## United States Court of Appeals FOR THE EIGHTH CIRCUIT

Nos. 97-2969 and 97-4380

Erik Gundacker, *
* Appellant, *
* Appeals from the United States
v. * District Court for the
* District of Minnesota. Unisys Corporation, *
* Appellee. *

Submitted: June 11, 1998 Filed: August 7, 1998

Before BOWMAN, Chief Judge, HEANEY and LOKEN, Circuit Judges.

HEANEY, Circuit Judge.

In this diversity action, Erik Gundacker appeals the district court’s grant o f summary judgment to Unisys Corporation on h is retaliation claim under the Minnesota Whistleblower

Act, Minn. Stat. Ann. §§ 181.931-937 (West Supp. 1998), and th e distri ct court’s finding that a document inadvertently disclosed to Unisys durin g discovery was pr

ivileged and had to be returned. As part of this consolidated appeal, Gu ndacker and his attorney, Dale Nathan, also challenge the district court’s decision to assess sanctions against them. We affirm the district court’s grant of summary2

judgment and finding that the inadvertently disclosed doc ument was privileged, reverse any s anctions levied against Gundacker, and remand for a proper determination o f monetary sanctions against Nathan.

I.
For several years, Gundacker worked as a software manager in Unisys’ defense business. When Gundacker was forty-two-years old, Unisys la id Gundacker off during a company-wide reduction in force (RI F). According to Gundacker, during the course of his employment with Unisys, he protested what he cons idered to be illegal orders by the company. Spe cifically, Gundacker contends that Unisys ordered or asked him to: (1) make illegal charges in a nav al contract; (2) arbitrarily increase a price estimate in a naval contract; (3) submit unrealistica lly low bids in a naval contract; (4) begin work

on a proje ct before receiving naval approval; and (5) illegally use replacemen t personnel as part of

a government contract when it started layoffs in November 1993.

In Nove mber 1993, when Unisys began conducting involuntary layoffs i t require d Gundacker's supervisor, Judith Groff, to rank employees according to th e skills necessa

ry to complete existing and future projects. After assessing Gundacker, Groff concluded that of those within Gundacker 's grade position, laying off Gundacker would have the least impact. Gundacker claims that within the same comparis on group, his performa

nce review went from a 12/37 (i.e., 12th best of 37 employees) to 37/37. On December 14, 1993, Unisys relieved Gundacker of some of his manageria l responsibilities.
On January 24, 1994, Unisys laid Gundacker off. Shortly before h is termination, Gun dacker

claims that Groff wrote an internal note evidencing that Unisys fire d Gu ndacker

because he protested Unisys’ allegedly illegal activity. The handwritte n note stated:3

Prior to 15 Nov RIF - about Nov. 5 - [Gundacker] sent a lette r to a number of people (Jerry, Judy, Huff, ?) Stating that the people on layoff wer e critical & shou ldn't be let go. Caused a ruckus through Bill, etc. with the last minut eness of it. Upshot was, he was relieved of his mgm' t responsibilities during week of Nov. 15 & resisted the acceptance unti l meeting in Dec. -- Talked to Jerry about being on probation, etc.
(Appellant’s App. at 105.)

Soon after he was laid off, Gundacker brought suit against Unisys alleging that Unisys retaliated against him for protesting illegal activity. At the beginning o f dis covery, Unisys’ lawyers inadvertently released a document to Nathan. Th e document contained information related to an internal investigation conducted b y Unisys’ lawyers to determine, in part, whether Unisys participated in illegal conduct. Upon realizing their mistake, the attorne ys asked Nathan to return the document. They claimed that the document was privileged attorne y work product and asked that Nathan not use i t. Several days after Nathan gave the document back, Unisys’ lawyers asked Nathan whether he had retained a copy. He r efused to answer, and Unisys again asked Nathan to return the o riginal and all other copies. Nathan wanted to use the document

as part of a separate whistleblower claim, known as a qui tam action, against Unisys. The magistrate determined that th e document was privileged as attorney work product. The district court agreed with the magistrate’s conclusion.

After the parties agreed to a confidentiality stipulation, on January 9, 1995, the magistrate entered a protective order. Nathan repeatedly disregarded the order. Fo r example, de spite the fact that the separate qui tam action against Unisys was seale d entirely, Nathan continually referred to the qui tam action as part of Gundacker’ s pleadings in this case.

While Gund acker was working at Unisys, he took several cartons of interna l company documents and retained several other documen ts that were given to him in theThe record indicates that Nathan did, in fact, speak to at least one member of the 1 press about this case and the separate qui tam action.

4 course of his employment. Unisys brought a counterclaim against Gundacker requesting tha t all documents be returned, and that Nathan be prohibited from disclosing an y informa tion from the documents. On April 11, 1997, the parties agreed that Unisy s would dismiss its counterclaim against Gundacker. Gundacker, in turn, agreed to return all Unisy s documents in his possession. The parties agreed that the documents would be coded, supervised by a third party, and stored at Unisys’ lawye rs office with the only key placed under seal in the court file.
Under the agreement, Nathan could review documents relevant to this case, but the documents would remain under seal. Further, if Gundacker ultimately lost o n appeal, Unisys would take possession of the documents. However, if Gundacke r
succ eeded on appeal, Gundacker could seek a court order allowing him to use th e docum ents. All parties agreed that because of the settlement agreement, Unisys ’ pending motion for a temporary restraining order was moot.
Nevertheless, shortly after the parties reached their sett lement agreement, Nathan sent a letter to Unisys claiming that the agreement did not prevent him from sendin g documents to law enforcement officials. The magistrate requested that the parties be available for an April 18, 1997 telephone conference call. On April 17, 1997, Nathan sent a letter to Unis ys’ lawyers indicating that he would tape the telephone conference call and possibly have the media present. He also stated that he reserved the right t o provide co pies of the tape and letters from Unisys’ attorneys to federal officials, th e Lawyers Professional Responsibility Board, and the media. Nathan wrote: 1

Not hing less than a written order not under seal by a judge specificall y prohibiting me from providing copies of the Gundacker documents to the United States Government will prevent me from providing these5

documents t o the United States Government if we decide to do so. W e will obey such an order if it is issued. We will also appeal that order.
(Appellee’s App. at 55.)

Nathan also stated that the various judges assigned to this case were part of a cover-up and were impeding a federal investigation. On April 21, 1997, the magistrate convened a meeting between the parties to discuss the court records remaining under seal. Uni sys’ lawyers were concerned that Nathan would turn documents over to th e United States Attorney. Nathan stated th at he would only do so if he were subpoenaed but h e would not ask for a subpoena. He specifically asked that the record show h e would not request a subpoena, and assured Unisys that if he were subpoenae d, he would first contact Unisys.

After th e conference, however, Nathan contacted an Assistant United State s Attorney (AUSA) and told him about the conver sation with the magistrate. The AUSA served Gundacker with a subpoena. Rely ing on Nathan’s advice, Gundacker complied with the subpoena. Despite his assurances to the contrary, Nathan turned over th e documents w ithout first contacting Unisys, stating that he forgot the court's order and inadvertently made a mistake.

Because of their conduct, the district court assessed sanction s against Nathan and Gundacker. The district court found that Gundacker and Nathan acted in bad faith in relation to the Federal Rule of Civil Procedure 16 settlement confe rence and vexatiously and unre asonably multiplied the proceedings under 28 U.S.C. § 1927. The court then determined that sanctions against the two were appropriate.

In sum, the district court granted Unisys’ summary judgment motion o n Gundacker’s whistleblower claim; found that the ina dvertently disclosed document was privileged under the

attorney work product doctrine; assessed $11,247.06 in sanctionsGun dacker argues that in addition to his 1(c) claim, he also alleged a 1(a) clai m 2 under the Minnesota Whistleblower Act. Subdivision 1(a) provides:

An e mployer shall not discharge, discipline, threaten, otherwis e discrim inate against, or penalize an employee regarding the employee' s co mpensation, terms, conditions, location, or privileges of employmen t because:

6 against Gun dacker and Nathan, holding them jointly liable; and assessed $6,111.07 in
sanct ions against Nathan, individually, to reimburse Unisys for certain fees and costs. The district court also ordered that Nathan be publicly admonished in an order to b e fil ed with the National Lawyer Regulatory Data Bank of the American Ba r Association’s Center for Professional Responsibility. Gundacker and Nathan appeal.

II.
Gundacker appeals the district court’s gra nt of summary judgment to Unisys and its finding that the inadvertently disclosed document was privileged. Both Gundacker and Nathan appeal the assessment of sanctions.
We review a district court’s g rant of summary judgment de novo. United States

ex. rel. Glas s v. Medtronic, Inc. , 957 F.2d 605, 607 (8th Cir. 1992). In considerin g whether t o grant summary judgment, a court examines all the “pleadings, depositions, answers to interrogat ories . . . admissions on file . . . [and] affidavits.” Fed. R. Civ. P. 56(c). Afte r viewing the record in a light most favorable to the nonmoving party , summary judgment is appropriate only where the re is “no genuine issue of material fact and . . . the moving party is entitled to judgment as a matter of law.” Langley v. Allstate Ins. Co. , 995 F.2d 841, 844 (8th Cir. 1993) (citations omitted).

Gun dacker

first argues that Unisys retaliated against him in violation o f § 181.932, subd. 1(c) of the Minnesota Whistleblower Act: 2. . . . (a) the employee, or a person acting on behalf of an employee, in good fait h, reports a violation or suspected violation of any federal o r state law or rule adopted pursuant to law to an employer or to an y governmental body or law enforcement official.

Minn. S tat. Ann. § 181.932, subd. 1(a) (West Supp. 1998). Having reviewed hi s original complaint and several ame nded complaints, we conclude that Gundacker only bro ught suit under 1(c). Despite this issue being flagged early in the proceedings , Gunda cker

never asked for leave of court to amend his complaint in order to add a claim under subd. 1(a) and he has not appealed this issue. Unisys argues that rather than review Gundacker’s claim as simply one o f 3 retal iation, we should analyze his cause of action under the more exacting standar d ap plied in RIF cases. We need not address this issue because under either mode o f analysis, Gundacker is unable to establish a prima facie case of retaliation.

7 An em ployer shall not discharge, discipline, threaten, otherwis e discri minate against, or penalize an employee regarding the employee' s com pensation, terms, conditions, location, or privileges of employmen t because:

. . . (c) the employee refuses an employer's order to perform an action th at the employee has an objective basis in fact to believe violates an y state or federal l aw or rule or regulation adopted pursuant to law, and the employee informs the employer that the order is being refused for tha t
reason. Minn. Stat. Ann. § 181.932, subd. 1(c) (West Supp. 1998).

In determining whether an employee has been subjected to a retaliator y discharge, Minnesota court s follow the three-part, burden-shifting analysis set forth in McDonnell Douglas Corp. v. Green , 411 U.S. 792 (1973). See Hubbard v. United 38

Press Int’l, Inc. , 330 N.W.2d 428, 444 (Minn. 1983) (citations omitted). In order t o make out a prima facie case of retaliation, Gundacker must prove: (1) he engaged i n condu ct that is protected by the statute, (2) Unisys took adverse employment actio n agains t him, and (3) a causal link between the adverse employment action and th e conduct protected by the statute. Id.

Gundacker

alleged five incidents in which he protested illegal orders. I n discussing why Gundacker failed to establish a prima facie case as it relates to the first four incidents of alleged illegal activity, the district court stated:

Plaintiff has produced no evidence . . . tending to show the [first two ] incidents were a factor in his termination. . . . Even if [the] evidence [as to the third and fourth incidents] were sufficient to create a genuine issue of material fact on the causation element of plaintiff’s prima facie case, the Court notes plaintiff has not shown that his actions during these tw o incid ents are protected by the whistleblower statute. With respect to the bid, plaintiff provided no evidence he informed Unisys the low bid wa s illegal. He also admitted he su bmitted the bid, and therefore cannot show he refused the allegedly illegal order to submit it. See Minn. Stat. § 181.923, subd. 1(c).

The evidence with r

espect to the work authorization issue shows plaintiff brought t he problem to the attention of his superiors and the wor k authorization was changed to h is satisfaction. Management’s response to his co mplaint takes this incident outside the whistleblower statute. Se e Morrow v. Air Methods, Inc. , 897 F. Sup p. 418, 421 (D. Minn. 1995) (no request to perform illegal act where management acknowledged an d corrected the error employee brought to his attention).

Gundacker , No. 4-95-676, Mem. & Order at 6-7 & n.3. Having carefully reviewed the record, we agree with the district court’s analysis concerning the first four incidents.9

With respect to the fifth incident, Gundacker sent a letter to his superviso r complaining that the proposed layoffs would adversely affect his ability to complet e projects under his direction. Gundacker claims that Unisys told him to use substitute personnel in place of those laid off. He ass erts that he complained to Unisys that doing

so would be illegal. To support his assertion, Gundacker submitted expert testimony to th e effect that the following actions violate state and federal law: (1) using lowe r grade personnel under a government contract without first advising the government, (2) charging the government for deliveries when a contractor knows the work is incomplete or of a lower quality, and (3) billing "direct charge worker" costs to overhead. Despite the introduction of expert testimony, the district court concluded that becaus e Gundacker did not refuse Unisys’ order, a s required by subd. 1(c) of the whistleblower act, he failed to establish a prima facie case. We agree.

In his deposition and supplemental memorandum opposing summary judgment, G u ndacker admitted that he used people that were not originally bid for the particular task and that he "used other personnel under protest because there wa s no other option." In his ap pellate brief, Gundacker stated that “he had no choice but to use replacement personn el.” Because Gundacker did not refuse Unisys’ order to use substitut e personnel, the district court properly granted summary judgment in favor of Unisys.

Gund acker

next argues that because the crime-fraud exception applied, th e di strict court erred by determining that the inadvertently disclosed document wa s privil eged under the attorney work product doctrine. We review the district court’ s deter mination that a document is privileged as attorney work product for an abuse o f discretion. See Zar v. South Dakota Bd. of Exam’rs of Psychologists , 976 F.2d 459, 463-64 (8th Cir. 1992).

The work p roduct privilege operates to ensure that an opponent cannot secur e materials that an adversary has prepared in anticipation of litigation. Pittman v. Frazer ,Ordinary work product includes such items as photographs and raw information. 4 See Pittman , 129 F.3d at 988 (citations omitted). Opinion work product includes conclusions, mental impressions, opinions, an d 5 legal the ories concerning the litigation. See Pittman , 129 F.3d at 988 (citation s omitted). Both parties agree that the docum ent was ordinary work product and inadvertently 6 disclosed. There is also evidence in the record suggesting that Unisys generated the document 7 as part of a voluntary compliance pr ogram with the Department of Defense’s Criminal Investigative Service.

10 129 F.3d 983, 988 (8th Cir. 1997) (citation omitted). The doctrine allows for discovery of ordinary work product when there is a demonstrated substantial need and an inability 4
to othe rwise procure the relevant material without undue hardship. See id. (citation s omitted). In rare circumstances, a party opponent is permitte d to discover opinion work product. See id. (citations omitted). Although disclosure to an adversary ordinaril y

5 waives work product protect ion, there must be an intention that the opposing party see the work pr oduct. See id. (citations omitted). Under the crime- fraud exception , 6 “[a ]ttorney-client

communications lose their privileged character when the lawyer i s consulted not with respect to past wrongdoings but rather to further a continuing o r contemplated criminal fra

ud or scheme.” In re Berkley & Co. , 629 F.2d 548, 553 (8th Cir. 1980) (citations omitted).
Unisys claims that the inadvertently disclosed document was generated as part of an int ernal investigation and that the data contained within the document wa s otherw ise readily discoverable. Unisys also claims that, at most, the document wa s evidence of an alleged past crime or fraud and was produced, in part, to investigat e Gundacker’s claims in anticipation of litigation. Having carefully reviewed the record, 7 we ho ld that the district court did not abuse its discretion in finding that the document was privileged under the attorney work product doctrine ; that the crime-fraud exceptionShortly before oral argument, Nathan filed a motion seeking to compel Unisys to 8 disclose whether it provided the government with a copy of the inadvertently disclosed document. In light of the above discussion, we deny Nathan’s motion.

11 does not apply; and that Gundacker should have obtained the information he sough t through the normal channels of discovery. 8

Finally , Gundacker and Nathan appeal the district court’s assessment o f sanctions. Because a notice of app eal had already been filed in this case, we must first d e termine whether the district court had jurisdiction to assess sanctions. Generally, a notice of appeal divests the district court of juris diction. See Liddell v. Board of Educ. , 73 F.3d 819, 822 (8th Cir. 1996) (citations omitted). Nevertheless, because the issue of sanction s was not before this court at the time Gundacker originally appealed, th e distr ict court properly decided whether sanctions were appropriate. See Perkins v

. General Motors Corp. , 965 F.2d 597, 599 (8th Cir. 1992) (citations omitted) (because sanctions are collateral to the merits of the case, sanctions may properly be considered by the district court even when the merits are no longer before it).

The district court assessed sanctions under 28 U.S.C. § 1927 and Federal Rule of Civil Procedure 16(f), which we review for an abuse of discretion. See Hill v. St

. Louis Univ. , 123 F.3d 1114, 1121 (8th Cir. 1997) (citat ion omitted). Under § 1927, we must determine whether the district court abused its discretion in making theUnder § 1927, 9
[a]ny attorney or other person admitted to conduct cases in any court of the United States . . . who so multiplies the proceedings in any cas e unreason ably and vexatiously may be required by the court to satisf y pe rsonally the excess costs, expenses, and attorneys’ fees reasonabl y incurred because of such conduct.
28 U.S.C. § 1927. Rule 16(f) states: 10

If a party or party’s attorney fails to obey a scheduling or pretrial order, or if no appearance is made on behalf of a party at a scheduling or pretrial conference, or if a party or party ’s attorney is substantially unprepared to participate in the conference, or if a party or party’s attorney fails t o participate in good faith, the judge, upon motion, or the judge’s ow n in itiative, may make such orders with regard thereto as are just, an d among othe rs any of the orders provided in Rule 37(b)(2)(B), (C), (D)

. In lieu of or in addition to any other sanction, the judge shall require the party or the attorne y representing the party or both to pay the reasonable expenses incurred because of any noncomplia nce with this rule, including at torney’s fees, unless the judge finds that the noncompliance wa s substan tially justified or that other circumstances make an award o f expenses unjust.
Fed. R. Civ. P. 16(f).

12 objective finding that Nathan unreasonably and vexatiou sly multiplied the proceedings. 9 See O’Connell v. Champion Int’l Corp. , 812 F.2d 393, 395 (8th Cir. 1987).

Under Rule

16(f), we must decide whether, in assessing sanctions, the district

10 court abused its discretion in finding that Gundacker and Nathan failed t o obey a pretrial order and generally failed to participate in good faith. We must also determineIn light of the above discussion, we also conclude that the district court did no t 11 abuse its discretion in ordering that Nathan be publicly admonished in an order to be filed with the National Lawyer Regulatory Data Bank of the American Ba r Association’s Center for Professional Responsibility. Because Nathan and Gundacker are no longer jointly liable for the sanction s 12 assessed against them, the district court should determine what level of sanction s against Nathan are appropriate. We note that we do not disturb the district court’ s indi vidual assessment of costs and fees against Nathan to be paid to Unisys under 28

13 whe ther, in exercising its inherent powers, the district court appropriately assesse d punitive sanctions against Gundacker and Nathan under Rule 16(f).

The r ecord is clear that Nathan unreasonably and vexatiously multiplied th e proceedings and generally acted in bad faith. He disobeyed court orders, violated his duty as an officer of the court by making false representations, spoke to at least on e member o f the press concerning this and an ongoing, sealed qui tam action, and made various t hreats directed at the court. The assessment of sanctions against Nathan was certainly appropriate. 11

We are not convinced, however, that Gundacker should be sanctioned because of Nathan’s reckless behavior. Having carefully reviewed the record, we believe that it was an ab use of discretion to assess sanctions against Gundacker. At worst , Gun dacker

did not prevent his lawyer from acting recklessly, and we will not imput e liability to Gundacker because his attorney decided to “run wild.”

III.

We affirm the district court’s grant of summary judgment and finding that th e inadverten tly disclosed document was privileged, reverse any sanctions levied against Gundac ker, and remand for a proper determination of monetary sanctions agains t Nathan in light of our above discussion. 12U.S.C. § 1927.

14

A true copy.

Attest.

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.