United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
August 24, 2005
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 04-60347
DONALD J. WILLY,
Petitioner,
versus
ADMINISTRATIVE REVIEW BOARD,
UNITED STATES DEPT OF LABOR
Respondent.
--------------------
Petition for Review of an Order of the
U.S. Department of Labor
--------------------
Before HIGGINBOTHAM, WIENER, and BARKSDALE, Circuit Judges.
WIENER, Circuit Judge:
This case has, since 1984, endured an odyssey through
administrative and judicial tribunals, during the course of which
it has appeared before us – in one form or another – on four
occasions. Petitioner Donald J. Willy now petitions for review
from the Department of Labor Administrative Review Board’s (“ARB”)
dismissal of his retaliation claims against his former employers,
Coastal Corporation and Coastal States Management (collectively,
“Coastal”). Although we grant his petition for review, we reject
Willy’s challenge to the constitutionality of the ARB under the
Appointments Clause of the United States Constitution, we vacate
the ARB’s final decision and order, and we remand in part.
I. FACTS AND PROCEEDINGS
A. Factual History
Coastal hired Willy as an in-house environmental attorney in
1981. Coastal and its subsidiaries are in the petroleum business,
including refining oil, marketing oil and gasoline, and
transmitting natural gas by pipeline. After a series of events in
1984, Coastal fired Willy.
1. The Belcher Environmental Audit Report
In early 1984, Albin Smith, President of Belcher Oil Company
(a subsidiary of Coastal), asked Coastal’s legal department to
perform an environmental audit of Belcher’s facilities. After
Willy examined the on-site reviews performed by fellow attorney
Troy Webb and a regulatory analyst, George Pardue, Willy concluded
in two preliminary draft reports (collectively, “the Belcher
Report” or “the Report”) that Belcher was exposed to liability for
violating several federal environmental statutes.
Webb and other Coastal employees disagreed with Willy’s
conclusions. Unbeknownst to Willy, Webb sent a memorandum to
Smith, stating that Belcher’s problems were less serious than
Willy’s drafts indicated. Pardue conceded that Willy’s conclusion
that Belcher was illegally polluting was factually accurate, but
also told Smith that the tone of Willy’s report was “inflammatory.”
At the end of March, Willy’s supervisor, Clinton Fawcett, asked
Willy to revise the Belcher Report and to delete reference to some
2
of Belcher’s violations. Willy refused, then discussed the matter
with Coastal’s general counsel, George Brundrett, who agreed with
Fawcett’s assessment of the Report. Fawcett ultimately made the
changes to the Report himself.
Willy testified that he began “getting the cold shoulder” from
Fawcett, Brundrett, Webb, and Pardue after this incident. Fawcett
later left Coastal’s legal department, and William Dunker, a
colleague of Willy’s in the environmental legal department, became
Willy’s supervisor. Dunker revisited the Belcher Report and
discussed the incident with Webb, who reiterated his opinion that
“the whole thing was overblown” by Willy. Dunker told Brundrett
that “the report was inflammatory and drew conclusions that I don’t
like to draw,” then told Willy of his concerns.
2. Corpus Christi Refinery
In late 1983 or early 1984, Willy began performing legal work
for the Corpus Christi Refinery (“the Refinery”), another Coastal
subsidiary. Early in June 1984, at the request of the manager of
the Refinery, Willy called the Texas Department of Water Resources
(“TDWR”) about a closure bond for the refinery.
Webb considered the Refinery his domain. When he visited it
in the summer of 1984, he learned that the TDWR had informed Willy
that Coastal might be sued because of the Refinery’s financial
problems. Webb was upset that Willy had not relayed this
information to him and considered that Willy was infringing on what
Webb regarded as his “turf.”
3
In September 1984, Dunker, who had learned from Webb about
the TDWR phone call, held a meeting in an effort to relieve the
tension between Webb and Willy. Dunker had prepared a letter of
reprimand for Willy, because Webb had complained that Willy had
been saying negative things about him and “backstabbing” him.
Dunker decided not to deliver the letter to Willy, however, because
what Dunker learned at the meeting did not satisfy him that Willy
had actually acted in the way that Webb had reported.
At the meeting, which Dunker secretly taped, Willy denied
having called the TDWR. Dunker telephoned a Refinery employee,
expecting to confirm that Willy had placed the call. The employee
stated, however, that he did not recall telling Webb and Pardue
that Willy had called the TDWR; that he could recall only that he
heard that a TDWR employee, Russell Lewis, had said that there
might be a lawsuit. The Refinery employee did confirm that Willy
and Webb had made disparaging remarks about each other. Willy and
Dunker, and sometimes Webb, then engaged in a lengthy exchange
about the antagonism that Willy experienced as a result of the
Belcher Report.
Soon after the meeting, Dunker called Lewis at the TDWR, and
Lewis confirmed that Willy actually had contacted him. Dunker
decided to fire Willy and obtained Brundrett’s agreement. Dunker
first met with Willy and again secretly taped their conversation.
At this meeting, Dunker called Lewis and allowed Willy to question
4
him. After Lewis confirmed that Willy had spoken with him about
financial assurances, Dunker severely criticized Willy’s breach of
trust and asked him to resign. When Willy refused, Dunker orally
fired him on the spot. An October 1 written termination notice
authored by Brundrett states: “The primary purpose for this
termination is the fact that you failed to report certain actions
taken by you with respect to the Corpus Christi Refinery
environmental matters. When asked if you had taken such action,
you unequivocably [sic] denied taking such action.”
B. Procedural History
1. Complaint to the Department of Labor
In October 1984, Willy filed a complaint with the Department
of Labor (“DOL”), alleging that Coastal had violated the
whistleblower provisions of several environmental statutes by
firing him in retaliation for writing the Belcher Report.
Specifically, Willy sued under the Clean Air Act,1 the Water
Pollution Control Act,2 the Safe Drinking Water Act,3 the Resource
Conservation and Recovery Act,4 the Toxic Substances Control Act,5
and the Comprehensive Environmental Response, Compensation
1
42 U.S.C. § 7622 (1988).
2
33 U.S.C. § 1367 (1988).
3
42 U.S.C. § 300j–9(i) (1988).
4
42 U.S.C. § 6971 (1988).
5
15 U.S.C. § 2622 (1988).
5
Environmental Response, Compensation and Liability Act6
(collectively, “the Acts”).
The Wage and Hour Division (“WHD”) of the DOL investigated
Willy’s complaint and found in his favor. The WHD ordered
reinstatement and damages.
2. Administrative Law Judge’s Order of Production
Coastal appealed the WHD’s ruling and requested a hearing
before a DOL administrative law judge (“ALJ”). Willy sought
extensive discovery, including introduction of the Belcher Report.
Coastal objected to the production of the Report and other
documents related to it based on the attorney-client and work-
product privileges. Willy filed a motion to compel production,
which the ALJ granted. The ALJ relied on Doe v. A Corp.7 in
holding that the documents, although confidential, were admissible
because Willy “could not effectively litigate his claim without
access to the documents in question.” Coastal refused to comply,
and the ALJ ordered Willy to seek enforcement of its order of
production in the district court.
3. ALJ’s Recommendation of Dismissal
Before Willy could do so, however, the ALJ recommended that
Willy’s complaint be dismissed in light of our then-recent opinion
6
42 U.S.C. § 9610 (1988).
7
709 F.2d 1043, 1048 (5th Cir. 1983).
6
in Brown & Root, Inc. v. Donovan.8 The ALJ concluded that under
the whistleblower provision of the Energy Reorganization Act
(“ERA”), “employee conduct which does not involve the employee’s
contact or involvement with a competent organ of government is not
protected.” The ALJ found that the language of the ERA’s
whistleblower provision was substantially identical to the language
of those of the Acts under which Willy had sued and that Willy’s
actions were solely internal. Thus, reasoned the ALJ, Willy’s
conduct was not protected.
4. Secretary’s Reversal of Recommended Dismissal
On appeal to the DOL Secretary, Willy argued that he was
terminated in part because he contacted government environmental
agencies. The Secretary ultimately rejected the ALJ’s recommended
dismissal, reasoning that, notwithstanding Brown & Root, Willy did
not have an adequate opportunity to prove that he had contacted
government agencies and that the Belcher Report constituted
protected activity under the Acts. The Secretary also concluded
that, contrary to Coastal’s arguments, there was nothing in any of
the statutes or their legislative histories to indicate that in-
house attorneys are excluded from statutory protection. The
Secretary further encouraged us to reconsider our holding in Brown
& Root in light of the Tenth Circuit’s more recent decision in
8
747 F.2d 1029 (5th Cir. 1984). In Brown & Root, we held
that the filing of purely internal quality control reports by
“whistleblowers” did not constitute protected activity under the
Energy Reorganization Act, 42 U.S.C. § 5851(a). See id. at 1031.
7
Kansas Gas & Electric Co. v. Brock.9
5. Our Refusal to Intervene
On remand, the ALJ again ordered Willy to seek enforcement
of the production order and resolution of Coastal’s privilege
claims in district court. Willy instead petitioned us under the
All Writs Act to resolve the discovery dispute. We declined
review, reasoning that “intervention at this time to resolve the
discovery would . . . interrupt the administrative process” and
that “[i]ntervention at this time is . . . unnecessary.”10
6. ALJ’s Hearing on Remand
In a March 1998 hearing on remand before an ALJ, Coastal
continued to refuse to produce the Belcher Report, basing its
refusal on the attorney-client privilege. The ALJ nevertheless
admitted two draft versions of the Report that were in Willy’s
possession. Based on these drafts, the ALJ found in favor of
Willy, reasoning that he was fired both because of Coastal’s
perception that he had lied about calling the TDWR and for having
written the Belcher Report in the first place. Applying a mixed-
motive analysis, the ALJ concluded that the animus towards Willy
arising from the Belcher Report and Willy’s “subsequent lie about
the phone call are inextricably mixed. Under the circumstances, no
9
780 F.2d 1505 (10th Cir. 1985). In Kansas Gas, the Tenth
Circuit held that the filing of internal safety complaints was
protected activity under the ERA. See id. at 1512-13.
10
In re Willy, 831 F.2d 545, 549-50 (5th Cir. 1987).
8
finding can be made that Donald Willy would have been fired solely
for lying about the phone call had he not engaged in protected
activity.” The ALJ declined to grant Willy relief, however,
because the judge concluded that Willy had offered “misleading
testimony” about his current employment status.
7. Secretary’s Review of ALJ’s Rulings
On automatic review, the Secretary agreed with the ALJ’s
Recommended Decision and Order that Coastal fired Willy in part
because he wrote the Belcher Report. The Secretary also affirmed
the ALJ’s 1987 holding that writing the Belcher Report constituted
protected conduct, notwithstanding our decision in Brown & Root.
The Secretary concluded that Brown & Root applied to the ERA only
and did not purport to interpret environmental whistleblower
statutes.11 The Secretary relied on, inter alia, various Rules of
Professional Conduct and our opinion in Doe in concluding that the
Belcher Report was admissible evidence under both federal and Texas
11
Neither party disputes that Willy’s writing of the
Belcher Report is protected conduct under the relevant statutes.
Congress clarified by statute that Brown & Root was incorrect in
holding that complaints to employers were not protected under 42
U.S.C. § 5851. Stone & Webster Eng’g Corp. v. Herman, 115 F.3d
1568, 1576 (11th Cir. 1997) (“The legislative history of the 1992
Energy Policy Act, too, makes clear that Congress intended the
amendments to codify what it thought the law to be already.
Congress sought ‘to explicitly provide whistleblower protection
for nuclear industry employees [who] (1) notify their employer of
an alleged violation rather than a federal regulator.’” (quoting
H.R. No. 102-474(VIII), at 78, reprinted in 1992 U.S.C.C.A.N.
1953, 2282, 2296 (emphasis added)).
9
law. The Secretary affirmed the ALJ’s ruling and remanded the case
to the ALJ to calculate back pay.
We denied Coastal’s interlocutory petition for review of the
Secretary’s ruling in October 1994, ten years to the month after
Willy’s original filing. The following July, the DOL Secretary
denied reconsideration of his decision. The ALJ then issued a
Recommended Decision and Order on Damages, Fees and Costs for
$977,513.44 in damages and $68,270 in attorney’s fees and expenses.
Willy and Coastal both appealed to the Administrative Review Board
(“ARB”), which by then had replaced the Secretary in the decision-
making process.
In February 2004, the ARB issued its Final Decision and
Dismissal Order, which reversed the prior orders of the DOL
Secretary and the ALJ on remand. The ARB upheld the ALJ’s
conclusion that federal law governed the issue of attorney-client
privilege, then determined that no exception to the privilege
existed to admit the Belcher Report and other related documents.
The ARB also concluded that under Texas attorney-client privilege
law, the result would prove the same. Willy timely filed his
notice of appeal.
8. Willy’s Parallel State Court Action
Concurrent with his administrative proceedings, Willy pursued
his claims against Coastal in the state courts of Texas. In 1985,
after the ALJ’s first recommendation of dismissal, Willy filed a
state-law wrongful discharge claim in state court. In it he
10
alleged that Coastal wrongfully terminated him under the Texas
public policy exception to the employment-at-will doctrine, viz.,
that it fired him for refusing to perform an illegal act.12
Coastal removed the case to federal court on the basis of federal
question jurisdiction. The district court dismissed the case,
reasoning that the Texas Canons of Ethics and Disciplinary Rules
precluded an attorney from bringing such a cause of action.13
On appeal, we reversed and remanded the matter to the district
court with instructions to remand to the state court because
removal had been improper.14 On remand to state court, a jury found
in favor of Willy and awarded him actual and punitive damages.15
The Texas Court of Appeals reversed, reasoning that although
Texas’s canons of ethics allow in-house counsel to maintain a
wrongful termination suit under the public policy exception, they
prohibit the use of confidential client information to prove such
12
See Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733
(Tex. 1985) (holding that public policy requires narrow exception
to employment-at-will doctrine when employee is fired for the
sole reason that he refuses to perform an illegal act).
13
Willy v. Coastal Corp., 647 F. Supp. 116 (S.D. Tex.
1986).
14
Willy v. Coastal Corp., 855 F.2d 1160, 1173 (5th Cir.
1988). We also set aside the district court’s Rule 11 sanctions
order because it did not comply with the principles announced in
Thomas v. Capital Security Services, Inc., 836 F.2d 866 (5th Cir.
1988). We thus remanded the sanctions issue to the district
court. See Willy, 855 F.2d at 1173.
15
Willy v. Coastal States Mgmt. Co., 939 S.W.2d 193, 194
(Tex. App. 1996).
11
a claim. The court held that, even under Texas’s self-defense
provision which allows lawyers to reveal confidences when necessary
to defend themselves against an accusation of wrongful conduct, the
Belcher Report was privileged and thus inadmissible. Willy
petitioned to the Supreme Court of Texas for a writ of error, which
that court denied in 1998.
II. ANALYSIS
A. Standard of Review
We must affirm the ARB’s decision unless it is arbitrary,
capricious, an abuse of discretion, or otherwise contrary to law.16
Factual findings are subject to substantial evidence review.17
Agency interpretations of our case law are reviewed de novo.18 We
also review Willy’s constitutional Appointments Clause challenge de
novo.19
B. The Appointments Clause
Willy first contends that the creation of the ARB violates the
16
5 U.S.C. § 706(2)(A).
17
Id. § 706(2)(E); Williams v. Admin. Review Bd., 376 F.3d
471 (5th Cir. 2004).
18
Macktal v. U.S. Dep’t of Labor, 171 F.3d 323, 326 (5th
Cir. 1999)
19
Tex. Office of Pub. Util. Counsel v. FCC, 183 F.3d 393,
419 n. 34 (5th Cir. 1999).
12
Appointments Clause of the Constitution.20 Specifically, Willy
asserts that Congress has not granted authority to the DOL
Secretary to appoint ARB members and to delegate his decision-
making authority to them as inferior officers. Willy contends that
“Congress’[s] generic delegation to the Secretary of Labor at 29
U.S.C. § 551 contains no officer appointment authority, and there
is no authority in any federal environmental statute to appoint
inferior officers for purposes of hearing employee protection
claims.”21 He notes that nothing in the United States Code titles
that expressly authorizes the creation of other administrative
boards explicitly authorizes the ARB’s creation. Willy maintains
that “Congress never intended adjudication powers be re-delegated”
by the DOL Secretary, “to whom Congress delegated authority,” to “a
non-responsible authority.” Willy therefore asks us to enforce the
DOL Secretary’s order upholding his cause of action and to
disregard any decision by the ARB as it “is not a legitimate
subordinate” of Congress.
Article II states:
[The President] shall nominate, and by and with the
20
Willy raises this issue for the first time on appeal.
This does not affect our jurisdiction or our standard of review.
See Freytag v. Commissioner, 501 U.S. 868, 878-79 (1991) (noting
that a court may, in its discretion, entertain a constitutional
challenge to the special appointment of a “Special Tax Judge”
because it involves the strong interest of the judiciary in
maintaining the “constitutional plan” of separation of powers
(citing Glidden Co. v. Zdanok, 370 U.S. 530, 536 (1962)).
21
Emphasis in original.
13
advice and consent of the Senate shall appoint . . . all
other officers of the United States, whose appointments
are not herein otherwise provided for and which shall be
established by law. But the Congress may, by law, vest
the appointment of such inferior officers as they may
think proper . . . in the heads of departments.22
In April 1996, the DOL Secretary created the ARB. The ARB is
composed of three members, each of whom is appointed by the
Secretary for terms of two years or less and is subject to removal
by the Secretary.23 The ARB acts for the Secretary and “issu[es]
final agency decisions on questions of law and fact arising in
review or on appeal” in whistleblower cases.24
We must first determine whether the ARB members are
“principal” or “inferior” officers for purposes of the Appointments
Clause. Willy bases his Appointments-Clause challenge on the
assumption that an ARB member is an inferior officer of the United
States. Willy asserts that ARB members are inferior officers
because they make final decisions for the Department of Labor.25
The Secretary does not contest that ARB members are “inferior
officers,” so, for purposes of this appeal, we assume that they
are.
Even though we recognize that no specific federal statute
22
U.S. CONST. art. II, § 2, cl. 2.
23
Secretary’s Order 102992, 67 Fed. Reg. 64272, 64273 (Oct.
17, 2002); 61 Fed. Reg. 19,978.
24
61 Fed. Reg. 19,978; see also Varnadore v. Sec’y of
Labor, 141 F.3d 625, 630 (6th Cir. 1998).
25
See Landry v. FDIC, 204 F.3d 1125 (D.C. Cir. 2000).
14
creates the ARB, we hold that the Secretary possesses the requisite
congressional authority to appoint members to the ARB to issue
final agency decisions. As the Secretary points out, other
circuits have held that Article II “does not require that a law
specifically provide for the appointment of a particular inferior
officer. To the contrary, ‘the Constitution affords Congress
substantial discretion to fashion appointments within the specified
constraints.’”26
The broad language employed by Congress in the Reorganization
Plan No. 6 of 1950 and in 5 U.S.C. § 301 vests the Secretary with
ample authority to create the ARB, appoint its members, and
delegate final decision-making authority to them. The
Reorganization Plan states that “[t]he Secretary of Labor may from
time to time make such provisions as he shall deem appropriate
authorizing the performance by any other officer, or by any agency
or employee, of the Department of Labor of any function of the
26
Pennsylvania v. U.S. Dep’t of Health and Human Servs., 80
F.3d 796, 804–05 (3rd Cir. 1996) (quoting Silver v. U.S. Postal
Serv., 951 F.2d 1033, 1037 (9th Cir. 1991)).
Indeed, in Pennsylvania, the Third Circuit rejected a
challenge to the composition and appointment of the Department of
Health and Human Services Appeals Board. Relevant to our
discussion here, the Third Circuit rejected Pennsylvania’s
argument that Congress provide specifically in the statute for
the entity to which the Secretary appoints members. See id. at
805. To do so, the court reasoned, would “defeat the purpose of
the relaxed requirements for ‘inferior officer’ appointments”:
“The convenience afforded by inferior officer appointments would
hardly be served if we were to require Congress to account for
every potential inferior officer appointment in its statutory
grant of authority to the department head.” Id.
15
Secretary. . . .”27 Other courts have held that this “provision
explicitly authorizes a subdelegation of authority by the Secretary
of Labor.”28 Further, Section 301 provides broad authority to the
Secretary to “prescribe regulations for the government of his
department . . . [and] the distribution and performance of its
business . . . .”29 In the only case to address directly an
Appointments-Clause challenge to the ARB, the Sixth Circuit relied
on this language to uphold the Secretary’s delegation of authority
to the ARB.30 We agree with the Sixth Circuit and conclude that
these provisions imbue the Secretary with the authority to create
the ARB, appoint its members, and delegate final decision-making
authority to them.
To support his argument that the Secretary’s appointment of
ARB members and delegation of final decision-making authority to
27
Reorg. Plan No. 6 of 1950, § 2, 15 Fed. Reg. 3174
(1950), 64 Stat. 1263.
28
Donovan v. Nat’l Bank of Alaska, 696 F.2d 678, 681 (9th
Cir. 1981); see also United States v. Marshall Durbin & Co., 363
F.2d 1 (5th Cir. 1966) (“The Act, applicable to all agencies,
included provisions authorizing any officer of a Government
agency to delegate any of his functions.”); FTC v. Gibson, 460
F.2d 605 (5th Cir. 1972) (per curiam) (“That Act, expressly
permits reorganization plans which involve the ‘authorization of
any officer to delegate any of his functions’ where appropriate
to effectuate any of the Act’s purposes.” (quoting 5 U.S.C. §
903(a)(5)).
29
5 U.S.C. § 301.
30
Varnadore, 141 F.3d at 631 (citing 5 U.S.C. § 301; 29
U.S.C. § 551; 5 U.S.C. app. at 1469; 5 U.S.C. § 901 et seq. as
statutes providing the Secretary with the requisite authority to
create the ARB).
16
the ARB is violative of the Appointments Clause, Willy principally
relies on three cases, Freytag v. Commissioner,31 Ryder v. United
States,32 and Edmond v. United States.33 Willy cites Ryder and
Edmond for the general propositions that (1) the Appointments
Clause preserves the structural integrity of the Constitution by
preventing the diffusion of appointive power, and (2) the clause is
one of the most significant structural safeguards of the
constitutional scheme. We recognize that this is so,34 but both
Ryder and Edmond are otherwise inapposite.
In Ryder, the Court treated the de facto officer doctrine.35
The petitioner there challenged the Court of Military Appeals’s
holding that even though the appointment of two civilian judges to
the Coast Guard Court of Military Review violated the Appointments
Clause, the petitioner’s conviction was valid under the de facto
officer doctrine.36 The Court held only that the “court of Military
Appeals erred in according de facto validity to the actions of the
31
501 U.S. 868 (1991).
32
515 U.S. 177 (1995).
33
520 U.S. 651 (1997).
34
Edmond, 520 U.S. at 659; Ryder, 515 U.S. at 182.
35
515 U.S. at 180.
36
See id. at 179-80. “The de facto officer doctrine
confers validity upon acts performed by a person acting under the
color of official title even though it is later discovered that
the legality of that person’s appointment or election to office
is deficient.” Id. at 180 (citing Norton v. Shelby County, 118
US. 425 440 (1886)).
17
civilian judges of the Coast Guard Court of Military Review” and
that the petitioner was entitled to review before a properly
constituted court.37 Holding, as it did, on the basis of the de
facto officer doctrine, Ryder provides no support for Willy’s
arguments.
Willy also cites Edmond as support for his aforesaid general
propositions, yet he expends little effort to explain Edmond’s
relevance here. In Edmond, the Court considered (1) whether the
Secretary of Transportation has the authority to appoint members of
the Coast Guard Court of Criminal Appeals (“CGCCA”), and (2)
whether the members of the CGCCA are principal or inferior
officers.38 As we have earlier assumed for purposes of this appeal
that the members of the ARB are inferior officers, that question is
not before us. Further, although the Edmond Court held that 49
U.S.C. § 323(a)39 provided explicit authority to the Secretary of
Transportation to appoint judges to the CGCCA,40 nothing in Edmond
requires such explicit language. Accordingly, Edmond too provides
little or no support for Willy’s arguments.
Neither does Freytag support Willy. In Freytag, the key issue
37
Id. at 188.
38
520 U.S. at 655-56.
39
Section 323(a) provides “[t]he Secretary of
Transportation may appoint and fix the pay of officers and
employees of the Department of transportation and may prescribe
their duties and powers.” 49 U.S.C. § 323(a).
40
520 U.S. at 658.
18
was whether the Chief Judge of the United States Tax Court was the
appropriate repository for the appointment (of “inferior officers”)
power which, as noted above, is vested only “in the President
alone, in the Courts of Law, or in the Heads of Department.”41
Willy does not dispute that the DOL Secretary is the “Head of a
Department,” nor could he do so.42 The Freytag issue is simply not
present here.
Finally, Willy contends that even if the DOL Secretary
possesses the legitimate authority to establish the ARB, the
Secretary’s final decision is entitled to deference when a conflict
exists between it and the ARB. In other words, Willy asserts that
because the Secretary is the head of the department, we should
afford greater deference to his final decision —— this time, in
favor of Willy —— than to the ARB’s final decision. Willy cites
Martin v. Occupational Safety and Health Review Commission43 to
support his argument. Willy’s argument is meritless.
In Martin, the Supreme Court treated the issue “to whom should
a reviewing court defer when the Secretary of Labor and the
Occupational Safety and Health Review Commission furnish reasonable
but conflicting interpretations of an ambiguous regulation
41
501 U.S. at 877-78 (citing U.S. CONST. art. II, § 2, cl.
2).
42
See 5 U.S.C. § 101 (stating that the Department of Labor
is an Executive Department); 29 U.S.C. § 551 (stating that the
Secretary of Labor is the head of the Department of Labor).
43
499 U.S. 144 (1991).
19
promulgated by the Secretary under the Occupational Safety and
Health Act [(“OSHA”)] of 1970 . . . .”44 The Court observed that
the dispute arose “under the unusual regulatory structure
established by the Act.”45 Specifically, the Court noted that the
Act granted enforcement and rulemaking authority to the Secretary
of Labor and adjudicative authority to the Commission.46 The Court
then held that, as the Act granted the Secretary the authority “to
promulgate and to enforce national health and safety standards,”
courts should grant deference to the Secretary’s, rather than the
Commission’s, interpretation.47
That situation is not present here. There is no “split
authority” under the whistleblower statutes. The relevant statutes
expressly grant rulemaking, enforcement, and adjudicative authority
to the Secretary, so no potential for conflict exists.
Additionally, no conflicting interpretations of statutes
promulgated by the Secretary are at issue here. The difference
between the Secretary’s and the ARB’s final decisions rests in
their conflicting interpretations of federal common law or ——
possibly —— Texas state law.
We hold that the language of 29 U.S.C. § 301 and of the
44
Id. at 146.
45
Id. at 152.
46
See id. (emphasis added).
47
Id.
20
Reorganization Plan No. 6 of 1950 is broad enough to allow the
Secretary to create the ARB, appoint its members, and delegate
decision-making authority to it. We hold that the DOL Secretary’s
appointment of ARB members and delegation of decision-making
authority to them do not violate the Appointments Clause of the
Constitution.
C. Attorney-Client Privilege
Having resolved the threshold issue of the violation vel non
of the Appointments Clause, we turn to the merits question of the
scope of the attorney-client privilege. Willy insists that, in
accordance with the DOL Secretary’s 1994 opinion, the Belcher
Report is admissible despite the attorney-client privilege.48
Relying on statutory exceptions to the attorney-client
privilege, Supreme Court Standard 503(d)(3), the Model Code of
Professional Responsibilities DR 4-101(C)(4), and our decision in
Doe v. A Corp.,49 the Secretary ruled that the Belcher Report was
admissible despite Coastal’s assertion of the attorney-client
privilege. In its February 2004 order, the ARB reversed the
Secretary’s order, concluding that no exception applies to exempt
the Report from the attorney-client privilege and that the DOL
Secretary erred when he admitted it into evidence. The ARB
accordingly dismissed Willy’s complaint because his action fails
48
The parties do not dispute that the Belcher report is
privileged material.
49
709 F.2d 1043 (5th Cir. 1983).
21
without the availability of the Belcher Report. The parties now
dispute whether the DOL Secretary or the ARB is correct.50
The parties first contest whether federal or state law governs
our analysis of the attorney-client privilege. We have no
difficulty in concluding that federal law applies here. “Questions
of privilege that arise in the course of adjudication of federal
rights are ‘governed by the principles of the common law as they
may be interpreted by the courts of the United States in the light
50
In 1994, Secretary Reich lifted the protective order that
the ALJ had issued to keep the Belcher Report under seal. After
oral argument in this appeal, we asked for supplemental briefing
as to whether the lifting of the protective order —— i.e.,
“publishing” the report —— had any effect on the issue of
attorney-client privilege, viz., whether it rendered this
controversy moot. It is now clear that because we can order
relief in this case, even if the report has been published, the
controversy is not moot. See Church of Scientology of Ca. v.
United States, 506 U.S. 9 (1992) (holding that, even after
Internal Revenue Service obtained confidential tapes, the remedy
of ordering the Government to destroy or to return any and all
copies of the tapes was enough to prevent the matter from being
moot).
We have no authority “to give opinions upon moot questions
or abstract propositions, or to declare principles or rules of
law which cannot affect the matter in issue in the case before”
us. Church of Scientology, 506 U.S. at 12. If an event occurs
that prevents us from granting “any effectual relief whatever” to
a prevailing party, the controversy is moot, and the appeal must
be dismissed. See id.
The current Secretary argues that “this Court need not be
concerned that it can no longer grant meaningful relief to
Coastal as a result of” the previous Secretary’s order in favor
of Willy, which took into account the privileged material (the
Belcher Report). The current Secretary notes that we may provide
relief by affirming the ARB’s dismissal of Willy’s complaint and
the exclusion of the Belcher Report. That it is within our power
to affirm the ARB and exclude the privileged material is
“effectual relief,” and the controversy is therefore not moot.
22
of reason and experience.’”51 As Willy’s claims arise under
federal law —— and are before us on federal question jurisdiction
under 28 U.S.C. § 1331 —— the federal common law of attorney-client
privilege governs our analysis.
The attorney-client privilege is the “oldest of the privileges
for confidential communications known to the common law.”52 The
central purpose of the privilege is to “encourage full and frank
communications between attorneys and their clients and thereby
promote broader public interests in the observance of law and the
administration of justice.”53 This purpose allows clients to “make
full disclosure to their attorneys”54 of past wrongdoings to obtain
“the aid of persons having knowledge of the law and skilled in its
practice.”55
Coastal’s assertion of the attorney-client privilege with
respect to the Belcher Report in response to Willy’s attempt to
maintain his personal cause of action against his former client
“creates a conflict with another fundamental policy: the
51
United States v. Zolin, 491 U.S. 554, 562 (1989) (citing
FED. R. EVID. 501).
52
Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).
53
Id.
54
Fisher v. United States, 425 U.S. 391, 403 (1976).
55
Zolin, 491 U.S. at 562 (citing Hunt v. Blackthorn, 128
U.S. 464, 470 (1888)).
23
availability of a legal forum for the adjudication of rights.”56
We have recognized that, “[w]hile the Boddie [v. Connecticut]
principle does not give any broad ‘right’ of access to federal
court, the courtroom door should not lightly be barred to a person
who has a tenable legal claim.”57
Accordingly, we – and the law – have recognized exceptions to
the general rule that an attorney may not disclose his client’s
confidences. Willy advances three exceptions to the attorney-
client privilege under which the Belcher report is admissible. He
asserts first that the Report is admissible under the “breach of
duty” exception; next, that Coastal waived any attorney-client
privilege when it placed the Belcher report at issue in the
litigation; and last, that the report is admissible under the
crime-fraud exception.
1. Breach of Duty
With respect to Willy’s contention that the “breach of duty”
exception applies, we conclude that the ARB’s rejection of this
exception is contrary to law. We therefore vacate and remand.58
Supreme Court Standard 503(d) states that no attorney-client
56
Doe, 709 F.2d at 1048.
57
Id. In Boddie v. Connecticut, the Supreme Court held
that, in certain circumstances, the due process clause of the
Fourteenth Amendment protects a party’s access to the courts. 401
U.S. 371 (1971).
58
As we find merit in Willy’s first argument, we do not
reach the other two.
24
privilege exists “[a]s to a communication relevant to an issue of
breach of duty by the lawyer to his client or by the client to the
lawyer . . . .”59 In addition, no privilege exists under Rule
1.6(b)(2) of the Model Rules of Professional Conduct in similar
circumstances:
A lawyer may reveal . . . information [relating to
representation of a client] to the extent the lawyer
reasonably believes necessary . . . to establish a claim
or defense on behalf of the lawyer in a controversy
between the lawyer and the client, to establish a defense
to a criminal charge or civil claim against the lawyer
based upon conduct in which the client was involved, or
to respond to allegations in any proceeding concerning
the lawyer’s representation of the client.60
The Model Code of Professional Responsibilities Disciplinary Rule
4-101(c) also provides the “breach of duty” exception to the
general rule.
Willy insists that the ARB incorrectly read into the breach-
of-duty exception a requirement that privileged communications only
be used defensively. Relying on Siedle v. Putnam Investments,
Inc., the ARB held that an attorney may use privileged documents
only as a shield and never as a sword. In Siedle, the defendant,
Putnam Investments, Inc. (“Putnam”) had employed the plaintiff
Siedle as in-house counsel. The parties signed a mutual
termination agreement, but Siedle continued to maintain a
retirement account with Putnam. After it discovered that a
59
SUPREME COURT STANDARD 503(d)(3), reprinted in WEINSTEIN’S
EVIDENCE, 503-1 to 2 (1992).
60
MODEL RULES OF PROF’L CONDUCT R. 1.6(b)(2) (1983).
25
clerical error had improperly credited $15,000 to that account,
Putnam unilaterally deducted that amount from it. Angry, Siedle
told his tale to Pensions & Investments, a weekly trade magazine.
Putnam responded, unfavorably to Siedle.
Siedle sued in state court for breach of contract and various
other claims. Putnam removed the suit to federal district court on
the basis of diversity of citizenship, then moved for a temporary
restraining order, a seal order, and a preliminary injunction to
keep Siedle from divulging information protected by the attorney-
client privilege. When the New York Times learned of the suit, it
intervened and urged the district court to lift the seal order.
The district court granted the motion, and Putnam appealed.
The First Circuit rejected Siedle’s claim that an attorney may
use the self-defense exception to introduce privileged information
offensively: “We believe that the exception is designed to
function only as a shield, not as a sword.”61 Notwithstanding this
broad pronouncement, however, the First Circuit recognized the
limited effect of its holding:
Let us be perfectly clear. We do not hold that the
materials which Putnam claims are privileged necessarily
must remain under permanent seal. As the record develops
and additional facts are adduced, the district court may
find that Putnam’s claims of privilege are unsupported or
that some applicable exception penetrates the attorney-
client privilege. Until such time, however, we hold that
Putnam’s unrebutted prima facie showing that the
attorney-client privilege applies entitles it to
61
Siedle, 147 F.3d at 11.
26
protection.62
The current DOL Secretary and Coastal – and the ARB – cite
Siedle as support for the proposition that the self-defense
exception to the attorney-client privilege may be used only as “a
shield, and not as a sword,” i.e., an attorney may use privileged
documents only as a defense against charges brought against him by
his client. We recognize that Siedle stands for only this narrow
proposition. With all due respect to our sister circuit, however,
we conclude that it and the ARB have misinterpreted —— and
misquoted —— the case law on which they rely.
The case law amply demonstrates the narrower proposition that
the attorney-client privilege only prohibits a party from
simultaneously using confidential information as both a shield and
a sword.63 Stated differently, the “shield and sword” analogy is
conjunctive: it does not stand broadly for the proposition that an
attorney may never use confidential information offensively. That
62
Id. at 12 (emphasis added).
63
See, e.g., Bittaker v. Woodford, 331 F.3d 715, 719 (9th
Cir. 2003) (“The principle is often expressed in terms of
preventing a party from using the privilege as both a shield and
a sword.” (emphasis added)); Nguyen v. Excel Corp., 197 F.3d 200,
207 n. 18 (5th Cir. 1999) (“In accord with this principle is a
client’s inability to, at once, employ the privilege as both a
sword and a shield. . . Attempts at such improper dual usage of
the privilege result in waiver by implication.”); United States
v. Workman, 138 F.3d 1261, 1264 (8th Cir. 1998) (“The attorney
client privilege cannot be used both as a shield and a sword.”);
United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991)
(“However, the attorney-client privilege cannot at once be used
as a shield and a sword.”).
27
analogy is a product of our parallel reasoning behind the doctrine
of implied waiver: a party may not use privileged information both
offensively and defensively at the same time.64 In other words,
when a party entitled to claim the attorney-client privilege uses
confidential information against his adversary (the sword), he
implicitly waives its use protectively (the shield) under that
privilege.
In addition, the ARB misinterpreted the holding of Siedle and
the law on which that holding relied. First, it is indisputable
that the Siedle court based its holding on Massachusetts law, not
federal law.65 Second, as noted above, the Siedle court treated
whether a seal order should remain in effect and was primarily
concerned with the right of the public – particularly, the press –
to have access to court records, not with the attorney’s use of the
confidential information against his client/employer.66 It must be
remembered that the basis of the Siedle appeal was the district
court’s unsealing of the record – an order brought about by motion
64
See, e.g., Nguyen, 197 F.3d at 207 n. 18 (“Attempts at
such improper dual usage of the privilege result in a waiver by
implication.”).
65
147 F.3d at 11 (“Massachusetts narrowly construes the
exceptions to an attorney’s duty to guard client confidences.”).
Putnam removed on the basis of diversity jurisdiction which, as
we have noted, is not the foundation of our jurisdiction here.
66
See id. at 12 (“When an attorney and a former client
embroil themselves in adversarial litigation, the right of public
access to judicial records stands in sharp contrast to the
lawyer’s duty to hold information obtained from the client during
the course of representation in the strictest confidence.”).
28
of The New York Times.67 The Siedle court neither explicitly nor
implicitly held that the attorney could never use confidential
information against his employer. It merely reversed the district
court’s order that the seal should be lifted.
The other case on which the current DOL Secretary, Coastal,
and the ARB relied are equally inapposite. Kachmar v. Sungard Data
Systems, Inc.68 did not hold that, in a Title VII suit, an attorney-
plaintiff can never use privileged information obtained during
representation against the client. The plaintiff in Kachmar,
formerly in-house counsel for Sungard Data Systems, Inc.
(“Sungard”), sued her employer for retaliation under Title VII,
alleging that she had been fired unlawfully after she alleged that
Sungard engaged in a pattern and practice of sex discrimination.69
When the district court dismissed her suit, Kachmar appealed.
Regarding the aspect of the attorney-client issue raised by
Sungard, the Third Circuit stated:
We do not suggest that concerns about the disclosure of
client confidences in suits by in-house counsel are
unfounded, but these concerns alone would not warrant
dismissing a plaintiff’s case, especially where there are
other means to prevent unwarranted disclosure of
confidential information.
In balancing the needed protection of sensitive
information with the in-house counsel’s right to maintain
the suit, the district court may use a number of
equitable measures at its disposal “designed to permit
67
See id. at 9.
68
109 F.3d 173 (3rd Cir. 1997).
69
See id. at 176-77.
29
the attorney plaintiff to attempt to make the necessary
proof while protecting from disclosure client confidences
subject to the privilege.” General Dynamics [Corp. v.
Superior Court], 876 P.2d [487], at 504 [(Cal. Ct. App.).
. . (en banc)]. Among those referred to in General
Dynamics were “[t]he use of sealing and protective
orders, limited admissibility of evidence, orders
restricting the use of testimony in successive
proceedings, and, where appropriate, in camera
proceedings.” Admittedly, this may entail more attention
by a judicial officer than in most other Title VII
actions, but we are not prepared to say that the trial
court, after assessing the sensitivity of the information
offered at trial, would not be able to draft a procedure
that permits vindicating Kachmar’s rights while
preserving the core values underlying the attorney-client
relationship.70
The Kachmar court did not hold that a plaintiff-attorney could
never use privileged information offensively, only that the
district court must take precautions to safeguard such information
by weighing the need to protect it against the attorney’s need to
maintain his suit. We reject the ARB’s conclusion that either
Siedle or Kachmar stands for the overbroad proposition that the
attorney-client privilege is a per se bar to an attorney’s use of
privileged information in a claim against his former client or
employer.
Doe v. A Corp. is our controlling precedent on the right of an
attorney to maintain a suit against his former client or employer
when the claim implicates communications allegedly protected by the
attorney-client privilege.71 In it we held that
70
Id. at 181-82 (emphasis added).
71
Coastal and the Secretary also cite to Douglas v.
DynMcDermott Petroleum Operations Co. as support for the
30
[a] lawyer, however, does not forfeit his rights simply
because to prove them he must utilize confidential
information. Nor does the client gain the right to cheat
the lawyer by imparting confidences to him.
The sole interest A Corporation can assert, other
than defeating Doe’s claim, is preservation of
confidentiality for the secrets Doe learned while in its
employment. The corporation’s interest in
confidentiality, however, can at least be partially
protected by anonymity. There is no interest in allowing
a corporation to conceal wrongdoing, if in fact any has
occurred.72
We therefore allowed Doe to maintain his suit. The ARB cites Doe
for the proposition that the lawyer “was permitted to use
information that he acquired during his employment that was not
proposition that “an attorney’s Title VII right to oppose her
employer-client’s allegedly discriminatory practices by
disclosing confidential information” must yield to an “employer-
client’s right to ethical representation and the profession’s
interest in assuring the ethical conduct of its members.” 144
F.3d 364, 376 (5th Cir. 1998). We do not read Douglas so
broadly.
In a lengthy dissent to this court’s refusal to rehear
Douglas en banc, 163 F.3d 223 (5th Cir. 1998), Judge Dennis, with
whom four other judges agreed, noted that Douglas called into
question our decisions in Doe and Jones v. Flagship
International, 793 F.2d 714 (5th Cir. 1986), in which we allowed
an attorney to sue her employer for sex discrimination.
Judge Jolly, as author of the majority opinion in Douglas,
responded to Judge Dennis’s dissent by stating that Douglas was
not meant to overrule either Doe or Jones. Indeed, as Judge
Jolly noted, Douglas specifically “recognize[d] as a valid means
of revealing confidential information, the exceptions under Rule
1.6 of the Louisiana State bar Articles of Incorporation, Rules
of Professional Conduct, LA. REV. STAT. ANN. §37:219 Ch. 4 —— App.,
Art. 16, which permits the disclosure, once disclosure becomes
necessary in a legal dispute with the employer-client.” 163 F.3d
at 238 (on petition for rehearing and suggestion for rehearing en
banc) (citing Douglas, 144 F.3d at 376). Accordingly, Douglas
does not stand for the broad proposition advanced by Coastal and
the Secretary.
72
709 F.2d at 1050 (emphasis added).
31
protected by attorney-client privilege.” Nowhere did we state this
in Doe; and no such rule can be inferred from our Doe opinion. We
did not distinguish between information protected by the privilege
and information not protected by it. The ARB broadly
misinterpreted both our precedent on this issue and that of other
circuits as well.
Further, in concluding that Coastal dismissed Willy as an
employee because he lied about calling the TDWR, the ARB states
that the “self-defense exception is tailored to the singular
circumstances of the attorney-client relationship and is limited to
a breach of duty a lawyer owes a client, not the broader array of
duties an employee owes to an employer, such as promoting harmony
with co-workers and dealing honestly with supervisors.”73 Not
surprisingly, the ARB cites to no law to support this proposition;
and we are aware of none.
Neither do we find support in the instant record for the ARB’s
finding that Coastal dismissed Willy solely because of his actions
as an employee.74 In contrast, we perceive ample evidentiary
support in the record before us to indicate that Willy’s call to
the TDWR was made in his capacity as Coastal’s attorney. None
contests that Willy’s call to the TDWR was in connection with a
73
Emphasis added.
74
We also question whether Coastal can maintain that it
dismissed Willy as an employee and then assert the attorney-
client privilege.
32
closure bond for one of Coastal’s refineries. Martin Hall, the
refinery’s engineer in charge of environmental matters, informed
Keith Pardue and Troy Webb (Willy’s colleagues on the Belcher
Report and vocal critics of it), that he had informed Willy that
Coastal might be sued because of financial-responsibility problems
relating to the Corpus Christi refinery. Coastal contends that it
fired Willy because he neglected to tell them about this problem
and lied about the phone call to TDWR. It is difficult, if not
impossible, to say that Willy was acting purely as an employee and
not as an attorney when he made this call, especially with the
knowledge that the call concerned a closure bond and a possible
lawsuit, two areas that would surely be a concern of in-house
counsel.
The above-emphasized language from the ARB’s final order ——
that the self-defense exception is limited to a breach of duty a
lawyer owes a client —— is a strained interpretation of the
language of the exception itself. As noted, the Model Rules
specifically provide that “[a] lawyer may reveal . . . information
[relating to representation of a client] to the extent the lawyer
reasonably believes necessary . . . to establish a claim or defense
on behalf of the lawyer in a controversy between the lawyer and the
client . . . .”75 That a lawyer may assert a “claim” against his
client means that the client breached a duty to the lawyer, not the
75
MODEL RULES OF PROF’L CONDUCT R. 1.6(b)(2) (1983).
33
opposite, as the ARB held. The American Bar Association endorses
this view as well:
The Model Rules do not prevent an in-house lawyer from
pursuing a suit for retaliatory discharge when a lawyer
was discharged for complying with her ethical
obligations. An in-house lawyer pursuing a wrongful
discharge claim must comply with her duty of
confidentiality to her former client and may reveal
information to the extent necessary to establish her
claim against her employer. The lawyer must take
reasonable affirmative steps, however, to avoid
unnecessary disclosure and limit the information
revealed.76
In sum, neither the current Secretary nor Coastal has directed
us to any case that can be stretched to stand for the broad
proposition espoused by the ARB, that the attorney-client privilege
is a per se bar to retaliation claims under the federal
whistleblower statutes, i.e., that the attorney-client privilege
mandates exclusion of all documents subject to the privilege. As
we observed in Doe, “[a] lawyer . . . does not forfeit his rights
[as an employee] simply because to prove them he must utilize
confidential information,”77 and we are disinclined to hold that he
has. The ARB seriously misinterpreted our —— and other circuits’
—— case law treating the attorney-client privilege. There are
ample opportunities – such as those adverted to in both Doe and
Kachmar – to protect privileged information such as that which
Coastal now seeks to protect. The ALJ followed these procedures,
76
AMERICAN BAR ASS’N FORMAL ETHICS OPINION 01-424 (Sep. 22, 2001).
77
709 F.2d at 1050.
34
and we find no error in his doing so.
One final caveat: We are fully cognizant of the procedural
posture of this case, viz., the claim of a former in-house counsel
against his former employer before an ALJ only, yet no party has
cited any law to us —— and we have found none —— that allows the
party asserting the attorney-client privilege, to refuse to show
allegedly privileged documents to a court. Indeed, when a party
asserts that documents are privileged, the court must in the first
instance inspect and review them to determine the applicability of
the privilege. What is not before us is a suit involving a jury
and public proceedings, so we leave that possibility for another
day. Today, we merely hold that no rule or case law imposes a per
se ban on the offensive use of documents subject to the attorney-
client privilege in an in-house counsel’s retaliatory discharge
claim against his former employer under the federal whistleblower
statutes when the action is before an ALJ.
III. CONCLUSION
For the foregoing reasons, we reject Willy’s challenge under
the Appointments Clause and hold that the DOL Secretary is vested
with the authority to appoint the members of the ARB, and to
delegate his decision-making authority to them without violating
the Appointments Clause of the Constitution. We nevertheless
vacate the ARB’s ruling that the attorney-client privilege mandates
exclusion of the Belcher Report in Willy’s action against Coastal,
35
and we remand to the ARB for a review of the merits of the original
holding of the ALJ and of the previous Secretary in light of the
facts that they had before them when they rendered their final
decisions.
PETITION GRANTED; AFFIRMED IN PART; VACATED AND REMANDED IN PART.
36
Willy v. Administrative Review Board
Court: Court of Appeals for the Fifth Circuit
Date filed: 2005-08-25
Citations: 423 F.3d 483
Copy CitationsCombined Opinion