United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 22, 2002 Decided July 2, 2002
No. 01-5391
Federal Trade Commission,
Appellee
v.
GlaxoSmithKline,
Appellant
Appeal from the United States District Court
for the District of Columbia
(No. 01ms00163)
Melvin A. Schwarz argued the cause for appellant. With
him on the briefs were Stephen A. Saltzburg and Stephen A.
Stack Jr.
Melvin H. Orlans, Special Litigation Counsel, Federal
Trade Commission, argued the cause for appellee. With him
on the brief was John F. Daly, Deputy General Counsel for
Litigation.
Before: Ginsburg, Chief Judge, and Henderson and
Rogers, Circuit Judges.
Opinion for the Court filed by Chief Judge Ginsburg.
Ginsburg, Chief Judge: In the course of investigating
whether a manufacturer of drugs listed its patents properly in
the compilation maintained by the Food and Drug Adminis-
tration, the Federal Trade Commission issued a subpoena
directing the company to produce documents relating to a
particular drug. When the company resisted, claiming the
attorney-client privilege shields the documents, the Commis-
sion repaired to the district court, which enforced the subpoe-
na. We reverse the decision of the district court because the
court both relied upon an argument to which the company
had no opportunity to respond and ruled erroneously that, by
failing to keep confidential the contents of the documents, the
company had waived the attorney-client privilege.
I. Background
GlaxoSmithKline manufactures paroxteine hydrochloride
hemihydrate under the brand name Paxil, the annual sales of
which in the United States exceed $1 billion. See FTC v.
GlaxoSmithKline, 203 F.R.D. 14, 15 (D.D.C. 2001). Several
companies have applied to the Food and Drug Administration
for permission to sell generic versions of Paxil when GSK's
patents expire. The Federal Trade Commission is investigat-
ing whether GSK, in an attempt to prevent or delay competi-
tion from generic versions of Paxil, has abused the process
for listing its patents in the FDA's compilation of "Approved
Drug Products with Therapeutic Evaluations." Id. at 16.
The Commission issued a subpoena directing GSK to pro-
duce two types of documents. First, the Commission sought
all documents concerning Paxil that the United States Dis-
trict Court for the Northern District of Illinois had directed
GSK to disclose when GSK had sued two manufacturers of
generic pharmaceuticals for infringement of its patents -- the
so-called Chicago documents, see SmithKline Beecham Corp.
v. Apotex Corp., 193 F.R.D. 530, aff'd, No. 98C3952, 2000 WL
1310669 (Sept. 13, 2000). Second, the Commission wanted all
"documents related to the manufacturing and marketing of
Paxil, the listing and use of any patents regarding Paxil, and
any filings with the FDA regarding Paxil." GlaxoSmith-
Kline, 203 F.R.D. at 16. GSK and the Commission re-
solved their differences over the inclusion or exclusion of
thousands of documents, but because GSK declined to pro-
duce hundreds of others -- primarily on the ground that they
were shielded by the attorney-client privilege -- the Commis-
sion petitioned the district court to enforce the subpoena.
The parties then agreed upon a procedure for presenting
their positions to the district court. See Stipulation Estab-
lishing Schedule & Procedure for Resolving FTC's Enforce-
ment Pet. (April 20, 2001). First, each would submit its
contentions about the Chicago documents. See id. p 1. If the
court compelled GSK to produce those documents, then the
parties would contest the second category of documents as
follows. The Commission would "identify for GSK ... every
responsive (and allegedly privileged) document that the Com-
mission [sought] to have produced and the reason(s) why each
privilege claim [was] invalid." Id. p 3(a). GSK would then
either produce the document or list it in a "privilege log
identifying any documents as to which it continue[d] to assert
privilege." Id. p 3(b). Accordingly, only after the Commis-
sion had informed GSK of its objections to the Company's
claims of privilege would the parties seek judicial resolution.
See id. p 3(c). At that final stage the court would either call
for oral argument or resolve summarily "[a]ny issues submit-
ted to [it] in connection with the FTC's enforcement petition."
Id. p 5.
The district court did enforce the subpoena with respect to
the Chicago documents. FTC v. GlaxoSmithKline, 202
F.R.D. 8, 12 (D.D.C. 2001). The parties then resolved
through negotiation their disputes about the disclosure of
hundreds more documents, leaving unresolved the status of
only 91. GSK asserted that all 91 documents were protected
by the attorney-client privilege and that 34 of them were
protected also by the privilege for attorney work product.
The Commission told GSK it considered the assertions of
privilege invalid for two reasons: (1) GSK had forfeited its
claim to confidentiality by disseminating all 91 documents
widely both within GSK and to consultants and other third-
parties; and (2) the decision in Apotex estopped GSK from
asserting that the 34 documents were attorney work product,
that is, were prepared in anticipation of litigation. In re-
sponse to these objections, GSK compiled a privilege log
describing each of the 91 documents, and the parties present-
ed their arguments to the district court.
In its opening brief to the district court, the Commission
raised the two objections it had previously presented to GSK.
The Commission also introduced in that brief a new argu-
ment: Regardless whether Apotex foreclosed the Company's
claim of attorney work product, GSK's privilege log "fail[ed]
to provide facts demonstrating that the document[s] w[ere]
created in anticipation of litigation." When GSK objected
that the Commission had not made this argument during pre-
motion negotiations, the Commission withdrew the argument.
It explained in a Stipulation approved by the district court
that it had "inadvertently failed to provide GSK with the
agreed advance notice regarding the grounds for challenging
the documents." Stipulation & Order with Respect to Cer-
tain Docs. in FTC's Req. for Enforcement (Sept. 6, 2001) at
p 1.
GSK submitted its responsive brief to the district court and
attached thereto the Company's privilege log and the affidavit
of Charles Kinzig, GSK's Vice President and Director of
Corporate Intellectual Property. For each document, the log
described the contents; listed the author, intended recipients,
and date of creation; and noted whether the author or
intended recipients were attorneys. A supplement to the log
indicated the title or titles of each person therein named who
was not an attorney. The Kinzig Declaration stated that the
documents had been disseminated to various "teams" of com-
pany employees and contractors, and explained the duties of
each team. According to Kinzig, all the teams were "involved
in seeking or giving legal advice and/or gathering and record-
ing information in anticipation of or preparation for litiga-
tion." The Kinzig Declaration states also that every employ-
ee and contractor named in the privilege log was "bound not
to disclose confidential information to persons outside [GSK]"
without receiving permission from a high-ranking official of
the Company.
The Commission then filed a reply brief in which it made
yet another argument for the first time: The attorney-client
privilege does not shield the documents because they contain
no confidential information.
The district court ordered GSK to produce the 91 docu-
ments. The court rejected GSK's claims of attorney-client
privilege on the grounds that (1) "GSK ha[d] not sustained its
burden of demonstrating that the relevant documents were
distributed on a 'need to know' basis or to employees that
were 'authorized to speak or act' for GSK," 203 F.R.D. at 19,
and (2) the Company had "failed to provide sufficient evi-
dence that the information contained therein is confidential,"
id. at 20. The court rejected GSK's claims of attorney work
product for the reason withdrawn by the Commission, name-
ly, that "GSK fail[ed] to set forth objective facts that support
the corporation's assertion that the relevant documents were
created in anticipation of litigation." Id. at 21. Having
determined that "even if GSK is not precluded from asserting
the privilege [for attorney work product], it has failed to
satisfy its burden of showing the applicability of the doctrine
to the relevant documents," the district court found it unnec-
essary to resolve whether the decision in Apotex estopped
GSK from claiming otherwise. Id. at 22 n.3. GSK sought
and we granted a stay pending appeal.
II. Analysis
GSK contends the district court erred both by rejecting its
claims of privilege based upon arguments the Commission did
not raise properly and by misapplying the standard for
determining whether a corporation has kept confidential the
contents of a communication. The Commission defends the
decision of the district court and argues that GSK is collater-
ally estopped in any event, by reason of the Apotex litigation,
from claiming the 34 documents are attorney work product.
Preliminarily, the parties disagree about the proper stan-
dard of review. The Commission claims we should defer to
the district court unless it committed a clear error, whereas
GSK argues that because the circumstances of this case "are
procedurally identical to an appeal of a ruling on a motion for
summary judgment," we should review the decision of the
district court de novo. This debate need not detain us long;
our standard of review is well established. We review a
decision to enforce a subpoena "only for arbitrariness or
abuse of discretion." In re Sealed Case, 146 F.3d 881, 883
(D.C. Cir. 1998). We will affirm the decision unless it "rests
upon a misapprehension of the relevant legal standard or is
unsupported by the record." In re Subpoena Served upon
the Comptroller of the Currency, 967 F.2d 630, 633 (D.C. Cir.
1992).
The district court held that GSK failed to establish either
of two prerequisites for recognition of the attorney-client
privilege -- that the documents contain confidential informa-
tion and that they have been kept confidential. See Glaxo-
SmithKline, 203 F.R.D. at 17-18. As the Company points
out, during the parties' negotiations the Commission did not
dispute that the documents contain confidential information.
The Commission did not even raise the argument in its
opening brief before the district court, waiting instead until
its reply brief and thereby depriving GSK of any opportunity
to respond.
The Commission had agreed, pursuant to the Scheduling
Stipulation approved by the district court, to inform GSK of
its reasons for disputing the Company's claims of privilege
before asking the court for a ruling. The Commission there-
fore was bound not to put before the district court any
objection not first raised with its adversary. Accordingly, the
district court abused its discretion when it ruled against GSK
based upon an argument that was raised not only in violation
of the Scheduling Stipulation but so belatedly that the Com-
pany had no chance to respond to it.
The Commission acknowledges that the parties intended
the Scheduling Stipulation to "enable them to narrow,
through pre-motion negotiations, the claims and documents
that would require judicial resolution," but it contends that
"nothing in the Stipulation barred the Commission from
making -- or the district court from considering -- additional
arguments simply because they had not been presented to
GSK during pre-motion negotiations." On its face, the
Scheduling Stipulation -- which required the Commission to
raise in negotiations with GSK "the reason(s) why each
privilege claim is invalid" -- refutes this claim, as does the
implausibility of the idea that parties would establish elabo-
rate procedures to narrow their dispute through negotiation
with the foreknowledge that their adversary might again
expand the dispute before the district court. It is not sur-
prising, therefore, that the Commission itself had previously
viewed the Stipulation as binding: Recall it withdrew from
the court another objection not raised in pre-motion negotia-
tions because, in its own words, it had "inadvertently failed to
provide GSK with the agreed advance notice regarding the
grounds for challenging the documents." Stipulation & Or-
der (Sept. 6, 2001) at p 1.
Nor is it true, as the Commission claims, that "GSK
suffered no possible prejudice" in having to overcome the
Commission's objections in front of the district court because
GSK bore the burden in any event "to present to the court
sufficient facts to establish the privilege." In re Sealed Case,
737 F.2d 94, 99 (D.C. Cir. 1984). If the district court had
held the Commission to the terms of its agreement, then the
court would not have required GSK to prove that the docu-
ments were confidential and had been kept in confidence
because the issue would have been conceded. As we have
held in the analogous context of a pretrial scheduling order
entered pursuant to Rule 16 of the Federal Rules of Civil
Procedure, "[e]ven a prima facie element of the plaintiff's case
may be removed from dispute" pursuant to a stipulation.
Smith v. Washington Sheraton Corp., 135 F.3d 779, 784 (D.C.
Cir. 1998). The concerns underlying Rule 16 compel the
same result for the analogous Scheduling Stipulation agreed
to by the Commission and GSK in this case. Cf. Meadow
Gold Prods. Co. v. Wright, 278 F.2d 867, 869 (D.C. Cir. 1960)
(pretrial procedures aimed at "eliminating unnecessary proof
and issues, lessening the opportunities for surprise and there-
by expediting the trial"); D.D.C. Local Civ. Rule 7.1(m)
(requiring parties to consult in advance of filing non-
dispositive motion "in a good-faith effort ... to narrow the
areas of disagreement").
The question that remains is whether the district court
erred in ruling that GSK failed to satisfy the second prerequi-
site for attorney-client privilege--that the documents have
been kept confidential. GSK contends that this issue, too,
was raised in a manner that deprived the Company of an
opportunity to respond. We think not. The Commission
took the position in its negotiations with GSK that the
Company had lost its claim of privilege by disseminating the
documents widely. This argument put the Company on
notice that it needed to establish it had kept the documents
confidential. The Commission renewed the point in its open-
ing brief to the district court thus: "In view of the breadth of
distribution and GSK's failure to carry its burden of establish-
ing that each and every recipient had a demonstrable 'need to
know,' ... GSK's assertions of attorney-client privilege must
fail...." And the Company joined this argument on the
merits before the district court. Having defended as suffi-
cient the evidence it submitted to the district court on this
point, GSK may not now claim it was unfairly surprised by
the argument.
Although the district court was correct to entertain the
Commission's second argument, it erred in resolving the legal
issue. The applicable standard is, as the district court recog-
nized, whether the "the documents were distributed on a
'need to know' basis or to employees that were 'authorized to
speak or act' for the company." 203 F.R.D. at 19 (quoting
Coastal States Gas Corp. v. DOE, 617 F.2d 854, 863 (D.C. Cir.
1980)). The Company's privilege log and the affidavit of
Charles Kinzig establish that GSK circulated the documents
in question only to specifically named employees and contrac-
tors, most of whom were attorneys or managers and all of
whom "needed to provide input to the legal department
and/or receive the legal advice and strategies formulated by
counsel." The affidavit also states that each intended recipi-
ent was bound by corporate policy or, in the case of the
contractors, by a separate understanding, to keep confidential
the contents of the documents. The Company's submission
thus leads ineluctably to the conclusion that no document was
"disseminated beyond those persons who, because of the
corporate structure, need[ed] to know its contents." Diversi-
fied Indus., Inc. v. Meredith, 572 F.2d 596, 609 (8th Cir. 1978)
(en banc).
The district court faulted GSK for not having explained
"why any, let alone all, of the employees received copies of
certain documents," 203 F.R.D. at 19, and the Commission
likewise claims on brief that GSK should have shown why
each individual in possession of a confidential document
"needed the information [therein] to carry out his/her work."
These demands are overreaching. The Company's burden is
to show that it limited its dissemination of the documents in
keeping with their asserted confidentiality, not to justify each
determination that a particular employee should have access
to the information therein. Not only would that task be
Herculean -- especially when the sender and the recipient
are no longer with the Company -- but it is wholly unneces-
sary. After all, when a corporation provides a confidential
document to certain specified employees or contractors with
the admonition not to disseminate further its contents and the
contents of the documents are related generally to the em-
ployees' corporate duties, absent evidence to the contrary we
may reasonably infer that the information was deemed neces-
sary for the employees' or contractors' work. Compare
Coastal States, 617 F.2d at 863 (confidentiality lost when
organization "admitted that it does not know who has had
access to the documents, and there is undisputed testimony
that ... copies of the memoranda were circulated to all area
offices"). We do not presume, therefore, that any business
would include in a restricted circulation list a person with no
reason to have access to the confidential document--that is,
one who has no "need to know." Id.
Moreover, we can imagine no useful purpose in having a
court review the business judgment of each corporate official
who deemed it necessary or desirable for a particular employ-
ee or contractor to have access to a corporate secret. It
suffices instead that the corporation limited dissemination to
specific individuals whose corporate duties relate generally to
the contents of the documents. As we have seen in this case,
the privilege log and the Kinzig Declaration together estab-
lish that GSK did just that, and the Company thereby demon-
strated its entitlement to the attorney-client privilege. The
FTC has proffered nothing to the contrary.
Our conclusion that the documents are protected by the
attorney-client privilege extends also to those communications
that GSK shared with its public relations and government
affairs consultants. The Kinzig affidavit notes that GSK's
corporate counsel "worked with these consultants in the same
manner as they d[id] with full-time employees; indeed, the
consultants acted as part of a team with full-time employees
regarding their particular assignments" and, as a result, the
consultants "became integral members of the team assigned
to deal with issues [that] ... were completely intertwined
with [GSK's] litigation and legal strategies." In these cir-
cumstances, "there is no reason to distinguish between a
person on the corporation's payroll and a consultant hired by
the corporation if each acts for the corporation and possesses
the information needed by attorneys in rendering legal ad-
vice." See In re Copper Market Antitrust Litig., 200 F.R.D.
213, 219 (S.D.N.Y. 2001).
III. Conclusion
Because we hold the 91 documents are protected by the
attorney-client privilege, we have no occasion to address
GSK's other arguments, including its claim that a subset of
those 91 documents are attorney work product. For the
foregoing reasons, the order of the district court enforcing
the subpoena is
Reversed.