Opinion ID: 751170
Heading Depth: 3
Heading Rank: 1

Heading: Primarily to assist in litigation.

Text: 21 The primarily to assist in litigation formulation is exemplified by a line of cases from the United States Court of Appeals for the Fifth Circuit. In United States v. Davis, 636 F.2d 1028 (5th Cir.), cert. denied, 454 U.S. 862, 102 S.Ct. 320, 70 L.Ed.2d 162 (1981), the Fifth Circuit denied protection to documents made in the course of preparation of a tax return. This result was well justified as there was no showing whatsoever of anticipation of litigation. In what might be characterized as a dictum, or in any event a statement going far beyond the issues raised in the case, the court asserted that the Rule applies only if the primary motivating purpose behind the creation of the document was to aid in possible future litigation. Id. at 1040. 22 Then, in United States v. El Paso Co., 682 F.2d 530 (5th Cir.1982), cert. denied, 466 U.S. 944, 104 S.Ct. 1927, 80 L.Ed.2d 473 (1984), a large public corporation sought to shield documents that analyzed prospective liabilities that might result from litigation with the IRS over its tax returns. The documents were prepared not to assist in litigation but to establish and justify appropriate reserves in El Paso's financial statements. Treating the Davis dictum as law, the Fifth Circuit held that because the primary motivating force [behind the preparation of the documents was] not to ready El Paso for litigation but rather to bring its financial books into conformity with generally accepted auditing principles, id. at 543, and because the documents' liability analysis was only a means to a business end, id., the documents were not prepared in anticipation of litigation within the meaning of the Rule and enjoyed no work-product protection. The El Paso requirement that the document be prepared to aid in litigation was then applied by a Fifth Circuit judge writing for the Temporary Emergency Court of Appeals in United States v. Gulf Oil Corp., 760 F.2d 292, 296-97 (Temp.Emer.Ct.App.1985). 3 23 We believe that a requirement that documents be produced primarily or exclusively to assist in litigation in order to be protected is at odds with the text and the policies of the Rule. Nowhere does Rule 26(b)(3) state that a document must have been prepared to aid in the conduct of litigation in order to constitute work product, much less primarily or exclusively to aid in litigation. Preparing a document in anticipation of litigation is sufficient. 24 The text of Rule 26(b)(3) does not limit its protection to materials prepared to assist at trial. To the contrary, the text of the Rule clearly sweeps more broadly. It expressly states that work-product privilege applies not only to documents prepared ... for trial but also to those prepared in anticipation of litigation. If the drafters of the Rule intended to limit its protection to documents made to assist in preparation for litigation, this would have been adequately conveyed by the phrase prepared ... for trial. The fact that documents prepared in anticipation of litigation were also included confirms that the drafters considered this to be a different, and broader category. Nothing in the Rule states or suggests that documents prepared in anticipation of litigation with the purpose of assisting in the making of a business decision do not fall within its scope. 25 In addition, the Rule takes pains to grant special protection to the type of materials at issue in this case--documents setting forth legal analysis. While the Rule generally withholds protection for documents prepared in anticipation of litigation if the adverse party shows substantial need for their disclosure and inability to obtain their equivalent by other means, even where the party seeking disclosure has made such a showing the Rule directs that the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of ... [a party or its representative] concerning the litigation. Fed.R.Civ.P. 26(b)(3) (emphasis added). As the Advisory Committee notes indicate, Rule 26(b)(3) is intended to ratify the principles that each side's informal evaluation of its case should be protected, that each side should be encouraged to prepare independently, and that one side should not automatically have the benefit of the detailed preparatory work of the other side. Where the Rule has explicitly established a special level of protection against disclosure for documents revealing an attorney's (or other representative's) opinions and legal theories concerning litigation, it would oddly undermine its purposes if such documents were excluded from protection merely because they were prepared to assist in the making of a business decision expected to result in the litigation. 26 Admittedly, there are fragmentary references in the caption to the Rule and in its commentary that can be read to lend support to a contrary interpretation. The caption, for example, refers to Trial Preparation, and the Advisory Committee Notes make occasional reference to trial preparation materials. We attach small importance to those references. Given that the text of the Rule (and of the commentary) expressly goes beyond documents prepared ... for trial to encompass also those documents prepared in anticipation of litigation, we cannot read the references in the caption and commentary as overriding the text of the Rule. See United States v. Minker, 350 U.S. 179, 185, 76 S.Ct. 281, 285, 100 L.Ed. 185 (1956); Whitehouse v. United States District Court, 53 F.3d 1349, 1358 n. 12 (1st Cir.1995). 27 In addition to the plain language of the Rule, the policies underlying the work-product doctrine suggest strongly that work-product protection should not be denied to a document that analyzes expected litigation merely because it is prepared to assist in a business decision. Framing the inquiry as whether the primary or exclusive purpose of the document was to assist in litigation threatens to deny protection to documents that implicate key concerns underlying the work-product doctrine. 28 The problem is aptly illustrated by several hypothetical fact situations likely to recur: 29 (i) A company contemplating a transaction recognizes that the transaction will result in litigation; whether to undertake the transaction and, if so, how to proceed with the transaction, may well be influenced by the company's evaluation of the likelihood of success in litigation. Thus, a memorandum may be prepared in expectation of litigation with the primary purpose of helping the company decide whether to undertake the contemplated transaction. An example would be a publisher contemplating publication of a book where the publisher has received a threat of suit from a competitor purporting to hold exclusive publication rights. The publisher commissions its attorneys to prepare an evaluation of the likelihood of success in the litigation, which includes the attorneys' evaluation of various legal strategies that might be pursued. If the publisher decides to go ahead with publication and is sued, under the primarily to assist in litigation formulation the study will likely be disclosed to the opposing lawyers because its principal purpose was not to assist in litigation but to inform the business decision whether to publish. We can see no reason under the words or policies of the Rule why such a document should not be protected. See United States v. Adlman, 68 F.3d at 1501. 30 (ii) A company is engaged in, or contemplates, some kind of partnership, merger, joint undertaking, or business association with another company; the other company reasonably requests that the company furnish a candid assessment by the company's attorneys of its likelihood of success in existing litigations. For instance, the company's bank may request such a report from the company's attorneys concerning its likelihood of success in an important litigation to inform its lending policy toward the company. Or a securities underwriter contemplating a public offering of the company's securities may wish to see such a study to decide whether to go ahead with the offering without waiting for the termination of the litigation. Such a study would be created to inform the judgment of the business associate concerning its business decisions. No part of its purpose would be to aid in the conduct of the litigation. Nonetheless it would reveal the attorneys' most intimate strategies and assessments concerning the litigation. We can see no reason why, under the Rule, the litigation adversary should have access to it. But under the Fifth Circuit's to assist test, it would likely be discoverable by the litigation adversary. 31 (iii) A business entity prepares financial statements to assist its executives, stockholders, prospective investors, business partners, and others in evaluating future courses of action. Financial statements include reserves for projected litigation. The company's independent auditor requests a memorandum prepared by the company's attorneys estimating the likelihood of success in litigation and an accompanying analysis of the company's legal strategies and options to assist it in estimating what should be reserved for litigation losses. 32 In each scenario, the company involved would require legal analysis that falls squarely within Hickman's area of primary concern--analysis that candidly discusses the attorney's litigation strategies, appraisal of likelihood of success, and perhaps the feasibility of reasonable settlement. The interpretation of Rule 26(b)(3) advocated by the IRS imposes an untenable choice upon a company in these circumstances. If the company declines to make such analysis or scrimps on candor and completeness to avoid prejudicing its litigation prospects, it subjects itself and its co-venturers to ill-informed decisionmaking. On the other hand, a study reflecting the company's litigation strategy and its assessment of its strengths and weaknesses cannot be turned over to litigation adversaries without serious prejudice to the company's prospects in the litigation. Cf. Hickman, 329 U.S. at 516, 67 S.Ct. at 396 (Jackson, J., concurring) (Discovery was hardly intended to enable a learned profession to perform its functions either without wits or on wits borrowed from the adversary.). 33 We perceive nothing in the policies underlying the work-product doctrine or the text of the Rule itself that would justify subjecting a litigant to this array of undesirable choices. The protection of the Rule should be accorded to such studies in these circumstances. See United States v. Adlman, 68 F.3d at 1501 ([T]here is no rule that bars application of work-product protection to documents created prior to the event giving rise to litigation.). We see no basis for adopting a test under which an attorney's assessment of the likely outcome of litigation is freely available to his litigation adversary merely because the document was created for a business purpose rather than for litigation assistance. The fact that a document's purpose is business-related appears irrelevant to the question whether it should be protected under Rule 26(b)(3). 4 34 We note that in Delaney, Migdail & Young, Chartered v. IRS, 826 F.2d 124 (D.C.Cir.1987), the IRS successfully argued against the very position it here advocates. The D.C. Circuit sustained the IRS's claim of work-product privilege in circumstances where the claim would have failed under the test applied by the Fifth Circuit and advocated by the IRS on this appeal. The documents sought in Delaney were prepared by IRS attorneys for a business purpose--to help the IRS decide whether to adopt a proposed system of statistical sampling for its corporate audit program for large accounts. However, the study was prepared because of expected litigation which would result from adoption of the program; it analyzed expected legal challenges to the use of the proposed program, potential defenses available to the agency, and the likely outcome. Based on the preparatory study, the IRS concluded that the proposed statistical sampling program presented an acceptable legal risk and authorized it. The court refused discovery with the observation that the party requesting discovery was 35 seeking the agency's attorneys' assessment of the program's legal vulnerabilities in order to make sure it does not miss anything in crafting its legal case against the program. This is precisely the type of discovery the [Supreme] Court refused to permit in Hickman v. Taylor. 36 Id. at 127 (emphasis added) (footnote omitted). The Seventh Circuit has also considered and rejected the contention that documents automatically fall outside the scope of the work-product doctrine when they are prepared for purposes other than assistance in litigation. See In re Special September 1978 Grand Jury (II), 640 F.2d 49, 61-62 (7th Cir.1980). 5 37 Similarly, several district courts have rejected the contention that Rule 26(b)(3) does not apply to documents that are not prepared for the primary or exclusive purpose of assisting in that litigation. See Vanguard Sav. and Loan Ass'n v. Banks, No. CIV. 93-CV-4627, 1995 WL 555871, at  4 (E.D.Pa.1995) (letters from defendant's attorneys giving the attorneys' opinion as to the likely outcome of pending litigation protected from discovery even though the letters were created primarily for the business purpose of satisfying the regulatory examination required by the Pennsylvania Department of Banking); American Optical Corp. v. Medtronic, 56 F.R.D. 426, 431 (D.Mass.1972) (memoranda prepared by a lawyer in the course of counseling a client whether to accept a license or challenge the validity of a competitor's patent in court protected work product); Sylgab Steel & Wire Corp. v. Imoco-Gateway Corp., 62 F.R.D. 454, 456 (N.D.Ill.1974) (opinion letters analyzing whether proposed products violated patents is protected work product), aff'd, 534 F.2d 330 (7th Cir.1976); Chemcentral/Grand Rapids Corp. v. EPA, No. 91 C 4380, 1992 WL 281322, at  5 (N.D.Ill. Oct. 6, 1992) (EPA documents analyzing likely legal challenges to proposed toxic waste cleanup plans are protected work product); In re Woolworth Corp. Sec. Class Action Litig., No. 94 CIV. 2217 (RO), 1996 WL 306576, at  3 (S.D.N.Y. June 7, 1996) (company's business purpose for creating material would not preclude application of Rule 26(b)(3)). 38 The few commentators to have specifically addressed whether the work-product doctrine should apply to documents analyzing anticipated litigation, but prepared to assist in a business decision rather than to assist in the conduct of the litigation, have generally concluded that protection is desirable. One argues that the work-product doctrine is intended to protect a lawyer's (or other representative's) personal evaluation of his or her case, and to ensure that adversaries have the opportunity to memorialize their mental impressions, strategies, and ideas free from the concern that their litigation opponents might gain access to the material. Special Project, The Work Product Doctrine, 68 Cornell L.Rev. at 784-85. The fact that the materials serve other functions apart from litigation does not mean that they should not be protected by work-product immunity if they reveal directly or indirectly the mental impressions or opinions of the attorney who prepared them. Note, The Work Product Doctrine: Why Have an Ordinary Course of Business Exception?, 1988 Colum.Bus. L.Rev. 587, 604. Allowing discovery of this type of material has also been characterized as an intolerable intrusion on the [settlement] bargaining process ... [which] allow[s] one party to take advantage of the other's assessment of his prospects for victory and an acceptable settlement figure. Edward H. Cooper, Work Product of the Rulesmakers, 53 Minn.L.Rev. 1269, 1283 (1969). Under the standard advocated by the IRS, documents assessing the strengths and weaknesses of one's case, or the likelihood of settlement and its expected cost, would be unprotected if prepared for a business purpose rather than to assist in litigation. This result is unwarranted. 39