Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-05-05168/USCOURTS-caDC-05-05168-0/pdf.json

Parties Involved:
Subpoena Duces Tecum

WD Energy Services Inc.
Appellant

Document Text:

Notice: This opinion is subject to formal revision before publication in the

Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify the

Clerk of any formal errors in order that corrections may be made before the

bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 29, 2005 Decided March 3, 2006

No. 05-5168

IN RE: SUBPOENA DUCES TECUM ISSUED TO COMMODITY

FUTURES TRADING COMMISSION

WD ENERGY SERVICES INC.,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 04ms00564)

Julian W. Poon argued the cause for appellant. With him

on the briefs were David A. Battaglia, J. Christopher Jennings,

and Miguel A. Estrada. Douglas F. John entered an appearance.

Steven N. Williams argued the cause for appellee E. & J.

Gallo Winery. With him on the brief were Jon Cuneo and David

W. Stanley. 

Michael S. Raab, Attorney, U.S. Department of Justice,

argued the cause for federal appellee. With him on the brief

were Peter D. Keisler, Assistant Attorney General, Kenneth L.

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Wainstein, U.S. Attorney, Catherine Y. Hancock, Attorney, Kirk

T. Manhardt, Deputy General Counsel, Commodity Futures

Trading Commission, Glynn L. Mays, Senior Assistant General

Counsel, and Gloria P. Clement, Assistant General Counsel.

Thuy T. Dinh, Attorney, entered an appearance.

Before: ROGERS, TATEL and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: This is an appeal of a discovery

order. In April 2003, E. & J. Gallo Winery sued WD Energy

Services, Inc. (f/k/a EnCana Energy Services, Inc.) in the

Eastern District of California during the pendency of an

investigation by the Commodity Futures Trading Commission

of the California natural gas market. Gallo alleged that WD

Energy (and other energy companies) had unlawfully

manipulated the California energy market in violation of state

and federal laws. During discovery, Gallo sought documents

from WD Energy with respect to the Commission’s

investigation and settlement with WD Energy. WD Energy

produced many of the subpoenaed documents, but withheld

documents that it characterized as relating to the settlement with

the Commission. When Gallo moved to compel compliance

with its subpoena, a Magistrate Judge ruled that the withheld

documents were protected by a federal settlement privilege

under FED. R. EVID. 501. 

Gallo also served on the Commission a third party judicial

subpoena from the district court for the District of Columbia to

produce the WD Energy documents in its possession. The

Commission indicated it would interpose no governmental

privilege in responding to the subpoena. However, WD Energy

filed objections to the subpoena, arguing that Gallo was

collaterally estopped by the Magistrate’s ruling on the

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settlement privilege and, alternatively, that many of the

documents were protected by a federal settlement privilege

under FED. R. EVID. 501. The district court rejected WD

Energy’s collateral estoppel arguments, ruled that no federal

settlement privilege existed under FED. R. EVID. 501, and

granted Gallo’s motion to compel the Commission’s compliance

with the subpoena. See In re Subpoena Issued to CFTC, 370 F.

Supp. 2d 201, 207 & n.7, 212 (D.D.C. 2005) (“Subpoena”). WD

Energy appeals. 

Upon de novo review, we hold that the Magistrate’s

privilege ruling was not entitled to preclusive effect under the

principle of collateral estoppel. In arguing that collateral

estoppel applied to the Magistrate’s ruling, WD Energy failed to

meet its burden to show that the same documents were at issue

in both fora; in addition, the Magistrate’s ruling contains a

potential ambiguity regarding whether the privilege issue was

actually decided. WD Energy’s contention based upon the

doctrine of law of the case lacks merit because the third-party

subpoena enforcement proceeding was a new proceeding in a

different court. We do not reach the question whether a federal

settlement privilege exists under FED.R.EVID. 501. WD Energy

failed to meet its burden of demonstrating that the disputed

subpoenaed documents were created for the purpose of

settlement discussions and therefore would merit protection

under any federal settlement privilege that the court might

recognize. Accordingly, we affirm the grant of the motion to

compel the Commission’s compliance with Gallo’s subpoena

without reaching the merits of the district court’s ruling that no

settlement privilege exists under FED. R. EVID. 501. 

I.

Orders compelling production of allegedly privileged

information satisfy the three criteria for collateral review under

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Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949).

In re Sealed Case (Med. Records), 381 F.3d 1205, 1209 (D.C.

Cir. 2004). Under doctrine deriving from Perlman v. United

States, 247 U.S. 7 (1918), a discovery order directed at a

disinterested third party is treated as an immediately appealable

final order because the third party generally lacks a sufficient

stake in the proceeding to risk contempt by refusing compliance.

See Church of Scientology of Cal. v. United States, 506 U.S. 9,

18 n. 11 (1992). In reviewing a discovery order directed at a

third party, our review is for abuse of discretion. See In re

Sealed Case, 121 F.3d 729, 740 (D.C. Cir. 1997). “Because a

‘district court by definition abuses its discretion when it makes

an error of law,’ the ‘abuse of discretion standard includes

review to determine that the discretion was not guided by

erroneous legal conclusions.’” In re Sealed Case (Med.

Records), 381 F.3d at 1211 (quoting Koon v. United States, 518

U.S. 81, 100 (1996)); see also Tuite v. Henry, 98 F.3d 1411,

1415 (D.C. Cir. 1996). Legal conclusions are reviewed de novo.

See In re Sealed Case, 146 F.3d 881, 883 (D.C. Cir. 1998); In

re Subpoena Served upon the Comptroller of the Currency, 967

F.2d 630, 633 (D.C. Cir. 1992).

Although WD Energy has failed to obtain a stay of the

district court’s order pending appeal, and the Commission has

now produced the documents to Gallo, WD Energy’s appeal is

not moot. In Church of Scientology, 506 U.S. at 13, the

Supreme Court held that a court’s ability to offer a partial

remedy, such as ordering the return or destruction of disputed

materials, is sufficient to prevent mootness. WD Energy seeks

the return of its documents to the Commission and the

destruction of all work product stemming from Gallo’s

examination of the documents. Cf. FTC v. Compagnie De

Saint-Gobain-Pont-a-Mousson, 636 F.2d 1300, 1327 (D.C. Cir.

1980). Thus, notwithstanding the Commission’s compliance

with Gallo’s subpoena, the court can provide a meaningful

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remedy. See Church of Scientology, 506 U.S. at 12-13.

II.

WD Energy contends that the district court erred by not

applying collateral estoppel to the Magistrate’s order because all

of the standards for establishing the preclusive effect of a prior

judgment have been satisfied. It relies on Yamaha Corp. of

America v. United States, 961 F.2d 245 (D.C. Cir. 1992), where

the court set forth the three conditions that must be satisfied in

order to bind a party to a prior determination of a legal or factual

issue:

First, the same issue now being raised must have been

contested by the parties and submitted for judicial

determination in the prior case. Second, the issue must

have been actually and necessarily determined by a

court of competent jurisdiction in that prior case.

Third, preclusion in the second case must not work a

basic unfairness to the party bound by the first

determination.

Id. at 254 (citations omitted); see, e.g., Jack Faucett Assocs.,

Inc. v. Am. Tel. and Tel. Co., 744 F.2d 118, 125 (D.C. Cir.

1984); Otherson v. Dep’t of Justice, 711 F.2d 267, 273 (D.C.

Cir. 1983). As the party invoking collateral estoppel, WD

Energy bears the burden of establishing that the conditions for

its application have been satisfied. See Democratic Cent.

Comm. of D.C. v. Washington Metro. Area Transit Auth., 842

F.2d 402, 409 (D.C. Cir. 1988); see also Blonder-Tongue Labs.,

Inc. v. Univ. of Ill. Found., 402 U.S. 313, 350 (1971). 

A.

The background to WD Energy’s collateral estoppel claim

begins in 2002, when the Commission opened an investigation

into the manipulation of California natural gas markets by a

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number of energy companies, including WD Energy, for

violation of the Commodity Exchange Act, 7 U.S.C. §§ 9, 13b,

13(a)(2), 15 (2000). In June 2002, the Commission informed

WD Energy that it was a subject of this investigation. WD

Energy produced a large number of documents in response to a

Commission subpoena of January 24, 2003 and the

Commission’s subsequent requests for information. WD Energy

requested, pursuant to a Commission regulation, 17 C.F.R. §

145.9 (2003), that the documents it was submitting be treated as

confidential under the Freedom of Information Act (“FOIA”), 5

U.S.C. § 552 (2000), which affords protection for certain

privileged documents, see id. § 552(b)(4). On July 28, 2003, the

Commission entered into a settlement agreement under which

WD Energy paid $20 million as a civil penalty. See In the

matter of WD Energy Services, Inc., Commission Docket No.

03-02, Comm. F. L. Rep. (CCH) ¶ 29,544, 2003 WL 21742069,

at * 4 (July 28, 2003).

Following the settlement, the Commission notified WD

Energy of FOIA requests lodged by parties contemplating suits

against a number of energy companies for documents related to

the Commission’s investigation of California’s natural gas

market. The Commission asked WD Energy to provide a

“detailed written justification” of its previous requests for

confidential FOIA treatment. By letter of January 5, 2004, WD

Energy listed the categories of documents it deemed to be

privileged, including those it categorized as “settlement

communications” and “voluntarily-created and produced

material.” The Commission agreed, by letter of February 6,

2004, that WD Energy’s “requests for confidential treatment”

under FOIA, contingent upon the requester’s right to appeal,

“should be granted in full.”

While WD Energy was under investigation by the

Commission, Gallo, a large California consumer of natural gas,

sued WD Energy in the Eastern District of California on April

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9, 2003. Gallo subsequently requested discovery of any

documents in WD Energy’s possession that supported the

factual findings in the Commission’s July 28, 2003 settlement

order. WD Energy produced thousands of pages of documents

and many hours of audio recordings in response to Gallo’s

discovery requests; however, WD Energy resisted disclosing

many of the documents it had provided to the Commission on

the grounds of various privileges. WD Energy filed a lengthy

privilege log, and, after briefing and argument, a Magistrate

Judge resolved the discovery disputes.

The Magistrate denied in part Gallo’s motion to compel

production of documents that WD Energy had claimed were

privileged, ruling that FED. R. EVID. 501 provided a federal

“settlement privilege” that protected documents created by WD

Energy subsequent to the Commission’s investigation whose

“tenor . . . was to settle [the Commission’s] claims.” Order on

Plaintiff’s Further Discovery Motions (Docs. 303-305, 306), E.

& J. Gallo Winery v. Encana Energy Servs., Inc., No. 03-5412,

at 7 (E.D. Cal. Jan. 28, 2004) (“Magistrate’s Order”). The

Magistrate cited decisions in the Eastern and Central districts of

California and the Sixth Circuit’s decision in Goodyear Tire &

Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 979 (6th

Cir. 2003), holding that a federal settlement privilege existed

under FED. R. EVID. 501. In his concluding paragraph on the

settlement privilege, the Magistrate stated:

Disclosure of the [Commission] documents would

likely chill discussions and thwart tribunal efficiencies

and public interests noted above. The [Commission]

documents likely would be used to cross examine [WD

Energy] under the ruse of impeachment evidence to

eviscerate privacy expectations. [WD Energy has]

produced documents provided to [the Commission] and

existing prior to [the Commission’s] investigation.

Moreover, the pending D.C. court action militates

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against overriding [WD Energy’s] assertion of the

settlement privilege.

Magistrate’s Order at 7. Subsequently, the Magistrate stated in

a letter of February 23, 2005, in response to Gallo’s letter

requesting clarification, that he was not deferring to the D.C.

district court but “[b]ased on WD Energy’s representations that

it created and provided to [the Commission] certain documents

to reach settlement,” he had “recognized and applied the

settlement privilege to such documents.” On March 7, 2005,

Gallo moved in the district court for reconsideration of the

Magistrate’s Order, as clarified by his February 23, 2005 letter.

While this discovery dispute was being litigated in

California, Gallo served on the Commission a third party

judicial subpoena from the district court of the District of

Columbia, directing the Commission to produce the documents

it had received from WD Energy (and other energy companies)

during its investigation of companies involved in the California

natural gas market. Gallo filed a motion to compel the

Commission’s compliance with the subpoena. WD Energy filed

a response, arguing in part that “[m]any of the documents that

Gallo is seeking . . . are documents that WD [Energy] prepared

during the course of the [Commission’s investigation] and

provided to the [Commission] in order to facilitate settlement.”

WD Energy Services, Inc., Objections and Opposition to

Subpoena Issued by E. & J. Gallo Winery to U.S. Commodity

Futures Trading Commission of Dec. 16, 2004 at 10-11. The

Commission responded that it would not assert any

governmental privileges against compliance and would defer

taking a position on the settlement privilege until WD Energy

had identified the documents and transactions it considered

protected by the settlement privilege. WD Energy subsequently

filed an affidavit of counsel in support of its privilege claim,

attaching the February 6, 2004 letter from the Commission. 

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The D.C. district court held a hearing on Gallo’s motion to

compel on March 11, 2005. Both Gallo and the Commission

challenged whether any of the documents sought under the

subpoena would be covered by a settlement privilege.

According to the Commission, no documents that remained

subject to the subpoena were created by WD Energy in order to

settle the Commission’s enforcement action or as a result of

settlement discussions, but were instead produced in response to

the Commission’s investigatory demands. WD Energy

responded that Gallo was collaterally estopped by the

Magistrate’s Order from enforcing its subpoena, and that the

Commission had been made aware by WD Energy’s January 5,

2004 FOIA letter of the documents WD Energy claimed were

privileged. Gallo also argued that the Magistrate’s Order was

not a final order.

On April 28, 2005, the district court granted Gallo’s motion

to compel, ruling that no estoppel attached to the Magistrate’s

Order and that there was no federal settlement privilege under

FED.R.EVID. 501. See Subpoena, 370 F. Supp. 2d at 207 & n.7,

212. A week later, the district court in the Eastern District of

California, presuming that the Commission had turned over the

withheld documents to Gallo in accord with the D.C. district

court’s order of April 28th, denied Gallo’s motion for

reconsideration of the Magistrate’s Order as moot, and further

ruled, even if the issue was not moot, that Gallo’s motion for

reconsideration was untimely under FED. R. CIV. P. 72(a) and

E.D. Cal. Local Rule 72-303(b). See E. & J. Gallo Winery v.

Encana Energy Servs., Inc., No. 03-5412, slip op. at 6 (E.D. Cal.

May 4, 2005).

B.

Neither Gallo nor the Commission challenges WD Energy’s

right to raise collateral estoppel as a ground to quash or modify

a subpoena under FED.R.CIV.P. 45(c)(3)(A)(iii). Although we

have found no authority that authorizes a third party to a

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subpoena to advance an estoppel claim, this is a reasonable

extension of the settled practice of allowing a party not named

in a subpoena to challenge the subpoena in ancillary proceedings

in the district court and on appeal under the Perlman doctrine.

See Perlman, 247 U.S. at 13; In re Sealed Case (Med. Records),

381 F.3d at 1210-11. Such an extension also comports with our

precedent. For instance, in United States v. Hubbard, 650 F.2d

293 (D.C. Cir. 1980), the court held that a third party may

attempt to maintain the confidentiality of materials that are

under the control of a court by initiating an ancillary proceeding

without intervening in the underlying litigation. Id. at 310-11.

The court noted a variety of circumstances in which third parties

may participate in proceedings in order to protect their interests.

See id. at 313 n. 67; see also In re Sealed Case, 237 F.3d 657,

663-64 (D.C. Cir. 2001); United States v. AT&T, 642 F.2d 1285,

1292 (D.C. Cir. 1980); Gravel v. United States, 408 U.S. 606,

608 n.1 (1972); cf. United States v. RMI Co., 599 F.2d 1183,

1186 (3d Cir. 1979). This is consistent with the dual purposes

behind collateral estoppel, namely, to “protect[] litigants from

the burden of relitigating an identical issue with the same party

or his privy and . . . [to] promot[e] judicial economy by

preventing needless litigation.” Parklane Hosiery Co., Inc. v.

Shore, 439 U.S. 322, 326 (1979).

In rejecting WD Energy’s collateral estoppel argument, the

district court focused on the fact that the Commission, as the

holder of the documents and a participant in the settlement

discussions underlying WD Energy’s settlement privilege claim,

had a significant interest but, because it was not a party to the

California proceedings, never had an opportunity to be heard on

the settlement privilege issue. See Subpoena, 370 F. Supp. 2d

at 206. Because Gallo is the party potentially precluded from

relitigating the issue of the settlement privilege and its

applicability to the withheld documents, we need not address the

significance of the Commission’s absence from the California

proceedings. Additionally, like the district court, which

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considered but did not decide whether the Magistrate’s Order

was a final order in light of the implication that, under the

Federal Magistrates Act, 28 U.S.C. §§ 636(b)(1)(A) or (B)

(2000), a Magistrate’s determination only becomes final once

the district court makes it final, see Subpoena, 370 F. Supp. 2d

at 205-06 (citing, e.g., J.R. Stripling v. Jordan Prod. Co., 234

F.3d 863, 868 (5th Cir. 2000)), we need not decide whether the

Magistrate’s Order is final for estoppel purposes. Cf.

Restatement (Second) of Judgments § 13. Assuming finality,

WD Energy has failed to meet its burden to establish that the

three conditions for collateral estoppel have been satisfied. See

Yamaha, 961 F.2d at 254.

First, it is unclear whether the same issues were presented

in both the California and the District of Columbia proceedings.

The question before the D.C. district court was the applicability

of a settlement privilege to specific documents. WD Energy

asserted the same settlement privilege in both fora, and Gallo’s

California lawsuit is the underlying basis of WD Energy’s

litigation in the D.C. district court. Nevertheless, it is not clear

that the same documents are being contested here as in the

Eastern District of California. The Magistrate’s Order specifies

which documents were protected by the settlement privilege

only by general reference to WD Energy’s privilege log and

suggests that the Magistrate did not, in order to determine

whether the privilege would apply to particular documents,

personally examine the withheld documents or hear testimony

about the circumstances surrounding their creation and use. The

Magistrate’s Order refers only to the “tenor” of the documents

based on WD Energy’s representations that the only withheld

documents were both related to facilitating settlement with the

Commission and created after the Commission “commenced its

investigation.” Magistrate’s Order at 5.

Inasmuch as the Magistrate’s Order was designed to settle

a large number of discovery disputes between the parties, and

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the Magistrate noted some deficiencies in WD Energy’s

privilege log that made it difficult to determine in all instances

which documents were claimed as privileged, it appears that the

Magistrate contemplated the possibility of subsequent

proceedings to define the circumstances surrounding the

creation of the documents and their role in the settlement

discussions; then, either Gallo could contest the applicability of

the settlement privilege on a document-by-document basis or the

Magistrate could conduct an in camera review. So far as the

record before this court indicates, this had not happened before

the D.C. district court granted Gallo’s motion to compel the

Commission to comply with Gallo’s subpoena. In any event,

neither the D.C. district court nor the district court in the Eastern

District of California appear to have examined the withheld

documents or the privilege log. Thus, WD Energy has been

unable to show that the specific documents Gallo seeks in the

D.C. district court already have been determined to be privileged

by the Magistrate. 

This court is not in a position to determine with confidence

that the withheld documents ruled by the Magistrate to be

protected by a federal settlement privilege are the same

documents WD Energy sought to have withheld in the D.C.

district court proceedings. The district court noted that before

the Magistrate, WD Energy had asserted that the privilege

applied to a larger set of documents. See Subpoena, 370 F.

Supp. 2d at 205 n.2. WD Energy, through the proffer at the

March 11, 2005 hearing of an excerpt from its January 5, 2004

FOIA letter to the Commission, attempted to define the scope of

its assertion of the settlement privilege to protect only eight sets

of subpoenaed documents. However, through this proffer, WD

Energy also made clear that it was claiming a privilege for

documents it submitted to the Commission between February

and May of 2003. This was after the Commission’s subpoena

of January 24, 2003 but was, according to the Commission’s

statement to the D.C. district court at the hearing that the

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Commission was not engaging in settlement discussions but was

conducting an investigation during this time, apparently before

any explicit discussions in which the Commission indicated its

willingness to address the terms of a settlement with WD

Energy. The Magistrate’s Order does not address whether

documents filed with the Commission before the

commencement of discussions over the terms of settlement were

included within the scope of its ruling that settlement documents

were protected by a federal settlement privilege. The affidavit

of WD Energy’s counsel, while stating that “certain [postJanuary 2003 created] materials were prepared for the sole

purpose of facilitating and furthering settlement,” Affidavit of

Douglas F. John, Feb. 25, 2005 at 1-2, does not identify those

documents individually or as being the eight sets of documents

later identified for the district court at the March 11, 2005

hearing; nor does it identify the dates of the settlement

discussions. The Magistrate’s Order, in turn, does not tie the

settlement privilege to specifically identified documents or to

specific settlement discussions. Hence, nothing on the record

before this court shows with a reasonable degree of certainty

that the privilege found by the Magistrate reached the eight sets

of documents at issue in the D.C. district court.

The uncertainty about the relationship between the

documents in the two fora is highlighted by the Commission’s

assertion in the D.C. district court that, upon reviewing the WD

Energy documents in its possession, the Commission was

unclear whether any of the remaining subpoenaed documents

would be covered by a settlement privilege. The Commission

further observed that because no judicial officer had identified

the withheld documents, were the D.C. district court to accord

preclusive effect to the Magistrate’s Order, the Commission

might have to go to California in order to determine which

documents were covered by the settlement privilege. By failing

to timely make a record in the D.C. district court that

unambiguously indicated that the same “settlement” documents

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were at issue in both fora, WD Energy failed to meet its burden

to show that the same issue was presented in the California

proceedings.

Second, there is a potential ambiguity in the Magistrate’s

Order about whether the question of privilege was actually and

necessarily determined. See NextWave Pers. Commc’ns, Inc. v.

FCC, 254 F.3d 130, 147 (D.C. Cir. 2001). The Magistrate

concluded his analysis of the federal settlement privilege by

observing, “Moreover, the pending D.C. court action militates

against overriding [WD Energy’s assertion] of the settlement

privilege.” Magistrate’s Order at 7. On the one hand, the

Magistrate may have meant that it was prudent to recognize that

a settlement privilege covered the withheld WD Energy

documents in order to prevent Gallo from obtaining them from

the Commission in the D.C. district court proceeding. On the

other hand, he may have meant that he was electing to defer a

decision pending the outcome of the D.C. district court

proceeding as WD Energy had requested. See id. at 3. To the

extent that the sentence may plausibly be read to suggest this

latter interpretation, the equivocal nature of the “militates”

sentence would suggest that the California proceedings did not

necessarily determine the settlement privilege issue. Although

the Magistrate clarified his intent in a February 23, 2005 letter

responding to Gallo’s ex parte letter inquiry, no letter could

alter the Magistrate’s Order itself, and because the district court

in the Eastern District of California issued its opinion after the

D.C. district court opinion now on review, its denial of Gallo’s

motion for reconsideration has no bearing on whether the

Magistrate’s Order actually and necessarily determined the

issue of privilege with respect to the documents.

The Supreme Court has observed: “Redetermination of

issues is warranted if there is reason to doubt the quality,

extensiveness, or fairness of procedures followed in prior

litigation.” Kremer v. Chem. Constr. Corp., 456 U.S. 461, 481

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(1982) (quoting Montana v. United States, 440 U.S. 147, 164,

n.11 (1979)). There is reason here. WD Energy has failed to

build a record in the D.C. district court that links the eight sets

of documents listed in the proffered excerpt of its January 5,

2004 FOIA Letter to the Commission with the documents listed

in its privilege log before the Magistrate Judge as subject to a

settlement privilege. Without such linkage, it is impossible to

know what specific documents the Magistrate concluded were

privileged; the cases cited in the Magistrate’s Order involved

different factual situations and hence cannot resolve the

uncertainty, particularly as there are no findings by either the

Magistrate or a district court on the settlement discussions that

would be covered by a federal settlement privilege. The fact

that the Commission informed the D.C. district court that the

WD Energy documents in its possession were created in

response to the Commission’s investigation and not in

connection with settlement discussions simply underscores the

uncertainty about whether the same issue was presented in both

fora, which alone would preclude according collateral estoppel

effect to the Magistrate’s Order. See Yamaha, 961 F.2d at 254.

Therefore, we hold that the district court did not err in

refusing to give preclusive effect to the Magistrate’s ruling on

the settlement privilege.

III.

WD Energy also contends that the doctrine of law of the

case called for deferring to the Magistrate’s determination that

the withheld documents were protected by a federal settlement

privilege “in these coordinated proceedings” to compel the

Commission to produce the same documents. Its contention is

meritless. Law of the case doctrine applies within the same

case, proceeding, or action. See generally Crocker v. Piedmont

Aviation, Inc., 49 F.3d 735, 739-40 (D.C. Cir. 1995); 18B

Charles Alan Wright, Arthur R. Miller & Edward H. Cooper,

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Fed. Prac. & Proc. Juris. 2d § 4478 (2002). Gallo’s lawsuit

against WD Energy in the Eastern District of California has not

been transferred to the district court in the District of Columbia.

“[A] subpoena enforcement action is technically a different

‘case,’” In re Subpoena Duces Tecum Served on Office of

Comptroller of the Currency, 145 F.3d 1422, 1425 (D.C. Cir.

1998) (dictum), as both the Magistrate and the district court in

the Eastern District of California recognized. The cases on

which WD Energy relies, such as Christianson v. Colt

Industries Operating Corp., 486 U.S. 800, 815-16 (1988),

involve the transfer of proceedings between courts, not the

commencement of a new, albeit ancillary, proceeding in a

different court. 

IV.

FED. R. EVID. 501 provides, in relevant part:

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.

The rule’s invocation of “reason and experience” was drawn

from Wolfle v. United States, 291 U.S. 7, 12 (1934); see also

Hawkins v. United States, 358 U.S. 74, 79 (1958), and, as the

Supreme Court observed in Trammel v. United States, 445 U.S.

40 (1980), “acknowledge[s] the authority of the federal courts

to continue the evolutionary development” of privileges as

matters of federal common law. Looking at the history of the

rule, the Court in Trammel explained that:

The general mandate of [FED. R. EVID. 501] was

substituted by the Congress for a set of privilege rules

drafted by the Judicial Conference Advisory

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Committee on Rules of Evidence and approved by the

Judicial Conference of the United States and by this

Court. That proposal defined nine specific privileges,

including a husband-wife privilege . . . and eliminated

the privilege for confidential marital communications.

In rejecting the proposed Rules and enacting [FED. R.

EVID. 501], Congress manifested an affirmative

intention not to freeze the law of privilege. Its purpose

rather was to ‘provide the courts with the flexibility to

develop rules of privilege on a case-by-case basis,’

120 Cong. Rec. 40891 (1974) (statement of Rep.

Hungate), and to leave the door open to change.

Id. at 47-48 (citations omitted). The Supreme Court in Jaffee v.

Redmond, 518 U.S. 1, 10-15 (1996), has provided guidance for

lower courts in determining whether to establish a new privilege

under FED. R. EVID. 501, instructing that courts consider

whether the privilege is “rooted in the imperative need for

confidence and trust,” 518 U.S. at 10 (internal quotation marks

omitted), whether the privilege would “serve public ends,” id.

at 11 (internal quotation marks and alteration omitted), what

evidentiary benefit would arise from denying the privilege, id.

at 11-12, and the States’ rules on the subject, id. at 12-15.

It is to the federal courts’ authority under FED.R.EVID. 501

that WD Energy looks for the establishment of a federal

settlement privilege to cover the documents it claims were

prepared for the purposes of facilitating settlement of a pending

enforcement action brought by the Commission. WD Energy

contends that the district court, by failing to recognize that the

Sixth Circuit’s decision in Goodyear Tire & Rubber, 332 F.3d

976, was based on a proper application of the Jaffee criteria for

recognizing a federal privilege under FED. R. EVID. 501,

compounded its errors by holding that federal law does not

recognize the existence of any privilege protecting settlement

communications between parties to prospective or actual

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litigation. 

This case does not present the occasion to examine whether

federal common law provides a settlement privilege. It is well

established that the proponent of a privilege bears the burden of

demonstrating facts sufficient to establish the privilege’s

applicability. See, e.g., United States v. Legal Servs. for N.Y.

City, 249 F.3d 1077, 1081 (D.C. Cir. 2001); In re Sealed Case,

148 F.3d 1073, 1076 (D.C. Cir. 1998); see also Schreiber v.

Soc’y for Sav. Bancorp, Inc., 11 F.3d 217, 220 (D.C. Cir. 1993).

This entails a threshold burden to show entitlement to a ruling

on the existence of a privilege. “A claim of privilege must be

presented to a district court with appropriate deliberation and

precision before a court can rule on the issue, and the fact that

[a] claim arose in the context of a subpoena enforcement

proceeding, rather than routine civil litigation, does not alter this

requirement.” SEC v. Lavin, 111 F.3d 921, 928 (D.C. Cir.

1997) (citations and internal quotations omitted); see Friedman

v. Bache Halsey Stuart Shields, Inc., 738 F.2d 1336, 1342 (D.C.

Cir. 1984). The “basis of [a] privilege” must be “adequately

established in the record,” Liberty Lobby, Inc. v. Dow Jones &

Co., Inc., 838 F.2d 1287, 1303 (D.C. Cir. 1988), through

evidence “sufficient . . . to establish the privilege . . . with

reasonable certainty,” FTC v. TWR, Inc., 628 F.2d 207, 213

(D.C. Cir. 1980).

Although Federal Rule of Civil Procedure 45(d)(2) does

not speak directly to the burden on third parties raising claims

of privilege under the Perlman doctrine, the applicability of a

similar burden is natural. Rule 45(d)(2) is generally satisfied by

the submission of a privilege log detailing each document

withheld and the reason. See Tuite, 98 F.3d at 1416. For

example, had the Commission objected to Gallo’s subpoena on

the basis of a privilege, the Commission would have been

required to state such claims “expressly” and with a

“description of the nature of the documents, communications,

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or things not produced that is sufficient to enable the demanding

party to contest the claim.” FED. R. CIV. P. 45(d)(2); see Tuite,

98 F.3d at 1416. Rule 45(d)(2) serves two purposes, both of

which are relevant in ancillary actions under Perlman and

acquire special moment when a court is faced with the challenge

of applying Jaffee to assertions of historically novel privileges.

First, it prevents courts from addressing often difficult questions

in the abstract. See In re Sealed Case, 856 F.2d at 271 (D.C.

Cir. 1988). Second, timely and detailed explanation of the

grounds of the privilege protects the subpoenaing party’s right

to contest the claims of privilege. See Tuite, 98 F.3d at 1416. 

In light of the admonitions from the Supreme Court and

this court that courts proceed cautiously in deciding whether

novel privileges exist under federal common law, see Univ. of

Penn. v. EEOC, 493 U.S. 182, 194 (1990); United States v.

Nixon, 418 U.S. 683, 710 (1974); In re Sealed Case, 148 F.3d

at 1075-77, the court must ensure that WD Energy has

identified with particularity the documents claimed as

privileged and the basis for this claim, much as WD Energy

may have done in the Eastern District of California by filing a

privilege log and affidavits regarding the settlement discussions,

before determining whether such a privilege exists. See

Friedman, 738 F.2d at 1342-43. Both the plain text of FED. R.

EVID. 501, which calls on federal courts to “interpret” the

“principles of the common law . . . in the light of reason and

experience,” and the standards articulated by the Supreme Court

in Jaffee and Trammel, suggest that a court’s inquiry must be

informed by a nuanced appreciation of the relevant factual

context. As generally understood, the “evolutionary”

development of the common law is a product of intensely factsensitive judicial responses to particular and not abstract

disputes. As then-Judge Benjamin Cardozo succinctly

observed: “The common law . . . . method is inductive, and it

draws its generalizations from particulars.” The Nature of the

Judicial Process 22-23 (1921). Where the proponent of a

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privilege does not identify the particular documents at issue and

the particular contextual basis for claiming a privilege, thereby

affording a challenger an opportunity to set forth its position, a

court will be hamstrung when it undertakes the requisite

analysis. See Jaffee, 518 U.S. at 10-15; In re Sealed Case, 148

F.3d at 1076-77. Where detailed description of the contested

documents would undermine the claimed privilege, the

proponent’s burden to describe with particularity can be met in

other ways, such as in camera review by the court. See, e.g.,

Judicial Watch, 432 F.3d at 370. 

The district court asked the pertinent questions during the

March 11, 2005 hearing on Gallo’s motion to compel but

received only incomplete responses. First, the district court

sought to clarify which documents were at issue. Gallo and the

Commission, after reviewing the WD Energy documents in its

possession, had asserted in their pleadings that WD Energy had

failed to carry its burden of building a record that could

demonstrate that any of the subpoenaed documents were

privileged. At the hearing Gallo argued that “it was incumbent

upon WD [Energy] . . . to specifically tell this [c]ourt with a

great deal of accuracy” which subpoenaed documents were

claimed as privileged. Transcript of March 11, 2005 at 7-8.

When the district court expressed concern that the Commission

may possess documents very clearly in the nature of settlement

proposals, Gallo responded, “If there are, WD [Energy] hasn’t

told us what they are, and it was their duty to do so . . . .” Id. at

10.

WD Energy, for its part, conceded that it bore the burden of

providing a “very specific description” of the documents it

claimed were privileged: “it’s clearly necessary for us to do

that.” Id. at 59-60. At the hearing, WD Energy told the district

court that in responding to the FOIA requests following its

settlement with the Commission, it had “advised the

[Commission] of exactly the documents that [WD Energy]

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sought to protect because they were created and provided to the

[Commission] for the purpose of facilitating a settlement . . . .”

Id. at 58. The affidavit of its counsel had declared that “certain

of these materials were prepared for the sole purpose of

facilitating and furthering settlement with the [Commission],”

that “[a]ll of these materials were voluntarily provided to the

[Commission] and [that] they were provided with an

expectation that the information would remain confidential and

would not be used against WD [Energy] in subsequent litigation

. . . .” Affidavit of Douglas F. John of Feb. 25, 2005 at 2.

Attached to the affidavit was a copy of the Commission’s

February 6, 2004 letter stating that WD Energy’s request for

confidential treatment of its submitted documents under FOIA

“should be granted in full.” The district court noted that various

other affidavits submitted by WD Energy “discuss in general

the kinds of documents and in general the kinds of harm.”

Transcript of March 11, 2005 at 20. At the hearing, WD Energy

also produced, for the first time in the D.C. district court

proceeding, an excerpt from its January 5, 2004 FOIA letter to

support its assertion of confidential treatment. Id. at 60. This

one-page excerpt contained WD Energy’s listing of sets of

documents it claimed (and the Commission had agreed) merited

confidential treatment under FOIA. Absent evidence of the

circumstances surrounding the creation of the documents and

their role in settlement discussions, however, identification of

the documents was an incomplete response to the district court’s

inquiry. 

Second, the district court asked why WD Energy had

previously provided only generalized descriptions of these

documents. WD Energy explained its refusal to “publicly

disclose” this list or to provide a “very specific description of

what we had provided or created for the [Commission],” id. at

59, on the ground that a more specific assertion would have

vitiated the privilege, see id. WD Energy explained that its

business records were already in Gallo’s possession while the

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contested documents were created to help the Commission

understand those business records. If this were the case, then it

behooved WD Energy to proffer the documents or a specific

description of them in a privilege log for in camera inspection

by the court.

Third, the district court sought an explanation of how it

should relate the categories of documents identified in the

excerpt of the January 5, 2004 FOIA letter to the timeline of the

Commission investigation. According to Gallo, WD Energy

had not shown there was a mutual understanding between WD

Energy and the Commission that the documents would be

produced to settle a potential claim in a civil action; rather,

Gallo asserted, WD Energy was relying upon its “supposed

subjective intent at the time [it] provided [documents] rather

than on facts demonstrating that [there] were, in fact, settlement

discussions going on and [that] specific documents . . . were

created pursuant to settlement discussions.” Id. at 14-15. The

district court noted, based on the Commission’s position that

prior to July 2003 it was prepared to move forward with an

enforcement action, that seven of the sets of documents listed

on the excerpt from the 2004 FOIA letter appeared to predate

July 2003. (The only remaining subpoenaed set of listed

documents was dated July 11, 2003.) “How,” asked the district

court, “am I . . . to ascertain whether something created on

March 7, 2003, which is a series of spreadsheets[,] is actually a

settlement document as opposed to just some information that

is being submitted to the investigating agency in an attempt

either to cooperate in the investigation or to talk the agency out

of taking any enforcement action?” Id. at 62. WD Energy

responded that these documents were distinguished from the

many other documents WD Energy had provided to the

Commission because they did not exist on January 24, 2003,

when WD Energy had received the Commission’s subpoena,

“were all stamped privileged and confidential,” id. at 64, and

“belie the efforts of somebody intending to litigate a case * * *

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[because] they were concessions. They were quid pro quo,” id.

Even so, in order to respond to the district court’s inquiry, WD

Energy needed to identify the type of information that would

appear on the March 7, 2003 spreadsheets that would indicate

that WD Energy submitted these documents to the Commission

to facilitate settlement. Again, WD Energy needed to provide

the district court with detailed information about the role of the

documents in particular settlement discussions. 

Only WD Energy’s proffer of the excerpt of the 2004 FOIA

letter even arguably answered the district court’s questions

about which documents WD Energy claimed would be

protected by a federal settlement privilege. The Commission

argued that this proffer was “too little, too late.” Id. at 144.

Even with the excerpt, the district court was unaware of the

specific connection between the listed documents and the

Commission’s investigation, which was the basis for claiming

a settlement privilege. Although the district court, after

examining the excerpt, better understood in what respect WD

Energy had been claiming a privilege over only a “small group”

of documents, the eleventh hour proffer deprived the district

court of responsive pleadings by Gallo and the Commission,

which could have shed additional light on whether these

documents had been prepared for use in settlement discussions

or in response to the administrative subpoena and other

Commission requests before any settlement discussions began.

Further, while WD Energy’s argument that the listed documents

could be distinguished from others it had provided the

Commission because they were concessions, WD Energy did

not explain away the Commission’s contrary view of events

prior to July 2003. 

Moreover, by its own terms, WD Energy’s January 5, 2004

FOIA letter did not address privileges under the federal rules

but confidentiality for purposes of FOIA. The Commission’s

acceptance of WD Energy’s confidentiality claims did not

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confer upon these documents a privilege from discovery.

FOIA’s exceptions to disclosure limit only the right to

information conveyed pursuant to that statute, see 5 U.S.C.

§ 552(d), and other limitations on the Commission’s authority

to publish information, such as 7 U.S.C. § 12(a)(1), do not alter

the Commission’s duty to comply with lawful subpoenas after

notice to the party whose information is sought, see id. § 12(f);

Friedman, 738 F.2d at 1344; 17 C.F.R. § 11.4 (2005).

Unlike the district court in Goodyear Tire & Rubber, 332

F.3d at 978-80, the D.C. district court had not itself presided

over the settlement discussions. Neither had the proceedings in

the Eastern District of California been transferred to the D.C.

district court. Hence, under “the well-established sequence of

burdens of going forward,” Friedman, 738 F.2d at 1343, WD

Energy had the burden to build a record containing specific

information about the disputed documents and the factual

context for the privilege claim, including information about

when settlement discussions began, what representations were

made by those involved, and what documents were created or

submitted to the Commission to facilitate those discussions.

Only then would the district court be in a position to evaluate

WD Energy’s claim that the listed sets of documents would be

protected from disclosure by a federal settlement privilege

under FED. R. EVID. 501.

WD Energy did not file a privilege log here, and thus the

record before the D.C. district court consisted of WD Energy’s

general characterizations of the disputed documents and

settlement discussions, a belated description of the specific sets

of documents, and contentions by Gallo and the Commission

that the documents generally and specifically described by WD

Energy would not be covered by a settlement privilege. There

were no factual findings regarding settlement discussions made

in the proceedings in the Eastern District of California that

could fill these gaps and potentially lessen WD Energy’s burden

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in the D.C. district court. Without such information, the district

court lacked a sufficient factual context within which to

evaluate whether withholding the listed eight sets of documents

advanced important public interests, satisfied the justified

expectations of the parties, or would have been treated as

privileged under various State laws — each of which can be an

important consideration under Jaffee and other relevant caselaw.

See, e.g., In re Sealed Case, 148 F.3d at 1075-77; Goodyear

Tire & Rubber, 332 F.3d at 980-81. Under the circumstances,

there was an inadequate record upon which the district court

could assess the merits of a novel privilege claim in this circuit

and in all but one other circuit court of appeals. Consequently,

a decision by this court on the merits of the federal settlement

privilege claim would likewise be premature. See Friedman,

738 F.2d at 1343.

Accordingly, we affirm the discovery order granting

Gallo’s motion to compel production by the Commission. The

Magistrate’s Order was not entitled to preclusive effect under

the principle of collateral estoppel, and the law of the case

contention lacks merit. We do not address the merits of WD

Energy’s settlement privilege claim; rather, we affirm on the

alternative ground, see Nat’l Ass’n of Home Builders v. U.S.

Army Corps of Eng’rs, 417 F.3d 1272, 1281 (D.C. Cir. 2005),

that WD Energy has failed to meet its burden of demonstrating

that the disputed subpoenaed documents were created for the

purpose of settlement discussions and therefore would merit

protection under any federal settlement privilege that the court

might recognize. We therefore do not reach the merits of the

district court’s ruling that no federal settlement privilege exists

under FED. R. EVID. 501. That question remains open in this

circuit.

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