UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
Nos. 97-1002
97-1003
IN RE: GRAND JURY SUBPOENAS
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael A. Ponsor, U.S. District Judge]
Before
Torruella, Chief Judge,
Bownes, Senior Circuit Judge,
and Lynch, Circuit Judge.
Michael
W.
Reilly, with whom Tommasino
&
Tommasino and
Michael G. West were on joint brief for appellants the Client and
the Owner.
John P. Pucci, with whom Jeanne M. Kaiser and Fierst & Pucci
were on brief for appellant Law Firm.
Andrea
N.
Ward, Assistant United States Attorney, with whom
Donald K. Stern
, United States Attorney, was on brief for appellee
United States.
August 13, 1997
TORRUELLA, Chief
Judge. The case before us is a small
piece in a much larger puzzle. A federal grand jury, sitting in
Massachusetts, has been investigating possible criminal activity on
the part of a firm ("firm" or "client") and its owner ("owner").
The firm was in the business of assisting inventors in promoting
their discoveries and in obtaining patents. The government
suspected fraud and began an investigation. During the
investigation, a search warrant was executed at the business
offices of the client. As a result of some of the materials seized
during this search, the government requested and received a grand
jury subpoena directed at the custodian of records at the office of
the firm's legal representative ("law firm"). The subpoena sought
all records "pertaining to charges or billing for legal services"
performed by the law firm for the client. The information sought
included:
1) all documents relating to the establishment
of such entities as clients;
2) all diary entries and other summaries
indicating the hours worked, the hours
charged, the nature or subject of the services
performed, and the identity of the client; and
3) all invoices or bills of any kind.
Subpoena to Testify Before Grand Jury, dated August 5, 1996.
The client and the firm filed separate motions to quash
the subpoena, arguing principally that the billing records
On February 5, 1997, a "Consent Motion to Seal and Redact" was
granted by the district court. In accordance with Federal Rule of
Criminal Procedure 6(e)(6), no references to the parties have been
made in this opinion. See, e.g., United
States v. (Under
Seal),
748 F.2d 871 (4th Cir. 1984).
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contained detailed descriptions of the legal work performed and
that disclosure thereof would violate the attorney-client
privilege.
On December 18, 1996, the district court denied the
motions to quash, holding that "records of the sort exemplified by
Ex. 2 to the Offord Affidavit (attached to the Government's
Response to the Motion to Quash) are not sufficiently specific to
be protected by the attorney-client privilege." See Motion to
Quash Subpoena, Record Appendix, at 24 (margin order). Both the
client and the law firm have appealed the denial of the motion to
quash.
I. Appellate Jurisdiction
As an initial matter, we must determine whether this
court has jurisdiction to hear the appeal.
It is established that, under normal circumstances, a
party seeking to quash a subpoena cannot appeal a court order to
comply without first resisting that order and subjecting itself to
a citation for contempt. United States
v.
Ryan, 402 U.S. 530, 533
(1971); Cobbledick v. United
States, 309 U.S. 323, 328 (1940);
Corporacion
Insular
de
Seguros v. Garcia, 876 F.2d 254, 257 (1st
Cir. 1989).
This rule disposes of the law firm's appeal. The law
firm has not been cited for contempt and, therefore, we lack
jurisdiction to hear the appeal. The client's appeal, however,
implicates a more complex jurisdictional analysis.
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An exception to the rule requiring a contempt citation
prior to appeal exists when subpoenaed documents are in the hands
of a third party. In that case, the owner of the documents may
seek immediate appeal of a district court's order requiring
production of those documents. This exception, known as the
"Perlman doctrine," exists because it is unlikely that a third
party will risk contempt simply to create an appealable order for
the benefit of the owner of the documents. See Perlman v. United
States, 247 U.S. 7, 12-13 (1918). In other words, the district
court order is effectively final with respect to a party that is
powerless to prevent compliance with the order.
When the third party is the document owner's lawyer,
however, a different rule applies. In this circuit, the "question
[of] whether a client may appeal to the court of appeals from a
district court's order directing his attorney to testify before the
grand jury with respect to a communication allegedly covered by the
attorney-client privilege," was decided in In re Oberkoetter, 612
F.2d 15, 16 (1st Cir. 1980). In that case, an attorney had been
ordered by the district court to testify before a grand jury. He
initially declined to do so on the grounds of attorney-client
privilege. Id. The district court ordered him to testify despite
the claim of privilege. The attorney's client then filed an appeal
from the district court order. This court held that it lacked
appellate jurisdiction until such time as the attorney received a
contempt citation.
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The facts of the instant case fall squarely with the
scope of Oberkoetter. We believe, however, that it is time to
reconsider our holding in that case.
We begin by noting the tension between Perlman and
Oberkoetter. In Perlman, exhibits belonging to Perlman were in the
hands of the clerk of the district court in connection with patent
litigation. The district court subsequently ordered the clerk to
produce the exhibits for presentation to a grand jury investigating
charges that Perlman had perjured himself in the patent suit.
Perlman claimed privilege with respect to the exhibits. The
district court denied his petition to restrain their presentation
to the grand jury. Perlman appealed. The Supreme Court ruled that
his appeal should be allowed on the grounds that "Perlman was
powerless to avert the mischief of the order." Perlman, 247 U.S.
Ordinarily, prior panel decisions are binding on future panels
and it is for an en banc court to reexamine the status of a prior
opinion. In rare instances, however, where it has become
relatively clear that a prior precedent of this court was
erroneously decided or is no longer good law, we have achieved the
same result more informally by circulating a proposed panel opinion
that reverses a prior panel to all the active judges of the court
for pre-publication comment. See, e.g., Gallagher v. Wilton
Enters.,
Inc., 962 F.2d 120, 124 n.4 (1st Cir. 1992); Trailer
Marine Transp. Co. v. Rivera Vazquez, 977 F.2d 1, 9 n.4 (1st Cir.
1992);
United States
v.
Bucuvalas, 909 F.2d 593, 598 n.9 (1st Cir.
1990); see
also Ionics,
Inc. v. Elmwood
Sensors,
Inc., 110 F.3d
184, 187 n.3 (1st Cir. 1997) (overturning a circuit precedent in
order to comply with controlling authority). While this practice
is to be used sparingly and with extreme caution, we have employed
it in the special circumstances of this case, with the result that
a majority of the active judges of this court has approved the
overruling of Oberkoetter on the point at issue. Of course, by
resorting to this mechanism, we neither foreclose any party from
filing a formal petition for rehearing en banc nor commit any
member of the court to a position in respect to any such petition.
-5-
at 13. We believe that the reasoning of Perlman is directly
applicable to this case and requires us to accept jurisdiction over
the instant appeal. Even though it is an attorney that is
subpoenaed for his or her client's records, the client here has
been denied the opportunity to avert the mischief of the order by
allowing himself to be held in contempt. The client is at the
mercy of his or her attorney and can only gain a review of the
district court's order if the attorney is prepared to risk a
contempt citation. The real possibility of a serious conflict of
interest cannot be overlooked or denied.
We also take note of the fact that the Supreme Court has
not overruled
Perlman. In Oberkoetter, Judge Wyzanski stated that
"he expects the Supreme Court to ultimately overrule Perlman."
Oberkoetter, 612 F.2d at 18. With the benefit of hindsight we know
that Perlman has not been overruled and continues to bind this
court. To whatever extent the Oberkoetter court believed that
Perlman's applicability had faded, and to whatever extent this may
have influenced its ruling, the reasoning in Oberkoetter was
incorrect.
Most of our sister circuits have interpreted Perlman to
apply in instances when an attorney is ordered by a court to
produce client records in the face of a claim of privilege. See
Conkling v. Turner, 883 F.2d 431, 433-34 (5th Cir. 1989) (order
directing the testimony of appellant's attorney is immediately
appealable); In re Grand Jury Subpoena, 784 F.2d 857, 859-60 (8th
Cir. 1986) (same); In
re
Klein, 776 F.2d 628, 630-32 (7th Cir.
-6-
1982) ("Like several other courts, this one has treated
Perlman as
a holding that clients always are entitled to appeal as soon as
their attorneys are required to produce documents.");
United States
v.
(Under Seal)
, 748 F.2d 871, 873 n.2 (4th Cir. 1984) ("[W]hen the
one who files the motion to quash, or intervenes, is not the person
to whom the subpoena is directed, and the movant or intervenor
claims that production of the subpoena documents would violate his
attorney-client privilege, the movant or intervenor may immediately
appeal.");
In re Grand Jury Proceedings
, 722 F.2d 303, 305-07 (6th
Cir. 1983) (allowing immediate appeal of an order compelling the
testimony of movant's attorney); In
re
Grand
Jury
Proceedings,
Appeal of Twist, 689 F.2d 1351, 1352 n.1 (11th Cir. 1982) (same);
In
re
Grand
Jury
Subpoena
Served
Upon
Doe, 759 F.2d 968, 971 n.1
(2d Cir. 1985) (same);
In re Grand Jury Proceedings
, 604 F.2d 798,
800 (3d Cir. 1979) (same).
Only three other circuits have determined that an order
directing an attorney to testify regarding material that is alleged
to be privileged is not automatically appealable. The Ninth
Circuit allows an appeal if the attorney no longer represents the
owner of the documents, but does not allow immediate appeal where
the attorney is currently representing the owner.
See,
e.g.,
In re
Grand
Jury
Subpoenas
Dated
December
10,
1987, 926 F.2d 847, 853
(9th Cir. 1991). The District of Columbia Circuit has ruled that
such an order is appealable when "circumstances make it unlikely
that an attorney would risk a contempt citation in order to allow
immediate review of a claim of privilege." In re Sealed Case
, 754
-7-
F.2d 395, 399 (D.C. Cir. 1985). The Tenth Circuit does not allow
the appeal of district court orders compelling the testimony of an
attorney who claims privilege unless the attorney has accepted a
contempt citation or the owner of the records can "prove that the
attorney will produce the records rather than risk contempt." In
re Grand Jury Proceedings, Subpoena to Vargas
, 723 F.2d 1461, 1464-
66 (10th Cir. 1983).
No circuit outside of our own has adopted a rule as
extreme as the Oberkoetter rule, which bars an appeal until the
lawyer is cited for contempt.
In addition to the persuasive case law from other
circuits, we are troubled by the tenuous logic of
Oberkoetter. In
particular, that opinion assumed that "[a]n attorney, in his
client's interest and as proof of his own stout-heartedness, might
be willing to defy a testimonial order and run the risk of a
contempt proceeding." In re Oberkoetter
, 612 F.2d at 18. Although
we do not doubt that some lawyers would accept a contempt citation
in order to provide their clients with the opportunity to appeal,
we are persuaded by the following reasoning of the Fifth Circuit:
Although we cannot say that attorneys are
in general more or less likely to submit
to a contempt citation rather than violate
a client's confidence, we can say without
reservation that some significant number
of client-intervenors might find
themselves denied all meaningful appeal by
attorneys unwilling to make such a
sacrifice. That serious consequence is
enough to justify a holding that a client-
intervenor may appeal an order compelling
testimony from the client's attorney.
-8-
In re Grand Jury Proceedings in Matter of Fine, 641 F.2d 199, 203
(5th Cir. 1981). Mindful that it would be unduly optimistic to
anticipate that all attorneys will accept contempt rather than
compromise their clients' appeal, we think it unwise to require
such an action before permitting an appeal.
Oberkoetter relies heavily on the premise that the
appellate review will interfere with the normal course of
litigation. The greatest of these concerns, in the eyes of the
Oberkoetter court, appears to have been the delay caused by an
appeal. While there is something to this argument, it ultimately
fails to justify a total bar on appeals in cases such as this. A
party who accepts contempt is permitted to appeal the contempt
citation and, thereby, seek review of the order compelling
testimony. Granting the same opportunity to appeal to a party who
does not have the option of accepting contempt is unlikely to lead
to greater delay than exists in cases that have featured a contempt
citation.
Finally, we add that allowing an appeal only if the
attorney accepts a contempt citation pits lawyers against their
clients in a manner that we do not believe is in the interests of
justice. See generally
United States
v.
Edgar, 83 F.3d 499, 507-08
(1st Cir. 1996). A lawyer should not be required to choose between
the interests of his or her client and his or her own interests.
A rule that promotes conflicts of interest hinders the fair
representation of the client and makes it less likely that clients
will be well served by their attorneys.
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In light of the above discussion, therefore, we overrule
In re Oberkoetter, 612 F.2d 15 (1st Cir. 1980). In its place, we
adopt the majority rule and apply the Perlman exception to those
cases wherein a client seeks immediate appeal of an order
compelling production of a client's records from his attorney.
Appellee advances one additional argument in support of
its claim that we lack jurisdiction over this appeal. It claims
that there is no jurisdiction unless the facts of the case, in
addition to being an appeal from the denial of a motion to quash a
subpoena directed at the law firm, meet the requirements of the
collateral order doctrine. See
United States
v.
Billmyer, 57 F.3d
31, 34 (1st Cir. 1995). We are unpersuaded by the government's
argument. It cites to no authority, nor do we find any, that
states that the denial of a motion to quash is reviewable only if,
in addition to meeting the requirements of the
Perlman doctrine, it
also meets the requirements of the collateral order doctrine. We
decline to adopt such a rule in this context.
II. Attorney-Client Privilege
Having overturned Oberkoetter, we have jurisdiction to
entertain this appeal. Upon review of the record and the briefs on
appeal, we are of the opinion that there is simply not enough
information for us to form a reasoned judgment as to whether the
records at issue are privileged.
Appellant alleges that the records at issue contain, in
part, substantive descriptions of legal work rendered. We
certainly agree that the documents are not per se non-privileged
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merely because they were intended primarily for billing purposes.
What matters is not the form of the information, but its content.
See, e.g., United
States v. Olano, 62 F.3d 1180, 1205 (9th Cir.
1995);
In re Grand Jury Proceedings
, 896 F.2d 1267, 1273 (11th Cir.
1990); Matter
of
Witnesses
Before
Special
March
1980
Grand
Jury,
729 F.2d 489, 495 (7th Cir. 1984). Whatever the form of the
information, it is privileged if: (1) the client was, or sought to
be, a client of the law firm; (2) the lawyer acted as a lawyer in
connection with the information at issue; (3) the information
relates to facts communicated for the purpose of securing a legal
opinion, legal services, or assistance in a legal proceeding; and
(4) the privilege has not been waived. See United
States v.
Wilson, 798 F.2d 509, 512 (1st Cir. 1986).
On the other hand, based on the one unredacted invoice
that was submitted to the district court by appellants, we do not
believe it is possible to determine whether the documents, as a
group, are privileged. The submitted invoice includes several
entries that are clearly not privileged, and one entry that names
the former accountant and chief financial officer of the client and
that reads "IRS Power of Atty. forms and corp. penalty abatements;
Correspondence to client." From this information, appellants urge
this court to conclude that the records at issue are privileged,
pointing out that the parties would expect to be able to discuss
IRS corporate penalty abatements and power of attorney forms
without the IRS learning about it. Appellee, on the other hand,
claims that this entry, described as "typical" of the group of
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records, demonstrates that there is no privilege. We cannot agree
with either argument.
It is at least arguable that the entry meets the criteria
of a privileged communication. Furthermore, when taken as a group,
it is possible that the bills would reveal considerable privileged
information. This possibility is compounded by the fact that the
government has already seized the client's business records, making
it more likely that the government can deduce the privileged
substance of the notations of the records. See In
re
Grand
Jury
Proceedings, 517 F.2d 666, 674 (5th Cir. 1975) ("[I]nformation, not
normally privileged, should also be protected when so much of the
substance of the communications is already in the government's
possession that additional disclosures would yield substantially
probative links in an existing chain of inculpatory events or
transactions.").
We cannot, however, base our decision on this mere
possibility. We believe that further inquiry into the question of
privilege is necessary.
Given that an
in camera
review of the documents was never
conducted, we are uncertain as to how the district court arrived at
its conclusion that the documents are not privileged. Appellants,
at bottom, ask us to accept their statements that the records
contain privileged information, while appellees urge us to assume
that they do not. We are unwilling to base our decision on such
assertions. See
United States
v.
Wujkowski, 929 F.2d 981, 984 (4th
Cir. 1991).
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Accordingly, we vacate the district court's ruling on the
privilege issue and remand with instructions that the district
court conduct a more complete inquiry into the question. See
Icicle Seafoods, Inc.
v.
Worthington, 475 U.S. 709, 714 (1986) ("If
the Court of Appeals believed that the District Court had failed to
make findings of fact essential to a proper resolution of the legal
question, it should have remanded to the District Court to make
those findings."). We also note that, in light of
Oberkoetter, the
parties and the district court may have been operating under the
assumption that no appeal from the district court's ruling would be
possible. Based on this reasonable, though ultimately incorrect,
assumption, those involved may have failed to produce a record
sufficient for appellate purposes. Our remand allows for the
production of such a record. Cf. Millipore
Corp. v. Travelers
Indemnity Co., 115 F.3d 21, 34 (1st Cir. May 30, 1997).
Appellants also argue that the subpoena is the fruit of
an impermissible violation of the attorney-client relationship.
This issue was raised by both parties below but was not decided by
the district court. Accordingly, we need not reach the issue. We
leave the issue to be decided, in the first instance, by the
district court on remand.
III. Conclusion
For the foregoing reasons, we dismiss the law firm's
appeal,
vacate the district court ruling as to the client's appeal,
and remand for further proceedings.
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