U.S. v. Williams Companies, Inc.

• Decision Date: 17 April 2009
• Docket Number: No. 08-5203.,08-5203.
• Citation: 562 F.3d 387
• Parties: UNITED STATES of America, Appellee The WILLIAMS COMPANIES, INC. and Williams Power Company Inc., Appellants v. Scott Thompson, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

562 F.3d 387

UNITED STATES of America, Appellee The WILLIAMS COMPANIES, INC. and Williams Power Company Inc., Appellants v. Scott Thompson, Appellee.

No. 08-5203.

United States Court of Appeals, District of Columbia Circuit.

Argued February 19, 2009.

Decided April 17, 2009.

Appeal from the United States District Court for the District of Columbia (No. 1:07-mc-00241-RJL).

Andrew S. Tulumello argued the cause for appellants. With him on the briefs was F. Joseph Warin.

Sangita K. Rao, Attorney, U.S. Department of Justice, argued the cause for appellee United States of America. With her on the brief were Patty Merkamp Stemler and Robertson T. Park, Attorneys. Roy W. McLeese III, Assistant U.S. Attorney, entered an appearance.

Philip T. Inglima argued the cause for appellee Scott Thompson. With him on the brief was Ann M. Mason.

Before: ROGERS, Circuit Judge, and SILBERMAN and WILLIAMS, Senior Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

This is a third-party appeal of a discovery order in a criminal case compelling the government to produce "all materials disclosed" by the third party pursuant to its cooperation with federal investigators during a criminal investigation of the third party and others. Ultimately, the government agreed to defer prosecution of the third party. Thereafter several of its former employees, including Scott Thompson, were indicted. The district court granted Thompson's motion to compel production of documents the third party had produced to the government that would be material to the preparation of his defense. This court stayed the order of production. The third party now seeks to enforce its agreement with the government that the government would hold the documents in confidence "to the extent possible" in view of the third-party's claims of privilege. The district court granted Thompson's motion but did not independently assess which documents were material to his defense. Accordingly, we remand the case for the district court to make that assessment and to protect against the public disclosure of material documents in a manner consistent with Thompson's right to a fair trial.

I.

This case is part of the fallout of the California energy crisis that prompted the federal government to examine practices of certain energy companies, including The Williams Companies and its subsidiary formerly known as Williams Power Company (hereinafter collectively "WPC"). In the fall of 2002, WPC's trading practices were under investigation by the Commodity Futures Trading Commission ("CFTC"), the Department of Justice, and the Federal Energy Regulatory Commission ("FERC"). In October 2002, WPC announced that it was "conducting an independent internal review of its trading activities, including reporting of information regarding natural gas trades to energy publications." Alex Goldberg, Esq., Decl. 1, ¶ 2. The law firm of Gray Cary Ware & Freidenrich LLP ("Gray Cary") carried out the internal investigation. In early November 2002, WPC received a subpoena from the grand jury in the Northern District of California, demanding production of information regarding WPC's trading practices, and WPC produced some responsive documents. On November 25, 2002, CFTC issued a subpoena to WPC and by separate letter advised that WPC was failing to "fully cooperate" with the investigation by not turning over certain documents and that "full cooperation" would entail disclosing the results of WPC's internal review. Letter from Steven Ringer, Division of Enforcement, CFTC, to Edward P. Davis, Jr., Esq. and Walter F. Brown, Jr., Esq., Gray Cary (Nov. 25, 2002).

WPC began producing documents to government investigators in the spring of 2003. The documents included attorney notes from interviews of WPC employees, data analyses and reports of natural gas transaction data developed under WPC's attorneys' supervision, and presentations to prosecutors by WPC attorneys aimed at "influenc[ing] the government's charging decisions." Goldberg Decl. 3, ¶ 11. Each disclosure was accompanied by a statement that the documents were privileged or that WPC was not waiving its privileges, at least as to other parties and/or other matters. For example, by letter of April 25, 2003 from its outside counsel to the Justice Department Antitrust Division, WPC stated:

We expressly reserve and do not waive any privilege and protection with respect to any other document and any other subject matter. Further, we expressly reserve and do not waive any privilege and protection for these documents as to any other action, investigation, case, matter, or party. We understand that these [redacted] will be afforded Rule 6(e) protection under the Federal Rules of Criminal Procedure, and to the extent possible you will assist WPC in preserving the confidentiality of these.

Letter from Edward P. Davis, Jr., Gray Cary, to Keslie Stewart, Esq., Dep't of Justice, Antitrust Division (Apr. 25, 2003) ("Davis Letter of April 25, 2003") (emphasis added).¹ On July 29, 2004, the CFTC approved WPC's offer of settlement regarding the gas reporting issues, and on February 21, 2006, the Justice Department executed a Deferred Prosecution Agreement ("DPA") under which WPC agreed to "cooperate fully" with federal prosecutors "regarding any matter about which [it] has knowledge ... including any investigations or prosecutions of others." DPA at 2. The DPA provided that cooperation would include not asserting the attorney-client privilege or work-product protection as to certain factual documents from the internal investigation, although WPC reserved its right to assert the privilege with respect to certain other documents. The Justice Department acknowledged that WPC's cooperation was a factor in the decision to "defer[]" criminal prosecution of WPC. Id. at 4-5. WPC also agreed to pay a $50,000,000 penalty to the United States Treasury.

On September 28, 2006, Thompson was indicted for conspiracy, 18 U.S.C. § 371, to commit wire fraud, id. § 1343, and to manipulate gas prices in violation of the Commodities Exchange Act, 7 U.S.C. § 13(a)(2), in connection with his energy trading activities while a WPC employee. Thompson filed a motion pursuant to, inter alia, Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), and Federal Rule of Criminal Procedure 16(a)(1)(E)(i) to compel the United States to produce "information that is material to preparing his defense" and that was provided to the government by WPC. The United States opposed the motion, stating that WPC had preserved the protected status of the produced work product and the government had agreed to these terms in receiving the documents. WPC filed a separate miscellaneous action opposing Thompson's motion. See D.D.C. R. 57.6.² The district court granted Thompson's motion to compel, and denied WPC's application for relief. The district court denied a stay. Upon WPC's emergency motion for a stay, this court granted the stay and expedited the appeal.

II.

On appeal, WPC seeks to enforce its agreement with the government to maintain the confidentiality of the documents it produced during the federal investigation of its trading activities. Specifically, WPC contends that it did not waive its work-product protection as to any other party, including Thompson, when it made a limited, one-time disclosure of documents to federal prosecutors in response to a grand jury subpoena while the target of a criminal investigation. It further contends Thompson has failed to demonstrate any need for the documents because he already has access to the source materials and witnesses on which WPC's work product is based.

A.

As a threshold matter, this court has jurisdiction over WPC's appeal under Perlman v. United States, 247 U.S. 7, 13, 38 S.Ct. 417, 62 L.Ed. 950 (1918), and its progeny. Under the Perlman doctrine, "discovery orders addressed to disinterested nonparties are immediately appealable," In re Sealed Case, 141 F.3d 337, 339-40 (D.C.Cir.1998), because "the third party generally lacks a sufficient stake in the proceeding to risk contempt by refusing compliance" as that party is not the holder of the privilege, In re Subpoena Duces Tecum Issued to CFTC, 439 F.3d 740, 743 (D.C.Cir.2006); see also Church of Scientology of California v. United States, 506 U.S. 9, 18 n. 11, 113 S.Ct. 447, 121 L.Ed.2d 313 (1992); In re Sealed Case, 141 F.3d at 339-40. Here, the United States is the subject of the discovery order but WPC's privileges are at stake; accordingly, the United States presumably lacks the incentive to preserve the privileges by committing contempt of court. See In re Sealed Case, 754 F.2d 395, 399 (D.C.Cir.1985). Indeed, in its brief to this court, the United States advises that "[t]he government has already complied partly and intends to comply fully with the district court's order [to] disclos[e] the documents to defendant Thompson." Appellee U.S. Br. at 20. Such intent to comply favors allowing an immediate appeal under the Perlman doctrine. See In re Sealed Case (Medical Records), 381 F.3d 1205, 1211 (D.C.Cir. 2004); In re Sealed Case, 141 F.3d at 340. Accordingly, under the Perlman doctrine, the discovery order is an "immediately appealable final order," In re Subpoena Duces Tecum Issued to CFTC, 439 F.3d at 743.

Notwithstanding the fact that the public, the government, and Thompson all have a strong interest in ensuring a speedy trial, see Flanagan v. United States, 465 U.S. 259, 265, 104 S.Ct. 1051, 79 L.Ed.2d 288 (1984), Thompson's objections to our jurisdiction are unpersuasive. According to Thompson, the Perlman doctrine is unavailable because contempt proceedings were available to WPC when it first turned over the documents; WPC could have refused to make disclosures to the government during its investigation of WPC, prompting a court order with which it could refuse to comply. Hence, allowing an appeal would be unnecessary because WPC has...