In Re Occidental Petroleum Corp.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT
_______________

m 00-20379
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IN RE:
OCCIDENTAL PETROLEUM CORPORATION,

Petitioner.

_________________________

Petition for Writ of Mandamus to
the United States District Court
for the Southern District of Texas
_________________________
June 28, 2000

Before SMITH, BARKSDALE, and In the underlying civil litigationSSCroucher
PARKER, Circuit Judges. v. MidCon Corp. Employee Stock Ownership
Plan Admin. Committee, the plaintiff class
JERRY E. SMITH, Circuit Judge: consists of employees of the MidCon Cor-
poration (“MidCon”). Before this litigation
This matter involves a discovery order began, MidCon was a wholly-owned subsid-
granted despite assertions of attorney-client iary of Occidental. For the benefit of MidCon
privilege by petitioner Occidental Petroleum employees, Occidental established the MidCon
Corporation (“Occidental”), which seeks a Employee Stock Ownership Plan (“ESOP”),
writ of mandamus instructing the district court funded by 1.4 million shares of Occidental pre-
to vacate that order. Finding no clear error, ferred stock originally valued at $1.4 billion.
because the plaintiff class is not subject to Oc- That stock was designed to track the value of
cidental’s attorney-corporate client privilege MidCon. Occidental subsequently sold Mid-
under Garner v. Wolfinbarger, 430 F.2d 1093, Con and entered into a negotiated settlement
1103-4 (5th Cir. 1970), we deny the petition. with the ESOP trustee, the U.S. Trust Com-
pany of California, N.A., respecting the pre-
I. ferred shares.
 Plaintiffs sued Occidental and others under Thus, for Occidental to establish entitle-
ERISA,1 alleging various breaches of fiduciary ment to mandamus relief,6 it must show not
duty relating to the ESOP. Pursuant to that only that the district court erred, but that it
litigation, the district court granted plaintiffs’ clearly and indisputably erred.7 Moreover,
request for discovery of nearly 200 Occidental Occidental must show that the “clear and in-
documents, over Occidental’s claim of attor- disputable” error is irremediable on ordinary
ney-client privilege. appeal,8 thereby justifying emergency relief in

II.
To obtain mandamus relief,2 Occidental (...continued)
must do more than prove merely that the court judice to reconsideration of the petition on the re-
erred.3 “Mandamus is an extraordinary rem- cord as further developed, should it be requested
edy reserved for extraordinary cases,” one after proceedings below are completed.”).
granted “not as a matter of right, but in the ex-
ercise of a sound judicial discretion.”4 A mere
6
showing of error, after all, may be corrected See American Marine, 14 F.3d at 277.
on appeal: “[I]t is more than well-settled that
a writ of mandamus is not to be used as a sub-
7
stitute for appeal.”5 See, e.g., In re Dresser Indus., Inc., 972 F.2d
540, 542-43 (5th Cir. 1992) (“We will therefore
grant the writ only if the petitioner can show its
right to the writ is clear and indisputable. Man-
damus is appropriate when the trial court has ex-
1
Employee Retirement Income Security Act of ceeded its jurisdiction or has declined to exercise it,
1974, 29 U.S.C. § 1001 et seq. or when the trial court has so clearly and indis-
putably abused its discretion as to compel prompt
intervention by the appellate court.”) (citations
2
See 28 U.S.C. § 1651; FED. R. APP. P. 21(a). omitted); Texaco Inc. v. Louisiana Land & Ex-
ploration Co., 995 F.2d 43, 43 (5th Cir. 1993)
(“We denied relief, stating, in an unpublished or-
3
See In re United States, 878 F.2d 153, 158 der, ‘We are not persuaded that petitioners have
(5th Cir. 1989) (noting that “generally discovery met the high standards for the extraordinary writs
and similar pretrial orders, even erroneous ones, [of either mandamus or prohibition], despite not
are not reviewable on mandamus”). insubstantial arguments that the courts below erred
in their treatment of privilege.’”); In re Terra Int’l,
Inc., 134 F.3d 302, 305-6 (5th Cir. 1998) (holding
4
Southern Pac. Transp. Co. v. City of San that, because “[w]e will grant a writ of mandamus
Antonio, 748 F.2d 266, 270 (5th Cir. 1984) only when the petitioner demonstrates that its right
(citations omitted). to the writ is clear and indisputable,” there was no
need to “intimate . . . view as to the merits of
Terra’s claims of privilege and other limitations on
5
In re American Marine Holding Co., 14 F.3d discovery”) (citation omitted).
276, 277 (5th Cir. 1994). Cf. Holiday Inns, Inc. v.
Fay, 451 F.2d 343, 344 (5th Cir. 1971) (“Our
8
denial of mandamus at this time is without pre- See Maloney v. Plunkett, 854 F.2d 152,
(continued...) (continued...)

2
the form of mandamus.9 Occidental notes In re Burlington N., Inc.,
822 F.2d 518 (5th Cir. 1987), in which we
granted mandamus relief, without explicitly re-
(...continued) quiring a showing of clear error, from a dis-
154-55 (7th Cir. 1988) (“Ordinarily even a clear covery order in purported violation of, inter
error in an interlocutory ruling is not a ground for alia, attorney-client privilege. But we noted
the extraordinary remedy of mandamus. Clear er- the existence of various other special factors
ror is a necessary condition, and one easily sat-
supporting the finding of “extraordinary cir-
isfied here as we have just seen, but it is not a
cumstances,” none of which is present here.
sufficient condition. Not only must the error be
clear; it must be irremediable by the regular ap- See id. at 522.
pellate remedies. And ordinarily the inconvenience,
lost time, and sunk costs of such further pro- First, the claim of mere error in Burlington
ceedings as could have been avoided by correcting was purely one of law. Id. at 523. The district
the trial judge’s error are not considered the kind of court had utterly failed to undertake “a proper
irremediable harm that will satisfy the stringent factual determination.” Id. at 534.10 By
requirements for issuing a writ of mandamus. It
could of course be argued that when the error is
clear, of course the appellate court should correct (...continued)
it at once; the court will have to do it sooner or extraordinary remedy of mandamus is appropriate
laterSS-why not sooner? But the court may not because the district court’s order would otherwise
have to do it later; the error may be mooted by the destroy the confidentiality of the communications
victory of the party against whom it was com- at issue.”); Harper & Row Publishers, Inc. v.
mitted. And to determine whether an error is clear Decker, 423 F.2d 487, 492 (7th Cir. 1970), aff’d,
enough to warrant immediate correction can itself 400 U.S. 348 (1971) (stating that “because main-
be a time-consuming endeavor. . . . If as we have tenance of the attorney-client privilege up to its
seen the ordinary inconvenience of a new trial proper limits has substantial importance to the
cannot justify the use of the writ, still, extra- administration of justice, and because an appeal
ordinary inconveniences may do so.”). after disclosure of the privileged communication is
an inadequate remedy, the extraordinary remedy of
mandamus is appropriate”).
9
We acknowledge that, if it is able to show that
the district court clearly erred in ordering discovery
10
because the requested documents are privileged, Cf. Sealed Appellees v. Sealed Appellants,
Occidental is likely also to be able to prove the 112 F.3d 173, 174 (5th Cir. 1997) (denying man-
necessity for mandamus relief. See In re Spalding damus, holding that “[t]he preferable practice in
Sports Worldwide, Inc., 203 F.3d 800, 804 (Fed. factual patterns, such as here, is for the [district]
Cir. 2000) (observing that “mandamus is appro- court to examine a sufficient number of the con-
priate ‘because maintenance of the attorney-client tested documents to insure the informed protection
privilege up to its proper limits has substantial im- of the privilege protecting the thought processes of
portance to the administration of justice, and be- an attorney. That examination can be conducted
cause an appeal after disclosure of the privileged by the court or a special master or magistrate judge
communication is an inadequate remedy.’”) (quot- as the district court may choose. . . . [We there-
ing In re Regents of Univ. of Cal., 101 F.3d 1386, fore] stay the order of production pending further
1387 (Fed. Cir. 1996)); In re General Motors order of the district court. Our stay left, as it is, in
Corp., 153 F.3d 714, 715 (8th Cir. 1998) (“The the control of the district court is to allow the in
(continued...) (continued...)

3
contrast, Occidental concedes that it is chal- triggering Occidental’s fiduciary duty to the
lenging not a conclusion of law, but merely the plaintiffs as plan administrator and thus fall
court’s document review and resulting factual within the fiduciary-duty exception to the
determination, and that the “abstract principle attorney-client privilege.11 Occidental takes
of law” at issue “is undisputed.” exception, arguing that the district court found
only that Occidental owed plaintiffs some fidu-
Second, the issues raised in the Burlington ciary duties, without additionally determining
mandamus petition called for “an important that each requested document concerned the
and potentially far-reaching decision . . . particular matters for which Occidental owed
appropriate . . . for our immediate review.” that duty.12
Id. at 523. The challenged discovery went “to
the heart of the controversy” between the par- We deny mandamus relief, but on alter-
ties and thus would “likely have a deter- native grounds. See Burlington, 822 F.2d
minative impact on the course of the case.” at 533. Irrespective of whether it owes plain-
Id. at 522. Moreover, the legal issue resolved tiffs a fiduciary duty as plan administrator,
in Burlington was of significant precedential Occidental fails to show how the court would
value, involving a question “which is likely to have erred had it ordered discovery on the
recur in future cases” and thus of “importance ground that the ESOP, as Occidental share-
beyond the immediate lawsuit.” Id. at 523. holder, was entitled to pierce the corporation’s
See also In re American Airlines, Inc., 972 attorney-client privilege under Garner, 430
F.2d 605, 609 (5th Cir. 1992). Occidental, F.2d at 1103-04. We therefore find no clear
however, has made no showing that resolution error.
of the instant controversy on mandamus re-
view will have such an extraordinary impact, Under Garner, a corporation may invoke
either within or beyond the confines of this only a limited attorney-client privilege against
dispute. the discovery demands of a shareholder. After
all, “management is not managing for itself,”
Finally, the order challenged in Burlington
was of extraordinary size and scope, directing
the production of several thousand documents. 11
See Wildbur v. ARCO Chem. Co., 974 F.2d
See 822 F.2d at 522. The instant order, by 631, 645 (5th Cir. 1992) (opining that “an ERISA
contrast, involves fewer than 200. fiduciary cannot assert the attorney-client privilege
against a plan beneficiary about legal advice deal-
III. ing with plan administration”).
The district court ordered discovery on the 12
ground that the documents relate to matters See, e.g., In re Long Island Lighting Co.,
129 F.3d 268, 271 (2d Cir. 1997) (“[A]n employer
acts as an ERISA fiduciary only in plan man-
agement or administration, not in the plan’s design
(...continued) or amendment. The employer’s ability to invoke
camera examination of documents the district court the attorney-client privilege to resist disclosure
may order.”); In re Oswalt, 607 F.2d 645, 647 (5th sought by plan beneficiaries turns on whether or
Cir. 1979) (granting mandamus relief only after not the communication concerned a matter as to
determining that “district court’s factual findings which the employer owed a fiduciary obligation to
were clearly erroneous.”) (emphasis added). the beneficiaries.”) (citations omitted).

4
but rather on behalf of the shareholder. Id. Occidental responds by noting that the plain-
at 1101. We outlined the scope of this limited tiffs brought this case as a class action, but
attorney-corporate client privilege as follows: does not explain why only an individual share-
holderSSand not an entire class of share-
The attorney-client privilege still has vi- holdersSSis entitled to recover.14
ability for the corporate client. The cor-
poration is not barred from asserting it There is good cause for applying Garner
merely because those demanding infor- here. As we have stated,
mation enjoy the status of stockholders.
But where the corporation is in suit There are many indicia that may con-
against its stockholders on charges of tribute to a decision of presence or ab-
acting inimically to stockholder inter- sence of good cause, among them
ests, protection of those interests as well [1] the number of shareholders and the
as those of the corporation and of the percentage of stock they represent;
public require that the availability of the [2] the bona fides of the shareholders;
privilege be subject to the right of the [3] the nature of the shareholders’ claim
stockholders to show cause why it and whether it is obviously colorable;
should not be invoked in the particular [4] the apparent necessity or desirability
instance. of the shareholders having the infor-
mation and the availability of it from
Id. at 1103-04. other sources; [5] whether, if the share-
holders’ claim is of wrongful action by
Occidental argues that Garner ought not the corporation, it is of action criminal,
apply, because the plaintiffs are not Occidental or illegal but not criminal, or of doubtful
stockholders. The ESOP is an Occidental legality; [6] whether the communication
stockholder, however, and the plaintiffs are en- related to past or to prospective actions;
titled to sue as plan beneficiaries on behalf of
the plan under 29 U.S.C. § 1132(a).13
(...continued)
son v. Avondale Indus., Inc., 141 F.3d 604, 610
13 (5th Cir. 1998) (“Section 1132(a)(2) allows a ben-
See 29 U.S.C. § 1132(a) (“A civil action may
be brought . . . (2) . . . by a participant, beneficiary eficiary to bring a standard breach of fiduciary du-
or fiduciary for appropriate relief under [29 U.S.C. ty suit for the benefit of the subject plan.”); Mas-
§ 1109]”); 29 U.S.C. § 1109(a) (“Any person who sachusetts Mut. Life Ins. Co. v. Russell, 473 U.S.
is a fiduciary with respect to a plan who breaches 134, 136, 140 (1985) (permitting § 1132(a)(2) suit
any of the responsibilities, obligations, or duties by “a beneficiary under two employee benefit plans
imposed upon fiduciaries by this subchapter shall administered by petitioner . . . [and] funded from
be personally liable to make good to such plan any the general assets of petitioner”).
losses to the plan resulting from each such breach,
14
and to restore to such plan any profits of such Recovery under 29 U.S.C. § 1109(a) and 29
fiduciary which have been made through the use of U.S.C. § 1132(a)(2) is limited to that which “in-
assets of the plan by the fiduciary, and shall be ures to the benefit of the plan as a whole.” Russell,
subject to such other equitable or remedial relief as 473 U.S. at 140. Extracontractual compensatory
the court may deem appropriate”). See also Tol- or punitive damages are therefore not appropriate.
(continued...) at 138.
Id.

5
 [7] whether the communication is between management and counsel where some
of advice concerning the litigation pecuniary interests are necessarily adverse.”
itself; [8] the extent to which the Ward v. Freeman, 854 F.2d 780, 785 (5th Cir.
communication is identified versus 1988).
the extent to which the share-
holders are blindly fishing; [9] the The concern expressed in Garner was with
risk of revelation of trade secrets or a shareholder’s attempt to pierce the attorney-
other information in whose con- corporate client privilege to vindicate interests
fidentiality the corporation has an other than those of a shareholderSSfor exam-
interest for independent reasons. ple, a shareholder of two competing compan-
ies who seeks to pierce the privilege adversely
Garner, 430 F.2d at 1104. to one company to benefit himself as a share-
holder of the other. That concern is not trig-
As applied to this dispute, these factors col- gered here. The plaintiffs’ interest in the re-
lectively argue against recognizing the privi- quested documents is limited to protecting
lege. First, the ESOP holds Occidental pre- their rights as (derivative) holders of Occi-
ferred stock originally valued at $1.4 billion. dental preferred stockSSand nothing more.
Second, Occidental does not question the That is to say, the plaintiffs seek discovery on-
plaintiffs’ good faith in initiating this action. ly to uphold Occidental’s fiduciary duties to
Third, Occidental makes no claim that these the ESOP, and that discovery should in no
actions are frivolous. Fourth, the plaintiffs way undermine Occidental’s fiduciary duties to
present sufficient necessity for the requested its common shareholders.
documents. Fifth, the plaintiffs allege unlawful
conduct tantamount to fraud. Sixth, the docu- The petition for writ of mandamus is
ments were created before the allegedly un- DENIED.
lawful acts. Seventh, the documents were
created before this litigation. Eighth, the
plaintiffs have identified the particular docu-
ments for which they seek discovery. Ninth,
Occidental claims no risk of trade secret or
other proprietary interest.

It is true, of course, that the plaintiffs stand
in adverse position to Occidental’s common
shareholders. Under Garner, a stockholder’s
demand for discovery “must be germane to his
interest as stockholder, and the interests of the
corporation and other shareholders may con-
trol to deny inspection.” Id. at 1104 n.21.
But opposing parties in litigation are inevitably
and by definition adverse to one another. In-
deed, in Garner “we specifically elected . . . to
open up to shareholders . . . communications

6