T-92/98 Interporc v Commission
[1999] ECR II-3521, paragraph 41, where the Court of
First Instance considered that correspondence between the Commission's Legal Service and its various
Directorates-General could not be disclosed. Furthermore, the limitation of professional privilege to
written communications with outside counsel constitutes a breach of the principle of non-discrimination
and, against the background of the modernisation of
competition law, adversely affects an undertaking's
assessment of the compliance of its activities with
competition law. Last, the communications in question were between two persons in the United Kingdom
and the Netherlands respectively, i.e. in two States
which recognise that written communications from
in-house lawyers are protected by professional privilege when the lawyers belong to a Bar.
81. Last, in their third plea the applicants submit that
the decision of 8 May 2003 breaches the fundamental
rights which are the very foundation of professional
privilege, namely the rights of defence, respect for
private life and freedom of expression, as defined in
the case-law of the European Court of Human Rights.
82. The Commission rejects all of those arguments
and contends that none of the pleas put forward by the
applicants is able to satisfy the condition relating to a
prima facie case.
83. The Commission thus disputes the applicants' first
plea, alleging that it breached the procedural principles applicable when undertakings claim that certain
documents are protected by professional privilege. As
a preliminary point, the Commission observes that the
procedure defined in AM & S v Commission, cited at
paragraph 66 above, is not absolute and does not require that, when an undertaking relies on professional
privilege, the Commission should be required to refrain from copying the documents in question and
subsequently to request them from the undertaking.
Still by way of preliminary point, the Commission
disputes the applicants' assertion that its officials took
possession of the documents in question during the
investigation and discussed them among themselves
for several minutes.
84. Next, the Commission contends that the adoption
of preventive measures to ensure that the documents
will not be destroyed is not inconsistent with the
principles laid down in AM & S v Commission, cited
at paragraph 66 above. By adopting such measures,
the Commission is able to avoid having to request the
assistance of the national authorities in making a
formal order for production of the documents concerned.
85. Last, the Commission submits that it did not
breach the principle of non-discrimination by treating
the Set A and the Set B documents differently, since
those documents were not identical.
86. The Commission also contends that the applicants'
second plea is manifestly unfounded.
87. The Commission contends, first, that the two Set A
documents are not covered by professional privilege,
since they consist of two copies of the same memorandum, with no indication that it was drafted in the
context of or for the purpose of a legal opinion by an
outside counsel. The only indication to that effect is a
handwritten reference on one of the two copies to the
name of a lawyer, which establishes at most that a
conversation with that lawyer regarding the memorandum had taken place. The evidence adduced by the
applicants is insufficient to demonstrate that the
memorandum in question was drawn up with a view to
seeking legal advice or that such advice was given.
88. In any event, the applicants themselves agree that
the memorandum reflects internal discussions between the General Manager of Akcros Chemicals and
other employees in connection with a competition law
compliance programme set up by the applicants. It
therefore does not reflect discussions with an outside
counsel, contrary to the requirements of case-law
(order of the Court of First Instance in Case T-30/89
Hilti v Commission [1990] ECR II-163, publication
by way of extracts, paragraph 18). Furthermore, the
fact that a document was drawn up in the context of a
competition law compliance programme is not sufficient for that document to be covered by professional
privilege, in so far as, by its scope, such a programme
exceeds the exercise of the rights of the defence, at
least in the absence of an investigation or actual proceedings against the undertaking. Nor does the fact
that the document was drawn up on the instructions of
an outside counsel in the context of such a programme
suffice to bring it within the scope of professional
privilege. The Commission concludes its observations
on the competition law compliance programme set up
by the applicants by stating, first, that the applicants
do not claim that that programme is mentioned in the
Set A documents; second, that the documents produced by the applicants demonstrate that they sought
to divert professional privilege from its purpose; and,
third, that the existence of the competition law compliance programme was never mentioned during the
investigation of 12 and 13 February 2003.
89. The Commission also contends that the Set B
handwritten memoranda are not protected by professional privilege, since they do not give the impression
of being a communication with an external lawyer, do
not indicate that the applicants had any intention of
having such communication and do not report the text
or the content of written communications with an
independent lawyer for the purposes of the exercise of
the rights of defence. There is no indication that the
documents have any link with the competition law
compliance programme set up by the applicants; in
any event, such a link is not sufficient to protect the
documents; and, last, according to the applicants
themselves, the memoranda were drafted in preparation for the Set A notes, which are not covered by
professional privilege.
90. As regards, last, the Set B e-mails, the Commission contends that they are clearly not covered by
professional privilege, since they neither constitute a
communication with an independent lawyer, nor reveal any intention to communicate with an independent lawyer nor, last, report the text or the content
of written communications with an independent lawyer for the purpose of the exercise of the rights of
defence. The Commission observes in that regard that
in Community law correspondence with in-house
lawyers is not covered by professional privilege (AM
& S v Commission, cited at paragraph 66 above,
paragraph 24). Furthermore, the contents of the
e-mails in question show that the applicants' in-house
lawyer was acting not as a lawyer but as an employee.
91. With more specific regard to the question of the
protection of written communications with lawyers
employed on a permanent basis, the Commission
observes that to accept the applicants' arguments
would be to create different systems within the European Union, depending on whether or not Member
States allow in-house lawyers to be members of a Bar.
The Commission also submits that the principles laid
down in AM & S v Commission, cited at paragraph 66
above, must not be altered, since, first, in-house lawyers do not enjoy the same independence as outside
lawyers, second, the principle established in Interporc
v Commission, cited at paragraph 80 above, is not
justified on grounds related to professional privilege
and, third, to extend the scope of professional privilege would lead to abuse. Last, the Commission claims
that the fact that undertakings are increasingly required to undertake self-assessment of the compatibility of their activities with competition law pursuant
to Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the competition rules laid down in Articles 81 and 82 of the Treaty
(OJ 2003 L 1, p. 1) is unrelated to questions of professional privilege. Self-assessment will be increasingly common in connection with the application of
Article 81(3) EC, whereas questions associated with
professional privilege arise essentially in connection
with the application of Articles 81(1) EC and 82 EC.
92. Third, the Commission contends that the applicants' final plea, whereby they allege that the Commission breached the fundamental rights forming the
basis of professional privilege, is unfounded. The
applicants have failed to establish a link between the
fundamental rights on which they rely and the alleged
breach and their rights of defence were not breached in
any event, since the Commission followed a procedure
consistent in every respect with the principles laid
down in AM & S v Commission, cited at paragraph 66
above. Last, the Commission contends that, contrary
to what the applicants maintain, the case-law of the
European Court of Human Rights which they cite in
their application makes no reference to the protection
of private life.
Findings of the President
93. In the present case, the President considers it appropriate to examine the pleas in the following order:
first, the second plea in so far as it relates to the Set A
documents; then, that plea in so far as it relates to the
Set B documents; and, finally, the first plea.
- Second plea, alleging breach of professional privilege, in so far as it relates to the Set A documents
94. In their second plea, the applicants maintain that
the decision of 8 May 2003 breached the professional
privilege which, in their submission, covers the Set A
documents.
95. In that regard, Regulation No 17 must be interpreted as protecting the confidentiality of written
communications between lawyers and clients provided, first, that such communications are made for
the purposes and in the interests of the client's rights of
defence and, second, that they emanate from independent lawyers, i.e. lawyers who are not bound to the
client by a relationship of employment (AM & S v
Commission, cited at paragraph 66 above, paragraph
21).
96. Furthermore, the principle of protection of written
communications between lawyer and client must, in
view of its purpose, be regarded as extending also to
the internal notes which are confined to reporting the
text or the content of those communications (order in
Hilti v Commission, cited at paragraph 88 above,
paragraph 18).
97. In the present case, the applicants do not claim that
the Set A documents constitute in themselves a
communication with an outside lawyer or a document
reporting the text or the content of such a communication. They maintain, on the contrary, that both
documents are memoranda drafted for the purpose of a
telephone conversation with a lawyer.
98. The President considers that the applicants' plea
raises very important and complex questions concerning the possible need to extend, to a certain degree, the scope of professional privilege as currently
delimited by the case-law.
99. It should be observed, first of all, that according to
settled case-law, in all proceedings in which sanctions,
especially fines or periodic penalty payments, may be
imposed, observance of the rights of the defence is a
fundamental principle of Community law, which must
be complied with even if the proceedings in question
are administrative proceedings (see, in particular,
Joined Cases C-238/99 P, C-244/99 P, C-245/99 P,
C-247/99 P, C-250/99 P to C-252/99 P and C-254/99
P Limburgse Vinyl Maatschappij and Others v
Commission [2002] ECR I-8375, paragraph 85, and
Case T-348/94 Enso Espa&ntilde;ola v Commission
[1998] ECR II-1875, paragraph 80).
100. Second, the protection of the confidentiality of
written communications between lawyer and client is
an essential corollary to the full exercise of the rights
of the defence, the protection of which Regulation No
17 itself, in particular in the 11th recital in its preamble
and in the provisions contained in Article 19, takes
care to ensure (AM & S v Commission, cited at paragraph 66 above, paragraph 23).
101. Third, professional privilege is intimately linked
to the conception of the lawyer's role as collaborating
in the administration of justice by the courts and as
being required to provide, in full independence, and in
the overriding interests of that cause, such legal assistance as the client needs (AM & S v Commission,
cited at paragraph 66 above, paragraph 24).
102. In order that a lawyer may effectively and usefully exercise his role of collaborating in the administration of justice by the courts with a view to the full
exercise of the rights of the defence, it may prove
necessary, in certain circumstances, for the client to
prepare working or summary documents, notably for
the purpose of gathering the information which the
lawyer may find useful, or indeed indispensable, in
understanding the context, the nature and the scope of
the facts in respect of which his assistance is sought.
Furthermore, the preparation of such documents may
prove particularly necessary in matters involving
considerable and complex information, which is the
case, in particular, of proceedings initiated with a view
to imposing sanctions for infringements of Articles 81
EC and 82 EC.
103. In that context, although Regulation No 17 has
given the Commission wide powers of investigation
and placed undertakings under an obligation to cooperate in the measures of investigation, it is settled
case-law that it is none the less necessary to prevent
the rights of the defence from being irremediably
impaired during preliminary inquiry proceedings
including, in particular, investigations which may be
decisive in providing evidence of the unlawful nature
of conduct engaged in by undertakings for which they
may be liable (Joined Cases 46/87 and 227/88 Hoechst
vCommission [1989] ECR 2859, paragraph 15, and
Case 374/87 Orkem v Commission [1989] ECR 3283,
paragraph 33).
104. If, in the context of investigations ordered under
Article 14(3) of Regulation No 17, the Commission
were able to copy working or summary documents
prepared by an undertaking solely for the purpose of
the exercise of the rights of defence by its lawyer, the
consequence might prima facie be an irremediable
impairment of the rights of defence of that undertaking, since the Commission would have evidence of
such a kind as to provide it with immediate information on the defence options available to the undertaking. There is reason to conclude, therefore, that
such documents are capable of being covered by
professional privilege.
105. It is therefore necessary to determine whether, in
the present case, the Set A documents may belong to
such a category.
106. The applicants claim that the Set A typewritten
memoranda were drafted in the context of a competition law compliance programme set up by outside
lawyers. More specifically, the Set A memoranda
were drawn up by the General Manager of Akcros
Chemicals on the basis of discussions with lower-level
employees, initially communicated to his superior and
then, finally, discussed with the applicants' external
counsel.
107. The President considers at this stage that, as the
Commission has stated, the mere existence of a
competition law compliance programme set up by
outside lawyers is not prima facie sufficient to establish that a document prepared in the context of such a
programme is covered by professional privilege.
Owing to their extent, those programmes include tasks
which frequently extend far beyond the exercise of the
rights of the defence.
108. Having made that clear, the President none the
less considers that, in the present case, it cannot be
precluded prima facie that, because of other factors,
the Set A typewritten memoranda were in fact drafted
for the sole purpose of obtaining legal advice from the
applicants' lawyer in the context of the exercise of the
rights of the defence.
109. First, after examining the Set A memoranda, the
President found that, in the light of their content, virtually the sole purpose of those documents was prima
facie to compile information of the kind which would
be communicated to a lawyer for the purpose of obtaining his assistance on questions involving the possible application of Articles 81 EC and 82 EC. The
first sentence of the memoranda gives the clear impression that the General Manager of Akcros Chemicals intended to assemble, in the Set A documents,
information relating to certain competition law matters. Owing to their content and their scope, moreover,
there are serious doubts as to the possibility that the
memoranda might have been drafted for a purpose
other than the subsequent consultation of a lawyer.
Furthermore, even if at this stage their content does
not indicate beyond doubt that the documents were
drafted for the sole purpose of obtaining the assistance
of a lawyer, the President none the less considers that
the absence of express reference in the memoranda to
seeking legal assistance is not in the present case sufficient reason to reject outright the possibility that
such assistance was in fact the reason why they were
drafted.
110. Second, the applicants produced before the
President the minute of a telephone conversation
drafted by one of the applicants' lawyers on the day on
which the conversation took place. As this minute
might itself be protected by professional privilege, it
could not be communicated to the Commission. It
gives the impression, however, that certain points
discussed did in fact relate prima facie to information
contained in the Set A documents.
111. Third, one of the two copies of the Set A memorandum bears handwritten notes mentioning the
name of the applicants' counsel and tends to indicate
that a telephone conversation did indeed take place
with him on the actual day on which he drafted the
minute of his telephone conversation referred to in the
preceding paragraph.
112. Consequently, in the circumstances of the present
case, the President considers that this evidence tends
to confirm the possibility that the Set A memoranda
were drafted for the sole purpose of obtaining the
assistance of a lawyer.
113. As regards, last, the condition relating to the
exercise of the rights of the defence, it is apparent
upon examining the Set A documents that they relate
to facts which are prima facie capable of justifying
consultation of a lawyer and of being connected either
with the investigation currently being carried out by
the Commission or with other investigations which the
applicants were reasonably able to fear or anticipate
and in view whereof they intended to draw up a
strategy and prepare in advance, if necessary, the
exercise of their rights of defence. Prima facie, however, it remains necessary, for the purpose of examining the present plea, to determine the precise conditions in which such documents may, particularly from
a temporal and material viewpoint, constitute a means
of exercising the rights of the defence.
114. It follows from the foregoing, therefore, that, in
so far as it concerns the Set A documents, the applicants' second plea raises numerous delicate questions
of principle requiring a detailed examination in the
main proceedings and that it does not therefore appear,
at this stage, to be manifestly unfounded.
- Second plea, alleging breach of professional privilege, in so far as it concerns the Set B documents
115. As stated at paragraphs 9 and 10 above, the Set B
documents consist, first, of handwritten memoranda
which, according to the applicants, were taken with a
view to drafting the Set A memoranda and, second, of
e-mails. It is necessary to examine those three documents in the light of the second plea raised by the
applicants, alleging breach of professional privilege
by the Commission.
116. As regards, first, the Set B handwritten memoranda, it is apparent, on the basis of a comparison with
the typewritten Set A memoranda, that both have the
same overall structure. They also contain, in substance, numerous common points. It cannot be precluded prima facie, therefore, that, like the Set A
memoranda, the Set B handwritten memoranda would
never have been drafted had the author not envisaged
consulting a lawyer about their contents. The applicants' second plea, as regards the Set B handwritten
memoranda, is therefore not wholly unfounded.
117. It is necessary to examine, last, the two Set B
e-mails between the General Manager of Akcros
Chemicals and the Akzo Nobel's competition law
coordinator.
118. In that regard, it should be pointed out that, in
application of the principles laid down in AM & S v
Commission, cited at paragraph 66 above, the protection afforded by Community law, especially in the
context of Regulation No 17, to written communications between lawyer and client applies only in so far
as those lawyers are independent, i.e. not bound to the
client by a relationship of employment (AM & S v
Commission, cited at paragraph 66 above, paragraph
21).
119. In the present case, it is common ground that the
e-mails in question were exchanged between the
General Manager of Akcros Chemicals and a lawyer
employed on a permanent basis by Akzo Nobel. Following AM & S v Commission, cited at paragraph 66
above, those communications are therefore not in
principle covered by professional privilege.
120. None the less, the President considers that the
arguments put forward by the applicants and the interveners raise a question of principle which merits
very special attention and which cannot be resolved in
the present interim proceedings.
121. On the one hand, as the Commission emphasises,
the Member States do not unanimously recognise the
principle that written communications with in-house
lawyers must be covered by professional privilege.
Furthermore, as the Commission also points out, it is
necessary to ensure that an extension of professional
privilege cannot facilitate abuses which would enable
evidence of an infringement of the Treaty competition
rules to be concealed and thus prevent the Commission from carrying out its task of ensuring compliance
with those rules.
122. On the other hand, however, the solution in AM
& S v Commission, cited at paragraph 66 above, is
based, inter alia, on an interpretation of the principles
common to the Member States dating from 1982. It is
therefore necessary to determine whether, in the present case, the applicants and the interveners have
adduced serious evidence of such a kind as to
demonstrate that, taking into account developments in
Community law and in the legal orders of the Member
States since the judgment in AM & S v Commission,
cited at paragraph 66 above, it cannot be precluded
that the protection of professional privilege should
now also extend to written communications with a
lawyer employed by an undertaking on a permanent
basis.
123. The President considers that arguments to that
effect have been submitted in the present case and that
they are not wholly unfounded.
124. First, the applicants, the Algemene Raad van de
Nederlandse Orde van Advocaten and ECLA have
adduced evidence which indicates that, since 1982, a
number of Member States have adopted rules designed to protect written communications with a
lawyer employed by an undertaking on a permanent
basis, provided that he is subject to certain rules of
professional conduct. That appears to be the position,
in particular, in Belgium and the Netherlands. At the
hearing, ECLA further stated that in most Member
States written communications with in-house lawyers
subject to particular rules of professional conduct
were protected by professional privilege. The Commission, on the other hand, contended in its observations that it was only in a minority of Member States
that communications with in-house lawyers were
covered by professional privilege.
an independent lawyer. In the present case, the applicants maintained at the hearing, without being
clearly contradicted on that point by the Commission,
that the lawyer whom they employed on a permanent
basis was in fact bound by professional rules equivalent to those governing independent lawyers of the
Netherlands Bar.
125. Without its being possible at this stage to ascertain and to embark upon a thorough and detailed
analysis of the evidence adduced by the applicants and
the interveners, that evidence none the less appears
prima facie to be capable of showing that the role
assigned to independent lawyers of collaborating in
the administration of justice by the courts, which
proved decisive for the recognition of the protection of
written communications to which they are parties
(AM & S v Commission, cited at paragraph 66 above,
paragraph 24), is now capable of being shared, to a
certain degree, by certain categories of lawyers employed within undertakings on a permanent basis
where they are subject to strict rules of professional
conduct.
129. This complex question must be examined thoroughly, in particular as regards, first, the precise scope
of the right which would then be recognised, second,
the Community rules and national rules applicable to
the professions of lawyer and in-house lawyer and,
third, the legal and practical alternatives available to
companies established in Member States which do not
allow in-house lawyers to be members of a Bar.
126. The evidence therefore tends to show that increasingly in the legal orders of the Member States
and possibly, as a consequence, in the Community
legal order, there is no presumption that the link of
employment between a lawyer and an undertaking
will always, and as a matter of principle, affect the
independence necessary for the effective exercise of
the role of collaborating in the administration of justice by the courts if, in addition, the lawyer is bound by
strict rules of professional conduct, which where
necessary require that he observe the particular duties
commensurate with his status.
127. It must therefore be held that the applicants and
the interveners have presented arguments which are
not wholly unfounded and which are apt to justify
raising again the complex question of the circumstances in which written communications with a
lawyer employed by an undertaking on a permanent
basis may possibly be protected by professional privilege, provided that the lawyer is subject to rules of
professional conduct equivalent to those imposed on
128. Nor does that question of principle appear prima
facie to have to be rejected at this stage as a result of
the Commission's argument that recognition of professional privilege for written communications with
lawyers employed on a permanent basis would give
rise to different regimes within the European Union,
depending on whether or not in-house lawyers are
authorised by the Member States to be members of a
Bar.
130. It must therefore be concluded that, in the present
case, the applicants have, by their second plea, raised a
delicate question of principle, which requires a complex legal assessment and must be reserved for the
Court when it adjudicates on the main application.
131. It is also necessary, in the present case, to examine the first plea put forward by the applicants.
- First plea, alleging breach of the procedural principles laid down in AM & S v Commission and of Article 242 EC
132. In principle, where the undertaking which is the
subject of an investigation under Article 14 of Regulation No 17 refuses, on the ground that it is entitled to
protection of the confidentiality of information, to
produce, among the business records demanded by the
Commission, written communications between itself
and its lawyer, it must nevertheless provide the
Commission's authorised agents with relevant material of such a nature as to demonstrate that the communications fulfil the conditions for being granted
legal protection, although it is not bound to reveal the
contents of the communications in question. Where
the Commission is not satisfied that such evidence has
been supplied, it is for the latter to order, pursuant to
Article 14(3) of Regulation No 17, production of the
communications in question and, if necessary, to im-
pose on the undertaking fines or periodic penalty
payments under that regulation as a penalty for the
undertaking's refusal either to supply such additional
evidence as the Commission considers necessary or to
produce the communications in question whose confidentiality, in the Commission's view, is not protected
by law (AM & S v Commission, cited at paragraph 66
above, paragraphs 29 to 31). It is then open to the
undertaking subject to the investigation to lodge an
application for annulment of the Commission's decision, together where appropriate with an application
for interim measures, under Articles 242 EC and 243
EC.
three Set B documents, as in the case of the Set A
documents.
133. The principles thus recited tend to demonstrate
that, in principle, where the representatives of the
undertaking under investigation have produced relevant material of such a nature as to demonstrate that a
particular document is protected by professional privilege and where the Commission is not satisfied with
those explanations, the Commission is not prima facie
entitled to examine the document concerned before it
has adopted a decision allowing the undertaking under
investigation to bring the matter before the Court of
First Instance and, where appropriate, the judge with
jurisdiction to order interim measures.
138. It follows from AM & S v Commission, cited at
paragraph 66 above, that the undertaking under investigation is not bound to reveal the contents of the
documents in question when it is required to present to
the Commission's officials relevant material of such a
kind as to prove that the documents merit protection
(AM & S v Commission, cited at paragraph 66 above,
paragraph 29). Furthermore, if the Commission's officials were able to cast even a cursory glance over the
documents concerned, there would be a risk that, in
spite of the superficial nature of their examination,
they would read information covered by professional
privilege. That may be so, in particular, if the confidentiality of the document in question is not clear from
external indications such as a lawyer's letterhead or a
clear reference by that lawyer to the confidentiality
from which the document should benefit. In such a
situation, it would frequently happen that the only way
in which the Commission's officials would be able to
satisfy themselves that the protected information was
confidential would be by looking at the information
itself. On the other hand, if those officials, without
first consulting the documents concerned, simply
placed copies of them in a sealed envelope which they
removed with a view to a subsequent resolution of the
dispute, then prima facie the risks of a breach of professional privilege could be avoided and at the same
time the Commission would be able to retain a certain
control over the documents forming the subject-matter
of the investigation.
134. It is apparent, on the contrary, that the mere fact
that an undertaking claims that a document is protected by professional privilege is not prima facie
sufficient to prevent the Commission from reading
that document if, in addition, the undertaking produces no relevant material of such a kind as to prove
that it is actually protected by professional privilege.
135. In the present case, paragraph 6 of the decision of
8 May 2003 states that, when examining the Set A
documents, the applicants' representatives, first, had a
detailed discussion with the Commission's officials,
second, mentioned a manuscript reference to the name
of an external lawyer on one of the copies of those
memoranda and, third, claimed that the memoranda
had been prepared with a view to seeking legal advice.
Those statements tend prima facie to indicate that the
applicants produced relevant material of such a kind as
to prove that the documents should be protected.
136. As regards, next, the Set B documents, it is apparent from paragraph 7 of the decision of 8 May 2003
and also from the Commission's observations that the
applicants' representatives and the Commission's officials also had a detailed discussion about the contents of the three documents, which, too, does not
preclude prima facie that the applicants' representatives produced, during that discussion, material of
such a kind as to justify the possible protection of the
137. However, the applicants' present plea raises a
further delicate question. It is necessary to consider, in
addition, whether, in the light of the duty of an undertaking subject to an investigation to submit relevant material of such a kind as to prove that a document must in fact be protected, the Commission officials were prima facie entitled, as they did in the present case, to cast a cursory glance over that document
in order to form their own view of its eligibility for
protection.
139. The President therefore considers that it is not
precluded at this stage that, in the context of an investigation under Article 14(3) of Regulation No 17,
the Commission's officials must refrain from casting
even a cursory glance over the documents which an
undertaking claims to be protected by professional
privilege, at least if the undertaking has not given its
consent.
140. In the present case, it follows from the minute of
the investigation prepared by the Commission that the
applicants' representatives were firmly opposed to a
cursory examination of the documents in the file in
question and also that it was only when they were
reminded of the possible criminal consequences of
obstructing the investigation that they agreed to allow
the leader of the investigating team to glance quickly
at the documents. At this stage, the President is unable
to determine whether the Commission's warnings
were sufficient to vitiate the consent of the applicants'
representatives. However, the circumstances in which
the warnings were formulated do not make it possible
to conclude, at this stage, that the applicants gave their
unreserved consent to the brief review of the Set A and
Set B documents subsequently carried out by the
leader of the investigating team, as may be seen from
points 14 and 15 of the minute of the investigation.
141. Furthermore, it is common ground between the
parties that it was subsequently, at the stage of the
investigation, that the Commission placed the Set B
documents in its file, without first adopting a decision
under Article 14(3) of Regulation No 17, which would
have allowed the applicants to bring the matter before
the Court of First Instance and, if appropriate, the
judge with jurisdiction to make interim orders.
142. At this stage, therefore, it appears that the applicants' first plea raises a complex question of interpretation of the procedure defined in AM & S v
Commission, cited at paragraph 66 above, and that it
cannot be precluded that the Commission failed to
observe the procedural principles laid down in that
judgment.
143. The arguments put forward by the Commission
do not call in question either the importance of that
question of interpretation or the possibility that the
Commission acted unlawfully in regard to the Set A
and Set B documents.
144. The Commission contends, first, that in AM & S
v Commission, cited at paragraph 66 above, its initial
investigation was based on Article 14(2) of Regulation
No 17 and that it therefore had no option other than
subsequently to order production of the documents
concerned on the basis of Article 14(3) of Regulation
No 17. The situation is different in the present case,
since its decision to carry out an investigation was
based from the outset on Article 14(3) of Regulation
No 17.
145. It should be observed, however, that at paragraph
29 of AM & S v Commission, cited at paragraph 66
above, the Court of Justice drew no distinction according to whether the decision to carry out an investigation, on the basis of which communication of
documents is initially demanded, is based on Article
14(2) of Regulation No 17 or on Article 14(3) thereof.
The Court of Justice merely referred generally to
investigations decided under Article 14 of Regulation
No 17. It cannot therefore be inferred prima facie that
the outcome must necessarily be different where the
initial decision to carry out an investigation is based
on Article 14(3) of Regulation No 17 rather than on
Article 14(2) thereof.
146. In any event, the Commission has not shown how
the fact that it ordered an investigation on the basis of
Article 14(3) of Regulation No 17 would prima facie
be sufficient to allow it to read immediately documents potentially protected by professional privilege
without having first adopted a second decision which
would give the undertaking forming the subject of an
investigation the proper opportunity to challenge the
Commission's position before the Court of First Instance and, where appropriate, the judge with jurisdiction to make interim orders. Admittedly, the
Commission stated at the hearing that the undertaking
under investigation could challenge the first decision,
adopted under Article 14(3) of Regulation No 17.
However, as already held at paragraph 68 above, an
undertaking cannot plead the illegality affecting the
investigation procedures as a ground for annulment of
the measure on the basis of which the Commission
carried out that investigation (see, in particular, Dow
Benelux v Commission, cited at paragraph 68 above,
paragraph 49, and Limburgse Vinyl Maatschappij and
Others v Commission, cited at paragraph 68 above,
paragraph 413). Furthermore, it is apparent that where,
during an investigation, the Commission intends to
read immediately documents which the undertaking
concerned claims to be covered by professional privilege, it is prima facie unrealistic to consider that that
undertaking, which has just learnt of the decision to
carry out an investigation, has the actual and effective
possibility to challenge it before the Court of First
Instance and, in particular, before the judge with jurisdiction to make interim orders, before the Commission reads the documents in question. In such a
circumstance, the interests of the undertaking do not
seem to be sufficiently protected by the possibility
available under Articles 242 EC and 243 EC to obtain
an order suspending the decision or any other interim
measure (see, by analogy, AM & S v Commission,
cited at paragraph 66 above, paragraph 32).
147. Second, the Commission maintained in its observations that it was entitled, where there can be no
doubt that the document cannot be covered by professional privilege, to place it immediately with the
rest of its file, as it did in the case of the Set B documents.
148. That solution cannot be accepted at this stage
without a thorough analysis in the main action. First,
as stated at paragraphs 137 to 140 above, it cannot be
precluded that the Commission's officials must refrain
from casting even a cursory glance over the documents in respect of which an undertaking produces
relevant material of such a kind as to prove that they
are covered by professional privilege. Second, even on
the assumption that the Commission's officials were
entitled to do so, the fact would remain that certain
documents covered by professional privilege, in particular the documents reporting the contents of a
communication with a lawyer, appear to be purely
internal documents and do not necessarily give any
external indication that they are confidential. Consequently, in such a circumstance, the only way in which
the Commission's officials could have no doubt that a
document did not have protection would ultimately be
to read it in full on the spot and, consequently, to know
what is in it before first giving the undertaking under
investigation the opportunity to challenge the Commission's decision before the Court of First Instance
and, where appropriate, the judge with jurisdiction to
make interim orders.
149. The Commission's arguments therefore do not
affect the reality of the question of principle raised by
the applicants' first plea, namely the question of the
circumstances in which, in procedural terms, the requirements of professional privilege and the material
and practical constraints which bind the Commission
in matters of investigation must be reconciled.
150. The condition relating to a prima facie case is
therefore satisfied as regards the Set A and Set B
documents. It is therefore appropriate to consider
whether the applicants have shown an urgent need to
order the interim measures requested for each of the
documents concerned.
Urgency
Arguments of the parties
151. The applicants maintain that a distinction must be
drawn between the Set A and Set B documents for the
purpose of assessing the urgency of ordering the interim measures sought.
152. First, as regards the Set A documents, the applicants observe that, in the decision of 8 May 2003, the
Commission stated that it would not open the sealed
envelope before expiry of the period within which an
appeal could be lodged against the decision. The applicants state that they are prepared to withdraw their
application for interim measures in respect of the Set
A documents if the Commission guarantees in writing
that the envelope containing those documents will
remain sealed until the end of the main proceedings.
153. Second, the applicants state that the Set B documents have been in the Commission's possession
since February 2003 and that the Commission has
already read them, so that it is necessary to adopt
urgent measures in order to ensure that the Commission does not take irreversible steps on the basis of
those documents.
154. Third, the applicants submit that they could suffer
irreparable damage if the effects of the decision of 8
May 2003 were not suspended. In particular, the status
of the documents may have an effect on the applicants'
position in the current investigation, since the Set B
documents have already been reviewed and since, on
the basis of all the documents concerned, the Commission may adopt other measures of investigation or
address a statement of objections to the applicants.
The applicants acknowledge, in that regard, that procedural irregularities may be invoked in an action
against a decision adopted on the basis of Article 81(1)
EC but maintain that it is not in the Commission's
interest that that evaluation should be made at such a
late stage. Furthermore, the applicants contend that the
possibility that third parties may have access to the
documents may cause them irreparable harm, in particular since authorities other than the Commission
may order those third parties to communicate documents to them in the context of discovery procedures.
Last, the status of the documents is of the greatest
importance in the light of the investigations taking
place in Canada, the United States and Japan.
155. The Commission, on the other hand, contends
that there is no urgency in ordering the interim
measures sought.
156. On that point, the Commission states, first, that it
will not open the envelope containing the Set A
documents until the President has adjudicated on the
application in this case. As regards, next, both the Set
A and the Set B documents, the Commission states
that if the Court should hold in the main proceedings
that the decision of 8 May 2003 is unlawful, the
Commission would be obliged to remove from its file
the documents affected by that illegality and would be
prevented from using the information as evidence. The
Commission none the less contends that it may base its
future strategy on the documents removed from the
file, since it is not required to suffer acute amnesia
(Case C-67/91 Direccion General de Defensa de la
Competencia v Asociacion Espa&ntilde;ola de Banca
Privada and Others [1992] ECR I-4785, paragraph 39,
referring to Dow Benelux v Commission, cited at
paragraph 68 above, paragraphs 18 and 19).
caused, to order the Commission not to read those
documents and, consequently, to suspend the operation of Article 2 of the decision of 8 May 2003.
157. The Commission also states that it will not give
third parties access to the documents in question before the Court has adjudicated on the main application,
thus preventing any risk of disclosure in the hands of
third parties.
163. In that regard, if the Commission were to read the
Set A documents and if the Court of First Instance
should subsequently consider, in its judgment in the
main proceedings, that the Commission was wrong to
refuse to regard those documents as covered by professional privilege, it would be impossible in practice
for the Commission to draw all the inferences from
that judgment of annulment, since its officials would
already have become aware of the contents of the Set
A documents.
158. Last, the risk that contentious proceedings will be
initiated outside the Community is purely hypothetical
and as such cannot be taken into account in examining
the urgency of ordering interim measures (order of the
President of the Court of Justice of 14 December 1999
in Case C-335/99 P(R) HFB and Others v Commission [1999] ECR I-8705, paragraph 67).
Findings of the President
159. It is settled case-law that the urgency of an application for interim measures must be assessed in
relation to the necessity to give interim judgment in
order to prevent serious and irreparable harm being
occasioned to the party seeking the interim measure. It
is for the latter to adduce evidence that it cannot await
the outcome of the main proceedings without being
required to sustain harm of that nature (see, in particular, orders of the President of the Court of First Instance of 30 April 1999 in Case T-44/98 R II [1999]
ECR II-1427, paragraph 128, and of 7 April 2000 in
Case T-326/99 R Fern Olivieri v Commission [2000]
ECR II-1985, paragraph 136).
160. It is sufficient, however, particularly where the
occurrence of the harm depends on the occurrence of a
number of factors, that the harm is foreseeable with a
sufficient degree of probability (see, in particular,
order of the Court of Justice of 29 June 1993 in Case
C-280/93 R Germany v Council [1993] ECR I-3667,
paragraphs 22 and 34, and order in HFB and Others v
Commission, cited at paragraph 158 above, paragraph
67).
161. It is appropriate, in the present case, to consider
separately, first, whether the condition relating to
urgency is satisfied in the case of the Set A documents
and, second, whether it is satisfied in the case of the
Set B documents.
- Set A documents
162. As the Commission has not yet had access to the
Set A documents, which are in a sealed envelope, it is
appropriate to determine whether it is necessary, in
order to prevent serious and irreparable harm being
164. In that sense, the fact that the Commission was
aware of the information in the Set A documents
would as such constitute a substantial and irreversible
breach of the applicants' right to respect for the confidentiality protecting those documents.
165. The Commission none the less states that, if the
decision of 8 May 2003 were subsequently held to be
unlawful, it would be required to remove from its file
the documents affected by that unlawfulness and
would therefore be unable to use them as evidence.
166. The President considers that the fact that the
Commission would be unable to use the documents as
evidence effectively prevents the aggravation of part
of the harm which the applicants might sustain,
namely the harm associated with the subsequent use as
evidence of the documents in question.
167. On the other hand, the fact that the Commission
would be unable to use the Set A documents as evidence would have no impact on the serious and irreparable harm which would result from their mere
disclosure. The Commission's argument fails to take
account of the particular nature of professional privilege. The purpose of professional privilege is not only
to protect a person's private interest in not having his
rights of defence irremediably affected but also to
protect the requirement that every person must be
able, without constraint, to consult a lawyer (see, to
that effect, AM & S v Commission, cited at paragraph
66 above, paragraph 18). That requirement, which is
formulated in the public interest of the proper administration of justice and respect for lawfulness, necessarily presupposes that a client has been free to consult
his lawyer without fear that any confidences which he
may impart may subsequently be disclosed to a third
party. Consequently, the reduction of professional
privilege to a mere guarantee that the information
entrusted by a litigant will not be used against him
dilutes the essence of that right, since it is the disclo-
sure, albeit provisional, of such information that might
be capable of causing irremediable harm to the confidence which that litigant placed, in confiding in his
lawyer, in the fact that it would never be disclosed.
168. Consequently, the prohibition on the Commission's using the information in the Set A documents
could at the most only prevent the aggravation of harm
which would already be caused by the disclosure of
those documents.
169. It must therefore be held that the condition relating to urgency is satisfied in the case of the Set A
documents.
- Set B documents
170. As a preliminary point, it should be borne in mind
that, unlike in the case of the Set A documents, the
Commission has already read the three Set B documents, which were not placed in a sealed envelope. It
is therefore no longer possible to ensure that the
Commission does not read those documents. However, if the decision of 8 May 2003 is annulled in the
main proceedings, the Commission will not be able to
use that information as evidence.
171. The applicants none the less contend that interim
measures must be adopted as a matter of urgency in
order to avoid three types of irreversible harm.
172. The first of these types of harm relates, first of all,
to the fact that the Commission must be prevented
from taking irreversible procedural steps on the basis
of the Set B documents and, in particular, from carrying out other investigative operations or adopting a
statement of objections.
173. However, in the event that the Commission, as it
claims in its observations, should be lawfully entitled
to use the information concerned as mere indicia, the
harm sustained by the applicants would be already
occasioned and irreversible, since the Commission has
already read the documents in question. It is not for the
judge hearing an application for interim measures to
adopt measures designed to make up for harm which is
already irreversible (order in Austria v Council, cited
at paragraph 36 above, paragraph 113).
174. Furthermore, if, on the other hand, the Commission should not be authorised to use the documents in
question as indicia, it would be required, should the
decision be annulled in the main action, to take the
necessary measures to comply with the judgment of
the Court of First Instance (see, in particular, judgment
in Case T-548/93 Ladbroke Racing v Commission
[1995] ECR II-2565, paragraph 54) and, consequently, to cancel the measures previously adopted, which
would be likely to prevent the occurrence of the harm
on which the applicants rely. Consequently, in practice, harm could be established only if the Commission adopted measures based on the information in the
Set B documents and the applicants were subsequently
unable to demonstrate with sufficient certainty an
actual link between the information and the measures
adopted. The President considers that the applicants
have not demonstrated that it was necessary and possible to order an interim measure to prevent a risk
which, in the absence of proof to the contrary, remains
hypothetical and, consequently, must not be taken into
account under the head of urgency by the judge
hearing the application for interim measures (order in
HFB and Others v Commission, cited at paragraph
158 above, paragraph 67).
175. The applicants rely on a second type of harm
relating, in essence, to the fact that, since the Set B
documents have been placed in the Commission's file,
third parties may demand access to them. There is,
they allege, a risk that these third parties will themselves be obliged to communicate the documents in
question to other third parties. The Commission must
therefore return or destroy all the copies of the Set B
documents in its possession.
176. It must be emphasised, however, that in its observations the Commission stated that it would not
allow third parties to have access to the Set A and Set
B documents until judgment is given in the main action. The judge hearing the application for interim
measures, as he is entitled to do (see order of the
president of the Court of Justice of 21 August 1981 in
Case 232/81 R Agricola Commerciale Olio and Others
v Commission [1981] ECR 2193), takes note, by the
present order, of that declaration by the Commission.
In those circumstances, the second type of harm relied
on by the applicants must be rejected.
177. As regards, last, the third type of harm on which
the applicants rely, it must be stated that they rely only
on what they allege to be the great importance of the
documents in question as regards investigations under
way in Canada, the United States and Japan. In the
light of the particularly vague nature of those arguments, it must be concluded that the applicants have
not shown the need to prevent irreparable harm. At the
hearing, the applicants did indeed state that the real
importance of the Set B documents could not be
evaluated at that stage. However, even on the assumption that that is actually so, the fact none the less
remains that, as the Commission has noted, the applicants have once again relied solely on hypothetical
risks.
178. In the light of the foregoing, the condition relating to urgency is not satisfied in the case of the Set B
documents. Since it is satisfied in the case of the Set A
documents, it is necessary to proceed, for those
documents alone, to balance the interests involved.
The balance of interests
179. As regards the balance of interests, the Commission observes that the documents in question may be
useful to it after the proceedings, notably in order to
enable it to make requests for information. The delay
in the investigation should the measures sought be
ordered would affect the general interest of the
Community and, more generally, of society as a whole
in competition investigations being carried out as
speedily and efficiently as possible. Speed is also
important for the undertakings which are subject to the
same investigation as the applicants and which, in the
Commission's submission, may well be affected by
the uncertainty resulting from suspension of the decision of 8 May 2003. Last, the procedure proposed by
the applicants, namely the procedure according to
which an investigation should be suspended in respect
of a document as soon as an undertaking claims professional privilege, constitutes an unrealistic procedure which would give rise to much abuse. Only the
option which allows the Commission to place a
document in a sealed envelope where there is doubt as
to whether it is protected by professional privilege
would allow it to retain a minimum of control over the
procedure.
180. Where, on an application for interim measures,
the judge before whom the applicant claims that it will
sustain serious and irreparable harm weighs up the
various interests involved, he must consider whether
the annulment of the contested decision by the court
dealing with the main application would make it possible to reverse the situation that would have been
brought about in the absence of interim measures and,
conversely, whether suspension of the operation of
that decision would be such as to prevent its being
fully effective in the event of the main application
being dismissed (see, to that effect, orders of the
President of the Court of Justice of 26 June 2003 in
Joined Cases C-182/03 R and C-217/03 R Belgium
and Forum 187 v Commission, not yet published in
the ECR, paragraph 142, and in Commission v Atlantic Container Line and Others, cited at paragraph 37
above, paragraph 50).
181. In the present case, it is appropriate to take into
account, first, the applicants' interest in the Set A
documents not being disclosed and, second, the general interest and the Commission's interest in the
Treaty competition rules being observed.
182. First of all, it must be emphasised that an undertaking's interest in the documents which it claims to be
protected by professional privilege not being disclosed
must be evaluated by reference to the circumstances of
each case and, in particular, to the nature and content
of the documents concerned. In the present case, after
examining the Set A documents, the President considers that their disclosure would be susceptible of
causing serious and irreparable harm to the applicants,
by virtue not only of their mere disclosure but also of
their contents.
183. However, that interest must be balanced against
the Commission's interest and, more generally, that of
the general public in competition investigations being
carried out with the utmost speed, having regard to the
importance of the competition rules for the attainment
of the objectives of the EC Treaty.
184. If the main application is dismissed, the Commission will be able to have access to the Set A
documents. Consequently, in principle, on that date,
even in the event that the investigation has been delayed, the Commission will none the less be in a position to use the Set A documents for the purpose of
completing the investigation.
185. At the hearing, however, the Commission stated
that the uncertainty in which it was placed, as regards
the content of the documents in question, caused major problems in allocating its resources and defining its
priorities and, consequently, obliged it to suspend its
investigation.
186. According to settled case-law, however, the
rights of the defence, to which professional privilege
is a necessary corollary (AM & S v Commission, cited
at paragraph 66 above, paragraph 23), constitutes a
fundamental right (see, in particular, judgment of the
Court of Justice in Limburgse Vinyl Maatschappij and
Others v Commission, cited at paragraph 99 above,
paragraph 85, and judgment in Enso Espa&ntilde;ola
v Commission, cited at paragraph 99 above, paragraph
80). That fundamental nature has the consequence
that, in the context of the present balance of interests,
given that it is established that the applicants' professional privilege and their rights of defence would be
likely to sustain serious and irreparable harm should
the Commission read the Set A documents, considerations of administrative efficiency and of resource
allocation, in spite of their importance, can in principle
prevail over the rights of the defence only if the
Commission pleads very special circumstances justifying such harm. Otherwise, it would be possible in
almost every case for the Commission to justify a
serious interference with the rights of the defence by
purely internal administrative considerations, which
would be contrary to the fundamental nature of the
rights of the defence.
Registry until the date of that judgment.
On those grounds,
THE PRESIDENT OF THE COURT OF FIRST
INSTANCE
hereby orders:
187. The President considers that the Commission has
not demonstrated in the present case the existence of
such circumstances, since it has referred to disadvantages that might follow for it, by nature, from any
suspension of the operation of a decision refusing to
regard certain documents as covered by professional
privilege.
188. Furthermore, in the context of the main application, the Commission has the possibility to lodge with
the Court of First Instance, at the same time as its
defence, an application pursuant to Article 76a of the
Rules of Procedure for the main application to be dealt
with under an expedited procedure. Admittedly, the
judge dealing with the application for interim
measures cannot guarantee that such an application
will be granted in this case. None the less, account
must be taken of the fact that if that application is
granted, it will have the consequence of allowing
judgment to be given speedily and, consequently, of
rendering the Commission's present position less uncertain. In the particular circumstances of the present
case, the President considers that the existence of that
possibility does not give the Commission a greater
interest in the application for interim measures being
dismissed.
189. Nor has the Commission adduced precise and
specific evidence capable of proving and evaluating
the disadvantages which, in its submission, may affect
the undertakings subject to the same investigation as
the applicants should the operation of Article 2 of the
decision of 8 May 2003 be suspended.
190. In the light of the foregoing, the balance of the
interests in issue tilts in favour of suspending the
operation of the provisions of the decision of 8 May
2003 whereby the Commission decides to open the
sealed envelope containing the Set A documents,
namely Article 2 of that decision.
191. Last, since the Set A documents will in all
probability constitute an essential factor in the Court's
assessment of the main application and since it has
been established in the present order that the Commission must not read those documents before judgment is given in the main proceedings, it is appropriate
to order that the Set A documents be kept at the Court
1. Cases T-125/03 R and T-253/03 R are joined for
the purposes of this order.
2. The Council of the Bars and Law Societies of the
European Union, the Algemene Raad van de Nederlandse Orde van Advocaten and the European Company Lawyers Association are granted leave to intervene in Cases T-125/03 R and T-253/03 R.
3. At the stage of the application for interim measures,
the requests for confidential treatment submitted by
the applicants in respect of certain matters in the
procedural documents in Cases T-125/03 R and
T-253/03 R and referred to as such in the letter of 16
September 2003 from the Registry to the applicants
are granted.
4. The application for interim measures in Case
T-125/03 R is dismissed.
5. The Commission's statement that it will not allow
third parties to have access to the Set B documents
pending judgment in the main proceedings in Case
T-253/03 is noted.
6. In Case T-253/03 R, the operation of Article 2 of the
Commission's decision of 8 May 2003 concerning a
claim of legal privilege (Case COMP/E-1/38.589) is
suspended pending the judgment of the Court in the
main proceedings.
7. The sealed envelope containing the Set A documents will be kept by the Registry of the Court of First
Instance pending the decision of the Court in the main
action.
8. The remainder of the application for interim
measures in Case T-253/03 R is dismissed.
9. The costs in Cases T-125/03 R and T-253/03 R are
reserved.
Luxembourg, 30 October 2003.
H. Jung
Registrar
B. Vesterdorf
President
employees ofLEGAL
the clientADVICE
can be treated
for privilege
V. ENGLISH AUTHORITIES REGARDING
PRIVILEGE
purposes
as
communications
between
the
lawyers and
AND WAIVER
the client.
Three Rivers District Council and Others v. Governor
and Company of the Bank of
England
House of Lords
HL
Before: Lord Scott of Foscote, Lord Rodger of
Earlsferry, Baroness Hale of
Richmond, Lord Carswell, Lord Brown of
Eaton-under-Heywood
Thursday 11th November, 2004
JUDGMENT
LORD SCOTT OF FOSCOTE
My Lords,
1. On 29 July 2004, the Appellate Committee announced that this appeal should be allowed. I now give
my reasons for reaching that decision.
Introduction
2. The actual issue for decision on this appeal is an
apparently simple one that can be very shortly stated.
Do the communications between the Bank of England,
their solicitors, Freshfields, and counsel relating to the
content and preparation of the so-called overarching
statement submitted on behalf of the Bank to the
Bingham Inquiry qualify for legal professional privilege? It is contended by the respondents, and was held
by the Court of Appeal, that they do not. But the
broader issues that have been debated on this appeal
are not in the least simple. They have required your
Lordships to consider the policy justifications for the
existence of legal professional privilege in our law
and, generally, the permissible scope of the privilege.
In relation to what sort of communications can legal
professional privilege be claimed? As to the scope of
legal professional privilege, the focus has been, first,
on the part, if any, that legal professional privilege
should be allowed to play where the advice or assistance sought by the lawyers is not advice or assistance
about the client's legal rights or obligations, and,
second, on the criteria to be applied to determine
whether communications between the lawyers and
3. In order that the significance of the issues as I have
broadly described them can be understood, it is necessary to provide a brief history of the events that have
led up to this appeal.
The history
4. The starting point is the collapse of BCCI in July
1991 with a huge excess of liabilities over assets.
BCCI's depositors stood to lose a substantial part of
their deposits. Shareholders in BCCI stood to lose
their investments. Under the Banking Acts of 1979
and 1987 the Bank of England ("the Bank") has a
supervisory role in relation to banks and financial
institutions carrying on business in the United Kingdom. So the Bank had had statutory responsibilities
and duties regarding the supervision of BCCI.
5. Very shortly after the collapse of BCCI the
Chancellor of the Exchequer announced in Parliament
that there would be an independent inquiry into the
Bank's supervision of BCCI. Bingham LJ (as he then
was) was appointed to conduct the Inquiry. Bingham
LJ's terms of reference required him
"To enquire into the supervision of BCCI under the
Banking Acts; to consider whether the action taken by
all the UK authorities was appropriate and timely; and
to make recommendations."
In a letter to the Chancellor of the Exchequer written
in July 1992, Bingham LJ described his terms of reference as calling for the consideration of five broad
questions. These were -"(1) What did the United Kingdom authorities know
about BCCI at all relevant times?
(2) Should they have known more?
(3) What action did the United Kingdom authorities
take in relation to BCCI at all relevant times?
(4) Should they have acted differently?
(5) What should be done to prevent or minimise the
risk of such an event recurring in the future?"
6. It was clear to all that the Bank was the principal
party to be investigated and shortly after the Inquiry
had been established the Governor of the Bank appointed three Bank officials to deal with all communications between the Bank and the Inquiry. These
officials, and other Bank personnel appointed to assist
them from time to time, became known as the Bank's
Bingham Inquiry Unit ("the BIU"). Freshfields were
retained by the Bank to advise generally on all dealings of the Bank, its officials and employees with the
Inquiry. Freshfields retained counsel to assist in that
process. One of the main functions of the BIU was the
preparation and communication of information and
instructions to Freshfields to enable them to carry out
their duties under their retainer. They (Freshfields)
and counsel gave advice as to the preparation and
presentation of the Bank's evidence to the Inquiry and
as to the submissions to be made to the Inquiry on the
Bank's behalf. Indeed, except for some routine administrative arrangements, all the Bank's communications with the Inquiry were the subject of extensive
advice from Freshfields and counsel.
7. The Bingham Inquiry Report was published on 22
October 1992. In 1993 some 6,231 persons, each of
whom claimed to be a depositor with United Kingdom
branches of BCCI, and BCCI itself (by its liquidators)
commenced an action against the Bank for the loss
they had respectively been caused by the BCCI collapse. Section 1(4) of the Banking Act 1987 relieves
the Bank of any liability "for anything done or omitted
in the discharge or purported discharge of the functions of the Bank under this Act unless it is shown that
the act or omission was in bad faith". It was, therefore,
not possible for the action to be based merely on an
alleged negligent performance by the Bank of its supervisory duties vis-à-vis BCCI. The various acts or
omissions on the part of the Bank to which the collapse of BCCI was alleged to be attributable had to be
"in bad faith". This requirement plainly placed before
the claimants in the action (the respondents before
your Lordships) a very high hurdle and it is not in the
least surprising that they have been, and still are,
seeking the widest possible discovery from the Bank
in order to assist their efforts to jump it.
8. By an application notice dated 25 October 2002
the claimants sought disclosure by the Bank of a large
number of documents which the Bank claimed it had
the right to withhold on the ground of legal professional privilege. These were documents which had
been brought into existence by employees of the Bank
for the purpose of being passed to Freshfields. The
parties were agreed that documents emanating from or
prepared by independent third parties and then passed
to Freshfields were not privileged. It was the status of
documents prepared by Bank employees that was in
question.
9. Tomlinson J in his judgment of 13 December 2002
(Three Rivers District Council v Governor and
Company of the Bank of England (No.5) [2002]
EWHC 2730) held that all these documents were
privileged. In paragraph 10 of his judgment, he described the documents as "generated for the purpose of
providing information to the Bank's legal advisers to
enable them to prepare submissions and/or to advise
on the nature, presentation, timing and/or content of
the Bank's submissions to, evidence for and responses
to requests from the Inquiry". And he proceeded to
consider the privilege issue "upon the assumption that
the material which the Bank seeks to protect from
disclosure is both relevant to and probative as to the
issues in the trial".
10. The modern case law on legal professional privilege has divided the privilege into two categories,
legal advice privilege and litigation privilege. Litigation privilege covers all documents brought into being
for the purposes of litigation. Legal advice privilege
covers communications between lawyers and their
clients whereby legal advice is sought or given. In in
re L [1997] AC 16 Lord Jauncey of Tullichettle described litigation privilege as "essentially a creature of
adversarial proceedings" and held that the privilege
could not be claimed in order to protect from disclosure a report prepared for use in non-adversarial proceedings (see p.26). Lord Lloyd of Berwick and Lord
Steyn expressed their agreement. The Bingham Inquiry could not have been described as adversarial. It
was, as inquiries invariably are, an inquisitorial proceeding. It was no doubt with in re L in mind that the
Bank did not claim that the documents of which disclosure was being sought were entitled to litigation
privilege. The Bank took its stand on legal advice
privilege. As to that, the Bank claimed privilege for all
documents prepared for at least the dominant purpose
of obtaining or recording legal advice from Freshfields or counsel. In paragraph 30 of his judgment
Tomlinson J accepted this claim. He said -"In my judgment an internal confidential document,
not being a communication with a third party, which
was produced or brought into existence with the
dominant purpose that it or its contents be used to
obtain legal advice is privileged from production."
He therefore dismissed the 25 October 2002 discovery application.
11. In an addendum to his judgment given on 6
February 2003 after a further hearing Tomlinson J
dealt with the question whether documents prepared
by ex-employees or ex-officers of BCCI stood on the
same footing for legal advice privilege purposes as
documents prepared by current employees or current
officers. He held that provided the dominant purpose
test that he had formulated in his main judgment were
satisfied, no distinction for privilege purposes was to
be drawn. He said, in paragraph 6 -"In my judgment the former officers of the Bank
who were concerned with the supervision of BCCI and
who in that capacity acquired relevant knowledge
which was confidential to the Bank are not for this
purpose to be regarded as third parties".
12. The BCCI claimants appealed and on 3 April
2003 the Court of Appeal allowed the appeal. It is
important to notice that Mr Gordon Pollock QC,
counsel for the claimants, did not argue for disclosure
of documents passing between the BIU and Freshfields nor for disclosure of any of Freshfields' internal
memoranda or drafts. Mr Pollock accepted that the
BIU was, for the purpose of the Inquiry, Freshfields'
client and that communications passing between them
were covered by legal advice privilege (see para.4 of
the judgment handed down by Longmore LJ: Three
Rivers District Council v Governor and Company of
the Bank of England (No.5) [2003] QB 1556).
13. The Court of Appeal judgment (Three Rivers
(No.5) succinctly summed up the rival submissions -"5 ? Mr Pollock submitted that it was only communications between solicitor and client, and evidence of the content of such communications, that
were privileged. Preparatory materials obtained before
such communications, even if prepared for the dominant purpose of being shown to a client's solicitor,
even if prepared at the solicitor's request and even if
subsequently sent to the solicitor, did not come within
the privilege."
"6 Mr Stadlen, for the Bank, submitted that, as a
matter of general principle, any document prepared
with the dominant purpose of obtaining the solicitor's
advice upon it came within the ambit of the privilege,
whether or not it was actually communicated to the
solicitor ? This general principle was subject to the
exception that documents sent to or by an independent
third party (even if created with the dominant purpose
of obtaining a solicitor's advice) would not be covered
by legal advice privilege".
The Court of Appeal accepted Mr Pollock's submission and held that the only documents for which legal
professional privilege could be claimed were communications between the BIU and Freshfields seeking
or giving legal advice. The BIU, and no one else, was
to be treated as Freshfields' client for privilege purposes. And in paragraph 37 of the judgment the Court
of Appeal expressed the view that material prepared
"for the dominant purpose of putting relevant factual
material before the inquiry in an orderly and attractive
fashion" was not prepared "for the dominant purpose
of taking legal advice upon such material" and so
could not attract legal professional privilege. The
former purpose has, for convenience, been referred to
as a "presentational" purpose.
14. As to the question of who, for privilege purposes,
was to be regarded as Freshfields' client, the Court of
Appeal said that information provided to solicitors by
an employee stood in the same position as information
provided by an independent third party (see [2003] QB
at 1574 G/H) and, specifically, when considering
whether information provided to Freshfields by the
Governor of the Bank would have qualified for privilege, that "the BIU ? is? the client rather than any
single officer however eminent he or she may be"
([2003] QB at 1581 A/B). In allowing the appeal the
Court of Appeal made a declaration that
"? the only documents or parts of documents coming into the Bank's possession between the closure of
BCCI on 5th July 1991 and the issue of the present
proceedings in May 1993 which the Bank is entitled to
withhold from inspection on the ground of legal advice privilege are:
1) communications passing between the
Bank and its legal advisers (including any solicitor
seconded to the Bank) for the purposes of seeking or
obtaining 'legal advice';
2) any part of a document which evidences
the substance of such a communication."
15. The Bank's petition to this House for leave to
appeal against the Court of Appeal's order was dismissed.
16. After the dismissal of the Bank's petition for
leave to appeal the Bank began the task of disclosing
documents whose disclosure was required under the
Court of Appeal order. But the Bank disclosed none of
the communications between the BIU and Freshfields
or drafts of or internal memoranda relating to the
overarching statement that had been submitted on
behalf of the Bank to the Inquiry. These were withheld
by the Bank from disclosure for two reasons. First, Mr
Pollock had told the Court of Appeal that his clients
were not seeking disclosure of any communications
between the BIU and Freshfields; secondly, the Bank
contended that the expression "legal advice" in the
Court of Appeal's declaration should be interpreted
widely so as to cover all advice and assistance from
Freshfields or counsel relating to the evidence to be
submitted and the submissions to be made to the Inquiry on behalf of the Bank ie. so as to cover advice
given for presentational purposes.
17. The impasse regarding these documents led to a
further discovery application by the claimants. The
application was made on 1 August 2003. It sought
"further documents from or relating to the Bingham
Inquiry Unit arising from the judgment of the Court of
Appeal dated 3 April 2003". Tomlinson J gave judgment on the application on 4 November 2003. He held
that the rationale of the Court of Appeal judgment
overturning his own previous decision was that
Freshfields' advice sought or given for presentational
purposes should not in general be categorised as legal
advice of the sort which attracted legal advice privilege (see para.13). If, however, the dominant purpose
of some particular communication between the BIU
and Freshfields was the provision of advice as to the
Bank's legal rights and obligations, as opposed to the
question of how the Bank's evidence might be presented to the Inquiry so as to be least likely to attract
criticism, then that communication, or the relevant
part of it, would be entitled to privilege.
18. So Tomlinson J made an order dated 10 November 2003 declaring that the only documents or
parts of documents that the Bank was entitled to
withhold from disclosure on the ground of legal advice
privilege were communications passing between the
BIU and its lawyers for the purpose of seeking or
obtaining "advice concerning the Bank's rights and
obligations".
19. The Bank appealed and on 1 March 2004 the
Master of the Rolls, Lord Phillips of Worth Matravers,
handed down the judgment of the Court of Appeal
dismissing the appeal (Three Rivers District Council v
Governor and Company of the Bank of England (No.
6) [2004] QB 916. The judgment (Three Rivers (No.
6)) made clear the view of the Court of Appeal that for
legal advice privilege purposes the advice being
sought from the lawyers must be advice as to legal
rights or liabilities. Advice as to how the Bank should
present its case to the Inquiry so as to lead to a conclusion as favourable to the Bank as possible did not
qualify for privilege.
20. The Bank has now appealed to your Lordships. It
is important to emphasise the narrowness of the actual
issue. It is whether the communications between the
BIU and Freshfields or counsel relating to the Inquiry
are protected by legal advice privilege. The Bank
plainly believe that the Court of Appeal order in Three
Rivers (No. 5) went too far. But the Bank's petition for
leave to appeal was refused and this is not an appeal
against that order. Moreover the Bank has discharged
the disclosure obligation required by that order.
However, the narrow scope allowed by the Court of
Appeal in the judgment now under appeal to "legal
advice" has heightened the concerns of many about
the approach to legal advice privilege inherent in the
first Court of Appeal judgment. This explains in part
the applications for leave to intervene in this appeal
made by the Attorney-General, by the Law Society
and by the Bar Council. Each has been given leave to
intervene by written submissions, including leave, if
so advised, to submit a written reply at the conclusion
of the oral hearing. Their Lordships are grateful for the
written submissions they have received from the interveners.
21. The written submissions from the interveners,
and particularly that from the Law Society, make clear
their concern that the Three Rivers (No. 5) Court of
Appeal judgment may have gone too far in treating
communications between Freshfields and employees
of the Bank, other than the BIU, as being for privilege
purposes communications between Freshfields and
third parties. Your Lordships have been invited to
clarify the approach that should be adopted to determine whether a communication between an employee
and his or her employer's lawyers should be treated for
legal advice privilege purposes as a communication
between the lawyers and their client. This is of particular importance for corporate clients, who can only
communicate through employees or officers.
22. The employee/client point does not, however,
arise as an issue on this appeal. It did arise on the
Three Rivers (No. 5) discovery application, and the
Court of Appeal's view that only communications
between the lawyers and the BIU could be regarded as
communications qualifying for legal advice privilege
was the basis on which disclosure by the Bank pursuant to the Court of Appeal order of 3 April 2003 has
taken place. The disclosed documents have included
communications between the Bank's lawyers and
those Bank employees and officers who were not
members of the BIU. Since then, and well before the
hearing of this appeal, the hearing of the action before
Tomlinson J commenced. Mr Pollock opened his case
on the basis, inter alia, of the documents disclosed
pursuant to the 3 April 2003 order. He expressed before your Lordships on this appeal a natural concern
that if your Lordships gave any ruling indicating that
some of the disclosed documents ought to have been
held to be privileged, serious complications affecting
the trial might arise. However Mr Sumption QC, on
behalf of the Bank, gave the Bank's undertaking that
reliance by the claimants on the documents already
disclosed would not, whatever view your Lordships
might express on the employer/client point, be resisted
on privilege grounds, and that it would not be suggested that Tomlinson J's knowledge and sight of the
contents of those documents constituted any reason
why he should recuse himself. The point is, therefore,
so far as the current litigation between the claimants
and the Bank is concerned, strictly moot. Nothing
turns on it. Nonetheless your Lordships have been
asked to express on a view on the point. I will return to
it.
Policy
23. It is impossible to express a coherent view about
the issues which have been debated on this appeal
without taking into account the policy reasons which
led to legal advice privilege becoming established in
our law in the first place and to the policy reasons for
its retention in our law today. Before examining those
reasons, however, it seems to me helpful to review
some of the features of legal advice privilege in order
to provide a context for the policy reasons underlying
the privilege.
24. First, legal advice privilege arises out of a relationship of confidence between lawyer and client.
Unless the communication or document for which
privilege is sought is a confidential one, there can be
no question of legal advice privilege arising. The
confidential character of the communication or document is not by itself enough to enable privilege to be
claimed but is an essential requirement.
25. Second, if a communication or document qualifies for legal professional privilege, the privilege is
absolute. It cannot be overridden by some supposedly
greater public interest. It can be waived by the person,
the client, entitled to it and it can be overridden by
statute (c/f R (Morgan Grenfell Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563), but it is
otherwise absolute. There is no balancing exercise that
has to be carried out (see B v Auckland District Law
Society [2003] 2 AC 736 paras.46 to 54). The Supreme Court of Canada has held that legal professional
privilege although of great importance is not absolute
and can be set aside if a sufficiently compelling public
interest for doing so, such as public safety, can be
shown (see Jones v Smith [1999] 1 SCR 455). But no
other common law jurisdiction has, so far as I am
aware, developed the law of privilege in this way.
Certainly in this country legal professional privilege,
if it is attracted by a particular communication between lawyer and client or attaches to a particular
document, cannot be set aside on the ground that some
other higher public interest requires that to be done.
26. Third, legal advice privilege gives the person
entitled to it the right to decline to disclose or to allow
to be disclosed the confidential communication or
document in question. There has been some debate as
to whether this right is a procedural right or a substantive right. In my respectful opinion the debate is
sterile. Legal advice privilege is both. It may be used
in legal proceedings to justify the refusal to answer
certain questions or to produce for inspection certain
documents. Its characterisation as procedural or substantive neither adds to nor detracts from its features.
27. Fourth, legal advice privilege has an undoubted
relationship with litigation privilege. Legal advice is
frequently sought or given in connection with current
or contemplated litigation. But it may equally well be
sought or given in circumstances and for purposes that
have nothing to do with litigation. If it is sought or
given in connection with litigation, then the advice
would fall into both of the two categories. But it is
long settled that a connection with litigation is not a
necessary condition for privilege to be attracted (see
eg. Greenough v Gaskell (1833) 1 My & K 98 per
Lord Brougham at 102/3 and Minet v Morgan (1873)
8 Ch. App. 361). On the other hand it has been held
that litigation privilege can extend to communications
between a lawyer or the lawyer's client and a third
party or to any document brought into existence for
the dominant purpose of being used in litigation. The
connection between legal advice sought or given and
the affording of privilege to the communication has
thereby been cut.
28. So I must now come to policy. Why is it that the
law has afforded this special privilege to communications between lawyers and their clients that it has
denied to all other confidential communications? In
relation to all other confidential communications,
whether between doctor and patient, accountant and
client, husband and wife, parent and child, priest and
penitent, the common law recognises the confidentiality of the communication, will protect the confidentiality up to a point, but declines to allow the communication the absolute protection allowed to communications between lawyer and client giving or
seeking legal advice. In relation to all these other
confidential communications the law requires the
public interest in the preservation of confidences and
the private interest of the parties in maintaining the
confidentiality of their communications to be balanced
against the administration of justice reasons for requiring disclosure of the confidential material. There
is a strong public interest that in criminal cases the
innocent should be acquitted and the guilty convicted,
that in civil cases the claimant should succeed if he is
entitled to do so and should fail if he is not, that every
trial should be a fair trial and that to provide the best
chance of these desiderata being achieved all relevant
material should be available to be taken into account.
These are the administration of justice reasons to be
placed in the balance. They will usually prevail.
29. In paragraph 39 of their judgment in Three Rivers
(No. 6) the Court of Appeal commented that
"The justification for litigation privilege is readily
understood. Where, however, litigation is not anticipated it is not easy to see why communications with a
solicitor should be privileged".
As to the justification for litigation privilege, I would
respectfully agree that the need to afford privilege to
the seeking or giving of legal advice for the purposes
of actual or contemplated litigation is easy to understand. I do not, however, agree that that is so in relation to those documents or communications which
although having the requisite connection with litigation neither constitute nor disclose the seeking or
giving of legal advice. Communications between
litigant and third parties are the obvious example. This
House in in re L [1997] AC 16 restricted litigation
privilege to communications or documents with the
requisite connection to adversarial proceedings. Civil
litigation conducted pursuant to the current Civil
Procedure Rules is in many respects no longer adversarial. The decision in in re L warrants, in my
opinion, a new look at the justification for litigation
privilege. But that is for another day. It does not arise
on this appeal.
30. The second sentence of the cited passage does,
however, pose a question of great relevance to this
appeal. It questions the justification for legal advice
privilege where the legal advice has no connection
with adversarial litigation. A number of cases in our
own jurisdiction and in other common law jurisdictions have sought to answer the question. In R v Derby
Magistrates' Court Ex parte B [1996] 1 AC 487 Lord
Taylor of Gosforth CJ said this -"In Balabel v Air India [1988] Ch. 317 the basic
principle justifying legal professional privilege was
again said to be that a client should be able to obtain
legal advice in confidence. The principle which runs
through all these cases ? is that a man must be able to
consult his lawyer in confidence, since otherwise he
might hold back half the truth. The client must be sure
that what he tells his lawyer in confidence will never
be revealed without his consent (p.507)"
and at p.508, that
"? once any exception to the general rule is allowed,
the client's confidence is necessarily lost".
In R (Morgan Grenfell Ltd) v Special Commissioner
of Income Tax [2003] 1 AC 563 Lord Hoffmann referred to legal professional privilege as "a necessary
corollary of the right of any person to obtain skilled
advice about the law" and continued (p.607) -"Such advice cannot be effectively obtained unless
the client is able to put all the facts before the adviser
without fear that they may afterwards be disclosed and
used to his prejudice."
And in B v Auckland District Law Society [2003] 2
AC 736 at 757 Lord Millett justified legal professional
privilege on the ground that
"? a lawyer must be able to give his client an absolute and unqualified assurance that whatever the
client tells him in confidence will never be disclosed
without his consent."
31. In the courts of foreign common law jurisdictions
similar views have been expressed. In Upjohn Co. v
United States (1981) 449 US 383, a decision of the US
Supreme Court, Justice Rehnquist said, at p.389, that
the purpose of legal professional privilege was
"? to encourage full and frank communication between attorneys and their clients and thereby promote
broader public interests in the observance of law and
administration of justice."
He went on -"The privilege recognises that sound legal advice or
advocacy serves public ends and that such advice or
advocacy depends upon the lawyer being fully informed by the client."
In Jones v Smith [1999] 1 SCR 455, a decision of the
Supreme Court of Canada, the privilege was justified
on the ground that -"Clients seeking advice must be able to speak freely
to their lawyers secure in the knowledge that what
they say will not be divulged without their consent.
? ... The privilege is essential if sound legal advice
is to be given ?. Family secrets, company secrets,
personal foibles and indiscretions all must on occasion
be revealed to the lawyer by the client. Without this
privilege clients could never be candid and furnish all
the relevant information that must be provided to
lawyers if they are to properly advise their clients"
(para.46)
32. In leading cases in Australia and New Zealand
the justification for a rule affording particular protection to confidential communications between lawyers
and clients has been expressed on a broader policy
basis than merely the need to ensure candour. In Baker
v Campbell (1983) 153 CLR 52, a decision of the High
Court of Australia, Murphy J commented that
"The client's legal privilege is essential for the orderly and dignified conduct of individual affairs in a
social atmosphere which is being poisoned by official
and unofficial eavesdropping and other invasions of
privacy" (p.89)
and Wilson J, at p.95, said
"In fostering the confidential relationship in which
legal advice is given and received the common law is
serving the ends of justice because it is facilitating the
orderly arrangement of the client's affairs as a member
of the community."
See also Commissioner of Inland Revenue v
West-Walker [1954] NZLR 191, a decision of the
Court of Appeal of New Zealand.
33. I would refer finally to the justification for legal
professional privilege given by Advocate-General
Slynn (as he then was) in A M & S Europe Ltd v
European Commission [1983] QB 878 at 913, a passage cited by Kirby J in Daniels Corp v ACCC [2002]
192 ALR 561. The Advocate-General said this --
"[The privilege] springs essentially from the basic
need of a man in a civilised society to be able to turn to
his lawyer for advice and help, and if proceedings
begin, for representation; it springs no less from the
advantages to a society which evolves complex law
reaching into all the business affairs of persons, real
and legal, that they should be able to know what they
can do under the law, what is forbidden, where they
must tread circumspectly, where they run risks."
34. None of these judicial dicta tie the justification
for legal advice privilege to the conduct of litigation.
They recognise that in the complex world in which we
live there are a multitude of reasons why individuals,
whether humble or powerful, or corporations, whether
large or small, may need to seek the advice or assistance of lawyers in connection with their affairs; they
recognise that the seeking and giving of this advice so
that the clients may achieve an orderly arrangement of
their affairs is strongly in the public interest; they
recognise that in order for the advice to bring about
that desirable result it is essential that the full and
complete facts are placed before the lawyers who are
to give it; and they recognise that unless the clients can
be assured that what they tell their lawyers will not be
disclosed by the lawyers without their (the clients')
consent, there will be cases in which the requisite
candour will be absent. It is obviously true that in very
many cases clients would have no inhibitions in
providing their lawyers with all the facts and information the lawyers might need whether or not there
were the absolute assurance of non-disclosure that the
present law of privilege provides. But the dicta to
which I have referred all have in common the idea that
it is necessary in our society, a society in which the
restraining and controlling framework is built upon a
belief in the rule of law, that communications between
clients and lawyers, whereby the clients are hoping for
the assistance of the lawyers' legal skills in the management of their (the clients') affairs, should be secure
against the possibility of any scrutiny from others,
whether the police, the executive, business competitors, inquisitive busy-bodies or anyone else (see also
paras. 15.8 to 15.10 of Adrian Zuckerman's Civil
Procedure where the author refers to the rationale
underlying legal advice privilege as "the rule of law
rationale"). I, for my part, subscribe to this idea. It
justifies, in my opinion, the retention of legal advice
privilege in our law, notwithstanding that as a result
cases may sometimes have to be decided in ignorance
of relevant probative material.
The scope of legal advice privilege
35. Legal advice privilege should, in my opinion, be
given a scope that reflects the policy reasons that
justify its presence in our law. In my respectful opinion, the approach of the Court of Appeal in the Three
Rivers (No. 6) judgment has failed to do so. The Court
of Appeal has restricted the scope of legal advice
privilege to material constituting or recording communications between clients and lawyers seeking or
giving advice about the clients' legal rights and obligations. It has excluded legal advice sought or given
for presentational purposes (see para. 13 above). The
particular issue to be decided under the disclosure
application of 1 August 2003 was whether advice that
related to the presentation of material to the Inquiry
qualified for legal advice privilege. In holding that it
did not, the Court of Appeal distinguished between a
lawyer-client relationship "formed for the purpose of
obtaining advice or assistance in relation to rights and
liabilities" and a lawyer-client relationship where "the
dominant purpose is not the obtaining of advice and
assistance in relation to legal rights and obligations".
In relation to the former, "broad protection will be
given to communications passing between solicitor
and client in the course of that relationship"; in relation to the latter, a similar broad protection could not
be claimed (see paragraph 26 of the judgment).
36. The authorities on which the Court of Appeal
founded their approach were all concerned with private law rights and obligations (ie. Greenough v
Gaskell (1833) 1 My & K 98, Wheeler v Le Marchant
(1881) 17 ChD 675, Minter v Priest [1930] AC 558
and Great Atlantic Insurance Co v Home Insurance Co
[1981] 1 WLR 529). It is clear, however, that whatever view may be taken of the presentational advice
point, legal advice privilege must cover also advice
and assistance in relation to public law rights, liabilities and obligations. I understood Mr Pollock in his
submissions to your Lordships to accept that that was
so.
37. In my opinion, the impossibility of a principled
exclusion from legal advice privilege of communications between lawyer and client relating to the client's
public law rights, liabilities and obligations is conclusive of the narrow issue in this appeal. One of the
main purposes of the Inquiry was to examine whether
in relation to BCCI the Bank had properly discharged
its public law duties of supervision imposed by the
Banking Acts. The Bank was naturally anxious that
the Inquiry's conclusions should be as favourable as
possible or, to put the point in reverse, that the Inquiry's criticisms of the Bank should be as limited as
possible. Every public inquiry conducts its proceedings and expresses its conclusions under the shadow of
potential judicial review. The inquiry's procedures
may be judicially reviewed if they are perceived to be
unfair. The inquiry's conclusions may be judicially
reviewed if they are thought to be unsustainable in the
light of the evidence the inquiry has received.
Presentational advice or assistance given by lawyers
to parties whose conduct may be the subject of criticism by the inquiry is advice or assistance that may
serve to avoid the need to invoke public law remedies.
It would be -- or should be -- readily accepted that,
once an inquiry's conclusions have been reached and
communicated to the sponsors of the inquiry, advice
from lawyers to someone criticised as to whether a
public law remedy might be available to quash the
critical conclusions would be advice that qualified for
legal advice privilege. It makes no sense at all, in my
opinion, to withhold the protection of that privilege
from presentational advice given by the lawyers for
the purpose of preventing that criticism from being
made in the first place.
38. In Balabel v Air India [1988] 1 Ch 317 Taylor LJ
(as he then was) said that for the purposes of attracting
legal advice privilege -"... legal advice is not confined to telling the client
the law; it must include advice as to what should
prudently and sensibly be done in the relevant legal
context" (p 330).
I would venture to draw attention to Taylor LJ's reference to "the relevant legal context". That there must
be a "relevant legal context" in order for the advice to
attract legal professional privilege should not be in
doubt. Taylor LJ said at p 331 that -"? to extend privilege without limit to all solicitor
and client communication upon matters within the
ordinary business of a solicitor and referable to that
relationship [would be] too wide."
This remark is, in my respectful opinion, plainly
correct. If a solicitor becomes the client's "man of
business", and some solicitors do, responsible for
advising the client on all matters of business, including investment policy, finance policy and other business matters, the advice may lack a relevant legal
context. There is, in my opinion, no way of avoiding
difficulty in deciding in marginal cases whether the
seeking of advice from or the giving of advice by
lawyers does or does not take place in a relevant legal
context so as to attract legal advice privilege. In cases
of doubt the judge called upon to make the decision
should ask whether the advice relates to the rights,
liabilities, obligations or remedies of the client either
under private law or under public law. If it does not,
then, in my opinion, legal advice privilege would not
apply. If it does so relate then, in my opinion, the
judge should ask himself whether the communication
falls within the policy underlying the justification for
legal advice privilege in our law. Is the occasion on
which the communication takes place and is the purpose for which it takes place such as to make it rea-
sonable to expect the privilege to apply? The criterion
must, in my opinion, be an objective one.
39. In the discussion of the issue before your Lordships, and in the very helpful written submissions that
the parties and the interveners have placed before your
Lordships, a number of examples have been given of
advice from lawyers in areas where it was suggested to
be questionable whether legal advice privilege would
be attracted. Planning inquiries were mentioned. Mr
Pollock, as I understand it, contended that advice
given by lawyers to an objector at a planning inquiry
would not qualify for the privilege. The objector's
rights, liabilities and obligations would not be in issue
-- so, no privilege. That plainly could not be said of
advice given to the developer seeking the planning
permission. Advice to the developer would relate
directly to the rights under planning law that the developer hoped to acquire and to any conditions accompanying the permission to develop with which the
developer would be under an obligation to comply.
But how could it be right to allow privilege to protect
advice given to the developer but to deny it to comparable advice given to the objector? Every objector
has the right under public law to present his case to the
inquiry. So, in my opinion, advice given by lawyers to
objectors for the purpose of enhancing the prospects of
a successful outcome, from their point of view, to the
inquiry would be advice given in a relevant legal
context and would qualify for legal advice privilege.
So to hold would not be to extend litigation privilege
to inquiries. It would be to give legal advice privilege
its due scope.
40. Advice given by lawyers to the promoters of
private bills was mentioned. I would myself be in no
doubt at all but that advice and assistance given by
lawyers to promoters of private bills, although often,
perhaps usually, presentational in character, would
qualify for legal advice privilege. The relevant legal
context seems to me clear. The same would apply to
advice by lawyers given to opponents of the proposed
bill.
41. Mr Jonathan Crow, in a written reply submission
on behalf of the Attorney-General, has referred to
advice given by Parliamentary counsel to the Government in relation to the drafting and preparation of
public bills. This advice, too, Mr Crow submitted,
should qualify for legal advice privilege. I agree that,
here too, the relevant legal context is unmistakable
and that legal advice privilege should apply.
42. Mr Pollock referred to advice sought from and
given by a lawyer as to how to set about joining a
private club. He put this forward as an obvious ex-
ample of a case where legal advice privilege would not
be attracted. The reason, Mr Pollock suggested, was
that the advice being sought would not relate to the
client's legal rights or obligations. I agree that legal
advice privilege would not be attracted, not because
the advice would necessarily not relate to the client's
legal rights or obligations but because the bare bones
of Mr Pollock's example had no legal context whatever. If his example were embellished with detail the
answer might be different. Suppose the applicant for
membership of the club had previously made an unsuccessful application to join the club, believed that
his rejection had been inconsistent with the club's
admission rules and wanted to make a fresh application with a view to testing the legality of his rejection
if he were again to be blackballed. I think Mr Pollock
would accept that in those circumstances the communications between the lawyer and the applicant
would be protected by legal advice privilege. It would
be protected because the communication would have a
relevant legal context. It would relate to the legal
remedies that might be available if the applicant's
application were again unsuccessful.
43. There may, as I have said, be marginal cases
where the answer is not easy. But, in my opinion, the
present case is not in the least marginal. The preparation of the evidence to be submitted and the submissions to be made to the Inquiry on behalf of the Bank
were for the purpose of enhancing the Bank's prospects of persuading the Inquiry that its discharge of
its public law obligations under the Banking Acts in
relation to BCCI was not deserving of criticism and
had been reasonable in the circumstances. The
presentational advice given by Freshfields and counsel
for that purpose was advice "as to what should prudently and sensibly be done in the relevant legal context" (Balabel v Air India supra at p.330). The "relevant legal context" was the Bingham Inquiry and the
question whether the Bank had properly discharged its
public law duties under the Banking Acts. The
presentational advice falls, in my opinion, squarely
within the policy reasons underlying legal advice
privilege.
44. I would be of the same opinion in relation to
presentational advice sought from lawyers by any
individual or company who believed himself, herself
or itself to be at risk of criticism by an inquiry,
whether a coroner's inquest, a statutory inquiry under
the 1921 Act or an ad hoc inquiry such as the Bingham
Inquiry. The defence of personal reputation and integrity is at least as important to many individuals and
companies as the pursuit or defence of legal rights
whether under private law or public law. The skills of
professional lawyers when advising a client what
evidence to place before an inquiry and how to present
the client and his story to the inquiry in the most favourable light are, in my opinion, unquestionably
legal skills being applied in a relevant legal context.
45. Accordingly, I would allow this appeal and set
aside the order of 10 November 2003 made by Tomlinson J. In my opinion, all the communications between the BIU and Freshfields or counsel regarding
the content and manner of presentation of the overarching statement made on the Bank's behalf to the
Inquiry, and all internal notes and memoranda relating
thereto, qualified for legal advice privilege. I have had
the advantage of reading the opinions of my noble and
learned friends Lord Carswell and Lord Rodger of
Earlsferry and am in full agreement with the reasons
they give for allowing the appeal. I agree also with the
comments made by my noble and learned friend Lord
Brown of Eaton-under-Heywood.
Communications between lawyers and their clients' employees
46. One of the matters debated at the Court of Appeal
hearing that led to the Three Rivers (No.5) judgment
was whether, or which, communications between
Freshfields and the Bank employees or ex-employees,
or officers or ex-officers, could qualify for legal advice privilege. It was accepted that communications
between the lawyers and third parties could not qualify. The Court of Appeal held that only communications between Freshfields and the BIU could qualify.
All other communications had to be disclosed. This is
not an issue which arises for decision on this appeal
but, for reasons which I have explained (see paras. 20
and 21), submissions have been made to your Lordships on the issue and your Lordships have been invited to express views on them. I think your Lordships
should decline the invitation for a number of reasons.
47. First, the issue is a difficult one with different
views, leading to diametrically opposed conclusions,
being eminently arguable. Second, there is a dearth of
domestic authority. Upjohn Co v United States (1981)
449 US 383 in the United States Supreme Court constitutes a valuable authority in a common law jurisdiction but whether (or to what extent) the principles
there expressed should be accepted and applied in this
jurisdiction is debatable. Third, whatever views your
Lordships may express, and with whatever unanimity,
the views will not constitute precedent binding on the
lower courts. The guiding precedent on the issue will
continue to be the Court of Appeal judgment in Three
Rivers (No.5). Fourth, if and when the issue does
come before the House (or a new Supreme Court) the
panel of five who sit on the case may or may not share
the views of your Lordships, or a majority of your
Lordships, sitting on this appeal. Fifth, and finally,
this House, represented by an Appeal Committee of
three, refused leave to appeal against the Three Rivers
(No.5) judgment.
48. For all these reasons I think your Lordships
should refrain from expressing views on the issue.
Nothing that I have said should be construed either as
approval or disapproval of the Court of Appeal's ruling on the issue in Three Rivers (No.5). The issue
simply does not arise on this appeal.
LORD RODGER OF EARLSFERRY
My Lords,
49. I have had the privilege of considering in draft the
speeches of my noble and learned friends, Lord Scott
of Foscote, Lord Carswell and Lord Brown of
Eaton-under-Heywood. I agree with them that the
appeal should be allowed for the reasons that they
give. I also agree that the House should not deal with
the second of the two points identified by Lord Scott.
In adding some observations of my own I gratefully
adopt the accounts of the facts and issues given by
Lord Scott and Lord Carswell.
50. The Bank of England ("the Bank") resist a claim
for disclosure of communications between the BIU
and Freshfields on the ground that the communications are covered by legal advice privilege. In the
formulation of Millett J in Price Waterhouse v BCCI
Holdings [1992] BCLC 583, 588d-e legal advice
privilege attaches to all communications made in
confidence between solicitors and their clients for the
purpose of giving or obtaining legal advice even at a
stage when litigation is not in contemplation. It does
not matter whether the communication is directly
between the client and his legal adviser or is made
through an intermediate agent of either.
51. It is common ground between the parties that
legal advice privilege has to be distinguished from
litigation privilege. As Lord Edmund-Davies noted in
Waugh v British Railways Board [1980] AC 521,
541-542, in the past the need to make that distinction
was sometimes overlooked:
"It is for the party refusing disclosure to establish
his right to refuse. It may well be that in some cases
where that right has in the past been upheld the courts
have failed to keep clear the distinction between (a)
communications between client and legal adviser, and
(b) communications between the client and third parties, made (as the Law Reform Committee put it) 'for
the purpose of obtaining information to be submitted
to the client's professional legal advisers for the purpose of obtaining advice upon pending or contemplated litigation."'
52. Litigation privilege relates to communications at
the stage when litigation is pending or in contemplation. It is based on the idea that legal proceedings take
the form of a contest in which each of the opposing
parties assembles his own body of evidence and uses it
to try to defeat the other, with the judge or jury determining the winner. In such a system each party
should be free to prepare his case as fully as possible
without the risk that his opponent will be able to recover the material generated by his preparations. In
the words of Justice Jackson in Hickman v Taylor
(1947) 329 US 495, 516, "Discovery was hardly intended to enable a learned profession to perform its
functions either without wits or on wits borrowed
from the adversary."
53. In In re L (A Minor)(Police Investigation: Privilege) [1997] AC 16 your Lordships' House held, Lord
Mustill and Lord Nicholls of Birkenhead dissenting,
that proceedings under Part IV of the Children Act
1989 were "investigative" rather than "adversarial" in
nature and that litigation privilege was therefore excluded by necessary implication. In the present case
the Bank accept that Bingham LJ's inquiry was not to
be regarded as adversarial in nature and that, for this
reason, they cannot claim litigation privilege for the
communications between the BIU and Freshfields. In
these circumstances it is unnecessary to analyse more
fully the characteristics of those kinds of proceedings
which do attract litigation privilege. In his dissenting
speech in In re L Lord Nicholls of Birkenhead
sounded a note of caution against basing any such
analysis simply on the distinction between "adversarial" and "inquisitorial" proceedings: [1997] AC 16,
31G-32D. In the meantime those cautionary words
have gained force since, for the purposes of the Human Rights Act 1998, one of the characteristics of a
fair trial under article 6 is that the proceedings should
be "adversarial": e g Lobo Machado v Portugal (1996)
23 EHRR 79, para 31. The ethos of the new system of
civil procedure in England and Wales, and of the more
limited changes in civil procedure in Scotland, may
also have a bearing on the question. Consideration of
the issue must, however, await a case where the matter
arises for decision.
54. The rationale of legal advice privilege has been
identified in numerous cases, many of which are cited
in the speeches of Lord Scott and Lord Carswell. I
need not repeat them but venture to add a passage
from Sir George Mackenzie's Observations upon the
18th Act of the 23rd Parliament of King James the
Sixth against Dispositions made in Defraud of Creditors etc (1675), in Sir George Mackenzie's Works Vol
2 (1755), p 1. He said this, at p 44:
"An Advocate is by the Nature of his Imployment
tied to the same Faithfulness that any Depositor is: For
his Client has depositate in his Breast his greatest
Secrets; and it is the Interest of the Common-wealth,
to have that Freedom allowed and secured without
which Men cannot manage their Affairs and private
Business: And who would use that Freedom if they
might be ensnared by it? This were to beget a Diffidence betwixt such who should, of all others, have the
greatest mutual Confidence with one another; and this
will make Men so jealous of their Advocates that they
will lose their private Business, or succumb in their
just Defence, rather than Hazard the opening of their
Secrets to those who can give them no Advice when
the case is Half concealed, or may be forced to discover them when revealed."
As this passage shows, the public interest justification
for the privilege is the same today as it was 350 years
ago: it does not change, or need to change, because it
is rooted in an aspect of human nature which does not
change either. If the advice given by lawyers is to be
sound, their clients must make them aware of all the
relevant circumstances of the problem. Clients will be
reluctant to do so, however, unless they can be sure
that what they say about any potentially damaging or
embarrassing circumstances will not be revealed later.
So it is settled that, in the absence of a waiver by the
client, communications between clients and their
lawyers for the purpose of obtaining legal advice must
be kept confidential and cannot be made the subject of
evidence. Of course, this means that, from time to
time, a tribunal will be deprived of potentially useful
evidence but the public interest in people being
properly advised on matters of law is held to outweigh
the competing public interest in making that evidence
available. As Lord Reid succinctly remarked in Duke
of Argyll v Duchess of Argyll 1962 SC (HL) 88, 93,
"the effect, and indeed the purpose, of the law of
confidentiality is to prevent the court from ascertaining the truth so far as regards those matters which the
law holds to be confidential."
55. Despite its long pedigree the Court of Appeal in
this case appear to have been less than enthusiastic
about the very notion of legal advice privilege. In
particular, they thought that it was not clear why it
should attach to matters such as the conveyance of real
property or the drawing up of a will: [2004] QB 916,
935, para 39 per Lord Phillips of Worth Matravers
MR. I do not share these doubts. A client's financial or
tax position, or the financial or tax position of members of his family, may well be relevant to the way in
which he asks his solicitor to structure a property
transaction. Or else, for example, the client may have
private worries about his son's ability to fend for
himself which explain why he conveys a more valuable property to his son than to his more able daughter.
People have a legitimate interest in keeping such
matters private. The case for confidentiality is, if anything, even more obvious when it comes to the
preparation of a will. Rightly or wrongly, the provisions are often shaped by past relationships, indiscretions, experiences, impressions and mistakes, as well
as by jealousies, slights, animosities and affections,
which the testator would not wish to have revealed but
which he must nevertheless explain if the solicitor is to
carry out his wishes. Divulging the provisions during
the testator's lifetime or disclosing the reasons for
them after the testator's death could often cause incalculable harm and misery. The public interest lies in
minimising the risk of that happening. In these circumstances it is, in the words of Sir George Mackenzie, Works vol 2, p 45, the interest of the commonwealth "not to unseal the Secrets of private Persons
and thereby to render all Trust and Commerce suspect."
56. More often than not the lawyer will be advising
his client on legal matters that relate to his own position -- whether his public law or private law rights and
obligations. Legal advice privilege also applies to
advice on criminal matters, which it may not always
be easy to characterise as relating, strictly speaking, to
rights and obligations of the client. Mr Pollock QC
accepted that legal advice privilege would apply in all
these cases. In other cases, such as that of an objector
at a public inquiry, the advice sought may relate partly
to the client's own legal position and partly to the
position of someone else, such as the developer. But
clients may also legitimately consult their lawyers
simply about someone else's legal position. Most
obviously, a concerned parent may consult a lawyer
about the potential repercussions for their adult child
of some step which that child is contemplating. In all
these cases the client would be inhibited in obtaining
proper advice from his lawyer if there were any risk
that either of them might require to reveal what had
passed between them. So legal advice privilege applies.
57. In the present case the Court of Appeal proceeded, [2004] QB 916, 932, on the basis that "the
dominant role of Freshfields was to advise on preparation and presentation of evidence for the Bingham
Inquiry but that it is possible that they may have given
some advice as to the Bank's legal rights and obligations" and that "the advice and assistance sought was
primarily in relation to the presentation of evidence to
the inquiry rather than in relation to the Bank's rights
and obligations." Mr Sumption QC criticised that
conclusion but, simply for present purposes, I am
content to accept it without addressing those criticisms. The implication of the Court of Appeal's
judgment that in these circumstances legal advice
privilege is not engaged must be that, when the Bank
were communicating with Freshfields in relation to
the presentation of their evidence to the inquiry, they
were not seeking legal advice from them.
58. In his important judgment in Balabel v Air India
[1988] Ch 317, 331H-332B, Taylor LJ seems to have
thought that in the past the business of solicitors was
more restricted than it is today and that there is
therefore now more of a need to keep legal advice
privilege within justifiable bounds. In the present case
the Court of Appeal adopted that observation, [2004]
QB 916, 933, para 30. As counsel for both parties
accepted, however, what Taylor LJ says in that passage is, at best, an over-simplification. Especially in
the nineteenth century, many solicitors or attorneys
acted as "men of business". They not only gave legal
advice and assistance but carried on business, for
instance, as patent agents, as agents for insurance
companies, as deposit agents for colonial banks, and
as stewards or factors running estates. They would
also lend money to their clients, sometimes in relation
to the purchase of property. Until fairly recently indeed, Scottish solicitors had succeeded in keeping for
themselves all the work of selling houses that estate
agents were doing in England. Given the varied functions performed by lawyers, it is scarcely surprising
that questions frequently arose as to the capacity in
which the lawyer or firm was acting in a particular
transaction. For example, in both Hagart and
Burn-Murdoch v Inland Revenue Commissioners
[1929] AC 386 and Minter v Priest [1930] AC 558 the
House had to decide in what capacity solicitors had
lent money to clients. And one of the issues in Minter
was, precisely, the application of legal advice privilege in that kind of case. Lawyers today may be instructed in situations in which they would not have
been instructed in the past or which did not even exist
in the past; equally, however, lawyers in the past were
employed in situations in which they would not be
employed today and which do not even exist today. In
relation to legal advice privilege what matters today
remains the same as what mattered in the past:
whether the lawyers are being asked qua lawyers to
provide legal advice.
59. In Balabel v Air India [1988] Ch 317, 330 Taylor
LJ reviewed the authorities and held that, for the
purposes of legal advice privilege, "legal advice is not
confined to telling the client the law; it must include
advice as to what should prudently and sensibly be
done in the relevant legal context." According to his
terms of reference, Bingham LJ was to enquire into
the supervision of BCCI under the Banking Acts and
to consider whether the action taken by all the United
Kingdom authorities was appropriate and timely.
Therefore the Banking Acts formed the relevant legal
context in which Freshfields were asked to act for the
Bank. So far as the Bank were concerned, what
Bingham LJ had to decide was whether or not the
steps that they took to supervise BCCI had been appropriate, having regard to their powers and duties
under the Banking Acts as they stood at the relevant
time. The Bank's evidence to the inquiry was directed
to that issue. It may be -- the House was not told -- that
the BIU consulted other professionals, such as bankers, accountants or actuaries, about the presentation of
the Bank's evidence. If so, the BIU would have expected them to bring their particular expertise to bear
on the evidence and to comment accordingly -- alerting the Bank, for instance, to any possible grounds of
criticism, or to particularly favourable points which
they noticed. Similarly, if -- and there is no reason to
suppose this happened -- the BIU had sought advice
from the modern equivalent of a rhetorician on how to
make sure that the Bank's evidence would be presented to the inquiry in a way that made it easily understood and assimilated, it would have expected him
to use his rhetorical expertise when making his
comments on the drafts.
60. When, however, the BIU consulted the lawyers in
Freshfields, and through them counsel, about the
presentation of their evidence to the inquiry, it was not
seeking their comments and assistance as bankers,
accountants, rhetoricians or anything else: it was
seeking their comments and assistance as lawyers
professing expertise in the field. Either expressly or
impliedly, the BIU was asking them to put on legal
spectacles when reading, considering and commenting
on the drafts. In other words it was asking them to
consider, as lawyers, how the Bank's evidence could
be most effectively presented to Bingham LJ, given
that he was inquiring into the Bank's discharge of their
legal responsibilities under the Banking Acts. Such
advice could come in many forms. For instance, the
BIU could have expected Freshfields to draw attention
to any implications, favourable or otherwise, which a
particular line of evidence on one aspect of the Bank's
supervisory obligations might have for a different
aspect of their responsibilities. Similarly, Freshfields
would be in a position to point out matters which
should not be laboured in evidence as they would be
obvious to a senior judge like Bingham LJ with his
ready grasp of the relevant law. Alternatively, they
might highlight points that would be worth exploring
more fully. Of course, your Lordships do not know
which issues actually arose and were considered by
the lawyers when reading the Bank's draft evidence -far less what comments Freshfields communicated to
the BIU which eventually helped to shape the Bank's
"overarching" statement to the inquiry. That does not
matter. What matters is that the BIU was instructing
the lawyers in Freshfields to carry out a function
which necessarily involved the use of their legal skills
if it was to be performed properly. The communications between the BIU and Freshfields were therefore
concerned with obtaining "legal advice" in the broader
sense in which, as Taylor LJ rightly said in Balabel v
Air India, that term should be understood for this
purpose. It follows that legal advice privilege applies
to those communications. The appeal must be allowed.
BARONESS HALE OF RICHMOND
My Lords,
61. I agree, for the reasons given by each of you, that
this appeal should be allowed. I do sympathise with
the Court of Appeal's anxiety to set boundaries to the
scope of legal advice privilege. Legal advice privilege
restricts the power of a court to compel the production
of what would otherwise be relevant evidence. It may
thus impede the proper administration of justice in the
individual case. This makes the communications
covered different from most other types of confidential communication, where the need to encourage
candour may be just as great. But the privilege is too
well established in the common law for its existence to
be doubted now. And there is a clear policy justification for singling out communications between lawyers
and their clients from other professional communications. The privilege belongs to the client, but it attaches both to what the client tells his lawyer and to
what the lawyer advises his client to do. It is in the
interests of the whole community that lawyers give
their clients sound advice, accurate as to the law and
sensible as to their conduct. The client may not always
act upon that advice (which will sometimes place the
lawyer in professional difficulty, but that is a separate
matter) but there is always a chance that he will. And
there is little or no chance of the client taking the right
or sensible course if the lawyer's advice is inaccurate
or unsound because the lawyer has been given an
incomplete or inaccurate picture of the client's position.
62. This rationale extends much more broadly than to
advice about legal rights and obligations strictly
so-called. I understand that we all endorse the approach of the Court of Appeal in Balabel v Air India
[1988] Ch 317, and in particular the observation of
Taylor LJ at 330, that "legal advice is not confined to
telling the client the law; it must include advice as to
what should prudently and sensibly be done in the
relevant legal context". There will always be borderline cases in which it is difficult to decide whether
there is or is not a 'legal' context. But much will depend upon whether it is one in which it is reasonable
for the client to consult the special professional
knowledge and skills of a lawyer, so that the lawyer
will be able to give the client sound advice as to what
he should do, and just as importantly what he should
not do, and how to do it. We want people to obey the
law, enter into valid and effective transactions, settle
their affairs responsibly when they separate or divorce, make wills which will withstand the challenge
of the disappointed, and present their best case before
all kinds of court, tribunal and inquiry in an honest and
responsible manner.
63. Given this rationale, there are particular difficulties in identifying ' the client' to whose communications privilege should attach in the case of a large
organisation such as the Bank or a Government Department. As the point does not arise for decision in
this case, I agree, for the reasons given by Lord Scott
of Foscote, that we should not express any views upon
the matter.
LORD CARSWELL
My Lords,
64. The relatively brief but active trading history of
the Bank of Credit and Commerce International SA
("BCCI"), which commenced business in 1972, came
to an end on 5 July 1991, when it presented a petition
for the appointment of a provisional liquidator. The
history of the rise and fall of BCCI has been fully set
out in the report of the inquiry held by Bingham LJ
and well documented in several judgments, and it is
unnecessary to repeat it here. It is sufficient merely to
refer for convenience to the summary contained in
paragraphs 16 to 26 of the speech of Lord Hope of
Craighead in the appeal entitled Three Rivers District
Council and others v Bank of England (No 3) [2003] 2
AC 1, 240-243.
65. The respondents, who are creditors of BCCI and
the liquidators of the company, have brought the
present claim against the Bank of England ("the
Bank") for misfeasance in public office. The essence
of the claim is that the Bank through its officials acted
in bad faith in the exercise its statutory responsibilities
as a supervisor of BCCI as an institution licensed to
accept deposits in the United Kingdom, in that it failed
to take decisions that would protect the interests of
depositors and potential depositors when it was aware
that there was a serious and immediate threat that
unless BCCI was rescued by the Abu Dhabi government it would collapse. The action, the hearing of
which has now commenced before Tomlinson J, has
spawned a mass of satellite litigation which has
brought the parties on a number of occasions to the
Court of Appeal and to your Lordships' House. The
present appeal concerns documents in the control of
the Bank, in circumstances to which I shall refer in
more detail, and raises fundamental questions concerning the nature and ambit of legal professional
privilege. That privilege is commonly classified in
modern usage under the two sub-headings of legal
advice privilege and litigation privilege (terminology
which appears to owe its origin to the submission of
counsel in Re Highgrade Traders Ltd [1984] BCLC
151, adopted by Oliver LJ at page 161h). The former
covers communications passing between lawyer and
client for the purpose of seeking and furnishing legal
advice, whether or not in the context of litigation. The
latter, which is available when legal proceedings are in
existence or contemplated, embraces a wider class of
communication, such as those passing between the
legal adviser and potential witnesses. The relationship
between these two classes of privilege formed the
subject of much of the argument before the House.
66. The Government reacted quickly to the failure of
BCCI, largely due to expressions of concern which
had emanated from the financial community about the
quality of the Bank's supervision of BCCI under the
Banking Acts. On 19 July 1991 it was announced that
an independent inquiry would be held into the exercise
by the Bank of its statutory duty of supervision of
BCCI as a licensed deposit-taker, and on 22 July 1991
Bingham LJ was formally appointed to conduct the
inquiry. His comprehensive report on the affair was
submitted in July 1992 to the Chancellor of the Exchequer and the Governor of the Bank.
67. The Bank considered it of great importance to
make the most effective response to the Bingham
Inquiry. For that purpose the Governor appointed a
group of officials who became known as the Bingham
Inquiry Unit ("BIU"), with the task of dealing with all
communications between the Bank and the Inquiry.
Messrs Freshfields and counsel were instructed and
over a period of time gave extensive advice and assistance, the nature of which is described in detail in
paragraphs 8 and 9 of the judgment of Tomlinson J
given on 13 December 2002 in Three Rivers District
Council v Bank of England (No 5) [2003] QB 1556
and the documents quoted therein. In the process the
BIU and Freshfields generated a substantial volume of
documents. It may be summarised very baldly as the
gathering of the necessary information to enable the
solicitors and counsel to advise on the way in which
the Bank's case could be presented to the Inquiry, the
furnishing of such advice and the preparation and
amendment of draft witness statements and submissions to and responses to requests from the Inquiry. It
is, however, worth adding to the material quoted by
Tomlinson J the contents of paragraph 17 of the second witness statement made by Mr Philip Mark
Croall, a partner in Freshfields Bruckhaus Deringer,
which gives a useful synopsis of the type of work
carried out by the BIU and Freshfields:
"So as to ensure that the Bank's legal advisers were
properly instructed and fully informed to advise and
assist the Bank in preparing its evidence and more
generally in relation to all its dealings with the Bingham Inquiry, there was a constant flow of factual
information from the Bank to its legal advisers, usually channelled through the BIU. The BIU and the
Bank's legal advisers effectively operated as a single
team, with members of the BIU undertaking, or delegating to others within the Bank, tasks of research or
fact-gathering for the purpose of review and/or advice
by the Bank's legal advisers. Specific requests for
factual matters to be investigated and reported (typically in the form of notes) to the legal team were
sometimes made by the legal team itself to the BIU
which then initiated work within the Bank. Sometimes
such work was carried out by the BIU itself and
sometimes by others elsewhere within the Bank
commissioned to do so by the BIU. Fact finding and
research based exercises were sometimes commissioned by the BIU itself of its own initiative in order to
furnish information to the legal advisers. The purpose
of carrying out all of this work was to provide information to the Bank's legal advisers to enable them to
prepare submissions and/or advise on the nature,
presentation and/or content of the Bank's submissions
to, evidence for and responses to requests from, the
Inquiry."
It was originally intended that witness statements
from employees of the Bank and other persons would
be furnished to Bingham LJ on behalf of the Bank, but
in the event this was not done and the witnesses were
called to give evidence to the inquiry without written
statements having been supplied in advance. It appears, however, that a substantial volume of communications came into existence in the course of gathering the evidence of witnesses. Moreover, an "overarching" statement of some 258 pages was prepared
on behalf of the Bank and furnished to the inquiry,
which set out its case and the material evidence in
some detail.
68. The inquiry itself amassed a large volume of
documentation, which has been given the title of the
"Bingham archive". Much of the satellite litigation to
which I have referred has been concerned with attempts by the respondents to obtain access to various
categories of documents in order to ascertain if there
was material which they could use in support of their
case. The phrase "fishing expedition" has been used
more than once during the course of the series of
proceedings, but it is no less than fair to recall the
comment of Tomlinson J at paragraph 72 of his
judgment given on 31 May 2002 in relation to the
Bingham archive:
"If the Claimants are to be regarded as fishing, I am
bound to say that they are fishing in waters which can
be regarded as likely to be stocked, albeit not exclusively with fish likely to be to their taste."
69. The respondents brought two successive applications for disclosure of documents relating to the
BIU. The first, the Court of Appeal decision in which
is reported as Three Rivers District Council v Bank of
England (No 5) [2003] QB 1556, is not directly the
subject of this appeal, but an understanding of the
issues dealt with in it is essential to consideration of
the present proceedings. The second decision of the
Court of Appeal, against which this appeal has been
brought, is reported under the title of Three Rivers
District Council v Bank of England (No 6) [2004] QB
916. I shall refer to these proceedings respectively as
Three Rivers (No 5) and Three Rivers (No 6).
70. In Three Rivers (No 5) the claimants, the present
respondents, applied pursuant to CPR r 31.19 for
disclosure by the Bank of a large number of documents for which the Bank had claimed legal privilege.
In his judgment given on 13 December 2002, to which
I have referred, Tomlinson J upheld the Bank's claim
and refused the declaratory relief sought by the
claimants. His reasons for so holding, which appear to
me to have considerable force, are set out in paragraph
30 of his judgment, in which he expressed his conclusion:
"In my judgment an internal confidential document,
not being a communication with a third party, which
was produced or brought into existence with the
dominant purpose that it or its contents be used to
obtain legal advice is privileged from production."
The judge stated that the necessary control is supplied by the dominant purpose test, which is applied at
the time of creation of the documents. He summarised
his conclusion on the dominant purpose test at para 32
of his judgment, where he held that
"? the Bank has properly identified as the dominant
purpose for which much of the material was brought
into existence by the BIU the obtaining or recording of
legal advice. More broadly, the Bank has established
that the material was prepared or commissioned pursuant to the retainer between the Bank and the legal
advisers as part of the necessary exchange of information of which the object was the giving of legal
advice."
71. The Court of Appeal (Lord Phillips of Worth
Matravers MR, Sedley and Longmore LJJ) reversed
the judge's decision, accepting the contention advanced by counsel for the claimants that documents
prepared by the Bank's employees or ex-employees,
whether prepared for submission to or at the direction
of Freshfields or not, should be disclosed as being no
more than raw material on which the BIU, as the client
of Freshfields, would thereafter seek advice. It accordingly held that the Bank was not entitled to privilege in respect of any of the following four categories
of documents in issue:
a. documents prepared by Bank employees, the
dominant purpose of preparing which was that they
should be sent to Freshfields and which were in fact so
sent;
b. documents of the same class which were not in
fact so sent to Freshfields;
c. documents prepared by Bank employees, without
the dominant purpose of obtaining legal advice, which
were in fact sent to Freshfields;
d. documents in categories a to c which had been
prepared by Bank employees who were no longer
employed by the Bank.
72. The court accepted that Freshfields' client was the
BIU, not the Bank itself or any individual officer, but
its conclusions did not turn so much on the identity of
the authors of the documents in question as on the
more general point that in the court's view legal advice
privilege, as distinct from litigation privilege, was
restricted to communications between a client and his
legal advisers, to documents evidencing such communications, and to documents that were intended to
be such communications even if they were not in fact
communicated. None of the four categories of documents concerned in the appeal came within that description and accordingly they were not covered by
privilege. It rejected the Bank's argument that communications from an employee were so covered, even
though it recognised that a corporation can only act
through its employees.
73. The court reached a subsidiary but distinct conclusion on a second issue, the dominant purpose of the
preparation of the documents, which was set out in
paragraph 35 of the judgment of the court, given by
Longmore LJ:
"In the former case of original documentary mate-
rial supplied to assist in the compilation of the November 1991 statement or April 1992 paper, we think
it impossible to say that the dominant purpose of its
preparation was the obtaining of legal advice. It is raw
material for presentation to the inquiry and the dominant purpose for which it was prepared was so that the
Bank could comply with its primary duty of putting all
relevant factual material before Bingham LJ."
74. The Bank presented a petition for leave to appeal
to your Lordships' House, but on 14 May 2003 the
Appeal Committee dismissed the petition. The Bank
has disclosed documents to the respondents in accordance with the ruling of the Court of Appeal. The
respondents, as they state in their printed case, found
that those documents proved to be a "veritable
gold-mine of factual information as to what had happened during the years of BCCI's supervision and as to
what various Bank officials had really thought."
75. In Three Rivers (No 5) Mr Pollock QC, leading
counsel for the respondents, made it clear that he did
not seek disclosure of any documents passing between
Freshfields and the BIU, regarding them on thitherto
accepted principle as being covered by legal advice
privilege. In the light of the content of the judgment of
the Court of Appeal on the second issue in Three
Rivers (No 5) the respondents mounted a further application -- Three Rivers (No 6) -- seeking disclosure
of communications between the BIU and Freshfields
in so far as those were seeking or obtaining assistance
or advice as to the manner in which the Bank should
most appropriately present evidence and material to
the inquiry. The essence of the case made by the respondents was that although the Court of Appeal had
declared that the Bank was entitled to claim privilege
for communications passing between the Bank and its
legal advisers for the purpose of obtaining legal advice, the term "legal advice" was limited to advice on
the legal rights and obligations of the Bank and, specifically, did not extend to advice and assistance directed towards the better presentation of the Bank's
case to the inquiry. Tomlinson J permitted Mr Pollock
to withdraw the concession which he had made in
Three Rivers (No 5) and to present this new argument.
He expressed the view that it was implicit in the decision of the Court of Appeal in Three Rivers (No 5)
that it did not regard Freshfields' assistance and advice
on presentational matters as attracting legal advice
privilege. He held accordingly and made a declaration
that
"the only documents or parts of documents in the
Bank's control and coming into existence between the
closure of BCCI SA on 5 July 1991 and the issue of
the present proceedings in May 1993 which the Bank
is entitled to withhold from inspection on the ground
of legal advice privilege are:
(1) communications passing between the
Bank and its legal advisers (including any solicitor
seconded to the Bank) for the purpose of seeking or
obtaining legal advice (which means, for the avoidance of doubt, advice concerning the Bank's rights and
obligations); and
(2) any part of a document which evidences
the substance of such a communication."
He ordered that the Bank should serve a further and
better list of documents and make them available for
inspection.
76. The Court of Appeal (Lord Phillips of Worth
Matravers MR, Longmore and Thomas LJJ) dismissed
the Bank's appeal. In giving the judgment of the court,
the Master of the Rolls commenced by defining legal
advice, not as advice given by a lawyer but as "advice
in relation to law". He examined in some detail a
series of authorities, which I shall consider in due
course, and concluded (para 16) that the statements in
them lent support to the argument that legal advice is
restricted to advice about legal rights and liabilities.
He referred (para 25) to the opinion expressed by the
Law Reform Committee in its 16th Report on Privilege in Civil Proceedings (1967) (Cmnd 3472), to the
effect that the true rationale of legal advice privilege
was that it was "a privilege in aid of litigation" and
was concerned exclusively with rights and liabilities
enforceable in law. He regarded the authorities as
supporting that statement, since he considered that in
all of them the relationship of solicitor and client arose
in relation to transactions involving legal rights and
obligations capable of becoming the subject matter of
litigation. The court set out in paragraph 26 the conclusion which it drew from this examination:
"In summary, the authorities to which we have
referred show that, where a solicitor-client relationship is formed for the purpose of obtaining advice or
assistance in relation to rights and liabilities, broad
protection will be given to communications passing
between solicitor and client in the course of that relationship. In all the cases, however, the primary object
of the relationship was to obtain assistance that required knowledge of the law. We do not consider that
the same principle applies to communications between
solicitor and client when the dominant purpose is not
the obtaining of advice and assistance in relation to
legal rights and obligations."
77. The Court of Appeal rejected (para 28) the Bank's
argument that since the subject matter of the inquiry
was very sensitive and the Bank could be subject to
criticism or blame as a result of its findings, the giving
of advice and assistance by the solicitors, being de-
signed to protect the Bank against such a possibility,
was in the context of a professional relationship that
involved advising on legal rights and obligations. It
held that the advice and assistance sought was primarily in relation to the presentation of evidence to the
inquiry rather than in relation to the Bank's rights and
obligations. Nor did the possibility of damage to the
Bank's reputation suffice to attract legal advice privilege for the communications in question. Although the
role of the solicitor might have widened in recent
times, the extent of legal advice privilege should not
be widened to encompass that extension. The court
expressed this conclusion in paragraph 37 of its
judgment:
"We do not consider that the facts of this case justify this extension to the law of privilege. The inquiry
in this case was a private, non-statutory inquiry. One
of the sponsors of that inquiry, albeit a reluctant
sponsor, was the Bank itself. The Bank's primary
concern was, or should have been, to ascertain
whether the collapse of BCCI was attributable to any
regulatory shortcomings in this country. We cannot
see that in these circumstances communications between the Bank and the solicitors who were assisting
in the obtaining, preparation and presentation of evidence and submissions to the inquiry should attract
privilege, even if the Bank was anxious that this assistance should enable the Bank's role to be presented
in the best possible light."
78. The Master of the Rolls concluded his judgment
with remarks in paragraph 39 which caused a degree
of concern to the interveners in the appeal before the
House, HM Government, the Bar Council and the Law
Society:
"We have found this area of the law not merely
difficult but unsatisfactory. The justification for litigation privilege is readily understood. Where, however, litigation is not anticipated it is not easy to see
why communications with a solicitor should be privileged. Legal advice privilege attaches to matters such
as the conveyance of real property or the drawing up
of a will. It is not clear why it should. There would
seem little reason to fear that, if privilege were not
available in such circumstances, communications
between solicitor and client would be inhibited.
Nearly fifty years have passed since the Law Reform
Committee looked at this area. It is perhaps time for it
to receive a further review."
79. Mr Sumption QC presented the case on behalf of
the Bank on two main grounds, one broader and one
narrower. The essence of the former was that legal
advice privilege attaches to the documents in question,
as being communications between lawyer and client
constituting advice and assistance of a kind which it is
part of the proper function of a lawyer to give by virtue
of his legal skills. Mr Pollock, upholding the decision
of the Court of Appeal, contended that legal advice
privilege is an "outgrowth and extension" of litigation
privilege, the true root of legal professional privilege,
which should be closely confined in extent to advice
on legal rights and obligations. It did not cover advice
and assistance in the presentation of a client's case
before a tribunal such as the Bingham Inquiry, the
outcome of which did not have legal consequences for
that client. Mr Sumption challenged this last point in
advancing his narrower submission, to the effect that
the Bingham Inquiry did have considerable potential
legal consequences for the Bank, and that even on the
definition of legal advice propounded by the Court of
Appeal Freshfields' advice to it was covered by legal
advice privilege.
80. It is convenient first to consider the narrower
submission, which involves looking at the nature of
the inquiry and the implications which it held for the
Bank. The terms of reference were:
"To enquire into the supervision of BCCI under the
Banking Acts; to consider whether the action taken by
all the UK authorities was appropriate and timely; and
to make recommendations."
The focus of the inquiry was always going to be a
critical examination of the Bank's performance of its
supervisory duties under the Banking Acts. It was
apparent that some would seek to attach blame to the
Bank for failing to take earlier action -- the then Prime
Minister stated in the House of Commons that the
inquiry would "determine where the blame lies" -- and
that public criticism in the inquiry report of the conduct of some officials was a distinct possibility. Nor
could one rule out the possibility that some amendment, which might be unwelcome to the Bank, of its
regulatory powers and duties might be recommended.
There appears accordingly to be some substance in the
suggestion made by Mr Croall in paragraph 8 of his
second witness statement that
"any criticism and consequential damage to its
reputation (or to that of any of its senior officials in the
Banking Supervision Division) might impair its ability
to supervise effectively."
81. Under section 1(4) of the Banking Act 1987 the
Bank was immune against ordinary civil liability for
failure to perform its duty to supervise deposit takers,
but if bad faith were established it would be liable to
remedies in private law. Public law remedies could
also be obtained against the Bank in respect of its
performance of its functions.
82. In these circumstances I consider that the ob-
servations made by Tomlinson J were justified, when
he stated at paragraph 7 of his judgment in Three
Rivers (No 5):
"Anything that the Bank did and said in relation to
the Inquiry was potentially of great legal sensitivity. It
was an inquiry one outcome of which could be criticism of the conduct of the Bank from an informed and
highly authoritative source, an outcome which would
not only be of some importance in relation to the
Bank's ongoing regulatory and supervisory role but
would itself be likely either to lead to or to encourage
the institution or attempted institution of proceeding
against the Bank by depositors and others who had lost
money in consequence of the collapse of BCCI."
Again, in paragraph 15 of that judgment the judge
referred to the "obvious possibility" that litigation
might in due course be instituted against the Bank.
Bingham LJ also appears to have envisaged the same
possibility when he referred in his covering letter of
July 1992 to the Chancellor of the Exchequer and the
Governor of the Bank to "any forthcoming litigation".
83. Counsel for the Bank did not seek to argue that
this possibility was sufficient to make the case one of
litigation privilege. For that head of privilege to apply
litigation must be reasonably in prospect: see Matthews & Malek, Disclosure, 2nd ed (2001) para 9.034
and authorities cited there. He did contend, however,
that the prospect of litigation, added to that of criticism and blame and the possibility of amendment of
the regulatory regime, meant that the advice and assistance given by Freshfields concerned the Bank's
legal rights and obligations. If, contrary to his submission, the Court of Appeal was correct in its definition of legal advice for which privilege can be
claimed, the advice and assistance given fell within
that definition on a correct view of the facts of the
case. The Court of Appeal was not correct in stating at
paragraph 28 of the judgment of the court that the
matter was concluded by the judge's finding in paragraph 8 of his judgment, for that was to disregard what
he stated in paragraphs 7 and 15 which I have quoted.
84. In my opinion there is substantial force in the
appellant's argument. Even if the definition of legal
advice adopted by the Court of Appeal is to be regarded as correct, the circumstances in which the
Bank sought advice and assistance from Freshfields
were such that much of the focus was on the legal
rights and obligations of the Bank. There may be room
for argument, however, on the question whether that
was the dominant purpose of the Bank in seeking that
advice and assistance, but I do not propose to attempt
to resolve that issue or to determine the appeal on this
ground alone. I think that it is of some importance for
the House to take the opportunity to examine more
generally the basis of legal advice privilege and the
correctness of the major thesis of the Court of Appeal
in its judgment in this case.
85. The object of litigation privilege was described in
the classic statement of Jessel MR in Anderson v Bank
of British Columbia (1876) 2 Ch D 644 at 649:
"The object and meaning of the rule is this: that as,
by reason of the complexity and difficulty of our law,
litigation can only be properly conducted by professional men, it is absolutely necessary that a man, in
order to prosecute his rights or to defend himself from
an improper claim, should have recourse to the assistance of professional lawyers, and it being so absolutely necessary, it is equally necessary, to use a vulgar phrase, that he should be able to make a clean
breast of it to the gentleman whom he consults with a
view to the prosecution of his claim, or the substantiating his defence against the claim of others; that he
should be able to place unrestricted and unbounded
confidence in the professional agent, and that the
communications he so makes to him should be kept
secret, unless with his consent (for it is his privilege,
and not the privilege of the confidential agent), that he
should be enabled properly to conduct his litigation.
That is the meaning of the rule."
86. Determining the bounds of privilege involves
finding the proper point of balance between two opposing imperatives, making the maximum relevant
material available to the court of trial and avoiding
unfairness to individuals by revealing confidential
communications between their lawyers and themselves. The practice which has developed is a reconciliation between these principles: Seabrook v British
Transport Commission [1959] 1 WLR 509 at 513, per
Havers J. There is a considerable public interest in
each of these. The importance of keeping to a minimum the withholding of relevant material from the
court, upon which Mr Pollock laid emphasis, is
self-evident. It was stressed by Wigmore (Evidence,
vol 8, para 2291 McNaughton rev. 1961), who expressed the opinion that the privilege should be strictly
confined within the narrowest possible limits consistent with the logic of its principle, an approach
echoed in the speech of Lord Edmund-Davies in
Waugh v British Railways Board [1980] AC 521 at
543. The competing principle of legal professional
privilege is also rooted in public policy: cf B v
Auckland District Law Society [2003] 2 AC 736,
paras 46-7. It is not based upon the maintenance of
confidentiality, although in earlier case-law that was
given as its foundation. If that were the only reason
behind the principle the same privilege would be extended to such confidants as priests and doctors,
whereas it has been settled in a line of authority
stemming from the Duchess of Kingston's Case (1776)
1 East PC 469 that it is confined to legal advisers: see,
eg, Cross & Tapper on Evidence, 9th ed, pp 461-5.
87. It is stated in Cross & Tapper, op cit, p 439 that in
England the rule was traditionally regarded as a rule of
evidence, but the learned editor points out that in some
Commonwealth jurisdictions
"The privilege was elevated into something more
nearly resembling a basic constitutional principle,
expressed in the rhetoric of rights."
That development has been mirrored in this jurisdiction. In R v Derby Magistrates' Court, ex parte B
[1996] AC 487 Lord Taylor of Gosforth CJ, with
whose reasons the other members of the House
agreed, stated at page 509, after reviewing the authorities:
"The principle which runs through all these cases,
and the many other cases which were cited, is that a
man must be able to consult his lawyer in confidence,
since otherwise he might hold back half the truth. The
client must be sure that what he tells his lawyer will
never be revealed without his consent. Legal professional privilege is thus much more than an ordinary
rule of evidence, limited in its application to the facts
of a particular case. It is a fundamental condition on
which the administration of justice as a whole rests."
Lord Hoffmann expressed himself similarly, again
with the concurrence of the other members of the
House, in R (Morgan Grenfell & Co Ltd) v Special
Commissioner of Income Tax [2003] 1 AC 563, when
he described legal professional privilege in paragraph
7 as "a fundamental human right long established in
the common law." In paragraph 31 he referred with
approval to the judgments of the New Zealand Court
of Appeal in IRC v West-Walker [1954] NZLR 191,
where the privilege was described as not merely a rule
of evidence but a substantive right founded on an
important public policy.
88. The approach of the Court of Appeal to ascertaining the ambit of legal advice which will attract
privilege was conditioned by its acceptance of Mr
Pollock's proposition to which I have referred, that
legal professional privilege is an outgrowth and extension of litigation privilege. The Master of the Rolls
stated at paragraph 25 of the judgment of the court:
"All of the cases to which we have thus far referred
were ones in which the relationship of client and solicitor arose in relation to transactions involving legal
rights and obligations capable of becoming the subject
matter of litigation."
One must therefore commence consideration of this
part of the case by examining the validity of the
proposition. One has to ask the question, does legal
professional privilege stem from litigation, as the
Court of Appeal held, in which event any extension of
it outside that sphere requires to be carefully limited?
Or is it, as the appellant contended, a more general
privilege based on the relationship of lawyer and client
and so extending to a wider area of advice and assistance given by legal advisers to their clients? Subsidiary arguments were developed about the need for
certainty and the inconvenience which would ensue if
the ruling given by the Court of Appeal were generally
applied. But if answers are found to these questions
which embody proper principles and are consistent
with established lines of authority, that will, I think,
take one a good distance towards conclusions which
will settle the issues debated in this part of the case
under appeal.
89. I propose to commence that search by examining
the authorities. The arguments on the issue of principle depend to a large extent on one's starting point,
which is determined by the answers to the questions
which I have posed. There is no a priori reason why
legal professional privilege should be regarded as
stemming from litigation rather than more generally
from the giving of legal advice, or vice versa, and
therefore it is of assistance to attempt to ascertain the
direction which the law has taken on this topic.
90. Both the appellant and the respondents claimed
that the decided cases supported their respective interpretations of the law, so it is necessary to consider
them in some detail. The early history of legal privilege is set out in the speech of Lord Taylor of Gosforth
CJ in R v Derby Magistrates, ex parte B [1996] AC
487 at 507 et seq, where he traces it back to the earliest
instances, to be found in 16th century reports, and
follows it through a number of cases in the 18th and
19th centuries. For present purposes it is sufficient to
commence with the case of Greenough v Gaskell 1 My
& K 98, decided by Lord Brougham LC in 1833. The
defendant in the suit, a solicitor, objected to being
required to produce book entries, memoranda, letters
and other papers generated over a period in the course
of furnishing professional legal advice to his client, to
whom money was advanced out of a fund in court in
an administration suit. In his judgment Lord
Brougham LC set out his conclusions on the claim to
privilege in a passage at pages 101-3 which is worth
quoting at length, since it is the fons et origo of the
modern law:
"Here the question relates to the solicitor, who is
called upon to produce the entries he had made in
accounts, and letters received by him, and those writ-
ten (chiefly to his town agent) by him, or by his direction, in his character or situation of confidential
solicitor to the party; and I am of opinion that he
cannot be compelled to disclose papers delivered, or
communications made to him, or letters, or entries
made by him in that capacity. To compel a party
himself to answer upon oath, even as to his belief or
his thoughts, is one thing; nay, to compel him to disclose what he has written or spoken to others, not
being his professional advisers, is competent to the
party seeking the discovery; for such communications
are not necessary to the conduct of judicial business,
and the defence or prosecution of men's rights by the
aid of skilful persons. To force from the party himself
the production of communications made by him to
professional men seems inconsistent with the possibility of an ignorant man safely resorting to professional advice, and can only be justified if the authority
of decided cases warrants it. But no authority sanctions the much wider violation of professional confidence, and in circumstances wholly different, which
would be involved in compelling counsel or attorneys
or solicitors to disclose matters committed to them in
their professional capacity, and which, but for their
employment as professional men, they would not have
become possessed of.
As regards them, it does not appear that the protection is qualified by any reference to proceedings
pending or in contemplation. If touching matters that
come within the ordinary scope of professional employment, they receive a communication in their
professional capacity, either from a client, or on his
account, and for his benefit in the transaction of his
business, or, which amounts to the same thing, if they
commit to paper, in the course of their employment on
his behalf, matters which they know only through their
professional relation to the client, they are not only
justified in withholding such matters, but bound to
withhold them, and will not be compelled to disclose
the information or produce the papers in any Court of
law or equity, either as party or as witness. If this
protection were confined to cases where proceedings
had commenced, the rule would exclude the most
confidential, and it may be the most important of all
communications -- those made with a view of being
prepared either for instituting or defending a suit, up to
the instant that the process of the Court issued.
If it were confined to proceedings begun or in
contemplation, then every communication would be
unprotected which a party makes with a view to his
general defence against attacks which he apprehends,
although at the time no one may have resolved to
assail him. But were it allowed to extend over such
communications, the protection would be insufficient,
if it only included communications more or less connected with judicial proceedings; for a person often-
times requires the aid of professional advice upon the
subject of his rights and his liabilities, with no references to any particular litigation, and without any
other reference to litigation generally than all human
affairs have, in so far as every transaction may, by
possibility, become the subject of judicial inquiry. 'It
would be most mischievous,' said the learned Judges
in the Common Pleas, 'if it could be doubted whether
or not an attorney, consulted upon a man's title to an
estate, was at liberty to divulge a flaw' (2 Brod. &
Bingh. 6).
The foundation of this rule is not difficult to discover. It is not (as has sometimes been said) on account of any particular importance which the law
attributes to the business of legal professors, or any
particular disposition to afford them protection,
though certainly it may not be very easy to discover
why a like privilege has been refused to others, and
especially to medical advisers.
But it is out of regard to the interests of justice,
which cannot be upholden, and to the administration
of justice, which cannot go on, without the aid of men
skilled in jurisprudence, in the practice of the Courts,
and in those matters affecting rights and obligations
which form the subject of all judicial proceedings. If
the privilege did not exist at all, every one would be
thrown upon his own legal resources; deprived of all
professional assistance, a man would not venture to
consult any skilful person, or would only dare to tell
his counsellor half his case. If the privilege were confined to communications connected with suits begun,
or intended, or expected, or apprehended, no one
could safely adopt such precautions as might eventually render any proceedings successful, or all proceedings superfluous."
91. Statements to the same effect concerning advice
given in relation to legal proceedings may be found in
such cases as Bolton v Liverpool Corporation (1833) 1
My & K 88 at 94-5, per Lord Brougham LC and
Holmes v Baddeley (1844) 1 Ph 476 at 480-1, per
Lord Lyndhurst LC. In Herring v Clobery (1842) 1 Ph
91 Lord Lyndhurst L C followed the rule laid down in
Greenough v Gaskell in preference to a narrower rule
confined to litigation, in progress or anticipated,
which had been propounded by Lord Tenterden CJ at
nisi prius. He stated at pages 94-5:
"But further, I think that restriction of the rule is not
consistent with, and not founded on, any sound principle; for it may, and in a great variety of cases would,
be of as much importance to parties that the communications made between a client and a solicitor with
respect to the state of the client's property, with respect
to his liabilities, with respect to his title, should be
protected, as that protection should be afforded to
communications made in the progress of a cause; and
it appears to me that, as individuals must from time to
time resort to their legal advisers for guidance in their
ordinary transactions, public policy requires that
communications of that kind should be privileged and
protected, in order that they may be free and unfettered."
Lord Lyndhurst gave a similar ruling in Carpmael v
Powis (1846) 1 Ph 687, where he held the privilege to
exist in respect of communications relating to the
fixing of a reserved bidding on a sale of land. He said
at page 692:
"I am of opinion that the privilege extends to all
communications between a solicitor, as such, and his
client, relating to matters within the ordinary scope of
a solicitor's duty."
Lord Lyndhurst declined to confine it to the lawyer's
work stricto sensu of drawing the agreements, investigating the title and preparing the conveyance. The
work done was all part of one transaction of the nature
in which solicitors are ordinarily employed. Knight
Bruce V-C gave a decision to the same effect in Pearse
v Pearse (1846) 1 De G & Sm 12, where the communications related to transactions concerning the client's
lands and were unconnected with any existing or anticipated litigation.
92. Notwithstanding the clarity of the expressions of
opinion which I have cited, there remained for some
time some differences of view and some contrary
statements in the case-law. The differences were authoritatively resolved by a judgment given by Lord
Selborne LC in the Court of Appeal in Chancery in
Minet v Morgan (1873) 8 Ch App 361, in which he
said that the law had not at once reached a broad and
reasonable footing, but reached it by successive steps.
He affirmed in very positive terms the propositions set
out in the judgments to which I have referred, quoting
with approval the statement of Kindersley V-C in
Lawrence v Campbell (1859) 4 Drew 485 at 490, in
which he said that it was now sufficient for privilege if
communications passed as professional communications in a professional capacity, even though they were
not made either during or relating to an actual or even
to an expected litigation. Similarly, the operation of
the rule was described in unqualified terms in the
Privy Council by the Earl of Halsbury LC, when he
said in Bullivant v Attorney-General for Victoria
[1901] AC 196 at 200 that
"for the perfect administration of justice, and for the
protection of the confidence which exists between a
solicitor and his client, it has been established as a
principle of public policy that those confidential
communications shall not be subject to production."
93. In modern law authoritative statements support
this view of the law. In R v Derby Magistrates, ex
parte B [1996] AC 487 at 510 Lord Nicholls of Birkenhead said:
"The law has been established for at least 150 years,
since the time of Lord Brougham LC in 1833 in
Greenough v Gaskell 1 M & K 98: subject to recognised exceptions, communications seeking professional legal advice, whether or not in connection with
pending court proceedings, are absolutely and permanently privileged from disclosure even though, in
consequence, the communications will not be available in court proceedings in which they might be important evidence." Lord Jauncey of Tullichettle expressed himself similarly in Re L (a minor) [1997] AC
16, when he said at page 25 that in the case of communications between solicitor and client "the privilege
attaches to all communications whether related to
litigation or not."
94. It is relevant also to inquire, since this doctrine is
a judge-made development, what view other common
law jurisdictions have taken of the nature of legal
professional privilege. One finds a similar approach in
Australia and Canada. In Baker v Campbell (1983)
153 CLR 52 in the High Court of Australia Wilson J
stated at page 94 that the privilege is not limited to a
rule of evidence confined to judicial and quasi-judicial
proceedings. This statement was followed in Esso
Australia Resources Ltd v Commissioner of Taxation
(1999) 201 CLR 49, para 35, per Gleeson CJ and in
Daniels International Corporation Pty Ltd v Australian
Competition and Consumer Commission, (2002) 192
ALR 561, para 44, per McHugh J, and para 85, per
Kirby J. In Descoteaux v Mierzwinski (1982) 141
DLR (3d) 590 in the Supreme Court of Canada Lamer
J, giving the judgment of the court, defined at pages
604-5 the substantive rule of privilege, as distinct from
the evidentiary rule applying in court proceedings, in
terms which were clearly meant to encompass any
circumstances in which a client consults a solicitor,
irrespective of any existing or anticipated litigation.
95. A statement of the rationale of legal privilege
which is consistent with the approach in the cases
which I have cited may be found in the European
case-law in the opinion of Mr Advocate-General Sir
Gordon Slynn in Case 155/79 A M & S Europe Ltd v
Commission [1983] QB 878, 913:
"Whether it is described as the right of the client or
the duty of the lawyer, this principle has nothing to do
with the protection or privilege of the lawyer. It
springs essentially from the basic need of a man in a
civilised society to be able to turn to his lawyer for
advice and help, and if proceedings begin, for representation; it springs no less from the advantages to a
society which evolves complex law reaching into all
the business affairs of persons, real and legal, that they
should be able to know what they can do under the
law, what is forbidden, where they must tread circumspectly, where they run risks."
96. The branch of legal professional privilege which
is classified under the name of litigation privilege had
a later origin in three cases decided in the later part of
the 19th century, which were discussed in detail by the
Court of Appeal in Three Rivers (No 5). The first was
Anderson v Bank of British Columbia (1876) 2 Ch D
644, to which I have already referred briefly. The
management of the defendant bank, whose headquarters were in London, apprehended litigation
concerning the conduct of an account in a branch in
Portland, Oregon. The London manager accordingly
cabled the branch manager in Portland, requesting
"fullest particulars" of the transactions in question.
The latter duly sent details by letter, which was discussed with the Bank's solicitor at a meeting of the
board of directors in London. In the ensuing litigation
privilege was claimed for the letter, but refused by
Jessel MR and the Court of Appeal. As Bingham LJ
observed in Ventouris v Mountain [1991] 1 WLR 607
at 612, on modern principles the Oregon manager's
letter would be regarded as privileged as a letter
written for the purpose of laying before a solicitor in
order to obtain legal advice. The importance of the
case, however, lies not in the conclusion reached but
in the statements of the law propounded by the judges
who heard the case.
97. Jessel MR defined the extent of the rule at pages
649-50:
"Now, as to the extent of the rule. It goes not merely
to a communication made to the professional agent
himself by the client directly, it goes to all communications made by the client to the solicitor through
intermediate agents, and he is not bound to write letters through the post, or to go himself personally to see
the solicitor; he may employ a third person to write the
letter, or he may send the letters through a messenger,
or he may give a verbal message to a messenger, and
ask him to deliver it to the solicitor, with a view to his
prosecuting his claim, or of substantiating his defence.
Again, the solicitor's acts must be protected for the
use of the client. The solicitor requires further information, and says, I will obtain it from a third person.
That is confidential. It is obtained by him as solicitor
for the purpose of the litigation, and it must be protected upon the same ground, otherwise it would be
dangerous, if not impossible, to employ a solicitor.
You cannot ask him what the information he obtained
was. It may be information simply for the purpose of
knowing whether he ought to defend or prosecute the
action, but it may be also obtained in the shape of
collecting evidence for the purpose of such prosecution or defence. All that, therefore, is privileged."
In the Court of Appeal James LJ described the principle shortly at page 656 as being
"that as you have no right to see your adversary's
brief, you have no right to see that which comes into
existence merely as the materials for the brief."
Mellish LJ at page 658 said:
"To be privileged it must come within one of two
classes of privilege, namely, that a man is not bound to
disclose confidential communications made between
him and his solicitor, directly, or through an agent who
is to communicate them to the solicitor; or, secondly,
that he is not bound to communicate evidence which
he has obtained for the purpose of litigation."
98. In the second case of this trilogy, Southwark and
Vauxhall Water Co v Quick (1878) 3 QBD 315,
documents prepared with the intention of laying them
before the plaintiff company's solicitor in order to
obtain his advice were held to be privileged. I need not
to go into the facts of the case, which I cite only for the
statement of law by Brett LJ at page 320, which he
deduced from the judgments in Anderson v Bank of
British Columbia:
"? it is clear that if a party seeks to inspect a document which comes into existence merely as the materials for the brief, or that which is equivalent to the
brief, then the document cannot be seen, for it is privileged. It has been urged that the materials, or the
information obtained for the brief, should have been
obtained 'at the instance' or 'at the request' of the solicitor; but I think it is enough if they come into existence merely as the materials for the brief, and I
think that phrase may be enlarged into 'merely for the
purpose of being laid before the solicitor for his advice
or for his consideration"'.
99. In the third case, Wheeler v Le Marchant (1881)
17 Ch D 675 the defendants sought privilege for reports obtained by their solicitors from estate
agents/surveyors in the course of previous administration proceedings unconnected with the instant
action brought by the plaintiff for specific performance of an agreement. The Court of Appeal, reversing the order of Bacon V-C, held that the documents were not privileged. Jessel MR at pages 680-1
discussed the limits of the privilege granted to documents obtained by a solicitor from third parties for the
purposes of existing or anticipated litigation:
"What they contended for was that documents
communicated to the solicitors of the Defendants by
third parties, though not communicated by such third
parties as agents of the clients seeking advice, should
be protected, because those documents contained
information required or asked for by the solicitors, for
the purpose of enabling them the better to advise the
clients. The cases, no doubt, establish that such
documents are protected where they have come into
existence after litigation commenced or in contemplation, and when they have been made with a view to
such litigation, either for the purpose of obtaining
advice as to such litigation, or of obtaining evidence to
be used in such litigation, or of obtaining information
which might lead to the obtaining of such evidence,
but it has never hitherto been decided that documents
are protected merely because they are produced by a
third person in answer to an inquiry made by the solicitor."
At page 682 he described the rule as being "established and maintained solely for the purpose of enabling a man to obtain legal advice with safety." Brett
and Cotton LJJ expressed the rule in similar terms,
Cotton LJ stating at pages 684-5:
"Hitherto such communications have only been
protected when they have been in contemplation of
some litigation, or for the purpose of giving advice or
obtaining evidence with reference to it. And that is
reasonable, because then the solicitor is preparing for
the defence or for bringing the action, and all communications he makes for that purpose, and the
communications made to him for the purpose of giving him the information, are, in fact, the brief in the
action, and ought to be protected. But here we are
asked to extend the principle to a very different class
of cases, and it is not necessary, in order to enable
persons freely to communicate with their solicitors
and obtain their legal advice, that any privilege should
be extended to communications such as these."
100. The limits of this litigation privilege were defined by your Lordships' House in relatively recent
times in Waugh v British Railways Board [1980] AC
521. The appeal concerned a report made very shortly
after a railway accident, based on a joint internal enquiry conducted by the board's personnel. The report
was prepared, in Lord Wilberforce's words,
"for a dual purpose: for what may be called railway
operation and safety purposes and for the purpose of
obtaining legal advice in anticipation of litigation."
The House rejected the claim for privilege, holding
that it extended to such documents only if the latter
purpose was the dominant one. It was made clear in
the speeches given by their Lordships that the context
was purely that of what is now termed litigation privilege, not legal advice privilege. So Lord Edmund-Davies said at page 542 that litigation, appre-
hended or actual, was the hallmark of this privilege,
and that preparation with a view to litigation was the
essential purpose which protects a communication
from disclosure in such cases.
101. An exception to the availability of litigation
privilege appears in the decision of your Lordships'
House in Re L (a minor) [1997] AC 16. The majority
held that a party could not rely upon it in proceedings
which were not adversarial. The jurisdiction concerned in that case was care proceedings under Part IV
of the Children Act 1989. Such proceedings, as Lord
Jauncey of Tullichettle stated at page 27,
"are so far removed from normal actions that litigation privilege has no place in relation to reports
obtained by a party thereto which could not have been
prepared without the leave of the court to disclose
documents already filed or to examine the child."
102. The conclusion to be drawn from the trilogy of
19th century cases to which I have referred and the
qualifications expressed in the modern case-law is that
communications between parties or their solicitors and
third parties for the purpose of obtaining information
or advice in connection with existing or contemplated
litigation are privileged, but only when the following
conditions are satisfied:
(a) litigation must be in progress or in contemplation;
(b) the communications must have been made for
the sole or dominant purpose of conducting that litigation;
(c) the litigation must be adversarial, not investigative or inquisitorial.
103. Mr Sumption relied on the cases which I have
cited as a foundation for his submission that no fundamental distinction should be drawn between communications in connection with litigation and others.
He submitted that Lord Nicholls of Birkenhead was
correct in his statement in Re L (a minor) [1997] AC
16 at 33 when he described the two sub-headings of
legal advice privilege and litigation privilege as integral parts of a single privilege. The only area in which
the distinction became relevant was that of third party
communications. Mr Pollock quoted, however, a
passage to the opposite effect from the 16th Report of
the Law Reform Committee, produced in 1967. In
discussing what in present terminology is legal advice
privilege, the Committee stated at paragraph 18:
"This privilege, which is generally referred to as
legal professional privilege, extends to all communications between the client or his agents and the client's
legal advisers made for the purpose of obtaining legal
advice other than communications made for the purpose of obtaining advice to enable the client to commit
a crime or a fraud. It differs from the other two kinds
of privilege in aid of litigation in that it is not necessary to show that, at the time the advice was sought,
any litigation was contemplated by the client in respect of the subject-matter of the advice. For this
reason, the privilege might also be classified as a
privilege in protection of a confidential relationship.
Nevertheless, we think that its true rationale is as a
privilege in aid of litigation."
It went on to say in paragraph 19, in a passage relied
upon by the Court of Appeal in paragraph 25 of its
judgment in the present appeal:
"What distinguishes legal advice from other kinds
of professional advice is that it is concerned exclusively with rights and liabilities enforceable in law, i.e.
in the ultimate resort by litigation in the courts or in
some administrative tribunal. It is, of course, true that
on many matters on which a client consults his solicitor he does not expect litigation and certainly hopes
that it will not occur; but there would be no need for
him to consult his solicitor to obtain legal advice unless there were some risk of litigation in the future in
connection with the matter upon which advice is
sought. As Lord Brougham pointed out, it is to minimise that risk by ensuring that he so conducts his
affairs as to make it reasonably certain that he would
succeed in any litigation which might be brought in
connection with them, that the client consults his
solicitor at all."
104. In so stating the Committee does not appear to
have meant merely that the operation of legal professional privilege is restricted to occasions when a party
wishes to resist production of documents in litigation
in a court of law, for it is apparent from cases such as
Parry-Jones v The Law Society [1969] 1 Ch 1 and R
(on the application of Morgan Grenfell & Co Ltd) v
Special Commissioner of Income Tax [2003] 1 AC
563 that it may operate in other situations. The approach of the Committee may owe something to the
reasoning of the Court of Appeal in Parry-Jones v The
Law Society, to which it bears some similarity. In their
judgments in that case Lord Denning MR and Diplock
LJ (who was a member of the Law Reform Committee) confined the definition of legal professional privilege to the principle whereby a party can resist production of documents in a court of law. They classified what is now termed legal advice privilege as a
confidence which is created by an implied term in the
contract between solicitor and client. This restriction
of the ambit of legal professional privilege was,
however, rejected by Lord Hoffmann, with whom the
other members of the House agreed, in the Morgan
Grenfell case, when he said at paragraph 30:
"It is not the case that LPP does no more than entitle
the client to require his lawyer to withhold privileged
documents in judicial or quasi-judicial proceedings,
leaving the question of whether he may disclose them
on other occasions to the implied duty of confidence.
The policy of LPP requires that the client should be
secure in the knowledge that protected documents and
information will not be disclosed at all."
With all respect to the eminence of the jurists who
comprised the membership of the Law Reform
Committee, accordingly, I think that paragraph 18 of
its Report would require to be rephrased in the light of
modern case-law and the correctness of the statements
in paragraph 19 requires consideration.
105. Mr Sumption submitted, in my opinion correctly, that the cases establish that, so far from legal
advice privilege being an outgrowth and extension of
litigation privilege, legal professional privilege is a
single integral privilege, whose sub-heads are legal
advice privilege and litigation privilege, and that it is
litigation privilege which is restricted to proceedings
in a court of law in the manner which the authorities
show. The conclusions which the Court of Appeal
sought in paragraph 25 of its judgment to draw from
the authorities cited by it do not appear to me to be
well founded.
106. The Court of Appeal also expressed some
doubts in paragraph 39 of its judgment about the justification for legal advice privilege. The Law Society
at paragraph 18 of its helpful written case stated:
"In the course of giving instructions to draw a will,
confidential information may be given about matrimonial or financial difficulties; about anticipated
inheritance; about the parentage or adoption of children; about the perceived unsuitability of a former
spouse to act as guardian; about the physical or mental
health of the testator or spouse or other family member; about pensions, or businesses, or other assets. If a
testator is to be free to supply the frank and full information necessary for the drafting of a will, he must
be sure that what he says will remain confidential even
though litigation is not 'anticipated"'.
In relation to family matters it stated at note 36:
"Family lawyers similarly receive a great deal of
sensitive information, not only about businesses and
assets, but also about family behaviour. Particularly
while taking initial instructions, when litigation may
well not be 'anticipated', this information can be very
wide. To learn that some or all of this information
might not be privileged would not only worry clients
but also might lead to a failure to disclose."
One can add to these observations the experience of
lawyers who have advised on taxation matters. This
applies in particular to inheritance tax planning, where
the focus is on the disposition of assets and litigation is
not in prospect. It is essential that the legal adviser has
a complete picture of financial matters, some of which
may be highly confidential, especially when dealing
with family businesses. Many clients seeking such
advice would be very dismayed to think that the information they have made available to their lawyers
might not remain confidential. In my view there is
substantial force in the Law Society's submissions,
and a well founded case has been made out for the
retention of legal advice privilege in its present form
107. Mr Sumption then relied on the proposition
which I have accepted concerning the basis of legal
professional privilege as a foundation for his argument
on the main issue to be decided, which is the ambit of
the term "legal advice" in legal advice privilege. His
contention was that the content of legal advice qualifying for the protection of privilege was the same in
respect of both legal advice privilege and litigation
privilege and that the creation of a special head for
litigation privilege would conflict both with principle
and with the authorities.
108. Some statements about the ambit of the privilege may be garnered from the earlier authorities. In
the passage which I have quoted from Greenough v
Gaskell (1833) 1 My & K 98 Lord Brougham LC
referred at page 102 to "matters that come within the
ordinary scope of professional employment" and in
Carpmael v Powis (1846) 1 Ph 687 at 692 Lord
Lyndhurst LC used the same phrase and defined it
further as "a transaction in which solicitors are ordinarily employed by their client". In Herring v Clobery
(1842) 1 Ph 91 Lord Lyndhurst referred at page 96 to
"professional business", while in Pearse v Pearse
(1846) 1 De G & Sm 12 at 26 Knight Bruce V-C uses
the phrase "communications made in confidence
professionally".
109. The ambit of the privilege was examined in
more depth in the Court of Appeal and your Lordships'
House in Minter v Priest [1929] 1 KB 655; [1930] AC
558. One of the issues was whether conversations
between a solicitor and his client relating to the business of obtaining a loan for the deposit on the purchase
of real estate were privileged from disclosure. The
Court of Appeal held that they were privileged. In the
course of his judgment Lawrence LJ referred at pages
675 and 678 to "the ordinary scope" of a solicitor's
business or duties, while Greer LJ at page 684 used the
phrase "ordinary scope of a solicitor's employment".
This House allowed the plaintiff's appeal, on the
ground that the defendant was not acting as a solicitor
at the relevant time because he was not undertaking
the duty of a solicitor on the proposal made to him but
had made a proposal involving "a malicious scheme"
(per Lord Buckmaster at p 569) to keep the plaintiff
out of the transaction, with a view to making a profit
from it himself. The House defined the ambit of the
privilege, however, in essentially the same terms as
the Court of Appeal. Lord Buckmaster referred at page
568 to "the ordinary scope of a solicitor's business".
Lord Atkin at page 580 spoke of professional communications for the purpose of getting legal advice,
but his explanation at page 581 of what is covered by
legal advice appears wider than that adopted by the
Court of Appeal in the present case:
"If therefore the phrase is expanded to professional
communications passing for the purpose of getting or
giving professional advice, and it is understood that
the profession is the legal profession, the nature of the
protection is I think correctly defined."
At pages 584-5 he was more specific, expressing the
opinion that:
"If a person goes to a professional legal adviser for
the purpose of seeing whether the professional person
will give him professional advice, communications
made for the purpose of indicating the advice required
will be protected. And included in such communications will be those made on occasions such as the
present where the parties go to a solicitor for the
purpose of seeing whether he will either himself advance or procure some third person to advance a sum
of money to carry out the purchase of real property.
Such business is professional business, and communications made for its purpose appear to me to be
covered by the protection, whether the solicitor
eventually accedes to the request or not."
110. Other decided cases are reviewed by Taylor LJ
in Balabel v Air India [1988] Ch 317, but it is always
necessary to take account of the context in which such
statements were made, for the ambit of legal advice
may not have been in issue.
111. The issue in Balabel v Air India was whether the
plaintiffs, who had sued the defendant airline for specific performance of an agreement for an underlease,
could obtain discovery of various documents generated by the airline and its solicitors relating to the
proposed underlease. After examining the authorities
in detail, Taylor LJ said at page 330:
"Although originally confined to advice regarding
litigation, the privilege was extended to non-litigious
business. Nevertheless, despite that extension, the
purpose and scope of the privilege is still to enable
legal advice to be sought and given in confidence. In
my judgment, therefore, the test is whether the com-
munication or other document was made confidentially for the purposes of legal advice. Those purposes
have to be construed broadly. Privilege obviously
attaches to a document conveying legal advice from
solicitor to client and to a specific request from the
client for such advice. But it does not follow that all
other communications between them lack privilege. In
most solicitor and client relationships, especially
where a transaction involves protracted dealings, advice may be required or appropriate on matters great
or small at various stages. There will be a continuum
of communication and meetings between the solicitor
and client. ? Where information is passed by the solicitor or client to the other as part of the continuum
aimed at keeping both informed so that advice may be
sought and given as required, privilege will attach. A
letter from the client containing information may end
with such words as 'please advise me what I should
do'. But, even if it does not, there will usually be implied in the relationship an overall expectation that the
solicitor will at each stage, whether asked specifically
or not, tender appropriate advice. Moreover, legal
advice is not confined to telling the client the law; it
must include advice as to what should prudently and
sensibly be done in the relevant legal context."
In a later passage at pages 331-2 relied upon by the
Court of Appeal as support for its conclusions Taylor
LJ stated:
"It follows from this analysis that those dicta in the
decided cases which appear to extend privilege
without limit to all solicitor and client communications upon matters within the ordinary business of a
solicitor and referable to that relationship are too wide.
It may be that the broad terms used in the earlier cases
reflect the restricted range of solicitors' activities at the
time. Their role then would have been confined for the
most part to that of lawyer and would not have extended to business adviser or man of affairs. To speak
therefore of matters 'within the ordinary business of a
solicitor' would in practice usually have meant the
giving of advice and assistance of a specifically legal
nature. But the range of assistance given by solicitors
to their clients and of activities carried out on their
behalf has greatly broadened in recent times and is still
developing. Hence the need to re-examine the scope of
legal professional privilege and keep it within justifiable bounds."
I agree with the view expressed by Colman J in Nederlandse Reassurantie Groep Holding NV v Bacon &
Woodrow Holding [1995] 1 All ER 976 at 982 that the
statement of the law in Balabel v Air India does not
disturb or modify the principle affirmed in Minter v
Priest, that all communications between a solicitor and
his client relating to a transaction in which the solicitor
has been instructed for the purpose of obtaining legal
advice will be privileged, notwithstanding that they do
not contain advice on matters of law or construction,
provided that they are directly related to the performance by the solicitor of his professional duty as legal
adviser of his client.
112. There must, as Taylor LJ said, be limits to the
scope of privilege, but in my opinion the Court of
Appeal has set them too tightly in concluding that it is
confined to advice relating to the legal rights and
obligations of the client. It has, I think, been too restrictive in its view, perhaps because of the doubts
expressed by the Master of the Rolls about the justification for legal advice privilege. It is of course important not to permit a party to withhold production of
information which may be of significant importance
when the court is reaching its decision. As Bingham
LJ put it in Ventouris v Mountain [1991] 1 WLR 607
at 612:
"? disclosure being generally regarded as beneficial,
any exception has to be justified as serving the public
interest which gives rise to the exception." In this
connection it is worth quoting the remarks of Knight
Bruce V-C in Pearse v Pearse (1846) 1 De G & Sm 12
at 28-9, which, expressed in the style of the times,
seem to me to retain considerable validity:
"The discovery and vindication and establishment of truth are main purposes certainly of the
existence of Courts of Justice; still, for the obtaining
of these objects, which, however valuable and important, cannot be usefully pursued without moderation, cannot be either usefully or creditably pursued
unfairly or gained by unfair means, not every channel
is or ought to be open to them ? Truth, like all other
good things, may be loved unwisely -- may be pursued
too keenly -- may cost too much. And surely the
meanness and the mischief of prying into a man's
confidential communications with his legal adviser,
the general evil of infusing reserve and dissimulation,
uneasiness, and suspicion and fear, into those communications which must take place, and which, unless
in a condition of perfect security, must take place
uselessly or worse, are too great a price to pay for truth
itself."
Lord Nicholls of Birkenhead summarised the same
principle in more sober modern legal parlance in Re L
(a minor) [1997] AC 16 when he said at page 32:
"The public interest in a party being able to obtain
informed legal advice in confidence prevails over the
public interest in all relevant material being available
to courts when deciding cases."
113. The question for decision is where the line is to
be drawn and the bounds of privilege are to be set. It is
unquestionable that the breadth of work commonly
carried out by lawyers has increased since the early
19th century. The increase in the number and variety
of tribunals other than courts of law has been marked
in recent years. Statutory and non-statutory inquiries
and investigations have proliferated, as HM Government set out in its written case. The consequences of
findings in inquiries such as the Bingham Inquiry
may, as I have earlier outlined, be serious for some of
the persons or bodies to whom they relate, and investigations such as those held under the Companies Act
1985 can have a substantial effect. It may be of considerable importance for those who may be affected to
ensure that their case is put before the inquiry in as
effective a manner as possible. The Court of Appeal
stated in paragraph 33 of its judgment that a desire to
protect reputation to avoid more intrusive regulation
does not put the Bank on the same footing as an individual whose reputation is at risk in a public inquiry.
That may be so, but I cannot agree that the Bank
should for that reason be deprived of any protection of
legal professional privilege. Its interests may differ
from those of individuals whose conduct is called in
question, but it does not follow that they are to be
disregarded.
114. The work of advising a client on the most suitable approach to adopt, assembling material for
presentation of his case and taking statements which
set out the relevant material in an orderly fashion and
omit the irrelevant is to my mind the classic exercise
of one of the lawyer's skills. I can see no valid reason
why that should cease to be so because the forum is an
inquiry or other tribunal which is not a court of law,
provided that the advice is given in a legal context: see
Lord Scott's opinion at para 42. The skills of a lawyer
in assembling the facts and handling the evidence are
of importance in that forum as well as a court of law.
The availability of competent legal advice will materially assist an inquiry by reducing irrelevance and
encouraging the making of proper admissions. As
Lord Phillips of Worth Matravers himself expressed it
in his Chairman's Note on Lawyers in connection with
the BSE tribunal:
"Lawyers are experienced in gathering documentary evidence and have the skills essential to ensure
that witness statements cover the relevant ground,
without becoming unnecessarily prolix."
Dr Johnson described the function of lawyers, as
Lord Simon of Glaisdale felicitously recalled in
Waugh v British Railways Board [1980] AC 521 at
535, in the following terms:
"As it rarely happens that a man is fit to plead his
own cause, lawyers are a class of the community who,
by study and experience, have acquired the art and
power of arranging evidence, and of applying to the
points at issue what the law has settled. A lawyer is to
do for his client all that his client might fairly do for
himself, if he could."
The Court of Appeal acknowledged at paragraph 34
of its judgment that the role of Freshfields in assisting
with the preparation of evidence and submissions for
the Bingham Inquiry was very similar to that which a
solicitor plays in relation to litigation. It is an exercise
in advocacy and good advocacy will be adapted to the
tribunal concerned.
115. An inquest is a case in point. The findings may
not now have the legal consequences which they
formerly could have, but, as Lord Bingham of Cornhill
stated in R (on the application of Amin) v Secretary of
State for the Home Department [2004] 1 AC 653 at
paragraph 31, the inquest may have a vital function in
exposing culpable and discreditable conduct: cf the
decision of the European Court of Human Rights in
Jordan v United Kingdom (2001) 11 BHRC 1 and the
discussion in the speech of Lord Bingham of Cornhill
in R (on the application of Middleton) v West Somerset Coroner [2004] 2 AC 182. It is difficult to suppose that those whose conduct is investigated under
such a searching light should be deprived of the protection of legal professional privilege when they obtain advice and assistance from their lawyers about
how to proceed.
116. I therefore conclude that there is a clear case for
upholding the appellant Bank's submission that privilege attached to communications between the BIU and
Freshfields by which the advice and assistance of
Freshfields was sought and obtained as to the manner
in which the Bank should appropriately present evidence and material to the Bingham Inquiry. To repeat
the phrase of Lord Nicholls of Birkenhead, the public
interest in the Bank's being able to obtain legal advice
in confidence prevails over the public interest in all
relevant material being available to the inquiry when
reaching its conclusions.
117. It follows that the declaration and order made by
Tomlinson J in Three Rivers (No 6) were incorrectly
made. I would allow the appeal and set aside the
judge's declaration and order for disclosure and inspection.
118. One other matter remains for mention. Mr
Sumption urged that we should express an opinion on
the correctness of the decision of the Court of Appeal
in Three Rivers (No 5), which he submitted raised
important issues about privilege which should be
resolved. The Court of Appeal in that case found
against the Bank and your Lordships refused the
Bank's petition for leave to appeal. Disclosure of large
numbers of documents has been made in accordance
with the order of the Court of Appeal and Mr Sumption gave an undertaking on behalf of the Bank that, if
the House were to rule that the decision of the Court of
Appeal was incorrect, the documents already disclosed will continue to be admissible in the present
action and no point will be taken about the judge
having seen them. I should be reluctant, in the absence
of a very pressing need, to express an opinion on
issues which are not before the House -- even though
we permitted some argument on them to be put before
us -- the more so when leave to appeal was refused.
For that reason, and for those given by my noble and
learned friend Lord Scott of Foscote in discussing this
issue, I do not propose to express any opinion on it.
Having said that, I am not to be taken to have approved of the decision in Three Rivers (No 5), and I
would reserve my position on its correctness.
LORD BROWN OF EATON-UNDER-HEYWOOD
My Lords,
119. Having had the advantage of reading in draft the
speeches of my noble and learned friends, Lord Scott
of Foscote, Lord Rodger of Earlsferry and Lord
Carswell, I gratefully adopt Lord Scott's and Lord
Carswell's accounts of the facts and issues and proceed at once to add just a very few observations of my
own.
120. I think it clear that legal advice privilege attaches to the communications between the Bank and
its lawyers concerning the preparation of the Bank's
overarching statement (the statement of its case to the
Bingham inquiry). I would go so far as to state as a
general principle that the process by which a client
seeks and obtains his lawyer's assistance in the
presentation of his case for the purposes of any formal
inquiry?whether concerned with public law or private
law issues, whether adversarial or inquisitorial in
form, whether held in public or in private, whether or
not directly affecting his rights or liabilities?attracts
legal advice privilege. Such assistance to my mind
clearly has the character of legal business. It is precisely the sort of professional service for which lawyers are ordinarily employed by virtue of their expertise and experience. Indeed, it falls squarely within Dr
Johnson's description of a lawyer's function?see Lord
Carswell's speech at paragraph 114. It is, moreover, a
service which can only effectively be rendered if the
client is candid and forthcoming as to the true facts of
his case?the very consideration which justifies the
absolute character of legal advice privilege in the first
place.
121. The Court of Appeal in Three Rivers District
Council v Governor and Company of the Bank of
England (No. 6) [2004] QB 916 (Three Rivers (No. 6))
to my mind adopted too narrow an approach to the
scope of legal advice privilege, holding as it did that
the privilege applies only where the client's legal
rights and liabilities are at stake, seldom therefore in
relation to an inquiry, perhaps not even where the
inquiry puts the client's reputation at risk?a question
expressly left undecided. But consider an inquiry
where the client receives and must respond to a
Salmon letter. Can the tribunal then insist on seeing
the communications between the client and his lawyer
by which the terms of his response come to be settled?
Surely not. Rather this would seem to me a classic
case for the application of the privilege. And by the
same token that legal advice privilege must in my
judgment apply to someone whose reputation is at
stake, so too should it apply to anyone who instructs
lawyers with a view to making the best presentation of
his case at an inquiry. It is simply not practicable to
seek to distinguish between the different interests of
those appearing. This is, after all, an area of the law
where clarity and certainty are at a premium. Furthermore, as Lord Scott points out at paragraph 39 of
his speech, it could hardly be right to allow legal advice privilege, for example, to a developer at a planning inquiry but deny it to an objector.
122. For these reasons, together with the reasons
given in the speeches of my noble and learned friends,
Lord Scott, Lord Rodger and Lord Carswell, I too
would allow this appeal.
Parliamentary copyright.
END OF DOCUMENT
*916 Three Rivers District Council and Others v.
Governor and Company of the
Bank of England (No 6)
Court of Appeal
CA
Lord Phillips of Worth Matravers MR, Longmore and
Thomas LJJ
2004 Jan 26, 27, 29; March 1
Practice--Discovery--Privilege--Legal advice privilege--Action alleging misfeasance in public office in
respect of defendant's supervision of bank-- Communications between defendant and solicitors relating to
assistance and advice on presentation of evidence to
inquiry
into
defendant's
supervision
of
bank--Application for disclosure of communications--Defendant claiming legal advice privilege--Whether communications privileged
The claimants, the liquidators and creditors of a bank
("BCCI"), brought an action against the Bank of
England for misfeasance in public office in respect of
its supervision of BCCI before its collapse. The
claimants sought an order for inspection and disclosure of communications passing between the Bank
and its solicitors during the course of a private
non-statutory inquiry which had been set up to inquire
into the Bank's supervision of BCCI. The Bank
claimed legal advice privilege in respect of all solicitor/client communications. On the hearing of the application the judge found that the function of the solicitors was not to advise on the Bank's obligations but
on how to present its evidence to the inquiry in the
way least likely to attract criticism, and he made a
declaration that the Bank was entitled to claim legal
advice privilege only in respect of solicitor/client
communications exchanged for the purpose of seeking
advice as to the Bank's rights and obligations, but not
in respect of communications relating to the seeking or
obtaining of advice or assistance on the presentation of
materials and evidence to the inquiry.
rights and liabilities, broad protection would be given
to communications passing between solicitor and
client in the course of that relationship which were
ancillary to that purpose; but that legal advice privilege did not necessarily attach to advice or assistance
merely because it was given in the normal course of
the ordinary business of a solicitor; that, on the judge's
findings, the solicitors' dominant role was to advise
the Bank on the preparation and presentation of evidence to the inquiry in order to show the Bank and its
officials in the best possible light; that although the
representation of witnesses at inquiries now came
within the ordinary business of a solicitor, a typical
inquiry was not necessarily, or even primarily, concerned with legal rights and liabilities; that the advice
and assistance given on the presentation of evidence to
the private non-statutory inquiry in order to protect the
reputation of the Bank, whatever the position might be
in relation to an individual witness whose reputation
was in jeopardy, was not given in the context of a
professional relationship involving advice on legal
rights and duties so as to attract legal advice privilege;
and that, although it was possible that the solicitors
might also have given some advice to the Bank on its
legal rights and liabilities, that possibility could not, in
the circumstances, clothe all the solicitor/client
communications with privilege (post, paras 10, 16, 21,
26, 28, 30-34, 37, 40).
Balabel v Air India [1988] Ch 317, CA and Three
Rivers District Council v Governor and Company of
the Bank of England (No 5) [2003] QB 1556, CA
considered.
*917 Per curiam. Where litigation is not anticipated
it is not easy to see why communications with a solicitor should be privileged. Nearly 50 years have
passed since the Law Reform Committee looked at
this area. It is perhaps time for further review (post,
para 39).
Decision of Tomlinson J [2003] EWHC 2565
(Comm) affirmed.
The following cases are referred to in the judgments:
Balabel v Air India [1988] Ch 317; [1988] 2 WLR
1036; [1988] 2 All ER 246, CA
On the Bank's appeal-Carpmael v Powis (1846) 1 Ph 687
Held, dismissing the appeal, that legal advice privilege attached to advice by a lawyer about legal rights
and liabilities; that where a solicitor/client relationship
was formed for the dominant purpose of obtaining
advice or assistance in relation to the client's legal
Great Atlantic Insurance Co v Home Insurance Co
[1981] 1 WLR 529; [1981] 2 All ER 485, CA
Greenough v Gaskell (1833) 1 M & K 98
All ER 472, CA
L (A Minor) (Police Investigation: Privilege), In re
[1997] AC 16; [1996] 2 WLR 395; [1996] 2 All ER
78, HL(E)
Minter v Priest [1930] AC 558, HL(E)
Three Rivers District Council v Governor and
Company of the Bank of England (No 5) [2002]
EWHC 2730 (Comm); [2003] EWCA Civ 474; [2003]
QB 1556; [2003] 3 WLR 667, CA
Wheeler v Le Marchant (1881) 17 Ch D 675, CA
Wilson v Northampton and Banbury Junction Railway Co (1872) LR 14 Eq 477
The following additional cases were cited in argument:
A M & S Europe Ltd v Commission of the European
Communities (Case 155/79) [1983] QB 878; [1983] 3
WLR 17; [1983] 1 All ER 705; [1982] ECR 1575, ECJ
Anderson v Bank of British Columbia (1876) 2 Ch D
644, CA
B v Auckland District Law Society [2003] UKPC 38;
[2003] 2 AC 736; [2003] 3 WLR 859, PC
General Mediterranean Holdings SA v Patel [2000] 1
WLR 272; [1999] 3 All ER 673
Gotha City v Sotheby's [1998] 1 WLR 114, CA
Hellenic Mutual War Risks Association (Bermuda)
Ltd v Harrison (The Sagheera) [1997] 1 Lloyd's Rep
160
Jacobs v London County Council [1950] AC 361;
[1950] 1 All ER 737, HL(E)
Nederlandse Reassurantie Groep Holding NV v
Bacon & Woodrow [1995] 1 All ER 976
R v Derby Magistrates' Court, Ex p B [1996] AC
487; [1995] 3 WLR 681; [1995] 4 All ER 526, HL(E)
Secretary of State for Trade and Industry v Baker
[1998] Ch 356; [1998] 2 WLR 667; [1998] 1 All ER
673
United States of America v Philip Morris Inc [2003]
EWHC 3028 (Comm)
Ventouris v Mountain [1991] 1 WLR 607; [1991] 3
Waugh v British Railways Board [1980] AC 521;
[1979] 3 WLR 150; [1979] 2 All ER 1169, HL(E)
The following additional cases, although not cited,
were referred to in the skeleton arguments:
Akzo Nobel Chemicals Ltd v Commission of the
European Communities (Joined Cases T-125/03 and
T-253/03) (unreported) 30 October 2003, ECJ
R (Morgan Grenfell & Co Ltd) v Special Comr of
Income Tax [2002] UKHL 21; [2003] 1 AC 563;
[2002] 2 WLR 1299; [2002] 3 All ER 1, HL(E)
Three Rivers District Council v Governor and
Company of the Bank of England (No 5) [2002]
EWHC 2730 (Comm)
INTERLOCUTORY APPEAL from Tomlinson J
By an application notice dated 1 August 2003 the
claimants, Three Rivers District Council, other creditors of the Bank of Credit and *918 Commerce International SA ("BCCI") and the Bank of Credit and
Commerce International SA (in liquidation), applied
pursuant to CPR r 31.12 for an order that the defendant, the Governor and Company of the Bank of England, list and make available for inspection and disclose, inter alia, documents and correspondence, including instructions to counsel and notes of consultations in respect of the period 23 June to 5 July 1991
immediately prior to BCCI's collapse, but which
might have been created or prepared after 5 July 1991.
The Bank resisted the application on the ground that
documents and correspondence between the Bank and
its legal advisers were subject to legal advice privilege. By order dated 10 November 2003 Tomlinson J,
inter alia, declared that the only documents or parts of
documents in the Bank's control and coming into
existence between the closure of BCCI on 5 July 1991
and the issue of the claim in May 1993 which the Bank
was entitled to withhold from inspection were: (i)
communications passing between the Bank and its
legal advisers, including any solicitor seconded to the
Bank, for the purposes of seeking or obtaining "legal
advice", namely advice concerning the Bank's rights
and obligations; and (ii) any part of a document which
evidenced the substance of such a communication.
The judge refused permission to appeal.
By an appellant's notice filed on 20 November 2003
and pursuant to the permission granted by the Court of
Appeal (Mance LJ) on 2 December 2003, the Bank
appealed the judge's order, inter alia, on the following
grounds. (1) The judge was wrong to introduce words
qualifying the effect of the Court of Appeal's order
dated 3 April 2003 in Three Rivers District Council v
Governor and Company of the Bank of England (No
5) [2003] QB 1556 by restricting the definition of
"legal advice" to advice concerning the Bank's rights
and obligations. (2) The judge was wrong to hold (i)
that legal advice privilege only extended to advice
pertaining to the client's legal rights and obligations;
and (ii) that other advice given by solicitors and
counsel to a client, including advice as to the presentation of its evidence and material to an inquiry, was
not privileged. (3) The judge wrongly understood the
effect of the judgment of the Court of Appeal in Three
Rivers District Council v Governor and Company of
the Bank of England (No 5) [2003] QB 1556 and
failed to have adequate regard to the fact that the Court
of Appeal's judgment in that case was not concerned
with communications between the Bank as client and
its solicitors and counsel. (4) The judge was wrong to
conclude that the evidence before him showed in
relation to communications between the Bank and its
lawyers that advice was sought by the Bank from its
lawyers not as to what was required to be done in order
to comply with the Bank's obligations, but rather on
how to present its evidence to the Bingham Inquiry in
the way least likely to attract criticism. (5) The judge
was wrong to conclude that the communications between the Bank and its lawyers were not privileged.
The facts are stated in the judgment of the court.
Bankim Thanki QC and Ben Valentin for the Bank.
The judge incorrectly understood the Court of Appeal
in Three Rivers District Council v Governor and
Company of the Bank of England (No 5) [2003] QB
1556, 1579-1580, paras 29- 30 as deciding that privilege could only be claimed for *919 solicitor/client
communications where the solicitor was giving advice
as to the client's legal rights and obligations. The court
held only that communications other than lawyer/client communications did not attract legal advice
privilege and confirmed that the law as to lawyer/client communications was that stated in Balabel v
Air India [1988] Ch 317.
The judge also erred in concluding that the Court of
Appeal in the Three Rivers (No 5) case decided that
the dominant purpose of the solicitor/client communications was to present evidence to the inquiry. The
relevant passages were obiter: see pp 1581-1583,
paras 32-37. The dominant purpose test, applicable to
litigation privilege, has no application to legal advice
privilege: see the Three Rivers (No 5) case; the Supplement to Civil Procedure 2003, para 31.3.6 and
Hollander, Documentary Evidence (8th ed) (2003), p
214, para 13-10. In any event, the test is satisfied since
the dominant purpose of the solicitors' retainer was to
obtain legal advice: see Hellenic Mutual War Risks
Association (Bermuda) Ltd v Harrison (The Sagheera)
[1997] 1 Lloyd's Rep 160. [Reference was also made
to Secretary of State for Trade and Industry v Baker
[1998] Ch 356, 372b-e.]
Legal advice privilege is not confined to advice on
legal rights and obligations but extends to advice as to
what should prudently and sensibly be done in the
relevant legal context: see the 16th Report of the Law
Reform Committee on Privilege in Civil Proceedings
(1967) (Cmnd 3472), paras 17-19. Once a solicitor has
been instructed, legal advice privilege extends to all
solicitor/client communications on matters which, at
any given time, are within the ordinary business of the
solicitor and are referable to the relationship: see
Balabel's case [1988] Ch 317, 329h-332; the Three
Rivers (No 5) case [2003] QB 1556, 1579-1580, 1582,
paras 29, 34; Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow [1995] 1 All ER 976,
982-983; Carpmael v Powis (1846) 1 Ph 687, 692;
Minter v Priest [1930] AC 558, 568 and Great Atlantic
Insurance Co v Home Insurance Co [1981] 1 WLR
529, 535a-536b. The ordinary business of a solicitor
has greatly expanded in recent years. Representation
at, and the giving of advice on the presentation of
evidence to, an inquiry are within the ordinary business of a solicitor and within the justifiable bounds of
legal advice privilege: see Sir Richard Scott's report,
dated 5 February 1996, on the inquiry into the sale of
arms to Iraq and the BSE Inquiry: Chairman's Note on
Lawyers, dated 5 February 1998. The advice need not
be referable to the lawyer's function as a lawyer but
must be something which an individual would legitimately go to a lawyer about.
A "relevant legal context" arises where a client
consults a lawyer on a matter which is reasonably
understood by the client to have direct or indirect legal
consequences. Therefore, where a person reasonably
apprehends any criticism from an inquiry and seeks
legal advice in relation to that inquiry, the advice he
receives is covered by legal advice privilege. The
Bingham Inquiry was a "relevant legal context": see
the terms of reference in the Bingham report on the
Inquiry into the Supervision of the Bank of Credit and
Commerce International (HC Paper (1992-1993) No
198), p iii. It is legitimate to seek advice from lawyers
in connection with an inquiry so as to avoid criticism
and protect reputation, even where there is legal immunity. The claimants' attempted distinction between
legal advice and presentational evidence is unrealistic.
*920 The rationale of legal advice privilege is that a
person must be able to consult his lawyer in confidence: see R v Derby Magistrates' Court, Ex p B
[1996] AC 487, 506, 507c-d; Balabel's case [1988] Ch
317, 330d-e and A M & S Europe Ltd v Commission
of the European Communities (Case 155/79) [1983]
QB 878, 949, para 18. The only difference between
legal advice privilege and litigation privilege is that
the former does not extend beyond direct communications between lawyer and client: see Three Rivers
(No 5) [2003] QB 1556. Legal advice privilege applies
to communications between client and lawyer whether
or not in contemplation of litigation, whereas litigation
privilege applies to communications between client
and lawyer and third parties when such communications are made in contemplation of litigation: see In re
L (A Minor) (Police Investigation: Privilege) [1997]
AC 16, 24h; Waugh v British Railways Board [1980]
AC 521, 542a-b; Anderson v Bank of British Columbia (1876) 2 Ch D 644, 658; Ventouris v Mountain
[1991] 1 WLR 607, 611a-c; A M & S Europe Ltd v
Commission of the European Communities (Case
155/79) [1983] QB 878, 912b-d, 913b-c; R v Derby
Magistrates' Court, Ex p B [1996] AC 487, 506,
507c-d; B v Auckland District Law Society [2003] 2
AC 736, 754-756, paras 37-45; Phipson on Evidence
15th ed (2000), para 20-06 and Bray on Discovery
(1885), p 404. Legal advice privilege extends to assistance as well as advice: see Gotha City v Sotheby's
[1998] 1 WLR 114 and Civil Procedure 2004, Vol I,
para 31.3.6.
Legal advice privilege is not a mere rule of evidence
but a substantive and fundamental common law principle. Where the privilege attaches, there is no question of balancing the considerations favouring the
protection of confidentiality against any considerations favouring disclosure: see General Mediterranean
SA Holdings v Patel [2000] 1 WLR 272, 285.
Gordon Pollock QC , Barry Isaacs and Nathan Pillow for the claimants. In the Three Rivers (No 5) case
[2003] QB 1556 the court held that legal advice privilege attached only to communications between client
and lawyer the dominant purpose of which was the
seeking or giving of legal advice; that the dominant
purpose of obtaining the information which Bank
employees could give to the Bingham Inquiry was
merely to present that evidence to the inquiry; and that
for the purposes of legal advice privilege advice on
presentation did not constitute legal advice: see pp
1581-1583, paras 32-37 and United States of America
v Philip Morris Inc [2003] EWHC 3028. Those conclusions did not depend on the fact that the court was
dealing with third party documents rather than direct
solicitor/client communications. They provided alternative reasons for disposing of the appeal and were
part of the ratio decidendi: see Jacobs v London
County Council [1950] AC 361, 369-370. Accordingly, this court is bound by the Three Rivers (No 5)
decision and the Bank's appeal fails.
Once a document has been identified as falling
within a potentially privileged class of documents the
question whether it is in fact privileged depends upon
the application of the dominant purpose test. Nothing
in the Three Rivers (No 5) case indicates that the
dominant purpose test has been abolished. Dominant
purpose applies both to litigation privilege and legal
advice privilege. The only distinction between the two
types of privilege is the class of potential communications to which the dominant purpose test is applicable. There is ample justification for judge's conclusion that assistance *921 and advice was sought not as
to what was required to be done in order to comply
with the Bank's obligations, but rather on how to
present the Bank's evidence to the Bingham Inquiry in
the way least likely to attract criticism. Inquiries are
not adversarial in nature and do not involve the determination of legal rights or liabilities.
The issue of principle for this court is whether legal
professional privilege should be extended to include
not only legal advice properly so called but also
"presentational" assistance given by a lawyer in a
non-litigious context. The question raised on the particular facts is whether employing a lawyer to manipulate presentational material so as to avoid justified or
unjustified criticism at a public inquiry should attract
legal professional privilege.
The starting point is the fundamental principle in the
administration of justice that the court should have
access to all relevant and probative material in resolving a dispute in court. The doctrine of privilege is
a necessary exception to this principle and must be
kept within proper bounds: see Waugh v British
Railways Board [1980] AC 521, 543d-e and Balabel's
case [1988] Ch 317, 331-332. Privilege must therefore
be justified.
First, the court should identify whether there is a
difference between advice as to legal rights or liabilities or the carrying out of a specifically legal transaction one the one hand, and the giving of forensic assistance on the other. The difference is illustrated by
asking whether the functions performed by the lawyer
could be done by someone else, or whether the lawyer
is performing a function which only he, with a lawyer's knowledge, skill and training, is capable of performing. Forensic skills are capable of being supplied
by lawyers or non-lawyers. The burden lies upon the
party resisting discovery to show why it should be
withheld and the question whether privilege arises
cannot depend upon the professional qualification of
the person supplying the forensic assistance. The
premise underlying the Bank's case, that anything
done by a lawyer should be privileged, is inconsistent
with the authorities, which confine legal advice privilege to lawyer/client communications relating to legal
rights and obligations or the carrying out of legal
transactions.
Second, the court should ask whether, where a lawyer is employed to provide purely forensic assistance
in a non-litigious context, policy reasons exist for
allowing the client to cloak communications with his
lawyer in privilege in any subsequent litigation.
Third, the court should ask whether any such policy
reasons outweigh the fundamental principle that all
relevant material should be made available in litigation. A desire to preserve reputation or honour, or
avoid criticism, as opposed to the desire to avoid the
risk of any legal consequences, does not provide a
sufficient countervailing factor as a matter of public
policy to outweigh this principle: see Wheeler v Le
Marchant 17 Ch D 675, 681 and Waugh v British
Railways Board [1980] AC 521, 531-532.
Fourth, the court should ask whether the historical
origins of the doctrine support or contradict an extension of privilege to pure forensic assistance. Legal
professional privilege exists as an extension of litigation privilege: see Greenough v Gaskell (1833) 1 M &
K 98. The Bank relies on the statement that a solicitor
cannot be compelled by a third party to disclose matters which have come to his knowledge "in the conduct of professional business" for a client. The fact
that it was considered necessary that privilege should
attach to the "professional business" of a solicitor in
1833 does not justify *922 the extension of the privilege to cover the much wider "professional business"
of a solicitor in 2004.
Balabel's case [1988] Ch 317 is inconsistent with the
Bank's submissions. The case concerned pure legal
advice, the "relevant legal context" being the grant of a
lease. Taylor LJ construed legal advice narrowly,
rejecting the argument that once a solicitor had been
instructed, legal advice privilege extended to all
communications between solicitor and client on matters within the ordinary business of the solicitor and
referable to the relationship. The Three Rivers (No 5)
case [2003] QB 1556, 1579-1580, para 29 is wrong in
stating that Taylor LJ accepted that argument. Provided advice is sought in a relevant legal context, all
communications referable to that context will attract
privilege, even if the individual communications do
not themselves involve the seeking or giving of legal
advice, as they are part of the "continuum of communication": see Balabel's case, p 330. The privilege
covers legal "advice and assistance of a specifically
legal nature" but not forensic "assistance": see p 332A.
Where an individual faces an inquiry, as a result of
which he might well be sued, and consults a solicitor
for advice on how best to minimise the risk of litigation, such advice will constitute legal advice. Privilege
would attach to any legal advice, properly so-called,
which was sought by the Bank or given by its lawyers.
[Reference was made to section 1(1) of the Tribunals
of Inquiry Evidence Act 1921.]
Legal professional privilege is an extension of a
single privilege in aid of litigation: see Ventouris v
Mountain [1991] 1 WLR 607, 617. The rationale for
the extension of privilege to the seeking and giving of
legal advice in a non-litigious context is that rights and
liabilities (but not criticisms or damage to reputation)
are the subject of litigation: see the Law Reform
Committee Report, paras 17-20. Legal professional
privilege, unlike litigation privilege, is confined to
legal advice on rights liabilities and obligations, and
does not extend to the orderly conduct of everyday
affairs, or assistance in a non-litigious matter. It is
essentially a creature of adversarial proceedings: see R
v Derby Magistrates' Court, Ex p B [1996] AC 487,
510; In re L (A Minor) (Police Investigation: Privilege) [1997] AC 16, 24, 26, 27 and the Three Rivers
(No 5) case [2003] QB 1556, 1561, para 2. The "clean
breast" rationale for litigation privilege has no application to legal professional privilege: see the Three
Rivers (No 5) case [2003] QB 1556, 1578-1579, para
26.
Thanki QC in reply. The judge misunderstood the
evidence by holding [2003] EWHC 2565 (Comm) at
[13] that the dominant purpose of the communications
was not the obtaining of legal advice, but the placing
of the material before the inquiry.
Since the communications come within an established category of privilege, there is no balancing
exercise to be performed: see B v Auckland District
Law Society [2003] 2 AC 736, 756, 759, paras 46, 56.
The "clean breast" rationale applies equally to legal
advice privilege and litigation privilege, but possibly
with lesser force in certain non-litigious situations: see
R v Derby Magistrates' Court, Ex p B [1996] AC 487,
506-508 and the Three Rivers (No 5) case [2003] QB
1556, 1578-1579, para 26. The formulation in Balabel's case [1988] Ch 317, 331h was regarded as too
wide only because the expansion of the ordinary
business of solicitors did not mean that all such ex-
panded business necessarily gave rise to a privileged
*923 relationship. [Reference was made to the Three
Rivers (No 5) case [2003] QB 1556, 1579-1580, paras
29, 30.]
Cur. adv. vult.
1 March. LORD
MATRAVERS MR
PHILLIPS
OF
WORTH
handed down the following judgment of the court.
Introduction
1 This appeal is a consequence of the previous
judgment of this court on an earlier disclosure application now reported as Three Rivers District Council v
Governor and Company of the Bank of England (No
5) [2003] QB 1556. In that appeal this court decided
that documents prepared by employees or
ex-employees of the Bank of England ("the Bank")
with the intention that they be sent to the Bank's solicitors ("Freshfields") whether or not they were prepared for the dominant purpose of obtaining legal
advice were not privileged and should be disclosed.
This was because, as the Bank accepted, there was no
litigation privilege in such material (see In re L (A
Minor) (Police Investigation: Privilege) [1997] AC
16) and the Bank had to rely on legal advice privilege
which extended only to communications between a
client (or his agent for the purpose) on the one hand
and his solicitor on the other.
2 The Bank's original claim for privilege was attacked by Mr Pollock for the liquidators on the basis
(1) that the documents for which privilege was
claimed were not documents of a class comprised
within the doctrine of legal advice privilege and (2)
that, in any event, they had not been prepared for the
dominant purpose of obtaining legal advice from
Freshfields but for the purpose of placing facts before
Bingham LJ and assisting him in the inquiry into the
collapse of BCCI which he was conducting at the
request of the Government and the Bank. The court
accepted the first of these arguments on the basis of
established authority; it also decided that, even if the
first argument was wrong and the relevant documents
could theoretically be the subject of a claim for privilege, the documents, which were the subject-matter of
the application, had not been prepared for the dominant purpose of obtaining legal advice so that the
claim for privilege would, in any event, have failed.
The court held that the dominant purpose for which
these documents were prepared was "so that the Bank
could comply with its primary duty of putting all
relevant factual material before Bingham LJ": see
[2003] QB 1566, 1582, para 35.
3 In the course of his submissions in the Three Rivers
(No 5) case [2003] QB 1566 Mr Pollock made it clear
that he was not seeking disclosure of any documents
passing between Freshfields and the Bingham Inquiry
Unit ("BIU "), which was set up as described, at p
1562, para 3, of the earlier judgment and was agreed to
constitute the client in this context. That was because
he accepted that such documents were covered by
legal advice privilege. In the light of the decision of
the court to accept the second part of his argument in
relation to what we may call "third-party documents",
he decided to withdraw that concession and argue that
even communications between BIU and Freshfields
are not properly within the category of legal advice
privilege as claimed by the Bank. The judge has permitted Mr Pollock to withdraw his concession. There
are no grounds on which that decision *924 can be
challenged, since it was a matter for his discretion.
The judge [2003] EWHC 2565 (Comm) then held
further that what we may call "solicitors' documents"
were not in this court capable of being the subject-matter of a privilege claim unless they came into
existence for the purpose of obtaining legal advice; the
reason for this decision was, broadly, that any other
decision would have been inconsistent with the Three
Rivers (No 5) case. He made a declaration in the following terms:
"It is declared that the only documents or parts of
documents in the Bank's control and coming into
existence between the closure of BCCI SA on 5 July
1991 and the issue of the present proceedings in May
1993 which the Bank is entitled to withhold from
inspection on the ground of legal advice privilege are:
(1) communications passing between the Bank and its
legal advisers (including any solicitor seconded to the
Bank) for the purposes of seeking or obtaining 'legal
advice' (which means, for the avoidance of doubt,
advice concerning the Bank's rights and obligations);
and (2) any part of a document which evidences the
substance of such a communication."
He then ordered a further and better list to be prepared
in accordance with this declaration.
The contentions
4 Mr Thanki for the Bank submitted: (1) the judge
was wrong to hold that this court in the Three Rivers
(No 5) case [2003] QB 1556 had, expressly or by
necessary inference, already decided that the documents now sought did not come into existence for the
purpose of giving or obtaining legal advice. (2) The
judge should therefore have looked at the matter
afresh and decided whether the documents did come
into existence for that purpose; he should then have
decided that the purpose for which the documents
came into existence was so that Freshfields could give
and the BIU receive legal advice. (3) The phrase "legal
advice" included giving legal assistance in the relevant
legal context. (4) The relevant legal context was,
immediately, the Bingham Inquiry but also the possible ramifications that might occur after the inquiry. (5)
Part of that assistance was the use of Freshfields' skills
in trying, by presenting material to the Bingham Inquiry in what seemed to them and the BIU the most
effective way, to counteract any suggestion of
blameworthiness on the part of the Bank's officials. (6)
Assistance of this kind, which many solicitors provide
for their clients if they take part in a non-statutory
inquiry, is part of the ordinary business of a solicitor;
documents coming into existence as part of that assistance are, therefore, privileged. (7) In the absence
of an assurance that such communications are privileged, parties will no longer co-operate with
non-statutory inquiries.
5 Mr Pollock for the liquidators submitted: (1) on a
proper reading of the judgment in the Three Rivers
(No 5) case [2003] QB 1556, this court had already
decided that the documents, of which he now sought
disclosure, had not come into existence for the purpose of giving or obtaining legal advice. (2) Whether
that had been decided or not, the documents did not
come into existence for that purpose and, certainly,
any such purpose was not the dominant purpose. (3)
Whereas legal advice, in the context of legal advice
privilege, could include "assistance" that assistance
had to be rendered in the *925 context of a request for
legal advice in connection with a legal transaction. (4)
Neither the Bingham Inquiry nor its ramifications
could be a legal transaction for the purpose of legal
advice privilege. (5) Assistance to counteract suggestions of blameworthiness was no part of legal advice.
(6) Before legal advice privilege can arise, there must
be a context of legal advice being requested. (7) The
suggestion of non-co-operation with non-statutory
inquiries was, if relevant at all, much exaggerated.
Did the Three Rivers (No 5) case decide the issue?
6 In the Three Rivers (No 5) case [2003] QB 1556 the
court held that the dominant purpose of obtaining
documents from third parties was to provide evidence
to the Bingham Inquiry. The same is not true of correspondence created by and passing directly between
BIU and Freshfields. That correspondence was likely
to include a high proportion of requests for and provision of advice as to how that material should be
presented to the Bingham Inquiry, and one object of
such advice would be to present the Bank and its officials in the best possible light. It would be advice on
presentation. Does such advice constitute "legal advice" for the purpose of legal advice privilege? The
court posed that question in the course of discussion in
the Three Rivers (No 5) case: see p 1581, para 32. It
was not unreasonable to expect the court to go on to
answer that question. The judge thought that it had
done so, in the negative. Submissions made by counsel for the Bank in the context of seeking permission
to appeal to the House of Lords suggest that they were
of the same view. Subsequently, however, they argued
that the court had answered that question not in the
negative but in the affirmative.
7 We have given careful consideration to the passages in the judgment that followed the posing of the
question. We have concluded that they do not give a
clear answer to it. We must address it ourselves, but in
the light of the judgment in the Three Rivers (No 5)
case. The judge thought that, if the judgment did not
give an express answer to the question, the answer
could none the less be deduced from the reasoning of
the court. The issue for us is whether the judge's conclusion was correct.
The nature of the advice
8 In para 8 of the judgment under appeal the judge
said this about the advice sought from and given by
Freshfields:
"the evidence demonstrates that assistance and
advice was sought not as to what was required to be
done in order to comply with the Bank's obligations
but rather on how to present its evidence to the inquiry
in the way least likely to attract criticism. That is not a
matter concerning the Bank's rights and obligations."
(See [2003] EWHC 2565 (Comm).)
Subsequently, he added, at para 16:
"Of course it is possible that the dominant purpose
of some communications between the BIU and
Freshfields during the period when the conduct of the
inquiry was a live issue may have been the provision
of advice as to the legal rights and obligations of the
Bank as opposed to the question how the Bank's evidence might be presented to the inquiry in the way
least likely to attract criticism."
9 *926 We propose to consider first whether the
corpus of advice that related to presentation, if considered in isolation, is capable of amounting to "legal
advice" for the purpose of legal advice privilege. We
will then turn to consider whether the context in which
that advice was given and, in particular, the fact that
Freshfields may also, under the same retainer, have
given advice in relation to the Bank's legal rights and
obligations, brought the presentation advice within the
cloak of privilege.
The meaning of "legal advice"
10 "Legal advice" is a phrase frequently used in the
authorities that were extensively considered in the
Three Rivers (No 5) case [2003] QB 1556. Before
turning to those authorities it is logical to start by
considering what "legal advice" means as a matter of
ordinary language. It does not mean "advice given by
a lawyer". Indeed it has not been suggested by the
Bank that communications between a solicitor seeking
or giving advice will automatically attract legal advice
privilege, regardless of the nature of the advice or the
circumstances in which it is given. The natural
meaning of legal advice is "advice in relation to law".
That is, in effect, the meaning that Tomlinson J held
the phrase had when declaring that legal advice
"means, for the avoidance of doubt, advice concerning
the Bank's rights and obligations". That is also the
meaning that Mr Pollock submits the phrase should
have.
11 Mr Thanki's submissions can, we believe, be
summarised as follows. Legal advice is advice given
by a solicitor to his client in the normal course of his
business. It is advice which arises out of and is given
in the context of the normal professional relationship
between a solicitor and his client and is not confined to
advice about rights and obligations.
12 Support for each of the rival propositions is to be
found in judicial statements, but it is important to pay
careful regard to the context in which the statements
have been made when considering the weight to be
attached to them. Thus, in Greenough v Gaskell
(1833) 1 M & K 98, which was cited at length in the
Three Rivers (No 5) case [2003] QB 1566, 1564, para
8, Lord Brougham LC stated, in relation to lawyers 1
M & K 98, 102:
"If, touching matters that come within the ordinary
scope of professional employment, they receive a
communication in their professional capacity, either
from a client, or on his account, and for his benefit in
the transaction of his business ... they are not only
justified in withholding such matters, but bound to
withhold them ..."
13 Lord Brougham LC went on, however, to explain
the reason for this privilege, at pp 102-103:
"for a person oftentimes requires the aid of professional advice upon the subject of his rights and his
liabilities, with no reference to any particular litigation, and without any other reference to litigation
generally than all human affairs have, in so far as
every transaction may, by possibility, become the
subject of judicial inquiry ... The foundation of this
rule is not difficult to discover. It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of
legal professors, or any particular disposition to afford
them protection, though certainly it may not be very
easy to discover why *927 a like privilege has been
refused to others, and especially to medical advisers.
But it is out of regard to the interests of justice, which
cannot be upholden, and to the administration of justice, which cannot go on without the aid of men skilled
in jurisprudence, in the practice of the courts, and in
those matters affecting rights and obligations which
form the subject of all judicial proceedings. If the
privilege did not exist at all, every one would be
thrown upon his own legal resources ..."
14 The two passages, when read as a whole, do not
support the proposition that legal advice extends beyond advice in respect of rights and liabilities which
are capable of being the subject of proceedings in a
court of law.
15 Wheeler v Le Marchant (1881) 17 Ch D 675,
which again is extensively cited in the Three Rivers
(No 5) case [2003] QB 1556, 1572-1574, paras 17- 18,
was a case about legal advice privilege, not litigation
privilege. The issue was whether legal advice privilege extended to documents obtained from third parties. In the course of his judgment Sir George Jessel
MR said, at pp 681-682:
"it must not be supposed that there is any principle
which says that every confidential communication
which it is necessary to make in order to carry on the
ordinary business of life is protected. The protection is
of a very limited character, and in this country is restricted to the obtaining the assistance of lawyers, as
regards the conduct of litigation or the rights to property. It has never gone beyond the obtaining legal
advice and assistance, and all things reasonably necessary in the shape of communication to the legal
advisers are protected from production or discovery in
order that that legal advice may be obtained safely and
sufficiently."
Brett LJ added, at p 683:
"The rule as to the non-production of communications between solicitor and client is a rule which has
been established upon grounds of general or public
policy. It is confined entirely to communications
which take place for the purpose of obtaining legal
advice from professional persons. It is so confined in
terms, it seems to me it is so confined in principle, and
it does not extend to the suggested case."
16 Once again, these statements lend support to the
argument that legal advice privilege is restricted to
advice about legal rights and liabilities. In 1881 the
rights in question were, when litigation was not in
prospect, no doubt frequently rights to property, but
we would not read the judgment of Sir George Jessel
MR as confining privilege to advice about those
rights. The principle to be derived from his judgment
is, however, that legal advice is advice about legal
rights and liabilities.
17 Mr Thanki relied upon statements in three leading
cases. The first was this passage from the judgment of
Lord Lyndhurst LC in Carpmael v Powis (1846) 1 Ph
687, 692: "I am of opinion that the privilege extends to
all communications between a solicitor, as such, and
his client, relating to matters within the ordinary scope
of a solicitor's duty." The context in which this
statement was made appears in the following further
passage from his judgment: *928
"Now, it cannot be denied that it is an ordinary part
of a solicitor's business to treat for the sale or purchase
of estates for his clients. For some purposes his intervention is indispensable in such transactions: he is
to draw the agreements, to investigate the title, to
prepare the conveyance. All these things are in the
common course of his business. But it is said that the
fixing of a reserved bidding and other matters connected with the sale are not of that character, inasmuch
as they might be entrusted equally well to anyone else.
It is impossible, however, to split the duties in that
manner without getting into inextricable confusion. I
consider them all parts of one transaction--the sale of
an estate: and that a transaction in which solicitors are
ordinarily employed by their clients. That being the
case, I consider that all communications which may
have taken place between the witness and his client in
reference to that transaction are privileged."
18 This decision affords little assistance to Mr
Thanki. The advice in question was held to be inextricable from assistance being provided by a solicitor
to his client in relation to the requirements of the law
relating to a sale of real property.
19 Next Mr Thanki relied on the following statement
by Lord Buckmaster in Minter v Priest [1930] AC
558, 568:
"The relationship of solicitor and client being once
established, it is not a necessary conclusion that
whatever conversation ensued was protected from
disclosure. The conversation to secure this privilege
must be such as, within a very wide and generous
ambit of interpretation, must be fairly referable to the
relationship ..."
At issue in that case was whether a conversation between a person seeking the services of a solicitor in
relation to the purchase of real property and the solicitor was privileged in circumstances where the solic-
itor was being requested to lend the deposit payable
under the transaction but was not prepared to do so
and declined to act. In holding that the conversation
was privileged, Lord Buckmaster said, at p 568:
"the idea that it was possible to split the interview
into two parts, treating the first as a proposal to lend
money personally and the second, contingent on this,
to act as a solicitor is, to my mind, outside the bounds
of reasonable inference. I am not prepared to assent to
a rigid definition of what must be the subject of discussion between a solicitor and his client in order to
secure the protection of professional privilege. That
merely to lend money, apart from the existence or
contemplation of professional help, is outside the
ordinary scope of a solicitor's business is shown by the
case of Hagart and Burn-Murdoch v Inland Revenue
Comrs [1929] AC 386. But it does not follow that,
where a personal loan is asked for, discussions concerning it may not be of a privileged nature. In this
case the contemplated relationship was that of solicitor and client, and this was sufficient."
20 In the same case, Viscount Dunedin observed
[1930] AC 558, 573:
"Now, if a man goes to a solicitor, as a solicitor, to
consult and does consult him, though the end of the
interview may lead to the conclusion *929 that he does
not engage him as his solicitor or expect that he should
act as his solicitor, nevertheless the interview is held
as a privileged occasion."
The most detailed and precise analysis is to be found
in this passage of the speech of Lord Atkin, at pp
580-581:
"The test for such protection has been defined in
different words in a number of cases. I think it is best
expressed in two phrases used in the Court of Appeal
in the leading case of O'Shea v Wood [1891] P 286,
289. Lindley LJ adopts the language of Cotton LJ in
Gardner v Irvin (1878) 4 Ex D 49, 53: 'professional
communications of a confidential character for the
purpose of getting legal advice.' Kay LJ refers to the
language of Kindersley V-C in Lawrence v Campbell
(1859) 4 Drew 485, 490, and adopted by Lord Selborne LC in Minet v Morgan (1873) LR 8 Ch App
361, 368, communications passing as ' professional
communications in a professional capacity'. The Lord
Justice prefers the former phrase, and emphasises the
importance of the confidential character. As to this it
is necessary to avoid misapprehension lest the protection be too limited. It is I think apparent that if the
communication passes for the purpose of getting legal
advice it must be deemed confidential. The protection
of course attaches to the communications made by the
solicitor as well as by the client. If therefore the phrase
is expanded to professional communications passing
for the purpose of getting or giving professional ad-
vice, and it is understood that the profession is the
legal profession, the nature of the protection is I think
correctly defined."
21 It seems to us that the speeches in this case
demonstrate that, if privilege is to attach, the starting
point is that the services of a solicitor must be sought
for the purpose of providing professional advice of a
kind to be sought from lawyers. Communications
ancillary to that purpose will be privileged. The services in question were conveyancing services--a paradigm example of assistance requiring the expertise of
a lawyer.
22 The third statement upon which Mr Thanki relied
was that of Templeman LJ in Great Atlantic Insurance
Co v Home Insurance Co [1981] 1 WLR 529, 535536. The issue in that case was whether the plaintiffs
could adduce evidence of part of a memorandum, but
decline to disclose the rest on the ground of privilege.
The Court of Appeal held that the entirety of the
document was privileged and that, by disclosing part,
the plaintiffs had waived privilege in relation to the
whole document. The observations of Templeman LJ
relied upon by Mr Thanki were as follows:
"In Minter v Priest ... the House of Lords affirmed
that a communication between solicitor and his client
is privileged provided that the relationship of solicitor
and client is established and that the communication is
'such as, within a very wide and generous ambit of
interpretation, must be fairly referable to the relationship' ... In the present case the relationship of
solicitor and client between the American attorneys
and the plaintiffs is undoubted. The plaintiffs were
seeking and the American attorneys were proffering
advice in connection with a business transaction. The
fact that litigation was not then contemplated is irrelevant. This appeal may serve a useful purpose if it
reminds the profession that all communications between solicitor and client where the solicitor is acting
as a solicitor are privileged subject to exceptions to
*930 prevent fraud and crime and to protect the client
and that the privilege should only be waived with great
caution."
23 It is important to note that, before making these
observations, Templeman LJ had, at p 535, identified
as the "clearest authority relevant to the present point"
Wilson v Northampton and Banbury Junction Railway
Co (1872) LR 14 Eq 477, 482-483 from which he had
cited the following passages:
"It is of the highest importance ... that all communications between a solicitor and a client upon a subject which may lead to litigation should be privileged,
and I think the court is bound to consider that ... almost
any contract entered into between man and man ...
may lead to litigation before the contract is completed.
Any correspondence passing between the date of the
contract which afterwards becomes the subject of
litigation and the litigation itself is, in my opinion, on
principle, within the privilege extended to the
non-production of communications between solicitors
and clients ... it is absolutely essential to the interests
of mankind that a person should be free to consult his
solicitor upon anything which arises out of a contract
which may lead to litigation; that the communications
should be perfectly free, so that the client may write to
the solicitor, and the solicitor to the client, without the
slightest apprehension that those communications will
be produced if litigation should afterwards arise on the
subject to which the correspondence relates."
24 The subject matter of the advice with which
Templeman LJ was concerned was a reinsurance
contract which ultimately led to litigation.
25 All of the cases to which we have thus far referred
were ones in which the relationship of client and solicitor arose in relation to transactions involving legal
rights and obligations capable of becoming the subject
matter of litigation. We have been referred to no case
in which legal advice privilege has been established
where this was not the case. The authorities appear to
us to support the following statement in the 16th Report on Privilege in Civil Proceedings (1967) (Cmnd
3472) of the distinguished Law Reform Committee
who, having observed in para 18 of their report that the
true rationale of legal advice privilege was that it was
"a privilege in aid of litigation", continued, at para 19:
"What distinguishes legal advice from other kinds
of professional advice is that it is concerned exclusively with rights and liabilities enforceable in law, i e
in the ultimate resort by litigation in the courts or in
some administrative tribunal. It is, of course, true that
on many matters on which a client consults his solicitor he does not expect litigation and certainly hopes
that it will not occur; but there would be no need for
him to consult his solicitor to obtain legal advice
unless there were some risk of litigation in the future
in connection with the matter upon which advice is
sought. As Lord Brougham pointed out, it is to minimise that risk by ensuring that he so conducts his
affairs as to make it reasonably certain that he would
succeed in any litigation which might be brought in
connection with them, that the client consults his
solicitor at all."
26 In summary, the authorities to which we have
referred show that, where a solicitor-client relationship is formed for the purpose of obtaining *931 advice or assistance in relation to rights and liabilities,
broad protection will be given to communications
passing between solicitor and client in the course of
that relationship. In all the cases, however, the primary
object of the relationship was to obtain assistance that
required knowledge of the law. We do not consider
that the same principle applies to communications
between solicitor and client when the dominant purpose is not the obtaining of advice and assistance in
relation to legal rights and obligations.
This case
27 Mr Thanki argued that the advice given by
Freshfields was given in the course of a professional
relationship that related to the Bank's legal rights and
obligations. In the course of his reply he drew our
attention to para 8 of Mr Croall's second witness
statement in the following terms:
"I am informed by Lord Kingsdown [the Governor
of the Bank of England at the time] ... that from the
time of the Government's decision to establish the
Bingham Inquiry it was clear to him that the inquiry
would require the assistance of the Bank. It was also
obvious to Lord Kingsdown that anything the Bank
did or said in relation to the inquiry was legally very
sensitive. This concern underpinned the retention of
Freshfields and counsel to advise the Bank from the
earliest stages of the inquiry (see below). The Bank
was conscious of the need to deal with the Bingham
Inquiry as efficiently and effectively as possible and to
seek to limit any 'blame' (the word used by the Prime
Minister in Parliament) that might be attached to the
Bank or any criticism of its conduct of the supervision
of BCCI. The Bank remained, at that time, responsible
for the supervision of banks under the Banking Act
1987 and any criticism and consequential damage to
its reputation (or to that of any of its senior officials in
the Banking Supervision Division) might impair its
ability to supervise effectively. The Bank was also
conscious from a very early stage of the danger of
litigation against the Bank (or otherwise affecting the
Bank) that might follow if the Bank were the subject
of criticism or if blame was attached to it or any of its
officials." (Emphasis supplied.)
Mr Croall does not explain why Lord Kingsdown
thought that anything done by the Bank was "legally"
very sensitive as opposed to sensitive in general as a
result of possible "blame" that might be attached to the
Bank which appears to have been Lord Kingsdown's
primary concern. The last sentence, however, does
refer to the danger of litigation "if the Bank were the
subject of criticism or if blame were attached to it". Mr
Thanki submitted that this statement was a complete
answer to Mr Pollock's application and claimed that
the judge had wrongly ignored this vital evidence.
28 This amounted to an attack on the judge's findings
in the first quotation in para 8 above. Indeed Mr
Thanki attacked those findings in his skeleton argument. The judge dealt at length with the nature of the
assistance provided by Freshfields in his judgment of
13 December 2002 in Three Rivers District Council v
Governor and Company of the Bank of England (No
5) [2002] EWHC 2730 (Comm). The findings in
question were a distillation of that part in his judgment
and, in particular, his finding at para 19 that the function of Freshfields was "to prepare submissions and/or
to advise on the nature, presentation, timing and/or
content of the Bank's *932 submission to, evidence for
and response to requests from the inquiry". There is no
basis upon which, in this appeal, we can review the
findings made by the judge on the basis of detailed
consideration of the evidence as to the nature of the
role played by Freshfields. We conclude that the
dominant role of Freshfields was to advise on preparation and presentation of evidence for the Bingham
Inquiry but that it is possible that they may have given
some advice as to the Bank's legal rights and obligations. We do not consider that this possibility, should
it be established as a fact, can clothe the entirety of the
advice given by Freshfields with privilege on the
ground that it was all "in the context of" a professional
relationship that involved advising on legal rights and
obligations. This appeal falls to be determined on the
basis of the judge's finding that the advice and assistance sought was primarily in relation to the presentation of evidence to the inquiry rather than in relation
to the Bank's rights and obligations.
29 Mr Thanki contended that the professional role of
the solicitor has widened in modern times and that the
scope of legal advice privilege has widened with it. In
support of this submission Mr Thanki relied upon the
following passages from the judgment of Taylor LJ in
Balabel v Air India [1988] Ch 317, 330:
"Although originally confined to advice regarding
litigation, the privilege was extended to non-litigious
business. Nevertheless, despite that extension, the
purpose and scope of the privilege is still to enable
legal advice to be sought and given in confidence. In
my judgment, therefore, the test is whether the communication or other document was made confidentially for the purposes of legal advice. Those purposes
have to be construed broadly. Privilege obviously
attaches to a document conveying legal advice from
solicitor to client and to a specific request from the
client for such advice. But it does not follow that all
other communications between them lack privilege. In
most solicitor and client relationships, especially
where a transaction involves protracted dealings, advice may be required [as] appropriate on matters great
or small at various stages. There will be a continuum
of communication and meetings between the solicitor
and client ... Where information is passed by the solicitor or client to the other as part of the continuum
aimed at keeping both informed so that advice may be
sought and given as required, privilege will attach. A
letter from the client containing information may end
with such words as 'please advise me what I should
do'. But, even if it does not, there will usually be implied in the relationship an overall expectation that the
solicitor will at each stage, whether asked specifically
or not, tender appropriate advice. Moreover, legal
advice is not confined to telling the client the law; it
must include advice as to what should prudently and
sensibly be done in the relevant legal context."
30 Mr Thanki pointed out that, in the Three Rivers
(No 5) case [2003] QB 1556, 1579, para 29, this court
summarised the effect of the Balabel case as follows:
"once a solicitor had been instructed, legal advice
privilege [extends] to all communications between
solicitor and client on matters within the ordinary
business of the solicitor and referable to the relationship."
*933 Mr Pollock submitted that this summary was not
correct. We agree with him, if it is considered in isolation. The material passage in the judgment of Taylor
LJ is where, after considering a number of authorities,
he said [1988] Ch 317, 331-332:
"It follows from this analysis that those dicta in the
decided cases which appear to extend privilege
without limit to all solicitor and client communication
upon matters within the ordinary business of a solicitor and referable to that relationship are too wide. It
may be that the broad terms used in the earlier cases
reflect the restricted range of solicitors' activities at the
time. Their role then would have been confined for the
most part to that of lawyer and would not have extended to business adviser or man of affairs. To speak
therefore of matters 'within the ordinary business of a
solicitor' would in practice usually have meant the
giving of advice and assistance of a specifically legal
nature. But the range of assistance given by solicitors
to their clients and of activities carried out on their
behalf has greatly broadened in recent times and is still
developing. Hence the need to re-examine the scope of
legal professional privilege and keep it within justifiable bounds."
We agree with this observation of Taylor LJ to the
effect that in circumstances where the traditional role
of a solicitor has expanded, it is necessary to keep
legal professional privilege within justifiable bounds.
The fact that work done is within what may be the
ordinary business of a solicitor does not necessarily
mean that it attracts privilege. This case raises the
question of the scope of the "justifiable bounds".
Inquiries
31 One activity that now falls within the ordinary
business of a solicitor is the representation of witnesses at inquiries. Public inquiries are now commonplace, both statutory and non-statutory. It is also
commonplace for witnesses at such inquiries to be
represented by lawyers. Often witnesses will be exposed to, and concerned about, the risk of legal liability as a consequence of their role in the matter under
inquiry. In such circumstances their communications
with their lawyers will plainly be subject to legal
advice privilege. Sometimes, however, the concern of
witnesses is not that they will be exposed to legal
liability but simply that they will be exposed to criticism. The BSE Inquiry is an example of such an inquiry; Lord Hutton's Inquiry is another. Criticism can
be a serious matter, as the resignations following Lord
Hutton's Report demonstrate. Are individuals whose
concern is solely for their reputation not entitled to
legal advice privilege?
32 Mr Pollock submitted that witnesses at statutory
inquiries are entitled to legal advice privilege by virtue
of section 1(3) of the Tribunals of Inquiry (Evidence)
Act 1921, as amended by section 17(1)(a) of the Civil
Evidence Act 1968, which provides: "A witness before any such tribunal shall be entitled to the same
immunities and privileges as if he were a witness in
civil proceedings before the High Court or the Court
of Session." This provision begs the question rather
than answers it. It seems to us that its principal target
is protection in relation to evidence given in the proceedings. If a witness in civil proceedings consults a
lawyer, this will normally be because of concern as to
the impact of the proceedings on his rights and liabilities. Communications in such circumstances will be
privileged *934 whether or not the proceedings are in
court, before a statutory tribunal or before a
non-statutory tribunal. If the witness's concern is only
to have advice on presentation, the question remains
of whether the advice attracts privilege. We know of
no case in which the issue now under consideration
has been raised. It can be argued that an individual
whose reputation is in jeopardy at a public inquiry, but
who needs no advice in relation to his legal rights and
obligations, ought to be able to seek the assistance of a
solicitor without inhibition. Is reputation to be equated
with legal rights and obligations so that the advice of a
solicitor for the purpose of protecting reputation attracts legal advice privilege?
33 We do not find it necessary to answer that question on the facts of the present case. Freshfields were
retained by the Bank. No claim for privilege has been
advanced by any individual witness. The precise status
of the Bank has not been explored before us as only its
regulatory functions are directly in issue, but it seems
to us questionable as to whether our private law affords any protection to the reputation of the Bank.
Certainly it does not afford the same protection as is
afforded by the law of defamation to the reputation of
an individual. It has been suggested that the Bank was
concerned to protect its reputation because it was
anxious to avoid more intrusive regulation. We do not
think that a desire to protect reputation for this reason
puts the Bank on the same footing as an individual
whose reputation is at risk in a public inquiry, whatever that footing may be.
34 Is the interest that the client seeks to protect relevant to the question of legal advice privilege in the
present context? The role of Freshfields in assisting
with the preparation of evidence and submissions for
the Bingham Inquiry was very similar to the role that a
solicitor plays in relation to litigation. But, in contradistinction to litigation, a typical inquiry is not necessarily (or even primarily) concerned with legal
rights and liabilities. Does the provision of advice in
relation to an inquiry involve the type of professional
relationship between solicitor and client that attracts
legal advice privilege regardless of whether any legal
rights or liabilities are in play?
35 Mr Pollock described this possibility as "quasi-litigation privilege". He submitted that no such
privilege existed. He also argued that it was not open
to the Bank to invoke privilege on this basis, having
specifically renounced any reliance on litigation privilege.
36 We have found this the most difficult question
that arises on this appeal. No authority bears on it. An
affirmative answer will extend legal advice privilege
to circumstances where the established test of whether
the advice and assistance relates to legal rights and
liabilities is not satisfied.
37 We do not consider that the facts of this case
justify this extension to the law of privilege. The inquiry in this case was a private, non-statutory inquiry.
One of the sponsors of that inquiry, albeit a reluctant
sponsor, was the Bank itself. The Bank's primary
concern was, or should have been, to ascertain
whether the collapse of BCCI was attributable to any
regulatory shortcomings in this country. We cannot
see that in these circumstances communications between the Bank and the solicitors who were assisting
in the obtaining, preparation and presentation of evidence and submissions to the inquiry should attract
privilege, even if the Bank was anxious that this assistance should enable the Bank's role to be presented
in the best possible light.
38 *935 Mr Pollock emphasised that he was not
asserting that no communications passing between
BIU and Freshfields could be privileged; he was
merely objecting to an assertion that all such communications were automatically privileged. If some
such communications were made in the context of
seeking specific legal advice (whether about the construction of the provisions of the Banking Act or any
other point of law) then a statement to that effect can
be made and all documents coming into existence
during that part of the investigation necessary for that
advice to be given will, as Mr Pollock accepted, be
privileged in accordance with the Balabel v Air India
[1988] Ch 317 decision. But no examination of the
communications now sought had been carried out to
see if they had indeed come into existence for the
purpose of giving specific legal advice; the judge's
order now requires that exercise be done. We consider
that the judge was right to so order.
39 We have found this area of law not merely difficult but unsatisfactory. The justification for litigation
privilege is readily understood. Where, however, litigation is not anticipated it is not easy to see why
communications with a solicitor should be privileged.
Legal advice privilege attaches to matters such as the
conveyance of real property or the drawing up of a
will. It is not clear why it should. There would seem
little reason to fear that, if privilege were not available
in such circumstances, communications between solicitor and client would be inhibited. Nearly fifty years
have passed since the Law Reform Committee looked
at this area. It is perhaps time for it to receive a further
review.
40 For the reasons that we have given we would
dismiss this appeal.
Appeal dismissed. Permission to appeal refused. Stay
until 22 March 2004 pending petition to the House of
Lords on terms.
28 April. The Appeal Committee of the House of
Lords (Lord Scott of Foscote, Lord Rodger of
Earlsferry and Baroness Hale of Richmond) allowed a
petition by the Bank for leave to appeal.
Representation
Solicitors: Freshfields Bruckhaus Deringer; Lovells.
IC
(c) Incorporated Council of Law Reporting For England & Wales
END OF DOCUMENT