United States Court of Appeals
For the First Circuit
Nos. 03-1726
03-1784
IN RE KEEPER OF THE RECORDS
(GRAND JURY SUBPOENA ADDRESSED TO XYZ CORPORATION).
____________________
XYZ CORPORATION,
Appellant,
v.
UNITED STATES OF AMERICA,
Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Selya, Lipez and Howard, Circuit Judges.
William F. Lee, with whom Robert D. Keefe, Stephen A. Jonas,
Mark D. Selwyn, Hale and Dorr LLP, Richard G. Taranto, and Farr &
Taranto were on brief, for appellant.
James E. Arnold, Trial Attorney, United States Department of
Justice, with whom Michael K. Loucks, Chief, Health Care Fraud
Unit, and Michael J. Sullivan, United States Attorney, were on
brief, for appellee.
October 22, 2003
SELYA, Circuit Judge. Although the attorney-client
privilege may be the most venerable of the privileges for
confidential communications, its accouterments are not the most
clearly delineated. These appeals, which require us to answer
delicate questions concerning implied waivers of the privilege,
bear witness to that point.
The appeals have their genesis in an investigatory
subpoena duces tecum issued by a federal grand jury (we use the
adjective "investigatory" because no indictments have yet
eventuated from the grand jury probe). The subpoenaed party, a
corporation, refused to produce certain of the requested documents
on the ground that they were shielded by the attorney-client and
work-product privileges. The government sought to compel
production, contending that any attendant privilege had been
waived. The district court, eschewing an evidentiary hearing,
ordered the corporation to produce the documents and cited it for
contempt when it declined to do so. These appeals — there are two
because the corporation filed a notice of appeal after the court
ordered production of the withheld documents and another after the
court adjudged it in contempt — followed.
After careful consideration, we conclude that the record
fails to support the lower court's finding of a broad subject
matter waiver. Accordingly, we reverse the turnover order and
vacate the contempt citation.
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I. BACKGROUND
We start with an abbreviated account of the events
leading to the turnover order. Consistent with the secrecy that
typically attaches to grand jury matters, see, e.g., Fed. R. Crim.
P. 6(e), these appeals have gone forward under an order sealing the
briefs, the parties' proffers, and other pertinent portions of the
record. To preserve that confidentiality, we use fictitious names
for all affected parties and furnish only such background facts as
are necessary to provide ambiance.
In the fall of 1998, XYZ Corporation (XYZ) began
distributing a neoteric medical device. Soon after distribution
began, XYZ learned that, on some occasions, the device was not
functioning properly. It conducted an internal investigation and
sought the advice of outside counsel to determine an appropriate
course of action.
In fairly short order, XYZ made a preliminary decision to
withdraw the device from the market (at least temporarily). Before
doing so, however, XYZ's existing supply agreement obligated it to
consult with its co-venturer, Smallco. Representatives of the two
companies conferred telephonically. The participants in that
discussion included two officers of XYZ, outside counsel for XYZ
(Bernard Barrister), the principals of Smallco, and Smallco's
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medical advisor.1 During this conversation, which we shall
hereafter refer to as "the call," Barrister advocated XYZ's
position in the face of strong counterarguments from the Smallco
hierarchs (who wished to keep the device on the market).
Unbeknownst to XYZ, Smallco recorded the call.
The next day, XYZ contacted the Food and Drug
Administration (the FDA) to discuss the emerging problems. A
dialogue ensued. Less than one month after its initial contact
with the FDA, XYZ voluntarily withdrew the device from the market.
The Department of Justice got wind of what had transpired
and commenced an investigation into the distribution of the device.
As part of this probe, a federal grand jury issued a subpoena
requiring XYZ to produce an array of documents.2 XYZ withheld
certain of the documents, instead producing privilege logs indexing
what had been retained and the claims of privilege applicable
thereto. As early as April of 2001, the government requested XYZ
to waive its claims of privilege. XYZ refused.
In late 2001, the government obtained a tape recording of
the call. The government thereafter asked XYZ for permission to
1
There is some suggestion in the record that two other
employees of XYZ were on the line during the call. We need not
resolve this uncertainty as the presence or absence of these
individuals would not affect our analysis.
2
The grand jury also caused subpoenas duces tecum to be served
on Barrister and Barrister's law firm. Those subpoenas are not
before us (although we note parenthetically that neither recipient
has surrendered the documents).
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audit the tape. XYZ replied that it would not seek to prevent the
government from listening but admonished that this decision should
not be viewed as a waiver of any privilege protecting other
communications. The government agreed — in writing — to this
condition. The investigation continued.
In February of 2002, federal prosecutors met with XYZ's
new outside counsel to inform XYZ of the direction of their
investigation. Pursuant to the request of a government attorney,
XYZ's counsel authored two letters responding to concerns voiced at
the February meeting. Each contained a footnote on the first page
stating explicitly that the letter should not be construed as a
waiver of the attorney-client or work-product privileges.3
Following this correspondence, representatives of XYZ again met
3
The language, in its entirety, read:
We submit this letter pursuant to Rule
11(e)(6) of the Federal Rules of Criminal
Procedure. This letter may not be used as
evidence against [XYZ] or any subsidiary,
affiliate, successor or assign, employee or
agent, in any civil or criminal proceeding.
This letter describes certain facts as we
understand them from the record developed
during the Government's investigation. It is
not intended to, and should not be interpreted
to, constitute admissions on behalf of [XYZ]
or any related entities or persons. It also
is not intended, and should not be construed,
as any waiver of the attorney-client, the
attorney work product, or any other applicable
privilege.
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with the prosecutors to discuss the possible indictment of XYZ
and/or its officers. This meeting took place in May of 2002.
In April of 2003 — after persistently requesting a
voluntary waiver of the attorney-client privilege for two full
years — the government changed its tune. It repaired to the
federal district court and filed a motion to compel production of
the disputed documents. In its motion, the government argued in
effect that XYZ already had waived the attorney-client privilege as
to the most important documents described in the subpoena. The
motion asserted that, during the call, Barrister had given legal
advice in the presence of third parties and had disclosed legal
advice previously provided to XYZ. In the government's view, this
conduct effected a waiver of the attorney-client privilege as to
all communications anent the marketing and withdrawal of the device
for a period extending from August 12, 1998 to October 8, 1998. As
a fallback, the government asseverated that XYZ had waived the
attorney-client privilege by means of the pre-indictment
presentations made in response to the prosecutors' requests. To
close the circle, the government maintained that the work-product
doctrine, if applicable at all, likewise had been waived.4
4
In addition, the government claimed that the crime-fraud
exception to the attorney-client and work-product privileges
abrogated any protections that had not been waived. Because the
district court did not reach this claim, we express no opinion on
it. The government remains free, if it so chooses, to reassert
this claim in the district court.
-6-
The district court, acting ex parte, granted the motion
to compel. In a four-sentence order, the court ruled that XYZ had
"waived its attorney-client privilege with respect to the subject
matter of the [call]." When the government moved for an expedited
hearing to clarify the order and XYZ sought reconsideration, the
district court again acted summarily. Without either conducting an
evidentiary hearing or entertaining argument, it ruled ore sponte
that XYZ's waiver of the attorney-client privilege applied both
retrospectively (i.e., to communications before the call relating
to the "same matter") and prospectively (i.e., to communications
after the call relating to the "same matter").
In its bench decision, the district court went well
beyond the three-month waiver window envisioned by the government;
it declared, in effect, that the waiver was to operate without
limit of time (indeed, the court noted, as to future
communications, that the waiver would have effect "so long as
people are talking about that same subject," and might apply up to
the time of trial). The court exempted from the waiver any
attorney-client communications about the waiver issue itself and
provided guidance as to the scope of the waiver by referring to the
"doctrine of completeness." The court declined to resolve any
additional issues, stating that it would cross those bridges as the
need arose.
-7-
Notwithstanding the district court's order, XYZ refused
to produce the documents. The district court held the corporation
in contempt (thus brushing aside, inter alia, its claim of a work-
product privilege),5 but stayed further proceedings pending
appellate review. We have jurisdiction over the ensuing appeals
because XYZ subjected itself to a citation for contempt. See In re
Grand Jury Subpoenas, 123 F.3d 695, 696-97 (1st Cir. 1997).
II. STANDARD OF REVIEW
On an appeal concerning a claim of privilege, the
standard of review depends on the precise issue being litigated.
See Cavallaro v. United States, 284 F.3d 236, 245 (1st Cir. 2002);
United States v. Mass. Inst. of Tech., 129 F.3d 681, 683 (1st Cir.
1997). We review rulings on questions of law de novo, findings of
fact for clear error, and judgment calls — such as evidentiary
determinations — for abuse of discretion. Cavallaro, 284 F.3d at
245. The standard of review is not altered by the fact that the
district court granted the motion without much elaboration of its
thinking. FDIC v. Ogden Corp., 202 F.3d 454, 460 (1st Cir. 2000).
"Although a lower court's elucidation of its reasoning invariably
eases the appellate task, motions often are decided summarily. .
. . [W]e are aware of no authority that would allow us
5
This implied dismissal of the work-product privilege was
fully consistent with comments made by the court in the course of
its earlier bench decision.
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automatically to vary the standard of review depending on whether
a district court has taken the time to explain its rationale." Id.
With these background principles in mind, we proceed to
the merits. In undertaking that task, we are mindful that, on the
facts of this case, the question whether XYZ has waived the
attorney-client privilege is governed by federal common law.
United States v. Rakes, 136 F.3d 1, 3 (1st Cir. 1998).
III. ANALYSIS
Despite a grand jury's vaunted right to every man's
evidence, it must, nevertheless, respect a valid claim of
privilege. United States v. Calandra, 414 U.S. 338, 346 (1974).
But the party who invokes the privilege bears the burden of
establishing that it applies to the communications at issue and
that it has not been waived. See State of Maine v. United States
Dep't of the Interior, 298 F.3d 60, 71 (1st Cir. 2002); United
States v. Bollin, 264 F.3d 391, 412 (4th Cir. 2001). Thus, XYZ
must carry the devoir of persuasion here.
The attorney-client privilege is well-established and its
rationale straightforward. By safeguarding communications between
client and lawyer, the privilege encourages full and free
discussion, better enabling the client to conform his conduct to
the dictates of the law and to present legitimate claims and
defenses if litigation ensues. See Upjohn Co. v. United States,
449 U.S. 383, 389 (1981). Still, the privilege is not limitless,
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and courts must take care to apply it only to the extent necessary
to achieve its underlying goals. In re Grand Jury Subpoena
(Custodian of Records, Newparent, Inc.), 274 F.3d 563, 571 (1st
Cir. 2001). In other words, the attorney-client privilege must be
narrowly construed because it comes with substantial costs and
stands as an obstacle of sorts to the search for truth. See United
States v. Nixon, 418 U.S. 683, 709-10 (1974).
The dimensions of the privilege itself are reasonably
well honed. The privilege protects only those communications that
are confidential and are made for the purpose of seeking or
receiving legal advice. See Bollin, 264 F.3d at 412; see also 8
John Henry Wigmore, Evidence § 2292, at 554 (John T. McNaughton ed.
1961). The idea that the attorney-client privilege may be waived
is a direct outgrowth of this well-established construction. When
otherwise privileged communications are disclosed to a third party,
the disclosure destroys the confidentiality upon which the
privilege is premised. See 2 Paul R. Rice, Attorney-Client
Privilege in the U.S. § 9:79, at 357 (2d ed. 1999).
Waivers come in various sizes and shapes. The easy cases
tend to be those of express waiver. See, e.g., United States v.
Lussier, 71 F.3d 456, 462 (2d Cir. 1995); United States v.
Kingston, 971 F.2d 481, 490 (10th Cir. 1992); Catino v. Travelers
Ins. Co., 136 F.R.D. 534, 536-37 (D. Mass. 1991). The more
difficult cases tend to involve implied waivers. While it is
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generally accepted that conduct can serve to waive the attorney-
client privilege by implication, see, e.g., Jack B. Weinstein &
Margaret A. Berger, Weinstein's Federal Evidence § 503.41 (Joseph
M. McLaughlin ed. 1997) (collecting cases), the case law does not
offer much assistance as to how broadly such implied waivers sweep.
Like most courts, this court has yet to develop a jurisprudence
clarifying the scope of such implied waivers. See United States v.
Desir, 273 F.3d 39, 45 (1st Cir. 2001).
In approaching these unanswered questions, we start with
the unarguable proposition that the attorney-client privilege is
highly valued. Accordingly, courts should be cautious about
finding implied waivers. See In re Grand Jury Proceedings, 219
F.3d 175, 186 (2d Cir. 2000). Claims of implied waiver must be
evaluated in light of principles of logic and fairness. See 2
Rice, supra § 9:79, at 357. That evaluation demands a fastidious
sifting of the facts and a careful weighing of the circumstances.
Desir, 273 F.3d at 45-46. Considering the need for this precise,
fact-specific tamisage, it is not surprising that the case law
reveals few genuine instances of implied waiver. See 8 Wigmore,
supra § 2327, at 635.
A. The Call.
With these considerations in mind, we turn first to the
government's contention that XYZ impliedly waived the attorney-
client privilege when it "sought, obtained, and discussed legal
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advice" from Barrister in the presence of outsiders. Appellee's
Br. at 26. The district court not only found such a waiver but
also concluded that it extended, without limit of time, to all past
and future communications on the subject matters discussed during
the call. We think that the court erred as a matter of law in
making these determinations.
For the attorney-client privilege to attach to a
communication, it must have been made in confidence and for the
purpose of securing or conveying legal advice. See Cavallaro, 284
F.3d at 245; see also 8 Wigmore, supra § 2292, at 554. The
privilege evaporates the moment that confidentiality ceases to
exist. With isthmian exceptions not pertinent here, the presence
of third parties is sufficient to undermine the needed
confidentiality. See 8 Wigmore, supra § 2311, at 601-03 & nn. 6-8
(collecting cases). So here: XYZ knew that third parties —
representatives of Smallco — were participating in the call. Thus,
it could not have had any expectation of confidentiality as to
matters discussed therein. The lack of such an expectation
shattered the necessary confidentiality. See In re San Juan Dupont
Plaza Hotel Fire Litig., 859 F.2d 1007, 1016 n.6 (1st Cir. 1988)
("Absent an expectation of confidentiality, none accrues.").
The short of it is that Barrister, regardless of his
professional relationship with XYZ, did not provide confidential
advice during the call but, rather, merely helped to advocate XYZ's
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position to its co-venturer. Consequently, the communications made
during the call were not confidential (and, therefore, not subject
to a colorable claim of privilege).
The fact that no privilege attached to the call brings
the government's waiver argument into sharper focus. It is crystal
clear that any previously privileged information actually revealed
during the call lost any veneer of privilege. See, e.g., von Bulow
v. von Bulow (In re von Bulow), 828 F.2d 94, 102-03 (2d Cir. 1987);
In re Sealed Case, 676 F.2d 793, 817-18 (D.C. Cir. 1982). XYZ does
not contest the occurrence of such a waiver (indeed, it never
listed the call on its privilege log). Rather, the bone of
contention is whether that waiver had a ripple effect, i.e.,
whether it reached anything beyond that which was actually
disclosed. We think not.
There was no express waiver, so the question is one of
implied waiver. It is well accepted that waivers by implication
can sometimes extend beyond the matter actually revealed. See,
e.g., In re Grand Jury Proceedings, 219 F.3d at 182-83; Sedco
Int'l, S.A. v. Cory, 683 F.2d 1201, 1206 (8th Cir. 1982). Such
waivers are almost invariably premised on fairness concerns. See
von Bulow, 828 F.2d at 101-03. As one respected treatise explains,
"[t]he courts have identified a common denominator in waiver by
implication: in each case, the party asserting the privilege
placed protected information in issue for personal benefit through
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some affirmative act, and the court found that to allow the
privilege to protect against disclosure of that information" would
have been unfair to the opposing party. 3 Weinstein, supra §
503.41[1]. See also Sedco, 683 F.2d at 1206 (noting that courts
have found waiver by implication when a client (i) testifies
concerning portions of an attorney-client communication, (ii)
places the attorney-client relationship itself at issue, or (iii)
asserts reliance on an attorney's advice as an element of a claim
or defense).
A paradigmatic example of this phenomenon is a case
involving an advice of counsel defense. When such a defense is
raised, the pleader puts the nature of its lawyer's advice squarely
in issue, and, thus, communications embodying the subject matter of
the advice typically lose protection. See, e.g., United States v.
Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991). Implying a subject
matter waiver in such a case ensures fairness because it disables
litigants from using the attorney-client privilege as both a sword
and a shield. Were the law otherwise, the client could selectively
disclose fragments helpful to its cause, entomb other (unhelpful)
fragments, and in that way kidnap the truth-seeking process.
Virtually every reported instance of an implied waiver
extending to an entire subject matter involves a judicial
disclosure, that is, a disclosure made in the course of a judicial
proceeding. See von Bulow, 828 F.2d at 103 (collecting cases).
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This uniformity is not mere happenstance; it exists because such a
limitation makes eminently good sense. Accordingly, we hold, as a
matter of first impression in this circuit, that the extrajudicial
disclosure of attorney-client communications, not thereafter used
by the client to gain adversarial advantage in judicial
proceedings, cannot work an implied waiver of all confidential
communications on the same subject matter. Accord von Bulow, 828
F.2d at 102-03; Yankee Atomic Elec. Co. v. United States, 54 Fed.
Cl. 306, 316 (2002).
The rationale behind our holding is self-evident. When
an attorney participates in an extrajudicial meeting or
negotiation, his participation alone does not justify implying a
broad subject matter waiver of the attorney-client privilege.
There is a qualitative difference between offering testimony at
trial or asserting an advice of counsel defense in litigation, on
the one hand, and engaging in negotiations with business
associates, on the other hand. In the former setting, the
likelihood of prejudice looms: once a litigant chooses to put
privileged communications at issue, only the revelation of all
related exchanges will allow the truth-seeking process to function
unimpeded. In the latter scenario, however, such concerns are
absent. The party has introduced its lawyer into the negotiations,
but that act, in and of itself, does nothing to cause prejudice to
the opposition or to subvert the truth-seeking process.
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Furthermore, a rule that would allow broad subject matter waivers
to be implied from such communications would provide perverse
incentives: parties would leave attorneys out of commercial
negotiations for fear that their inclusion would later force
wholesale disclosure of confidential information. This would
strike at the heart of the attorney-client relationship — and would
do so despite the absence of any eclipsing reason for the
implication of a waiver. Where a party has not thrust a partial
disclosure into ongoing litigation, fairness concerns neither
require nor permit massive breaching of the attorney-client
privilege.6 See In re Grand Jury Proceedings, 219 F.3d at 188-89
(finding no broad waiver when disclosure occurred in grand jury
testimony and government did not show sufficient prejudice).
Viewed against this backdrop, the district court's
turnover order cannot be sustained. Although plotting the precise
line that separates judicial disclosures from extrajudicial
disclosures sometimes can be difficult, no such difficulties are
presented here. The call took place entirely outside the judicial
6
Nothing in this opinion is intended to suggest that
extrajudicial disclosures can never work an implied waiver of
anything beyond that which actually was disclosed. But such cases
will be rare, and the scope of any ensuing waiver will be narrow.
See von Bulow, 828 F.2d at 102 n.1. For today, it suffices that
the government has neither argued for a narrow waiver nor
identified any particular document to which such a waiver might
extend. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.
1990) (explaining that arguments not made in a party's briefs need
not be considered).
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context. The parties to it were co-venturers bent on ironing out
wrinkles and reaching a joint business decision. Given these
facts, it would be fanciful to suggest that the disclosures cited
by the government were made in anticipation of litigation.
That gets the grease from the goose. Because the call
was plainly extrajudicial, the district court erred in using it as
a fulcrum for the implication of a broad subject matter waiver of
the attorney-client privilege. See von Bulow, 828 F.2d at 103;
Electro Scientific Indus. v. Gen. Scanning, Inc., 175 F.R.D. 539,
543-44 (N.D. Cal. 1997).
The government argues that even extrajudicial disclosures
should be given broad scope when the waiving party seeks later to
use that disclosure to its advantage. We agree in part: if
confidential information is revealed in an extrajudicial context
and later reused in a judicial setting, the circumstances of the
initial disclosure will not immunize the client against a claim of
waiver. See Electro Scientific, 175 F.R.D. at 544 (explaining that
a past extrajudicial disclosure will not cause any prejudice in
subsequent litigation as long as the disclosing party "does not try
to use [the disclosure] in this litigation"); cf. United States v.
Workman, 138 F.3d 1261, 1263-64 (8th Cir. 1998) (finding subject
matter waiver after client placed attorney's advice in issue in
court case). The key is that the subsequent disclosure, on its
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own, would suffice to waive the privilege. Here, however, XYZ has
not made use of the call in any judicial proceeding.7
At the risk of carting coal to Newcastle, we add that a
prospective waiver will very rarely be warranted in extrajudicial
disclosure cases. Courts have generally allowed prospective
waivers in discrete and limited situations, almost invariably
involving advice of counsel defenses. See, e.g., Minn. Specialty
Crops, Inc. v. Minn. Wild Hockey Club, 210 F.R.D. 673, 679 (D.
Minn. 2002); Chiron Corp. v. Genentech, Inc., 179 F. Supp. 2d 1182,
1187 (E.D. Cal. 2001). Every case the government cites in support
of the district court's imposition of a prospective waiver involves
precisely this scenario. See Minn. Specialty Crops, 210 F.R.D. at
679 (finding a prospective waiver effected “by the adoption of [an]
advice-of-counsel defense"); Chiron Corp., 179 F. Supp. 2d at 1188
(same); Gabriel Capital, L.P. v. Natwest Finance, Inc., No. 99-
Civ.-10488, 2001 WL 1132050, at *1 (S.D.N.Y. Sept. 21, 2001)
(same); Dunhall Pharms., Inc. v. Discus Dental, Inc., 994 F. Supp.
1202, 1209 n.3 (C.D. Cal. 1998) (finding subject matter waiver
throughout the time period of alleged patent infringement when
putative infringer asserted advice of counsel defense); see also
Glenmede Trust Co. v. Thompson, 56 F.3d 476, 486 (3d Cir. 1995)
(finding broad waiver where advice of counsel defense had been
7
To the extent that the government implies that XYZ used the
call in its pre-indictment proffers, that argument fails for the
reasons discussed in Part III(B), infra.
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asserted); Abbott Labs. v. Baxter Travenol Labs., Inc., 676 F.
Supp. 831, 832 (N.D. Ill. 1987) (same).
Enforcing a prospective waiver in such a case makes
sense: once a litigant puts the legal advice given to him at
issue, the opposing party should be entitled to all the information
on that same subject regardless of when it was compiled. This
ensures that a litigant is not able to present only selected bits
of the story and thus distort the truth-seeking process. The case
at hand is not one in which an advice of counsel defense has been
asserted — indeed, there is no pending proceeding to serve as a
vehicle for such a defense — and no such ends would be served by
implying a broad prospective waiver.
B. Presentations to the Government.
Our odyssey is not yet finished. Even though the
district court did not reach the issue, the government invites us
to consider, as an alternative basis on which to uphold the
turnover order, its argument that XYZ's pre-indictment proffers
waived the attorney-client privilege. See Intergen N.V. v. Grina,
344 F.3d 134, ___ (1st Cir. 2003) [No. 03-1056, slip op. at 13]
(explaining that the court of appeals can affirm a judgment on any
ground made manifest by the record). The parties have briefed this
issue, the facts pertaining to it are essentially uncontradicted,
and an adjudication will expedite matters. These factors convince
us to accept the government's invitation.
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Many years ago, Justice Holmes warned that those who deal
with the government must turn square corners. Rock Island, Ark. &
La. R.R. Co. v. United States, 254 U.S. 141, 143 (1920). That
advice cuts both ways: those who deal with the government have a
right to expect fair treatment in return. The principle that the
government must turn square corners in dealing with its
constituents is dispositive here.
The facts are these. At the time the government filed
the motion to compel, it had been engaged in discussions with XYZ
for over two years. During that span, the government repeatedly
had requested that XYZ waive the attorney-client privilege vis-à-
vis communications concerning the device's withdrawal from the
market, and XYZ steadfastly had refused. When the government
sought permission to audit the tape recording of the call, XYZ
agreed on the express condition that leave "was not to be viewed as
a waiver of any applicable privilege protecting other
communications." The government acceded to this condition.
In February of 2002, government attorneys met with XYZ's
outside counsel to discuss the threatened indictment of the
corporation and/or its officers. The government acknowledges that
it solicited a response from XYZ in hopes of gaining information so
that an indictment, if one eventuated, would be based on a fully
informed account of the product-withdrawal decision.
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Initially, this solicitation went unheeded. In late
April, however, the government wrote to XYZ's outside counsel,
formally identifying the corporation as a target of the grand jury
investigation. That letter apparently got XYZ's attention. The
next month, its counsel responded to the government's earlier
request. This epistle, dated May 10, 2002, began with a clear and
explicit statement, quoted supra note 3, that nothing contained
therein should be deemed a waiver of the attorney-client privilege.
The letter set forth various reasons why the government should
forgo an indictment. It contained only one glancing mention of an
attorney-client communication — a reference to the call (a
communication to which the attorney-client privilege never
attached). In all events, the government never replied either to
this letter or to the privilege reservation contained therein.
The May 10 letter advised the prosecutors that XYZ's
counsel would be sending additional material within the next few
weeks in order to complete the response that the government had
solicited. As promised, XYZ's counsel sent a follow-up letter
eleven days later. This missive contained the same privilege
reservation (again conspicuously displayed on the first page). In
the body of the letter, counsel discussed communications between
XYZ and the FDA during September of 1998 (some of which involved
Barrister). Once again, the privilege reservation evoked no
response.
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Both of counsel's letters referred to an anticipated
meeting with the government. That meeting occurred on May 22,
2002. As the first order of business, XYZ's counsel renewed the
privilege reservation, stating that any disclosures made during the
meeting should not be interpreted as waiving the attorney-client
privilege. The government's representatives received this
announcement in stony silence. XYZ's presentation proved fruitless
and the colloquy between the parties apparently ground to a halt.
That was the state of affairs when the government endeavored to
subpoena the disputed documents.
The government now claims that these presentations
resulted in a waiver of the attorney-client privilege as to the
subjects discussed therein. But the circumstances, and
particularly the government's own conduct, belie that claim. XYZ
was careful to condition each and every disclosure on a clearly
stated privilege reservation. The government did not raise the
slightest question when these reservations were stated, but,
rather, kept the dialogue going and invited additional disclosures.
In the circumstances of this case, we think that XYZ reasonably
interpreted the government's silence as an acceptance of the
reservations. Cf. McGurn v. Bell Microprods., Inc., 284 F.3d 86,
90 (1st Cir. 2002) (stating that silence can serve as acceptance of
a condition when the offeree, despite having a reasonable
opportunity to reject the condition, takes the benefit of the offer
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without saying anything); Restatement (Second) of Contracts §
69(1)(a) (similar).
To be sure, the government now says that XYZ, if it
wanted to guarantee preservation of the attorney-client privilege,
should have secured a written agreement to that effect. In the
absence of such a step, the government suggests, the unilaterally
imposed privilege reservation was impuissant. This argument lacks
force.
As we have said, in some cases silence can be the basis
of acceptance. See, e.g., McGurn, 284 F.3d at 90. In this case,
the undisputed facts show that the government knew of XYZ's
intention to operate under a privilege reservation from the time
that it first secured a tape recording of the call. It
unquestionably accepted the reservation at that time. XYZ then
repeated the reservation on the occasion of each of the three
succeeding pre-indictment presentations (two written and one oral).
The government voiced no objection to the privilege reservation at
any of these times. Its silence encouraged (indeed, allowed) the
disclosures to go forward.
Here, moreover, the government does not deny that it knew
of the oft-repeated privilege reservations. Hence, the
government's long delay in raising a claim of waiver is itself an
indication of such knowledge. See Akamai Techs., Inc. v. Digital
Island, Inc., Nos. 144, 149, 2002 WL 1285126, at *6 (N.D. Cal. May
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30, 2002) (finding privilege reservation valid, in part because
opposition waited eight months after supposed waiver before seeking
to compel production of documents). In turn, the government's
ready acceptance of the proffers' benefits, notwithstanding its
knowledge of the privilege reservations, makes its current position
untenable. Cf. 3 A's Towing Co. v. P & A. Well Serv., Inc., 642
F.2d 756, 758 n.3 (5th Cir. 1981) (finding ratification where delay
in repudiating was long and failure to repudiate was "accompanied
by acts indicating approval . . . such as receiving and retaining
the benefits").
In short, the privilege reservations were not
unilaterally imposed, but, rather, were accepted by the
government's consistent course of conduct. That course of conduct
signaled clearly the government's intention to acquiesce in the
privilege reservations. We conclude, therefore, that the
reservations were fully effective here. Having lured XYZ into
making a series of proffers, the government cannot now be allowed
to contradict that reasonable understanding by arguing, after the
fact, that it never acceded to the reservations. Cf. United States
v. Tierney, 760 F.2d 382, 388 (1st Cir. 1985) ("Having one's cake
and eating it, too, is not in fashion in this circuit.").
Although we ground this result in equitable principles,
it also comports with sound policy. Arm's-length negotiations
between the government and private parties, in advance of an
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indictment, aid the truth-seeking process. Such negotiations are
to everybody's advantage. They give potential defendants an
opportunity to explain away suspicious circumstances, give the
government an opportunity to avoid embarrassing and wasteful
mistakes, and give the public a greater likelihood of a just
result. Requiring the government to turn square corners in such
negotiations will make potential defendants more willing to deal
with the government in the future. Conversely, refusing to hold
the government to such a standard will send a signal to future
litigants to negotiate with the government only at their peril.
That is not a message that we wish to send — nor is it one that
would serve the government's interests.
In a perfect world, of course, XYZ would have secured a
written acknowledgment of its privilege reservation in advance of
each and every disclosure. But XYZ did secure one such written
acknowledgment, and its failure to do so on subsequent occasions is
clearly outweighed by two facts: (i) it repeatedly set forth its
position, and (ii) the government failed to question the privilege
reservation in a timely manner. Under the circumstances of this
case, we find that the proffers were made in the course of ongoing
plea negotiations; that XYZ explicitly reserved all claims of
attorney-client privilege with respect thereto; that the government
effectively acquiesced in these reservations; and that the
government is bound by them. Consequently, XYZ reserved the
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attorney-client privilege by means of its pre-indictment
presentations.
IV. CONCLUSION
We need go no further.8 We hold that XYZ's extrajudicial
disclosure did not give rise, by implication, to a broad subject
matter waiver. We further hold that the government's seeming
acquiescence in XYZ's privilege reservations precludes any claim
that XYZ's pre-indictment presentations worked a waiver of any
applicable privilege. Accordingly, we reverse the order appealed
from, vacate the contempt citation, and remand to the district
court for further proceedings not inconsistent herewith.
Reversed.
8
In view of the fact that the attorney-client privilege
remains intact, we need not address the work-product doctrine. Nor
do we need to reach the government's contention that the inadequate
detail on the privilege logs resulted in a waiver. If this is a
line of attack that the government wishes to pursue, the district
court should consider it in the first instance.
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Unknown case name
Court: Court of Appeals for the First Circuit
Date filed: 2003-10-22
Citations: 348 F.3d 16
Copy CitationsCombined Opinion