Court Opinion

ID: 2964839
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:31:57.269829+00
Date Added: 2024-06-11T08:46:15.562625
License: Public Domain

USCA1 Opinion

	

                           UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                ____________________
          Nos. 97-1002
               97-1003
                            IN RE: GRAND JURY SUBPOENAS
                                ____________________
                    APPEALS FROM THE UNITED STATES DISTRICT COURT
                          FOR THE DISTRICT OF MASSACHUSETTS
                    [Hon. Michael A. Ponsor, U.S. District Judge]
                                ____________________
                                       Before
                               Torruella, Chief Judge,
                            Bownes, Senior Circuit Judge,
                              and Lynch, Circuit Judge.
                                _____________________
               Michael  
                       W.  
                           Reilly, with whom   Tommasino  
                                                          &  
                                                             Tommasino and
          Michael G. West were on joint brief for appellants the Client and
          the Owner.
               John P. Pucci, with whom Jeanne M. Kaiser and Fierst & Pucci
          were on brief for appellant Law Firm.
               Andrea 
                      N. 
                         Ward, Assistant United States Attorney, with whom
          Donald K. Stern
                        , United States Attorney, was on brief for appellee
          United States.
                                ____________________
                                   August 13, 1997
                                ____________________

                    TORRUELLA, Chief 
                                     Judge. The case before us is a small
          piece in a much larger puzzle. A federal grand jury, sitting in
          Massachusetts, has been investigating possible criminal activity on
          the part of a firm ("firm" or "client") and its owner ("owner").
          The firm was in the business of assisting inventors in promoting
          their discoveries and in obtaining patents. The government
          suspected fraud and began an investigation. During the
          investigation, a search warrant was executed at the business
          offices of the client. As a result of some of the materials seized
          during this search, the government requested and received a grand
          jury subpoena directed at the custodian of records at the office of
          the firm's legal representative ("law firm"). The subpoena sought
          all records "pertaining to charges or billing for legal services"
          performed by the law firm for the client. The information sought
          included:
                    1) all documents relating to the establishment
                    of such entities as clients;
                    2) all diary entries and other summaries
                    indicating the hours worked, the hours
                    charged, the nature or subject of the services
                    performed, and the identity of the client; and
                    3) all invoices or bills of any kind.
          Subpoena to Testify Before Grand Jury, dated August 5, 1996.
                    The client and the firm filed separate motions to quash
          the subpoena, arguing principally that the billing records
                              
           On February 5, 1997, a "Consent Motion to Seal and Redact" was
          granted by the district court. In accordance with Federal Rule of
          Criminal Procedure 6(e)(6), no references to the parties have been
          made in this opinion.  See, e.g., United 
                                                   States v. (Under 
                                                                     Seal),
          748 F.2d 871 (4th Cir. 1984).
                                         -2-

          contained detailed descriptions of the legal work performed and
          that disclosure thereof would violate the attorney-client
          privilege.
                    On December 18, 1996, the district court denied the
          motions to quash, holding that "records of the sort exemplified by
          Ex. 2 to the Offord Affidavit (attached to the Government's
          Response to the Motion to Quash) are not sufficiently specific to
          be protected by the attorney-client privilege."    See Motion to
          Quash Subpoena, Record Appendix, at 24 (margin order). Both the
          client and the law firm have appealed the denial of the motion to
          quash.
                             I. Appellate Jurisdiction
                    As an initial matter, we must determine whether this
          court has jurisdiction to hear the appeal.
                    It is established that, under normal circumstances, a
          party seeking to quash a subpoena cannot appeal a court order to
          comply without first resisting that order and subjecting itself to
          a citation for contempt. United States
                                                 v. 
                                                    Ryan, 402 U.S. 530, 533
          (1971); Cobbledick v.  United 
                                        States, 309 U.S. 323, 328 (1940);
          Corporacion 
                      Insular 
                              de 
                                 Seguros v. Garcia, 876 F.2d 254, 257 (1st
          Cir. 1989).
                    This rule disposes of the law firm's appeal. The law
          firm has not been cited for contempt and, therefore, we lack
          jurisdiction to hear the appeal. The client's appeal, however,
          implicates a more complex jurisdictional analysis.
                                         -3-

                    An exception to the rule requiring a contempt citation
          prior to appeal exists when subpoenaed documents are in the hands
          of a third party. In that case, the owner of the documents may
          seek immediate appeal of a district court's order requiring
          production of those documents. This exception, known as the
          "Perlman doctrine," exists because it is unlikely that a third
          party will risk contempt simply to create an appealable order for
          the benefit of the owner of the documents.  See Perlman v. United
          States, 247 U.S. 7, 12-13 (1918). In other words, the district
          court order is effectively final with respect to a party that is
          powerless to prevent compliance with the order.
                    When the third party is the document owner's lawyer,
          however, a different rule applies. In this circuit, the "question
          [of] whether a client may appeal to the court of appeals from a
          district court's order directing his attorney to testify before the
          grand jury with respect to a communication allegedly covered by the
          attorney-client privilege," was decided in In re Oberkoetter, 612
          F.2d 15, 16 (1st Cir. 1980). In that case, an attorney had been
          ordered by the district court to testify before a grand jury. He
          initially declined to do so on the grounds of attorney-client
          privilege. Id. The district court ordered him to testify despite
          the claim of privilege. The attorney's client then filed an appeal
          from the district court order. This court held that it lacked
          appellate jurisdiction until such time as the attorney received a
          contempt citation.
                                         -4-

                    The facts of the instant case fall squarely with the
          scope of Oberkoetter. We believe, however, that it is time to
          reconsider our holding in that case.
                    We begin by noting the tension between     Perlman and
          Oberkoetter. In Perlman, exhibits belonging to Perlman were in the
          hands of the clerk of the district court in connection with patent
          litigation. The district court subsequently ordered the clerk to
          produce the exhibits for presentation to a grand jury investigating
          charges that Perlman had perjured himself in the patent suit.
          Perlman claimed privilege with respect to the exhibits. The
          district court denied his petition to restrain their presentation
          to the grand jury. Perlman appealed. The Supreme Court ruled that
          his appeal should be allowed on the grounds that "Perlman was
          powerless to avert the mischief of the order."  Perlman, 247 U.S.
                              
           Ordinarily, prior panel decisions are binding on future panels
          and it is for an en banc court to reexamine the status of a prior
          opinion. In rare instances, however, where it has become
          relatively clear that a prior precedent of this court was
          erroneously decided or is no longer good law, we have achieved the
          same result more informally by circulating a proposed panel opinion
          that reverses a prior panel to all the active judges of the court
          for pre-publication comment.    See,  e.g., Gallagher v.   Wilton
          Enters., 
                   Inc., 962 F.2d 120, 124 n.4 (1st Cir. 1992);     Trailer
          Marine Transp. Co. v. Rivera Vazquez, 977 F.2d 1, 9 n.4 (1st Cir.
          1992); 
                United States
                              v. 
                                 Bucuvalas, 909 F.2d 593, 598 n.9 (1st Cir.
          1990); see 
                     also Ionics, 
                                  Inc. v.  Elmwood 
                                                   Sensors, 
                                                            Inc., 110 F.3d
          184, 187 n.3 (1st Cir. 1997) (overturning a circuit precedent in
          order to comply with controlling authority). While this practice
          is to be used sparingly and with extreme caution, we have employed
          it in the special circumstances of this case, with the result that
          a majority of the active judges of this court has approved the
          overruling of Oberkoetter on the point at issue. Of course, by
          resorting to this mechanism, we neither foreclose any party from
          filing a formal petition for rehearing en banc nor commit any
          member of the court to a position in respect to any such petition.
                                         -5-

          at 13. We believe that the reasoning of      Perlman is directly
          applicable to this case and requires us to accept jurisdiction over
          the instant appeal. Even though it is an attorney that is
          subpoenaed for his or her client's records, the client here has
          been denied the opportunity to avert the mischief of the order by
          allowing himself to be held in contempt. The client is at the
          mercy of his or her attorney and can only gain a review of the
          district court's order if the attorney is prepared to risk a
          contempt citation. The real possibility of a serious conflict of
          interest cannot be overlooked or denied.
                    We also take note of the fact that the Supreme Court has
          not overruled 
                       Perlman. In  Oberkoetter, Judge Wyzanski stated that
          "he expects the Supreme Court to ultimately overrule    Perlman."
          Oberkoetter, 612 F.2d at 18. With the benefit of hindsight we know
          that Perlman has not been overruled and continues to bind this
          court. To whatever extent the    Oberkoetter court believed that
          Perlman's applicability had faded, and to whatever extent this may
          have influenced its ruling, the reasoning in     Oberkoetter was
          incorrect.
                    Most of our sister circuits have interpreted Perlman to
          apply in instances when an attorney is ordered by a court to
          produce client records in the face of a claim of privilege.   See
          Conkling v. Turner, 883 F.2d 431, 433-34 (5th Cir. 1989) (order
          directing the testimony of appellant's attorney is immediately
          appealable); In re Grand Jury Subpoena, 784 F.2d 857, 859-60 (8th
          Cir. 1986) (same); In 
                                 re 
                                    Klein, 776 F.2d 628, 630-32 (7th Cir.
                                         -6-

          1982) ("Like several other courts, this one has treated 
                                                                 Perlman as
          a holding that clients always are entitled to appeal as soon as
          their attorneys are required to produce documents."); 
                                                              United States
          v. 
            (Under Seal)
                        , 748 F.2d 871, 873 n.2 (4th Cir. 1984) ("[W]hen the
          one who files the motion to quash, or intervenes, is not the person
          to whom the subpoena is directed, and the movant or intervenor
          claims that production of the subpoena documents would violate his
          attorney-client privilege, the movant or intervenor may immediately
          appeal."); 
                    In re Grand Jury Proceedings
                                                , 722 F.2d 303, 305-07 (6th
          Cir. 1983) (allowing immediate appeal of an order compelling the
          testimony of movant's attorney);  In 
                                               re 
                                                   Grand 
                                                         Jury 
                                                               Proceedings,
          Appeal of Twist, 689 F.2d 1351, 1352 n.1 (11th Cir. 1982) (same);
          In 
             re 
                Grand 
                      Jury 
                           Subpoena 
                                    Served 
                                           Upon 
                                                Doe, 759 F.2d 968, 971 n.1
          (2d Cir. 1985) (same); 
                                In re Grand Jury Proceedings
                                                            , 604 F.2d 798,
          800 (3d Cir. 1979) (same).
                    Only three other circuits have determined that an order
          directing an attorney to testify regarding material that is alleged
          to be privileged is not automatically appealable. The Ninth
          Circuit allows an appeal if the attorney no longer represents the
          owner of the documents, but does not allow immediate appeal where
          the attorney is currently representing the owner. 
                                                           See, 
                                                                e.g., 
                                                                      In re
          Grand 
                Jury 
                     Subpoenas 
                               Dated 
                                     December 
                                               10, 
                                                   1987, 926 F.2d 847, 853
          (9th Cir. 1991). The District of Columbia Circuit has ruled that
          such an order is appealable when "circumstances make it unlikely
          that an attorney would risk a contempt citation in order to allow
          immediate review of a claim of privilege." In re Sealed Case
                                                                      , 754
                                         -7-

          F.2d 395, 399 (D.C. Cir. 1985). The Tenth Circuit does not allow
          the appeal of district court orders compelling the testimony of an
          attorney who claims privilege unless the attorney has accepted a
          contempt citation or the owner of the records can "prove that the
          attorney will produce the records rather than risk contempt."  In
          re Grand Jury Proceedings, Subpoena to Vargas
                                                     , 723 F.2d 1461, 1464-
          66 (10th Cir. 1983).
                    No circuit outside of our own has adopted a rule as
          extreme as the Oberkoetter rule, which bars an appeal until the
          lawyer is cited for contempt.
                    In addition to the persuasive case law from other
          circuits, we are troubled by the tenuous logic of 
                                                           Oberkoetter. In
          particular, that opinion assumed that "[a]n attorney, in his
          client's interest and as proof of his own stout-heartedness, might
          be willing to defy a testimonial order and run the risk of a
          contempt proceeding." In re Oberkoetter
                                                 , 612 F.2d at 18. Although
          we do not doubt that some lawyers would accept a contempt citation
          in order to provide their clients with the opportunity to appeal,
          we are persuaded by the following reasoning of the Fifth Circuit:
                      Although we cannot say that attorneys are
                      in general more or less likely to submit
                      to a contempt citation rather than violate
                      a client's confidence, we can say without
                      reservation that some significant number
                      of client-intervenors might find
                      themselves denied all meaningful appeal by
                      attorneys unwilling to make such a
                      sacrifice. That serious consequence is
                      enough to justify a holding that a client-
                      intervenor may appeal an order compelling
                      testimony from the client's attorney.
                                         -8-

          In re Grand Jury Proceedings in Matter of Fine, 641 F.2d 199, 203
          (5th Cir. 1981). Mindful that it would be unduly optimistic to
          anticipate that all attorneys will accept contempt rather than
          compromise their clients' appeal, we think it unwise to require
          such an action before permitting an appeal.
                    Oberkoetter relies heavily on the premise that the
          appellate review will interfere with the normal course of
          litigation. The greatest of these concerns, in the eyes of the
          Oberkoetter court, appears to have been the delay caused by an
          appeal. While there is something to this argument, it ultimately
          fails to justify a total bar on appeals in cases such as this. A
          party who accepts contempt is permitted to appeal the contempt
          citation and, thereby, seek review of the order compelling
          testimony. Granting the same opportunity to appeal to a party who
          does not have the option of accepting contempt is unlikely to lead
          to greater delay than exists in cases that have featured a contempt
          citation.
                    Finally, we add that allowing an appeal only if the
          attorney accepts a contempt citation pits lawyers against their
          clients in a manner that we do not believe is in the interests of
          justice. See generally
                                 
                                 United States
                                               v. 
                                                 Edgar, 83 F.3d 499, 507-08
          (1st Cir. 1996). A lawyer should not be required to choose between
          the interests of his or her client and his or her own interests.
          A rule that promotes conflicts of interest hinders the fair
          representation of the client and makes it less likely that clients
          will be well served by their attorneys.
                                         -9-

                    In light of the above discussion, therefore, we overrule
          In re Oberkoetter, 612 F.2d 15 (1st Cir. 1980). In its place, we
          adopt the majority rule and apply the Perlman exception to those
          cases wherein a client seeks immediate appeal of an order
          compelling production of a client's records from his attorney.
                    Appellee advances one additional argument in support of
          its claim that we lack jurisdiction over this appeal. It claims
          that there is no jurisdiction unless the facts of the case, in
          addition to being an appeal from the denial of a motion to quash a
          subpoena directed at the law firm, meet the requirements of the
          collateral order doctrine. See 
                                         United States
                                                       v. 
                                                          Billmyer, 57 F.3d
          31, 34 (1st Cir. 1995). We are unpersuaded by the government's
          argument. It cites to no authority, nor do we find any, that
          states that the denial of a motion to quash is reviewable only if,
          in addition to meeting the requirements of the 
                                                       Perlman doctrine, it
          also meets the requirements of the collateral order doctrine. We
          decline to adopt such a rule in this context.
                           II. Attorney-Client Privilege
                    Having overturned Oberkoetter, we have jurisdiction to
          entertain this appeal. Upon review of the record and the briefs on
          appeal, we are of the opinion that there is simply not enough
          information for us to form a reasoned judgment as to whether the
          records at issue are privileged.
                    Appellant alleges that the records at issue contain, in
          part, substantive descriptions of legal work rendered. We
          certainly agree that the documents are not per se non-privileged
                                        -10-

          merely because they were intended primarily for billing purposes.
          What matters is not the form of the information, but its content.
          See, e.g., United 
                            States v. Olano, 62 F.3d 1180, 1205 (9th Cir.
          1995); 
                In re Grand Jury Proceedings
                                            , 896 F.2d 1267, 1273 (11th Cir.
          1990); Matter 
                        of 
                           Witnesses 
                                     Before 
                                            Special 
                                                    March 
                                                          1980 
                                                               Grand 
                                                                      Jury,
          729 F.2d 489, 495 (7th Cir. 1984). Whatever the form of the
          information, it is privileged if: (1) the client was, or sought to
          be, a client of the law firm; (2) the lawyer acted as a lawyer in
          connection with the information at issue; (3) the information
          relates to facts communicated for the purpose of securing a legal
          opinion, legal services, or assistance in a legal proceeding; and
          (4) the privilege has not been waived.     See  United  
                                                                 States v.
          Wilson, 798 F.2d 509, 512 (1st Cir. 1986).
                    On the other hand, based on the one unredacted invoice
          that was submitted to the district court by appellants, we do not
          believe it is possible to determine whether the documents, as a
          group, are privileged. The submitted invoice includes several
          entries that are clearly not privileged, and one entry that names
          the former accountant and chief financial officer of the client and
          that reads "IRS Power of Atty. forms and corp. penalty abatements;
          Correspondence to client." From this information, appellants urge
          this court to conclude that the records at issue are privileged,
          pointing out that the parties would expect to be able to discuss
          IRS corporate penalty abatements and power of attorney forms
          without the IRS learning about it. Appellee, on the other hand,
          claims that this entry, described as "typical" of the group of
                                        -11-

          records, demonstrates that there is no privilege. We cannot agree
          with either argument.
                    It is at least arguable that the entry meets the criteria
          of a privileged communication. Furthermore, when taken as a group,
          it is possible that the bills would reveal considerable privileged
          information. This possibility is compounded by the fact that the
          government has already seized the client's business records, making
          it more likely that the government can deduce the privileged
          substance of the notations of the records.  See In 
                                                             re 
                                                                Grand 
                                                                       Jury
          Proceedings, 517 F.2d 666, 674 (5th Cir. 1975) ("[I]nformation, not
          normally privileged, should also be protected when so much of the
          substance of the communications is already in the government's
          possession that additional disclosures would yield substantially
          probative links in an existing chain of inculpatory events or
          transactions.").
                    We cannot, however, base our decision on this mere
          possibility. We believe that further inquiry into the question of
          privilege is necessary.
                    Given that an 
                                 in camera
                                           review of the documents was never
          conducted, we are uncertain as to how the district court arrived at
          its conclusion that the documents are not privileged. Appellants,
          at bottom, ask us to accept their statements that the records
          contain privileged information, while appellees urge us to assume
          that they do not. We are unwilling to base our decision on such
          assertions. See 
                          United States
                                        v. 
                                          Wujkowski, 929 F.2d 981, 984 (4th
          Cir. 1991).
                                        -12-

                    Accordingly, we vacate the district court's ruling on the
          privilege issue and remand with instructions that the district
          court conduct a more complete inquiry into the question.      See
          Icicle Seafoods, Inc.
                               v. 
                                  Worthington, 475 U.S. 709, 714 (1986) ("If
          the Court of Appeals believed that the District Court had failed to
          make findings of fact essential to a proper resolution of the legal
          question, it should have remanded to the District Court to make
          those findings."). We also note that, in light of 
                                                           Oberkoetter, the
          parties and the district court may have been operating under the
          assumption that no appeal from the district court's ruling would be
          possible. Based on this reasonable, though ultimately incorrect,
          assumption, those involved may have failed to produce a record
          sufficient for appellate purposes. Our remand allows for the
          production of such a record.   Cf.  Millipore 
                                                        Corp. v.  Travelers
          Indemnity Co., 115 F.3d 21, 34 (1st Cir. May 30, 1997).
                    Appellants also argue that the subpoena is the fruit of
          an impermissible violation of the attorney-client relationship.
          This issue was raised by both parties below but was not decided by
          the district court. Accordingly, we need not reach the issue. We
          leave the issue to be decided, in the first instance, by the
          district court on remand. 
                                  III. Conclusion
                    For the foregoing reasons, we  dismiss the law firm's
          appeal, 
                 vacate the district court ruling as to the client's appeal,
          and remand for further proceedings.
                                        -13-