Grand Jury Investigation, In re

• Citation: 599 F.2d 1224
• Decision Date: 01 June 1979
• Docket Number: No. 78-2040,78-2040
• Parties: 4 Fed. R. Evid. Serv. 1338 In re GRAND JURY INVESTIGATION. Appeal of UNITED STATES of America.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 1224

599 F.2d 1224

4 Fed. R. Evid. Serv. 1338

In re GRAND JURY INVESTIGATION Appeal of UNITED STATES of America.

No. 78-2040.

United States Court of Appeals Third Circuit.

Argued March 21, 1979.

Decided June 1, 1979.

Peter F. Vaira, U. S. Atty., Alfred A. Gollatz (argued), Walter S. Batty, Jr., Bonnie S. Brier, Norman E. Greenspan, Asst. U. S. Attys., Philadelphia, Pa., for appellant.

Barbara W. Mather (argued), William A. DeStefano, David Richman, Jeffery C. Hayes, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for appellee Sun Co., Inc.

Before SEITZ, Chief Judge, and ALDISERT and ROSENN, Circuit Judges.

OPINION OF THE COURT

SEITZ, Chief Judge.

The United States appeals from an order of the district court quashing a grand jury subpoena issued to Sun Company, Inc. The subpoena sought various questionnaires and memoranda compiled by Sun Company and the law firm of Pepper, Hamilton & Scheetz during an internal corporate investigation of various foreign transactions. Although Sun has contested our jurisdiction to consider this appeal, we recently settled this question in In the Matter of Grand Jury Empanelled February 14, 1978 (Colucci), 597 F.2d 851 (3d Cir. 1979). Pursuant to 18 U.S.C. § 3731, ¹ the United States Attorney has certified that this appeal "is not taken for the purpose of delay and that the evidence is a substantial proof of a fact material in the proceeding." The district court having received this certification, we are not required by section 3731 to evaluate independently the substantiality or the materiality of the contested material. Compare 18 U.S.C. § 3731 With 28 U.S.C. § 1292(b). Cf. United States v. Comiskey, 460 F.2d 1293, 1297-98 (7th Cir. 1972) (United States Attorney need not allege any specific facts in support of his affidavit). We accordingly have jurisdiction to consider this appeal under 18 U.S.C. § 3731 or, alternatively, under 28 U.S.C. § 1291. See Colucci, supra, at 854-858.

I

Although the facts before us are largely uncontested, the record has been impounded to preserve the confidentiality of the grand jury's inquiry. We therefore will refrain from identifying some individuals by name.

In January 1976 Sun Company, Inc., (Sun) began an investigation into possible illegal payments made by some of its employees in connection with Sun's foreign operations. The corporation's Audit Committee, a standing committee of the Board of Directors, supervised the investigation and, on July 20, 1976, reported that no significant violations had occurred.

Late in 1976, however, information submitted by a Sun employee led to a reopening of the investigation. On January 25, 1977, Samuel K. White, Sun's vice-president and general counsel, retained Pepper, Hamilton & Scheetz (Pepper) to advise Sun of its legal obligations in regard to certain payments uncovered during the internal audit. Two days later, the Audit Committee asked Pepper to assist and advise it in the conduct of the investigation itself. The full Board of Directors later ratified Pepper's retention by the Audit Committee and authorized funds for the investigation.

On February 11, 1977, H. Robert Sharbaugh, the chairman of Sun's Board of Directors, sent a covering letter, a questionnaire, and a return envelope to each of 1,877 managerial employees of Sun and its majority-owned subsidiaries. The letter explained the purpose of the investigation and asked the employees to complete the questionnaires and to mail them directly to Pepper. The questionnaire itself contained ten questions probing the employee's knowledge of any suspicious transactions. The instructions accompanying the questionnaire explained that an employee should answer "yes" if he knew of payments like those described in the question, "no" if he didn't, and "conference" if he was uncertain. Neither the questionnaire nor the instructions requested any further elaboration on the answers.

On February 16, 1977, Pepper began to follow up questionnaires containing responses of "yes" or "conference." By September, Pepper had conducted 265 telephone interviews and 90 personal interviews. No interviews were conducted in the presence of anyone except representatives of Pepper and Sun, and, when necessary, an interpreter. The interviews were not transcribed. Instead, the Pepper attorneys reduced their notes and recollections concerning the interviews to memoranda, always within ten days of the actual interview. These memoranda have remained in Pepper's files, and have been released only to members of Sun's Board of Directors.

On September 21, 1977, the Audit Committee filed its report, which discussed a number of transactions deemed "questionable." One of the selected transactions involved the renegotiation of a contract with an entity of a foreign government. Sun had paid a citizen of that country a total of $235,000 for services rendered during the renegotiation of the contract. The Audit Committee found reason to believe that some of the money paid to the foreign representative may have been passed on to governmental officials as an inducement to renegotiate the contract.

The Audit Committee made a number of recommendations in its report, including the amendment of corporate tax returns and the filing of a form 8-K with the Securities and Exchange Commission. On October 27, 1977, Sun did, in fact, file an 8-K with the SEC, disclosing all the questionable payments noted in the report, including the payment of the $235,000 to the foreign representative. This filing prompted an article in the Philadelphia Inquirer and, in turn, an investigation by the United States Attorney for the Eastern District of Pennsylvania.

In a letter dated December 20, 1977, the United States Attorney asked Sun to turn over, Inter alia, "all documents referring in any way to questionable foreign payments made by Sun, its officers or employees." Sun responded by releasing a number of documents including the Audit Committee report itself. After examining the report, the United States Attorney narrowed the inquiry, requesting all documentation of the renegotiation of the foreign contract and the payment of the $235,000. This request specifically included "all interview memoranda, questionnaires, statements, or other recorded recollections of these events . . . ." Although Sun released a number of documents pertaining to the affair, it refused to release the interview memoranda or the questionnaires, claiming protection under the attorney-client privilege and the work-product doctrine. On March 21, 1978, Sun received a grand jury subpoena requesting these documents. That request later was amended to allow redaction of those portions of the documents that "would disclose the mental impressions, conclusions, opinions, or legal theories of an attorney." Sun moved to quash the subpoena and the district court granted that motion on June 1, 1978. Although the district judge did not file a written opinion, he indicated at oral argument some of the bases for his conclusions.

Sun has asserted, and the government has not contested, that only thirteen persons provided the Audit Committee with any information regarding the targeted transaction. Eleven of the thirteen were employees of Sun at the time they were interviewed. One of the employees interviewed is now deceased. Except for the deceased employee and the foreign representative himself, who is neither a Sun employee nor a resident of this country, all of the interviewees could be reached by grand jury subpoenas. Although Sun has offered to ensure the appearance of its employees before the grand jury, the government has made no attempt to summon any of the interviewees.

II

Sun claims that the documents sought in the subpoena are protected by the attorney-client privilege or the work-product doctrine or both. As Sun concedes, the attorney-client privilege cannot protect any communications made by either of the two interviewees who were not employed by Sun. Sun asserts, however, that the work-product doctrine protects all the summoned documents and that this protection is absolute. We therefore consider first the more inclusive of the two alleged shields: the work-product doctrine.

A

The work-product doctrine, recognized initially in Hickman v. Taylor,329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947), protects from discovery materials prepared or collected by an attorney "in the course of preparation for possible litigation." Id. at 505, 67 S.Ct. at 391. See also Fed.R.Civ.P. 26(b)(3). This doctrine applies in criminal, as well as in civil, litigation. See United States v. Nobles, 422 U.S. 225, 236, 95 S.Ct. 2160, 45 L.Ed.2d 141 (1975). Moreover, the government has conceded in this appeal that the doctrine applies to documents sought by a grand jury. See In re Grand Jury Proceedings (Duffy), 473 F.2d 840 (8th Cir. 1973); In re Grand Jury Investigation (Sturgis), 412 F.Supp. 943 (E.D.Pa.1976).

We must decide three questions in regard to the work-product doctrine. First, were these materials collected or prepared in preparation for possible litigation so as to qualify as "work product"? Second, if they are entitled to protection as work product, is the protection afforded them absolute or qualified? Third, if the documents are entitled to only qualified protection, has the government made an adequate showing to overcome that protection?

The government asserts that the subpoenaed materials are not entitled to protection as work product because they were not collected or prepared "in the course of preparation for possible litigation." Hickman v. Taylor, supra, 329 U.S. at 505, 67 S.Ct. at 391. At the close of oral argument, the district court stated that it would be "difficult" to hold that the investigation was not conducted "in contemplation of litigation." Although this statement, by itself, may be ambiguous, the district court subsequently quashed the subpoena as to all the requested documents. Because Sun based its motion on the...