572 F.2d 596 (8th Cir. 1977), 77-1043, Diversified Industries, Inc. v. Meredith

Docket Nº:77-1043.
Citation:572 F.2d 596
Party Name:DIVERSIFIED INDUSTRIES, INC., Petitioner, v. The Honorable James H. MEREDITH, Chief Judge of the United States District Court for the Eastern District of Missouri, Respondent.
Case Date:August 09, 1977
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 596

572 F.2d 596 (8th Cir. 1977)

DIVERSIFIED INDUSTRIES, INC., Petitioner,

v.

The Honorable James H. MEREDITH, Chief Judge of the United

States District Court for the Eastern District of

Missouri, Respondent.

No. 77-1043.

United States Court of Appeals, Eighth Circuit

August 9, 1977

Submitted April 11, 1977.

On En Banc Hearing Feb. 5, 1978.

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[Copyrighted Material Omitted]

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Thomas J. Guilfoil, St. Louis, Mo., for petitioner; Stuart Symington, Jr., Jim J. Shoemake and J. Richard McEachern, St. Louis, Mo., on the briefs.

Thomas E. Wack, St. Louis, Mo., for respondent; Walter M. Clark, St. Louis, Mo., on the briefs.

Before LAY, HEANEY and HENLEY, Circuit Judges.

HENLEY, Circuit Judge.

This is an original petition for a writ of mandamus directed at The Honorable James H. Meredith, Chief Judge of the United States District Court for the Eastern District of Missouri, by Diversified Industries, Inc. which is the defendant in a

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case pending in the district court entitled The Weatherhead Company, Plaintiff v. Diversified Industries, Inc., Defendant, Docket No. 76-623C(1). In the instant proceeding Diversified seeks to protect from discovery the contents of a certain memorandum, dated June 19, 1975, and a written report, dated December, 1975, both prepared for the benefit of Diversified by the Washington, D. C. law firm of Wilmer, Cutler & Pickering, hereinafter called Law Firm. Petitioner also seeks to protect certain corporate minutes in which reference is made to the memorandum and report of Law Firm.

Weatherhead sought to obtain the materials in question by means of pretrial interrogatories and a motion for production of documents to which Diversified objected. In November, 1976 the district court overruled the objections without opinion. Diversified moved for reconsideration and alternatively asked the district court to certify the questions presented as appropriate for interlocutory appeal under 28 U.S.C. § 1292(b). On December 30, 1976 respondent refused both reconsideration and § 1292(b) certification, and in that connection filed a memorandum opinion. Finally, on January 6, 1977 the district court affirmatively ordered disclosure of the materials and Diversified applied to this court for relief.

Petitioner contends that the documents in question are not subject to disclosure because they fall within the scope of the traditional attorney-client privilege and also are protected by the "work product" privilege dealt with in the leading case of Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947), and now expressed in Fed.R.Civ.P. 26(b)(3) which became effective in 1970.

Respondent, actually Weatherhead, denies that the material in question is covered by either privilege, and also contends that any originally existing privilege was waived effectively for purposes of the litigation in the district court when petitioner turned the material over to the Securities and Exchange Commission without protest in response to an agency subpoena in the course of an investigation that the Commission was conducting.

We heard the matter preliminarily on January 14, 1977 and entered an order staying operation of the district court's order of January 6 as it affected Law Firm's memorandum and report and portions of the corporate minutes of Diversified relating to those documents pending final disposition of the case. We also called for the filing of briefs within a comparatively short period of time.

We have considered the petition, the response thereto, the exhibits tendered by the respective parties, and their briefs. And we have also considered in camera material that was submitted to the district court and later to us. That material includes the memorandum and report of Law Firm and copies of the minutes of certain meetings of Diversified's Board of Directors.

The writ of mandamus is not ordinarily available to a litigant to obtain appellate review of interlocutory discovery orders entered by a district court as litigation proceeds. However, where a claim of attorney-client privilege has been raised in and rejected by a district court, we have held that mandamus is available as a means of immediate appellate review. Pfizer, Inc. v. Lord, District Judge, 456 F.2d 545, 547-48 (8th Cir. 1972). See also Harper & Row Publishers v. Decker, 423 F.2d 487 (7th Cir. 1970), aff'd without opinion by an equally divided Supreme Court, 400 U.S. 348, 91 S.Ct. 479, 27 L.Ed.2d 433 (1971). We concluded, therefore, that we should consider the instant petition on the merits.

Petitioner is a Delaware corporation with its principal place of business in Clayton, Missouri. Its operations include sales of scrap copper which is the principal component of brass. Some and perhaps many of petitioner's sales are made in interstate commerce.

Weatherhead is an Ohio corporation having its principal place of business at Cleveland. It is engaged in the manufacture and sale of brass and brass products, and it maintains a mill at Angola, Indiana.

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For a number of years prior to the filing of its suit against Diversified in July, 1976 Weatherhead purchased large quantities of copper from Diversified which copper was shipped from Clayton to Angola. Naturally, there were extensive dealings between employees of Weatherhead engaged in the purchasing of copper and employees of Diversified engaged in the sale of copper. Diversified sold copper not only to Weatherhead but also to other purchasers.

In 1974 and 1975 Diversified became engaged in two lawsuits in federal court in the Eastern District of Missouri, which litigation involved what is commonly known as a "proxy fight." In the course of that litigation it came to light that Diversified may have established and maintained a "slush fund" which was used to bribe purchasing agents of other business entities including Weatherhead, and perhaps for other improper purposes.

Disclosures made in the course of the 1974-75 litigation, which litigation had no direct relationship to the suit that is now pending in the district court, attracted the interest of the Securities and Exchange Commission. In due course the Commission conducted an official investigation of the affairs of Diversified and other corporations and individuals, and it later filed a suit for an injunction against Diversified and others in the United States District Court for the District of Columbia; a consent decree was entered in that case in late 1976.

In July, 1975 Weatherhead commenced its suit against Diversified in the district court alleging an unlawful conspiracy between Diversified and Weatherhead employees whereby the latter were paid large sums of money out of Diversified's alleged "slush fund" to procure the purchase from Diversified by Weatherhead of large amounts of inferior copper. Weatherhead alleged conspiracy, tortious interference with the contractual relationships between itself and its employees, and violation of § 4 of the Clayton Antitrust Act, 15 U.S.C. § 15. On the common law counts of the complaint actual and punitive damages and an accounting of profits were sought. Treble damages were sought under the antitrust count. We assume that Diversified denies liability.

Weatherhead has employed extensive discovery in the case in the district court and doubtless has been able to acquire much information of value to it. However, Weatherhead has not yet been able to obtain access to Law Firm's memorandum and report.

The history of those documents may be summarized as follows.

The 1974-75 litigation involving Diversified was settled amicably and before any official action had been taken by the SEC. However, the Board of Directors of Diversified concluded that it should cause an investigation to be made of the business practices of the company in the context of the disclosures that had been made in the course of the litigation. In the spring of 1975 Law Firm was employed to make that investigation and to report the results thereof to Diversified's Board. Law Firm was not employed to give legal advice to Diversified and was not employed to represent diversified in any pending or potential litigation. The reason for the employment of Law Firm was its supposed expertise in the relevant field.

The memorandum of June 19, 1975 was of a purely preliminary nature and was written at a time when the employment of Law Firm was still somewhat tentative. Basically, the memorandum is a statement of historical matters, and an outline of how Law Firm proposed to conduct the investigation. The memorandum also discussed the extent to which information developed by the investigation would be immune from disclosure should disclosure be sought officially. As to the method of investigation, Law Firm stated that it proposed to interview individuals, including employees of Diversified, and Law Firm requested the Board to instruct corporate employees to cooperate in the investigation and to participate in interviews with Law Firm's representatives. Law Firm also indicated that it intended to examine relevant records, and

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that it might find it necessary or convenient to employ an independent firm of accountants to assist in the investigation.

This memorandum was satisfactory to the Board, and Diversified employees were instructed to cooperate with Law Firm and to furnish information to Law Firm's representatives.

The December, 1975 report was quite different from the June memorandum. The December document was a full and detailed report of the investigation; it identified persons who had been interviewed and set out the substance of what they had said; it also identified individuals who had refused to give any information. The report also dealt with...

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