Court Opinion

ID: 9464640
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:38:50.775739+00
Date Added: 2024-06-11T17:38:44.337471
License: Public Domain

HENLEY, Circuit Judge,
concurring in part and dissenting in part.
I agree- with the majority of the court that mandamus is a remedy available to *612Diversified in this action, and that the privileges claimed by Diversified, if originally extant, were not waived by the voluntary disclosures made by Diversified to the Securities & Exchange Commission (SEC). I further agree with the majority that the memorandum of June 19, 1975 prepared for Diversified by the law firm of Wilmer, Cutler & Pickering (Law Firm) is not privileged, and that certain corporate minutes of Diversified are not privileged, except perhaps to the extent that they may disclose otherwise protected matter.
To the extent that the court holds that Law Firm’s report to Diversified’s Board of Directors, dated December 5, 1975, or any other material related to that report is privileged from disclosure on the basis of the traditional attorney-client privilege, I respectfully dissent.1 In so doing I lay to one side what is to me the very serious question of whether or not this entire controversy has become moot due to the disclosures that have now been made by SEC by virtue of which Weatherhead and its attorneys have been able to obtain all of the information that they sought originally.2
In United States v. United Shoe Machinery Corp., 89 F.Supp. 357 (D.Mass.1950), a frequently cited case, Judge Wyzanski stated the conditions under which the attorney-client privilege is applicable. He said (89 F.Supp. at 358-59):
. The privilege applies only if (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 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 on law or (ii) legal services ór (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.
A somewhat shorter definition of the privilege, cited with approval in 8 Wright & Miller, Federal Practice & Procedure, § 2017, p. 133, is to be found in Wonneman v. Stratford Securities Co., 23 F.R.D. 281, 285 (S.D.N.Y.1959): “. . . where legal advice of any kind is sought from a professional legal advisor in his capacity as such, the communications relevant to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself or by the legal advisor except the protection be waived.”
While the attorney-client privilege, where it exists, is absolute, the adverse effect of its application on the disclosure of truth is potentially such that the privilege should be construed strictly. See Radiant Burners, Inc. v. American Gas Ass’n, 320 F.2d 314, 323 (7th Cir. 1963); Underwater Storage, Inc. v. United States Rubber Co., 314 F.Supp. 546, 547-48 (D.D.C.1970); United States v. United Shoe Machinery Corp., supra, 89 F.Supp. at 358.
In order for the privilege to come into play, it must appear that the relationship of the parties to the communication sought to be protected was that of attorney and client. It must also appear that the attorney was engaged or consulted by the client for the purpose of obtaining legal services or advice that a lawyer. may perform or give in his capacity as a lawyer, not in some other capacity. A communication is not privileged simply because one of the parties to it is a lawyer. 8 Wright & Miller, op. cit., p. 136. See Underwater Storage, Inc. v. United States Rubber Co., supra; In re Natta, 264 F.Supp. 734, 741 (D.Del.1967), aff’d on other issues, 388 F.2d 215 (3d Cir. 1968); Georgia-Pacific Plywood Co. v. Unit*613ed States Plywood Corp., 18 F.R.D. 463, 464 (S.D.N.Y.1956); Zenith Radio Corp. v. Radio Corp. of America, 121 F.Supp. 792, 794 (D.Del.1954).
Where an attorney-client relationship in fact exists and where the client is a corporation, a question may arise as to how far down the corporate table of organization the privilege extends. Is the privilege limited to corporate personnel who may be said to be in the corporation’s “control group”, as many of the cases seem to have held? Or is the privilege the broader one defined in Harper & Row Publishers, Inc. v. Decker, 423 F.2d 487 (7th Cir. 1970), aff’d by an equally divided court, 400 U.S. 348, 91 S.Ct. 479, 27 L.Ed.2d 433 (1971)?
Much of the discussion that appears in the opinion of the majority in this case is devoted to the question mentioned in the preceding paragraph, and it is only after the majority adopts the Harper & Row test, as modified to some extent by Judge Wein-stein, that the majority turns to a consideration of the underlying questions of whether Diversified was Law Firm’s client and whether Law Firm was employed to perform legal services or to give legal advice.
If I were able to accept the majority’s premise that Diversified employed Law Firm as its attorney to give it legal advice or to perform legal services, I would not, at least to a point, have any trouble with the adoption of a modified Harper & Row test to be applied in identifying corporate personnel whose communications would be considered as falling within the attorney-client privilege, although I might have some trouble in including within the privileged category communications involving officers or employees of corporations that are subsidiaries of or affiliated with the corporate client or involving corporate personnel who have dealt adversely to the corporate client.3
My point of departure from the majority is that I cannot accept its premise.
The majority having defined what it deems to be the applicable standards in Harper & Row-Weinstein terms undertakes to apply those standards “to the employee interviews to determine whether they are within the scope of the attorney-client privilege.” And the majority first addresses itself to the question of whether “the communications were made for the purpose of securing legal advice for the corporation.” Having answered that question in the affirmative, the majority determines that “the remaining requirements of the test set forth by Judge Weinstein and adopted by us have been .met,” and the final conclusion of the majority is that the December, 1975 report of Law Firm, the “relevant portions of the corporate minutes,” and the January 30,1976 letter of Diversified’s president are all covered by the attorney-client privilege. I cannot agree.
In answering the question of the purpose for which the communications were made the court refers to certain language appearing in 8 Wigmore on Evidence, § 2296, pp. 566-67 (McNaughton rev. 1961). I think that the quotation should be expanded to some extent , so as to include all of the language that appears in § 2296 on pp. 566-67.
§ 2296. Advice sought for sundry nonlegal purposes; Consultation with prosecuting attorneys. A lawyer is sometimes employed without reference to his knowledge and discretion in the law — as where he is charged with finding a profitable investment for trust funds. So, too, one not a lawyer is sometimes asked for legal advice — as where a policeman or a clerk of court is consulted. It is not easy to frame a definite test for distinguishing legal from nonlegal advice. Where the general purpose concerns legal rights and *614obligations, a particular incidental transaction would receive protection, though in itself it were merely commercial in nature [footnote omitted] — as where the financial condition of a shareholder is discussed in the course of a proceeding to enforce a claim against a corporation. But apart from such cases, the most that can be said by way of generalization is that a matter committed to a professional legal adviser is prima facie so committed for the sake of the legal advice which may be more or less desirable for some aspect of the matter, and is therefore within the privilege unless it clearly appears to be lacking in aspects requiring legal advice.
Obviously, much depends upon the circumstances of individual transactions.
With regard to that language, I think that it is going too far to say that every time a matter is entrusted to a lawyer communications developed in the course of the entrustment are prima facie privileged, and that the burden is on the party seeking disclosure of the communications to make it “clearly appear” that the entrustment is “lacking aspects requiring legal advice.” And I doubt that Dean Wigmore intended to go so far. The difficulty is that, at least in many instances, the party seeking disclosure does not know in advance and has no way of knowing why the matter in question was turned over to the lawyer, or why the communications were developed, or what they amounted to or contained. Thus, apart from in camera proceedings, such as the one that was had in this case, there is no way for the party seeking disclosure to meet the prima facie case of privilege mentioned by Wigmore.
However, my dissent is not based upon any question of the incidence of burden of proof in the area of attorney-client privilege or on any question of whether Weath-erhead made any evidentiary showing that it may have been required to make.
I have given careful consideration to the material that Judge Meredith considered in camera, and particularly to the documents that reflected the employment of Law Firm and the December, 1975 report that Law Firm submitted to Diversified’s Board of Directors. From that consideration I am satisfied that Law Firm was not employed to provide legal services or advice. It was employed to make a factual investigation and business recommendations in such areas as the results of the investigation might suggest. And Law Firm did just that. The work that Law Firm was employed to perform and the work that it performed could have been performed just as readily by non-lawyers, aided to the extent necessary by a firm of public accountants, just as Law Firm was assisted by Arthur Andersen & Co. Thus, one of the primary requisites of a successful claim of attorney-client privilege never came into existence.
The majority takes note of the fact that Joseph B. Woodlief, who became president of Diversified two months after Law Firm was employed, testified by deposition that he did not believe that Law Firm “represented Diversified ‘in the context of advice of attorney to client.’ ” As to that testimony, the majority after observing the date of Woodlief’s employment in relation to the date of the employment of Law Firm goes on to say: “We cannot tell from his deposition whether he thought of attorney-client advice solely in the context of litigation. In any event, his characterization is only one fact to consider in determining whether the communications were privileged. The totality of the circumstances indicates that the communications were privileged.” And the majority also observes that the fact that the report contains some nonlegal matter does not destroy the privilege because in the majority’s eyes the nonlegal matter is “insubstantial.”
If Mr. Woodlief misconceived the connection between Diversified and Law Firm, then his misconception was shared by the corporation’s Board of Directors and, perhaps more importantly, by Law Firm itself.
The minutes of the Board which relate to the employment of Law Firm indicate that the Firm was hired as an investigator and not as legal counsel. The fact that the Firm is referred to as “Special Counsel” and *615the fact that it doubtless had some expertise in SEC practice do not in and of themselves create any attorney-client relationship.
In its original memorandum which was prepared in June, 1975 and which all of the members of the court agree contained no privileged matter, Law Firm clearly warned Diversified that communications made and data assembled in the process of the proposed investigation might well be the subject of enforced disclosure.
The critical document involved in the case is the December, 1975 report to the Board which is a succinct and well written document. Since the majority holds that the report is privileged and is unwilling to dispose of the case on the ground of mootness of controversy notwithstanding the fact that Weatherhead and its lawyers have now obtained a copy of the report, I am somewhat handicapped in discussing the report and its contents.
The report consists of a factual statement of the historical background of Law Firm’s investigation, a description of the investigation, factual findings, a discussion of certain limitations upon the investigation, accounting recommendations made by Arthur Andersen & Co., and certain recommendations made by Law Firm itself. Affixed to the report are certain items of documentary material.
In the introductory portion of the report Law Firm explains that the report is based on the joint efforts of Law Firm and Arthur Andersen & Co., that much documentary material had been examined, that a number of identified persons had been interviewed, and that a number of identified persons had not been interviewed.
Law Firm made findings with respect to the question of whether cash funds had in fact been surreptitiously created and used in violation of Diversified’s established business procedures and internal controls. Some transactions involving substantial sums of money Law Firm found itself unable to explain. One isolated transaction which does not appear to involve either “slush funds” or Weatherhead is described. The report recites that the over-all investigation was hampered to some extent by the fact that some individuals refused to be interviewed and that other individuals were not available.
One of the attachments to the report consists of the accounting recommendations of Arthur Andersen & Co. I see nothing in those recommendations that would constitute “legal advice.” There was one specific statement of Arthur Andersen & Co. which Law Firm deemed it well to stress. That statement, introductory in nature, was as follows:
. At the outset ... we wish to emphasize that the institution of these [recommended] procedures will be meaningless if the personnel who have responsibility for their implementation are not faithful in the performance of their duties. There is no system of internal control that can presently be devised which cannot be circumvented if the responsible persons conspire to do so.
That statement is but an expression of the obvious. A business man certainly does not need a lawyer to tell him that the internal controls that he has established with respect to his business operations are valueless if they are intentionally violated or ignored by those whose duty it is to administer them.
Law Firm made three recommendations of its own which may be summarized as follows: (1) That the accounting procedures recommended by Arthur Andersen & Co. be adopted; (2) that the Board make such changes in personnel as it deemed necessary in the light of the report to prevent a recurrence of certain practices; and (3) that the Board should consider whether appropriate steps should be taken to restore allegedly misused assets.
Those recommendations could have been made by any firm of private investigators, or by accountants, or by bankers, or, for that matter, by any person possessing ordinary common sense and business prudence. And I do not consider that the making of the investigation or the making of the rec*616ommendations based thereon amounted to the performance of legal services or the giving of legal advice.
Finally, it appears to me that if Law Firm had felt that it had been employed as legal counsel and that the information that it had collected was privileged, it would hardly have concluded its report by referring to what Law Firm had always felt was a serious disclosure problem and suggesting that Diversified consult its regular counsel in that connection.
This opinion may be too long. I hope that it does not appear to be too critical or quarrelsome. In another factual setting I would have no trouble agreeing with much of what is said by way of principle in the opinion of the court. As it is, I am of the view that the majority’s holding on the issue of attorney-client privilege simply is not geared to the facts of the instant case. I would dismiss the petition in its entirety.

. As will be seen, I do not consider that the attorney-client privilege is available to Diversified in this case. Nor do I consider that the material in question is protected “work product” under Fed.R.Civ.P. 26(b)(3), which codifies the rule laid down in the leading case of Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947).

. Had the court been willing to dismiss this appeal on the ground of mootness, I would have concurred gladly.

. In this case Law Firm’s investigations, which were assisted by the accounting firm of Arthur Andersen & Co., which reported to Law Firm, were not limited to officers, employees and records of Diversified itself. The -investigation involved in some measure the personnel and records of subsidiary or affiliated corporations, and there is reason to believe that in at least one instance a substantial sum of money turned over by Diversified to the president of a subsidiary corporation for a particular purpose, perhaps unlawful, was not used for that purpose but was diverted to the private pockets of the two individuals involved in the transaction.