In Re. Subpoena Duces Tecum Issued to Commodity Futures Trading Commission WD Energy Services Inc.

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 29, 2005 Decided March 3, 2006

No. 05-5168

IN RE: SUBPOENA DUCES TECUM ISSUED TO COMMODITY
FUTURES TRADING COMMISSION

WD ENERGY SERVICES INC.,
APPELLANT

Appeal from the United States District Court
for the District of Columbia
(No. 04ms00564)

Julian W. Poon argued the cause for appellant. With him
on the briefs were David A. Battaglia, J. Christopher Jennings,
and Miguel A. Estrada. Douglas F. John entered an appearance.

Steven N. Williams argued the cause for appellee E. & J.
Gallo Winery. With him on the brief were Jon Cuneo and David
W. Stanley.

Michael S. Raab, Attorney, U.S. Department of Justice,
argued the cause for federal appellee. With him on the brief
were Peter D. Keisler, Assistant Attorney General, Kenneth L.
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Wainstein, U.S. Attorney, Catherine Y. Hancock, Attorney, Kirk
T. Manhardt, Deputy General Counsel, Commodity Futures
Trading Commission, Glynn L. Mays, Senior Assistant General
Counsel, and Gloria P. Clement, Assistant General Counsel.
Thuy T. Dinh, Attorney, entered an appearance.

Before: ROGERS, TATEL and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: This is an appeal of a discovery
order. In April 2003, E. & J. Gallo Winery sued WD Energy
Services, Inc. (f/k/a EnCana Energy Services, Inc.) in the
Eastern District of California during the pendency of an
investigation by the Commodity Futures Trading Commission
of the California natural gas market. Gallo alleged that WD
Energy (and other energy companies) had unlawfully
manipulated the California energy market in violation of state
and federal laws. During discovery, Gallo sought documents
from WD Energy with respect to the Commission’s
investigation and settlement with WD Energy. WD Energy
produced many of the subpoenaed documents, but withheld
documents that it characterized as relating to the settlement with
the Commission. When Gallo moved to compel compliance
with its subpoena, a Magistrate Judge ruled that the withheld
documents were protected by a federal settlement privilege
under FED. R. EVID. 501.

Gallo also served on the Commission a third party judicial
subpoena from the district court for the District of Columbia to
produce the WD Energy documents in its possession. The
Commission indicated it would interpose no governmental
privilege in responding to the subpoena. However, WD Energy
filed objections to the subpoena, arguing that Gallo was
collaterally estopped by the Magistrate’s ruling on the
 3

settlement privilege and, alternatively, that many of the
documents were protected by a federal settlement privilege
under FED. R. EVID. 501. The district court rejected WD
Energy’s collateral estoppel arguments, ruled that no federal
settlement privilege existed under FED. R. EVID. 501, and
granted Gallo’s motion to compel the Commission’s compliance
with the subpoena. See In re Subpoena Issued to CFTC, 370 F.
Supp. 2d 201, 207 & n.7, 212 (D.D.C. 2005) (“Subpoena”). WD
Energy appeals.

Upon de novo review, we hold that the Magistrate’s
privilege ruling was not entitled to preclusive effect under the
principle of collateral estoppel. In arguing that collateral
estoppel applied to the Magistrate’s ruling, WD Energy failed to
meet its burden to show that the same documents were at issue
in both fora; in addition, the Magistrate’s ruling contains a
potential ambiguity regarding whether the privilege issue was
actually decided. WD Energy’s contention based upon the
doctrine of law of the case lacks merit because the third-party
subpoena enforcement proceeding was a new proceeding in a
different court. We do not reach the question whether a federal
settlement privilege exists under FED. R. EVID. 501. WD Energy
failed to meet its burden of demonstrating that the disputed
subpoenaed documents were created for the purpose of
settlement discussions and therefore would merit protection
under any federal settlement privilege that the court might
recognize. Accordingly, we affirm the grant of the motion to
compel the Commission’s compliance with Gallo’s subpoena
without reaching the merits of the district court’s ruling that no
settlement privilege exists under FED. R. EVID. 501.

I.

Orders compelling production of allegedly privileged
information satisfy the three criteria for collateral review under
 4

Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949).
In re Sealed Case (Med. Records), 381 F.3d 1205, 1209 (D.C.
Cir. 2004). Under doctrine deriving from Perlman v. United
States, 247 U.S. 7 (1918), a discovery order directed at a
disinterested third party is treated as an immediately appealable
final order because the third party generally lacks a sufficient
stake in the proceeding to risk contempt by refusing compliance.
See Church of Scientology of Cal. v. United States, 506 U.S. 9,
18 n. 11 (1992). In reviewing a discovery order directed at a
third party, our review is for abuse of discretion. See In re
Sealed Case, 121 F.3d 729, 740 (D.C. Cir. 1997). “Because a
‘district court by definition abuses its discretion when it makes
an error of law,’ the ‘abuse of discretion standard includes
review to determine that the discretion was not guided by
erroneous legal conclusions.’” In re Sealed Case (Med.
Records), 381 F.3d at 1211 (quoting Koon v. United States, 518
U.S. 81, 100 (1996)); see also Tuite v. Henry, 98 F.3d 1411,
1415 (D.C. Cir. 1996). Legal conclusions are reviewed de novo.
See In re Sealed Case, 146 F.3d 881, 883 (D.C. Cir. 1998); In
re Subpoena Served upon the Comptroller of the Currency, 967
F.2d 630, 633 (D.C. Cir. 1992).

Although WD Energy has failed to obtain a stay of the
district court’s order pending appeal, and the Commission has
now produced the documents to Gallo, WD Energy’s appeal is
not moot. In Church of Scientology, 506 U.S. at 13, the
Supreme Court held that a court’s ability to offer a partial
remedy, such as ordering the return or destruction of disputed
materials, is sufficient to prevent mootness. WD Energy seeks
the return of its documents to the Commission and the
destruction of all work product stemming from Gallo’s
examination of the documents. Cf. FTC v. Compagnie De
Saint-Gobain-Pont-a-Mousson, 636 F.2d 1300, 1327 (D.C. Cir.
1980). Thus, notwithstanding the Commission’s compliance
with Gallo’s subpoena, the court can provide a meaningful
 5

remedy. See Church of Scientology, 506 U.S. at 12-13.

II.

WD Energy contends that the district court erred by not
applying collateral estoppel to the Magistrate’s order because all
of the standards for establishing the preclusive effect of a prior
judgment have been satisfied. It relies on Yamaha Corp. of
America v. United States, 961 F.2d 245 (D.C. Cir. 1992), where
the court set forth the three conditions that must be satisfied in
order to bind a party to a prior determination of a legal or factual
issue:

First, the same issue now being raised must have been
contested by the parties and submitted for judicial
determination in the prior case. Second, the issue must
have been actually and necessarily determined by a
court of competent jurisdiction in that prior case.
Third, preclusion in the second case must not work a
basic unfairness to the party bound by the first
determination.

Id. at 254 (citations omitted); see, e.g., Jack Faucett Assocs.,
Inc. v. Am. Tel. and Tel. Co., 744 F.2d 118, 125 (D.C. Cir.
1984); Otherson v. Dep’t of Justice, 711 F.2d 267, 273 (D.C.
Cir. 1983). As the party invoking collateral estoppel, WD
Energy bears the burden of establishing that the conditions for
its application have been satisfied. See Democratic Cent.
Comm. of D.C. v. Washington Metro. Area Transit Auth., 842
F.2d 402, 409 (D.C. Cir. 1988); see also Blonder-Tongue Labs.,
Inc. v. Univ. of Ill. Found., 402 U.S. 313, 350 (1971).

A.
The background to WD Energy’s collateral estoppel claim
begins in 2002, when the Commission opened an investigation
into the manipulation of California natural gas markets by a
 6

number of energy companies, including WD Energy, for
violation of the Commodity Exchange Act, 7 U.S.C. §§ 9, 13b,
13(a)(2), 15 (2000). In June 2002, the Commission informed
WD Energy that it was a subject of this investigation. WD
Energy produced a large number of documents in response to a
Commission subpoena of January 24, 2003 and the
Commission’s subsequent requests for information. WD Energy
requested, pursuant to a Commission regulation, 17 C.F.R. §
145.9 (2003), that the documents it was submitting be treated as
confidential under the Freedom of Information Act (“FOIA”), 5
U.S.C. § 552 (2000), which affords protection for certain
privileged documents, see id. § 552(b)(4). On July 28, 2003, the
Commission entered into a settlement agreement under which
WD Energy paid $20 million as a civil penalty. See In the
matter of WD Energy Services, Inc., Commission Docket No.
03-02, Comm. F. L. Rep. (CCH) ¶ 29,544, 2003 WL 21742069,
at * 4 (July 28, 2003).

Following the settlement, the Commission notified WD
Energy of FOIA requests lodged by parties contemplating suits
against a number of energy companies for documents related to
the Commission’s investigation of California’s natural gas
market. The Commission asked WD Energy to provide a
“detailed written justification” of its previous requests for
confidential FOIA treatment. By letter of January 5, 2004, WD
Energy listed the categories of documents it deemed to be
privileged, including those it categorized as “settlement
communications” and “voluntarily-created and produced
material.” The Commission agreed, by letter of February 6,
2004, that WD Energy’s “requests for confidential treatment”
under FOIA, contingent upon the requester’s right to appeal,
“should be granted in full.”

While WD Energy was under investigation by the
Commission, Gallo, a large California consumer of natural gas,
sued WD Energy in the Eastern District of California on April
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9, 2003. Gallo subsequently requested discovery of any
documents in WD Energy’s possession that supported the
factual findings in the Commission’s July 28, 2003 settlement
order. WD Energy produced thousands of pages of documents
and many hours of audio recordings in response to Gallo’s
discovery requests; however, WD Energy resisted disclosing
many of the documents it had provided to the Commission on
the grounds of various privileges. WD Energy filed a lengthy
privilege log, and, after briefing and argument, a Magistrate
Judge resolved the discovery disputes.

The Magistrate denied in part Gallo’s motion to compel
production of documents that WD Energy had claimed were
privileged, ruling that FED. R. EVID. 501 provided a federal
“settlement privilege” that protected documents created by WD
Energy subsequent to the Commission’s investigation whose
“tenor . . . was to settle [the Commission’s] claims.” Order on
Plaintiff’s Further Discovery Motions (Docs. 303-305, 306), E.
& J. Gallo Winery v. Encana Energy Servs., Inc., No. 03-5412,
at 7 (E.D. Cal. Jan. 28, 2004) (“Magistrate’s Order”). The
Magistrate cited decisions in the Eastern and Central districts of
California and the Sixth Circuit’s decision in Goodyear Tire &
Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 979 (6th
Cir. 2003), holding that a federal settlement privilege existed
under FED. R. EVID. 501. In his concluding paragraph on the
settlement privilege, the Magistrate stated:

Disclosure of the [Commission] documents would
likely chill discussions and thwart tribunal efficiencies
and public interests noted above. The [Commission]
documents likely would be used to cross examine [WD
Energy] under the ruse of impeachment evidence to
eviscerate privacy expectations. [WD Energy has]
produced documents provided to [the Commission] and
existing prior to [the Commission’s] investigation.
Moreover, the pending D.C. court action militates
 8

against overriding [WD Energy’s] assertion of the
settlement privilege.

Magistrate’s Order at 7. Subsequently, the Magistrate stated in
a letter of February 23, 2005, in response to Gallo’s letter
requesting clarification, that he was not deferring to the D.C.
district court but “[b]ased on WD Energy’s representations that
it created and provided to [the Commission] certain documents
to reach settlement,” he had “recognized and applied the
settlement privilege to such documents.” On March 7, 2005,
Gallo moved in the district court for reconsideration of the
Magistrate’s Order, as clarified by his February 23, 2005 letter.

While this discovery dispute was being litigated in
California, Gallo served on the Commission a third party
judicial subpoena from the district court of the District of
Columbia, directing the Commission to produce the documents
it had received from WD Energy (and other energy companies)
during its investigation of companies involved in the California
natural gas market. Gallo filed a motion to compel the
Commission’s compliance with the subpoena. WD Energy filed
a response, arguing in part that “[m]any of the documents that
Gallo is seeking . . . are documents that WD [Energy] prepared
during the course of the [Commission’s investigation] and
provided to the [Commission] in order to facilitate settlement.”
WD Energy Services, Inc., Objections and Opposition to
Subpoena Issued by E. & J. Gallo Winery to U.S. Commodity
Futures Trading Commission of Dec. 16, 2004 at 10-11. The
Commission responded that it would not assert any
governmental privileges against compliance and would defer
taking a position on the settlement privilege until WD Energy
had identified the documents and transactions it considered
protected by the settlement privilege. WD Energy subsequently
filed an affidavit of counsel in support of its privilege claim,
attaching the February 6, 2004 letter from the Commission.
 9

The D.C. district court held a hearing on Gallo’s motion to
compel on March 11, 2005. Both Gallo and the Commission
challenged whether any of the documents sought under the
subpoena would be covered by a settlement privilege.
According to the Commission, no documents that remained
subject to the subpoena were created by WD Energy in order to
settle the Commission’s enforcement action or as a result of
settlement discussions, but were instead produced in response to
the Commission’s investigatory demands. WD Energy
responded that Gallo was collaterally estopped by the
Magistrate’s Order from enforcing its subpoena, and that the
Commission had been made aware by WD Energy’s January 5,
2004 FOIA letter of the documents WD Energy claimed were
privileged. Gallo also argued that the Magistrate’s Order was
not a final order.

On April 28, 2005, the district court granted Gallo’s motion
to compel, ruling that no estoppel attached to the Magistrate’s
Order and that there was no federal settlement privilege under
FED. R. EVID. 501. See Subpoena, 370 F. Supp. 2d at 207 & n.7,
212. A week later, the district court in the Eastern District of
California, presuming that the Commission had turned over the
withheld documents to Gallo in accord with the D.C. district
court’s order of April 28th, denied Gallo’s motion for
reconsideration of the Magistrate’s Order as moot, and further
ruled, even if the issue was not moot, that Gallo’s motion for
reconsideration was untimely under FED. R. CIV. P. 72(a) and
E.D. Cal. Local Rule 72-303(b). See E. & J. Gallo Winery v.
Encana Energy Servs., Inc., No. 03-5412, slip op. at 6 (E.D. Cal.
May 4, 2005).

B.
Neither Gallo nor the Commission challenges WD Energy’s
right to raise collateral estoppel as a ground to quash or modify
a subpoena under FED. R. CIV. P. 45(c)(3)(A)(iii). Although we
have found no authority that authorizes a third party to a
 10

subpoena to advance an estoppel claim, this is a reasonable
extension of the settled practice of allowing a party not named
in a subpoena to challenge the subpoena in ancillary proceedings
in the district court and on appeal under the Perlman doctrine.
See Perlman, 247 U.S. at 13; In re Sealed Case (Med. Records),
381 F.3d at 1210-11. Such an extension also comports with our
precedent. For instance, in United States v. Hubbard, 650 F.2d
293 (D.C. Cir. 1980), the court held that a third party may
attempt to maintain the confidentiality of materials that are
under the control of a court by initiating an ancillary proceeding
without intervening in the underlying litigation. Id. at 310-11.
The court noted a variety of circumstances in which third parties
may participate in proceedings in order to protect their interests.
See id. at 313 n. 67; see also In re Sealed Case, 237 F.3d 657,
663-64 (D.C. Cir. 2001); United States v. AT&T, 642 F.2d 1285,
1292 (D.C. Cir. 1980); Gravel v. United States, 408 U.S. 606,
608 n.1 (1972); cf. United States v. RMI Co., 599 F.2d 1183,
1186 (3d Cir. 1979). This is consistent with the dual purposes
behind collateral estoppel, namely, to “protect[] litigants from
the burden of relitigating an identical issue with the same party
or his privy and . . . [to] promot[e] judicial economy by
preventing needless litigation.” Parklane Hosiery Co., Inc. v.
Shore, 439 U.S. 322, 326 (1979).

In rejecting WD Energy’s collateral estoppel argument, the
district court focused on the fact that the Commission, as the
holder of the documents and a participant in the settlement
discussions underlying WD Energy’s settlement privilege claim,
had a significant interest but, because it was not a party to the
California proceedings, never had an opportunity to be heard on
the settlement privilege issue. See Subpoena, 370 F. Supp. 2d
at 206. Because Gallo is the party potentially precluded from
relitigating the issue of the settlement privilege and its
applicability to the withheld documents, we need not address the
significance of the Commission’s absence from the California
proceedings. Additionally, like the district court, which
 11

considered but did not decide whether the Magistrate’s Order
was a final order in light of the implication that, under the
Federal Magistrates Act, 28 U.S.C. §§ 636(b)(1)(A) or (B)
(2000), a Magistrate’s determination only becomes final once
the district court makes it final, see Subpoena, 370 F. Supp. 2d
at 205-06 (citing, e.g., J.R. Stripling v. Jordan Prod. Co., 234
F.3d 863, 868 (5th Cir. 2000)), we need not decide whether the
Magistrate’s Order is final for estoppel purposes. Cf.
Restatement (Second) of Judgments § 13. Assuming finality,
WD Energy has failed to meet its burden to establish that the
three conditions for collateral estoppel have been satisfied. See
Yamaha, 961 F.2d at 254.

First, it is unclear whether the same issues were presented
in both the California and the District of Columbia proceedings.
The question before the D.C. district court was the applicability
of a settlement privilege to specific documents. WD Energy
asserted the same settlement privilege in both fora, and Gallo’s
California lawsuit is the underlying basis of WD Energy’s
litigation in the D.C. district court. Nevertheless, it is not clear
that the same documents are being contested here as in the
Eastern District of California. The Magistrate’s Order specifies
which documents were protected by the settlement privilege
only by general reference to WD Energy’s privilege log and
suggests that the Magistrate did not, in order to determine
whether the privilege would apply to particular documents,
personally examine the withheld documents or hear testimony
about the circumstances surrounding their creation and use. The
Magistrate’s Order refers only to the “tenor” of the documents
based on WD Energy’s representations that the only withheld
documents were both related to facilitating settlement with the
Commission and created after the Commission “commenced its
investigation.” Magistrate’s Order at 5.

Inasmuch as the Magistrate’s Order was designed to settle
a large number of discovery disputes between the parties, and
 12

the Magistrate noted some deficiencies in WD Energy’s
privilege log that made it difficult to determine in all instances
which documents were claimed as privileged, it appears that the
Magistrate contemplated the possibility of subsequent
proceedings to define the circumstances surrounding the
creation of the documents and their role in the settlement
discussions; then, either Gallo could contest the applicability of
the settlement privilege on a document-by-document basis or the
Magistrate could conduct an in camera review. So far as the
record before this court indicates, this had not happened before
the D.C. district court granted Gallo’s motion to compel the
Commission to comply with Gallo’s subpoena. In any event,
neither the D.C. district court nor the district court in the Eastern
District of California appear to have examined the withheld
documents or the privilege log. Thus, WD Energy has been
unable to show that the specific documents Gallo seeks in the
D.C. district court already have been determined to be privileged
by the Magistrate.

This court is not in a position to determine with confidence
that the withheld documents ruled by the Magistrate to be
protected by a federal settlement privilege are the same
documents WD Energy sought to have withheld in the D.C.
district court proceedings. The district court noted that before
the Magistrate, WD Energy had asserted that the privilege
applied to a larger set of documents. See Subpoena, 370 F.
Supp. 2d at 205 n.2. WD Energy, through the proffer at the
March 11, 2005 hearing of an excerpt from its January 5, 2004
FOIA letter to the Commission, attempted to define the scope of
its assertion of the settlement privilege to protect only eight sets
of subpoenaed documents. However, through this proffer, WD
Energy also made clear that it was claiming a privilege for
documents it submitted to the Commission between February
and May of 2003. This was after the Commission’s subpoena
of January 24, 2003 but was, according to the Commission’s
statement to the D.C. district court at the hearing that the
 13

Commission was not engaging in settlement discussions but was
conducting an investigation during this time, apparently before
any explicit discussions in which the Commission indicated its
willingness to address the terms of a settlement with WD
Energy. The Magistrate’s Order does not address whether
documents filed with the Commission before the
commencement of discussions over the terms of settlement were
included within the scope of its ruling that settlement documents
were protected by a federal settlement privilege. The affidavit
of WD Energy’s counsel, while stating that “certain [post-
January 2003 created] materials were prepared for the sole
purpose of facilitating and furthering settlement,” Affidavit of
Douglas F. John, Feb. 25, 2005 at 1-2, does not identify those
documents individually or as being the eight sets of documents
later identified for the district court at the March 11, 2005
hearing; nor does it identify the dates of the settlement
discussions. The Magistrate’s Order, in turn, does not tie the
settlement privilege to specifically identified documents or to
specific settlement discussions. Hence, nothing on the record
before this court shows with a reasonable degree of certainty
that the privilege found by the Magistrate reached the eight sets
of documents at issue in the D.C. district court.

The uncertainty about the relationship between the
documents in the two fora is highlighted by the Commission’s
assertion in the D.C. district court that, upon reviewing the WD
Energy documents in its possession, the Commission was
unclear whether any of the remaining subpoenaed documents
would be covered by a settlement privilege. The Commission
further observed that because no judicial officer had identified
the withheld documents, were the D.C. district court to accord
preclusive effect to the Magistrate’s Order, the Commission
might have to go to California in order to determine which
documents were covered by the settlement privilege. By failing
to timely make a record in the D.C. district court that
unambiguously indicated that the same “settlement” documents
 14

were at issue in both fora, WD Energy failed to meet its burden
to show that the same issue was presented in the California
proceedings.

Second, there is a potential ambiguity in the Magistrate’s
Order about whether the question of privilege was actually and
necessarily determined. See NextWave Pers. Commc’ns, Inc. v.
FCC, 254 F.3d 130, 147 (D.C. Cir. 2001). The Magistrate
concluded his analysis of the federal settlement privilege by
observing, “Moreover, the pending D.C. court action militates
against overriding [WD Energy’s assertion] of the settlement
privilege.” Magistrate’s Order at 7. On the one hand, the
Magistrate may have meant that it was prudent to recognize that
a settlement privilege covered the withheld WD Energy
documents in order to prevent Gallo from obtaining them from
the Commission in the D.C. district court proceeding. On the
other hand, he may have meant that he was electing to defer a
decision pending the outcome of the D.C. district court
proceeding as WD Energy had requested. See id. at 3. To the
extent that the sentence may plausibly be read to suggest this
latter interpretation, the equivocal nature of the “militates”
sentence would suggest that the California proceedings did not
necessarily determine the settlement privilege issue. Although
the Magistrate clarified his intent in a February 23, 2005 letter
responding to Gallo’s ex parte letter inquiry, no letter could
alter the Magistrate’s Order itself, and because the district court
in the Eastern District of California issued its opinion after the
D.C. district court opinion now on review, its denial of Gallo’s
motion for reconsideration has no bearing on whether the
Magistrate’s Order actually and necessarily determined the
issue of privilege with respect to the documents.

The Supreme Court has observed: “Redetermination of
issues is warranted if there is reason to doubt the quality,
extensiveness, or fairness of procedures followed in prior
litigation.” Kremer v. Chem. Constr. Corp., 456 U.S. 461, 481
 15

(1982) (quoting Montana v. United States, 440 U.S. 147, 164,
n.11 (1979)). There is reason here. WD Energy has failed to
build a record in the D.C. district court that links the eight sets
of documents listed in the proffered excerpt of its January 5,
2004 FOIA Letter to the Commission with the documents listed
in its privilege log before the Magistrate Judge as subject to a
settlement privilege. Without such linkage, it is impossible to
know what specific documents the Magistrate concluded were
privileged; the cases cited in the Magistrate’s Order involved
different factual situations and hence cannot resolve the
uncertainty, particularly as there are no findings by either the
Magistrate or a district court on the settlement discussions that
would be covered by a federal settlement privilege. The fact
that the Commission informed the D.C. district court that the
WD Energy documents in its possession were created in
response to the Commission’s investigation and not in
connection with settlement discussions simply underscores the
uncertainty about whether the same issue was presented in both
fora, which alone would preclude according collateral estoppel
effect to the Magistrate’s Order. See Yamaha, 961 F.2d at 254.

Therefore, we hold that the district court did not err in
refusing to give preclusive effect to the Magistrate’s ruling on
the settlement privilege.

III.

WD Energy also contends that the doctrine of law of the
case called for deferring to the Magistrate’s determination that
the withheld documents were protected by a federal settlement
privilege “in these coordinated proceedings” to compel the
Commission to produce the same documents. Its contention is
meritless. Law of the case doctrine applies within the same
case, proceeding, or action. See generally Crocker v. Piedmont
Aviation, Inc., 49 F.3d 735, 739-40 (D.C. Cir. 1995); 18B
Charles Alan Wright, Arthur R. Miller & Edward H. Cooper,
 16

Fed. Prac. & Proc. Juris. 2d § 4478 (2002). Gallo’s lawsuit
against WD Energy in the Eastern District of California has not
been transferred to the district court in the District of Columbia.
“[A] subpoena enforcement action is technically a different
‘case,’” In re Subpoena Duces Tecum Served on Office of
Comptroller of the Currency, 145 F.3d 1422, 1425 (D.C. Cir.
1998) (dictum), as both the Magistrate and the district court in
the Eastern District of California recognized. The cases on
which WD Energy relies, such as Christianson v. Colt
Industries Operating Corp., 486 U.S. 800, 815-16 (1988),
involve the transfer of proceedings between courts, not the
commencement of a new, albeit ancillary, proceeding in a
different court.

IV.

FED. R. EVID. 501 provides, in relevant part:

the privilege of a witness, person, government, State,
or political subdivision thereof shall be governed by
the principles of the common law as they may be
interpreted by the courts of the United States in the
light of reason and experience.

The rule’s invocation of “reason and experience” was drawn
from Wolfle v. United States, 291 U.S. 7, 12 (1934); see also
Hawkins v. United States, 358 U.S. 74, 79 (1958), and, as the
Supreme Court observed in Trammel v. United States, 445 U.S.
40 (1980), “acknowledge[s] the authority of the federal courts
to continue the evolutionary development” of privileges as
matters of federal common law. Looking at the history of the
rule, the Court in Trammel explained that:

The general mandate of [FED. R. EVID. 501] was
substituted by the Congress for a set of privilege rules
drafted by the Judicial Conference Advisory
 17

Committee on Rules of Evidence and approved by the
Judicial Conference of the United States and by this
Court. That proposal defined nine specific privileges,
including a husband-wife privilege . . . and eliminated
the privilege for confidential marital communications.
In rejecting the proposed Rules and enacting [FED. R.
EVID. 501], Congress manifested an affirmative
intention not to freeze the law of privilege. Its purpose
rather was to ‘provide the courts with the flexibility to
develop rules of privilege on a case-by-case basis,’
120 Cong. Rec. 40891 (1974) (statement of Rep.
Hungate), and to leave the door open to change.

Id. at 47-48 (citations omitted). The Supreme Court in Jaffee v.
Redmond, 518 U.S. 1, 10-15 (1996), has provided guidance for
lower courts in determining whether to establish a new privilege
under FED. R. EVID. 501, instructing that courts consider
whether the privilege is “rooted in the imperative need for
confidence and trust,” 518 U.S. at 10 (internal quotation marks
omitted), whether the privilege would “serve public ends,” id.
at 11 (internal quotation marks and alteration omitted), what
evidentiary benefit would arise from denying the privilege, id.
at 11-12, and the States’ rules on the subject, id. at 12-15.

It is to the federal courts’ authority under FED. R. EVID. 501
that WD Energy looks for the establishment of a federal
settlement privilege to cover the documents it claims were
prepared for the purposes of facilitating settlement of a pending
enforcement action brought by the Commission. WD Energy
contends that the district court, by failing to recognize that the
Sixth Circuit’s decision in Goodyear Tire & Rubber, 332 F.3d
976, was based on a proper application of the Jaffee criteria for
recognizing a federal privilege under FED. R. EVID. 501,
compounded its errors by holding that federal law does not
recognize the existence of any privilege protecting settlement
communications between parties to prospective or actual
 18

litigation.

This case does not present the occasion to examine whether
federal common law provides a settlement privilege. It is well
established that the proponent of a privilege bears the burden of
demonstrating facts sufficient to establish the privilege’s
applicability. See, e.g., United States v. Legal Servs. for N.Y.
City, 249 F.3d 1077, 1081 (D.C. Cir. 2001); In re Sealed Case,
148 F.3d 1073, 1076 (D.C. Cir. 1998); see also Schreiber v.
Soc’y for Sav. Bancorp, Inc., 11 F.3d 217, 220 (D.C. Cir. 1993).
This entails a threshold burden to show entitlement to a ruling
on the existence of a privilege. “A claim of privilege must be
presented to a district court with appropriate deliberation and
precision before a court can rule on the issue, and the fact that
[a] claim arose in the context of a subpoena enforcement
proceeding, rather than routine civil litigation, does not alter this
requirement.” SEC v. Lavin, 111 F.3d 921, 928 (D.C. Cir.
1997) (citations and internal quotations omitted); see Friedman
v. Bache Halsey Stuart Shields, Inc., 738 F.2d 1336, 1342 (D.C.
Cir. 1984). The “basis of [a] privilege” must be “adequately
established in the record,” Liberty Lobby, Inc. v. Dow Jones &
Co., Inc., 838 F.2d 1287, 1303 (D.C. Cir. 1988), through
evidence “sufficient . . . to establish the privilege . . . with
reasonable certainty,” FTC v. TWR, Inc., 628 F.2d 207, 213
(D.C. Cir. 1980).

Although Federal Rule of Civil Procedure 45(d)(2) does
not speak directly to the burden on third parties raising claims
of privilege under the Perlman doctrine, the applicability of a
similar burden is natural. Rule 45(d)(2) is generally satisfied by
the submission of a privilege log detailing each document
withheld and the reason. See Tuite, 98 F.3d at 1416. For
example, had the Commission objected to Gallo’s subpoena on
the basis of a privilege, the Commission would have been
required to state such claims “expressly” and with a
“description of the nature of the documents, communications,
 19

or things not produced that is sufficient to enable the demanding
party to contest the claim.” FED. R. CIV. P. 45(d)(2); see Tuite,
98 F.3d at 1416. Rule 45(d)(2) serves two purposes, both of
which are relevant in ancillary actions under Perlman and
acquire special moment when a court is faced with the challenge
of applying Jaffee to assertions of historically novel privileges.
First, it prevents courts from addressing often difficult questions
in the abstract. See In re Sealed Case, 856 F.2d at 271 (D.C.
Cir. 1988). Second, timely and detailed explanation of the
grounds of the privilege protects the subpoenaing party’s right
to contest the claims of privilege. See Tuite, 98 F.3d at 1416.

In light of the admonitions from the Supreme Court and
this court that courts proceed cautiously in deciding whether
novel privileges exist under federal common law, see Univ. of
Penn. v. EEOC, 493 U.S. 182, 194 (1990); United States v.
Nixon, 418 U.S. 683, 710 (1974); In re Sealed Case, 148 F.3d
at 1075-77, the court must ensure that WD Energy has
identified with particularity the documents claimed as
privileged and the basis for this claim, much as WD Energy
may have done in the Eastern District of California by filing a
privilege log and affidavits regarding the settlement discussions,
before determining whether such a privilege exists. See
Friedman, 738 F.2d at 1342-43. Both the plain text of FED. R.
EVID. 501, which calls on federal courts to “interpret” the
“principles of the common law . . . in the light of reason and
experience,” and the standards articulated by the Supreme Court
in Jaffee and Trammel, suggest that a court’s inquiry must be
informed by a nuanced appreciation of the relevant factual
context. As generally understood, the “evolutionary”
development of the common law is a product of intensely fact-
sensitive judicial responses to particular and not abstract
disputes. As then-Judge Benjamin Cardozo succinctly
observed: “The common law . . . . method is inductive, and it
draws its generalizations from particulars.” The Nature of the
Judicial Process 22-23 (1921). Where the proponent of a
 20

privilege does not identify the particular documents at issue and
the particular contextual basis for claiming a privilege, thereby
affording a challenger an opportunity to set forth its position, a
court will be hamstrung when it undertakes the requisite
analysis. See Jaffee, 518 U.S. at 10-15; In re Sealed Case, 148
F.3d at 1076-77. Where detailed description of the contested
documents would undermine the claimed privilege, the
proponent’s burden to describe with particularity can be met in
other ways, such as in camera review by the court. See, e.g.,
Judicial Watch, 432 F.3d at 370.

The district court asked the pertinent questions during the
March 11, 2005 hearing on Gallo’s motion to compel but
received only incomplete responses. First, the district court
sought to clarify which documents were at issue. Gallo and the
Commission, after reviewing the WD Energy documents in its
possession, had asserted in their pleadings that WD Energy had
failed to carry its burden of building a record that could
demonstrate that any of the subpoenaed documents were
privileged. At the hearing Gallo argued that “it was incumbent
upon WD [Energy] . . . to specifically tell this [c]ourt with a
great deal of accuracy” which subpoenaed documents were
claimed as privileged. Transcript of March 11, 2005 at 7-8.
When the district court expressed concern that the Commission
may possess documents very clearly in the nature of settlement
proposals, Gallo responded, “If there are, WD [Energy] hasn’t
told us what they are, and it was their duty to do so . . . .” Id. at
10.

WD Energy, for its part, conceded that it bore the burden of
providing a “very specific description” of the documents it
claimed were privileged: “it’s clearly necessary for us to do
that.” Id. at 59-60. At the hearing, WD Energy told the district
court that in responding to the FOIA requests following its
settlement with the Commission, it had “advised the
[Commission] of exactly the documents that [WD Energy]
 21

sought to protect because they were created and provided to the
[Commission] for the purpose of facilitating a settlement . . . .”
Id. at 58. The affidavit of its counsel had declared that “certain
of these materials were prepared for the sole purpose of
facilitating and furthering settlement with the [Commission],”
that “[a]ll of these materials were voluntarily provided to the
[Commission] and [that] they were provided with an
expectation that the information would remain confidential and
would not be used against WD [Energy] in subsequent litigation
. . . .” Affidavit of Douglas F. John of Feb. 25, 2005 at 2.
Attached to the affidavit was a copy of the Commission’s
February 6, 2004 letter stating that WD Energy’s request for
confidential treatment of its submitted documents under FOIA
“should be granted in full.” The district court noted that various
other affidavits submitted by WD Energy “discuss in general
the kinds of documents and in general the kinds of harm.”
Transcript of March 11, 2005 at 20. At the hearing, WD Energy
also produced, for the first time in the D.C. district court
proceeding, an excerpt from its January 5, 2004 FOIA letter to
support its assertion of confidential treatment. Id. at 60. This
one-page excerpt contained WD Energy’s listing of sets of
documents it claimed (and the Commission had agreed) merited
confidential treatment under FOIA. Absent evidence of the
circumstances surrounding the creation of the documents and
their role in settlement discussions, however, identification of
the documents was an incomplete response to the district court’s
inquiry.

Second, the district court asked why WD Energy had
previously provided only generalized descriptions of these
documents. WD Energy explained its refusal to “publicly
disclose” this list or to provide a “very specific description of
what we had provided or created for the [Commission],” id. at
59, on the ground that a more specific assertion would have
vitiated the privilege, see id. WD Energy explained that its
business records were already in Gallo’s possession while the
 22

contested documents were created to help the Commission
understand those business records. If this were the case, then it
behooved WD Energy to proffer the documents or a specific
description of them in a privilege log for in camera inspection
by the court.

Third, the district court sought an explanation of how it
should relate the categories of documents identified in the
excerpt of the January 5, 2004 FOIA letter to the timeline of the
Commission investigation. According to Gallo, WD Energy
had not shown there was a mutual understanding between WD
Energy and the Commission that the documents would be
produced to settle a potential claim in a civil action; rather,
Gallo asserted, WD Energy was relying upon its “supposed
subjective intent at the time [it] provided [documents] rather
than on facts demonstrating that [there] were, in fact, settlement
discussions going on and [that] specific documents . . . were
created pursuant to settlement discussions.” Id. at 14-15. The
district court noted, based on the Commission’s position that
prior to July 2003 it was prepared to move forward with an
enforcement action, that seven of the sets of documents listed
on the excerpt from the 2004 FOIA letter appeared to predate
July 2003. (The only remaining subpoenaed set of listed
documents was dated July 11, 2003.) “How,” asked the district
court, “am I . . . to ascertain whether something created on
March 7, 2003, which is a series of spreadsheets[,] is actually a
settlement document as opposed to just some information that
is being submitted to the investigating agency in an attempt
either to cooperate in the investigation or to talk the agency out
of taking any enforcement action?” Id. at 62. WD Energy
responded that these documents were distinguished from the
many other documents WD Energy had provided to the
Commission because they did not exist on January 24, 2003,
when WD Energy had received the Commission’s subpoena,
“were all stamped privileged and confidential,” id. at 64, and
“belie the efforts of somebody intending to litigate a case * * *
 23

[because] they were concessions. They were quid pro quo,” id.
Even so, in order to respond to the district court’s inquiry, WD
Energy needed to identify the type of information that would
appear on the March 7, 2003 spreadsheets that would indicate
that WD Energy submitted these documents to the Commission
to facilitate settlement. Again, WD Energy needed to provide
the district court with detailed information about the role of the
documents in particular settlement discussions.

Only WD Energy’s proffer of the excerpt of the 2004 FOIA
letter even arguably answered the district court’s questions
about which documents WD Energy claimed would be
protected by a federal settlement privilege. The Commission
argued that this proffer was “too little, too late.” Id. at 144.
Even with the excerpt, the district court was unaware of the
specific connection between the listed documents and the
Commission’s investigation, which was the basis for claiming
a settlement privilege. Although the district court, after
examining the excerpt, better understood in what respect WD
Energy had been claiming a privilege over only a “small group”
of documents, the eleventh hour proffer deprived the district
court of responsive pleadings by Gallo and the Commission,
which could have shed additional light on whether these
documents had been prepared for use in settlement discussions
or in response to the administrative subpoena and other
Commission requests before any settlement discussions began.
Further, while WD Energy’s argument that the listed documents
could be distinguished from others it had provided the
Commission because they were concessions, WD Energy did
not explain away the Commission’s contrary view of events
prior to July 2003.

Moreover, by its own terms, WD Energy’s January 5, 2004
FOIA letter did not address privileges under the federal rules
but confidentiality for purposes of FOIA. The Commission’s
acceptance of WD Energy’s confidentiality claims did not
 24

confer upon these documents a privilege from discovery.
FOIA’s exceptions to disclosure limit only the right to
information conveyed pursuant to that statute, see 5 U.S.C.
§ 552(d), and other limitations on the Commission’s authority
to publish information, such as 7 U.S.C. § 12(a)(1), do not alter
the Commission’s duty to comply with lawful subpoenas after
notice to the party whose information is sought, see id. § 12(f);
Friedman, 738 F.2d at 1344; 17 C.F.R. § 11.4 (2005).

Unlike the district court in Goodyear Tire & Rubber, 332
F.3d at 978-80, the D.C. district court had not itself presided
over the settlement discussions. Neither had the proceedings in
the Eastern District of California been transferred to the D.C.
district court. Hence, under “the well-established sequence of
burdens of going forward,” Friedman, 738 F.2d at 1343, WD
Energy had the burden to build a record containing specific
information about the disputed documents and the factual
context for the privilege claim, including information about
when settlement discussions began, what representations were
made by those involved, and what documents were created or
submitted to the Commission to facilitate those discussions.
Only then would the district court be in a position to evaluate
WD Energy’s claim that the listed sets of documents would be
protected from disclosure by a federal settlement privilege
under FED. R. EVID. 501.

WD Energy did not file a privilege log here, and thus the
record before the D.C. district court consisted of WD Energy’s
general characterizations of the disputed documents and
settlement discussions, a belated description of the specific sets
of documents, and contentions by Gallo and the Commission
that the documents generally and specifically described by WD
Energy would not be covered by a settlement privilege. There
were no factual findings regarding settlement discussions made
in the proceedings in the Eastern District of California that
could fill these gaps and potentially lessen WD Energy’s burden
 25

in the D.C. district court. Without such information, the district
court lacked a sufficient factual context within which to
evaluate whether withholding the listed eight sets of documents
advanced important public interests, satisfied the justified
expectations of the parties, or would have been treated as
privileged under various State laws — each of which can be an
important consideration under Jaffee and other relevant caselaw.
See, e.g., In re Sealed Case, 148 F.3d at 1075-77; Goodyear
Tire & Rubber, 332 F.3d at 980-81. Under the circumstances,
there was an inadequate record upon which the district court
could assess the merits of a novel privilege claim in this circuit
and in all but one other circuit court of appeals. Consequently,
a decision by this court on the merits of the federal settlement
privilege claim would likewise be premature. See Friedman,
738 F.2d at 1343.

Accordingly, we affirm the discovery order granting
Gallo’s motion to compel production by the Commission. The
Magistrate’s Order was not entitled to preclusive effect under
the principle of collateral estoppel, and the law of the case
contention lacks merit. We do not address the merits of WD
Energy’s settlement privilege claim; rather, we affirm on the
alternative ground, see Nat’l Ass’n of Home Builders v. U.S.
Army Corps of Eng’rs, 417 F.3d 1272, 1281 (D.C. Cir. 2005),
that WD Energy has failed to meet its burden of demonstrating
that the disputed subpoenaed documents were created for the
purpose of settlement discussions and therefore would merit
protection under any federal settlement privilege that the court
might recognize. We therefore do not reach the merits of the
district court’s ruling that no federal settlement privilege exists
under FED. R. EVID. 501. That question remains open in this
circuit.