Opinion ID: 149672
Heading Depth: 2
Heading Rank: 2

Heading: The Deloitte Memorandum

Text: The government makes two categorical arguments that the Deloitte Memorandum cannot be work product. First, it argues that the Deloitte Memorandum cannot be work product because it was created by Deloitte, not Dow or its representative. Second, it argues that the Deloitte Memorandum cannot be work product because it was generated as part of the routine audit process, not in anticipation of litigation. If either argument is correct, the Deloitte Memorandum cannot be work product, regardless of its contents. We reject both arguments, but nevertheless conclude that the district court lacked sufficient information to determine that the entire Deloitte Memorandum is work product.
The government first contends that Dow cannot claim work-product protection for the Deloitte Memorandum because it was prepared by Deloitte. Rule 26(b)(3) only protects documents and tangible things that are prepared ... by or for another party or its representative. FED. R.CIV.P. 26(b)(3)(A). Given this language, the government argues that the Deloitte Memorandum is not work product because Deloitte is not Dow's representative. It relies principally on United States v. Arthur Young & Co., 465 U.S. 805, 104 S.Ct. 1495, 79 L.Ed.2d 826 (1984), in which the Supreme Court refused to recognize an accountant work-product privilege. In Arthur Young, the Court contrasted the role of an attorney with that of an accountant, explaining that an attorney is a loyal representative whose duty it is to present the client's case in the most favorable possible light, whereas an independent certified public accountant has a public responsibility and owes ultimate allegiance to the corporation's creditors and stockholders, as well as to the investing public. Id. at 817-18, 104 S.Ct. 1495. In the government's view, Arthur Young demonstrates that Deloitte cannot be Dow's representative, which in turn means that the Deloitte Memorandum cannot be work product under the plain language of Rule 26(b)(3). Dow counters that the representative for purposes of Rule 26(b)(3) is its counsel, whose thoughts and opinions are recorded in the document. In addition, it argues that the Deloitte Memorandum is work product because it contains the same type of opinion work product that is found in the Dow Documents, which the government concedes are work product. Even if the government is correct in asserting that the Deloitte Memorandum falls outside the definition given by Rule 26(b)(3), this does not conclusively establish that it is not work product. The government mistakenly assumes that Rule 26(b)(3) provides an exhaustive definition of what constitutes work product. On the contrary, Rule 26(b)(3) only partially codifies the work-product doctrine announced in Hickman. Rule 26(b)(3) addresses only documents and tangible things, but Hickman 's definition of work product extends to intangible things. 329 U.S. at 511, 67 S.Ct. 385. Moreover, in Hickman, the Court explained that the attorney's mental impressions were protected from discovery, so that he could not be forced to repeat or write out that information in discovery. Id. at 512-13, 67 S.Ct. 385. Thus Hickman provides work-product protection for intangible work product independent of Rule 26(b)(3). Accord In re Seagate Tech., LLC, 497 F.3d 1360, 1376 (Fed.Cir.2007); In re Cendant Corp. Sec. Litig., 343 F.3d 658, 662 (3d Cir.2003); United States v. 266 Tonawanda Trail, 95 F.3d 422, 428 n. 10 (6th Cir.1996). The government focuses on Deloitte's role in creating the document and on its relationship to Dow. Under Hickman, however, the question is not who created the document or how they are related to the party asserting work-product protection, but whether the document contains work productthe thoughts and opinions of counsel developed in anticipation of litigation. The district court found that the memorandum records those thoughts, even though Deloitte and not Dow or its attorney committed them to paper. The work product privilege does not depend on whether the thoughts and opinions were communicated orally or in writing, but on whether they were prepared in anticipation of litigation. Thus Deloitte's preparation of the document does not exclude the possibility that it contains Dow's work product.
The government next contends that the Deloitte Memorandum cannot be work product because it was generated during an annual audit, not prepared in anticipation of litigation. The courts are not unanimous on the proper test for determining whether a document was prepared in anticipation of litigation. Under the test adopted by most circuits, the question is whether the document was created because of the anticipated litigation. See, e.g., Sandra T.E. v. S. Berwyn Sch. Dist. 100, 600 F.3d 612, 622 (7th Cir.2010); In re Prof'ls Direct Ins. Co., 578 F.3d 432, 439 (6th Cir.2009); In re Grand Jury Subpoena, 357 F.3d 900, 907 (9th Cir.2004); PepsiCo, Inc. v. Baird, Kurtz & Dobson LLP, 305 F.3d 813, 817 (8th Cir.2002); Maine v. U.S. Dep't of the Interior, 298 F.3d 60, 68 (1st Cir.2002); Montgomery County v. Microvote Corp., 175 F.3d 296, 305 (3d Cir. 1999); United States v. Adlman, 134 F.3d 1194, 1195 (2d Cir.1998); Nat'l Union Fire Ins. Co. v. Murray Sheet Metal Co., 967 F.2d 980, 984 (4th Cir.1992). The Fifth Circuit, however, requires that anticipation of litigation be the primary motivating purpose behind the document's creation. United States v. El Paso Co., 682 F.2d 530, 542 (5th Cir.1982). Like most circuits, we apply the because of test, asking whether, in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation. In re Sealed Case, 146 F.3d at 884 (quotation omitted). In addition, while this standard addresses a document, it applies equally to work product in other forms. Thus for the Deloitte Memorandum, the question is whether it records information prepared by Dow or its representatives because of the prospect of litigation. In the government's view, the Deloitte Memorandum was prepared not because of the prospect of litigation, but as part of the routine audit process. The government asserts that a document's function, not its content, determines whether it is work product. For this proposition the government relies on Delaney, Migdail & Young, Chartered v. IRS, 826 F.2d 124 (D.C.Cir.1987). In Delaney, a law firm sought to obtain under the Freedom of Information Act memoranda and supporting documents relating to the government's legal analysis of an Internal Revenue Service program concerning the use of statistical sampling in auditing large accounts. In that case it was the IRS that asserted work-product protection. The court held that the documents were work product because they advise[d] the agency of the types of legal challenges likely to be mounted against a proposed program, potential defenses available to the agency, and the likely outcome. Id. at 127. In its reasoning, the court noted that a previous work-product decision had identified the function of the documents as the critical issue. Id. at 127 (citing Coastal States Gas Corp. v. Dep't of Energy, 617 F.2d 854, 858 (D.C.Cir.1980)). The government seizes on this language, arguing that the Deloitte Memorandum is not work product because its function was to facilitate Deloitte's audit, not to prepare Dow for litigation. We think the government misreads Delaney. While Delaney used the term function, it was not considering any distinction between function and content in determining whether a document constituted work product. On the contrary, the court evaluated the function of the IRS documents at issue by examining their contents. It contrasted the documents at issue in the Coastal States case, which were like an agency manual, fleshing out the meaning of the statute it was authorized to enforce, with the documents at issue in Delaney, which were memoranda describing potential legal challenges, possible defenses, and likely outcomes. Id. Delaney does not support the proposition that we should look solely to a document's function divorced from its contents in determining its status as work product. The government also relies on two decisions holding that a corporation's tax accrual workpapers were not prepared in anticipation of litigation. In El Paso, the Fifth Circuit applied the primary motivating purpose standard and concluded that El Paso's tax accrual workpapers were not work product because the company's primary motivation in creating them was to bring its financial books into conformity with generally accepted auditing principles as required by federal securities laws. 682 F.2d at 543. The court reasoned that the primary motivating force ... [was] not to ready El Paso for litigation over its tax returns, but to anticipate, for financial reporting purposes, what the impact of litigation might be on the company's tax liability. Id. In United States v. Textron Inc., 577 F.3d 21 (1st Cir.2009) (en banc), the First Circuit likewise held that a corporation's tax accrual workpapers were not prepared in anticipation of litigation. Applying the because of test, the court concluded that the workpapers were tax documents and not case preparation materials that were prepared in the ordinary course of business and that their only purpose was to support a financial statement and the independent audit of it. Id. at 28, 30. It found no evidence that the workpapers were prepared for potential use in litigation or that they would in fact serve any useful purpose for Textron in conducting litigation if it arose. Id. at 30. The government argues that El Paso and Textron demonstrate that when a document is created as part of an independent audit, as the Deloitte Memorandum was, its sole function is to facilitate that audit, which means it was not prepared in anticipation of litigation. Neither case convinces us. El Paso was decided under the primary motivating purpose test, which is more demanding than the because of test we employ. Under the more lenient because of test, material generated in anticipation of litigation may also be used for ordinary business purposes without losing its protected status. For example, in Adlman, the Second Circuit considered whether a document containing legal analysis about possible future litigation qualified as work product when it was procured to assist the parties in deciding whether to go through with a proposed merger. The court held that a document created because of anticipated litigation, which tends to reveal mental impressions, conclusions, opinions or theories concerning the litigation, does not lose work-product protection merely because it is intended to assist in the making of a business decision influenced by the likely outcome of the anticipated litigation. Where a document was created because of anticipated litigation, and would not have been prepared in substantially similar form but for the prospect of that litigation, it falls within Rule 26(b)(3). 134 F.3d at 1195. Under this same reasoning, material developed in anticipation of litigation can be incorporated into a document produced during an audit without ceasing to be work product. Textron, which did apply the because of standard, is distinguishable because it turned on the court's examination of the particular documents at issue. While the court concluded that those documents were not work product, it did not exclude the possibility that other documents prepared during the audit process might warrant work-product protection. Moreover, Judge Torruella's dissenting opinion in Textron makes a strong argument that while the court said it was applying the because of test, it actually asked whether the documents were prepared for use in possible litigation, a much more exacting standard. 577 F.3d at 32. In short, a document can contain protected work-product material even though it serves multiple purposes, so long as the protected material was prepared because of the prospect of litigation.
Rejecting the government's categorical arguments establishes only that the Deloitte Memorandum may be protected work product under the law; we must now determine whether it is. On examination of the record, we conclude that the district court did not have a sufficient evidentiary foundation for its holding that the memorandum was purely work product. According to the record, the document was created during Deloitte's preparation of an audit report which in Deloitte's view required consideration of potential litigation. The meeting generating the document included both Deloitte and Dow employees, as well as Dow's outside counsel. The document itself was prepared by a third party. While none of this negates the possibility of work-product privilege, it could make it likely that the document includes other information that is not work product. According to Dow's privilege log and the Curry declaration, the memorandum does contain thoughts and analyses by legal counsel, but this does not rule out or even render unlikely the possibility that it also includes other facts, other thoughts, other analyses by non-attorneys which may not be so intertwined with the legal analysis as to warrant protection under the work-product doctrine. We will therefore remand this question to the district court for the purpose of independently assessing whether the document was entirely work product, or whether a partial or redacted version of the document could have been disclosed. Accordingly, we vacate the district court's decision that the Deloitte Memorandum was work product and remand so that the district court can examine the document in camera to determine whether it is entirely work product. See In re Sealed Case, 146 F.3d at 886-88 (remanding for in camera review to determine whether documents were prepared in anticipation of litigation); In re Sealed Case, 29 F.3d 715, 718 (D.C.Cir.1994) (same).