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D ock e t 97-7347

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. e du/thir dc ir c uit_1998/48Filed March 13, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 97-7347

IN RE: GRAND JURY (IMPOUNDED)

On Appeal from the United States District Court
for the District of Delaware (D.C. Misc. No. 97-00020)

Argued February 11, 1998

BEFORE: GREENBERG, NYGAARD, and MCKEE, Circuit Judges

(Filed: March 13, 1998)

Charles M. Oberly, III (argued) Oberly, Jennings & Drexler, P.A. 800 Delaware Avenue, Suite 901

P.O. Box 2054 Wilmington, DE 19899 Attorneys for Appellant

Gregory M. Sleet, United States
Attorney Colm F. Connolly (argued), Assistant United States Attorney

Chase Manhattan Centre 1201 Market Street, Suite 1100

P.O. Box 2046 Wilmington, DE 19899-2046 Attorneys for AppelleeOPINION OF THE COURT

GREENBERG, Circuit Judge.

I. JURISDICTION

Thomas J. Capano appeals from an order entered in t he district court on June 27, 1997, holding that he wa ived the attorney work product privilege with respect to cer tain
documents he created which the United States seized from a third party pursuant to a subpoena.1 The distric t court had jurisdiction under 18 U.S.C. S 3231, and we hav e jurisdiction to review the order of the district co urt pursuant to 28 U.S.C. S 1291. Cf. In re Grand Jury, 111 F.3d 1066, 1073-77 (3d Cir. 1997) (holding that a d enial of an order to quash a subpoena not directed to a mova nt was a final order if the movant had no further opportun ity to challenge the subpoena).

II. FACTUAL AND PROCEDURAL HISTORY

In July 1996, the Federal Bureau of Investigation ( "FBI") and a federal grand jury in Delaware began a kidnap ing investigation into the disappearance of Anne Marie Fahey, who last was seen alive on June 27, 1996. Capano be came the major target of these investigations. At the ti me of Fahey's disappearance, Capano, who is an attorney, was a partner in the Wilmington office of the Saul, Ewing , Remick & Saul law firm ("Saul Ewing"), a position he held until his resignation on May 31, 1997.

On June 30, 1996, Capano retained attorneys after p olice officers notified him that they considered him a su spect in Fahey's disappearance. One of Capano's attorneys, C harles M. Oberly, III, directed him to prepare "a time-lin e of everything he could remember concerning his whereab outs

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1. While the proceedings on this appeal originally were sealed, the district court on December 2, 1997, unsealed itsfil e in this case. Accordingly, in response to our inquiry at oral arg ument, the parties agreed that we need not use ficticious names in our opinion.

2on June 27, 1996 and immediately thereafter," and t o

"write down his thoughts and notes, as he remembere d them, of anything he could recall about his relatio nship with Ms. Fahey." App. at 42. Following his attorney 's instructions, Capano created a time-line and wrote down other notes regarding his relationship with Fahey a nd placed them in a legal file.

Capano then put the file on a bookshelf in the offi ce adjacent to his own office at Saul Ewing occupied b y of one of his law partners, Timothy A. Frey, because he wa s concerned that there could be an unauthorized searc h of his own office leading to an unauthorized seizure o f the file. Initially Frey was unaware that Capano placed thefi le in his office; however, in August or September of 1996
, Capano informed Frey about the location of the file . Within the next month, Frey found the file in his office, read it, and returned it to its prior location on his booksh elf.

The file remained in Frey's office until the United States seized it on November 4, 1996. On that day, Assista nt United States Attorney Colm F. Connolly telephoned Frey to inform him that an FBI agent would serve him with a grand jury subpoena for Capano's file. Frey then re-exami ned the
file and determined that it was the same file he ha d examined previously. Connolly also telephoned the chairman of Saul Ewing, J. Clayton Undercofler, to notify him about the subpoena. Undercofler expressed a con cern that the production of the file might reveal inform ation relating to the law firm's representation of its cl ients. Connolly and Undercofler then agreed that thefile w ould be produced under seal, and that the law firm would ha ve an opportunity to screen the file for any confidential
information.

After these phone calls, FBI Special Agent Kevin Sh annon arrived at Frey's office and served the subpoena. T he file was placed in an envelope, sealed, and delivered to Assistant United States Attorney Patricia Hannigan, who had been "walled off " from the investigation to av oid any possibility of taint. On November 5, 1996, Hannigan met with Undercofler and Saul Ewing's executive partner
, Frederick D. Strober. After unsealing the envelope, the two attorneys from Saul Ewing examined the file and

3determined that it did not contain any information relating

to the law firm's representation of its clients. Ha nnigan then examined the file and determined that nothing in it arguably was privileged or protected. She then made a copy of the file which she gave to Connolly. She, howeve r, retained the original file.

Although the parties dispute exactly when Capano learned of the seizure, they agree that Capano and his attorneys did not know that the government intended to seize the file prior to the service of the subpoena and that they were informed of the seizure only after it had occurred. Capano asserts that his attorney first learned of t he disclosure on November 6, 1996, two days after the seizure. See br. at 27. In any event, on November 12, 1996, one of Capano's attorneys, Bartholomew J. Dalton, sent a l etter to the United States Attorney advising the government that the file contained privileged information. The Unit ed States, through Connolly, responded on November 26, 1996, b y telephone and informed Dalton that the United State s did not believe that the attorney-client privilege or t he attorney work product doctrine protected the materials conta ined in the file. Connolly told him to "take the issue up w ith the Court." App. at 138.

On at least two occasions between December 30, 1996
, and February 1997, Connolly also had telephone discussions with Oberly regarding the applicability of the attorney work product and the attorney-client privi leges to
the seized documents. In a second letter to the Uni ted States dated January 22, 1997, Oberly requested tha t the government either return the documents in the file or send him a letter stating its opposition to the assertio n of the privileges. In response, Connolly formally denied t he production request in a letter dated February 25, 1 997, contending that the documents were not privileged a nd that, in any event, Capano waived any privilege whe n he placed them in Frey's office. Finally, on March 14, 1997, Capano, citing both the attorney-client and the att orney work product privileges, filed a motion in the dist rict court seeking an order compelling the government to retur n the
file.

4In a memorandum opinion dated June 27, 1997, the

district court denied Capano's motion. While the di strict court held that the attorney-client privilege did n ot offer any protection to the file, it nevertheless held th at the file was attorney work product, because Capano acted as his attorney's agent in creating the file in preparatio n of litigation. However, the district court determined that Capano waived this work product protection based on both disclosure and timeliness grounds. In particular, b ecause Capano had revealed the presence of the file to Fre y and had stored it in Frey's unlocked and easily accessi ble office, the district court held that Capano disregarded the risk that an adversary might obtain the file, and thus h ad waived the work product privilege. Alternatively, t he district court held that Capano waived the work product priv ilege by waiting nearly four months to file a motion to c ompel the return of the seized materials. Finally, the distri ct court noted in a footnote in its opinion that even if Cap ano did not waive the attorney work product protection of t he file,
the United States had demonstrated sufficient cause to overcome that protection.

Capano filed a timely appeal to this court on July 7, 1997. Neither party has challenged the district cou rt's holdings regarding the applicability of the attorne y-client or the attorney work product privileges; therefore, we accept its determination that the seized file was attorney work product, but was not protected by the attorney-clie nt privilege. Because we will affirm the district cour t's holding that Capano waived his attorney work product privil ege with regard to the seized file based on his delay i n seeking a judicial determination, we do not determine wheth er Capano waived the privilege by disclosing the docum ents.
Nor do we decide whether the United States demonstr ated sufficient cause to overcome the work product prote ction.

III. WAIVER OF THE WORK PRODUCT PROTECTION

In examining the district court's holding that Capa no waived his work product privilege, we use an abuse of discretion standard of review. Cf. Livingstone v. N orth Belle Vernon Borough, 91 F.3d 515, 524 (3d Cir. 1996), ce rt.

5denied, 117 S.Ct. 1311 (1997) (using an abuse of di scretion

standard to review a waiver of an attorney-client p rivilege).2

The work-product doctrine, first recognized by the Supreme Court in Hickman v. Taylor, 329 U.S. 495, 6 7 S.Ct. 385 (1947), "shelters the mental processes of the attorney, providing a privileged area within which he can analyze and prepare his client's case." United Stat es v. Nobles, 422 U.S. 225, 238, 95 S.Ct. 2160, 2170 (197 5). The privilege thus promotes the adversarial system by protecting the confidential nature of materials pre pared by attorneys in anticipation of litigation and "enabl[ es] attorneys to prepare cases without fear that their work product will be used against their clients." Westin ghouse Elec. Corp. v. Republic of the Philippines, 951 F.2 d 1414, 1428 (3d Cir. 1991). This protection also can exten d to materials prepared by an attorney's agent, if that agent acts at the attorney's direction in creating such docume nts. See Nobles, 422 U.S. at 238-39, 95 S.Ct. at 2170.

The attorney work product privilege, however, is no t absolute, and it may be waived. See id. at 239, 95 S.Ct. at 2170. Thus, we have held that a party may waive the attorney work product privilege by disclosing prote cted documents in certain circumstances. See Westinghous e, 951 F.2d at 1428-29. It has been held that a disclo sure sufficient to waive the work product protection doe s not have to be intentional; therefore inadvertent or unintentional disclosures of protected materials al so might result in the waiver of the privilege. See, e.g., C arter v. Gibbs, 909 F.2d 1450, 1451 (Fed. Cir. 1990). Howeve r, such a disclosure does not automatically forfeit th e attorney work product privilege. In determining whe ther a party has waived the privilege through an inadverte nt or involuntary disclosure, courts consider, among othe r

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2. Capano argues in his brief that we should exerci se plenary review. Br. at 18-19. We disagree but observe that even exercis ing plenary review we
would reach the same result. While we will assume w ithout deciding that in some circumstances we would exercise plenary rev iew to determine if the work product privilege had been waived, we thin k that it is appropriate to use an abuse of discretion standard here because the weighing of various considerations leads us to affi rm the district court's

order.

6factors, the steps taken by a party to remedy the d isclosure

and any delay in doing so. See, e.g., United States v. Keystone Sanitation Co., 885 F. Supp. 672, 676 (M.D . Pa. 1994); cf. United States v. de la Jara, 973 F.2d 74 6, 749-50 (9th Cir. 1992) (holding that a defendant waived hi s attorney-client privilege with regards to a seized letter
because he waited six months after the seizure to a ssert his privilege). But see Carter, 909 F.2d at 1451 (holdi ng that even an inadvertent disclosure automatically waives the attorney work product privilege, because to do othe rwise "would do no more than seal the bag from which the cat has already escaped."). Thus, in the case of inadve rtent or involuntary disclosures, the party asserting the wo rk product doctrine must pursue all reasonable means t o restore the confidentiality of the materials and to prevent further disclosures within a reasonable period to c ontinue to receive the protection of the privilege.

It is undisputed that neither Capano nor his attorn eys knew of the subpoena until after it had been issued and the file had been seized. Consequently, Capano had no opportunity to challenge the involuntary disclosure of the file by seeking to quash the subpoena; instead, his only remedy was to assert the attorney work product priv ilege after the United States took possession of the file . Capano clearly made a timely assertion of the attorney wor k product privilege to the government; his attorney m ailed a letter asserting the privilege to the United States within eight days after the seizure. However, as of Novemb er 26, 1996, Capano and his attorneys were on notice that the United States disagreed with the assertion of the p rivilege and would not relinquish the file voluntarily. In s pite of this knowledge, Capano waited until March 14, 1997, tofi le a motion to compel the return of the seized file. Thu s, the determinative issue on this appeal is whether Capan o's initial assertion of the privilege to the United St ates sufficiently protected his rights or whether his fa ilure to seek a judicial ruling on the issue more promptly w aived the privilege.

We hold that the district court did not abuse its discretion determining that even though Capano time ly notified the United States of his claim of the priv ilege and

7continued to assert it in subsequent communications , these

assertions were insufficient to protect his rights. The United States was a direct adversary of Capano, and its co ntinued use of the documents directly undermined the purpos e of the attorney work product privilege of protecting confidential documents prepared in anticipation of litigation from a party's adversary. Capano's repeated admonit ions to his adversary to return the protected documents did not prevent the continuing harm resulting from the disc losure. Judicial enforcement of the privilege was the only remedy that Capano could have obtained which would have
foreclosed the United States from further use of th e seized file. Without such judicial vindication, the United States was free to continue to utilize the documents, ther eby negating their confidential character.

In the case of such an involuntary disclosure, a reasonable person would not only inform his or her adversary of the breach of the privilege, but also would seek a judicial determination of the controversy if his or her adversary took an opposing stance. Merely asserting the privilege to an adversary is not sufficient to prot ect the privilege in these circumstances inasmuch as the ad versary has possession of the materials claimed to be privi leged and thus can make use of them. Moreover, if the distric t court countenanced Capano's delay in judicially asserting his privilege and then upheld his claim of privilege, t he grand jury's use of the seized file potentially could hav e tainted its investigation.3

In short, when a party's adversary has obtained possession of a party's work product and refuses to recognize the work product privilege, the party ass erting the privilege must move expeditiously for relief partic ularly

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3. In his brief Capano asserts that during the four months before he served his motion, the government had possession of the disputed
documents and "is believed to have used these docum ents in the grand jury proceedings." Br. at 29. He reasons from this belief that there "was no prejudice to the Government as a result of the f our-month period between [his] initial assertion of the . . . work p roduct privilege[ ]"

and the filing of his motion. Id. While the grand jury in fact did not indict Capano, clearly his argument overlooks the taint pr oblem we have
identified.

8where, as here, the party asserting the privilege d oes not

even claim that he had reason to believe that the adversarial party was not making use of the work pr oduct. Indeed, in his brief Capano asserts that in "this e ntire period," i.e., between November 12, 1996, and March 14, 1997, when he filed his motion, the govenment "used these documents to further its grand jury investigation." Br. at
15-16. While we cannot set an exact time within whi ch such a motion must be made, we hold that the distri ct court did not abuse its discretion in holding that Capano waived the privilege as we are satisfied that Capan o acted unreasonably in waiting nearly four months to seek a judicial vindication of his assertion of the privil ege.

Capano contends that SEC v. Lavin, 111 F.3d 921 (D. C. Cir. 1997), supports his position that his assertio n of the privilege to the United States sufficiently protect ed his rights. In Lavin, the Securities and Exchange Commi ssion ("SEC") sought to obtain copies of tape recordings of
conversations between a husband and a wife. These recordings were made by and were in the possession of the husband's employer, Bankers Trust Company ("Bankers Trust"). See id. at 924. Initially, Bankers Trust h ad submitted these tapes to the Federal Reserve Board ("Board") as part of a production request pursuant to the Board's examination powers. When Bankers Trust noti fied Lavin, the husband, that it had relinquished the ta pes to the Board, he immediately asserted his marital communications privilege and requested that Bankers Trust
assert it on his behalf to the Board. Bankers Trust and Lavin subsequently entered into an agreement whereb y Bankers Trust would give him the opportunity to cha llenge any further requests seeking the release of the tap es. However, Lavin did not institute any legal proceedi ngs against Bankers Trust to obtain the tapes. Subseque ntly, the SEC sought the disclosure of the tapes, and Lav in asserted his marital communications privilege.

In considering whether the privilege had been waive d, the Court of Appeals for the District of Columbia Circu it held that Lavin had no obligation to initiate any legal proceedings against Bankers Trust to protect the
conversations "absent a concrete threat of further

9disclosure." Id. at 931. There was no such threat i n Lavin's

case, because Bankers Trust continued to abide by i ts agreement. In fact, Lavin had intervened successful ly in an
unrelated civil suit to assert his marital communic ations privilege with respect to the tapes. See id. at 924 -25, 931. The court also noted that "taking reasonable precau tions to preserve the confidentiality of privileged material s does not require gaining physical possession in cases such a s this where . . . attempts to gain such possession would have been futile because the tapes were not the property of [Lavin]." Id. at 932. Thus, Capano argues that like Lavin, he should not have been forced to seek an immediate ju dicial determination regarding the return of his file, bec ause the disclosure already had occurred and no threat of fu ture
disclosures existed.

Aside from the obvious differences in the privilege s at issue and the purposes behind them, the facts of La vin differ substantially from the present case. In Lavi n, Lavin took active measures to assure that no one beyond t he owner of the recordings, Bankers Trust, had access to them. More importantly, Lavin took legal action aga inst any potential adversary that sought to obtain the recor dings, and the entity in possession of the tapes, Bankers Trust, was not such an adversary. Capano was in a more dif ficult position than Lavin, because the privilege already had been breached by the seizure, and his adversary already had access to the documents. Thus, unlike Lavin, Capano was harmed immediately by the initial disclosure as it was to his direct adversary and not to a third party. Repe ated communications by Capano asserting the privilege to his adversary were insufficient to prevent further harm ; only timely intervention by a court could accomplish tha t objective.

Therefore, we reiterate that the district court did not abuse its discretion in determining that Capano wai ved his attorney work product privilege with regard to the seized documents by failing to file a timely motion to com pel their
return. Within a few weeks after the seizure of the file, Capano was on notice both of the seizure and of the government's unwillingness to recognize his attorne y work product privilege with regard to the seized file. Y et, he

10waited nearly four months to seek a judicial vindic ation of

his claim of privilege. This delay is inconsistent with the purpose behind the attorney work product privilege, and
thus the district court did not abuse its discretio n in determining that Capano's delay waived the privileg e.

In view of the aforesaid, we will affirm the order of June 27, 1997.

11McKEE, Circuit Judge, concurring.

I concur with the holding of the majority. I write separately for two reasons. First, I think that we should reject the assertion that the government has establ ished "good cause" to overcome the protection of the priv ilege. Second, I write because I believe that my colleague s' apparent concern for eliminating any taint from thi s ongoing investigation is misplaced.

I.

The government argues that "[its] need for the file results from [Capano's] refusal to testify before the grand jury and speak with investigators. The Government attempted to secure [Capano's] testimony, but its efforts failed ." Appellant's Br. at 23. This amounts to nothing more than an assertion that failure to waive the privilege ag ainst selfincrimination under the Fifth Amendment gives the government the right to obtain information that wou ld otherwise be protected as work product because it a llows the government to establish the "good cause" needed to defeat that privilege. Surely, one need not waive t he protections embedded in the Fifth Amendment in orde r to preserve a work product privilege.

We have historically been quite reluctant to find t he good cause needed to overcome the protections of the wor k product doctrine. See In re Grand Jury, 633 F.2d 28 2 (3d Cir. 1980); United States v. Armerada Hess Corp., 6 19 F.2d 980 (3d Cir. 1985); and In re Grand Jury Investigat ion, 599 F.2d 1224 (3d Cir. 1979). We should not be reluctan t to reject the government's claim of "good cause" insof ar as it is based upon the argument that assertion of a constitutional right defeats the work product privi lege.

II.

My colleagues note that "if the district court countenanced Capano's delay in judicially asserting his privilege and then upheld his claim of privilege, t he grand jury's use of the seized file potentially could hav e tainted its investigation." Maj. Op. at 8. This may well be tru e, but is

12irrelevant. The government risked tainting the inve stigation

when it decided to proceed in the manner that it di d. The circumstances here are unique. There is no reason t hat has been pointed out to this court why the government c ould not have sought to have Saul Ewing secure the Capan o file, and then notified Capano of the government's intent to subpoena it. The district court could then have dec ided the motion to quash that Capano would most certainly ha ve filed, and there would have been no possibility of taint prior to an adjudication of the privilege. The government was obviously aware of the problems it was creating by seizing the documents and setting up a "Chinese wall" in an attempt to insulate them. Because the Government ch ose that tactic, we ought not to allow a concern for an y taint that the seizure may have created to affect our ana lysis of the claim of privilege. "The ultimate aim [of the w ork product privilege doctrine] is to promote the prope r administration of justice." In re Grand Jury Procee dings, 604 F.2d 798, 802 (3d. Cir. 1979). That objective i s not well served if we allow a possible taint that the govern ment itself created to influence our inquiry.1

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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1. There is no suggestion that Capano deliberately delayed filing a motion to secure an advantage. Where a defendant or target does that, I agree that consideration of taint may be appropriate.

13