1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-17-1994

Rhone-Poulenc Rorer, Inc., et al. v. Home

Indemnity Co., et al.

Precedential or Non-Precedential:

Docket 93-1962 and 93-1975

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Recommended Citation

"Rhone-Poulenc Rorer, Inc., et al. v. Home Indemnity Co., et al." (1994). 1994 Decisions. Paper 114.

http://digitalcommons.law.villanova.edu/thirdcircuit_1994/114
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ____________________ 

 Nos. 93-1962 and 93-1975 

 ___________________ 

 RHÔNE-POULENC RORER INC. and 

 ARMOUR PHARMACEUTICAL COMPANY, 

 Petitioners, 

v. 

 THE HOME INDEMNITY COMPANY, 

 a New Hampshire corporation, 

 

v. 

 AETNA CASUALTY & SURETY INSURANCE; AIU 

 INSURANCE COMPANY; AMERICAN CENTENNIAL 

 INSURANCE COMPANY; BIRMINGHAM FIRE INSURANCE 

 COMPANY; FIRST STATE INSURANCE COMPANY; GRANITE 

 STATE INSURANCE COMPANY; HARTFORD INSURANCE 

 COMPANY; INSCO LIMITED; INSURANCE COMPANY OF 

 PENNSYLVANIA; LEXINGTON INSURANCE COMPANY; 

 MANHATTAN FIRE & MARINE INSURANCE COMPANY; 

 MOTOR VEHICLE CASUALTY COMPANY; OLD REPUBLIC 

 INSURANCE COMPANY; PANTRY PRIDE INC; PROMETHEAN 

 INSURANCE LTD.; PRUDENTIAL REINSURANCE COMPANY; 

 PURITAN INSURANCE COMPANY; REVLON INC; TWIN 

 CITY INSURANCE COMPANY; LONDON MARKET CO.; 

 JOHN BARRINGTON HUME, AS REPRESENTATIVE OF 

 UNDERWRITERS AT LLOYDS; INSURANCE COMPANY 

 OF NORTH AMERICA; NATIONAL UNION FIRE INSURANCE 

 COMPANY OF PITTSBURGH, PENNSYLVANIA; ALL CITY 

 INSURANCE COMPANY; EMPLOYER'S MUTUAL CASUALTY; 

 GIBRALAR CASUALTY COMPANY; LANDMARK INSURANCE 

 COMPANY; NEW ENGLAND INSURANCE COMPANY; ROYAL 

 INSURANCE COMPANY; REPUBLIC INSURANCE COMPANY; 

 INTERNATIONAL INSURANCE COMPANY; PACIFIC 

 INSURANCE COMPANY LTD; ATLANTA INTERNATIONAL 

 INSURANCE COMPANY; CENTURY INDEMNITY COMPANY; 

 LIBERTY MUTUAL INSURANCE COMPANY; TRANSPORT 

 INSURANCE COMPANY; MIDLAND INSURANCE COMPANY; 

 INTEGRITY INSURANCE COMPANY; UNION INDEMNITY 

 INSURANCE; TRANSIT CASUALTY COMPANY; CITY 

 INSURANCE COMPANY; DRAKE INSURANCE COMPANY; 

 EXCESS INSURANCE COMPANY; HOME INSURANCE 

 COMPANY; PACIFIC EMPLOYER'S INSURANCE COMPANY; 
 ROYAL INDEMNITY COMPANY; ZURICH INTERNATIONAL 

 INSURANCE COMPANY; HENRIJEAN; ILLINOIS 

 NATIONAL INSURANCE COMPANY; NORTH STAR 

 REINSURANCE COMPANY; and NATIONAL CASUALTY 

 INSURANCE COMPANY, 

 Respondents, 

and 

 THE HONORABLE JAMES McGIRR KELLY, 

 UNITED STATES DISTRICT JUDGE FOR THE 

 EASTERN DISTRICT OF PENNSYLVANIA, 

 Nominal Respondent 

 MORGAN, LEWIS & BOCKIUS; REED SMITH SHAW & 

 McCLAY; SHANLEY & FISHER, P.C.; HUGHES HUBBARD 

 & REED; MONTGOMERY McCRACKEN WALKER & RHOADS; 

 SKADDEN ARPS SLATE MEAGHER & FLOM; and COOPERS & LYBRAND, 

 Intervenors in support of 

Petitioners. 

 ___________________ 

 RHÔNE-POULENC RORER INC. and 

 ARMOUR PHARMACEUTICAL COMPANY, 

 Appellants, 

v. 

 THE HOME INDEMNITY COMPANY, 

 a New Hampshire corporation, 

v. 

 AETNA CASUALTY & SURETY INSURANCE; 

 AIU INSURANCE COMPANY; AMERICAN 

 CENTENNIAL INSURANCE COMPANY; 

 BIRMINGHAM FIRE INSURANCE COMPANY; 

 TRANSPORTATION INSURANCE COMPANY; 

 FIRST STATE INSURANCE COMPANY; GRANITE STATE 

 INSURANCE COMPANY; HARTFORD INSURANCE 

 COMPANY; ILLINOIS NATIONAL INSURANCE CO.; 

 INSCO, LTD; INSURANCE COMPANY OF THE STATE 

 OF PENNSYLVANIA; LEXINGTON INSURANCE COMPANY; 

 MANHATTAN FIRE & MARINE INSURANCE COMPANY; 

 MOTOR VEHICLE CASUALTY COMPANY; NATIONAL 

 UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA; 
 NEW ENGLAND REINSURANCE COMPANY; NEW HAMPSHIRE 

 INSURANCE COMPANY; OLD REPUBLIC INSURANCE 

 COMPANY; PACIFIC EMPLOYERS INSURANCE COMPANY; 

 PANTRY PRIDE, INC.; PROMETHEAN INSURANCE, LTD.; 

 PRUDENTIAL REINSURANCE COMPANY; PURITAN 

 INSURANCE COMPANY; REVLON, INC; TWIN CITY 

 INSURANCE COMPANY; THE LONDON MARKET 

 COMPANIES; and JOHN BARRINGTON HUME A 

 REPRESENTATIVE OF UNDERWRITERS AT LLOYDS 

 OF LONDON; 

and 

 REVLON, INC.; 

v. 

 CITY INSURANCE COMPANY; DRAKE INSURANCE 

 COMPANY; EXCESS INSURANCE COMPANY; 

 HENRIJEAN; THE HOME INSURANCE COMPANY; 

 PACIFIC EMPLOYER'S INSURANCE COMPANY; ROYAL 

 INDEMNITY COMPANY; ZURICH INTERNATIONAL 

 INSURANCE COMPANY; INSURANCE COMPANY OF 

 NORTH AMERICA; NATIONAL UNION FIRE INSURANCE 

 OF PITTSBURGH, PA; ALL CITY INSURANCE COMPANY; 

 EMPLOYERS MUTUAL CASUALTY COMPANY; 

 GIBRALTER CASUALTY COMPANY; LANDMARK 

 INSURANCE COMPANY; NEW ENGLAND INSURANCE 

 COMPANY; ROYAL INSURANCE COMPANY; REPUBLIC 

 INSURANCE COMPANY; INTERNATIONAL INSURANCE 

 COMPANY; PACIFIC INSURANCE COMPANY, LTD.; 

 ATLANTA INTERNATIONAL INSURANCE CO.; CENTURY 

 INDEMNITY COMPANY; LIBERTY MUTUAL INSURANCE 

 COMPANY; TRANSPORTION INSURANCE COMPANY; 

 MIDLAND INSURANCE COMPANY; PACIFIC 

 INSURANCE COMPANY LTD.; ATLANTA INSURANCE 

 COMPANY LTD.; CENTURY INDEMNITY COMPANY; 

 LIBERTY MUTUAL INSURANCE; MIDLAND INSURANCE 

 COMPANY; INTEGRITY INSURANCE COMPANY; UNION 

 INDEMNITY INSURANCE COMPANY; TRANSIT 

 CASUALTY COMPANY; ROYAL INSURANCE COMPANY; 

 ROYAL INDEMNITY COMPANY; NEW ENGLAND 

 INSURANCE COMPANY; INSURANCE COMPANY 

 OF NORTH AMERICA; NORTH STAR REINSURANCE COMPANY; 

 and NATIONAL CASUALTY INSURANCE COMPANY, 

 Appellees, 

 MORGAN, LEWIS & BOCKIUS; REED SMITH SHAW & 

 McCLAY; SHANLEY & FISHER, P.C.; HUGHES HUBBARD 
 & REED; MONTGOMERY McCRACKEN WALKER & RHOADS; 

 SKADDEN ARPS SLATE MEAGHER & FLOM; and COOPERS & LYBRAND, 

 Intervenors-appellants. 

 ____________________ 

 ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

 FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

 (D.C. Civ. No. 88-9752) 

 _____________________ 

 Argued March 10, 1994 

 Before: MANSMANN, LEWIS, Circuit Judges

 McKELVIE, District Judge* 

 _____________________ 

 (Filed August 17, l994) 

 _____________________ 

*Hon. Roderick R. McKelvie, United States District Judge for the 

District of Delaware, sitting by designation 
 STEPHEN J. MATHES (Argued) 

 WILLIAM R. HERMAN 

 Hoyle, Morris & Kerr 

 One Liberty Place, Suite 4900 

 1650 Market Street 

 Philadelphia, PA 19103 

 Attorneys for Appellants/Petitioners RhônePoulenc Rorer Inc. and Armour Pharmaceutical 

Company 

 JEFFREY B. ALBERT 

 Fox, Rothschild, O'Brien & Frankel 

 2000 Market Street 

 10th Floor 

 Philadelphia, PA 19103 

 JAMES W. CHRISTIE 

 Christie, Pabarue, Mortensen and Young 

 1880 JFK Boulevard 

 10th Floor 

 Philadelphia, PA 19103 

 

 ROY L. REARDON 

 JAMES P. BARRETT 

 ROBERT F. CUSUMANO (Argued) 

 DAVID J. WOLL 

 KEVIN G. LAURI 

 Simpson, Thacher & Bartlett 

 425 Lexington Avenue 

 New York, NY 10017 

 Attorneys for Appellee/Respondent The Home 

Indemnity Company 
 H. MARC TEPPER 

 Margolis, Edelstein & Scherlis 

 Sixth and Walnut Streets 

 The Curtis Center, 4th Floor 

 Philadelphia, PA 19106 

 Attorney for Appellees/Respondents AIU 

Insurance Company, Birmingham Fire Insurance, 

Granite State Insurance Company, Illinois 

National Insurance Company, Lexington Insurance 

 Company, National Union Fire Insurance Company of 

 Pittsburgh, Pennsylvania, New Hampshire Insurance 

Company and Landmark Insurance Company 

 JOSEPH M. OBERLIES 

 Connor & Weber 

 2401 Pennsylvania Avenue 

 Suite 1C-47 

 Philadelphia, PA 19130 

 Attorney for Appellee/Respondent American 

Centennial Insurance Company 

 RICHARD B. MARRIN 

 Ford, Marrin, Esposito & Witmeyer 

 88 Pine Street 

 Wall Street Plaza, 23rd Floor 

 New York, NY 10005 

 WILLIAM G. SCARBOROUGH 

 Stradley, Ronon, Stevens & Young 

 2600 One Commerce Square 

 Philadelphia, PA 19103 

 Attorneys for Appellee/Respondent Transport 

Insurance Company 

 E. DOUGLAS SEDERHOLM (Argued) 

 RICHARD J. BORTNICK 

 White and Williams 

 One Liberty Place 

 Suite 1800 

 1650 Market Street 

 Philadelphia, PA 19103 

 Attorneys for Appellees/Respondents Pacific 

Employers Insurance Company, Century 

Indemnity Company and Insurance Company of 

North America 
 WALTER A. STEWART 

 Manta & Welge 

 2005 Market Street 

 One Commerce Square 

 37th Floor 

 Philadelphia, PA 19103 

 Attorney for Appellees/Respondents Liberty 

Mutual Insurance Company, Liberty Mutual 

Insurance and Royal Indemnity Company 

 EDWARD M. DUNHAM, JR. 

 Miller, Dunham, Doering & Munson 

 1515 Market Street 

 13th Floor 

 Philadelphia, PA 19102 

 Attorney for Appellee/Respondent Aetna 

Casualty & Surety Company 

 SUSAN M. DANIELSKI 

 Cozen & O'Connor 

 The Atrium 

 1900 Market Street 

 Philadelphia, PA 19103 

 Attorney for Appellees/Respondents Pantry 

Pride Inc. 

 and Revlon Inc. 

 THOMAS C. DELORENZO 

 Marshall, Dennehey, Warner, Coleman & Goggin 

 1845 Walnut Street 

 Philadelphia, PA 19103 

 Attorney for Appellees/Respondents Prudential 

Reinsurance Company and Gibraltar Casualty 

Company 
 DAVID F. ABERNETHY 

 Drinker, Biddle & Reath 

 1345 Chestnut Street 

 Philadelphia National Bank Building 

 Philadelphia, PA 19107-3496 

 Attorney for Appellee/Respondent 

International Insurance Company 

 RONALD P. SCHILLER 

 Piper & Marbury 

 Two Penn Center Plaza 

 Suite 1500 

 Philadelphia, PA 19102 

 Attorney for Appellee/Respondent North Star 

Reinsurance Company 

 

 THOMAS M. KITTREDGE (Argued) 

 Morgan, Lewis & Bockius 

 2000 One Logan Square 

 Philadelphia, PA 19103 

 Attorney for Intervenor Morgan, Lewis & 

Bokius 

 KERRY A. KEARNEY 

 Reed Smith Shaw & McClay 

 Mellon Square 

 435 Sixth Avenue 

 Pittsburgh, PA 15219 

 Attorney for Intervenor Reed Smith Shaw & 

McClay 

 

 RAYMOND M. TIERNEY, JR. 

 SUSAN SHARKO 

 Shanley & Fisher 

 131 Madison Avenue 

 Morristown, NJ 07962 

 Attorneys for Intervenor Shanley & Fisher 
 JEFF H. GALLOWAY 

 Hughes, Hubbard & Reed 

 One Battery Park Plaza 

 New York, NY 10004 

 Attorney for Intervenor Hughes, Hubbard & 

Reed 

 JEREMY D. MISHKIN 

 Montgomery, McCracken, Walker & Rhoads 

 Three Parkway, 20th Floor 

 Philadelphia, PA 19103 

 

 Attorney for Intervenor Montgomery, 

McCracken, Walker & Rhoads 

 ED YODOWITZ 

 Skadden, Arps, Slate, Meagher & Flom 

 919 Third Avenue 

 New York, NY 10022 

 Attorney for Intervenor Skadden, Arps, 

Slate, Meagher & Flom 

 MATTHEW J. BRODERICK 

 Dechert Price & Rhoads 

 4000 Bell Atlantic Tower 

 1717 Arch Street 

 Philadelphia, PA 19103 

 

 Attorney for Intervenor Coopers & Lybrand 

 _________________________________ 

McKELVIE, District Judge. 

 In this insurance coverage case, the district court has 

ordered the insureds, their attorneys and their accountants to 

produce documents that would normally be protected from 

disclosure by the attorney client privilege, by the accountant 

client privilege, or as attorney work product. The documents to 

be produced were created before the insureds purchased coverage, 
and contain evaluations of the insureds' potential liability to 

consumers of their products. 

 The district court found the information in the documents 

relevant to matters in issue in the action in that it may tend to 

show whether or not the insureds expected or intended the claims 

for which they seek coverage. The court held the insureds had 

waived any right to maintain confidentiality of these documents 

by filing this action for coverage and by putting in issue the 

matter of their knowledge of facts relating to the claims. 

 The insureds have appealed from that order. They have also 

filed a petition for a writ of mandamus directing the district 

court to vacate and reverse the order. The six law firms and the 

accounting firm that have been subpoenaed to produce documents 

have moved to intervene and join in the insureds' requests for 

relief. 

 For the reasons set out below, we will grant the 

petitioners' request for relief and issue a writ of mandamus to 

the district court and direct it to vacate its order that these 

documents be produced. 
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

 A. The Parties and the Nature of the Proceedings 

 Rhône-Poulenc Rorer Inc. is the successor to the Rorer Group 

Inc. In the fall of 1985, soon after Pantry Pride, Inc. had 

acquired Revlon, Inc., Rorer entered into an agreement with 

Pantry Pride to purchase Revlon's ethical pharmaceutical 

businesses, including USV and Armour Pharmaceutical Company. One 

of Armour's products was Factorate, a blood clotting product 

processed by Armour and sold principally for use by hemophiliacs. 

 Rorer formally acquired Armour on January 7, 1986. On April 

21, 1986, Armour was named in the first of a series of lawsuits 

filed by individuals who claimed Factorate had infected them with 

the Human Immunodeficiency Virus (HIV), which is thought to be 

the cause of Acquired Immunodeficiency Syndrome (AIDS). To date, 

Armour has been joined as a defendant in more than two hundred 

AIDS-related cases. 

 Rorer had purchased a general liability insurance policy 

from The Home Indemnity Company on December 31, 1985, and looked 

to it for coverage for the claims against Armour. In addition, 

it sought coverage under a blanket excess policy it purchased 

from Pacific Employers Insurance Company on July 29, 1986. Home 

denied coverage for these AIDS-related claims. 

 In December of 1988, Rorer and Armour brought this suit in 

the United States District Court for the Eastern District of 

Pennsylvania. In the complaint, they allege they are insureds 

under a primary comprehensive general liability insurance policy 

provided by The Home Indemnity Company. They contend Home has 
failed and refused to honor its obligations to defend and 

indemnify them from liability for the AIDS-related claims. They 

contend the district court has subject matter jurisdiction based 

on diversity of citizenship of the parties under 28 U.S.C. § 

1332. Rhône-Poulenc and Armour seek, among other things, a 

declaration that Home accepted coverage for these claims. 

 Home answered the complaint by denying that Rhône-Poulenc 

Rorer and Armour are entitled to the relief sought. In addition, 

it has asserted a number of affirmative defenses and has filed a 

counterclaim for a declaration that it does not owe a duty to 

indemnify or defend the plaintiffs for the claims identified in 

the complaint. Home has also filed a third party complaint 

against Pantry Pride, Inc., Revlon, Inc. and a number of 

insurance companies, including Pacific Employers Insurance 

Company. Certain of the third-party defendant insurers have 

filed fourth-party complaints against other insurers. 

 One of Home and Pacific Employers' affirmative defenses is 

that the claims identified in the complaint are excluded from 

coverage because they do not result from "occurrences." The 

insurers agreed to indemnify and defend against claims relating 

to bodily injury that is caused by an occurrence. An occurrence 

is defined in the Home policy as "an accident, including 

continuous or repeated exposure to conditions, which results in 

bodily injury or property damage neither expected nor intended 

from the standpoint of the insureds." The insurers argue that 

the alleged transmission of HIV from Factorate was known when the 

insurance policies were purchased, that the resulting injuries 
were not "neither expected nor intended," and that the resulting 

claims are not insured. 

 A second affirmative defense asserted by the insurers is 

that Rorer and Armour wrongfully obtained the coverage by 

intentionally failing to disclose their knowledge of the 

potential for these claims. A third defense is that Armour sold 

the products knowing that they would create an unreasonable risk 

of harm to others and that the resulting claims are, therefore, 

uninsurable. 

 B. The Discovery Sought by Home and Pacific Employers

 In connection with these defenses, Home and Pacific 

Employers have sought discovery from the plaintiffs on what 

information they may have had prior to purchasing the policies 

that would have suggested that Armour's products might transmit 

the HIV virus and that Armour would be subject to claims for 

injuries suffered as a result of transmitting that virus. 

 During a September, 1992 deposition, Robert E. Cawthorn, 

Rhône-Poulenc Rorer's chairman and chief executive officer, 

testified to the investigation and analysis undertaken by Rorer 

in connection with its decision to purchase Armour. Cawthorn 

testified that at the time Rorer was negotiating to purchase 

Armour he and others at Rorer were aware of reports in the press 

that blood products might have transmitted the AIDS virus and had 

sought and obtained advice from counsel with regard to 

liabilities for claims alleging damages for transmitting the 

virus. He testified: 
 We had got the advice of outside counsel on 

the potential legal liabilities in this area 

and had learned that blood products are not 

considered in most states as products, per 

se, and are not subject to the same liability 

laws as regular pharmaceutical products. We 

had learned that there was some precedence 

[sic] in terms of transmission of the 

hepatitis virus which these plasma products 

had transmitted to hemophiliacs. And that, 

in fact, my recollection is we were told that 

there had been no successful cases against 

the fractionaters [sic] and hepatitis because 

of the particular legal situation. And the 

opinion was that that should hold, also, for 

the AIDS virus. 

 After the deposition, Home and Pacific Employers moved for 

an order extending the time for completion of discovery and 

compelling Rhône-Poulenc and Armour to produce all evaluations of 

their potential liability for AIDS-related claims, including any 

documents confirming the advice described by Cawthorn. In 

response to the motion, Rhône-Poulenc and Armour produced copies 

of four documents, subject to an agreement with the insurers that 

the production would not waive any privilege with respect to any 

other communication. 

 The first of the four documents produced is the minutes of 

the November 26, 1985, meeting of the Board of Directors of Rorer 

Group Inc. During this meeting the Board considered the Armour 

acquisition. Those minutes show that John W. Eckman chaired the 

meeting, and that Cawthorn and Rorer's general counsel, Richard 

H. Lange, were present. Also present were representatives of the 

accounting firm of Coopers & Lybrand and the investment banking 

firm of First Boston Corporation, as were attorneys from the law 
firms of Hughes, Hubbard & Reed; Skadden, Arps, Slate, Meagher & 

Flom; and Montgomery, McCracken, Walker & Rhoads. The following 

summary is included in the minutes: 

 In response to a question by Mr. Eckman concerning 

Armour's product liability exposure, Mr. Lange said 

that Armour's products are not regarded as drug 

products, with associated strict liability, and that it 

has been necessary to prove negligence by the 

manufacturer as a basis for liability. In addition, 

many states have legislation limiting liability for 

blood products. There have been only about six to 

eight AIDS contamination suits to date in the industry, 

none of them against Armour. Revlon has carried an 

umbrella excess liability policy of $60 million, and 

the benefits of a substantial portion of this coverage 

will be available for USV/Armour product claims arising 

during the pre-acquisition period. 

 The second document produced by the insureds is a copy of an 

April 10, 1986, letter from John S. Allee, an attorney with 

Hughes, Hubbard & Reed, to Richard Lange, forwarding to Lange a 

copy of the third document produced, a memorandum by Hughes 

Hubbard titled "Survey of Blood Immunity Statutes and Case Law." 

This survey provides a state-by-state analysis of the law 

applicable to entities engaged in the preparation, distribution 

and use of human blood and blood products.

 The fourth document is a copy of an April 18, 1986, letter 

from Allee to Lange following up on the April 10 letter and 

suggesting steps Lange should consider as a part of his risk 

assessment and reduction efforts. In producing a copy of this 

seven page letter, Rhône-Poulenc and Armour redacted 

approximately one half of the typed material on the fifth page 

and the entire sixth page, and reported to the insurers that the 
deleted material contained very general advice of a legal nature 

as well as Allee's mental impressions. 

 On receiving copies of these documents, Home and Pacific 

Employers continued to pursue their motion to compel, and asked 

the court to enter an order directing the plaintiffs to produce 

all documents in their possession, custody or control relating to 

the 1985 and early 1986 assessments of potential AIDS-related 

claims. 

 In the briefing in support of their motion, the insurers 

argued that these documents would disclose what information the 

insureds had about the AIDS-related claims at the time they 

obtained the coverage, the advice they received on whether those 

claims would be asserted, and their intent or expectation as to 

whether they would become obligated to pay damages as a result of 

those claims. Home and Pacific Employers argued that this 

information would be relevant to a number of issues in the 

litigation, including whether the AIDS-related claims fell within 

the definition of an "occurrence" under the policy, whether Rorer 

and Armour had sufficient knowledge of the probability of the 

AIDS-related claims so that in obtaining the coverage they had 

breached duties owed the insurers by failing to disclose facts 

relating to the risk that Armour's products transmitted the HIV 

virus, and whether or not the probability of the AIDS-related 

claims was sufficiently clear at the time the insureds obtained 

the coverage that they would not be insurable as fortuitous 

claims. 
 Home and Pacific Employers argued that by filing the suit 

and putting these matters in issue, Rhône-Poulenc and Armour had 

waived any right to object to the disclosure of the requested 

documents on the grounds of privilege or work product. The 

insurers also argued Rhône-Poulenc and Armour had waived any 

protection from disclosure by failing to file timely objections 

to the initial discovery requests seeking the disclosure of these 

documents and by failing to identify them on a list of documents 

being withheld as privileged or as work product. With regard to 

the redacted portion of the April 18 Hughes Hubbard letter, they 

argued Rorer had disclosed the letter to First Boston after the 

acquisition and thus had waived the privilege. They further 

argued that by producing a portion of the letter Rhône-Poulenc 

and Armour had waived the privilege as to the balance of the 

contents, including the advice that had been redacted. 

 The insurers asked the district court to enter an order 

compelling Rhône-Poulenc and Armour to produce all evaluations or 

assessments of their potential liability for AIDS-related claims 

arising from Armour's blood products, including those in their 

possession and those in the possession of their present and 

former agents and attorneys. This request includes documents in 

the possession of the law firms that had advised Rorer in 

connection with the acquisition of Armour: Hughes, Hubbard & 

Reed; Skadden, Arps, Slate, Meagher & Flom; and Montgomery, 

McCracken, Walker & Rhoads, as well as the accounting firm 

Coopers & Lybrand, and three law firms that have represented 
Armour in connection with the AIDS-related claims: Morgan, Lewis 

& Bockius; Shanley & Fisher; and Reed Smith Shaw & McClay. 

 C. The Magistrate Judge's Orders Providing for the 

Production of Documents

 The district court referred the motion to a magistrate 

judge. By an opinion and order dated March 30, 1993, the 

magistrate judge found the advice in the April 18 Hughes Hubbard 

letter relevant to matters in issue in the litigation, including 

whether the underlying claims arose from a fortuitous event or 

circumstance and were not the result of a known loss, and whether 

the injuries giving rise to the claims were not expected or 

intended. The magistrate judge held that as Rhône-Poulenc and 

Armour had brought the action and had put their own conduct and 

the conduct of their counsel in issue, they had waived any right 

to object to the disclosure of the documents based on the 

attorney client privilege or the work product doctrine. 

 In addition, the magistrate judge noted that a related 

rationale for a finding of waiver is that the selective use of 

privileged information may garble the truth. In that situation, 

he noted, fairness demands a party be allowed to examine the 

whole picture. The magistrate judge therefore ordered the 

redacted portions of the April 18 letter produced and scheduled 

further argument on the balance of the documents sought by the 

insurers. 

 The magistrate judge heard further argument from the parties 

on April 13, 1993. During that argument, counsel for the 

insurers argued that Rhône-Poulenc and Armour had wrongfully 
failed to disclose the existence of the assessments in response 

to discovery requests. At the conclusion of the argument, the 

magistrate judge reviewed the basis for his March 30 opinion and 

found that the insurers had sought production of the documents 

long before the end of discovery. He directed Rhône-Poulenc and 

Armour to produce the liability assessments sought by the 

insurers and also directed counsel for the insurers to prepare 

and submit for approval subpoenas to be delivered to the law 

firms and accounting firm directing them to produce the documents 

sought by the insurers. 

 By letter dated April 20, 1993, counsel for the insurers 

submitted to the magistrate judge copies of proposed subpoenas 

addressed to the six law firms and the accounting firm. On April 

21 the magistrate judge entered an order approving the subpoenas 

and providing that any objections to the subpoenas must be 

presented to the district court within five days from the date of 

the order. Thereafter, the insurers' counsel delivered subpoenas 

issued by the Southern District of New York on Hughes Hubbard, 

Skadden Arps, and Coopers & Lybrand at their offices in New York 

City and sought production of the documents at Simpson Thatcher & 

Bartlett's offices in New York on May 3, 1993. They delivered 

subpoenas issued by the Eastern District of Pennsylvania on 

Morgan Lewis, and Montgomery McCracken at their offices in 

Philadelphia and sought production of the documents at Fox, 

Rothschild, O'Brien & Frankel's offices in Philadelphia on May 3, 

1993. They also delivered subpoenas issued by the Eastern 

District of Pennsylvania on Shanley & Fisher at its offices in 
Morristown, New Jersey and on Reed Smith at its offices in 

Philadelphia and sought production of the documents at White and 

Williams' offices in Philadelphia on May 3, 1993. The subpoenas 

sought production of the following documents: 

 1. All documents, including, but not limited to, time 

billing records, that reflect the date of your 

retention by plaintiffs and/or the purpose of your work 

for plaintiffs. 

 2. All documents concerning actual or potential AIDSrelated claims against plaintiffs or against any other 

company or entity which manufactured and/or distributed 

blood products, to the extent that such documents were 

received or created, or are contained in files 

pertaining to, your work for plaintiffs. 

 3. All documents that constitute, were reviewed in 

preparation for, or are contained in files concerning 

actual or potential AIDS-related claims. 

 4. All documents concerning insurance coverage for 

actual or potential AIDS-related claims against 

plaintiffs. 

 5. All documents concerning (i) blood shield statutes; 

(ii) the nature and scope of liability arising from the 

manufacture and/or sale and/or use of blood products 

generally; and (iii) the nature and scope of liability 

arising from the manufacture and/or sale and/or use of 

Armour's blood products in particular. 

 6. All documents concerning information and/or advice 

pertaining to plaintiffs' actual or potential liability 

for AIDS-related claims arising from the manufacture 

and/or sale and/or use of Armour's blood products 

communicated by Rorer or any agent or representative of 

Rorer to persons and/or entities interested in 

acquiring Armour or any of its assets in 1986. 

 7. All documents concerning information and/or advice 

pertaining to plaintiffs' actual or potential liability 

for AIDS-related claims arising from the manufacturer 

and/or sale and/or use of Armour's blood products 

communicated by you or others to Rorer in connection 

with the attempted sale of Armour in 1986. 
 8. All documents concerning information and/or advice 

pertaining to plaintiffs' actual or potential liability 

for AIDS-related claims arising from the manufacture 

and/or sale and/or use of Armour's blood products 

communicated by Rorer or any agent or representative of 

Rorer to others in connection with the attempted sale 

of Armour in 1986. 

 

 Rhône-Poulenc and Armour did not appeal the March 30 order 

directing them to produce the redacted portion of the April 18 

Hughes Hubbard letter. They did, however, take an appeal to the 

district court from the magistrate judge's April 13 order, and 

moved to quash the subpoenas. Skadden Arps and Morgan Lewis also 

moved to quash and the district court granted their motions. In 

addition, all seven firms served objections to the subpoenas on 

the grounds that they sought documents protected from disclosure 

as privileged and as work product and on the grounds of 

relevance, vagueness and oppressiveness. The presentation of 

these matters resulted in a clarification of the status of 

certain discovery requests, of Rhône-Poulenc and Armour's 

responses to those requests, and of agreements that had 

apparently been reached by the parties but had not been filed 

with the court. The rediscovery of this information caused 

counsel for the insurers to abandon the argument that RhônePoulenc and Armour had wrongfully failed to identify these 

documents in discovery or had waived objections to producing them 

by failing to respond to discovery requests or by failing to list 

the documents on a privilege log. Thereafter, the district court 

found that these procedural matters would not be controlling on 

an appeal from the magistrate judge's order, as it appeared the 
magistrate judge would have ordered production of the documents 

in any event. 

 D. The District Court's Order Denying Objections to the 

Magistrate Judge's Order and Denying Motions to Quash

 The district court heard argument on the appeal and motions 

to quash on July 28, 1993. By an opinion and order dated August 

6, 1993, and entered on August 9, the court found: 

 In accordance with [the magistrate judge's] 

findings, this court adjudges the subpoenas 

to pertain to directly relevant information. 

At issue is Plaintiffs' knowledge of the 

liabilities associated with the acquisition 

of Armour. The issues put into question by 

this lawsuit focus around Plaintiffs' 

knowledge of the underlying claims and when 

they became aware of such claims. This court 

finds that the documents The Home and PEIC 

seek will aide in disclosing what and when 

Plaintiffs knew of the underlying claims. 

Thus, the information contained in the 

requested documents is directly relevant. 

Therefore, in this instance this court finds 

it necessary to invade the attorney-client 

privilege. 

The district court denied the insureds' objections to the 

magistrate judge's order and the motions to quash, and reinstated 

Skadden Arps and Morgan Lewis' obligations to produce documents 

identified in the subpoenas. By that decision, the district 

court held: (1) in filing the action for a declaration of 

insurance coverage, Rhône-Poulenc and Armour had put in issue the 

knowledge they had as to potential AIDS-related claims at the 

time they purchased the coverage; (2) by putting their knowledge 

of those matters in issue, they had waived the privilege to 

prevent the disclosure of attorney client and accountant client 
communications relevant to those matters; and (3) by putting 

their knowledge of these matters in issue, they had also waived 

the protection from disclosure of the work product of their 

attorneys. 

 Plaintiffs, their attorneys and accountants sought 

reargument on that decision and by an order dated October 4, 

1993, the district court denied their motion. 

 E. The Appeal and Petition for a Writ of Mandamus

 On October 15, 1993, Rhône-Poulenc and Armour filed 

petitions with this court for a stay of the August 6 order and 

for a writ of mandamus directing the district court to vacate and 

reverse the August 6 order. On October 19, 1993, Rhône-Poulenc 

and Armour filed a notice of appeal from that order and the 

court's order denying the motion for reargument. 

 We have entered orders staying the discovery, consolidating 

the proceedings on the petition and the appeal, and granting the 

petition to intervene filed by the six law firms and Coopers & 

Lybrand. 
II. DISCUSSION

 A. Jurisdiction and Scope of Review

 Rhône-Poulenc and Armour urge us to find that we have 

jurisdiction to hear this appeal under 28 U.S.C. § 1291. Section 

1291 states that the courts of appeals have jurisdiction over 

appeals from all final decisions of the district courts of the 

United States. Generally, discovery orders are not final and not 

reviewable under this section. However, under the collateral 

order doctrine a discovery order is appealable where it meets the 

following three criteria: 

 First, the order must conclusively determine the 

disputed question. Second, the order must resolve an 

important issue completely separate from the merits of 

the action. Third and finally, the order must be 

effectively unreviewable on appeal from a final 

judgment. 

Smith v. BIC Corp., 869 F.2d 194, 198 (3d Cir. 1989). 

 Rhône-Poulenc and Armour argue that each element of this 

test is present here because: (1) the order they appeal from 

conclusively determines that they must disclose privileged 

communications and work product; (2) the order resolves issues 

totally separate from the merits of the case; and (3) the order 

will not be effectively reviewable after judgment, as the 

privilege and confidentiality for the information in the 

documents will be lost when they are produced. 

 In Smith, we held that the public disclosure of trade 

secrets is not effectively reviewable. A trade secret is 

valuable because it allows a business to obtain an advantage over 

competitors who do not know or use it. The damage suffered by a 
business due to public disclosure of trade secrets cannot be 

remedied by an appellate court because the court cannot make the 

information secret again. Here, however, an appellate court can 

remedy any damage resulting from the erroneous disclosure of 

documents after judgment. As the United States Court of Appeals 

for the Tenth Circuit recently explained: 

 The practical consequences of the district court's 

decision on the controversy between the parties can be 

effectively reviewed on direct appeal following a 

judgment on the merits. If this court determines that 

privileged documents were wrongly turned over to the 

plaintiffs and were used to the detriment of defendants 

at trial, we can reverse any adverse judgment and 

require a new trial, forbidding any use of the 

improperly disclosed documents. Plaintiffs would also 

be forbidden to offer at trial any documents, 

witnesses, or other evidence obtained as a consequence 

of their access to privileged documents. 

Boughton v. Cotter Corporation, 10 F.3d 746, 749 (10th Cir. 

1993). 

 As the district court's order is effectively reviewable on 

appeal from a final judgment, section 1291 does not give us 

jurisdiction to hear an appeal at this time. 

 Alternatively, the insureds argue that we should decide the 

matter pursuant to our authority to issue a writ of mandamus 

under the All Writs Act, 28 U.S.C. § 1651(a), which provides that 

the federal courts may issue all writs "necessary or appropriate 

in aid of their respective jurisdictions and agreeable to the 

usages and principles of law." The two prerequisites for the 

issuance of a writ of mandamus are that the petitioners have no 

other adequate means to obtain the relief sought and that they 

have shown that their right to the writ is clear and 
indisputable. Kerr v. United States Dist. Court, 426 U.S. 394, 

96 S.Ct. 2119, 48 L.Ed.2d 725 (1976). 

 Mandamus may properly be used as a means of immediate 

appellate review of orders compelling the disclosure of documents 

and information claimed to be protected from disclosure by 

privilege or other interests in confidentiality. Haines v. 

Liggett Group Inc., 975 F.2d 81, 89 (3d Cir. 1992); Cipollone v. 

Liggett Group, Inc., 785 F.2d 1108, 1118 (3d Cir. 1986); Sporck 

v. Peil, 759 F.2d 312, 314, 315 (3d Cir. 1985), cert. denied, 474 

U.S. 903; Bogosian v. Gulf Oil Corp., 738 F.2d 587, 592 (3d Cir. 

1984). See also, Chase Manhattan Bank, N.A. v. Turner & Newall, 

PLC., 964 F.2d 159 (2d Cir. 1992); In re von Bulow, 828 F.2d 94 

(2d Cir. 1987). We find that the petitioners have no other 

adequate means to attain relief from the district court's order 

that compels the disclosure of privileged information and work 

product. In addition, we find that the district court has 

committed clear errors of law in ordering that information 

disclosed. The petitioners' right to the writ is, therefore, 

clear and indisputable. We will exercise mandamus jurisdiction 

to resolve the issues raised by the petitioners. 

 B. Whether Rhône-Poulenc and Armour have Waived the 

Attorney Client Privilege by Filing this Suit to 

Establish Insurance Coverage

 Federal Rule of Civil Procedure 26(b)(1) provides: 

 Parties may obtain discovery regarding any 

matter, not privileged, which is relevant to 

the subject matter involved in the pending 

action, whether it relates to the claim or 

defense of the party seeking discovery or to 

the claim or defense of any other party, 

including the existence, description, nature, 
custody, condition, and location of any 

books, documents, or other tangible things 

and the identity and location of persons 

having knowledge of any discoverable matter. 

The information sought need not be admissible 

at the trial if the information sought 

appears reasonably calculated to lead to the 

discovery of admissible evidence. 

 Rule 26 thus provides that relevant but privileged matters 

are not discoverable. As a result, it frequently occurs that a 

party has documents containing information relevant to matters of 

consequence in the action, but does not produce the documents or 

disclose confidential communications, and the information is not 

offered into evidence at trial. In this case, Home and Pacific 

Employers seek to discover more than just information on what 

facts Rorer and Armour had gathered about potential AIDS-related 

claims before they purchased the policies. They also seek to 

discover the advice counsel provided to Rorer with regard to the 

legal significance of those facts and documents that identify and 

disclose communications relating to that advice. Those 

communications and the documents containing those communications 

would normally be protected from disclosure by the attorney 

client privilege. 

 As the claims and defenses in issue in this action arise 

under state law, Federal Rules of Evidence 501 and 1101(c) 

provide that we should apply state law in determining the extent 

and scope of the attorney client privilege.1 The parties and 

 

1

 Rule of Evidence 501 reads: 

 Rule 501. General Rule
intervenors agree that we should look to the privilege rules of 

the forum state, the Commonwealth of Pennsylvania, as 

establishing the privilege for the attorney client communications 

in issue in this case.2 No one has argued, however, that there 

are any principles or rules of law as to the attorney client 

privilege unique to Pennsylvania that should control the 

resolution of our decision on these matters. 

 The traditional elements of the attorney client privilege 

that identify communications that may be protected from 

 

 Except as otherwise required by the Constitution of the 

United States or provided by Act of Congress or in 

rules prescribed by the Supreme Court pursuant to 

statutory authority, the privilege of a witness, 

person, government, State, or political subdivision 

thereof shall be governed by the principles of the 

common law as they may be interpreted by the courts of 

the United States in the light of reason and 

experience. However, in civil actions and proceedings, 

with respect to an element of a claim or defense as to 

which State law supplies the rule of decision, the 

privilege of a witness, person, government, State, or 

political subdivision thereof shall be determined in 

accordance with State law. 

Rule of Evidence 1101(c) reads: 

 (c) Rule of privilege.

 The rule with respect to privileges applies at all 

stages of all actions, cases, and proceedings. 

2

 Pennsylvania has codified the attorney-client privilege at 42 

Pa.C.S.A. § 5928 (Purdon 1982) as follows: 

 In a civil matter counsel shall not be competent or 

permitted to testify to confidential communications 

made to him by his client, nor shall the client be 

compelled to disclose the same, unless in either case 

this privilege is waived upon the trial by the client. 
disclosure in discovery are: (1) the asserted holder of the 

privilege is or sought to become a client; (2) the person to whom 

the communication was made (a) is a member of the bar of a court, 

or his or her subordinate, and (b) in connection with this 

communication is acting as a lawyer; (3) the communication 

relates to a fact of which the attorney was informed (a) by his 

client (b) without the presence of strangers (c) for the purpose 

of securing primarily either (i) an opinion of law or (ii) legal 

services or (iii) assistance in some legal proceeding, and (d) 

not for the purpose of committing a crime or tort; and (4) the 

privilege has been (a) claimed and (b) not waived by the client. 

See In re Grand Jury Investigation, 599 F.2d 1224, 1233 (3d Cir. 

1979) citing United States v. United Shoe Machinery Corp., 89 F. 

Supp. 357, 358-59 (D.Mass. 1950); see also, 8 Wigmore, Evidence, 

§ 2292, at 554 (J. McNaughton rev. 1961) (1st ed. 1904). 

 While documents may be protected from disclosure in 

discovery because they contain confidential communications that 

are privileged, that protection may be inapplicable to facts 

incorporated in the communication. Upjohn Co. v. United States, 

449 U.S. 383, 395-396, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). 

 [T]he protection of the privilege extends 

only to communications and not to facts. A 

fact is one thing and a communication 

concerning that fact is an entirely different 

thing. The client cannot be compelled to 

answer the question, `What did you say or 

write to the attorney?' but may not refuse to 

disclose any relevant fact within his 

knowledge merely because he incorporated a 

statement of such fact into his communication 

to his attorney. 
Id. (quoting City of Philadelphia, Pa. v. Westinghouse Elec. 

Corp., 205 F. Supp. 830, 831 (E.D.Pa. 1962)). 

 Evidentiary privileges are an exception to the general rule 

that relevant evidence is admissible. Privileges forbid the 

admission of otherwise relevant evidence when certain interests 

the privileges are thought to protect are regarded as more 

important than the interests served by the resolution of 

litigation based on full disclosure of all relevant facts. The 

privilege forbidding the discovery and admission of evidence 

relating to communications between attorney and client is 

intended to ensure that a client remains free from apprehension 

that consultations with a legal adviser will be disclosed. See

Hunt v. Blackburn, 128 U.S. 464, 470, 9 S.Ct. 125, 32 L.Ed. 488 

(1888). See Wigmore, § 2290, at 543. The privilege encourages 

the client to reveal to the lawyer confidences necessary for the 

lawyer to provide advice and representation. Upjohn Co. v. 

United States, 449 U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 

584 (1981). See E. Cleary, McCormick on Evidence, § 87, at 314 

(3d ed. 1984). As the privilege serves the interests of justice, 

it is worthy of maximum legal protection. Haines v. Liggett 

Group Inc., 975 F.2d 81, 90 (3d Cir. 1992). 

 If we intend to serve the interests of justice by 

encouraging consultation with counsel free from the apprehension 

of disclosure, then courts must work to apply the privilege in 

ways that are predictable and certain. "An uncertain privilege--

or one which purports to be certain, but rests in widely varying 
applications by the courts--is little better than no privilege." 

In re von Bulow, 828 F.2d at 100. 

 There is authority for the proposition that a party can 

waive the attorney client privilege by asserting claims or 

defenses that put his or her attorney's advice in issue in the 

litigation. For example, a client may waive the privilege as to 

certain communications with a lawyer by filing a malpractice 

action against the lawyer. See Wigmore, § 2327, at 638. A 

defendant may also waive the privilege by asserting reliance on 

the advice of counsel as an affirmative defense. Chevron Corp. 

v. Pennzoil Co., 974 F.2d 1156 (9th Cir. 1992) (party's claim 

that its tax position was reasonable because it was based on 

advice of counsel puts advice in issue and waives privilege); see 

also, Hunt v. Blackburn, 128 U.S. at 470, (client waives 

privilege when she alleges as a defense that she was misled by 

counsel). See generally, E. Cleary, McCormick on Evidence § 93, 

at 343 (3d ed. 1984). In an action for patent infringement, 

where a party is accused of acting willfully, and where that 

party asserts as an essential element of its defense that it 

relied upon the advice of counsel, the party waives the privilege 

regarding communications pertaining to that advice. Mellon v. 

Beecham Group PLC, 17 U.S.P.Q.2d 1149, 1151 (D.N.J. 1991); see 

also, e.g., W.L. Gore & Associates, Inc. v. Tetratec Corp., 15 

U.S.P.Q.2d 1048, 1051 (E.D.Pa. 1989) (client waived privilege by 

asserting reliance upon advice of counsel as an essential element 

of his defense). 
 In these cases, the client has made the decision and taken 

the affirmative step in the litigation to place the advice of the 

attorney in issue. Courts have found that by placing the advice 

in issue, the client has opened to examination facts relating to 

that advice. Advice is not in issue merely because it is 

relevant, and does not necessarily become in issue merely because 

the attorney's advice might affect the client's state of mind in 

a relevant manner. The advice of counsel is placed in issue 

where the client asserts a claim or defense, and attempts to 

prove that claim or defense by disclosing or describing an 

attorney client communication. North River Insurance Company v. 

Philadelphia Reinsurance Corporation, 797 F. Supp. 363, 370 

(D.N.J. 1992); Pittston Company v. Allianz Insurance Co., 143 

F.R.D. 66, 71 (D.N.J. 1992). 

 Thus, in a patent suit, where an infringer is alleged to 

have acted willfully, the advice of the infringer's lawyer may be 

relevant to the question of whether the infringer acted with a 

willful state of mind. However, the advice of the infringer's 

counsel is not placed in issue, and the privilege is not waived, 

unless the infringer seeks to limit its liability by describing 

that advice and by asserting that he relied on that advice. When 

the advice of counsel is asserted as a defense by the infringer, 

the patent owner may explore facts that would make it more 

probable than not that the infringer did not rely in good faith 

on that advice, including for example, what the advice was, when 

it was given, whether the alleged infringer's conduct suggests he 

had relied on the advice and whether he had knowledge of facts 
that would have led him to believe it would not be reasonable to 

rely on that advice. See, e.g., Underwater Devices Inc. v. 

Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983). 

 Finding a waiver of the attorney client privilege when the 

client puts the attorney's advice in issue is consistent with the 

essential elements of the privilege. That is, in leaving to the 

client the decision whether or not to waive the privilege by 

putting the attorney's advice in issue, we provide certainty that 

the client's confidential communications will not be disclosed 

unless the client takes an affirmative step to waive the 

privilege, and we provide predictability for the client 

concerning the circumstances by which the client will waive that 

privilege. This certainty and predictability as to the 

circumstances of a waiver encourage clients to consult with 

counsel free from the apprehension that the communications will 

be disclosed without their consent. 

 Some decisions have extended the finding of a waiver of the 

privilege to cases in which the client's state of mind may be in 

issue in the litigation. These courts have allowed the opposing 

party discovery of confidential attorney client communications in 

order to test the client's contentions. See, e.g., Byers v. 

Burleson, 100 F.R.D. 436 (D.D.C. 1983); Hearn v. Rhay, 68 F.R.D. 

574 (E.D.Wash. 1975). These decisions are of dubious validity. 

While the opinions dress up their analysis with a checklist of 

factors, they appear to rest on a conclusion that the information 

sought is relevant and should in fairness be disclosed. 

Relevance is not the standard for determining whether or not 
evidence should be protected from disclosure as privileged, and 

that remains the case even if one might conclude the facts to be 

disclosed are vital, highly probative, directly relevant or even 

go to the heart of an issue. 

 As the attorney client privilege is intended to assure a 

client that he or she can consult with counsel in confidence, 

finding that confidentiality may be waived depending on the 

relevance of the communication completely undermines the interest 

to be served. Clients will face the greatest risk of disclosure 

for what may be the most important matters. Furthermore, because 

the definition of what may be relevant and discoverable from 

those consultations may depend on the facts and circumstances of 

as yet unfiled litigation, the client will have no sense of 

whether the communication may be relevant to some future issue, 

and will have no sense of certainty or assurance that the 

communication will remain confidential. 

 A party does not lose the privilege to protect attorney 

client communications from disclosure in discovery when his or 

her state of mind is put in issue in the action. While the 

attorney's advice may be relevant to the matters in issue, the 

privilege applies as the interests it is intended to protect are 

still served by confidentiality. 

 It appears that one matter in issue in this case is whether 

or not the insureds knew, before they obtained coverage, that 

Armour's pharmaceutical products were causing the transmission of 

HIV. Rhône-Poulenc has not waived the attorney client privilege 

by filing this lawsuit or by placing its state of mind in issue. 
As Rhône-Poulenc and Armour have not interjected the advice of 

counsel as an essential element of a claim in this case, the 

district court erred in affirming the magistrate judge's decision 

and in finding they must disclose documents relating to the AIDSrelated evaluation that would otherwise be protected from 

disclosure by the attorney client privilege. Accord, Remington 

Arms Co. v. Liberty Mut. Ins. Co., 142 F.R.D. 408 (D.Del. 1992). 

 In summary, we emphasize that our holding is not meant to 

preclude disclosure of the knowledge the insureds possessed at 

the time they obtained coverage. Facts are discoverable, the 

legal conclusions regarding those facts are not. A litigant 

cannot shield from discovery the knowledge it possessed by 

claiming it has been communicated to a lawyer; nor can a litigant 

refuse to disclose facts simply because that information came 

from a lawyer. Rather than separately review each subpoena 

served on the law firms, it should suffice to say that each 

subpoena seeks the production of both privileged and discoverable 

documents. Because some documents may contain both discoverable 

and privileged information it would be appropriate, if not too 

burdensome, to redact them accordingly. See Bogosian v. Gulf Oil 

Corp., 738 F.2d 587, 595 (3d Cir. 1984); In re Martin Marietta 

Corp., 856 F.2d 619, 626 (4th Cir. 1988). On remand the insurers 

may redraft the subpoenas in a manner consistent with this 

opinion. 

 C. Whether Rhône-Poulenc and Armour have Waived the

Accountant Client Privilege by Filing this Suit to 

Establish Insurance Coverage
 In affirming the magistrate judge's decision approving the 

subpoena served on Coopers & Lybrand, the district court did not 

speak to the accountant client privilege recognized under 

Pennsylvania law.3 On remand, the district court should 

determine the applicability of the accountant client privilege, 

and whether that privilege has been waived. If there has been a 

waiver, the district court should then determine the extent of 

that waiver. The district court should also examine the other 

objections to the subpoena. 

 

3

 Pennsylvania has codified the accountant client privilege at 

63 Pa.C.S.A. § 9.11a (Purdon 1994) as follows: 

 Except by permission of the client or person or entity 

engaging him . . . a certified public accountant . . . 

shall not be required to, and shall not voluntarily, 

disclose or divulge information of which he may have 

become possessed relative to and in connection with any 

professional services as a certified public accountant. 

. . . The information derived from or as the result of 

such professional services shall be deemed confidential 

and privileged[.] 
 D. Whether Rhône-Poulenc and Armour have Waived the 

Attorney Client Privilege by Failing to Object to 

Discovery Requests and by Failing to Serve a Privilege 

Log

 In their motion to compel, Home and Pacific Employers also 

argued that Rhône-Poulenc and Armour had wrongfully failed to 

object to the disclosure of documents in their response to the 

insurers' discovery requests, and had wrongfully failed to serve 

a list identifying the documents they were withholding. Home and 

Pacific Employers sought an order from the magistrate judge 

finding that by failing to object and to supply a list of 

documents being withheld, Rhône-Poulenc and Armour had waived the 

protection of the attorney client privilege. 

 It appears from the transcript of the April 13, 1993, 

hearing on their motion to compel that the magistrate judge did 

look to the plaintiffs' failure to list privileged documents as a 

basis for granting the insurers' motion to extend the time for 

discovery. The magistrate judge did not, however, find that the 

insureds' failure to object and to provide a list of privileged 

documents was a waiver of the privilege. The failure to object 

was not a basis for his decision to order these documents 

produced. 

 As we noted above, in connection with the appeal to the 

district court from the magistrate judge's decision, Home and 

Pacific Employers abandoned this waiver argument after RhônePoulenc put on the record documents that suggest Home had agreed 

to defer the insureds' obligation to respond to certain discovery 

requests. In their briefing on the petition and this appeal, 
Home and Pacific Employers have sought to reintroduce this issue 

into the case and have suggested that the magistrate judge and 

district court concluded that a major factor warranting expedited 

disclosure of these documents was the petitioners' concealment of 

the documents. That argument is neither consistent with the 

facts nor supported by the record. Therefore, we find that the 

magistrate judge was correct in disregarding the failure to 

object. 

 E. The Extent of Rhône-Poulenc and Armour's Waiver of the 

Attorney Client Privilege by Cawthorn's Testimony and 

the Disclosure of the Hughes Hubbard Correspondence

 Home and Pacific Employers also argued to the magistrate 

judge that Rhône-Poulenc and Armour had waived the protection of 

the privilege for the AIDS-related evaluation documents when 

Cawthorn testified about the investigation and when Rhône-Poulenc 

produced the First Hughes Hubbard report and all but a portion of 

the second. The magistrate judge apparently agreed, at least to 

the extent that he found in his March 30, 1993, memorandum 

opinion that in fairness the selective disclosure of privileged 

communications required disclosure of the whole picture and 

ordered the disclosure of the redacted portion of the second 

Hughes Hubbard letter. Rhône-Poulenc and Armour did not appeal 

that decision to the district court. 

 Neither the magistrate judge nor the district court relied 

on this waiver by disclosure as a basis for granting the 

insurers' motion to compel the production of the documents 
relating to the AIDS-related evaluation. As this issue was never 

presented to the district court, we need not address its merits. 

 F. Whether Rhône-Poulenc and Armour have Waived the 

Protection From Disclosure for Their Attorneys' Work 

Product

 There are numerous substantive and procedural errors with 

the subpoenas approved by the magistrate judge. In granting the 

petitioners the relief they seek and in finding they are not 

obligated to produce the documents identified in the subpoenas, 

we will not address each of these issues. Two principal matters 

lead us to the conclusion that the subpoenas should not have been 

approved or issued. First, it appears the magistrate judge and 

the district court's decisions to approve the subpoenas were 

based on their conclusion that Rhône-Poulenc and Armour's 

privilege to protect the disclosure of confidential attorney 

client communications had been waived as the insureds' state of 

mind was in issue in the action. As noted above, we have 

concluded that these decisions constituted an error of law. 

 Second, it appears the magistrate judge and the district 

court had concluded that a finding that the insureds had waived 

the attorney client privilege necessarily meant they had also 

waived the protection from disclosure for the work product of the 

firms that had represented and advised them. For a number of 

reasons, one does not lead to the other. As a factual matter, if 

the state of mind of the insureds is in issue, papers reflecting 

the work product of counsel that were not shared with or 

communicated to the clients are not relevant. Work product that 
was not communicated to the client cannot affect the client's 

state of mind. See Thorn EMI North America, Inc. v. Micron 

Technology, Inc., 837 F. Supp. 616 (D.Del. 1993). In approving 

the subpoenas and denying the motions to quash, the court failed 

to determine whether the documents sought were relevant to the 

matters in issue or were reasonably calculated to lead to the 

discovery of admissible evidence. 

 More significantly, in ordering the broad range of documents 

produced, the magistrate judge and the district court failed to 

consider that the protection stemming from the work product 

doctrine belongs to the professional, rather than the client, and 

that efforts to obtain disclosure of opinion work product should 

be evaluated with particular care. See Fed. R. Civ. P. 26(b)(3); 

Hickman v. Taylor, 329 U.S. 495, 509, 67 S.Ct. 385, 91 L.Ed. 451 

(1947) ("Not even the most liberal of discovery theories can 

justify unwarranted inquiries into the files and the mental 

impressions of an attorney."); Haines v. Liggett Group Inc., 975 

F.2d at 94 ("This court has accorded an attorney's work product 

almost absolute protection from discovery."); In re Grand Jury 

Proceedings (FMC Corp.), 604. F.2d 798, 801 n. 4 (3d Cir. 1979) 

(right to assert the privilege belongs to the attorney). 

 We find the district court erred in denying the motions to 

quash these subpoenas. While the subpoenas may identify certain 

documents that are discoverable, as drafted and served they 

appear to seek the production of documents that are protected 

from disclosure as the work product of attorneys or by the 

attorney client privilege. 
 While Rhône-Poulenc and Armour's disclosure of the Hughes 

Hubbard reports may provide a basis for finding that certain of 

the documents identified by the subpoenas are discoverable, it 

appears that the subpoenas are generally directed to documents 

for which there is no basis for believing there had been or could 

be a waiver by the clients. 

III. CONCLUSION

 We find that the district court erred in affirming the 

magistrate judge's decision finding Rhône-Poulenc and Armour had 

waived the attorney client privilege by putting their state of 

mind in issue, and erred in denying the motions to quash the 

subpoenas served on the law firms. The district court should 

reconsider its decision not to quash the subpoena served on the 

accounting firm. We will dismiss the appeal. We will issue a 

writ of mandamus, and direct the district court to vacate its 

Order of August 6, 1993, and to quash the subpoenas served on the 

law firms. We will remand the case for further proceedings. 

_________________________________________________________________

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