# United States Court of Appeals
FOR THE EIGHTH CIRCUIT

___________ No. 97-2261

___________ The United States of America * ex rel. Daniel G. O'Keefe, *

Plaintiff - Appellant, *

v. * District Court for the McDonnell Douglas Corporation, *

Defendant - Appellee. *

____________________ * The Conference of Chief Justices, * Amicus * Curiae. * *

* Appeal from the United States

* Eastern District of Missouri.

*

*

*

___________ Submitted: September 8, 1997 Filed: January 6, 1998

___________ Before HANSEN, JOHN R. GIBSON, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________ HANSEN, Circuit Judge.

## The Honorable George F. Gunn, Jr., United States District Judge f or the Eastern 1 

## District of Missouri. -2- The United States of America appeals the district court's protective order preventing government attorneys 1 fr om engaging in ex parte communications with current employees of the defendant, McDonnell Dougla s Corporati on(McDonnell Douglas). The government also appeals restrictions placed upon its investigation o f former employees. We affirm.
I.
This action arose as a qui tam action brought by Daniel O'Keefe under the False Claims Act, 31 U.S.C. §§ 3729 -33, alleging mischarging of labor hours by employees of McDonnell Douglas Corporation (McDonnell Douglas) while working on United States military co ntracts. The United States subsequently intervened in the suit pursuant to 31 U.S.C. § 3730(b)(4) and (c). On behalf of the United States, the Department of Justice (DOJ ) began its pretrial investigation. In particular, i nvestigative agents of the DOJ began making ex parte contacts with various pr esent and former lower-level employees of McDonnell Douglas without the consent of McDonnel l Douglas’s counsel.
McDonnell

Douglas brought a motion for a protective order preventing such contacts, arguing that such ex parte contacts were barred by Missouri Supreme Court Rule 4-4.2. Missouri Supreme Court Rule 4-4. 2 provi des, "[i]n representing a client, a lawyer shall not communicate about the subject of the representation with aparty the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so." The official comment explains that where the opposing party i s an organization, Rule 4-4.2 bars ex parte communications with "persons having the managerial responsibility on behalf of the organization, and with any other person whose act or omission in connection with that

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matter may be imputed to the organization for purposes of civil or criminal liability or whose statement ma y constitute an admission on the part of the organization." This comment was adopted by the Supreme Court o f Missouri in Sta te ex rel. Pitts v. Roberts , 857 S.W.2d 200, 202 (Mo. 1993) (en banc). The Supreme Court o f Missouri's ethical rules have in turn been adopted by the United States District Court for the Eastern District of Missouri. See

E.D. Mo. L .R. 12.02 ("The Code of Professional Responsibility adopted by this Court is the Code of Professional

Responsibility adopted by the Supreme Court of Missouri, as amended from time to time, except as may otherwise be provided by this Court’s Rules of Disciplinary Enforcement. "). The government argues that a protective order was not warranted because the ex parte contacts it engaged in are e xpressly authorized by 28 C.F.R. § 77.10(a), arule promulgated by the Attorney General of the Unite d States. This rule provides as follows: A communication with a current employee of an organization that qualifies as a represented party or repr esented person shall be considered to be a communication with the organization fo r purposes of this part only if the employee is a controlling individual. A "controlling individual" is a current high level employee who is known by the government to be participating as a decision maker in the determination of the organization’s legal position in the proceeding or investigation of the subject matter.
28 C.F.R. § 7 7.10(a). The Government argues that section 77.10(a) supersedes the local rules of the Easter n District of Missouri. In the alternative, the government argues that, in light of section 77.10(a), the disputed ex parte contacts by DOJ attorneys were "authorized by law," and thus fell under the express exception to Rule 4-4.2 which sta tes that ex parte contacts are permissible if "authorized by law." McDonnell Douglas responds to both arguments by asserting that the Attorney General lacked the

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statutory authority to issue 28 C.F.R. § 77.10(a), and that this provision is therefore invalid and of no effect. The district court concluded that section 77.10(a) fell b eyond the limits of the Attorney General's statutory authority. Accordingly, it granted the protec tive order in part, finding that the government's ex parte contacts with cur rent McDonnell Douglas employees violated Missouri Supreme Court Rule 4-4.2 as adopted by the Easter n Dis trict of Missouri. It ordered the government to cease such contacts and to provide discovery of informatio n obtaine d from those contacts already made. The court also imposed conditions on ex parte contacts with former Mc Donnell Douglas employees. At the government's request, we stayed that portion of the district court's order that requires the government to provide discovery of information obtained from its ex parte contacts.
II.

" I t is axiomatic that an administrative agency's power to promulgate legislative regulations is limited to the authority delegated by Congress." Bowen v. Georgetown Univ. Hos p. , 488 U.S. 204, 208 (1988); see als o Loui siana Pub. Serv. Comm’n v. FCC , 476 U.S. 355, 374 (1986) (“an agency literally has no power to act . .

. unl ess and until Congress confers power upon it.”) . The government claims that 5 U.S.C. § 301 and variou s sections of Title 28 of the United States Code grant the Attorney General the authority to promulgate 28 C.F.R. § 77.10(a) . We address each assertion in turn.
A. The Housekeeping Statute
The government relies primarily on 5 U.S.C. § 301 (1994). Section 301, better known as th e “H ousekeeping Statute,” was passed in 1789 “to help General Washington get his administration underway b y spelling out the authority for executive officials to set up offices and file government documents.” H.R. Rep. No. 85-1461

## -5-

(19 58), reprinted in 1958 U.S.C.C.A.N. 3352. The current version of the Housekeeping Statute provides a s follows:
The head of an Executive department or military department may prescribe regulations for th e government of his department , the conduct of its employees, the distribution and performance of its business, and the custody, use, and preservation of its records, papers, and property. Thi s section does not authorize wi thholding information from the public or limiting the availability of records to the public. 5 U.S.C. § 301 (1994). The government's argument that the Housekeeping Statute authorizes the Attorney General's promulgation of 28 C.F.R. § 77.10(a) contradicts the plain meaning of the statute and the jurisprudence of the Supreme Court. In Chrysler Corp. v. Brown , 441 U.S. 281, 310 (1979) , the Supreme Court examined the Housekeeping Statute an d held that it does not provide statutory authority for substantive regulations. After a brief historical analysis of the provision, the Court wrote: Given this long and relatively un controversial history, and the terms of the statute itself, it seems to be s imply a grant of authority to the agency to regulate its own affairs. . . . It is indeed a “housekeeping statute,” authorizing what the APA terms “rul es of agency organization, procedure or practice” as opposed to “substantive rules.”
Id. at 309-10. In so ruling, the Court noted that Congress had looked carefully at the statute in 1958, that th e Special Subcommittee on

Government Information had “unanimously agreed that [§ 301] originally was adopted in 1789 to provide for the day-to-day office housekeeping in the Government departments,” and that attempts to construe it as something more was “misuse” which “twisted” the statute. Chrysler Corp. , 441 U.S. at 310 n.41 (quoting H.R. Rep. No. 85-1461 at 7 (1958)) (alterations in original).

## -6- In recent years, several agenci es have unsuccessfully attempted to find statutory authority for substantive regulations in the Hou sekeeping Statute. See In re Bankers Trust Co. , 61 F.3d 465, 470 (6th Cir. 1995) (Federal Reserve Board regulation requiring subpoenaed party to refuse production of confidential FRB information , contrary to Federa

l Rule of Civil Procedure 34, was not authorized by the Housekeeping Statute and “exceed[ed] the congressional delegation of authority”) , cert. dismissed , 116 S. Ct. 1711 (1996); Exxon Shipping Co. v. United States Dep't of Interior , 34 F. 3d 774, 776-78 (9th Cir. 1994) (Housekeeping Statute did not authorize regulations allowing agency to withho ld deposition testimony of federal employees); In re Cincinnati Radiation Litig. , 874 F. Supp. 796, 826-27 (S.D. Ohio 1995) (Housekeepin g Statute did not authorize 1953 Defense Department directive on the use of human volunteers in experimental research); McElya v. Sterling Med. Inc. , 129 F.R.D. 510, 51 4 (W.D. Tenn. 1990) (Houseke eping Statute did not give Department of Navy authority to create general discovery privilege fo r persons under its jurisdiction). The government’s argument in the case at bar is simply one mor e attempt to twist this si mple administrative statute into an authorization for the promulgation of substantive rules. The government cites three case s in support of its reading of the Housekeeping Statute. These are Boske v. Comingore , 177 U.S. 459 (1900), United States ex rel. Touhy v. Ragen , 340 U.S. 462 (1951), and Georgia v. United States , 411 U.S. 526 (1973). None of these cases controls the case at bar. Touhy and Boske

both involve regulations whic h dealt exclusively with internal administrative procedure. The regulations at issue in Touhy established which agency employees would produce documents in response to a subpoena duces tecum. 340 U.S. at 467-68. Similarly, the regulations at issue in Boske established which IRS officials would have control over ce rtain IRS records. 177 U.S. at 469-70. In contrast, the regulations in the case at bar are not limited to issues of internal agency procedures.

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Rather, t hey purport to exempt the DOJ from the requirements of state and local federal ethical rules which bind all other litigants.
Additiona lly, both Boske and Touhy were decided prior to the 1958 amendment to section 301, whic h expresses a clear congressi onal mandate that agencies cannot promulgate regulations exempting themselves from their duty to make information available to the public. S ee NLRB v. Capitol Fish Co. , 294 F.2d 868, 875 (5th Cir. 1961) (Since 1958, i t has been clear that the Housekeeping Statute “cannot be construed to establish authority in the executive departments to determine whether certain papers and records are privileged.")

. Boske reflects a particularly antiquated view of administrative rule making authority. See Guardians Ass'n v. Civil Serv. Comm’n , 463 U .S. 582, 614-15 n.2 (1983) (O’Connor, J., concurring) (“cases since Boske articulating the limitation s applicable to agency rule making power indicate that the scope of agency discretion is indeed narrower than the language of Boske would suggest”). Finally, the Georgia

case is not on point. In Georgia , the Court held that the Housekeeping Statut e provided “amp le legislative authority” for regulations promulgated by the Attorney General. 411 U.S. at 536

. However, the regulations at issue in Georgia did not expand the agency’s power. Rather, they merely established procedures for the use of power delegated t o the Attorney General by the Voting Rights Act of 1965. Id. Georgia there fore provides no support for the government’s contention that the Housekeeping Statute authorized th e substantive regulation at issue here.
B. Title 28
The government relies additionally on various sections of Title 28 of the United States Code (sections 509, 510, 515(a), 516, 519, 533, and 547) which, it argues, col lectively authorize 28 C.F.R. § 77.10(a). We reject this contention because none

## These sections provide as follows: 2 

## All functions of other officers of the Department of Justice and all fun ctions of agencies and employees of the Department of Justice ar e vested in the Attorney General except the functions (1) vested by subchapter I I of chapter 5 of title 5 in administrative law judges employed by the Department of Justice; (2) of the Federal Prison Industries, Inc.; and (3) of the Board of Directors and officers of the Federal Priso n Industries, Inc. 28 U.S.C. § 509.

The Attorney General may from time to time make such provisions as he considers appropriate authorizing the performance by any othe r officer, employee, or agency of the D epartment of Justice of any function of the Attorney General. 28 U.S.C. § 510.

Th e Attorney General or any other officer of the Department o f Justice, or any attorney specially appointed by the Attorney G eneral under law, m ay, when specifically directed by the Attorney General, conduc t any kind of legal proceeding, civil or criminal, including grand jury proc eedings and proceedings before committing magistrates, whic h United States attorney s are authorized by law to conduct, whether or not he is a resident of the district in which the proceeding is brought. 28 U.S.C. § 515(a).

Exc ept as otherwise provided by law, the conduct of litigation i n which the United States, an agency, or officer thereof is a party, or i s inter ested, and securing evidence therefor, is reserved to officers of th e Department of Justice, under the direction of the Attorney General. -8- of these is any more than a general enabling statute, see United S tates v. Lopez , 4 F.3d 1455, 1461 (9th Cir. 1993) (rejecting claim that §§ 509, 515, 516, 533, and 547 authorized similar DOJ policy), and because no reviewing court could “reasonably . . . conclude that the grant of authority contemplates the regulations issued.” See Chrysler Corp. , 441 U.S. at 308 . Sections 509, 510, 515(a), 516, 519, and 533 define the duties o f the Attorney General, grant her the power to appoint inferio r off icers and to delegate power to these officers, and provide that thes e officers shall answer to her. 2

## 28 U.S.C. § 516.
Except as otherwise authori zed by law, the Attorney General shall supe rvise all litigation to which the United States, an agency, or office r thereof is a party, and shall direct all United States attorneys, assistan t Uni ted States attorneys, and special attorneys appointed under sectio n 543 of this title in the discharge of their respective duties. 28 U.S.C. § 519. The Attorney General may appoint officials— (1) to detect and prosecute crimes against the United States; (2) to assist in protection of the person of the President; and (3) to conduct such other investigations regarding official matter s under the control of the Department of Justice and the Department of State as may be directed by the Attorney General. This section does not limit the authority of departments and agencies to in vestigate crimes against the United States when investigativ e jurisdicti on has been assigned by law to such departments and agencies. 28 U.S.C. § 533. Section 547 provides: 3 

## Except as otherwise provided by law, eac h United States attorney, within his district, shall— (1) prosecute for all offenses against the United States; (2) p rosecute or defend, for the Government, all civil actions, suits or proceedings in which the United States is concerned; (3) appear in behalf of the defendants in all civil actions, suits o r proceedings pen ding in his district against collectors, or other officers of the revenue or customs for any act done by them or for the recovery -9- Section 547 simply defines the role of Uni ted States Attorneys who, although appointed by the President and removable by him, are nonetheless directed by the At torney General in the discharge of their duties pursuant to sectio n 519. The district court 3

## of

any money exacted by or paid to these officers, and by them pai d into the Treasury; (4) inst itute and prosecute proceedings for the collection of fines , penalt ies, and forfeitures incurred for violation of any revenue law , unless satisfied on investigation that justice does not require th e proceedings; and (5) make such reports as the Attorney General may direct. 28 U.S.C. § 547. -10- correctly concluded that nothing in any of these sections expressly o r imp liedly gives the Attorney General the authority to exempt lawyer s representing the United States from the lo cal rules of ethics which bind all other lawyers appearing in that court of the United States.
III. An agency's promulgation of rules without valid statutory auth ority implicates core notions of the separation of powers, and we are required by Congress to set these regulations aside. 5 U.S.C. § 706(2)(C) (1994) ("Th e reviewing courts shall . . . hold unlawful and set aside agency action, findings and conclusions found to be . . . i n excess of statutory jurisdiction, authority, or limitations, or short of statutory right

. . . .") ; see also Chrysler Corp. , 441 U.S. at 308 (regulation must be struck down unless reviewing court i s "reasonably [] able to conclude that the grant of authority contemplates the r egulations issued"); Transohio Sav. Bank
v. Director, Office of Thrift Supervision , 967 F.2d 598, 621 (D.C. Cir. 1992) ("Agency actions beyond delegated authority are 'ultra vires,' and courts must invalidate them." ).

## The preemption issue, which consumes a major portion of the government' s 4 

## brief, is a non-issue in this case. At issue in this case is whether attorneys representing the United States must abide by the ethical standards imposed by the local rules of a United States District Court when conducting the government's litigation in that court. Afederal regulation cannot preempt federal law, because “Supremacy Claus e considerations do not

come into play when a court balances competing federal rules.” Ci ty of Kirkwood v. Union Elec. Co ., 671 F.2d 1173, 1178-79 n.14 (8th Cir. 1982) , cert. denied , 459 U.S. 1170 (1983); see United States v. Klubock , 832 F.2d 649, 651 (1st Cir . 1987) (finding preemption doctrine inapplicable to federal court rule whic h incorporates state ethics rules), aff’d en banc , 832 F.2d 664, 667 (1st Cir. 1987). -11- Because we cannot reaso nably conclude that the grants of authority in the statutory provisions cited by the governme nt

contemplate the issuance of anything resembling 28 C.F.R. § 77.10(a), we find this regulation to b e invalid. Accordingly, we reject the government's argument that its ex parte contacts are “authorized by law" an d therefore satisfy Rule 4-4.2. Moreover, because invalid promulgations of the Attorney General can neither preempt nor su persede the local federal rules for the Eastern District of Missouri, we reject the government' s supersession/preemp tion argument as well. Because the government's position has no remaining legs on which to 4 stand, we lift the stay and affirm the order of the district court.

IV.
The dist rict court determined that Missouri Supreme Court Rule 4-4.2 does not require the DOJ to obtain the c onsent of McDonnell Douglas's counsel before initiating ex parte contacts with McDonnell Douglas's former employees, unless such former employees are current ly represented by counsel. However, it ordered the government to keep a list of the names of the former employees it interviews and the dates on which it interviews them. The court further ordered the government to preserve all statements, notes, and answers to questions obtained as a result of these contacts, and to make

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these documents available to McDonnell Douglas for review upon request, subject to work-product limitations. The government appeals the imposit ion of these conditions upon its investigation of the former employees. We review discovery matters only for “gross abuse of discretion resulting in fundamental unfairness in the trial of the case.” Prow v. Medtronic, Inc. , 770 F.2d 117, 122 (8th Cir. 1985). Since the district court created safeguards to pr otect government attorney work-product from discovery, and since the non-privileged information would b e subject to normal discovery in any case, we find no gross abuse of discretion.
V. For the reasons stated above, we lift the stay and affirm the judgment of the district court.

A true copy.
Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.