Grand Jury Subpoenas, In re, s. 97-1002

• Decision Date: 09 May 1997
• Docket Number: Nos. 97-1002,97-1003,s. 97-1002
• Parties: In re: GRAND JURY SUBPOENAS . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 695

123 F.3d 695

In re: GRAND JURY SUBPOENAS

Nos. 97-1002, 97-1003.

United States Court of Appeals First Circuit.

Heard May 9, 1997.

Decided Aug. 13, 1997.

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.

Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.

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"). ¹ 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 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, 91 S.Ct. 1580, 1582, 29 L.Ed.2d 85 (1971); Cobbledick v. United States, 309 U.S. 323, 328, 60 S.Ct. 540, 542-43, 84 L.Ed. 783 (1940); Corporacin Insular de Seguros v. Garca, 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.

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, 38 S.Ct. 417, 419, 62 L.Ed. 950 (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.

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. ²

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. at 13, 38 S.Ct. at 419. 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.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 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...